Overcoming the Challenge of Cooperating with Competitors: Critical Success Factors of Interorganizational Systems Implementation

Abstract

Introduction has changed the rules of the game and the real beneficiaries are the customers, i.e., the investors. (A CEO of a major Israeli investment house) The increasing phenomenon of competitors that collaborate and use a common interorganizational information system (IOS), such as Covisint in the automotive industry (Willcocks & Plant, 2003), or ORBITZ in the airline industry (Granados, Gupta, & Kauffman, 2007), evokes challenging strategic and organizational issues. Practically, it may be more efficient that all participants in a certain industry share a common system and increase the benefits of network externalities (Shapiro & Varian, 1999; Zhu, Kraemer, Gurbaxani, & Xu, 2006). However, from a strategic perspective, there can be a value paradox of IOS: organizations join IOS initiatives although it seems to weaken their competitive position (Borman, 2006). One possible explanation is that they may be compelled to do so by powerful initiators, e.g., an influential retailer requires its suppliers to adopt a certain system. Previous studies have found that external pressure by trading partners enhanced IOS implementation (Chwelos, Benbasat, & Dexter, 2001; Hart & Saunders, 1997, 1998; Premkumar, Ramamurthy, & Crum, 1997; Teo, Wei, & Benbasat, 2003). However, this may not explain a situation where major competitors collaborate in a joint IOS initiative. The organizational challenge of an IOS manager is to resolve conflicts among the participating organizations in order to establish a successful IOS. This study examines two major research questions: why organizations initiate or join IOS and how competing organizations overcome the challenges of participating in a common IOS. The term IOS implementation as used in this paper encompasses both the initial adoption and the mode of continued use of IOS. Although IOS implementation concerns have been widely researched (Chwelos et al., 2001; Teo et al., 2003), studies like Granados et al. (2007) that examine the implementation of the same IOS by competing organizations are rare. Geri & Ahituv (2008) have developed a model of IOS feasibility that is based on the Theory of Constraints (TOC) (Goldratt & Cox, 1986; Gupta, 2003; Mabin & Balderstone, 2000; Ronen, 2005; Ronen & Pass, 2007). Geri & Ahituv's (2008) model aims to explain the overall IOS implementation level in an organization. It relates to all the potential IOS connections of an organization with its business customers, suppliers, competitors, business partners, banks and others. That model has been empirically supported in a field survey of 139 organizations. The earlier research focused on the organization level, whereas this study concentrates on the system level, particularly an IOS that is shared, or is intended to be shared, by competitors. This paper extends the IOS feasibility model of Geri & Ahituv (2008) and analyzes, in retrospect, the implementation of the fully automated Tel-Aviv Continuous Trading system (TACT) by the Tel-Aviv Stock Exchange (TASE) and its members, about a decade after its inauguration. It provides a comprehensive analysis of one system, which includes the points of view of the initiator (TASE) as well as the participants (TASE members), and examines TACT's feasibility and its critical success factors. Structured interviews were conducted with TASE managers and member organizations managers involved in the initiation, development, implementation, operation, and control of TACT. Additionally, a mail survey was sent to all 31 TASE members including all Israeli large and medium size banks, and 20 replies were received (64.5% response rate). TACT was chosen as the research object for the following reasons: Financial services are e-business management pioneers and provide leading examples of IOS applications and patterns that may evolve in other industries (Gordon, 2002; Wise & Morrison, 2000). …