Week 6_Chatterjee and Ravichandran (2011)_Aaron

Decisions regarding inter-organizational information systems (IOS) ownership and control have been crucial for viability of these systems. Nonparticipation in IOS and IOS failure cause major concerns for practitioners but remain little understood academically.

Chatterjee and Ravichandran (2013) therefore investigate why and how firms seek ownership and control of IOS. They propose two distinct facets of IOS governance, transactional and financial governance, which represent firms’ financially responsibility for IOS and controls on transactions within IOS respectively. Drawing on resource dependence theory, they model the key motivators of IOS governance as resource criticality and replaceability, which affect IOS governance through their influences on operational integration existing between partners. Furthermore, they argue technological uncertainty moderates such influences.

Their model was empirically tested using data gathered from a survey of 159 US manufacturing firms. Through mediation analysis and mediated moderation test, they found that resource criticality positively affects the extent of financial and transactional IOS governance by increasing the needs for operational integration, whereas resource replaceability negatively affects them by reducing the need for operational integration. In addition, they also found technological uncertainty creates disincentives for IOS governance by weakening the positive influence of resource criticality on operational integration, but does not significantly affect the relationship between resource replaceability and operation integration.

Theoretically, this study contributes to understand the drivers of IOS governance choices made by firms, extends and complements the research stream on the role of IOS in fostering tighter buyer-supplier relationships. Practically, third party providers and technology vendors are suggested to create appropriate offerings by understanding the fit between firms’ IOS governance decisions and existing exchange arrangement. Moreover, firms seeking to leverage IOS for competitive benefits are encouraged to closely examine the contingencies that influence their supplier relationships before investing in these systems.