Organizational Culture, ITCompetence, and Supply ChainAgility in Small andMedium-Size Enterprises

SHAGHAYEGH MALEK IFAR ,SEYEDEH KHADI JEH TAGHIZADEH ,

SYED ABIDUR RAHMAN ,AND SA IF UR REHMAN KHAN

The ability to manage a supply chain flexibly andresponsively is essential to competitive advantage,particularly for small and medium-sizes enterprises(SMEs) that lack the economies of scale of largerfirms. An examination of the relationship amongorganizational culture, information technology (IT)competence, and supply chain agility leads to a con-ceptual framework that can help SMEs structuretheir business strategies and practices to keep themaligned with market changes. C ⃝ 2014 Wiley Period-icals, Inc.

The ability to implement change is one of themajor requirements for businesses to compete inthe twenty-first century. Globalization, unexpectedmarket pressures, and rapid technological changeshave driven organizations to adopt the capabilityto change as a necessary competency. Businessesneed to align their operations according to dynamicchanges in the market environment. In seeking thisalignment, supply chain management is as impor-tant as other functional areas.

Management of the supply chain ensures thatbusinesses—whether they be large or small tomedium-size enterprises (SMEs)—can meet theneeds of the market efficiently and effectively. Be-cause effective and efficient decision making must re-flect the notions of flexibility and responsiveness, theissue of supply chain agility emerges with greater im-portance. According to Ganguly, Nilchiani, & Farr(2009) turbulent markets, rapid changes in customer

demand, and quick transformation of technologieshave focused attention on supply chain agility. Toadopt supply chain agility as a competitive tool forSMEs, it is important for firms to have the kind ofcompetencies that would assist them in technolog-ical transformation. The “sensing” and “respond-ing” capabilities of firms toward market changeand consumer demands become vital issues for sur-vival in business (Chiang, Kocabasoglu-Hillmer, &Suresh, 2012).

“Sense” focuses on adequacy, accuracy, accessi-bility, and timeliness of information, while “re-sponse” emphasizes timeliness, cost, and quality(Martin, 2000). In this context, information tech-nology (IT) can have a significant impact on achiev-ing sense and response in supply chain agility(Huang, Ouyang, Pan, & Chou, 2012). IT, in theform of computer-based information systems, helpsorganizations gather and arrange pertinent data forall processes to enhance decision making. In fact, thecurrent rapid wave of technological expansion hastouched on the critical status of the supply chain inbusiness operations where all activities are relatedto market sense and response (Pavlou & El Sawy,2006). It is arguable, however, that the speed ofsense and response to the market can be determinedby the degree of flexibility within firms.

Scholars also have recognized the influence of orga-nizational culture in improving supply chain flexi-bility and responsiveness in a turbulent environment

C ⃝ 2014 Wiley Per iodicals , Inc .Publ ished onl ine in Wi ley Onl ine Library (wi leyonl inel ibrary.com)

Global Business and Organizat ional Excel lence ● DOI : 10.1002/ joe .21574 ● September/October 2014 69

(McAfee, Glassman, & Honeycutt, 2011). To deter-mine the total influence of organizational culture onsupply chain agility, it is important to know to whatextent organizational culture accelerates the effectof IT competence.

Larger firms typically benefit from such advan-tages as economies of scale and bargaining powerwith stakeholders, such as suppliers and distributors(Fiegenbaum & Karnani, 1991), while smaller firmsoften face many obstacles that stem from havingfewer resources (Li, Ragu-Nathan, Ragu-Nathan, &Subba Rao, 2006). Nonetheless, SMEs play a signif-icant role in macroeconomic growth within devel-oped and developing countries (Sen, 2011).

Given the increasing prominence of SMEs in thebusiness environment, it is important to considerthe relationship among IT competence, supply chainagility, and organizational culture from the stand-point of SMEs.

Resources aside, several other differences can benoted between SMEs and their larger counterparts.SMEs are likely to have more customer contact andto be more inclined to action and more flexible thanlarger firms (Fiegenbaum & Karnani, 1991). Forthese reasons, SMEs have become the subject of ex-tensive research in such areas as operations manage-ment and supply chain management.

Given the increasing prominence of SMEs in thebusiness environment, it is important to considerthe relationship among IT competence, supplychain agility, and organizational culture from thestandpoint of SMEs. Specifically, there is value tounderstanding any moderating influence that orga-nizational culture might have on the effect of ITcompetence on supply chain agility in SMEs and thedirect relationship of organizational culture on ITcompetence and supply chain agility.

Opportunities Through Supply Chain Agility

In today’s turbulent market, organizations face in-creasing global competition, rapid changes in cus-tomer demand, and ever-changing technologies.This volatility threatens firms’ ability to create andmaintain competitive advantage. Agility enables or-ganizations to improve their capabilities to sense andrespond to changes in uncertain markets (Gangulyet al., 2009).

Various writers have explored supply chain agilityfrom different perspectives. Martin and Denis(2001) define agility as the capability to encompassinformation systems, organizational structures, lo-gistic processes, and mindsets. Li, Chung, Goldsby,and Holsapple (2008) indicated that agility is the ca-pability to leverage resources to respond to changesquickly and flexibly. Sherehiy, Karwowski, andLayer (2007) identified seven global characteristicsof agility: flexibility, responsiveness, speed, cultureof change, integration and low complexity, high-quality and customized products, and mobilizationof core competencies. With these characteristics, anagile organization is able to sense and respond toenvironmental changes swiftly. In the current study,sense and response are considered as two compo-nents of supply chain agility.

Sense focuses on adequacy, accuracy, accessibility,and timeliness of information (DeGroote, 2012).Response focuses on timeliness, cost, and qual-ity of the plan (Martin, 2000). Sensing marketchange depends on the collection of high-quality,reliable information about changes in the market.The quality of that information has a significantimpact on decision making throughout the supplychain. Through IT, organizations are able to effi-ciently share high- quality, relevant information effi-ciently among all parties in the supply chain process(Swafford, Ghosh, & Murthy, 2006). By analyz-ing the collected data, a supply chain will beable to sense changes more easily, and maketimely decisions on how to respond swiftly to

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them. Since time is a valuable resource, fast senseand response capabilities empower the businessto take strategic and tactical decisions ahead ofcompetitors in the market. This improves thefirm’s ability to gain more customers and marketshare, enhancing its performance and competitiveadvantage.

Enhancing Competitiveness with IT Competence

It is popularly said that businesses could more easilysurvive with business-illiterate managers and own-ers who have IT competence than they could withtechnologically illiterate managers and owners. IThas simplified the arrangement of global supplychain markets by facilitating the gathering, storing,accessing, sharing, and analysis of data. To be fullyexploited, this powerful resource requires effectivemanagement.

IT has simplified the arrangement of global supplychain markets by facilitating the gathering, storing,accessing, sharing, and analysis of data.

In the context of SMEs, Ashurst, Cragg, andHerring (2012) found that IT competence is oneof the most important competitive advantagesbecause of the vital role it plays in ensuring anaccurate flow of information about product and fi-nancial status that reflects the critical status of thesupply chain. The result of an empirical study byTippins and Sohi (2003), however, suggests thatfirms looking for strategic advantage should notonly develop IT competency but also should simul-taneously focus on organizational culture and or-ganizational learning. Others have suggested thatIT integration and IT flexibility as componentsof IT competence make the most evident contri-butions to supply chain agility (Nagi, Chau, &Chan, 2011).

IT integration is the extent to which information sys-tems are linked and shared among different func-

tions and parts of the supply chain (Lin, Chiu, &Chu, 2006). IT integration focuses on the use ofIT to coordinate activities in design, development,procurement, manufacturing, logistics, and distri-bution, allowing the supply chain partners to ex-change knowledge, cooperate, and create replenish-ment plans simultaneously. In an empirical study,Nagi et al. (2011) claimed that an integrated infor-mation system in an organization is necessary to in-formation flow, physical resources, and cash flow.With a well-integrated information system in an or-ganization, suppliers and manufacturers can accessinformation on the inventory and thereby get a clearpicture of the supply chain and inventory status andestimate the required response time in a time ofrapid market change. IT integration enables real-time information exchange and information sharingamong supply chain partners and thus enhances sup-ply chain agility.

IT flexibility is the ability of the IT system to adaptto incremental and radical changes in business pro-cesses and markets with the least possible penaltyin terms of time, cost, effort, and performance(Byrd & Turner, 2000). In a similar vein, Anote,Donyaprueth, and Do Ba (2006) defined IT flexibil-ity as capability in the adoption of change withinand outside the organization to enable informationsharing, system development, and continuation ofthe IT operation with nominal time and effort. ITflexibility focuses on the establishment of corporaterules and standards that determine hardware andoperating systems. With a flexible IT infrastructure,organizations are able to easily integrate techno-logical components and enhance their capability torespond to market changes in a cost-efficient man-ner. Therefore, IT flexibility enables the develop-ment and improvement of supply chain agility (Nagiet al., 2011).

The Role of Organizational Culture

The domain of organizational culture has beenextensively researched, especially in the fields of

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human resource management and organizationalbehavior. Recently, it also has been given greater im-portance in the field of supply chain management(Goffnett, Cook, Williams, & Gibson, 2012), for or-ganizational culture has an impact on the relation-ship between customers and suppliers.

It appears that the literature on organizational cul-ture primarily concerns values, norms, beliefs, atti-tude, and assumptions. Organizational culture alsoidentifies the interaction among relevant employees,consumers, suppliers, and competitors as key actors.According to Chang and Lin (2007), organizationalculture drives the organization and its actions to-ward its objectives. Schein (1990) defines organiza-tional culture as the climate, norms, and attitudeof an organization, which are composed of localprocesses that involve change and stability. Hatch(1993) considers it as a complex set of values, be-liefs, assumptions, artifacts, and symbols that a firmshould embrace in its business operations.

Firms with a strong organizational culture areexpected to have excellent management systemsand the capacity to make modifications in accor-dance with the needs of the market environment(Barney, 1986). Firms that take a sustainable andproactive stance toward shaping their organiza-tional culture are expected to perform better thanthose that do not. Researchers suggest that organi-zational culture has a significant bearing on supplychain management and supply chain agility, servingas an important determinant of competitive advan-tage (Braunscheidel, Suresh, & Boisnier, 2010).

A Framework for Understanding Supply Chain

Agility

Scholars have acknowledged that supply chainagility, which enables firms to react quickly andeffectively to volatile market conditions, gives or-ganizations a significant competitive advantage(Swafford et al., 2006). An enabler of supply chainagility, IT competence can also place SMEs in a bet-

Exhibit 1. A Framework for the Relationship Among

Organizational Culture, IT Competence, and Supply Chain

Agility

ter position. An organizational culture that allowsSMEs to be responsive to the market in terms ofsupply chain agility can also promote competitiveadvantage.

Based on the literature discussed above, a concep-tual framework has been developed for SMEs thatproposes IT competence (IT integration and IT flex-ibility) as the predictor for supply chain agility (senseand response). In this model, organizational cul-ture is believed to have a direct impact on sup-ply chain agility, along with a moderating effect onthe relationship between IT competence and supplychain agility. This framework constructs dimensionsthat would help to establish a market-driven supplychain agility system (see Exhibit 1).

Flexible and responsive organizational culture helpsto shape supply chain agility. Scholars have sup-ported a supply chain system that should be flex-ible enough to meet market needs and conditions(Gunasekaran, Lai, & Edwin Cheng, 2008). Theyalso note that such a flexible and responsive systemcan only be implemented successfully if the organi-zational culture is sufficiently dynamic and strong(Chatman & Jehn, 1994).

The influence of organizational culture can be saidto be a catalyst for agility in a business organization.It can be argued that once the management of the or-ganization has the desire and the capacity to adjust,it can align itself with the market environment. The

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capacity to adjust, however, refers to the significanceof individual competencies that will enable changeand responsiveness.

Business managers need to carry out a diverse rangeof activities that require specific competencies, in-cluding those involving IT. A significant numberof studies support the notion that IT-enabled sup-ply chain management can enhance the competitive-ness of a business through communication, collab-oration, and coordination across the organization(Liu, Ke, Wei, Gu, & Chen, 2010). One study alsorevealed that organizational culture influences theuse of technology among individuals (Cronley &Patterson, 2010). Since the use of technology de-pends on the level of IT competency, it can be as-serted that organizational culture can build up ITcompetencies among a firm’s employees. A market-driven organizational culture can value the impor-tance of IT competencies in promoting supply chainagility. The following propositions are based on thisdiscussion:

Proposition 1: Because of the moderating influenceof organizational culture, IT competence has a pos-itive effect on supply chain agility in SMEs.

Proposition 2: Organizational culture has a directrelationship with IT competence and supply chainagility in SMEs.

The Benefits of an Effective Supply Chain

An effective supply chain that is both flexible andresponsive is essential to helping SMEs improve re-lationships with their stakeholders and thus affirmtheir position in the market, particularly in a turbu-lent and uncertain environment. But accumulatinginformation and knowledge is not enough for sur-vival.

The ability to both sense and respond enables thesupply chain to react in a way that will secure theorganization’s competitive position in a volatile mar-ket. As a competitive tool, information technology

can also help SMEs to improve sensing and respond-ing capabilities. SMEs should utilize the benefits ofIT competencies to arrange their activities to en-able business operations to run more smoothly andachieve competitive advantage.

Many external and internal factors have an ef-fect on the relationship between IT competenciesand supply chain agility. Organizational culture, aninternal factor, has a significant influence on allthe processes of the firm, which significantly in-fluences its overall operations. Since organizationalculture is a complex combination of roles, norms,values, beliefs, assumption, and symbols, each ofthese characteristics affects the attitudes of employ-ees and managers in contact with external and in-ternal environment changes. Any aspect of organi-zational culture that creates an obstacle to progresswill hinder goal achievement. An organization’s cul-ture can, however, contribute to competitive advan-tage when it helps the firm use IT competencies toquickly sense market changes, adopt the changesmore easily, assure logical treatment of unexpectedchanges, and respond to the changes in a timely andcost-effective manner. Without a doubt, organiza-tional culture plays a prominent role in supply chainagility.

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Shaghayegh Malekifar is a PhD student in the area of op-erations management at Universiti Teknologi Malaysia. Herarea of interest is supply chain agility in SMEs and large en-terprises in developing countries, and her work has been pre-viously published in several journals. She can be contacted atshaghayeghmalekifar@gmail.com.

Seyedeh Khadijeh Taghizadeh is a PhD student in the areaof marketing and innovation at Universiti Sains Malaysia.Her areas of interest are service innovation, sustainable de-velopment, and entrepreneurship. She can be contacted attaghizadeh.nastaran@gmail.com.Syed Abidur Rahman, an assistant professor in the Busi-ness Administration Department of Stamford University,Bangladesh, is a PhD student in the area of sustainable de-velopment and entrepreneurship at Universiti Sains Malaysia.His areas of interest are base of pyramid, entrepreneur-ship, and sustainable development. He can be contacted atsyedabid728@gmail.com.Saif Ur Rehman Khan is an associate professor of man-agement at Universiti Teknologi Malaysia. His area ofinterests are operation management, marketing manage-ment, and finance principles. He can be contacted atdoctor.saifkhan@yahoo.com.

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