INTER-ORGANIZATIONAL COMMUNICATION AND DECISION SUPPORT IN SMALL by tzm16628

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									     INTER-ORGANIZATIONAL COMMUNICATION AND DECISION SUPPORT
                       IN SMALL BUSINESSES

                                       Suling Zhang
            Department of Information Systems, New Jersey Institute of Technology
                   Guttenberg Information Technology Center, Suite 4400
                               323 Martin Luther King Jr. Blvd
                                     Newark NJ, 07102
                                       sz29@njit.edu
                                     +1 (973) 596-3366


Abstract

There has been very limited research in the area of small business decision making. Many issues
remain unexamined and one important issue is the communication processes underlying the
inter-organizational decision making in small businesses. In the trend of globalization, small
businesses build network or alliance with other businesses to tap into external resources.
Considering this web of relationships, decisions of small business are often made as an inter-
organizational communication and negotiation process. To examine how technology can support
such communication process, a case study is conducted and problems in the communication
process are identified, including information ambiguity and conflicting understanding, trust
issue, domination of bigger companies, and communication workload problem. For each
problem, preliminary technological solutions are proposed.

Introduction

Small businesses are an important and integral part of every nation’s economy (Hambrick and
Crozier, 1985). In the United States, small businesses account for almost one-half of the gross
national product, create two-thirds of new jobs and invent more than one-half of the
technological innovations (U. S. Small Business Administration, 2001). From many
perspectives, small businesses are unique. They are likely to be limited in financial,
management, human, and information resources (Aspelun & Moen 2003), with different
managerial processes and structures that are less rigid, sophisticated, and complex than those in
larger firms.

In the last past decade, with the increase of evidence in the awareness and investment from small
businesses to information technologies, there has been significant convergence of IS research
and small business research. The major stream of small business IS research has been focusing
on the technology adoption decision and implementation practices in small business. However,
small business research has been criticized as adapting theories exclusively developed for large
corporations (Southen & Tilley 1999) and a number of important areas are under-researched
(Premkumar 2003).

One area of small business IS research warrants more exploration from the academicians are
decision support. Sporadic studies have been conducted which examined how analytic models
can be used to complement the intuitive decision styles and bring more scientific operational
management into small businesses (e.g. Hayen 1982; Houben, lenie and Vanhoof 1999). These
researches were conducted in a context where a single or a small number of small business
managers made decisions independently. Nonetheless, in the new business environment of
increasingly globalization and more-than-ever intensive competition, decisions in small
businesses are often made in a new fashion. Small businesses, typically with limited resources,
build a network and alliance with other businesses to expand its operation into a larger market
with the help of external resources. Decision in one small business is influenced by other
businesses in this network. To carry out its plan, one small business often relies on the
commitment of other businesses and the impact of one small businesses’ decision will ripple
through the network. The new decision-making environment demands collaboration and
communication between different businesses. Therefore, though traditional model-based DSS
still hold its place in small businesses, it is also important to develop an understanding how the
communication-intensive decision-making in small business can be facilitated by decision
support systems. To that end, this paper first reviews existing literature from several fields; based
on the literature review results, the research question is refined; a case study in a small business
with a network of business partners is presented; typical communication-intensive decision
making scenarios are accounted; problems and issues are identified and preliminary analyses are
done in terms of how information technologies work or fail to solve these problems. The paper
concludes with a discussion of the contribution and limitation of this paper and suggestion for
future research.

Literature Review

Small Business and Decision Support

The definition of small business is controversial. A variety of different standards including
industry type, sales volume, the number of employees and etc. have been used. This paper adopts
one of the most popular definitions from U.S. Small Business Administration: Small Businesses
are independently owned and operated and not dominant in its field of operation (Small Business
Administration 2003). Past organizational science research has found the importance of the role
of owner manager in small businesses. There are often only one or two managers in small
businesses and the businesses are very dependent on the decisions of the owner manager (
Feltham, Feltham & Barnett 2005). In view of three levels of management activities: strategic,
managerial and operational, small business lacks of long-term planning as long-term planning is
considered time-wasting or resource-costly (Miller & Toulouse 1986; Temtime, Chinoka &
Shunta 2003). Other researchers explained from another perspective that small businesses’
strategic planning is constraint by the competition level it is faced with and small businesses tend
to adopt the strategy of market leaders instead of inventing strategies of their own (Dodge,
Fullerton & Robbins 1994). Small business managers, however, are very involved in operational
management but they resist the use of quantitative methods, more comfortable with intuitive
decision making (Chaudhry, Salchenberger & Beheshtian 1996; Dianich & Gupta 1983).

Small business decision support research has focused on introducing operational management
principles and theories into small businesses. Model-based decision support systems were found
improved the efficiency and quality of decision making in financial planning (Hayen 1982),
inventory management (Chaudhry, Salchenberger & Beheshtian 1996), and other management
activities. Some researchers attempted to find ways to use rational decision making method to
complement the intuitive way of decision making (Dianich & Gupta 1983). In addition, several
studies have been done on the adoption and implementation of DSS in small business (Lai 1992;
Raymond & Bergeron 1992). At the same time, industry practitioners have called for the use of
more powerful software and applications in small businesses (Heathfield 1997). However, from a
technology determinism perspective, they along with the adoption research stream have assumed
the benefits inherent in the use of technology, failing to examine the complexity of small
businesses.

Small Business and Communication

Small businesses are considered characterized by a flat organizational hierarchy and close
proximity to coworkers, which is believed to contribute to effective communication practices,
often comprised of informal channels (Vinten 1999), and typically carried out face-to-face as the
need arises rather than through formal communication channels such scheduled meetings.
Nonetheless, it is found that as small business grows, especially into a global market, traditional
face-to-face is not sufficient any more.

Small enterprises are increasingly active in international markets (Erramilli and D' Souza 1993;
Haahti, Hall, and Donckels 1998). In addition, a growing body of research has found the trend of
building business-oriented relationships outside organizational boundaries in small businesses
(Street & Cameron 2004). The web of external alliances provides a wide variety of tangible and
intangible benefits. Small businesses use external relationships to tap into these resources to
extend their reach. Such practices help small businesses to overcome resource constraints of
time, capital, and expertise by looking outside the company for colleagues and collaborators
(Gomes-Casseres 1997; Lipparini and Sobrero 1994). More and more, companies have to see
their business processes in a wider context where many companies contribute complementarily
to achievement of business goals. In this light, the companies have to integrate business partners
into effective information and communication. Moreover, as decisions will impact a small
business’ partners in the network and many decisions need to be carried out collectively by the
businesses in the network, external communication becomes an integral part of decision making.
In the communication process, information is exchanged, understanding is established and
commitment is promised. Such process crosses organizational boundaries and geographical
distances and has to be facilitated by information and communication technologies.

Considering the potential significance of networking strategy toward the wellbeing of a small
enterprise (Feindt, Jeffcoate, and Chappell 2002; Alvarez and Barney 2001; Hite and Hesterly
2001), it is imperative to examine the external communication process small business managers
engage in when making decisions with partner businesses and how information technologies can
be developed or used to support the process. The literature review in the last section shows that,
from this perspective, the small business decision support research has not inadequate. They are
more objective model oriented and little has been actually known about the communication
processes underneath decision making.

Social Communication
The inter-organizational communication involved in small business decision makings is rife with
risks: Business partners in the network may not have common goals in every decision making
scenario and understand the problem from the perspective developed from their own individual
experience. Information may be withheld from others and even wrong information may be
intentionally conveyed. Inter-organizational trust may not be at a level to make one business to
commit to the decision from another one. Due to the small scale of operation and resource
constraint, facing with conflicts and differences, a small business cannot use dominant buying or
selling power to force compromise from other parties, like big corporations would be able to do.
Instead, a typical inter-organizational decision-making communication process in small business
is expected to be a process of establishing mutual understanding, negotiating differences and
fostering trust. Smoliar and Sprague (2002) view such a process as social communication in
interactive decision making, which has three dimensions: meaning, authority and trust.
“Meaning” simply means what things mean. Smoliar and Sprague (2002) explains the volatility
of business world makes difference in understanding what things mean a norm. They emphasize
that the right format and material through which information is presented is essential to solving
difference in “meaning” understanding. By “authority”, they mean the authority from the
organizational position or functional expertise. They think conflicts are inevitable, but conflicts
should be solved through negotiation not authoritarian mandate. Authority determines more on
the responsibility of what a person brings to the communication. Technology can be used to
facilitate communication to move away from authority. However, awareness of who has the
expertise should be fostered. Trust is needed for members to accept interpretations of meaning.
To build trust in communication, technology should be used to improve awareness of prevailing
opinions through collecting, visualizing and filtering opinions.

The proposals of Smoliar and Sprague provide insights into the social interaction process in
interactive decision making and give an organized way to look at the situation. They emphasize
conveying the “meaning” and create shared understanding of “meaning”. While they inspire this
paper on the shared understanding issue in the small business issue, they do not consider many
other important issues such as information sharing, motive conflicts and etc.

In summary of the literature review section, there has been very limited research done in the
small business decision support field. The existing literature yields little knowledge on the inter-
organizational decision making process in small businesses. The communication processes
underlying such decision making is subject to various risks. Nonetheless, theoretical research by
Smoliar and Sprague, though not addressing the unique situation of small business, gives some
initial thoughts.

After thorough review and drawing on different perspectives, the research question raised at the
beginning of the paper is refined as: what problems actually exist in the inter-organizational
communication processes underlying interactive decision-making in small businesses and how
such problems can be overcome from a technological persecctive.

Research Method
As the first attempt in this research field, this paper is not to get deep theories. It aims to do a
descriptive study of this new issue and give preliminary analysis. As Benbasat et al. (1987)
suggest, when an area is new and few prior studies have been done, the researchers can begin
with recording the trial-and-error process of the practitioners and formalize knowledge from
accumulated understanding. They suggest case method is appropriate for a research question
where no established theories exist and the research question is of an exploratory nature. Small
business IS researchers have criticized using quantitative method and modeling based on theories
which are exclusively developed for large corporations (e. g. Southen & Tilley 1999; Swartz &
Boaden 1997). These researchers also recommended qualitative research method.

In this study, case study is conducted to identify the actual problems in the decision process this
paper targets.

Case Study Site Selection

The study site should be a small business with typical resources constraints and dependence on
owner manager. Also the study site company should have a network of external partners and
collaboration in the network is extensive. The decision processes should often involve interaction
with other businesses, so the manager can give a good account of decision making experience the
study is looking for. To select such a company, the author talked to several small business
managers and choose Company A (the name is changed for privacy purpose). This company
meets all the standards. Also the author has strong connection with the managers of this company
so the managers trust the author and gave rich information.

Overview of the Study Site

Company A is an E-commerce retailer. It sells brand-name gifts and its customer base consists of
customers from all over the world. It has five employees and one owner manager. The owner
manager along with another manager conducts all managerial activities in the company and is
also into the daily operations of the company. The annual sales of the company are under $1
million and the company is actively seeking new business partners to expand its business. The
order fulfilling process of the company is carried out in close collaboration with its suppliers.
The company does not carry any inventory. When an order arrives, the company processes the
order then send shipping request to the suppliers. The suppliers ship the product from their
warehouse. Very high level of collaboration is required to fulfill each order. Decisions about the
company’s product and service offering, and pricing and marketing strategy are largely
influenced by the information provided by and the ability to cooperate of the suppliers and also
need the supplier to work together to make the decisions a reality.

Data Collection Method and Analysis

Case study should use multiple data collection methods and results collected through different
channels can be used to triangulate in order to improve the objectivity and validity of analysis
and conclusions (Benbasat et al. 1987). In this case study, three data collection methods were
used. First, the managers were interviewed in-depth about detailed processes of inter-
organizational decision-making, communication practices involved, communication technologies
used, and issues and problems associated with the communication. Second, the managers were
also observed making such decisions. Third, communication record including IM transcripts and
emails were collected. The information collected from the latter two methods corroborates the
description of the manager and complement it with a higher level of details. No conflicting
results were identified. It is believed that the data collected from the three methods give a
cohesive and objective picture of the inter-organizational decision making processes in Company
A.

Patterns about problems which occurred during the communications are induced and reasons are
explored. In the following section, the results about the problems and the reasons behind the
problems are presented and illustrated by typical scenarios. It was found Company A uses phone
calls, and text message exchange in email and instant messaging to communicate with its
suppliers. These basic communication tools cannot provide effective solutions to the problems.
Therefore, for each problem, how other technologies can help is analyzed.

Problems, Reasons and Solutions

First, information ambiguity and understanding conflicts

The message conveyed is ambiguous and the decision makers from different parties may
interpret the message in more than one way. There is no shared understanding of what the
message means. The owner manager gave an example about this problem: Company A needed to
decide on the price on some new laptop models. The supplier of the laptops emailed the spread
sheet containing the prices upon the request of Company A. There were three types of prices in
the spread sheet: market price, retail price and wholesale price. The manager of Company A
determined that the “market price” is the price other retailers in the market use and the “retail
price” is the cost Company A needs to pay the supplier. It turned out that “retail price” was
actually the dominant price on the market and “wholesale price” is the cost Company A needs to
pay. The problem occurred mainly because of information asymmetry and the poor way
information is presented. The supplier is in a country where the retailers usually list an “official”
market price but actually sell the product at a discounted price. Since this becomes the standard
practice of the retailers, the actual market price is the “discounted” retail price. However,
Company A is not aware of such a phenomenon. Also the prices are presented as mere numbers
and there lacks the additional cues through which the managers of Company A would’ve gained
better understanding.

This problem is a common issue, as the businesses are in different market positions and
knowledge of different companies is developed in different business environments and social
cultures. The consequence of this problem can be highly costly if critical business decisions are
made with wrong interpretation. It also slows down the decision making process. It takes time
for the managers to find out about the problem and revise the decision. To solve the problem,
technology should facilitate the awareness of the context where information is created. No GDSS
or CSCW studies have been found addressing this problem. Some communication theories have
touched on the issue, though.
McGrath and Hollingshead (1993) proposed a relationship between medium and task types based
on information richness. Task types include idea-generation, negotiation, and intellective tasks.
Negotiation tasks are further categorized into cognitive conflict and mixed-motive tasks.
Cognitive conflict tasks are those in which group members have conflicts of viewpoint and
mixed-motive tasks are those in which group members have conflicts of interest. Both task types
exhibit equivocality and uncertainty phenomena. They argue that to reduce equivocality, richer
communication means should be used. Then it can be inferred that to solve information
ambiguity problem, increase the bandwidth of communication technologies in terms of the
capability to convey multiple cues will help. For instance, automatic hyperlinks can be added
into the spreadsheet so documents, videos, or audio files which provide additional background
information on an item in the spreadsheet will be retrieved. However, this preliminary solution
only provides a starting point. How such rich communication media should be actually integrated
in the whole decision processes is still a question.

Visualization tools can be used to present the information in a visualized way managers can
intuitively understand the information with little cognitive efforts. Many DSS tools come with a
set of visualization functions. Also it will be useful if the visualized results from one company’s
DSS can be read by commonly available application which the manager of another company
may use and can be used directly as input to the DSS of the other company.

Recent development in semantic integration also sheds light on the solution of the information
ambiguity problem. When ambiguity arises because of difference in the contexts of information
receiver and sender, shared ontology can be developed to representing, processing, and reconciling
heterogeneous data semantics. However, to date ontology sharing technology only address differences in
object context variables such as currency, weight measurements and etc. In the small business inter-
organizational decision making process, communication barriers exist, in many cases in the sharing of
subjective data such as managers’ judgments and evaluation.

Second, trust problem

Trust problem occurs when there are conflicts of interests. Conflicts arise often because each
business acts in an individually rational way for its own good or seeking to maximize its own
utility. The manager of Company A depicts such an example: Company A needed to decide on
which new models of a brand-name watch will be added to their E-commerce website. They
asked their supplier what options the supplier could provide. The supplier wanted to make as
much profit as possible. Even though they could not guarantee the stable supply of some models,
they withheld this information from Company A. Instead they told Company A to market all the
new models. Later on, Company A had to remove some models from their website after several
experiences where the supplier did not have the product in stock. Reputation and credibility of
Company A was damaged in these incidents.

To solve this problem, Smoliar & Sprague (2002) propose that technology can be used to collect
and visualize the prevalent opinions which are hold by most parties in the negotiation. DeSanctis
& Gallupe (1987) suggest a similar solution where the opinions of team members are aggregated
and presented in a way everyone in the team can see. Besides that, the author believes increasing
external transparency will help. Street & Meister (2003) explains that external transparency is the
outcome of communication behaviors directed outside the organization. From the supply chain
management perspective, information exchange between supply chain partners (e.g., Lamming et
al. 2001) is described as a type of transparency. One type of information that can be made
transparent is cost. With such transparency, one company will believe the truthfulness of the
information provided by other companies and will be able to collect information the other
companies unintentionally omits to transmit. The positive role of IS in increasing transparency
has been highlighted (Min et al. 2002). However, detailed solutions on increasing transparency
have not been studied. The author proposes some additional features of DSS may increase
external transparency. For instance, a list of businesses which will be impacted by the decisions
is recorded in the DSS; when a decision is being made, the DSS also models the impact on the
other businesses. A report is automatically generated including, for example, cost consideration,
action plan and etc, and sent to the other businesses.

Third, domination of larger partners

Larger partners possess dominant power over smaller ones in the supply chain and are often
unwilling to reconcile in case of interest conflicts or to cooperate with other businesses when
collective efforts are needed. The managers of Company A complained about some of their
bigger partners and here is an example: High-quality service is one of the primary strategies
Company A deploys. They provide services such as sending a free greeting card along with the
gift and these services have distinguished Company A from its competitors. The actual
fulfillment of these services often falls onto the shoulder of the company’s suppliers. However,
when deciding on what service the company can provide with the pearl jewelry products, the
manager found it hard to negotiate with the pearl jewelry supplier, the largest pearl jeweler in the
country, even when Company A is willing to pay for premium costs for the services.

    This issue is similar to the “authority” issue Smoliar & Sprague posit, in that bigger
companies generally have more authority in negotiation. Traditional GDSS addresses this issue
by implementing anonymity feature in hope that participants will not be judged by their
organizational position or expertise and social barriers to participation will be removed.
However, this approach will not work in the context of small business problem as the domination
of bigger players cannot be overlooked or circumvented. To address this problem, technological
support must be designed in the context of the relationship of bigger companies and smaller
companies. Some artificial intelligence research has been trying to find ways to reduce the
influence of domination. For example work practices may be mediated by conversational agents as a
move away from authority figures (Smoliar & Sprague 2002). The capabilities of such artificial agents
have been investigated by Elizabeth Churchill et al. (2000).

Fourth, communication workload

Most of the decision making, due to the negotiation nature, is communication intensive. Also
because of the volatile business environment, decisions have to be reevaluated frequently and
new rounds of negation begin. This creates large volume of communication workload and results
in communication fatigue. As the manager of Company A explains: For each new product or
service, he has to negotiate with his suppliers and negotiation lasts intermittently over a few days
before a final consensus can be reached. Sometimes, he simply gets tired of communication and
makes a hasty decision.
To deal with this problem, technologies should be used in a way that facilitates efficient
communication. First of all, communication media need to be carefully chosen. For example,
communication media with features such as presence awareness, real-time exchange of
messages, like instant messaging, results in higher response rate than telephone calls (Herbsleb et
al. 2002) and can be used to initiate a communication process. Also managers should control the
variety of communication tools they use to reduce information complexity (Rennecher &
Godwin 2003). In addition, as small business managers need to frequently reevaluate the basis of
decisions they made, the DSS models should be designed to be easily understood by the
managers. The models should also be easily tried and modified so the managers have less
workload in revising decisions.

Discussion

The four types of problems identified in the case studies are interrelated. For example,
information ambiguity may be attributed to information withholding or distortion due to lack of
trust. They should not be viewed as existing independently.

Traditional DSS technologies fail to address these problems effectively. The communication-
based GDSS are more oriented towards groups who work for one organization and do not
address the social aspects of communication processes such as trust or shared understanding.
Actually social processes in decision-making groups are considered detrimental to the quality of
decisions. It is often assumed that removing social influence of the group on its members
improves group decisions. GDSSs are increasingly used to remedy the social faults of the
decision-making process in groups. In these systems, anonymity is seen as tool to reduce the
impact of the group over its members, and therefore as the key to improved group performance.
In their meta-analytic review, Postmes and Lea (2000) examines the assumption that anonymity
in GDSSs is beneficial for group decision-making on a range of performance indicators. They
find that the effects of anonymity on group performance are mixed and argue that performance in
decision-making groups partly depends on the social context and relevant social norms.
Therefore, to support communication-based inter-organizational decision making in small
businesses, GDSS design must facilitate the inter-organizational social communication process
and address the special problems in the process.

Some agent-based decision making research have also attempted to facilitate communication
processes in the group interactive decision making. One popular agent-based process is multi-
attribute negotiation process. According to Jonker and Treur (2001), the multi-attribute
negotiation process includes the following five steps: (1) Evaluation of the attributes of the initial
solutions made by the participants; (2) These evaluations are aggregated into overall utilities of
these initial solutions; (3) Provision of the target utility; (4) Based on the target utility and the
distribution of attributes, the values of the target attributes are determined, which lead to a new
round of decision making; (5) For each of the target attributes, an attribute value is chosen that
has an evaluation value as close as possible to the target evaluation value for the attribute.
However, this method assumes 1) the participants will objectively and truthfully evaluate the
attributes and set the objective; 2) the participants will trust the input from each other; 3) there is
no authority issue. These three assumptions do not hold in the case of small business inter-
organizational decision making.
The contribution of paper is that it identifies an important area where researchers can provide
wisdom and guidance to the practitioners. Moreover, some preliminary technological solutions
are proposed and may inspire the small business practitioners to use technologies to better
support their inter-organizational decision making process. As the first study in this field, this
paper serves as a starting point for future research.

However, this paper is not without its limitations. This paper only studies the support of the
inter-organizational decision making from a technological viewpoint. The author recognizes that
technology alone cannot effectively solve the problems. The organizational and managerial
factors must be studied in light of how they can significantly improve the process and be
combined with the use of technologies.

Also this study uses the method of single case study. A major concern about case study has been
about generalizability. Generalizability may be impacted by the subjective lens through which
the researchers collect and interpret case study results as well as the small number of research
sites. The findings of this study should be tested in more varied types of organizations. Also, in
future study, quantitative method, such as questionnaire survey, should be used to get data from a
large number of small businesses and rigorous statistical analysis should be conducted to
triangulate with the results from the case study. Such “in-between” research methodology will
yield more confident inference and more convincing results (Swartz & Boaden 1997).

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