The Impact of Electronic Data Interchange (EDI) on SMEs: Summary of Eight British Case Studies

Abstract

Electronic data interchange (EDI) has its roots in Morse code and the telegraph technology of the 19th century. In its present form, it dates from the 1980's and is a product of the synthesis of information and telecommunication technologies. EDI can be defined as the electronic transmission of information or documents between the computer systems in different organizations based on a standard, structured, and machine-retrievable format. EDI has been widely accepted as an essential business tool used to facilitate inter-organizational transactions and sometimes to enhance internal operations by integrating internal and external systems. It is also claimed to achieve quick response and just-in-time stock handling in order to gain competitive advantage. In addition, it is claimed that EDI improves trading relationships by sharing information between trading partners. Although many EDI publications have become available, there are very few studies of the effect of EDI on small firms, and those that do exist are contradictory. There may many reasons why this may occur, for example: the studies may be uncritical because they are premised on an evangelical notion of EDI (EDI World Institute 1995); they may be written from the premise that SMEs are merely miniature versions of large enterprises (Holland, Lockett, and Blackman 1992; Pfeiffer 1992; and Horluck 1994); they may be written from the perspective of large enterprises who wish to extend their span of control to SMEs using EDI (Iacovou, Benbasat, and Dexter 1995); they may be written from an organizational rather than inter-organizational perspective (Parfett 1992); and so on. The purpose of this study is to report first-hand experience of the effect of EDI in a sample of small firms in the UK from an independent perspective. The Study A questionnaire survey was used primarily to make initial contact with SMEs using EDI and also to collect background statistical data on the firms. The questionnaire was divided into the following sections: company background, computer experience, EDI experience, impact of EDI, respondent's background, comments on the questionnaire, and an invitation to participate in the research. The INS (International Network Service - one of the largest value-added networks in the UK) membership list was used to select organizations for the study. In this list there were 198 organizations that complied with the definition of SMEs given in the UK Companies' Act 1985. The questionnaires were posted with prepaid reply envelopes, and 76 were returned in two weeks. Of these 76 replies, 13 were returned blank, and 63 were completed. The final usable sample contained 44 companies, representing one per cent of EDI members in the INS community and a response rate of 22 per cent. Companies willing to participate in a follow-up study were contacted, and eight agreed to take part. Their profiles are summarized in Table 1. The research comprised a series of in-depth interviews with key personnel in each of the eight organizations. The data gathered from these interviews have [TABULAR DATA FOR TABLE 1 OMITTED] been analyzed according to a number of emerging themes, discussed below. Results The findings from the cases are grouped together and discussed under a number of themes relevant to both SMEs and EDI. These themes include the organizational context of SMEs (particularly the role of the owner-manager); interorganizational relations (power dependency and inter-organizational information systems); and the flexible responsive attributes of SMEs. The eight companies in the study were all small in size. Half of them had fewer than 30 employees - even the largest company (Conservation Equipment Manufacturer) had fewer than 250 employees. Administrative staff were generally overloaded, and in most cases had to carry out more than one function. The management structures were very simple, with no more than three levels in any company. …

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