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Forgot your login information? Edited by: Charles Wankel. Subject: Management general. Lin, H. Planning effectiveness for internet-based interorganizational systems. Wankel 21st century management: A reference handbook Vol. II, viewed 22 September , doi: Charles Wankel. SAGE Knowledge. Have you created a personal profile? Login or create a profile so that you can create alerts and save clips, playlists, and searches. Please log in from an authenticated institution or log into your member profile to access the email feature.

Internet-based interorganizational systems IIOS are Internet-based information systems ISs shared by two or more organizations such as extranets, virtual corporations, Internet-based electronic data interchanges EDIs , and business-to-business electronic commerce B2B e-commerce; Grossman, IIOS planning was consistently identified as one of the most critical issues facing IS executives and academic researchers. According to surveys of information systems management issues in the recent decade, improving information systems strategic planning remains among the top ten issues facing IS The various combinations of IOS business functions, ownership and governance structures, and technological choices have implications for the extent to which IOS are adopted and implemented, as well as for the kinds of outcomes participants experience.

For example, EDI- based IOS often lack participation by small and medium-sized enterprises SMEs who face challenges implementing EDI due to a lack of requisite knowledge, limited resources, and fewer anticipated benefits due to their generally lower volume of transactions Markus ; Segev, Porra, and Roldan ; Iacovou, Benbasat, and Dexter When forced to use EDI by larger and more powerful trading partners, SMEs may implement the system only superficially to satisfy partner requirements, which limits the overall integration and coordination benefits that such systems offer Hart and Saunders On the other hand, developing standards-based IOS and implementing these in shared coordination hubs can also be difficult because competing companies view the systems they use to exchange data with partners as strategic tools that convey competitive advantage, and are therefore prone to pursuing proprietary approaches E.

Impact on Practice There are many well-established cases where companies initiating IOS connections with their trading partners have experienced such benefits as reduced costs of transactions, fewer errors with orders and delivery, greater efficiency due to the reduced need to rekey information into separate systems, and enhanced competitiveness. Examples include McKesson in the wholesale pharmaceutical supply industry E. Many of the cases cited above represent proprietary efforts implemented by a dominant trading partner for the purposes of improving its competitive position.

McKesson, a drug wholesaler, used its system to provide advanced electronic ordering and inventory management services to independent pharmacies that otherwise had little in the way of automated systems.

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Hand held terminals, communications lines, and a series of business applications were provided to client pharmacies. Clemons and Row The retail sector has also experimented with many IOS approaches, primarily aimed at reducing the proportion of inventory holdings that are safety stock — i. POS data provides information about consumer demand, enabling each partner in the channel to adjust inventory stock based on real time information, and speed up ordering and replenishment processes. Rather, it is largely limited to specific manufacturer-retailer chains where a strong participant drives implementation among its partners in the channel Markus and Gelinas Cartwright and colleagues Cartwright et al.

This case study also revealed an important benefit that follows from such an aggressive implementation of standards-based IOS — it supported greater integration of business processes across the many disparate information systems inside the company. Nonetheless, many of the smaller business partners were unable to bear the costs of converting to RosettaNet standards, precluding Intel from mandating its use.

Moreover, there is further evidence that MISMO standards have contributed to vertical disintegration in the mortgage industry, allowing companies to outsource various mortgage processing functions to SMEs as a result of the reduced coordination costs made possible by VIS Wigand, Steinfield, and Markus XML-based standards also figured heavily in RosettaNet, which not only helped to lower the costs and time for developing standards, but also enabled participation by the growing number of Asian suppliers to the electronics industry Boh, Soh, and Yeo Not all IOS efforts have been successful.

For example, Steinfield and colleagues Steinfield, Markus, and Wigand review the history of problematic efforts by one automotive manufacturer to implement proprietary IOS throughout its supply chain. Automotive industry supply chains are characterized by multiple tiers of suppliers, and while there are extensive EDI linkages between top tier suppliers and manufacturers, IOS connections to lower tier suppliers are less common due to their lack of technical expertise and other resources.

Hence, it has been difficult to extend proprietary IOS throughout the supply chain. The lack of interoperable IOS throughout the automotive supply chain imposes significant costs to the industry as a whole.

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Despite the considerable cost savings that have been found to result from EDI use between automobile manufacturers and their suppliers Mukhopadhyay, Kekre, and Kalathur , the lack of full implementation across the entire supply chain remains a consistent problem. In summary, there are many well-known cases where use of IOS has contributed to lower costs, greater efficiency, increased business, competitive advantage, and broader performance benefits at the industry level. However, IOS adoption is far from universal, and examples of failed implementations are also evident.

Hence, research has investigated the factors associated with successful IOS development, adoption, and implementation, including the identification of both anticipated and unanticipated outcomes of use. An overview of research issues is provided in the next section. That is, the social, organizational, and industry contexts in which IOS are embedded must be examined in concert with IOS technical features in order to understand the varying outcomes surrounding systems that contain seemingly equivalent technical features.

Indeed, a recent meta-analysis of the EDI literature highlighted the inconsistent findings regarding factors influencing EDI adoption and benefits, positing such factors as industry influence and anticipated benefits as mediating forces that affect the relationship between hypothesized predictors of both adoption and benefit Narayanan, Marucheck, and Handfield Much of the past research has focused on EDI adoption, highlighting a number of antecedents that can be broadly grouped into internal and external factors. Internal factors found to influence adoption decisions include a variety of characteristics of the adopting organization that broadly reflect its readiness for IOS.

These include having the requisite human, financial, and technical resources needed for implementation, compatible legacy systems, and business processes that have been improved to take advantage of IOS capabilities Chau and Hui ; Iacovou, Benbasat, and Dexter ; Markus and Christiaanse ; Premkumar and Ramamurthy ; Narayanan, Marucheck, and Handfield External factors generally include aspects of the relationships between an adopting organization and its trading partners.

As noted earlier, often EDI adoption by SMEs has historically been limited, which is not surprising as SMEs tend to have more limited financial resources, and can lack sufficient managerial and technical expertise needed to implement EDI. One approach is for the larger, more powerful trading partner to simply mandate adoption in order to do business with it; however, research has demonstrated that such attempts at coercion often do not succeed and generate resistance among smaller trading partners Hart and Saunders ; Steinfield, Markus, and Wigand To facilitate adoption, the IOS may be subsidized, or offered at no cost to smaller trading partners Riggins and Mukhopadhyay Yet, even when entirely provided by the dominant partner, such systems still impose costs related to learning and the need to maintain redundant systems if the dependent partner does business with other organizations that use a different IOS.

To insure that partners do engage in such relationship-specific investments, there must be sufficient expectation of future business Mukhopadhyay and Kekre More broadly, the imposition of costs for adopting and implementing IOS has to be perceived as equitable, and the benefits have to be shared, in order to encourage greater adoption Jap In general, research has explored both tactical and strategic impacts of IOS use Chatfield and Yetton Successful IOS use can result in many types of tactical benefits, ranging from reduced lead time for orders, faster deliveries, fewer errors in procurement transactions, fewer out-of-stock situations, reductions in the size of inventory holdings, increased staff efficiency, better monitoring of shipments, lower costs, and other transactional and operational benefits Narayanan, Marucheck, and Handfield Research on strategic benefits emphasizes competitive advantage outcomes such as growth in the volume of business with existing or new trading partners, improved relationships with trading partners leading to better communication and information sharing, improved market share, faster product design cycle times, and higher quality of products and services Chatfield and Yetton ; Narayanan, Marucheck, and Handfield ; Riggins and Mukhopadhyay Not all implementations of IOS realize the benefits anticipated by their initiators, however.

Furthermore, business processes may need to be re-engineered to take advantage of IOS capabilities, rather than simply automating existing processes in order to realize benefits Clark and Stoddard Just-in-time inventory practices can be enabled with IOS, but only if new business processes by suppliers and manufacturers are developed that support new channel distribution practices such as continuous replenishment. Business process re-engineering can also help companies integrate across disparate legacy systems, such that enhanced internal efficiencies result from IOS use Markus In order to achieve high value strategic benefits with more tightly-coupled business processes over IOS, companies have to be willing to share proprietary information with each other.

Because of the sensitive nature of the data that is shared, including design data, forecast data, operational data and more, there can be understandable reluctance to participate in such highly integrated IOS without a strong degree of trust between partners Hart and Saunders ; Hart Hence, an ongoing thrust in the IOS research literature explores the nature of the relationships between IOS participants, and the influence of these relationships on outcomes of IOS use.

Assimilation of Interorganizational Business Process Standards | Information Systems Research

EDI researchers have further shown that when systems exhibit such embeddedness — fostering tight integration among trading partners characterized by high trust — the participants are more likely to experience the kinds of strategic benefits that yield competitive advantage Chatfield and Yetton These findings expose an interesting theoretical tension in IOS research, and reveal how IOS use can lead to impacts at higher levels of analysis such as on market structure, supply chains and whole industries.

This is occurring because IOS networks reduce the traditional transaction costs associated with market exchanges; they lower search costs and make it easier to monitor transactions Malone, Yates, and Benjamin On the other hand, achieving strategic benefits seems to require tighter integration that is not consistent with arms- length, market transactions Chatfield and Yetton ; Kraut et al. More research is needed to resolve this paradox, but one explanation may be that companies are more willing to use electronic market transactions for commodity inputs that are not highly asset specific i.

Conversely, they rely on tighter connections to a smaller set of suppliers for core inputs with greater asset specificity and a higher degree of proprietary information sharing. Clemons, Reddi, and Row Research on the impacts of IOS use at higher levels of analysis beyond the dyad is less common, despite several calls for more attention to the industry structure implications of IT-enabled interorganizational exchanges Gregor and Johnston ; Johnston and Gregor ; Segars and Grover ; Steinfield, Markus, and Wigand ; Wigand, Steinfield, and Markus Johnston and Gregor develop a theory of industry level impacts of IOS, emphasizing the need to look at higher level factors such as the role of industry groups, government policy makers, and competitive dynamics in order to understand how IOS adoption and use occurs in different industries.

These higher level factors also are viewed as necessary for understanding how IOS use affects both routine business practices as well as the relationships among actors in the industry.


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The availability and widespread acceptance of vertical information system VIS standards is another important factor in understanding industry-level impacts of IOS. Due to the rise of lower cost data exchange protocols made possible by the growing use of Internet-based XML, many industries formed user-led associations with the purpose of establishing VIS standards Markus et al. First, if Internet and XML-based, they can be less costly and less complex. Second, participating in systems built on open standards should presumably make it easier to connect with other trading partners, generating network externalities benefits derived from the greater numbers of other users that are accessible in a network that increase the attractiveness of using a standardized IOS Zhu et al.

In the home mortgage industry, for example, widespread usage of VIS standards resulted in significant industry performance benefits due to the aggregation of gains in efficiency among participating organizations Steinfield, Markus, and Wigand Structural changes in the mortgage industry were also observed, including evidence of consolidation among the larger players as well as growth in the number of smaller players who used VIS-based systems to fill specialty niches in the industry Steinfield, Markus, and Wigand ; Wigand, Steinfield, and Markus This can include decisions regarding who participates in the IOS, how any technical changes to the IOS or its configuration are determined, for what transactions the IOS will be used, and who owns any intellectual property rights associated with the IOS.

Such problems refer to situations where a group effort is required to achieve a collective good, but such goods have the characteristics of public goods, where free riding can occur. That is, participants who have not necessarily contributed to the production of the good can still enjoy its benefits, and therefore may have a disincentive to help shoulder the associated costs of production. VIS standards are public goods; organizations do not have to contribute to their development, but nonetheless benefit from their existence if they achieve widespread adoption.

Markus et al highlight the types of collective action dilemmas that need to be resolved in order for industry consortia to be able to effectively develop standards that have a greater probability of achieving widespread adoption. They point out that standards development and standards diffusion are two linked collective action problems, and it is possible to solve the former in such as way that the latter is less likely. For example, if the consortia privileges only certain types of participants e.

This can lead to an industry standard that is not taken up by the under-represented companies, and hence fails to achieve widespread adoption, depriving all industry participants of potential benefits. Their case study of the home mortgage industry identifies the diverse interests of different types of industry stakeholders — and particularly emphasizes the different needs of IT vendors vs.

IOS users. Bringing IT vendors into the process, even in user-driven consortia, is essential so that the software solutions available to industry participants will be standards-based. A variety of governance issues come to the fore when IOS standards are examined in this light.

For example, standards consortia must deal a priori with intellectual property issues, so that when a standard is developed, adopting companies are not obligated to pay unexpected licensing fees or royalties to participants that had not revealed ownership or granted royalty free use of patents that were used Steinfield et al.

Processes for ensuring compliance with standards must be in place to avoid the problem of fragmentation of the standard, which can occur when there is some leeway in implementing the standard and individual vendors and other organizations make small changes that cause one version of the IOS to be incompatible with another Damsgaard and Truex Other direct governance issues related to the function of standards consortia include rules for who can participate in the work of the committees developing the standards, as well as voting rules for selection of officers and for making other decisions Markus, Steinfield, and Wigand All of these factors can shape the development process in ways that not only influence IOS standards development, but also the prospects for diffusion throughout the industry.

Standards that are largely driven by dominant companies and which fail to take into account the needs of other industry participants are less likely to experience successful diffusion.

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Inter-Organizational Information Systems in the Internet Age

Not all governance issues are about standards development. As noted earlier, some IOS are hub- based, and interconnect many different trading partners in a common system. ICHs face such challenges as attracting adequate investment, ensuring participation, and determining rules related to ownership and access to the data they generate Markus and Bui In one study of an ICH developed for an automotive supply chain, the participants opted for a third-party owned IOS to avoid perceptions that the system would only cater to the needs of the dominant manufacturer that functioned as the buyer in the supply chain Steinfield, Markus, and Wigand Towards a Research Agenda The previous sections have highlighted a number of significant research questions related to IOS adoption and implementation, IOS outcomes, and IOS development and governance, and offer insights into the key directions for research on IOS in the next several years.

In the area of IOS adoption and implementation, there is clearly a need for more research that clarifies how organizations, and particularly SMEs, evaluate the risks and rewards of participating in an IOS. How can industry associations help to diffuse the IOS standards they have developed more effectively, and encourage companies in their industry to adopt them?


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  4. What approaches can companies take to increase trust and convince smaller trading partners to sign on to use IOS? In the area of IOS outcomes, more research is needed to better understand why some IOS participants benefit while others do not. What IOS arrangements best contribute to improved outcomes for all participants?

    IOS development and governance research in the coming years will be critical for understanding the questions posed above. For example, research on how to attract more SMEs to participate in VIS standards-making will be essential for solving diffusion and adoption problems.


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    With more representative participation, there should be a better match between SME needs and the types of standards that are developed. Moreover, awareness of the availability and utility of standards should be greater and SME involvement in the process may motivate later adoption and use. Research on governance of IOS will be essential as well.

    Assimilation of Interorganizational Business Process Standards

    With the growth of shared coordination hubs, more research is needed to understand if such shared IOS platforms based on open standards are more likely to find acceptance, or if companies will resist due to perceptions of a loss of control and competitive advantage? Clearly, much work remains to be done over the coming years to provide guidance to IS managers and to IT vendors so that the potential benefits of IOS can be more effectively harnessed.

    Summary This chapter has provided a broad introduction to the field of interorganizational information systems. Modern organizations of all types — public and private, profit and non-profit, large and small — need to rely on IOS to reduce costs, improve quality of products and services, and compete effectively. Implementing IOS, however, is not an independent decision of a single organization, and requires cooperation among the participants in order to achieve desired outcomes.