ICT and e-Business Impact in the Furniture Industry - empirica

ICT and e-business impact in the furniture industrynumber and size of supplying firms as well as the number and preferences of customersand their size in case of businesses. An important aspect of market structure dynamics isthe level of ease of market entry. Further industry structure characteristics are related toproducts, production and production factors: the degree of product differentiation, thedegree of vertical integration of production, i.e. value chain characteristic, thetechnologies available to the firms, the firms’ cost structure (i.e. the relative importance ofcosts for items such as production facilities, energy, personnel), and finally the workforcecomposition and the demand for labour, most importantly with regard to knowledge andskills. All these characteristics determine the level of competition in the industry.These industry structure components influence a firm’s conduct. The conduct aspectsmost important here are production strategies, particularly with regard to inter-firmcollaboration, as well as investments in ICT and in ICT-enabled innovation.Finally, a firm’s performance is assumed to be the outcome of its conduct. Successfulinnovations improve firm performance by, for example, reducing production cost,increasing productivity, improving product quality or enabling it to enter new markets. Thismay eventually lead to increased sales, turnover and market shares.Extending the SCM paradigm: feedback effectsIn contrast to the standard SCP paradigm, the flow of causality is in fact not onedirectional(Fauchart and Keilbach, 2002 and Nepelski, 2003). As an example offeedback between performance and industry structure, successful and innovativecompanies are more likely to grow and increase their market share at the expense of lessprogressive firms, which transforms the market structure. There may also be feedbacksbetween conduct and industry structure: for example, depending on the innovation type –i.e. product or process innovation, ICT-enabled or not –, innovations influence the choiceof products manufactured and a firm’s cost structure. Innovations may also change theincentives to perform activities in-house versus outsourcing them and, consequently, mayinfluence the demand for labour and its composition. It may also further shape therelationships with suppliers and customers, for example with regard to collaborationintensity. Thus, in the following discussion it is assumed that firm performance may havea feedback effect on both firm conduct and industry structure, and conduct may have afeedback on structure. This conceptualisation allows for an enhanced economic approachthat studies the drivers and impacts of ICT and ICT-enabled innovations at the firm andsector level. Exhibit 4.1-1 illustrates the SCP paradigm together with the causalityrelationships of the elements studied in this sector report.Exhibit 4.1-1: Conceptual framework for the analysis of e-business impactsStructureStructureConductConductPerformanceMarket Market / / firmfirmcharacteristics:characteristics:- - MarketMarketstructurestructure- - TechnologyTechnology- - Value Value chainchainICTICTICT ICT enabledenabledadoptionadoptioninnovationinnovationFeed-back loopsPerformance:Performance:- - ProductivityProductivity- - TurnoverTurnover- - Market Market shareshareSource: DIW/empirica79