Understanding the Development of IOS-Based Trading Partner Relationships: A Structural Model with Empirical Validation

Abstract

This study develops a research model that explains the interorganizational system (IOS) network development process in the buyer-supplier relationship. Particular attention is paid to the antecedents and consequences of two types of influence strategies— exercising power and offering IOS support—that a buyer firm often uses in increasing IOS usage with its suppliers. The research model is empirically tested with data obtained through a field survey from a sample of 233 suppliers, each exchanging electronic data interchange (EDI) documents with a nationally known retailing buyer in the United States. We find that the buyer's decision to offer EDI-related support to a supplier is negatively associated with the transaction volume with the supplier but positively with the supplier's IT capabilities as well as the supplier's transaction-specific investments made toward the relationship with the buyer. On the other hand, the buyer's decision to exercise power to a supplier is found to be negatively associated with the transaction volume between the trading partners. Our findings also indicate that offering EDI support, rather than exercising power, is more effectual in inducing greater EDI usage between the trading partners. Finally, the buyer's EDI support is found to be positively associated with suppliers' perceived benefits of using EDI in the relationship that, in turn contributes to more voluntary use of EDI with the buyer.

Keywords:

• buyer-supplier relationships
• electronic data interchange
• interorganizational information systems
• IT adoption
• survey research

ACKNOWLEDGEMENT

The authors thank anonymous reviewers for their valuable comments on the earlier versions of the paper. The fourth author acknowledges the research support by the Hong Kong Polytechnic University's General Research Fund.

Notes

¹A notable exception is the recent work of Subramani [28] that empirically demonstrated suppliers could also gain a large amount of operational and strategic benefits by taking advantage of the IOS. Exploration and exploitation have been shown to be two important patterns of system use that in turn allow the suppliers to retain a portion of the value generated from joining the IOS network.

²The log transformation of the variable was made for subsequent analysis purposes, due to its departure from normality based on results from skewness and kurtosis analysis.

³One hundred eighty-five out of 233 suppliers in the sample reported their total sales revenue of the previous year, which is necessary to measure their dependence on the buyer. We therefore used only the 185 suppliers for testing H14 and H15.