Interdependent Benefits from Interorganizational Systems: Opportunities for Business Partner Reengineering

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Abstract
Managing the growth of interorganizational systems (IOS), such as electronic data interchange (EDI), and the adoption decisions of trading partners have become major concerns for network managers. The fact that IOS are shared by separate trading partners means that the benefits from IOS are both unequal and interdependent. Therefore, how trading partners implement and use the system internally may directly affect the original firm’s benefit. In order to maximize benefits from IOS, we propose that firms engage in business partner reengineering. We study two buyer-initiated EDI systems where the way in which trading partners internally implement the technology directly affects the level of benefit for the initiating buyer. In both cases, the buyer’s benefit is increased when suppliers choose to adopt an optional buyer-initiated modification to their system. However, because it is not clear how suppliers benefit from the modification, they may not have adequate incentives to make the modification. Buyers with substantial leverage over their suppliers may require trading partners to implement the system in a particular way or not be considered for future business.