Managing electronic trading partner relationships is a key to successful development of an interorganizational systems (IOS) network. Firms often exercise their power and offer reciprocal investments to their trading partners in developing an IOS network. However, limited effort has been made to empirically validate their effects on increasing IOS usage between trading partners. This paper gauges the effects of these two relational factors--power and reciprocal investments--within the context of an electronic data interchange (EDI) network development. Moreover, the role of channel climate in increasing EDI usage is explicated with a particular focus on its determinants and impacts. With insights obtained from social exchange and transaction cost theories, a research model is developed and tested with data collected from 233 suppliers with electronic linkages via EDI with a nationally recognized retailer of home improvement supplies and materials in the United States. The customer's reciprocal investments in the form of BDI-related support are proven to be effective in increasing EDI volume and diversity. However, power exercised is found to be not effective. Suppliers' cooperation with the customer, which is influenced by perceived uncertainty, trust, and transaction-specific investments, is found to have strong effects on EDI volume and diversity. Finally, the reciprocal investments are found to be an even more effective strategy when suppliers desire to keep a more cooperative relationship with the customer.
We develop a multichannel model of separating equilibrium where a seller markets a durable good to high- and low-type consumers in two different channels--an online Internet storefront and an offline bricks-and-mortar store. We show how the digital divide, where high-type consumers dominate the online channel and low-type consumers dominate the offline channel, artificially segments the market-place, thereby mitigating the classic cannibalization problem. This allows the seller to more efficiently market its goods to each consumer segment. We show conditions under which low-type consumers are initially served in the offline channel, but subsequently bridging the divide results in their not being served in either channel. We also examine the implications of bridging the digital divide when the seller uses delay by engaging in intertemporal price discrimination.
We develop an analytical model of a separating equilibrium for a two-tier fee-based and sponsorship-based information Web site. We examine the monopolist's choice of content quality and price for a fee-based site targeted at high-type consumers and the content quality level for a sponsored site offered free to all consumers. We show how a reduction in the potential for advertising revenues results in lower content quality on the free site, but permits the seller to raise the fee charged to high-type consumers. We also show how differences in consumer tolerances to ads affects content quality, banner ad volume, and usage fees. In particular, the seller can increase profits by making ads more attractive to either high- or low-type consumers, but rarely both at the same time. We show the conditions that determine which consumer segment the seller should seek to improve ad relevancy.
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.