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A major focus of IOIS research has been on the adoption of EDI. Iacovou, Benbasat, and Dexter (1995) found that small firm adoption of EDI depended on three major factors: organizational readiness, external pressure to adopt, and perceived benefits. Organization readiness refers to the firm’s financial and technological resources. Financial resources relate to the availability of funds to pay for the EDI implementation. Technological readiness refers to the sophistication of IT usage and IT management. Two major sources of pressure to adopt are competitive pressure and pressure imposed by trading partners. These researchers found that management perceived EDI benefits of cost savings and improvement of business processes and relationships.
A study of financial EDI suggests that adoption of this type of IOIS is dependent on organizational factors and business environment characteristics, including coercive and normative pressures (Teo, Wei, & Benbasat, 2003). In the study by Teo, Wei, and Benbasat, coercive pressures included perceived dominance of supplier adopters and customer adopters, and conformity with the parent corporation. Normative pressures included the extent of adoption among suppliers and customers, and the organization’s participation in industry associations.
Hart and Saunders (1998) analyzed the relationship between power and trust in relation to EDI use. These researchers found that a higher level of trust between partners correlated with more diverse use of EDI. These researchers suggested that a more cooperative approach will encourage diverse use of IOISs. Conversely, customer power was found to have mixed relationships with the volume of EDI use. For the suppliers of a chemical company, volume was positively correlated with the power of a chemical company, while there was a negative relationship with a retail customer.
Researchers found that IOIS benefits depend on changes in business process when implementing the IOIS. Riggins & Mukhopadhyay (1994) found that the buyer benefited when the supplier adopted an optional buyer-initiated modification to its system. In addition, Clark and Stoddard (1996) found that inter- organizational process redesign through continuous replenishment (CRP) and EDI benefited suppliers and retailers. They also found that neither CRP nor EDI alone resulted in benefits to both parties.
Prior EDI research provides a solid foundation for understanding IOISs, but the emergence of new Web technology requires analysis of IOISs in the context of the Internet. Traditionally, EDI was developed under older, proprietary technologies. Underlying components of EDI adoption were the startup cost and state of organizational readiness critical to using the technology. Conversely, extranets rely on flexible, open software that is easier to use and requires fewer monetary and technical resources. Some aspects of adoption, such as the importance of process reengineering, are similar between the technologies. However, some of the characteristics that may inhibit or benefit adoption are likely to differ between extranets and EDI.
Adoption of EDI has been somewhat dependent on the relative power of the exchange partners. Some organizations were pressured to adopt EDI if they wanted to continue their relationships with larger or more powerful exchange partners. Smaller firms that complied might have considered the move as just one of the many costs of doing business. Trust influenced the use of EDI and should also be important to the use of the extranet. The flexible nature of the extranet allows organizations to easily enter, maintain, and leave inter-organizational partnerships. The level of trust in the partners, however, will affect the level of information sharing between them. Organizations are concerned that the partner will use proprietary information opportunistically, causing harm to the organization. Research on the influence of trust in extranet-based partnerships would provide further understanding of this important issue.
The B2B virtual marketplace, involving a consortium of market members, is different than EDI, which involves the interaction of two partners. The reasons for adoption, and the benefits seen, of the IOIS most likely differ. Like EDI, normative pressures such as adoption of suppliers, customers, and organizations may encourage adoption. However, the necessary levels of normative pressure may vary among the Web-based IOIS. For instance, one executive indicated that 80 percent of physical market participants are needed to make a successful electronic market (Applegate et al., 2002). Thus, for the B2B virtual markets, the majority of the physical market members must join the electronic market before normative pressures are sufficient to encourage adoption. Investigations are needed to identify the factors that encourage or inhibit membership in virtual markets.
Rayport and Sviokla (1994) suggested that information technology has changed the delivery mechanisms of products, from a place to an information space. These authors mentioned that physical products such as answering machines have been replaced by an information service such as an answering service. They pointed out that the information services can be bundled together to provide value-added services and opportunities for differentiation for customers. Researchers may be able to identify the value-added services that are more effective in enhancing the IOIS environment for business partners.
The literature on electronic markets describes an exciting and challenging business environment where organizations partner to provide goods and services. The low cost and communication capabilities facilitate the formation of virtual organizations and electronic communities that will gain a competitive advantage over competing virtual organizations and communities. The extranet and B2B virtual market comprise the backbone to this exciting environment that is of interest to the organizational theory, economics, and information systems disciplines. More research is needed to determine the factors that drive firms to engage in B2B virtual markets and what features make them more or less appealing than other forms of partnerships.
Web-based IOISs, the extranet, and the B2B virtual market maintain distinct differences from EDI that warrant further research. Research efforts should focus on areas of Web-based IOIS adoption, inter-organizational trust, virtual and horizontal partnerships supported by IOISs, and advantages and disadvantages of inter-organizational partnerships based on extranet versus a B2B virtual market.
The IOIS adoption research should focus on Web-based IOISs along with EDI. This will provide an understanding of the effectiveness of modern tools on adoption. More importantly, a comparison of the EDI and Web-based IOISs will assist researchers in identifying the adoption variables that vary by technology and those that are constant for different technologies. Focusing on the constant IOIS factors will provide a sound foundation of IOIS research that will last beyond the current state of technology.
With the recent improvements in information technology and communication capabilities, a possible inhibitor to IOIS effectiveness is the human factor of trust. The IOISs are most effective with collaboration between partners which necessitates information sharing. Trust is difficult to achieve in an environment where business partners can easily change. Research on trust building that leads to long-term strategic partnerships should be identified and evaluated so that an understanding of the determinants of these partnerships can be gained. In addition, agency theory should be applied to the inter-organizational situation. More specifically, a further understanding of methods to monitor, control, and encourage the agent (business partner organization) are needed so that its members do not act opportunistically to the detriment of the principal (organization).
Analysis of the influence of the information exchange on partner trust, length of partnership, and volume of inter-organizational transactions would shed light on the influence of IOIS capabilities on business partnerships. Web-based IOISs provide various multimedia methods, which vary in effectiveness, to use to communicate with partners. Identifying the type of information that best suits each medium would benefit practitioners through stronger partnerships. Virtual markets may also be analyzed in regard to antitrust laws, should there be unfair barriers to entering the electronic market or monopolistic activity through inter- organizational partnerships. These initiatives will provide researchers with better understanding of the influence of trust development on IOIS adoption and provide practitioners with recommended methods for fostering successful inter- organizational partnerships.
An IOIS may support horizontal partnerships, involving suppliers of complementary products, and vertical partnerships, involving buyer–supplier relationships (Hong, 2002). The horizontal partnerships involve competitors and suppliers of complementary products working together to meet current market demands or expand into new markets. IOIS support for these partnerships involves communication of general industry information while not disclosing proprietary information. Investigating IOIS support of this competitive cooperative environment will provide an understanding of the components of system support for these partnerships.
The vertical partnership focuses on the supply chain, which can include long- lasting partnerships and temporal partnerships that quickly can be created and dissolved. The IOIS is required to support these different partnerships through information sharing and management reporting. Investigation of how an IOIS can assist in strengthening these partnerships and in providing appropriate levels and types of information for the different partnerships is useful to forming an understanding in different partnership settings.
Companies interested in inter-organizational partnerships can often seek out partners through extranets and, in some cases, through B2B virtual markets. Understanding the business implications of these two approaches will help companies form business strategies. For instance, will forming a partnership using an extranet provide a stronger competitive advantage than joining in a partnership using the B2B virtual market, where the technology and the business supplier are easily accessible to your competitors? In addition, as these IOISs evolve, researchers will be able to determine the dominant platform for B2B activity and the reasons for the dominance. Through the research initiatives described above, academics and practitioners will have a better understanding of the current capabilities of IOISs that will better prepare them for dealing with future changes.
In summary, EDI research provided the first look at the nature of inter- organizational systems. Therefore, it serves as a starting point for future investigations. The emergence of Web-based technology led to the development of new forms of IOISs—extranets and B2B virtual markets—that are fundamentally different from EDI. New methods, variables, and tools are needed to study them. Existing literature on marketing, channel dynamics, networks, and joint ventures may provide clues to enhance our understanding of the competitive IOIS environment. Researchers are encouraged to find the factors leading to success with Web-based IOISs. These investigations will improve our under- standing of global initiatives and provide guidance to practitioners who are empowered to utilize IOISs for competitive advantage.
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