Electronic Data Interchange and Small Organizations: Adoption …€¦ · · 2017-09-01EDI Adoption in Small Firms Electronic Data Interchange and Small Organizations: Adoption

EDI Adoption in Small Firms

Electronic DataInterchange andSmall Organizations:Adoption and Impactof Technology

By: Charalambos L. lacovouFaculty of Commerce and Business

AdministrationUniversity of British Columbia2053 Main MallVancouver, B.C. V6T lZ2CANADAiacovou @ phdlab.commerce.ubc.ca

Izak BenbasatFaculty of Commerce and Business

AdministrationUniversity of British Columbia2053 Main MallVancouver B.C. V6T 1Z2CANADAizak@ unixg.ubc.ca

Albert S. DexterFaculty of Commerce and Business

AdministrationUniversity of British Columbia2053 Main MallVancouver B.C. V6T lZ2CANADAaldexter @ unixg.ubc.ca

Abstract

Many EDI researchers and practitioners haverecognized the importance of high penetrationlevels for the success of EDI. Unfortunately,such penetration is partly impeded by the resis-tance of small companies to become EDI capa-

ble. To investigate this issue, three major fac-tors are identified that influence the EDI adop-tion practices of small firms. These factors are:organizational readiness (because of the lowlevels of IT sophistication and resource avail-ability of small firms), external pressures toadopt (because of the weak market positions ofsmall firms and the network nature of the tech-nology), and perceived benefits (because of thelimited impact that IT has on small firms due tounder-utilization and lack of integration). Bycombining the anticipated effects of these fac-tom, we developed a framework of EDI adop-tion by small businesses. The applicability ofthis framework is empirically demonstratedusing the results of seven case studies. Finally,recommendations are made for the develop-ment of successful EDI partner expansionplans. These include the development of along-term EDI partner expansion plan from thevery beginning, the individual assessment ofeach partner’s EDI preparedness level, and theselection of appropriate influence tactics toexpedite adoption by small partners.Specifically, it is suggested that EDI initiatorspursue promotional efforts to improve partners’perceptions of EDI benefits, provide financialand technological assistance to partners withlow organizational readiness, and carefullyselect and enact influence strategies to reduceresistance.

Keywords: Electronic data interchange,interorganizational systems, small busi-ness, electronic commerce

ISRL Categories: AI0102, CAl101, DA0201,DD0502, HA07, HA0702

Introduction

Electronic Data Intemhange (EDI) can only of full benefit to systems initiators and adoptersthrough widespread adoption of.the technology.Widespread adoption is required to (1) transactwith a substantial EDI network of business part-ners, and (2) eliminate the costs for maintainingparallel, non-EDI systems that are used intransacting with non-EDI-capable partners. As

MIS Quarterly/December 1995 465

EDI Adoptioh in Small Firms

a critical mass of firms become EDI-capable,the costs of trade transactions will decrease forEDI users, who will be able to more efficientlyprocess the majority, if not all, of their purchas-es, sales, and payments via EDI (Bouchard,1993; Lyttle, 1988; McCusker, 1993).

One major impediment to this level of adoptionis the inability of EDI initiators to motivate theirbusiness partners to adopt the technology. Thisis especially true for small enterprises that arereluctant to join the EDI community (Ahlin,1991; Banerjee and Golhar, 1994; Smith,1990). The lack of EDI capability of small orga-nizations is critical because of the importantrole they play in the economy.1 To address thisissue, many large organizations, industry asso-ciations, and governmental units have recentlylaunched EDI partner expansion plans.However, many practitioners have argued that"expanding trading partners seems more diffi-cult than implementing EDI in the first place"(Stelzer, 1993, p. 43). Because of the impor-tance of high adoption levels, this reluctance ofsmaller partners to become EDI-capabledeserves serious attention.

Thus, this article addresses two issues:(1) What are the major factors that influence theadoption and impact of EDI in the small busi-ness context, and (2) how can EDI systems ini-tiators assist in expediting the adoption processof their small partners?

To examine these issues, we reviewed past con-ceptual and empirical research on EDI adoptionand impact, formulated a small business-focusedEDI-adoption framework, and tested its validitywith seven case studies. A summary of the litera-ture review, a description of the model of EDIadoption by small businesses, an overview ofour research methodology, a summary of theempirical findings, a list of recommendations toEDI initiators, and a description of suggestionsfor future research comprise this article.

Literature Review

Electronic data-interchange

EDIs are co-operative interorganizational sys-tems (lOS) that allow trading partners

exchange structured business information elec-tronically between separate computer applica-tions (Swatman and Swatman, 1992). lOSs aretelecommunication-based computer systemsthat are used by two or more organizations tosupport the sharing of data, and sometimesapplications, among users in different organiza-tions (Barrett and Konsynski, 1982; Cash, 1985).For an lOS to be classified as EDI, it must pos-sess four essential features (Pfeiffer, 1992):

1. It must have at least two organizations in abusiness relationship as users;

2. Data processing tasks pertaining to a trans-action at both (all) organizations must supported by independent application sys-tem~, (This property is unique to EDI; otherlOSs are based on a single application sys-tem that is used by multiple users.)

3. The integrity of the data exchange betweenapplication systems of trading partners mustbe guaranteed by agreements concerningdata coding and formatting rules; and

4. Data exchange between the application sys-tems must be accomplished via telecommu-nication links.

EDI adoption

Most of the past EDI studies have used the dif-fusion of innovations theory (Rogers, 1983) identify attributes of the innovation (the EDIsystems) that influence its adoption. Among the-most commonly investigated EDI characteris-tics that promote the adoption of the technologyare: relative advantage (i.e., perceived EDIbenefits and impact), compatibility (both techni-cal and organizational), and trialability (e.g.,pilot tests, prototypes, etc.).2 Perceived relativeadvantage of EDI is the only variable that hasbeen consistently identified as one of the mostcritical adoption factors and as the most impor-tant factor for information technology (IT)growth in small firms (Cragg and King, 1993)oTherefore, perceived EDI benefits wereincluded in our framework as one of the mainexplanatory factors for EDI adoption.

466 MIS Quarterly~December 1995


Several factors that inhibit EDI adoptions werealso identified. Among these are the cost andcomplexity of the technology, the need tochange internal systems, a lack of technologicalskills, and a lack of system integration (Pfeiffer,1992; Saunders and Clark, 1992). We expectthese inhibitors to play a big role in the contextof small organizations, where resources andcomputer sophistication are limited (Swatmanand Swatman, 1991). Indeed, empirical findingssuggest that economic costs and lack of techni-cal knowledge are two of the most importantfactors that hinder IT growth in small organiza-tions (Cragg and King, 1993). Therefore, EDIorganizational readiness, defined as the avail-ability of the needed organizational resourcesfor adoption, is another factor in this study.

Clearly, many factors influence the adoption ofEDI.3 But, since these factors have generallybeen identified through studies of large organiza-tions, their applicability to small business is ques-tionable. Smaller organizations have been shownto have different technology adoption patternsthan large ones.4 Furthermore, most of the previ-ous studies failed to recognize that EDI is a net-work interorganizational system in which interde-pendencies, power of the EDI initiator, and trusttoward the partners become critical issues.~

Pressure from trading partners who are EDI ini-tiators plays a critical role in EDI adoption bysmall firms (Hart and Saunders, 1994; Swatmanand Swatman, 1991; Webster, 1994). Researchsuggests that a firm’s decision to adopt EDI "isprimarily based on what [its] business partnersare doing and not on the characteristics of EDI"(Bouchard, 1993, p. 366). Indeed, more than percent of the respondents in recent surveysidentified customer pressure/mandate as one ofthe primary reasons for adopting EDI.S Hence,external pressure to adopt EDI is an additionalfactor in our framework.

A Model of EDI Adoption bySmall BusinessesBased on a review of the literature on EDIadoption and small business IT, three factors --(1) perceived benefits of EDI, (2)organizationalreadiness, and (3) external pressure -- wereidentified as the main reasons that couldexplain the EDI adoption behavior of small firmsand the expected impact of the technology. Therelationships of these factors with the processof EDI adoption and integration, and impact areshown in Figure 1.

EDI Adoptionand

Integration

Figure 1. Proposed Small Business EDI Adoption Model

MIS Quarterly~December 1995 467


EDI adoption and integration

EDI adoption is the process during which a firmbecomes capable of transacting via EDI, usuallythrough a front-end, PC-based EDI server. Thisis the first step of EDI integration. Although adop-tion and integration can be undertaken at thesame time, EDI integration is the process duringwhich a firm alters its business practices andapplications so that they interface with its EDIapplications. For the purposes of this study, inte-gration is considered bi-dimensional. Internalintegration refers to the variety of applicationsinterconnected through EDI, such as order-entry,invoicing, billing, and payment transfer, andexternal integration refers to the number of trad-ing partners, such as suppliers, customers, gov-ernmental units, and financial institutions withwhich the firm can transact business through EDI(Bergeron and Raymond, 1992).

EDI impact

Impact refers to the actual benefits adoptersreceive from utilizing EDI. To estimate theexpected impact of the technology, the level ofsystem integration is used as a surrogate mea-sure. We assume that the integration level of EDIis positively related to the benefits an adoptercan receive given its EDI capability (Benbasat, etal., 1993; Bergeron and Raymond, 1992;Bouchard, 1993). Usually, non-integrated EDIsystems will offer adopters direct benefits only,such as reduced transaction costs and higherinformation quality. Integrated systems, on theother hand, will offer both high direct benefitsand the ability to take advantage of indirect ben-efits, such as increased operational efficiency,better customer service, and improved interfirmrelationships. This more complete integration,which requires interorganizational design andpolicies, is essential to achieve the performanceimprovements and full beneficial impact of EDI(Clark and Stoddard, 1994).

Perceived EDI benefits

Many practitioners and researchers haveattempted to identify the potential advantagesthat EDI technology has to offer.7 These can begrouped into two categories (Pfeiffer, 1992),roughly equivalent to the two levels of integrationnoted above. The first group is direct benefits.These are mostly operational savings related tothe internal efficiency of the organization. Thesecond group is indirect benefits or opportunities,which refer to the impact of EDI on the businessprocesses and relationships. These are mostlytactical and competitive advantages. A list of thetwo types of benefits is presented in Table 1.

Although direct benefits can include large financialsavings, much of the attention on EDI has focusedon its impact on business operations. EDI offersseveral opportunities that can tum into organiza-tional advantages if they are combined with anappropriate business strategy and reengineeringof business processes (Clark and Stoddard, 1994;Swatman, et al., 1993). This means that EDI isideally best integrated with the core business ofthe organization, since higher levels of integrationlead to higher expected benefits.

Perceived EDI benefits refer to the level ofrecognition of the relative advantage that EDItechnology can provide the organization.8Higher managerial understanding of the relativeadvantage of EDI (i.e., direct and indirect bene-fits) increases the likelihood of the allocation ofthe managerial, financial, and technologicalresources necessary to implement an integrat-ed EDI system (Benbasat, et al., 1993).Therefore, we anticipate that small firms withmanagement that recognizes the benefits ofEDI will be more likely to adopt EDI and enjoyhigher impacts than those whose managementhas a lower level of recognition of the perceivedbenefits.

Organizational readiness for EDI

Organizational readiness refers to the level of(1) financial and (2) technological resources the firm. This factor was considered becausesmall firms tend to lack the resources that are



Table 1. List of Benefits Accrued to EDI Users*

Ben~its Reasons

Direct Benefits:Reduced transaction costsImproved cash flow

Reduced inventory levels

Higher information quality

Indirect Benefits (Opportunities):Increased operational efficiency

Better customer service

Improved trading partner relationships

Increased ability to compete

Elimination of paperwork; labor savingsFaster processing and exchange ofinformationShorter order cycle; reduced orderingcostsIncreased timeliness, accuracy, andaccessibility of information

Improved internal operations due to timeand cost reduction and better informationmanagementShorter lead times; more timely informationabout transaction statusEnhanced trust through increased sharing ofinformation; elimination of nuisance factors (e.g.,errors in orders); increased ability to participatein Just-In-Time programsIncreased ability to reach new markets;increased ability to provide better service at alower cost

*Based on a list of benefits in Pfeiffer (1992).

necessary for EDI and other IT investments(Bouchard, 1993; Saunders and Clark, 1992).Furthermore, the relatively low computerizationlevel of the operations of small firms makes theintegration of sophisticated information systems(such as EDI) difficult, necessitating costlyexpenditures (i.e., capital, people, and technol-ogy). Because small organizations tend to lacksuch resources, their ability to receive all strate-gic benefits of the technology is usually limited.

Financial readiness refers to financial resoumesavailable for EDI to pay for installation costs,implementation of any subsequent enhance-ments, and ongoing expenses during usage(such as communication charges, usage fees,etc.). Although the cost of EDI adoption can belimited to a few hundred dollars (for EDI soft-ware running on a front end, independent per-sonal computer), the cost of integration may runover $10,000 (Bouchard, 1993). Because inte-gration is necessary for successful EDI invest-ments, one can easily see the importance offinancial resources. Usually, small firms with

available financial resources will be betterequipped to implement integrated EDI systems.Consequently, firms that can afford more costly,integrated EDI projects are more likely to enjoyhigher benefits from the use of such systems.

The second dimension of organizational readi-ness-technological readiness--is concernedwith the level of sophistication of IT usage andIT management in an organization.Sophisticated firms usually are less likely to feelintimidated by the technology, possess a supe-rior corporate view of data as an integral part ofoverall information management, and haveaccess to the required technological resoumes(i.e., hardware, expertise, and a competent pro-ject leader) (Pare and Raymond, 1991). expect that these properties of sophisticatedfirms will expedite. EDI adoption. Moreover,firms with highly integrated, computerizedprocesses are better prepared to undertakeintegrated EDI projects, which increase theimpact of the technology and provide greaterbenefits. In summary, we anticipate that small



firms with higher organizational readiness forEDI will be more likely to be adopters and morelikely to enjoy higher benefits than firms withlow levels of readiness.

External pressure to adopt EDI

External pressure to adopt refers to influencesfrom the organizational environment. The twomain sources of external pressure to adopt are(1) competitive pressure, and more important-ly, (2) imposition by trading partners, such when U.S. car manufacturers required theirsuppliers to use EDI in their transactions withthem. Competitive pressure refers to the levelof EDI capability of the firm’s industry and,most importantly, to that of its competitors. Asmore competitors and trading partnersbecome EDI-capable, small firms are moreinclined to adopt EDI in order to maintain theirown competitive position.

Imposition from trading partners is expected tobe one of the most critical factors for EDIadoption by small firms; as the weaker part-ners in interorganizational relationships, smallbusinesses are extremely susceptible to impo-sitions by their larger partners (Saunders andHart, 1993). Such impositions are especiallyprevalent in the case of EDI because of itsnetwork nature.

The pressure exercised by trading partners isa function of two factors: the potential power ofthe imposing partner and its chosen influencestrategy (Provan, 1980). Not surprisingly,requests from powerful partners (e.g., onesthat consume a large proportion of sales orgenerate a large portion of the small firm’sprofits) to become EDI-capable are expectedto be more influential in the adoption decisionof small firms than similar requests from lesspowerful partners.

A powerful partner may pursue three differentstrategies to induce a small partner to adoptEDI.e In the first type of strategy--recommen-dations--large firms use information to altertheir smaller trading partners’ general percep-tions of how their organizations might moreeffectively operate via the use of EDI. In con-

trast, the other two strategies require compli-ance from the smaller firms. Promises includeall tactics that suggest that the larger firm willprovide the smaller partner with a specifiedreward (such as discounts for EDI-transactedgoods, subsidized adoption and usage, etc.) ifit becomes EDI-capable. Threats, on the otherhand, refer to actions that convey the largerfirm’s intentions to apply negative sanction(such as discontinuance of the partnership)should the smaller company fail to becomeEDI-capable. Such threats have been invokedby large automobile manufacturers anddepartment store chains in recent years(Brent, 1994).

Because of the importance of external integra-tion in EDI networks, one expects small orga-nizations to be more vulnerable to competitivepressures and more likely to comply withdemands of their trading partners than largerfirms (Pfeffer and Salancik, 1978). Thus, expect that small firms that encounter pres-sure either by their partners or from the com-petition will adopt EDI more frequently thanthose that do not encounter such pressure.

As outlined in Table 2, we expect perceivedbenefits and organizational readiness to influ-ence both the adoption and integration (andthus impact) of EDI. External pressure, on theother hand, is expected to play a critical role inthe adoption decision, but not in integration.

Research Methodology

To investigate the effects of the three mainfactors, an empirical study of seven compa-nies was undertaken during the Summer of1993.1o

Samp~

All seven organizations in our sample are suppli-ers to the British Columbia (BC) government,which is currently pursuing an EDI initiative.These companies were selected from a list ofprovincial government suppliers with less than

470 MIS Quarter/y/December 1995


Table 2. Summary of Concepts, Variables, and Ex

Concept Variables

EDI AdoptionEDI Integration

EDI Impact

Perceived Benefits

Organizational Readiness

External Pressure

Capability to transact via EDIInternal integrationExternal integrationActual direct and indirectbenefits received

Awareness of direct benefitsAwareness of indirect benefits

Financial resourcesTechnological resources

Competitive pressureImposition by partners

)ected Relationships

Expected Effect

Positively related toadoption, integration, andimpact

Positively related toadoption, integration, andimpact

Positively related toadoption

200 employees; the list was provided by the BCPurchasing Commission (BCPC).I~ These government suppliers are currently the target ofan EDI implementation plan as part of the BCBuy Smart project, a major initiative undertakenby the government in an attempt to streamlineand computerize its purchasing function. The EDIproject is currently in development and scheduledto become functional by 1996. Although anattempt was made to identify small companiesthat were EDI-capable and include them in thesample, only two of the seven were EDI-capable.This lack of small EDI-capable companies furthersupports the initial arguments about the reluc-tance of small firms to adopt EDI.

After the seven companies were identified aspotential candidates, high-level managers (own-ers, vice presidents, or other top-level managers)were asked to participate in the study. All of themagreed to participate. A summary description ofthese companies is presented in Table 3.

firms were conducted to supplement the informa-tion gathered during the personal interviews.Three firms also provided a copy of their financialstatements. All interviews were tape recorded,and all sessions were transcribed before the datawere analyzed. To enhance the validity of theanswers, summaries of the major findings of eachinterview were verified by the participants afterthe end of each interview session. Furthermore,to ensure consistency and reliability, structuredinterview guides were used for all interviews. Twoforms of the interview guide were developed---one for non-EDI-capable and one for EDI-capa-ble firms.~2 The interview guides included severalopen format questions to allow the participantsflexibility in their responses.

Empirical Findings

Categories of EDI adopters

Data collection

The main data collection method was face-to-face, structured interviews with managers of thesmall organizations. However, when necessary,telephone interviews with other executives in the

The relative proportions of organizational readi-ness, extemal pressure, and perceived benefits ina firm influence different levels of EDI adoptionand impact for the organization. Thus, we com-bined the anticipated effects of each factor to for-mulate a framework to serve as an EDI


Table 3. Description of the Organizations in the Sample

Firm

Industry Businesscommun., videoand pdntproduction

Officefurnituresales; mostlycontract sales

Sales in 1992(CDN$ millions) 1.4 = 10

Employees 12 105

Environment

Competitors

Customers

About 7; allsmall firms

Large private andgovemmentalcorporations

Large equipmentsuppliers; talentedartists

Suppliers

Many; large andsmall firms

4,000 customers;large and smallfirms

Few large firms;one supplies 60%of products

Processing andwholesal~ offresh food andvegetables

18.5

110

One large firm andfew small ones

Large supermarketchains and smallrestau rants

Few largemultinational firmsand many localproducers

Industrialcleaning andsanitizingchemicalsmanufacturing

2O

45

Very few largefirms

Many; mostlylarge firms

Large chemicaldistributors

Commercialpdnting

N/A

175

Many large andsmall firms; bothlocal and abroad

200 customers;large and smallfirms; paperdistributors;

Mostly large

Recycling ofindustrialwaste

0.4

One large andtwo small firms

350 customers

Very few

Engineering/manufact, oflow technologyproducts

0.3

1 & 3 part-time

Very large firms

Few; very largecorporations

Very few, largemultinationalcorporations

EDI-Capable No Yes No Yes No No No


adoption/impact typology for small businesses(see Table 4). We investigated the proposedmodel by classifying each of the organizations inour sample according to this framework (seeTable 5). This section describes and illustrateseach organizational type from Table 4 as it appliesto the case study organizations. Then, a fuller dis-cussion of the effects of the factors is offered.

Unprepared Adopters

Unprepared adopters are firms that are pres-sured into adopting EDI by their trading part-ners. Even though these firms are aware of thepotential benefits of the technology, they do notpossess the necessary financial resourcesand/or technical expertise to integrate the EDI

Table 4. Framework of EDI Adoption by Small Businesses

Organization Perceived Organizational External ExpectedBenefits Readiness Pressure Impact

1 UnpreparedAdopter

2 ReadyAdopter

3 CoercedAdopter

4 UnmotivatedAdopter

5 EDI Initiator

6a Non-Adopter

6b Non-Adopter

6c Non-Adopter

High

High

Low

Low

High

High

Low

Low

Low

High

Low

High

High

Low

Low

High

High

High

High

High

Low

Low

Low

Low

Low

High

Low

Low

High

N/A

N/A

N/A

Table 5. Summarized Case Descriptions

Firm 1 2 3 4 5 6 7

EDI-capable

ExpectedIntegrationLevel*

ExternalPressure

PerceivedBenefits

OrganizationalReadiness

Dependency onBC Government

Willingness toAdopt BC BuySmart

No

Low

High

Low

High

Low

Low

Yes

High

High

High

High

Low

High

No

Low

High

Low

Low

High

High

Yes

High

Low

High

High

Low

High

No

Low

High

Low

High

Low

Low

No

Low

High

;Low

Low

High

High

No

Low

High

iHigh

Low

High

High

The entry for firm 2 indicates the current integration level of its EDI applications; for the rest of the firms, it indicates expected levels.



system into their operations (i.e., they lackorganizational readiness). In the case of adop-tion due to imposition by a trading partner, EDImay help to enhance the trading relationship,but it will not significantly improve the internalprocesses of the adopter firm because lowreadiness indicates a lack of needed resourcesto develop an integrated EDI system that wouldprovide high benefits.

One organization in our sample (firm 7) is likelyto become an unprepared adopter if it attemptsto adopt EDI without any assistance. Firm 7 is alow-technology engineering firm run by one per-son. Its level of IT sophistication is very low. Itowns two personal computers and no facsimile,all of its operations are manual (except for theuse of a simple accounting program), and theowner has very little computer experience. Ithas limited financial resources; its annual salesare $250,000, and its working capital is about$15,000. Even though the owner recognizedseveral benefits that EDI can offer to her orga-nization (such as time and cost savings), sheindicated that a lack of resources restrains herfirm’s ability to become EDI-capable. Despitethe lack of these resources, the owner hasexpressed a strong willingness to become EDI-capable as part of the BC Buy Smart projectbecause she thinks that an EDI partnership willimprove her trading relationship with the gov-ernment. This relationship is very important forthe survival of her firm because iit is currentlytrying to sign a new, major contract with the BCgovernment, the largest of its seven clients.

Ready Adopters

Ready adopters represent those .organizationsthat, although pressured into an EDI relation-ship, are prepared for it. They usually have thenecessary resources to develop integrated EDIsystems that will interface with their existingcomputer applications. Management of readyadopter firms has recognized the relativeadvantages of EDI and is willing to allocate therequired resources and support the adoption ofEDI in the organization. This, in turn, wouldsuggest the eventual implementation of an inte-grated EDI system with many benefits.

Firm 2, an office furniture retailer, is a readyadopter. It had a high level of preparednessbefore adopting an EDI system; it owned amainframe, had many personal computers, andemployed an MIS staff of five. Overall, its oper-ations were highly computerized and integrat-ed. This high level of IT sophistication was aug-mented by support subsidies from the tradingpartner that initiated the EDI adoption. Thistrading partner, which supplies 60 percent offirm 2’s purchases, was wholly responsible forthe EDI installation, maintenance, and stafftraining. The high level of organizational readi-ness of firm 2 enabled the implementation of ahighly integrated system. Characteristically, thissystem included software that transformed thesalespeople’s layout designs into orders thatwere then transmitted via EDI. According to therespondent, this integrated system reduced theneed for order entry clerks, eliminated errors,and significantly improved customer service.Having recognized the large benefits that EDIcan offer, the management is currently attempt-ing to establish EDI partnerships with its othersuppliers and customers. In our opinion, highlevels of preparedness and awareness of bene-fits account for the willingness of this firm toparticipate in the BC Buy Smart project, despiteits extremely low dependency on governmentbusiness (less than three percent of its salesare made to the BC government).

Coerced Adopters

Coemed adopters are small firms that are pres-sured into adopting EDI without having recog-nized the need for it and without owning thenecessary resoumes to integrate the technolo-gy. Even though coemed adopters are not fullyaware of the potential impact of the technology,they adopt EDI to sustain the business relation-ship with the imposing trading partner.However, it is very common that coerced, smalladopters can afford only a stand-alone personalcomputer as an EDI server. In such cases, theEDI system is no more beneficial than a fax ore-mail-based system. Consequently, the poten-tial efficiency of EDI does not materialize.


Adoption in Small Firms

Two companies in our sample, firms 3 and 6,lack necessary resources to adopt but are high-ly dependent on the BC government. Thesefirms are likely to become coerced adopterswho would not realize the full benefits of thetechnology unless the BC government providedthem with technical training and support (toincrease their readiness) and education (tostimulate their awareness of the benefits). Firm3, with annual sales of $18.5 million and 110employees, is a wholesaler and processor offresh food and vegetables. Its level of comput-erization is very low; it has no MIS staff andowns only two personal computers and a mini-computer used exclusively for bookkeeping andword processing. The senior manager of thefirm sees little advantage to EDI adoption (otherthan increased transaction speed and elimina-tion of paperwork). However, due to his firm’shigh dependency (20 percent of its sales aremade to the government), he is willing to makethe firm EDI-capable to maintain the workingrelationship with the government.

Firm 6, a recycler of industrial waste, is alsowilling to become EDI-capable to gain betteraccess to governmental business despite thefirm’s low levels of readiness. The firm ownsonly three personal computers, which are main-ly used for word processing and record keep-ing, and none of its six employees has receivedformal computer training. The financialresources of the company are also limited; itsannual sales are $400,000, and its workingcapital is about $40,000. Nevertheless, the firmis willing to adopt EDI to improve its sales to thegovernment (which are expected to triple in thenext five years).

The respondents from both of these firms indi-cated that, because of their limited resoumes,they intend to use a personal computer as anEDI server to receive and send messages butwill process the printed EDI messages manual-ly. Unfortunately, as indicated above, such aconfiguration limits the benefits of the technolo-gy and lowers its positive impact on the opera-tions of the organization.

Unmotivated Adopters

Unmotivated adopters are firms that have beenpressured into EDI, but still have not recognizedthe need for it. Even though they possess thenecessary resources to create an integratedsystem, they have not recognized the relativeadvantage of the technology and thus are notwilling to spend the resources to enhance theirEDI investments. Therefore, the actual impact ofthe technology in these organizations is limited.

Firm 1, a video and print production company,and firm 5, a commercial printing firm, are likelyto become such unmotivated adopters if the BCgovernment requires them to become EDI-capable. Both of them are highly computerizedand own local area networks. Their computer-ized applications are integrated, and both useoutside consultants to assist them with theirsystems. However, the respondents from bothfirms indicated that their companies see veryfew advantages in EDI. Firm l’s managerexpressed a fear about the "levelling effect" ofEDI that could allow other smaller companies toobtain some of the government’s businessbecause of lower prices. This respondent saidthat his firm competes on quality and long-termpartner relationships, something he believescan be undermined by the lack of personal con-tact in EDI relationships. He perceived low ben-efits from EDI; indeed, he indicated that it wouldbe "a pain in the neck to implement," and itscosts would be higher than any benefits.

It is important to note that both of these firms’sales to the government are relatively small,accounting for less than eight percent of theirbusiness, and neither of them expect these fig-ures to increase in the future. Because of thislow dependency and the low awareness of EDIbenefits, these firms are not willing to becomeEDI-capable unless required to do so. Eventhough strong pressures from the BC govern-ment could potentially lead to EDI adoption bythese firms, unless an effort is made toincrease the firms’ awareness of the advan-tages of EDI and encourage the allocation ofthe necessary resources for integration, theimpact of EDI will be limited.


EDI Adoption in SmallFirms

EDI Initiators

EDI initiators are organizations that have recog-nized the need for EDI, possess the necessaryfinancial resources, have reached a high level ofIT sophistication, and have not been pressuredby external factors into adopting EDI. In manycases, these firms implement integrated EDIsystems as part of a larger business reengineer-ing initiative. Such initiators should be treated asinnovators and should expect high returns ontheir EDI investments (after the system hasbeen integrated into their business processes)because of the indirect advantages they standto gain. EDI initiators are extremely rare in thesmall firm population because of the relativelylarge investment necessary for EDI initiation.

Firm 4 in our sample, however, is such an inno-vator. It is an industrial cleaner and chemicalmanufacturer with $20 million annual sales. Themanagement of the firm has recognized themany benefits that EDI can offer to the compa-ny. The firm’s vice president believes, in addi-tion to saving costs, EDI will increase the bar-gaining power of his firm and will allow the com-pany "to grow with its customers" and tap intothe government business market. The ability ofthe company to become EDI-capable was large-ly facilitated by its high computer sophisticationand the proactive stand of its MIS team. Theproject champion, the vice president of finance,has played a critical role in materializing this ini-tiative. Also, outside consultants have beenhired to supplement the skills of the in-houseMtS team. Although the project is still underdevelopment, its impact on the operations of theorganization, is expected to be significant.

Non-Adopters

Lastly, non-adopters are firms that do not intendto become EDI-capable. These firms usually donot face high external pressure to adopt EDIcapabilities. In the absence of external pressure,the only mix of factors that leads to adoption byan organization is a combination of both highorganizational readiness and high perception ofbenefits. The lack of either will hinder adoption.To assist these non-adopter firms to become

EDI-capable, several strategies are suggestedin the last section of this article.

Effects of the three explanatory factors

Perceived Benefits

Several observations can be made comparingthe current adopters (firms 2 and 4) to non-adopters (firms 1,3, 5, 6 and 7). First, the recog-nition of perceived benefits of EDI varies signifi-cantly between the two groups. When dis-cussing the advantages of the technology allnon-EDI adopters primarily focused on efficien-cy (i.e., direct) benefits, indicating that there is perception of low competitive advantage inadopting EDI. Only EDI-capable participantsidentified non-efficiency benefits of the technolo-gy. Respondents from non-EDI-capable firmsalso mentioned time, paper, and cost savings asthe primary motivation for EDI adoption. On theother hand, respondents from EDI-capable firmsmentioned as significant benefits the potential ofEDI to transform interfirm relationships, to allowentry into new and remote markets, and toenable organizational and structural change.This suggests a significant lack of awarenessabout non-direct EDI benefits prior to adoptionand, hence, a need for greater promotionalefforts to increase awareness. Furthermore, thelack of EDI capability is not perceived as a com-petitive disadvantage among the firms in oursample, primarily because the vast majority oftheir direct competitors (usually other local smallfirms) are equally, or even less, EDI-capable.

Our results indicate a positive relationshipbetween pemeived benefits and adoption. In fiveout of the seven cases, pemeived benefits werecongruent with the adoption decision (in theother two, dependency on partner was named).The findings also suggest that perceived bene-fits must indeed influence the integration level ofEDI. All four firms in the sample that have lowawareness of the benefits do not plan to inte-grate EDI in the near future. Of the three firmswith high awareness, one has already devel-oped an integrated EDI system, another plansan integrated adoption, and the third is not plan-ning integration due to a lack of the necessaryresources (organizational readiness).




The majority of the respondents expressed con-cerns about the cost of the investment and lackof know-how. Furthermore, all firms with lowreadiness (firms 3, 6, and 7) indicated a desireto receive technical assistance from the BC gov-ernment in implementing EDI. This finding illus-trates the importance of using subsidies toincrease the EDI readiness of small businesses.

Our findings indicate that the relationshipbetween organizational readiness and adoptionis not very strong. Specifically, two of the firmswith high organizational readiness are not likelyto adopt immediately, while two of the low-readiness businesses are willing to becomeEDI-capable. (This paradoxical finding can beexplained by the partner dependency effects forthese four firms.) Organizational readiness alsohas an unclear relationship with potential inte-gration; none of the three firms with low readi-ness expect to integrate their EDI systems.Only two of the four firms with high readiness,the current adopters, are willing to undertakeintegration of the systems. This suggests thatorganizational readiness may be needed forintegration; however, high readiness does notnecessarily lead to high integration.

Although firm size was not included in ourmodel, we looked closely at the relationshipbetween size and adoption behavior. In termsof sales volume, it appears that the currentadopters are, on average, larger than non-adopters. This is not surprising because size,especially in financial measures, should indi-cate the resources available to the firm. Andaccording to our assumptions, the higher thelevel of resources, the more likely the firm willbe an adopter. In terms of number of employ-ees, however, it seems that there is no relation-ship between firm size and EDI adoption. Infact, the average size of the firms in our samplethat are willing to adopt is smaller than those offirms that are reluctant to become EDI-capable.(This finding should be interpreted very careful-ly due to the small sample size and the largevariation within the sample.)

External Pressure to Adopt

It seems that the strongest explanatory variableinfluencing small firms to adopt EDI is the exter-nal pressure from EDI initiators. With theexception of the two current adopters, the valueof perceived dependency on the BC govern-ment perfectly corresponds to the likelihood ofadoption. Firms that are highly dependent onBC government (firms 3, 6, 7) are very willing adopt EDI; firms that are less dependent on BCgovernment for their sales are reluctant toadopt the system. This indicates that partnerimposition is one of the most critical adoptionfactors in the context of small organizations.The fact that current adopters are willing toadopt the BC Buy Smart system, despite theirlow dependency on the government, supportsour earlier arguments about the non-specificityof EDI investments and the expected gainsfrom external integration.

EDI integration and impact

Considering that the impact of EDI technologyis largely determined by its level of integrationwithin business processes and with other com-puter applications, two observations arise aboutits potential impact on small organizations.First, it seems that small firms are reluctant tointegrate EDI with other applications (i.e., thereis low internal integration), mainly becausemost of their operations are not computerized.All of the non-adopters in our sample plan torun the EDI applications od a stand-alone per-sonal computer and then print out the EDI mes-sages for manual processing. Interestingly, thetwo current adopters are willing to integrate EDIwith other systems. This suggests that integra-tion is perceived as a second stage in adoption,rather than a concurrent one.

Second, the data indicates that both high per-.ceived benefits and high organizational readi-ness are needed for the development of thehighly integrated EDI systems that usually resultin greater benefits. High impact is achieved byEDI initiators because they own the necessaryresources for the development of an integratedsystem; high impact by ready adopters is real-ized mainly because their organizational readi-


EDIAdoption in Small Firms

ness is significantly increased by partner subsi-dies and support. In our sample, firm 2’s sys-tems are highly integrated and, as the respon-dent indicated, "EDI has changed the way thecompany does business." Systems develop-ment, software updates, and staff training wereprovided by the EDI initiator, and’ the adoptionwas highly supported by top management.Other incentives (e.g., allocation of credit pointsfor use) were also used to induce adoption. Onthe other hand, the other adopter in the sample(firm 4), is currently developing its own system.Although there are plans for internal integrationin the future, the EDI application is not currentlyintegrated with other computer applications inthe organization.

The respondent from firm 2 pointed out severalindirect benefits of EDI that were enjoyed in thecompany, while the participant from firm 4focused most of his comments about the impactof the technology on issues associated with effi-ciency and ability to trade with larger firms (i.e.,external integration). The participant from firm also reported that several organizationalchanges occurred as a result of EDI adoption,such as the ability of salespeople to directly

track and modify an order without the assis-tance of an order entry clerk (i.e., internal inte-gration). This finding supports our conjecturethat the impact of the technology is indeeddirectly affected by its level of integration, whichin turn can be greatly enhanced by outsideassistance, such as subsidised adoption fromthe system initiator.

Summary

This empirical investigation suggests that amajor reason that small companies becomeEDI-capable is due to external pressure, espe-cially from trading partners (for a summary ofthe findings, please refer to Table 6). Smallorganizations that are pressured into adoptingEDI will reap limited benefits unless they arewilling and capable of investing the resourcesnecessary to integrate the system within theiroperations. Therefore, both high organizationalreadiness and an awareness of the benefits(which induces the allocation of the availableresources) are required for integrated, high-impact EDI systems. Based on our findings, it

Table 6. Summary of Key Findings

Factor Findings

Perceived Benefits


External Pressure

EDI Integration

Pre-adoption awareness of EDI benefits is low.There is a need for promotion to increase awareness.The relationship between perceived benefits and EDI adoption and

integration is moderate.

The overall readiness of small organizations is not high enough foradoption.

There is an additional need for financial, technological, and manageri-al assistance.

The relationship between readiness and integration is moderate.The influence of readiness on adoption is weak.

The relationship between dependency and adoption is strong.

Both organizational readiness and perceived benefits are required forhighly integrated systems.

Small firms are reluctant to integrate EDI into their operations(because it is too costly).

Subsidies from EDI partners/initiators greatly enhance the integration(and thus impact) of the technology.



appears that a large number of small organiza-tions tend to lack the needed high organization-al readiness and perceived benefits that arerequire~l for integrated, high-impact systems.The case results also indicate that the use ofsubsidies, promotional efforts, and other influ-ence tactics can reduce the liabilities caused bythe low levels of these factors and lead to fasterand more integrated adoption.

Recommendations to EDIInitiators

Unquestionably, there is a need for a method-ological approach in facilitating EDI adoption bysmall partners. We suggest the following stepsfor EDI initiators such as organizations, industryassociations, and governmental bodies toassist them in preparing their partner expansionplans.

Step lmPlannin~ Develop a long-term planthat covers the adoption of small partnersfrom the very beginning. The faster the adop-tion by a few small partners, the higher the like-lihood that other small partners will imitate thisbehavior in order to retain their competitiveposition and to protect their business with theEDI initiator. Unfortunately, many initiators tendto focus on large partners only and ignore thesmall ones during the early stages of their EDIpartner expansion plans. This isolation of small-er partners during the initial stages conveys theidea that the relationships with the smaller part-ners are not very important and that the mainreason the initiator wants the small partners tobecome EDI-capable (after all of its larger part-ners are EDI-capable) is so that it enjoys higherbenefits. In addition, lack of EDI capabilityamong the small business population reducesthe perceptions of competitive necessity forEDI, reducing any external competitive pres-sure for adoption. Early involvement of smallpartners can eliminate these misconceptionsand better educate the small firms about thepotential impact of EDI on their businesses,which in turn would lead to faster EDI adoptionby small organizations.

Step 2mPartner Assessment: Assess theEDI preparedness status of each small part-ner. Both the available resources and aware-ness of EDI benefits of each potential EDI part-ner must be carefully considered, because highlevels of both organizational readiness and per-ceived benefits are required for the develop-ment of integrated, high-impact systems. Toestimate the partners’ organizational readinesslevels, IT sophistication and slack indicatorscan be used; to measure their levels of per-ceived benefits, interviews with key decisionmakers should be conducted (using the mea-sures presented in this article). These two mea-sures should be used to estimate the prepared-ness level of each potential partner so that aneffective influence strategy and subsidyscheme can be chosen to induce successfulEDI adoption.

Step 3reEnactment of Influence Strategy:Choose and implement an appropriate sub-sidy and influence strategy for each partner.The objective of these strategies is twofold: toassist the smaller partner in implementing anintegrated system (so that it receives high ben-efits) and to facilitate faster diffusion of EDI (sothat the initiator can achieve high external inte-gration). Three main aspects should be consid-ered when formulating expansion plans: finan-cial and technological assistance, promotionefforts, and coercive tactics. As the case stud-ies indicate, these actions can alter the effect ofthe three explanatory factors and facilitate amore successful implementation of EDI. Theeffects of each strategy are illustrated in ourmodified EDI adoption model shown inFigure 2.

First, financial and technical assistance can beused to alleviate problems of organizationalreadiness. Initiators can offer technical subsi-dies such as training and on-site assistanceduring the development and maintenance of thesystems to augment the resources of smallerpartners that lack the expertise required for EDIprojects~ Economic support such as discountedsoftware, h~.rdware, and training may also beneeded to overcome resistance because of lackof financial resources and to facilitate the devel-opment of internally integrated systems, leadingto high benefits for the adopters. This approach



PerceivedBenefits

OrganizationalReadiness

ExternalPressure

PromotionalEfforts

Financial andTechnologicalAssistance

CoerciveTactics

EDI Adoptionand

Integration

Figure 2. Revised Small Business EDI Adoption Model

has been used by Sears, which offered full EDIsoftware costing $3000 and training to its sup-pliers as an incentive to adopt EDI (Fitzgerald,1990). We specifically recommend heavier sub-sidization during the early stages Of the expan-sion plan, potentially leading to a "critical-mass"effect and facilitating faster adoption.

Second, the use of promotional efforts and non-coemive influence tactics is suggested for part-ners with levels of awareness of EDI benefits.In many cases, diffusion of EDI, and IT in gen-eral, is delayed because the managers of smallorganizations fail to perceive the benefits thatthe technology has to offer to their businessoperations. To ovemome this problem, EDI ini-tiators are encouraged to pursue a recommen-dation strategy that actively communicates thebenefits of the technology through promotionalseminars, presentations, and on-site visits.Such tactics have been recently utilized bymany larger retailers as part of their EDI expan-sion plans (Booker and Fitzgerald, 1990).Promises, which are strategies that offerrewards to adopters, are also appropriate forfirms with low awareness. Such strategies usu-

ally include discounted prices for EDI transact-ed goods and other rewards (such as the creditpoint system for EDI transacted goods that isused by the supplier of firm 2’s EDI system).These incentives are usually very effective inincreasing the perceived (and subsequentlyactual) EDI benefits, leading to a more rapidadoption.

So far, only non-coercive influence strategieshave been discussed. These are preferredbecause they seek to expedite adoption whileaiming to augment the resources of the smallfirms (to ensure integration and high benefitsfor the small adopters). However, several orga-nizations, such as UoS. automobile manufactur-ers, have lately pursued coercive tactics as partof their EDI expansion plans (Helper, 1991). general, the use of such threats, especiallywithout subsidies, should be avoided for twomain reasons. First, under conditions of lowdependency, there is a danger that the level ofcooperation and trust in trading relationshipswill be compromised as a result of the imposi-tion. Second, unless the small partners possessboth high readiness and awareness levels to



become ready adopters, threats will usuallyresult in non-integrated systems with very lowimpact for the unprepared, coerced, and unmo-tivated adopters.

In summary, the careful assessment of pre-paredness of each small partner and subse-quent selection of subsidies and influence tac-tics are critical for the success of an EDI part-ner expansion plan. The framework presentedin this article can be used to develop individualsubsidy plans tailored to suit the needs of eachpotential partner. In general, the appropriateselection of subsidies and influence tactics willinduce a faster and more successful adoptionof EDI by small organizations and will lead tosignificant gains for both the EDI initiator and itssmall partners.

Suggestions for FutureResearch

As part of this study, we developed and testeda simple framework that categorizes EDIadopters and non-adopters into a typology andpredicts the expected impact of this technology.Two of the main strengths of this model are itsparsimony and the derivation of its factors fromprevious conceptual and empirical research.

Although our case-based investigation of themodel has provided preliminary findings on theadoption and impact of EDI on small organiza-tions, further research is needed to completeour understanding of this subject. We believethat our model and hypotheses can form thebasis of larger scale studies to (1) examine thevalidity and applicability of the model, and (2)improve and refine it.

As with any other simple model, there is a dan-ger that additional significant factors have notbeen included in the framework. Researcherswho believe that additional variables play a criti-cal role in the adoption and impact of EDI coulduse our constructs in their studies to better esti-mate the influence of each factor. Large-scale,longitudinal surveys can be especially appropri-ate for addressing this issue. Longitudinalinvestigations would allow researchers to mea-

sure the three explanatory factors before theadoption of EDI, observe the interventions bythe EDI initiators, and, finally, more objectivelyassess the impact of EDI on the organizations.Such studies would reduce threats to thecausal direction of the effects and, perhapsmore importantly, would provide neededinsights about the proposed relationshipbetween EDI integration and impact.

For researchers who are indeed interested inpursuing empirical investigations such as sur-veys we recommend using our theory-based,previously validated measures. We also sug-gest that they endeavor to provide a more rigor-ous validation of three critical measures: EDIpemeived benefits, integration, and impact..

Finally, we suggest that the model be applied inthe context of larger organizations as well.Such empirical testing will allow students of EDIto identify necessary modifications to the modelto enlarge its generalizability and isolate the difoferences in the factors that influence the adop-tion decisions of both small and large organiza-tions. These differences are also relevant toMIS researchers_who study small firms as aunique user group of information technology.

Acknowledgements

We would like to thank Blaize Horner-Reich,Carol Saunders, Paula Swatman, our col-leagues in the Faculty of Commerce at theUniversity of British Columbia, the anonymousreviewers, the associate editor, and senior edi-tor Blake Ives for their useful comments. Weare also grateful for access to the firms in oursample facilitated by the British Columbia BuySmart project team. Finally, we acknowledgesupport from the Strategic Grants Division ofthe Social Sciences and Humanities ResearchCouncil of Canada.

Endnotes

1 There are 13 million small firms in the U.S. creating 90 per-cent of the new jobs and contributing 38 percent of thetotal U.S. gross national product (Ojala, 1989). Small firms



play a comparable, critical role in the Canadian and othereconomies (Ibrahim and Goodwin, 1986).

2 For example, see Emmelhainz (1988); Benjamin, et al.(1990); Reich and Benbasat (1990); Rogers (1990);Bergeron and Raymond (1992); O’Callaghan, et al. (1992),Pfeiffer (1992); Saunders and Clark (1992); Benbasat, al. (1993); and Swatman and Swatman (1993).

3For a list of these factors, see Bergeron and Raymond(1992); O’Callaghan, et al. (1992); Pfeiffer (1992); Saunders and Clark (1992). Not surprisingly, Most of theprevious research studies have focused on EDI system ini-tiators and large organizations. These include:Emmelhainz (1988); Reich and Benbasat (1990); Kavan(1991); Benbasat, et al. (1993); Fowler, et al. (1993); Swatman and Swatman (1993).

4 For example, see Rogers (1983); Massey (1986); Craggand King (1993); and Benbasat, et al. (1993).

5 Due to the network nature of EDI, the benefits accrued byan EDI user are a function of both its own investment andthe investments of its trading partners (Bergeron andRaymond, 1992; Bouchard, 1993). In other words, as moreof its trading partners become EDI-capable, a firm receiveshigher benefits (due to its increased ability to transact viaEDI with more of them). Therefore, interorganizationalpresssures play a critical role in the adoption of EDIbecause of the dependency of one’s benefits on others’EDI investments.

6See Kavan and Van Over (1990); Pfeiffer (1992);Bouchard (1993); and Saunders and Hart (1993).

7For example, see Benjamin, et al. (1990); Emmelhainz(1990); Swatman and Swatman (1991); Bergeron Raymond (1992); O’Callaghan, et al. (1992); Saunders Clark (1992); and Nault, et al. (1993).

8 Perceived benefits refer to managers’ perceptions beforeany EDI implementation. As our findings indicate, the list ofanticipated benefits (provided by non-adopters) significant-ly differs from the list of obtained benefits (as described byadopters). This difference can be the result of two phe-nomena. Either the benefits of the technology are notwidely known or visible, or adopters descdbe the benefitsof their integrated systems, whereas non-adopters think ofnon-integrated systems when assessing the advantage ofthe technology.

9 These are based on Frazier and Summers’ (1984) typologyof intedm influence strategies.

lO A multiple-case study approach was chosen for this studyfor several reasons. As the EDI survey literature indicates,little attention has been given to small firms, and there isno previous study that exclusively focuses on small busi-ness and EDI. Furthermore, it is eviden~ that a complexorganizational phenomenon such as the adoption of EDIcould be better understood if the context of the action werealso studied (Bonoma, 1985). The utilization of multiplecases would allow for cross case analysis, which could sig-nificantly enhance the Investigation of.the proposed frame-work (Benbasat, et al., 1987). Lastly, since the literaturedid not reveal a set of valid measure~ to assess the vari-ables of interest, it was problematic to use survey tech-niques. To ensure that the case study yielded testable, rel-

evant, and valid results, we followed Eisenhardt’s (1989)list of case implementation steps.

11The companies in our sample were selected because theyvary on four organizational characteristics: industry affilia-tion, proportion of their sales to govemment, level of com-puter sophistication, and number of employees. This varia-tion faciliated the investigation of the effects of these fourfactors on EDI adoption and impact.

12Copies of the interview guides can be found on theIntemet’s Wodd Wide Web at the MISQ Archivist on theMISQ Central home page. The uniform resource Iocator ofthis site is htlp://www.cox.smu.edu/mis/misq/central.html. Inpreparing these guides, most variables were operational-ized using previously validated measures. To assess thelevel of perceived benefits, executives of small partnerfirms were interviewed and asked to list the potential bene-fits of EDI to their organizations. A list of benefits, similar toTable 1, was also provided, and respondents were askedto rate the expected benefits. Organizational readinesswas estimated using two measures. Indicators of highslack rasoumes provided estimates of the level of availabil-ity of financial assets, allowing us to assess a firm’s abilityto pay for EDI-related costs. These included indicatorssuch as quick, working capital/sales, and general andadministrative expenses/sales ratios (Bourgeois, 1981;Singh, 1986), as well as other antecedents of slack(Sharfman, et al., 1988). Available technological resourceswere assessed using relevant items from a 35-item validat-ed IT sophistication scale (Pare and Raymond, 1991).Regarding external pressure, to assess competitive pras-sure, two measures were used: the estimated proportion ofa firm’s competitors and partners that are EDI-capable,and perceptual measures about possible competitive dis-advantage due to the lack of EDI-capability. To estimatethe power of the trading partner (BC Government), used net dependency measures such as the proportion ofcurrent sales, current profits, expected future sales, andexpected future profits of the small firm that are attributedto sales to the trading partner, as well as the inverse of thetotal number of trading partners (Kale, 1989). The effectsof the different influence tactics that could be used by EDIinitiators to persuade their partners to adopt the technologywere investigated using scenarios based on Frazier andSummer’s (1984) typology. Concerning the dependentvariables, EDI adoption was self-raported by the respon-dents, Integration was investigated using Bergeron andRaymond’s (1992) internal and external integration indica-tors, and impact was investigated based on the reportedactual benefits of EDI capability. Although the majority ofthe questions focused on the main constructs of interest, aspecific attempt was made to include open, probing ques-tions to ensure that the respondents’ perceptions andbeliefs about any other relevant issues could also be iden-tified. These open questions were based on the instrumentused by Reich and Benbasat (1990).

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About the Authors

Charalambos L. lacovou is a doctoral candi-date in management information systems at theFaculty of Commerce and BusinessAdministration of the University of BritishColumbia. He earned his bachelor’s in businessadministration from the University of Vermontwith the support of a Fulbright Scholarship. Hisresearch interests include small business com-puting, interorganizational systems, and socialimpacts of information technology.

Izak Benbasat is CANFOR Professor ofManagement Information Systems at theFaculty of Commerce and. BusinessAdministration, University of British Columbia.He received his Ph.D. from the University ofMinnesota. His research interests include evalu-ating human-computer interfaces, investigatingthe influence of decision support tools on prob-lem-solving strategies, the use of explanationsin expert systems, and comparing methods forconducting information systems research.

Albert S. Dexter is a professor in the Faculty ofCommerce and Business Administration at theUniversity of British Columbia. He has served asan expert witness for the Supreme Court ofBritish Columbia on issues of economics andsoftware copyright infringement. ProfessorDexter’s research has appeared in such journalsas The Accounting Review, Communications ofthe ACM, Journal of Accounting Research,Journal of Money, Credit and Banking, INFOR,MIS Quarterly, and Management Science. He isan associate editor for INFOR. His currentresearch interests are the relationship betweeninformation technology and competitive advan-tage and electronic data interchange.


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