The Case of Canada’s Small Customs Brokers

Information Technology Projects by International Logistics Services Providers: The Case of Canada’s Small Customs Brokers

Haughton, Michael A

Abstract

This study explores the motives and effects of information and communication technology (ICT) investments made by some of Canada’s small customs brokers. Like other providers of support services for global supply chain operations, customs brokers have been implored to recognize the significant rewards of effectively deployed ICT. Using qualitative data on eight small Canadian customs brokers, this study determines the extent to which expectation of those rewards motivated the workers’ ICT investments. Drawing on institutional theory to complement the analysis, the study finds that the motives transcend belief in ICT projects’ inherent utility. This and related findings on the impact of ICT projects on the brokers, extend knowledge concerning the study of important ICT investment decisions in the context of trans-border goods movement.

JEL Classifications: O33, L8, L2, D81

Keywords: Technology Choice; Technology Consequences; Services Industry; Firm Behaviour; Decision-Making Criteria

Résumé

Cette étude examine les motifs et les effets des investissements réalisés dans la technologie de l’information et de la communication (ICT) par de petits agents en douane canadiens. Comme d’autres fournisseurs d’abonnement de maintenance des opérations de chaîne d’approvisionnements, ces agents étaient invités à identifier les récompenses considérables liées au déploiement efficace de l’ICT. À partir de données qualitatives portant sur huit agents, l’étude s’attelle à déterminer dans quelle mesure l’espérance des récompenses motive les investissements. S’inspirant de la théorie institutionnelle pour compléter l’analyse, l’étude constate que les motifs dépassent la croyance en l’utilité intrinsèque des projets ICT. Cette conclusion et l’impact des projets sur les agents, s’inscrit dans le prolongement des études sur les décisions d’investissement en ICT dans le contexte du commerce transfrontalier.

Mots clés : Choix de Technologie, Conséquences de Technologie, Service Industrie, Comportement de Compagnie, Critères de Décision

With increasing emphasis on the belief that ICT can significantly aid the competitiveness of customs brokers in their role as providers of services to support international logistics and supply chain management (ILSCM) operations (e.g., Briggs, 1997; Tausz, 2000; Woods, 1997), it would seem fair to conclude that the implementation (or at least the contemplation) of ICT projects by Canadian customs brokers has been based on such belief. Yet, at the same time, some commentators suggest that smaller customs brokers view ICT less as a means to exploit the potential opportunities (or prevent the consequences of missing out on those opportunities) than as an imposition reflecting the agenda and will of external entities. For example, Mark (2001) opined that the potential benefits of ICT have not been made sufficiently clear to generate universal enthusiasm among those brokers. This alternative suggestion raises the question of what the motives are for ICT initiatives by small customs brokers operating in Canada. Is it that the initiatives are, to use the words of Teo, Wei, and Benbasat (2003, p. 20), “driven by a rationalistic and deterministic orientation guided by goals of technical efficiency”? Or is it that, as Oliver (1991, p. 149) says, they merely are driven by pressures suggesting that “it would be unthinkable to do otherwise”?

The primary focus of this paper is to investigate these differing viewpoints on the motives for these brokers’ ICT projects. The investigation draws on institutional perspectives which reason that the motives for an organization’s decision to undertake an initiative such as an ICT project transcend belief in the project’s inherent utility. These motives include isomorphic pressures (see Tingling & Parent, 2002) that cause some brokers to imitate their peers’ ICT choices. The paper also addresses the related issue of how the projects undertaken have affected the brokers, and is based on qualitative data collected through telephone interviews and electronic mail from eight brokers. The study’s core contribution is a broader perspective on the motives and effects of ICT decisions by providers of support services for ILSCM operations. In particular, the stated or implied angle of analysis in previous studies of these service providers (Hellberg & Sannes, 1991; Murphy & Daley, 1996 is on the inherent cost, quality, and operational efficiency benefits of ICT with no real coverage of alternative motivations. There is slight coverage in a related but nonILSCM study by Lynagh, Murphy, Poist, and Grazer (2001), in which the nonimplementation of a website by competing logistics service providers (LSPs) was cited by 1 of 13 LSPs as the reason for not implementing a website. To be fair, elucidation of motives was not the primary aim of these papers. This paper seeks to fill that gap.

To clarify the research, the remainder of this paper is organized as follows: the next section provides an overview of the contemporary context in which Canada’s customs brokerage firms operate. The purpose of that overview is to profile the key types of ICT initiatives that are relevant to the work of customs brokers. Following that is a clarification of the study’s theoretical grounding in the extant literature, and a formal introduction to the research questions. The next section describes the research methodology and the last section presents and discusses the findings. The paper then concludes with a summary and an identification of potentially valuable work to extend the present research.

ICT in the Operating Environment for Contemporary Customs Brokers

The central task of customs brokers is to facilitate speedy and cost-effective customs processing of their clients’ shipments. Their work involves direct operational contact with Canada’s customs authorities during the import process and is therefore significantly affected by changes in Canada’s import procedures (Mark, 1997). The changes are manifested in the operations of the central authority: the Canada Border Services Agency (CBSA1). Many of the prominent changes are geared towards greater ICT-based automation of those procedures. The automation changes, which can be traced back to the Customs Automated Data Exchange System of 1988, have been complemented with regulatory changes, with a view to facilitating legitimate trade. The following summary, which draws on Haughton and Desmeules (2001), highlights the essential features of the trade facilitation philosophy and serves as a preamble to reviewing their role in the customs brokers’ ICT decisions.

A fundamental principle of the trade facilitation philosophy is to reduce unnecessary customs scrutiny that impedes the movement of shipments deemed to pose little or no risk to, primarily, Canada’s security. Risk assessment relies on ICT to gather and study the relevant data and intelligence on each shipment. Thus, CBSA’s automation initiatives for giving expedited clearance to low-risk shipments (e.g., the Pre-arrival Review System [PARS] and the Accelerated Customs Release Operations System [ACROSS]) require submission of relevant shipment particulars in electronic format to the CBSA before the shipment arrives at a customs checkpoint. To keep all importers honest, every shipment is subject to a possible random physical inspection. Similarly, by law, every importer’s international trade accounts are subject to random postclearance audits (i.e., after shipments have cleared customs) to determine, for example, if the correct duties were paid and if any trade regulations were breached (and, if so, what penalties apply).

The impact of automation and regulatory initiatives such as these affects the ICT decisions of customs brokers in terms of three general sets of processes: the preparation of shipment documentation for submission of documents to the CBSA, actual document submission, and processes following a shipment’s clearance or release. The importance of the link between ICT and document preparation can be related to, for example, the steep increase in fines that importers incur for breaching customs regulations. The punitive fines for underpayment of customs duties (whether resulting from inadvertent or deliberate misclassification of imported products) increase the desirability of customs brokers that have systems to minimize errors. These systems automate processes such as product classification and shipment data entry and without them a broker may be competitively vulnerable. A case in point is the highly publicized Matsushita project (Sheppard, 1995) which showed that importers can use software to self-perform product classification without customs broker assistance and attain significant cost savings. These software systems, often termed regulatory databases, cover customs regulations for matters such as product classification and tax or duty calculations. There is a mounting body of anecdotal evidence that importers and exporters in Canada and elsewhere are not only seriously eying this “do-it-yourself” option (Andel, 1997), but also achieving success with it.2 Thus, brokers may see the need to automate, inter alia, document preparation in order to stave off competition from ILSCM support service providers whose business model is based on supplying these regulatory databases (e.g., service providers such as Open Harbour, Vastera, ClearCross, and Management Systems Resources).

Regarding processes related to document submission, from an importer’s viewpoint it is beneficial for customs brokers to have the electronic data interchange (EDI) capability to submit their clients’ shipment documentation to the CBSA in order to take advantage of expedited clearance options such as PARS. Having this capability, as well as the capability to receive the documentation from clients in electronic format, would facilitate fast clearance of clients’ shipments. With respect to processes after a shipment has cleared customs, the previously noted issue of heavy fines for an importer’s noncompliance with trade regulations can play a significant role in a broker’s ICT decisions. Specifically, postclearance audits of an importer’s international trade records which reveal trade violations or shoddy record-keeping provide a basis for the levy of fines.3 Additionally, the suspicions created by an unfavourable audit report mean that the CBSA is unlikely to consistently give unfettered processing to subsequent shipments by a penalized importer. Therefore, customs brokers that have the data capture and maintenance systems to help ensure their clients get favourable audit reports from customs should be more competitive. Beyond these three general areas, there are many other ways that brokers can deploy ICT to help their clients in the present era: For example, Roberts (2000) presents an extensive range of potential offerings that ILSCM service providers can deliver to clients with the aid of ICT. However, the outline of the above three areas suffices to signal the relevant types of ICT since it addresses the key business processes that define what customs brokers do.

Theoretical Background and Research Questions

That the inherent utility of an ICT project (i.e., to improve the performance of business processes) triggers an organization’s adoption of the ICT offers only a partial explanation of the motives for ICT projects. That view from the extant literature is supported by findings from empirical work by Tingling and Parent (2002) and Teo et al. (2003). The former used an experimental study to show that even when an organization’s internal analysis of an ICT recommends a particular decision, that decision might be reversed to agree with the decisions of peer organizations, especially those of esteemed peers. In a survey of financial EDI (FEDI) in Singapore, Teo et al. found that even though an organization can, on the basis of belief in the inherent utility of FEDI, freely elect to adopt it, adoption decisions are also influenced by various forms of external pressure such as perceived dominance of customers who have adopted FEDI. These studies provide empirical support for a set of theories which posits the motives behind an organization’s decisions as institutional influences. The influences include the pressure on organizations to mimic their peers (isomorphism) and to choose practices that might not even be defensible on the grounds of intrinsic contribution to better organizational performance. That is, according to DiMaggio and Powell (1983) in quoting Selznick (1957, p. 17), adoption of such practices is not necessarily driven by anticipated improvement in organizational performance but merely by the practices having become “infused with value beyond the technical requirements of the task at hand” (p. 148).

DiMaggio and Powell (1983) present a framework that classifies institutional pressures into three broad types: mimetic, coercive, and normative. To summarize, the practices an organization adopts can, respectively, be viewed as reflecting tendencies to (a) mimic the choices of esteemed peer organizations (mimetic); (b) remain in the good graces of the practice’s endorsers or adopters on which the organization is dependent for, as an example, legitimacy and economic survival (coercive); and (c) avoid practices that would be inexplicable in light of what appears to be standard practice (normative). While one can find examples to distinguish among these pressures (e.g., from the perspective of the diffusion of innovation theory by Rogers, 1995), normative pressures might be more of a motive for the late majority adopters because adoption by other organizations has caused the new practice to be viewed as the norm. It is generally accepted that the three pressures are not always empirically distinguishable (DiMaggio & Powell, Tingling & Parent, 2002). Thus, in this paper’s analysis to determine what institutional isomorphic pressures might be influencing the customs brokers’ ICT projects, the emphasis is more on detecting the existence of such pressures than on specifying which of the three classes each observed pressure falls within.

For customs brokers in Canada, the institutional pressures are characterized by suggestions that the CBSA, in seeking to automate customs clearance processes, is imposing its will on the trade community to make concomitant adjustments. One angle to this suggestion is that this community, rather than universally and enthusiastically embracing these adjustments, sometimes views them as obligatory. As noted in Mark (2001 ), one of the recurrent explanations for the lack of enthusiasm among smaller brokers is that, unlike the larger rokers, they have difficulty envisioning real benefits from making the required ICT investments. To examine the validity of the suggestion, this study asks the specific question: Does the case-study evidence indicate any support for the alternative hypothesis that ICT adoptions are motivated by institutional pressures?

The study’s other major focus is on the postadoption organizational effects of the customs brokers’ ICT projects. Like motives, which can be viewed as coming from two broad sources (institutional pressures and anticipated performance improvements), effects are not of a single variety: positive, negative and ambiguous effects have been reported in the literature. In the ILSCM literature, the general impression is that the effects are positive. Examples include practitioner-oriented papers espousing the idea that ICT can enhance the competitiveness of customs brokers (e.g., Briggs, 1997; Tausz, 2000; Woods, 1997). Other examples are scholarly papers such as Helberg and Sannes’s (1991), which reported savings by Norwegian international freight forwarders who applied EDI to their core business processes. Beyond the ILSCM literature, examples on the positive side include Shao and Lin (2002), who present strong statistical evidence to “confirm that IT exerts a significant favourable impact on technical efficiency and in turn, gives rise to productivity growth” (p. 391 ). Still, several other empirical studies are less definitive and tend to view the success of IT investments as context-dependent. For example, Mukhopadhyay, Lerch, and Vandana (1997) found ICT to significantly improve productivity for complex toll-collection transactions but not for simple ones. Other studies of this ilk include Hitt and Brynjolfsson (1996) and Li (2000).

An example of the potential ambiguity of an ICT’s organizational benefit appears in Orlikowski and Baroudi (1991). In that paper, the authors review an earlier study on the impact of electronic point of sale (EPOS) systems in retail organizations and note that EPOS can be used by management to produce outcomes that may have little or nothing to do with improved performance of business processes. In making their point, they cite one of the study’s conclusions: “the information technology represented by EPOS systems is malleable, that is, capable of being deployed by managers in ways that reflect and sustain the existing social relations and management control systems” (Orlikowski & Baroudi, p. 7). Given the potential for variety in the effects, this paper’s descriptive contribution will focus on detecting the existence of each of the three types of effects (positive, negative, ambiguous) and on illuminating their particulars. A key element of this undertaking will be to address the following question: Are positive outcomes from ICT projects more likely to be cited by brokers who were motivated by belief in the intrinsic performance improvement value of the projects?

Methodology

This study may be described as a mixed qualitative and quantitative analysis of a small sample survey. In terms of the qualitative methodology suggestions in works such as Berg (2001), Crabtree and Miller (1992), Marshall and Rossman (1999), and Sarantakos (1998), the research process from sample selection through to data collection and analysis seemed appropriate for an exploratory study of the motives and effects of the customs broker’ ICT projects. The methodological choices made in pursuit of this research objective are outlined below.

Sample Selection

In October of 2001, an initial sample frame of 56 brokers was created from the listing at the website of the Canadian Society of Customs Brokers. Given the importance of the internet in signaling an organization’s drive to becoming digital (i.e., becoming a heavy user of ICT in conducting its business processes), the sample frame of 56 reflected a methodological decision to focus on customs brokers that had a functional website with more than just a single or introductory web page (i.e., the site had to have more than a home page). Of the 56, 16 were ineligible because they were not considered small (based on information on their websites, they had more than a marginal presence outside North America, with offices in an average of 78 countries). Of the remaining 40, a random sample of 25 was selected. Selecting 25 estimated that this number would be sufficient to get a response from between 4 and 10. Given the small population and the exploratory nature of the work, any number in this range was regarded as suitable. Still, because more is likely to be better and only 4 of the 25 brokers consented to participate, the remaining 15 were contacted in the hope of increasing the sample size. This raised the total sample to eight. Table 1 shows particulars of these brokers, who invariably described themselves as “small,” “local,” and “family owned and operated.”

The chosen point of initial contact for the e-mail to request participation in the study was based on contact information on the brokers’ websites. That choice reflected a deduction as to who would be most capable of answering the research questions. Ultimately, the determination of the appropriate respondent(s) was made by the organization. In some instances, the request to participate was passed on to someone deemed a more capable respondent. The primary criteria were that the respondent(s) had meaningful involvement in the organization’s ICT decisions and activities and had begun working with the organization in some administrative or managerial capacity prior to 1997. Since many of the developments prompting the international trade community to develop ICT capabilities to support customs clearance processes occurred in the mid-1990s, 1997 was considered an acceptable year.

Data Collection

The data were collected in the form of responses to two questions: (a) What conditions (managerial, technological, organizational, etc.) have influenced your organization’s implementation of information technologies in the last five years? and (b) What are, and might continue to be, the effects on your organization during the process of developing, implementing, and operating these information technologies? E-mail responses to the questions, telephone interviews (if preferred by the respondent, and if required for clarification in the e-mailed responses), and archival analysis were the data collection instruments. The archival work entailed perusal of the brokers’ websites and online information sources such as the Canadian Business and Current Affairs Index and practitioner journals that cover customs brokerage issues. An interview time commitment of 40 minutes was requested from the respondents. For one broker (H), the telephone interview was significantly less than the 40 minute target as the respondent sent an e-mail response that left only minor questions easily clarified with a brief follow-up call. For the other seven brokers, telephone interviews provided all the required information.

Although the two interview questions were quite straightforward, probing questions were allowed. These sought clarification without biasing the respondents’ answers. In particular, given the possibility that ICT implementation by some members of the import and export business community reflects imposition of the CBSA’s will on that community, care was taken to not mention this if the respondent did not cite it in answering the first question. Fortunately with this question (influential conditions), there was very little need to probe beyond seeking factual clarification since the responses all included a word or phrase indicating whether the motive should be classified as institutional pressure, anticipated performance improvement, or both. For the second question (organizational effects), more probing was necessary since respondents were sometimes ambiguous about whether they perceived the stated effects as positive or negative for the organization. In such instances, the probing question was “has that been good or bad for the organization?” This did not always produce complete clarification as there were situations where the respondent still remained uncertain about whether the effect was beneficial or not.

Under supervision of this author, data collection from each respondent was carried out as part of a course research project assignment by a different team of four to five final-year undergraduate students enrolled in the Management Information Systems (MIS) course taught by the author during the winter term of 2002 (JanuaryApril). Beyond instructing the students on matters such as the purposes of the research project, its link to the course objectives, and the nature of business or management research in MIS, the author instructed the students on methodology in two 80-minute sessions. The sessions covered the study’s three data collection strategies: interviews, e-mail, and web-based sources such as the brokers’ websites (in order to help enrich understanding of the interview and e-mail information). The sessions also focused on documentation and preparation of the collected information and on the handling of previously mentioned methodological issues, such as how to probe for clarification when anticipated ambiguous answers are encountered.

The resulting project reports that the students’ prepared and presented in class contained the study’s “raw data” that were subjected to further analysis by this author. The appendices show the report extracts on each broker covering the e-mailed information and the interview notes that were transcribed from the handwritten version created during the interviews. To authenticate the students’ reports, the author contacted a random sample of four respondents, ascertained that they were indeed respondents, and verified the accuracy of a few selected pieces of data. These callbacks and the study’s other procedures, such as guiding the students on data collection protocol, conform to research process controls that are well established in the literature as appropriate when students are enlisted to collect data from human subjects. Examples of application of these controls in the literature include Brady and Cronin (2001), Chaudhuri and Holbrook (2001), Eveland (2002), Huq and Martin (2000), and Kuratko, Goodale, and Hornsby (2001).

Data Analysis

Using the continuum of analysis strategies by Crabtree and Miller (1992, pp. 17-20) as a guide, the chosen analytical approach was to operate at both ends of that continuum by combining qualitative and quantitative treatment of the data. At one end of the continuum is the more objectivist approach of quasi-statistical, analysisbased data transformation (reduction) by coding the original data according to logical categories. In this study, the focus of coding for the motives behind an ICT project is whether they are based on belief in the project’s inherent contribution to better organizational performance or on the sort of institutional pressures discussed earlier. For an ICT project’s effects, the emphasis in coding is on whether the organization perceives them as positive, negative, or ambiguous. This author was solely responsible for coding of the data from the interview and e-mail notes in the appendices. Quantitative analysis of the coded data involved nonparametric methods because there was no basis for assumptions about, for example, sampling distributions. Naturally, because the sample’s nonresponse bias was untestable, there is no statistical basis for presenting the study’s quantitative analyses as inferences about a larger population. Instead, the analyses serve as signals and insights to help deepen understanding of the issues under investigation.

At the other end of the Crabtree and Miller continuum are the more immersive approaches, which eschew coding for a more interpretive study of the untransformed qualitative data. This aspect of the analysis (qualitative treatment) requires preservation and presentation of the data in as original a form as possible (as per the interview and e-mail notes in the appendices). An example of this approach in the MIS area is an exploratory study reviewed by Orlikowski and Baroudi (1991). Presented in the context of concerns by Orlikowski and Baroudi about the restrictiveIy narrow epistemological perspectives in current MIS research, the review was used as an example of underrepresented research paradigms in MIS. In that reviewed study of computer-aided software engineering tools in organizations, the author presents the data directly from her field notes, which, though necessarily condensed, gave readers an opportunity to determine the adequacy of the author’s interpretations. With the summarized notes in the appendices, this paper adopts a similar approach as a complement to the quantitative treatment.

Findings and Discussion

For each of this paper’s two main foci, the motives and the effects of the customs brokers’ ICT projects, the organization of this section is to start with detailed qualitative analysis, then proceed to a more summative quantitative analysis. The quantitative analysis is condensed in Tables 2, 3, and 4. In Table 2, where the data-reduced version of the stated motives are classified according to the dichotomy of intrinsic performance improvement value versus institutional pressure, the frequency of mention for each motive is also presented. The nonparametric test results in Table 2 are presented to help signal the roles of intrinsic performance improvement and institutional pressures as motives for ICT adoptions. To bring some more order to the findings, the factors are also categorized by whether they relate most closely to Strategy, Operations, Customer, Competition, Partners, or Government/Environment/Other. Since boundaries between some of these categories are permeable, the structure is more suggestive than definitive. Table 4 lists the data-reduced organizational effects (classified by whether respondents perceived them as positive, negative, or ambiguous), and their frequency of mention. As with Table 2, the attempt to bring some structure to the empirical data involved categorizing them with intuitively reasonable labels that suited those data.

Factors in ICT Adoptions

One of the most striking findings in the data is that only broker H’s respondent failed to identify any kind of anticipated performance improvement as a motive for the company’s ICT projects: institutional pressures characterize all the motives cited by that respondent. While the respondent cited institutional pressures that were not unique (acquiescence to the CBSA’s expectation, that is, the respondent’s feeling that although there is no law forcing them to have, say, PARS-compatible systems, the CBSA expects all brokers to come on board), it cited another one that makes the above finding understandable. Specifically, broker H is an affiliate of a large company whose customs brokerage requirements it handles (although it does customs brokerage work for external clients as well). It appears that rather than having the independence to analyze and elect to adopt or reject any ICT undertaking, broker H operates under the direction (coercive pressure) of this large internal client. To quote broker H’s respondent, “they really decide on what IS/IT we need to have in place” (Appendix H).

In contrast with the situation of broker H, data on each of the other brokers exhibited both institutional pressures and performance improvement motives. The pressures seem to cover mimetic (e.g., broker D “everyone else is doing it so to remain competitive with the larger brokers we have to keep pace,” Appendix D), coercive (e.g., broker F: “many customers that are nationally-based importers/exporters demand that customs brokers provide seamless services to meet their entire business needs,” Appendix F) and normative (e.g., broker C: “when the CBSA introduced ACROSS, they set the standard for brokers to follow so refusing to follow was not an option,” Appendix C). While for the most part, the cited performance improvement motives focused directly on the operational matter of efficient customs clearance (e.g., broker A: “upon noticing great gains in efficiencies with these initial improvements, we continued to invest in IT,” Appendix A) they also touched on issues that seem more strategic. For example, broker C’s respondent saw the company as an information technology leader among small customs brokers, and thus has a philosophy of always seeking to improve its ICT and to exploit ICT capabilities (Appendix C).

The respondent at broker C described the company’s early involvement in the CBSA’s ACROSS as something clearly beneficial and consistent with company philosophy. This finding on broker C is also interesting from another point of view: though seemingly contradictory to a response signifying normative pressure (quoted above), it suggests that broker C’s development of ACROSS-compatible ICT is an effort to simultaneously follow the emerging norms of the brokerage industry as a whole and to do so ahead of the subgroup of brokers that the respondent considers to be similar in size. Thus, along with the motive of adopting the norm, there may be some confidence in the inherent benefits of this ICT and broker C does not wish to risk missing out on those benefits by being slower than the company’s closest peers.

This finding of simultaneous presence of inherent benefits and institutional pressures as underlying motives for a single ICT (even within an individual organization) is consistent with findings and assertions in previous papers. One example is the finding by Teo et al. (2003) to support the view “that organizations may simultaneously use both social and technical indicators as guides to actions, even within a single domain such as FEDI adoption” (p. 39). This also has some support outside the ICT sphere; for example, a study by Anderson, DaIy, and Johnson (1999) found that the reasons for firms’ decisions to seek ISO 9000 Certification included institutional pressures (satisfying regulatory compliance) and perceived benefits (gaining competitive advantage).

From the standpoint of the coded version of the data, Table 2 shows that on average, across the eight brokers, the number of cited motives categorized as institutional pressures as a ratio of the number of cited motives was 0.54. Had it been possible to test for non-response bias and to show it not to be present, the most appropriate nonparametric statistical test of these results would have been the Wilcoxon signed rank test of the median. Nonetheless, the technique was performed with a view to determining if it would give any additional signal (as opposed to conclusive evidence) about the influence of institutional pressures vis-à-vis the influence of belief in the inherent utility of the ICT projects. The test results are displayed in Table 3 in terms of 90% and 95% confidence intervals for the median value of the ratio of institutional pressure motives to total motives: 0.375-0.667 and 0.333-0.750 respectively. The inclusion of 0.50 in these ranges lends credence to the notion that institutional pressures are probably no less influential than inherent utility considerations in the customs broker’s ICT adoptions.

Organizational Effects of ICT Adoptions

The data in the appendices revealed the full range of effects of the brokers’ ICT projects: positive, negative, and ambiguous. Each broker cited at least one unambiguously positive effect, and three brokers, A, B, and E, cited only positive effects (see respective appendices). Several of the positive effects seemed unexpected by the broker; that is, they were not mentioned as anticipated outcomes in response to the question about motives. An example of such an effect was noted by broker E:

The ability to remotely file and receive clearance notices electronically means that our people do not need to be at a port to clear shipments through that port so as the (information) systems have evolved and improved, the company has been able to increase its geographic reach across Canada’s ports without becoming a bigger company. (Appendix E)

This would imply that the answer is negative in response to this study’s question of whether positive effects are more likely to be cited by brokers whose stated motivations related to the intrinsic utility of the ICT projects in improving organizational performance. This finding has the support of conventional wisdom that it is difficult to forecast all the outcomes of any significant undertaking in an organization. So, for any major ICT investment, many beneficial effects (and often cost and negative effects as well) are more visible at post-implementation than at pre-implementation. This means that while an ICT implementation might not have been prompted by an a priori expectation of certain benefits, an organization can still come to experience those benefits after implementation begins.

Three effects were perceived to be unambiguously negative: less efficient border clearance, more impersonal work environment, and increased training burden. On the matter of training, the comments from broker F’s respondents were representative of the general sentiment: “constant (technological and CBSA policy) change has made it difficult to maintain our training programs” (Appendix F). The seemingly “outlier” responses of an impersonal work environment (brokers D and H) are quite illuminating because while the two respondents seemed to lament increased use of ICT as contributing to such a work environment, they, like the respondents from three other brokers (A, C, and G), still saw ICT as enhancing communication efficiency (see respective Appendices).

In light of the high frequency of comments that ICT has improved transactional efficiency and speed, comments from a broker F respondent about lower efficiency (a negative effect) appear to be something of an out lier as well. Respondent #2 noted the reduced head count of employees to handle clearance at one U.S./Canada border crossing as indicative of general improvement in processing efficiency. That view, however, seemed refuted by comments from respondent #1 (broker F’s operations manager) in a separate telephone interview. Respondent #1 cited a decline in throughput (number of packages per day) and the fact that the small shipment sizes that broker F handles make it difficult to benefit from the involved process of setting up shipments in the EDI system. The apparent contradiction, which this research did not seek to resolve, may well be about imprecision and inconsistency in how broker F has attempted to evaluate whether the effect is positive or not.

In addition to the contradiction, the negative effect as described by Respondent #1 of broker F is in itself noteworthy. In elaborating on the point, that respondent noted that the nondigital format (“faxes and the like”) in which information is received from clients, necessitates a time-consuming data-entry step by the broker’s staff before the documents can be submitted to customs. This is a case of the client-to-broker stage not being in sync with the level of automation (via ICT) at the broker-tocustoms stage. It suggests that automating only some of the stages in the flow of shipment documentation might not be sufficient for a broker’s ICT project to be deemed a success. This illustrates the interorganizational character of the ICT being developed by customs brokers, and as noted in Teo et al. (2003, p. 20), those systems are unlikely to have a positive effect on the adopting organization unless its suppliers and customers accede to electronic linkages. This may further explain the sort of customer pressure cited by broker F and broker H: that is, importers seeking the processing efficiency benefits of initiatives such as PARS, and possessing the requisite ICT capabilities, are likely to insist that their chosen broker also has the ICT capabilities to ensure realization of those benefits.

Along with positive and negative effects reported in the data, all eight brokers cited ambiguous effects: those that the respondents could not unequivocally categorize as either positive or negative. For example, broker H’s respondent noted the increasingly permeable boundary between the company and the CBSA, but was unable to say whether that was good or bad for the company. Broker A’s respondent was also indefinite regarding the ICT effect of changing work flows and procedures: “it is hard to say if those changes are the best we can do right now. Maybe they are … but it is too early for me to say for sure so I think we just have to learn as we go along” (Appendix A). Similar equivocation by broker D’s respondent in evaluating the ICT effect of being able to operate with fewer people provided some inferable insight on the nature of the ambiguity: “We are seeing new things that we have to do, so although we are now doing quite well with fewer people than before, who knows, we will have to see if we need more later” (Appendix D). The insight is that an effect might only be momentarily beneficial (i.e., the benefit of being able to operate with fewer people may be temporary) so it opens the possibility of the short-term benefit being canceled out by subsequent outcomes (e.g., future recruiting and training costs).

These types of ambiguities and the simultaneous presence of positive and negative effects (as well as the previously noted contradiction of conflicting views within the same organization about the advantage of an effect) seem indicative of a more general phenomenon concerning the benefits of ICT. It is from this standpoint that the preceding discussion of the study’s results provides some elaboration on current thought. Basically, the ambiguities and contradictions, though unsatisfying if unresolved, reflect the inconsistency in previous research findings on the impacts of ICT on organizations. As previously noted, while there are studies extolling the virtues of ICT (e.g., Shao & Lin, 2002), others provide only qualified endorsement (e.g., Muckhopadhay et al., 1997).

Table 4 quantitatively depicts this conspicuousness of ambiguous effects by showing that 5 of the cited 17 distinct organizational effects were such that respondents could not unequivocally judge them to be either positive or negative. The table also depicts the previously discussed paucity of unambiguously negative effects cited by the respondents: that category accounted for only 3 of the cited 17 organizational effects. The other quantitative treatment of the effects data also helped to answer this study’s question of the link between citing positive effects and citing motives based on the intrinsic utility of the ICT. The analysis used the standard nonparametric significance test of the Spearman’s rank coefficient of correlation between the citation frequency of positive effects and the citation frequency of motives that seem to be based directly on intrinsic utility. The test of the Spearman coefficient (p-value > 0.20) suggested no support for the hypothesis of a correlation between these two variables. The test result was robust to whether citation frequency for each variable was measured in absolute numbers (e.g., total number of positive effects each broker cited) or in relative terms (e.g., each broker’s ratio of positive cited effects to total cited effects). As with the other nonparametric test used in this research, the lack of assurance that the sample is representative of the larger population means that the test result is being used only as a corroborating signal to complement the qualitative analysis, and not as definitive evidence.

Conclusions

This paper’s major contribution is to explore the motives and effects of ICT projects that target the core business processes that customs brokers perform: that is, clearance of clients’ shipments through customs. The study drew on the theoretical framework of institutional pressures (mimetic, coercive, and normative) to analyze motives and found the customs brokers’ motives to encompass these pressures as well as the confidence in the intrinsic utility of the ICT projects. In using this framework, the study provides empirical support to institutional theory. The research has also added empirical perspective on issues of uncertainty about the effects of ICT on organizations. In particular, respondents from the customs brokers reported positive, negative, and ambiguous effects. This reinforced the notion that the effects from ICT adoptions will not always be visible at the pre-implementation stage. Nor will they necessarily be positive or unambiguous.

Although the paper seeks to be descriptive rather than normative (i.e., not to indicate what ought to be), some normative implications are extractable from the findings. For example, since the CBSA has a vested interest in seeing all customs brokers and other participants in the international trade process reach the ideal of engaging in automated (digital) inter- and intra-organizational information flows, research such as this might provide some insights into what could be required to realize that ideal. This points to normative questions, such as whether furthering that interest requires additional effort (by the CBSA and other interests in Canada’s international logistics trade) in convincing these participants of the benefits of ICT adoptions.

Despite these positives, the study has some limitations that would have to be addressed in future research in order to make the findings more robust. The most obvious of these is the lack of certainty about how representative the sample is. As with any single research study using a small sample, the study’s extrapolative scope must be restricted. Thus, a possibly worthwhile future undertaking would be a study of other customs brokers in Canada and other countries. Through such research, the resulting larger body of findings would provide a way to test the generalizability of findings presented herein.

The second concern is that the responses were perceptions and depended on the long-term memory of the respondents (ICT investments over the last five years) and therefore memory decay may be an issue. One might rebut this concern by noting that the respondents were all in their respective organizations for at least that period (except for respondent #2 of broker F) and all had meaningful involvement in their organization’s ICT decisions and activities, so their perceptions are valid. Further, there are benefits in getting answers that are based on a period of reflection and the perceptions of these respondents cannot be dismissed as invalid. Still, the reality is that one cannot be sure if, say, a time series study that focused on each ICT adoption within a shorter period of its implementation would have yielded different results.

This raises the related issue of whether the results might reflect some “revisionist history.” That is, having had the benefit of seeing the effects of some ICT decisions, respondents were influenced by those effects in how they characterized the ICT decision motives (e.g., the experience of positive effects might prompt the characterization of motives in the more positive light as the inherent utility of the ICT). This does not seem to be the case for at least one broker, E, whose respondent cited only positive effects, yet emphasized institutional pressures as motives (e.g., “the whole customs brokerage industry is at the whim of the CBSA’s decisions”). This conclusion had some tentative quantitative support in the Spearman’s , which indicated no statistical significance for the correlation between the tendency to cite performance improvement motives and the tendency to cite positive effects. Again, the difficulty of categorically dismissing these concerns means that the research results must be viewed as the retrospective perceptions of individuals with qualification to provide those perceptions and not as some invariant truth. Thus, these exploratory results represent baseline findings that are open to further examination by future studies using alternative methodologies.

One possible alternative is a more structured approach to gathering data on perceived ICT effects by presenting respondents with a comprehensive list of potential ICT effects from which they might identify the ones that apply to their situation. Other issues that can be explored in future studies include ICT implementation costs and duration (rapid versus incremental). Since the expected cost and time (e.g., for aptitude and attitude training to ensure effective use of the ICT by an organization’s personnel) is likely to affect the organization’s enthusiasm about the ICT, that research extension could add an explanatory element to some of the motives noted here. It could also build on the framework in Oliver (1991), which posits that attitudes (and responses) to institutional processes (in this case, trends towards more ICT-based customs clearance procedures) depend on the perceived consistency between the requirements of those processes (e.g., expenditure on implementation) and the organization’s goals (e.g., expenditure targets).

Notes

1 At the time the present study was conducted, the Canada Customs and Revenue Agency (CCRA) was the agency responsible for border clearance. The new name of the agency (CBSA) is used throughout this paper.

2 Based on evidence from various case studies and news reports of importers and exporters. In the case of Canada, information on companies such as Ericsson Communications, H. A. Kidd, and RCC Electronics was retrieved from MSR’s website, http://www.msr.ca, on February 2, 2002.

3 From an anonymous article titled “Record-keeping by Canadian importers” in Liaison (newsletter of Affiliated Customs Brokers). (1999, January), 5(1).

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Michael A. Haughton*

Wilfrid Laurier University

* Michael A. Haughton, School of Business Economics, Wilfrid Laurier University, Waterloo. Ontario, Canada N2L 3C5. Email: mhaughton@wlu.ca

Copyright Administrative Sciences Association of Canada Mar 2006

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