Higher Order Control Loops as a Determinant of B2B E-commerce Performance: a Comparative Model from Australian Empirical Evidence

Much of the literature relating to the implementation and use of business to business (B2B) e-commerce technologies focuses on benefits, outcomes and the use of technology. The purpose of this paper is to test the relationship between the use of B2B related techniques and methodologies and firm performance in the context of a "systems" view of managerial cognitive processes. This view of the strategic logic development process proposes that organizations faced with rapidly changing environments use "higher order control loops" to enable rapid and effective adaptation. Sanchez and Heene propose three approaches in order to allow managers to interpret data that is often subject to causal ambiguity and long dynamic response times: Benchmarking; Challenging Cognitive Frameworks; and Environmental Scanning (Sanchez and Heene, 1997, Sanchez, 1997). It is hypothesised in this paper that these three elements, (as well as an additional factor capturing the involvement of organizational stakeholders), have a significant relationship with the performance of organisations using B2B e-commerce methods. A model is developedtesting the relative causal paths between these "higher order control loops" and firm performance, and a number of indicators of B2B adoption. The causal model developed, and the relationships tested, are derived from data collected from 335 Australian organizations involved in the use of B2B methods for the management of their supply chains. The results indicate that the use of "higher order control loops" are a significant determinant of performance related to B2B use and implementation, and that although B2B enablers such as technology investment, infrastructure investment and cooperative arrangements with suppliers and customers are significantly correlated with performance, they do not appear to determine it.