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

Abstract

The growing phenomenon of competitors that use a common interorganizational system (IOS) raises challenging strategic and organizational issues. Sometimes organizations join IOS initiatives although it seems to weaken their competitive position. This paper analyzes, in retrospect, the fully automated Tel-Aviv Continuous Trading system (TACT) implemented by the Tel-Aviv Stock Exchange (TASE) and its members, about a decade after its inauguration. It examines TACT's organizational feasibility and its critical success factors, using the Theory of Constraints (TOC) as a theoretical basis. The paper provides a comprehensive analysis of one system, including the point of view of both the initiator (TASE) and the participants (TASE members). TACT's implementation complexity was further escalated since all users had to convert to it simultaneously. Therefore, intensive cooperation was required, especially between Israel's five largest banks, which had seemingly faced a value paradox of IOS, since TACT was supposed to undermine their competitive position by reducing customer lock-in. This study contributes to the informing science transdiscipline by extending its applicability to interorganizational contexts, and by introducing the Theory of Constraints as an effective analysis tool that can be integrated within the informing science framework. It emphasizes the importance of a neutral managing intermediary, provides guidelines for successful IOS implementation, and suggests that the main critical success factor is information systems management skills.