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International Journal of Logistics Management, The Designing interorganizational information systems for supply chain integration: a framework Jouni Kauremaa Kari Tanskanen
Article information: To cite this document: Jouni Kauremaa Kari Tanskanen , (2016),"Designing interorganizational information systems for supply chain integration: a framework", International Journal of Logistics Management, The, Vol. 27 Iss 1 pp. - Permanent link to this document: http://dx.doi.org/10.1108/IJLM-01-2013-0008
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1 INTRODUCTION
Innovations in information technology (IT), particularly in Internet technologies, have created
a significant opportunity for supply chain integration (SCI), thus improving the efficiency
and effectiveness of supply chain management (SCM) processes (Bowersox et al., 1999) and
attaining a competitive advantage through increased sales, reduced costs, and improved asset
utilization (Lancioni et al., 2000; Lancioni et al., 2003; Gunasekaran and Ngai, 2004;
Christopher, 2005). These opportunities have been widely studied in two separate streams of
literature. Literature in the information systems (IS) field has centered on the required
technological infrastructure for managing electronic interchange of business documents (e.g.,
Banerjee and Kumar, 2002) and the overall benefits of interorganizational information system
(IOIS) use (e.g., Narayanan et al. 2009), whereas the SCI literature has mainly considered
with the integration process (e.g., Chen et al. 2009), SCI and the performance link (e.g.,
Wong et al. 2011), and the antecedents of SCI (e.g., Wong and Boon-itt, 2008). Though these
research streams lend significant insights into the technological infrastructure required for
IOIS and the usefulness of supply chain integration, there is less understanding on how to
combine managerial and technical aspects when designing IOIS for SCI. This article is
positioned at the intersection of these two streams of literature and presents a framework on
how to design IOIS for supply chain integration.
The purpose of this study is to increase the understanding of the essential managerial and
technical decisions when designing IOIS for supply chain integration and to propose
directions for future research. Towards this end, we propose a framework for the design of
IOIS for SCI based on the current literature, elaborating on the IOIS constructs in the supply
chain integration context. The framework is illustrated with empirical findings originating
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from three studies that belong to a ten-year research program focusing on IOIS utilization in
supply chain management. The program resulted in a set of several journal articles and
conference papers (eight references are removed to protect author anonymity). The process
through which the framework was developed and the empirical studies utilized are described
in the material and methods section.
The question of how interorganizational information systems should be designed for supply
chain integration is of great importance. Recent studies have suggested that IOIS technology
does not necessarily induce competitive advantage without being coupled with
complementary resources (Wiengarten et al., 2011; Hazen and Byrd, 2012). Kohli and
Grover (2008) state that information technology value is increasingly being created and
realized through the actions of multiple entities participating in the interorganizational
network. Lyytinen and Damsgaard (2011) take a major step towards explaining IOIS
diffusion by introducing the concept of “adopter configuration”, or a set of interrelated IOIS
adopters united by an organizing vision and associated key functionality that, they argue,
determine the structure, mode of interaction, and appropriation available for the participating
organizations. They also highlight the need for improved IOIS typologies and call for
analysis on the differences in adoption configurations, notably the roles and functionalities of
interorganizational information systems (Lyytinen and Damsgaard, 2011).
Empirical work related to interorganizational information systems is characterized by a lack
of an intrinsic conceptualization of IOIS use. Based on a meta-analysis, Orlikowski and
Iacono (2001) argue that previous information systems research commonly employed a
simplistic view of the IT construct, treating it as a “taken for granted” variable. Such a black-
box approach equally applies to IOIS research (Narayanan et al., 2009). In particular, based
on an analysis of 103 empirical studies on IOISs published from 1991 to 2005 in various
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mainstream journals, Narayanan et al. report that this research is highly fragmented, with no
overall theoretical perspective. Prior work has compiled substantial evidence that IOIS
utilization leads to benefits on multiple levels, such as reduced inventory levels, improved
customer service, quicker response to market trends, improved communication with trading
partners, reduced paperwork, increased productivity, and more accurate data (Narayanan et
al., 2009). However, notable inconsistencies exist among individual studies (Ahmad and
Schroeder, 2001; Craighead et al., 2006; Narayanan et al., 2009). An important reason for
these inconsistencies, we argue, is the under-conceptualization of the key construct: the IOIS-
based intervention. Indeed, Narayanan et al. call for studies on the configurations of
structures, processes, and contexts in cases of effectively used IOISs. Similarly, Boone et al.
(2007, p. 118), based on their comprehensive literature survey, call for more research on
tactical-level issues, i.e., questions relating to the type of system adopted and the impacts that
the adoption has on organizations and supply chain partnerships.
The structure of the paper is as follows. Section 2 reviews prior literature, section 3 presents
the material and methods, section 4 develops the framework by building on prior literature,
and section 5 concludes the paper by discussing contributions, limitations, and directions for
future research.
2 INTERORGANIZATIONAL INFORMATION SYSTEMS IN SUPPLY CHAIN INTEGRATION
An interorganizational information system (IOIS) is defined here as the means to digitally
transmit data between two separate organizations. Because the management of material and
related information flows is key in SCM (Mentzer et al., 2001), IOISs are an essential class
of means to support and execute SCM and integrate supply chains (see Bowersox and
Daugherty, 1995; Holland, 1995; Christiaanse and Kumar, 2000; van Hoek, 2001; Frohlich,
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2002; Johnson and Whang, 2002; McLaren et al., 2002, 2004; Gunasekaran and Ngai, 2004;
Craighead et al., 2006; Boone and Ganeshan, 2007; Johnston et al., 2007; van Donk, 2008).
Recent empirical research supports the link between IOIS utilization and operational
performance. Hartano et al. (2010) observe that supply chain performance is positively
impacted by the quality of shared information, which is affected positively by top
management support and information technology infrastructure capability. Prajogo and
Olhager (2011) state that information technology capabilities and information sharing both
have a significant effect on logistics integration, which has a significant effect on operations
performance. At the turn of the millennium, e-business – the use of the Internet or any
digitally enabled inter- or intra-organizational information technology that is used to
accomplish business processes (Boone and Ganeshan, 2007, p. 1195) – emerged as a new
business management paradigm (Cohan, 2000, Hartman et al., 2000; Bauer et al., 2001;
Kalakota and Robinson, 2001). However, the idea of using information systems for
interorganizational business management had already been conceived in the 1960s
(Bowersox, 1969; Kaufman, 1966). The academic discourse on this subject emerged within
the management information systems research in the early 1980s, under the rubric of IOISs
(Barret and Konsynski, 1982; Cash and Konsynski, 1985).
Fundamentally, IOISs address the two main features of an information transfer system:
capacity (bits of data reliably transmitted over a given time period) and response time (the
period of time after which the channel is available for further data transmissions) (Bakos,
1991b, p. 34). Improvements in both of these dimensions occur when traditional
telecommunications technologies – telegraph, telex, telefax, telephone – are replaced with the
electronic exchange of messages, either directly or indirectly, between the information
systems of the transacting organizations (Bakos, 1991b). More broadly, IOISs have important
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impacts on coordination costs, or the various costs of the process of managing dependencies
among activities (Malone and Crowston, 1994). In the supply chain context, these
coordination costs arise from the management of interdependent interorganizational
information and material flow processes.
Traditionally within the management information systems discourse, interorganizational
information systems have also been studied under the rubric of electronic data interchange
(EDI), which is, broadly, the interorganizational exchange of business documentation in a
structured, machine-processable form (Emmelhainz, 1990, p. 4). The discourse has often
specifically referred to the application of EDI communication standards such as EDIFACT
and ANSI X.12 (Nurmilaakso, 2008). Within this discourse, the research on IOISs evolved
from more conceptual works in the 1980s to theory-based empirical studies in the 1990s and
2000s (for literature reviews, see Kauffman and Walden, 2001; Chatterjee and Ravichandran,
2004b; Elgarah et al., 2005). A key early study was Malone et al.’s (1987) conceptual
examination of electronic markets and hierarchies, which included their famous proposition
that the use of information technology for interorganizational processes decreases
coordination costs by lowering the costs of communication (the electronic communication
effect), enabling the more efficient matching of demand and supply in the marketplace (the
electronic brokerage effect), and supporting process integration between two organizations
(the electronic integration effect). The 1990s observed the growth of both empirically and
theoretically motivated studies on the topic (notable works include Venkatraman and Zaheer,
1990; Bakos, 1991a,b; Gurbaxani and Whang, 1991; Clemons et al., 1993; Riggins and
Mukhopadhyay, 1994; Bensaou and Venkatraman, 1995; Iacovou et al., 1995;
Mukhopadhyay et al., 1995; Kumar and van Dissel, 1996; Choudhury, 1997; Hart and
Saunders, 1997; Holland and Lockett, 1997), a trend that continued in the 2000s, along with
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technological developments related to IOISs (notable works include Chwelos et al., 2001;
Iskandar et al., 2001; Mukhopadhyay and Kekre, 2002; Barua et al., 2004; Subramani, 2004;
Kim et al., 2005; Premkumar et al., 2005; Saeed et al., 2005; Rai et al., 2006; Grover and
Saeed, 2007).
Prior work has suggested multiple dimensions of designing interorganizational information
systems (Barrett and Konsynski, 1982; Malone et al., 1987; Johnston and Vitale, 1988;
Benjamin et al., 1990; Kumar and van Dissel, 1996; Choudhury, 1997; Massetti and Zmud,
1996; Premkumar, 2000; Banerjee and Kumar, 2002; Chatterjee and Ravichandran, 2004a;
Lyytinen and Damsgaard, 2011), but comprehensive frameworks on how these systems are or
should be designed for supply chain integration are still lacking. Chatterjee and
Ravichandran’s (2004a) work is particularly important because it summarizes much of the
previous literature and notably includes the characteristics of the interorganizational
relationship as an explicit structural feature of interorganizational information systems.
However, Chatterjee and Ravichandran’s conceptualization lacks two important features of
IOIS design: the communication standards and networks that are used (discussed by Banerjee
and Kumar, 2002 and Premkumar, 2000) and the fact that the function of the systems
includes either transaction execution or the sharing of information for decision-making
purposes (discussed by Benjamin et al. 1990). The latter works, however, are light on the
relationship-level aspects. More generally, the primary question of interest to both supply
chain integration theorists and practicing managers is not sufficiently explicated. That is, how
should essential questions be conceptualized to enable the design of effective IOISs? In other
words, how can interorganizational information technologies best support the building of
supply chain integration?
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3 MATERIAL AND METHODS
This paper draws from prior literature on interorganizational information systems and supply
chain management, building a conceptual framework that is illustrated by empirical evidence
from three individual studies reported elsewhere (these anonymous author references are
hereafter referred to as Study I, Study II, and Study III, respectively). The research process
began with real-life observations in Studies I, II, and III and followed by a creative iterative
process of “theory matching”. Thus, empirical observations guided the literature search, with
the aim of understanding the phenomena. The literature review followed a concept-centric
approach, in which the main concepts determine the organizing framework of the review
(Webster & Watson, 2002). The aim of this process was to suggest a new theory that
combines managerial and technical aspects of IOIS design within the SCI context. Studies I,
II, and III follow the case study method in different ways, including description (Study II
follows Yin, 1994) and proposition building (Studies I and III follow Yin, 1994 and
Eisenhardt, 1989). The research methods and data are reviewed in detail in Table 1. Next, we
elaborate on the methods used in Studies I-III.
Enter Table 1 here
Study I examines the utilization of the vendor-managed inventory (VMI) model, an e-trading
system that intrinsically couples interorganizational business process development with
digital data exchange (Clark and Stoddard, 1996; Holmström, 1998). Under a VMI system,
the supplier becomes responsible for providing replenishments on behalf of the buyer. Two
specific questions were studied: (1) what types of benefits are realized from a VMI program
(operational, i.e., efficiency-related, versus commercial, i.e., sales-related) and (2) how the
benefits are shared at the dyad level (suppliers versus buyers). Study I followed a proposition
building multiple-case study research design to enable the comparison of different VMI
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implementations in multiple contexts. The unit of analysis in the study was a single
implemented VMI arrangement that included the concerned supplier and buyer organizations
(i.e., a dyad). The sampling logic was to cover VMI implementations in different industry
contexts. In total, five dyads were studied. Qualitative and quantitative data were collected
over four months. Qualitative data were collected through interviews with the persons who
were most knowledgeable on the studied VMI model in each organization. Quantitative data
were collected to triangulate the interview findings. The data analysis followed an iterative
process. In the first phase, within-case analyses were conducted, and individual dyad-level
reports were prepared and checked by the informants in each dyad. In the second phase, a
cross-case analysis was performed to search for patterns with a priori constructs and for
constructs that were developed and refined during the analyses.
Study II followed a descriptive single-case study research design to analyze the utilization of
an electronic trading system of a consumer durables retailing company (CDRC) towards its
suppliers, all small and medium-sized enterprises (SMEs). In particular, system-to-human
and system-to-system exchanges of messaging were contrasted as a means for supply chain
integration from the perspective of the non-initiating suppliers. In close collaboration with the
focal company, the case data were collected over seven months from three primary sources:
interviews with CDRC, interviews with CDRC’s suppliers, and a questionnaire for the
CDRC’s key suppliers. Data were analyzed on the impacts and obstacles of CDRC’s key
suppliers in terms of CDRC’s e-trading system.
Finally, Study III evaluated the role and effectiveness of the RosettaNet, a novel e-business
standardization approach (Bussler, 2003; Chituc et al., 2008; Linthicum 2001) in integrating
the telecommunications supply chain. The in-depth case study analyzed the efforts of a
globally operating manufacturer of infrastructural equipment for mobile telecommunications
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networks (henceforth, MobInfra) to create system-to-system integration-supported business
processes for its customers, who were telecommunications operators. The study followed a
single case study approach with embedded units (Yin, 1994). The overall studied case was
the deployment of the RosettaNet-based system-to-system integrations by MobInfra. The
embedded units were specific ongoing or complete customer-facing deployments of system-
to-system integrations within specific business processes. Data were collected in three phases
over nine months, including pre-study interviews with MobInfra’s representatives, a dyadic
in-depth evaluation of the supply processes between MobInfra and two European
telecommunications operators, termed Alpha and Bravo, and a longitudinal analysis of an e-
trading system implementation project between MobInfra and Alpha over one year. The main
data collection was supplemented by comparing MobInfra’s system-to-system integrations
with Alpha and Bravo to those of four other MobInfra customer-facing system-to-system
integrations (telecommunications operators termed Charlie, Delta, Echo, and Fox). The data
analyses were focused on MobInfra’s perspective on the RosettaNet-standard, on MobInfra’s
customers’ perspectives on system-to-system integration towards MobInfra using the
RosettaNet-standard, and on the dyad-level perceived successes of past and current system-
to-system integrations between MobInfra and its customers.
Overall, rigor was applied by maintaining case study quality in general (internal, external,
and construct validity as well as reliability) (Gibbert et al., 2008; Yin, 1994) and by using
Yin’s (1994) recommendations related to the use of case study protocol in particular (see the
review of the tactics employed as presented in Table 2). Furthermore, the findings were
triangulated by collecting both qualitative and quantitative data from multiple sources (Stuart
et al., 2002). Finally, transparency was supported by disclosing the analysis procedures used
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on data, primarily on the data of a qualitative nature (Eisenhardt, 1989; Miles and Huberman,
1994; Yin, 1994).
Enter Table 2 here
4 DESIGNING INTERORGANIZATIONAL INFORMATION SYSTEM FOR SUPPLY CHAIN INTEGRATION: A FRAMEWORK
Adapting the design theory framework of Gregor and Jones (2007), we synthesize prior
literature from several domains, and propose a framework that forms the basis for
constructing the three main elements of the IOIS for SCI design theory: purpose and scope,
design principles, and the technical framework (Figure 1). The framework combines both the
managerial and technical viewpoints of designing IOIS for SCI.
Two managerial decisions form the basis for designing purpose and scope of IOIS for SCI:
the decision regarding the relationship mode and the definition of the IOIS purpose. The
decision regarding the relationship mode relates to unilateral and bilateral approaches:
whether a system is deployed from a single-party perspective and aimed at individual benefits
or whether the buyer-supplier dyad in question pursues joint goals and mutual benefits.
Second, the key management-level question on IOIS design for SCI focuses on whether it is
used for transaction execution or information-sharing purposes. Information sharing serves
supply chain planning, whereas transaction execution improves the efficiency of operational
supply chain processes. The SCI literature places a clear emphasis on assessing the impact of
these two managerial decisions on performance. The effect of adopting a bilateral
relationship mode on performance has been studied using different labels, such as
supplier/customer partnering/partnership (e.g. Vickery et al. 2003; Droge et al. 2004) and
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close customer/supplier relationships (e.g. Swink et al. 2007; Schoenherr & Swink 2012).
The performance effect of information sharing with supply chain partners is also extensively
researched in the SCI literature (e.g. Svink et al., 2007; Flynn et al., 2010; Wong et al., 2011;
Schoenherr & Swink, 2012).
The two main elements of design principles of IOIS for SCI design theoryhave both
managerial and technical aspects: the architecture of the IOIS (e-market, bilateral link, or
electronic monopoly) and the decisions related to the level of automation (system-to-system
vs. system-to-human). The IOIS literature is dominated by discussion in this area (e.g.
Malone et al., 1987; Benjamin et al., 1990; Bakos, 1991a; Choudhury, 1997), but some
aspects of these issues are also studied in the SCI literature, specifically how the use of
electronic reverse auctions affects performance (Pearcy et al. 2007) and relationship success
(Lösch & Lambert, 2007).
Finally, the technical framework of IOIS design for SCI design theory includes selecting the
appropriate e-business framework (for example, RosettaNet) and the message standard (for
example, EDIFACT). The IOIS literature extensively discusses these issues (as described
below in 4.1.3). In turn, SCI scholars have shown interest towards the performance effects of
investing in EDI (e.g. Stump and Sriram, 1997; Larson & Kulchitsky, 2000), but selecting
suitable standards has not been of interest.
The managerial and technical decisions in the framework are evidently interrelated. The
relationship mode and purpose definition guide decisions regarding the architecture and the
level of automation. These definitions, in turn, influence the decisions related to
communication standards. The outcome of these decisions indicates the purpose and scope,
design principles, and technical framework for designing IOIS for SCI.
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Enter Figure 1 here
4.1 Purpose and scope
At a high level, key managerial decisions regarding supply chain integration can be
understood through the transaction cost economics (TCE) framework. TCE suggests that
when organizing interorganizational transactions, firms should either resort to markets or
internalize a given transaction (Williamson, 1985, 1994). Higher risks, particularly specificity
of assets and context uncertainty, should favor the use of hierarchies, or organization under a
single authority. Conversely, firms often favor markets over hierarchies. Between these two
alternatives, there exists a mixture of hybrid governance forms, such as long-term contracts,
joint ventures, and franchising, which blend features from both markets and hierarchies
(Williamson, 1991).
Importantly, we can delineate between two basic types of hybrids in terms of the nature of the
incorporated buyer-supplier relationship. Specifically, the prior literature suggests a division
between the unilateral and bilateral forms of hybrid governance (Heide, 1994; Rindfleisch
and Heide, 1997). Unilateral hybrid governance mechanisms “provide a way to safeguard
specific assets by solidifying ex ante agreements with an exchange partner”, whereas bilateral
mechanisms “provide a firm with a way to safeguard its specific assets by developing closer
ties with its exchange partners” (Rindfleisch and Heide, 1997, p. 44).
A key managerial decision for the parties involved in IOIS design concerns centers on
whether they act separately according to their own interests, which may result in divergent
goals, or whether they work together by striving towards a common goal. This dual
interpretation of hybrids is shared by various authors from different streams in the literature
(Bonoma, 1976; Dwyer et al., 1987; Anderson and Narus, 1990; Heide and John, 1990;
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Heide and John, 1992; Heide, 1994; Cannon and Perreault, 1999; Schultze and Orlikowski,
2004; Williamson, 2008). These two basic modes primarily differ in the ways in which the
relationship between the parties is established and maintained (Heide, 1994, p. 75). The
parties of a bilateral hybrid “behave as if there were some [mutually relevant] third party to
their interaction” (Bonoma, 1976, p. 507). Furthermore, within unilateral hybrids, there are
two parties for whom the benefits and costs of the transaction to the other party are less
relevant. For bilateral forms, the more relevant entity is the dyad, where mutual benefit is the
norm and necessary reciprocal adjustments are made to secure it. Whereas unilateral hybrids
are characterized by subtle or outright blatant behavior to secure the fulfillment of individual
agendas, bilateral hybrids host open discussions on the agenda as a starting point and then
pursue the agreed-upon approach cooperatively.
In short, the unilateral mode of IOIS deployment is fundamentally initiated by a single party
and aimed towards individual benefits, whereas the starting point of bilateral system
deployment involves joint goals and respective mutual benefits at the dyad level. The
conceptualizations by various authors appearing in different literature streams lend support to
this dual interpretation of hybrids. Chatterjee and Ravichandran (2004a) suggest that
“relational support” is one key feature within IOIS use. Son et al. (2005) suggest that higher
volume and diversified IOIS use (by system function) are related to cooperative approaches.
Finally, Bensaou and Venkatraman (1995) and Premkumar et al. (2005) suggest that distinct
patterns of IOIS use can be related to varying information processing needs.
These three analyzed empirical studies highlight the fundamental role of the relationship
mode and its relevance in IOIS utilization. In Study I, the multiple case studies of the patterns
of VMI show that buyer-supplier VMI-replenishment systems can be conceptualized as either
basic or cooperative, exhibiting two forms of relationship mode -adjusted IOISs. Basic VMI
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is defined as an IOIS that is used according to more traditional – or unilateral – interests. It is
proposed that the goals for the involved buyers of this basic type of VMI are ease of supply
and improved operational efficiency. The buyer’s basic VMI objectives are satisfied to the
extent that its purchasing operations become easier, more efficient, and more effective: the
manual process of placing orders is eliminated, inventory levels are reduced, and material
availability is improved. The supplier’s target is met to the extent that VMI as a service – to
increase sales and lock in customers – is successfully offered to the buyer. Within
cooperative VMI, however, both the buyer and the supplier seek efficiency at the dyadic
level. In addition to the basic effects provided by VMI, such as operational efficiency, gains
for buyers, and improvements in the buyer-supplier relationship, the cooperative
implementation pattern incorporates buyer-supplier goal alignment and joint action.
The role of the relationship mode is also noted in Study II, analyzing the utilization of an
IOIS by a consumer durables retail company (CDRC). The focal company implemented a
unilateral IOIS towards its suppliers to pursue the goal of better controlling its supplier base.
At first, the CDRC’s approach was to dictate its IOIS system use and collect payments for its
use from its suppliers. The issue of system-to-human or system-to-system data exchange
rested with the suppliers. When the CDRC realized that system-to-system data exchange was
more beneficial to both the suppliers and the CDRC, it shifted towards a more bilateral
relationship mode by taking actions such as providing its suppliers with tools to help them in
system-to-system integration. Finally, the Study III evaluation of the role and effectiveness of
RosettaNet ─ a more recent e-business standardization approach ─ recognizes two distinct
modes in IOIS utilization: adverse and cooperative. Adverse IOIS integrations are
characterized by a low extent of mutual process alignment and unilateral benefits, whereas
cooperative integrations involve dyad-level mutual commitment, bilateral benefits, and
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requisite mutual process development within the integration projects. In addition, cooperative
integrations are based on a true intention to enhance the associated interorganizational
business process, whereas adverse integrations embody a unilateral pursuit of direct cost
savings, e.g., by receiving invoices electronically.
The second key managerial issue within IOIS design is defining its purpose: the question of
use for transaction execution or information sharing must be answered. In effect, the function
of the IOIS defines the operational goals of that particular system, or what will actually be
done with the system, i.e., what type of data will be exchanged. General decisions on function
address a basic duality: the IOIS could be used to exchange transaction data (e.g., orders,
invoices) and/or share information that is relevant to decision-making. In their framework,
Johnston and Vitale (1988) suggest that the “what” question should be asked when designing
IOISs, referring to whether the systems are meant primarily for boundary transactions or are
meant to retrieve and analyze shared information (p. 159). Benjamin et al. (1990) suggest a
two-by-two matrix typology on IOISs: electronic hierarchies or electronic markets deployed
either for transaction processing or task support, the latter of which is defined as providing
“non-routine task support for managerial, analytic, and design functions that contribute to
decision making” (p. 31). Furthermore, Simchi-Levi et al. (2003) summarize the four key
functions of IT use in supply chain management: (1) information availability and visibility,
(2) efficient transaction execution, (3) support for decision-making and planning, and (4)
support for cooperation and collaboration. Simatupang and Sridharan (2002, p. 24)
complement the information sharing-perspective by suggesting key categories of information:
availability of resources (capacity, inventories, funds, capability), status of performance
(time, quality, costs, flexibility), status of process (forecasting, ordering, delivering,
replenishing, servicing), and status of the dyadic contract.
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The three analyzed studies illustrate how the function of each system must be matched to the
needs of relevant business processes to provide the gains sought from system use. Study I
features the execution of transactions in the VMI process, and Study III examines order-
related messaging in the telecommunications equipment delivery context. Study I further
highlights how sharing information on the inventory levels of buyers is fundamental in
enabling suppliers to make accurate decisions on replenishing buyer inventory, an essential
aspect of a VMI-style IOIS. Study II demonstrates how an important aspect of the
implemented IOIS, in addition to its ability to exchange transactional messages, was the need
of a CDRC, the focal company, to electronically receive product availability data from its
suppliers to improve its capability to provide a timely and accurate vision of product
availability to the final customer.
4.2 Design principles
We postulate two key decisions when designing IOIS for SCI, requiring both managerial and
technical considerations: architecture (electronic market, electronic monopoly, or bilateral
link) and the level of automation (system-to-system vs. system-to-human). These elements
constitute the core design principles of IOIS for SCI. Decisions on architecture address the
vertical scope of the IOIS. Thus, companies should decide whether they need multi-vendor,
multi-buyer (public) electronic markets (Malone et al., 1987; Benjamin et al., 1990; Bakos,
1991a; Choudhury, 1997) or private electronic hierarchies (Malone et al. 1987; Benjamin et
al., 1990; Bakos, 1991b), with the additional general alternatives of having one-to-one
bilateral links and one-to-many electronic monopolies (Choudhury, 1997). Clearly, each
alternative has its own idiosyncratic costs and particular depth of integration: point-to-point
bilateral electronic links allow customized solutions but include the potential costs of
increased asset specificity and all of the accompanying and eventual negative consequences.
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Electronic markets and electronic monopolies, in contrast, allow for smooth transactions with
low commitment but only offer a “one-size-fits-all” design.
Decisions on automation essentially call for determining whether the planned system should
be system-to-human or system-to-system (Benjamin et al., 1990; Massetti and Zmud, 1996;
Bussler, 2003). In system-to-human integration, data exchange is semi-automated: data from
the internal information system of one transacting party are delivered in an electronic format
to the other transacting party, which manually processes these data further. In system-to-
system integration, data exchange between the internal information systems of the transacting
organizations is fully automated; no human intervention is needed. This system can be
considered the most efficient way to manage interorganizational data exchange in terms of
manual work in the data exchange process.
These considerations are illustrated in the analyzed studies in several ways. One prominent
aspect is how the supplier efficiency gains from IOIS use are directly related to the level of
automation. For example, in Study II, system-to-system users exhibited an average of one-
tenth of the manual work content and perceived higher benefits from their investments in the
CDRC’s system than did the system-to-human users. Study III presents a situation where the
starting point was to build system-to-system links, with the idea that only direct data
exchange beyond organizational boundaries would bring true efficiency benefits. However,
the integrations resulted in variable levels of benefits, ranging from negligible to notable. It
was found that using only the standard ways of messaging was not sufficient for creating
system-to-system integrations that benefitted both implementing parties at the dyadic level.
Study III proposed the necessity to unambiguously define product item code data on the least
complex level from the perspective of both trading partners to reach economic benefits on the
dyadic level. Such an approach would simplify the interorganizational data exchange and
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improve data quality such that the true benefits of automating data flows would become
possible, thereby enabling an effective system-to-system mode.
4.3 Technical framework
Finally, decisions about the technical nature of IOIS address the communication standards
deployed to support the data exchange (Premkumar, 2000; Linthicum, 2001; Bussler, 2003;
Goldfarb and Prescod, 2004; Chituc et al., 2008). Data must be mapped in such a way that
the communicating information systems send the data in machine-producible and/or readable
format. One basic approach is to build a proprietary, firm-specific standard (Zhu et al., 2006).
Serious attempts at creating non-proprietary standards have been made at least since the early
days of EDI (Emmelhainz 1990) in the late 1970s. However, the current landscape of e-
business standards or, perhaps more aptly, frameworks (Nurmilaakso et al., 2006) ranges
from global horizontal EDIFACT standards to industry-specific standards and messaging-
based EDI standards to XML-based business process-oriented approaches (Schubert and
Legner 2011) and, in many cases, to vertical standards that have been developed in certain
industry contexts, such as PapiNet and RosettaNet (Nurmilaakso et al., 2006). Nevertheless,
standards continue to be essential for any structured exchange of data between distinct
information systems, and their role is accentuated in the case of transactions under different
authorities, i.e., in the realm of hybrid governance forms. Navigating in this terrain
constitutes grass-roots-level decision-making in IOIS use, which is the most practical but no
less critical dimension.
These aspects and related tensions are perhaps best highlighted in Study III. MobInfra, the
focal company, pursued the use of the RosettaNet-standard to enable smooth integrations
with a set of partners and to free itself from the use of proprietary networks in favor of open,
Internet-based networks. However, as observed in Study III, it is challenging to share the
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standard with all users, particularly because the customers of Study III worked with various
types of suppliers in multiple industries and under multiple standards. One potential but still
partial solution to the matter of multiple standards was pursued by Alpha, a
telecommunications operator and customer of MobInfra. The company implemented a policy
to use a third-party integration service provider to connect with its suppliers. Alpha delivered
messages in its own preferred form from its internal information system to its service
provider; the suppliers then received the messages in the form that they preferred, and the
conversion was performed by the third-party intermediary. The point of using such third-
party intermediaries was to make Alpha itself indifferent to communication standards and
network issues. However, such third-party translation services have a cost, as do the
traditional VAN services (Emmelhainz 1990).
By studying another divide between older EDI-based and newer XML-based systems, Study
III also shows that the question of newer vs. older standard is by no means trivial. In
particular, new is always not “better”. In fact, the perceived benefits of using the RosettaNet-
standard versus EDIFACT in telecommunications industry business processes were higher
only in limited instances, most notably in more indirect cases such as those supporting novel
business processes and process re-design efforts.
4.4 Attaining outcomes of integration: differentiation over use contexts
The real thread binding the decisions on all levels – purpose and scope; design principles;
technical framework – is the flexible differentiation over use contexts, primarily over partners
and focal interorganizational processes. In particular, both the prior literature and the three
studies analyzed here show that the point at which the desired outcomes of integration accrue
can be associated with matching the core decisions with situational characteristics.
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For example, Holland and Lockett (1997) elaborate the basic market-hierarchy dichotomy
within the TCE framework by proposing the concept of mixed mode network structures –
combinations of market and hierarchy features – and empirically matching specific types of
mixed network structures with different types of IOIS features through a case study of five
transaction instances. Johnston and Vitale’s (1988) framework includes the “who” question
as one of its key features, i.e., which partners (customers, dealers, suppliers, competitors)
should be linked to the prospective IOIS. In their typology, Massetti and Zmud (1996)
propose diversity (the extent to which different types of documents are exchanged via IOISs,
fundamentally relating to different types of buyer-supplier tasks) and breadth (the extent to
which IOISs exist with different trading partners) as intrinsic aspects of IOIS use. Saeed et al.
(2011) observe that the configuration (functionalities included in the IOIS) varies depending
on the level of integration between parties. Within the SCM discourse, Lambert and Cooper
(2000) conceptualize SCM as essentially three key differentiating decisions: who to integrate
with, what processes to integrate, and how deeply to integrate.
The analyzed studies further highlight this need for differentiation. Study I shows how VMI
systems were deployed in various ways, based on the nature of the transaction, ranging from
implementation to receiving operational benefits or offering services and maintaining a
traditional buyer-supplier transaction to implementations (the basic VMI implementation
pattern) to support buyer-supplier cooperation (the cooperative VMI implementation pattern).
A further differentiating aspect was observed: whether a supplier used the VMI to improve its
own operations in a given interorganizational process (termed the synchronized VMI
implementation pattern in the study). The study shows distinct instances where suppliers
intentionally pursued internal benefits based on the added visibility of buyers’ processes;
however, this type of approach was not found in all implementations. As a tentative
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explanation, the study finds contextual inhibiting factors, such as the small share of VMI-
based business, i.e., aspects pertaining to the transaction instance-based design of IOISs.
Study II illustrates how a CDRC combined system-to-human and system-to-system
integration alternatives for its SME suppliers with varying internal information system
capabilities and how this process enabled the extension of the company’s partner base. The
CDRC initiated its supplier-facing IOIS in the late 1990s as an extension of its internal
information system. Suppliers could either use the system manually or integrate the data flow
with their internal systems. A handful of the target suppliers started to transact electronically,
remaining either system-to-human users (manually using the CDRC’s system from a
dedicated terminal) or upgrading the electronic link to a full system-to-system setup at their
own expense. In 2003, to increase the share of supply-side electronic transactions, a new
development phase was initiated: a supplier web-portal was deployed. This system-to-human
approach allowed a supplier to receive and confirm the CDRC’s orders, communicate with
the CDRC’s retail outlets, send product availability data, and view the inventory levels and
sales figures of the CDRC's retail outlets using just a standard desktop computer and an
Internet browser. This development illustrates what Laukkanen et al. (2007) term the dual
role of web-portals: partner extension, in which electronic transactions are extended to
situations where system-to-system approaches are not feasible or possible, and information
expansion, in which new data or functionalities are provided in exchanges with partners that
are already electronically integrated.
Finally, Study III reports MobInfra’s challenges in trying to implement a single RosettaNet
standard approach among all of its customers. Because the needs and operational contexts of
the customer-task combinations of the transactions differed, MobInfra encountered
challenges when it tried to increase the volume, diversity (variety of processes), and breadth
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(variety of transaction partners) of system utilization among its end customers. To partially
address this issue, MobInfra was inspired to develop a specific software tool that helped
adapt the varying telecom-operator-specific processes to MobInfra’s internal processes and
information systems (for example, allocating an order to a proper contract in its ERP-system).
Thus, in several instances, MobInfra partly made itself less sensitive to the efficiency-
decreasing idiosyncratic aspects of certain transactions.
5 DISCUSSION
This paper synthesizes the findings from previous research on the design of
interorganizational information systems from the supply chain integration perspective,
drawing both from prior literature in IS and SCI streams and analyzing three empirical case
studies from a 10-year research program. Lyytinen and Damsgaard (2011) highlight the need
for improved IOIS typologies and call for an analysis of the differences in adoption
configurations, and Narayanan et al. (2009) suggest that future researchers should try to
better understand the configurations of the structures, processes, and contexts used in the
effective utilization of IOISs. Furthermore, as noted, most of the recent works on this topic
neglect to include either the technical (Chatterjee and Ravichandran, 2004a) or managerial
aspects (Banerjee and Kumar, 2002) of IOIS design within a single framework and usually
lack direct empirical evidence. This study’s synthesized IOIS design framework and its
observation of the need for differentiation required for effective IOIS design complement
prior works from multiple domains by discussing, within a single conceptualization, the
questions relevant to IOIS deployment in the context of supply chain integration.
Our results point explicitly to the implications of the benefits received from unilateral and
bilateral modes of IOIS design. Prior work has shown that IOISs offer various types of
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benefits in terms of reductions in inter-organizational coordination costs (Elgarah et al., 2005;
Narayanan et al. 2009). However, the framework developed in this paper suggests that it is
relevant to ask which parties actually receive these benefits. We submit that inter-dyad
benefit distribution from a given IOIS centrally depends on the unilateral or bilateral
deployment modes of IOIS. Webster (1995) reports how Ford Europe pursued raw market-
power games and dominance outcomes through IOISs. Webster concludes that “[i]n
developing a proprietary interorganizational network, Ford [had] a basic objective – to gain
competitive advantage by locking its suppliers and customers into its systems” (p. 34). In
contrast, Chatfield and Yetton (2000) elaborate the concept of the high embeddedness of EDI
use that was found “in a cooperative relationship with established strategic links and people
links” (p. 201) and further elaborate that “what matters here is that information flows are
bidirectional and information sharing is reciprocal” (p. 202). Contrasting this with the low
embeddedness corresponding to unilateral IOIS use (“likely found in an arm’s length
relationship, where the initiator-adopter relationship establishes EDI links without having
either strategic links or ongoing, close people links” [p. 201]), Chatfield and Yetton show in a
cross-case study how Honda deployed highly embedded EDI-solutions within its supply
system and, through this measure, achieved strategic payoffs such as advantages over
competitors. The empirical examples in this paper from multiple SCI contexts show how
unilateralism signifies the desire and realization of single party operational efficiency benefits
whereas bilateralism nurtures the formation of operational efficiency benefits on the dyadic
level.
A further key contribution of this work is the identification of the relevant differentiation in
IOIS design for SCI that is required to achieve the desired outcomes. Finding sufficiently
similar instances and separating them from other instances through differentiated IOIS
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applications appears, based on this analysis, to be a means for deploying IOISs effectively.
This paper also contributes along these lines by noting variations in IOIS use not only
between companies but also within a focal company.
This paper identifies three promising areas for further research. First, future work should
examine the implications of having to operate multiple IOISs with various supply chain
trading partners in more detail. As implied by our suggestion of transaction instance-based
differentiation, companies need to, and indeed should, address multiple systems concurrently.
When willingly done – as when providing system-to-human and system-to-system
alternatives for data exchange to a set of suppliers – it should be efficient for the focal
company. However, an unwillingly imposed IOIS diversity, such as forcing compliance with
diverging requests from multiple customers, could compromise the operational cost-
efficiency of the focal company. Thus, there is a need to systematically describe the extent
that having a variety of systems presents issues and to understand in what ways, e.g.,
management practices or smart application of technologies, this problem can be countered.
Both in-depth case studies and large sample studies of organizations are needed: case studies
to describe and map the territory and to build relationships between identified constructs
(Eisenhardt, 1989; Handfield and Melnyk, 1998; Stuart et al., 2002) and survey research and
experiments to test theoretical propositions (Handfield and Melnyk, 1998).
Second, there is a need for a systematic analysis of the inhibitors of fully automated data
exchange within IOISs. As noted in this paper, the efficiency benefits of micro-level process
improvements in terms of data quality and the reduction of manual work are maximally
realized only under system-to-system IOIS designs. However, empirical examples show that
it remains a challenge for organizations to truly realize beneficial system-to-system links in
terms of operational efficiency, particularly in instances of unilateral relationship modes. A
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good research format to study this matter would be a polar multiple case study (Eisenhardt,
1989) that contrasts successful and unsuccessful system-to-system integration instances,
specifically identifying the reasons for the failures. There is also a need to better understand
the conditions for the effective and efficient use of third-party integration service providers
because such an approach could be a potential solution to the integration problem that arises
from the wide range of active e-business standards and their additional context-specific
adjustments. From a technological development perspective, there appears to be a need to
further develop flexible IOIS technologies.
Finally, the issue of contextual factors in IOIS design must be pursued more systematically
and must be informed by the developed framework. Prior research has identified a range of
exogenous determinants in the use of IOISs. In the contexts of organization studies and
organizational economics, Thompson ([1967] 2003) and Williamson (1985) propose that
interorganizational interdependence and asset specificity are relevant factors in the analysis
of economic organizations. The relevance of these two factors should also pertain to the
analysis of IOIS design (Malone et al., 1987; Holland et al., 1992; Bensaou and
Venkatraman, 1995; Hart and Saunders, 1997; Holland and Lockett, 1997; Premkumar et al.,
2005; Son et al., 2005). Another suggested factor implicated in the TCE framework is the
environmental uncertainty that drives the need for higher-caliber governance structures
(Williamson, 1985). The implications of the nature of the interorganizational relationship
should also be systematically studied. In particular, the concept of relationship mode, either
bilateral or unilateral, is well exhibited in prior works, such as buyer-supplier closeness or
trust (Bensaou and Venkatraman, 1995; Chatterjee and Ravichandran, 2004a; Premkumar et
al., 2005; Son et al., 2005); buyer-supplier power balance (Holland et al., 1992; Hart and
Saunders, 1997; Banerjee and Kumar, 2002; Chatterjee and Ravichandran, 2004a); expected
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opportunism (Son et al. 2005); and buyer-supplier cooperation (Son et al. 2005). The
important question of whether deeper relationships are associated with the utilization of more
sophisticated IOISs must be evaluated. Additionally, product-specific features should be
examined. Both Bensaou and Venkatraman (1995) and Premkumar et al. (2005) relate the
attributes of products to specific patterns of IOIS use, such as high levels of product
complexity and deeper EDI-based bilateral links. Banerjee and Kumar (2002) suggest another
set of potentially relevant issues: competitive and regulatory environment, technical
performance factors, organizational readiness, existing IOIS use, and security requirements.
Further research should consider the potential contextual limitations of IOISs. For instance, in
the healthcare sector, information systems dealing with delicate personal information must
account for the security and privacy requirements in all of their functionalities (Win, 2005).
The applicability of automated systems in healthcare may also be hindered because patient-
provider relationship feels less personal (Black et al, 2011). A relevant topic is to determine
whether such limitations exist more commonly among different industries.
There is thus a need to investigate these matters in future research and to study the
phenomenon of differentiation in IOIS design for SCI with a broad application of empirical
operations management research methods (Swamidass, 1991; Handfield and Melnyk, 1998).
Such research should first aim to identify the relevant factors that drive differentiation within
different contexts of IOIS utilization. Moreover, in the spirit of research bearing relevance on
practical action (van Aken 2004; Holmström et al. 2009), such research should investigate in
detail how these factors are reflected or should be reflected in the relationship mode and
technical design considerations of IOIS utilization in supply chain integration.
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FIGURES AND TABLES
Figure 1: Core decisions in designing interorganizational systems for supply chain integration
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Table 1: Methods and data in the analyzed studies
Paper/ study
Type of case study
Cases Qualitative data Quantitative data
Study I
Proposition building multiple-case study
5 dyads with a VMI- model in place
19 interviews with 14 informants representing 9 different organizations
Before/after data on VMI implementation impacts, where available
Study II
Descriptive single-case study
Supplier- facing electronic trading system of CDRC
8 interviews with 8 CDRC informants; 5 interviews with 5 different of suppliers of CDRC
Questionnaire responses from 24 suppliers of CDRC; Several data from CDRC’s internal information system (esp. relating to CDRC’s purchases).
Study III
Proposition building single-case study with embedded units
6 customer- facing system-to- system integrations of MobInfra
51 interviews with 32 singular informants, representing three different organizations
Supplementary data from MobInfra (esp. overall number and type of integrations at MobInfra's customer interface) and from Alpha and Bravo (purchasing transaction volumes)
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Table 2: Review of validity and reliability tactics employed in the analyzed studies
Test Yin's tactic Study I Study II Study III
C o n s tr u c t v a li d it y
Use multiple sources of evidence
Multiple informants in each dyad; use of quantitative data where available; exhibiting audit trail from case data to the explicated framework and propositions; having informants review case study report drafts; presentation of tentative results at a seminar to a practitioner audience.
Multiple sources of evidence; explicit grounding each key finding empirically from multiple data sources; presentation of preliminary results to key contact persons at CDRC and sending a summary of the preliminary results to the studied suppliers.
Multiple sources of evidence; exhibiting audit trail from case data to key concepts and propositions; providing MobInfra representatives and other informants opportunity to comment to intermediary results; presentation of the results to a meeting of a European professional association on e-business standards.
Establish chain of evidence
Have key informants review draft case study report
In te rn a l v a li d it y
Do pattern-matching
N/A (proposition building case study without an interest to build explanations)
N/A (descriptive case study without an interest to build explanations).
N/A (proposition building case study without an interest to build explanations)
Do explanation building
Do time-series analysis
E x te rn a l v a li d it y
Use replication logic in multiple-case studies
Multiple-case design selecting cases from different operational contexts; supported further by coherent mapping of key findings with prior literature.
N/A (single case study)
Selection of Alpha and Bravo as same-sized customers (to MobInfra) operating in the same geographic region; selection of four additional system-to-system integration cases with the help of MobInfra representatives to illustrate different kinds of customer integrations.
R e li a b il it y
Use case study protocol Yes Yes Yes
Develop case study database
Yes Yes Yes
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