Power and Trust: Critical Factors in the Adoption and Use of Electronic Data Interchange

Abstract

Computer networks are an increasingly important technology for improving the efficiency of information processing and providing shared access to information resources. Because computer networks are increasingly being used to support the flow of information between and within organizations, their use both influences and has consequences for interorganizational relationships. An important and widespread application of interorganizational computer networks is Electronic Data Interchange (EDI), which refers to the computer-based exchange of standardized business-related information between buyer and supplier firms. The following theoretical framework addresses the role that power and trust play in EDI adoption and use. Firms with greater power can influence their trading partners to adopt EDI. But power can be exercised in different ways. Because computer networks provide a way for certain information to be more accessible to outside parties, their use makes organizational boundaries more permeable. When firms use coercive power to force trading partners to adopt EDI, less powerful partners may be left more vulnerable. And, over time this perceived vulnerability becomes a constraint in interorganizational relationships that prevents improvements in coordination through expanded use of EDI. On the other hand, when the event of EDI adoption is viewed as an opportunity to build and reinforce trust between firms, the relationship is able to support organizational changes (e.g., restructuring operational processes or new modes of distribution) related to EDI use which contribute to improving interorganizational coordination. The role of power and trust in EDI adoption has important implications for interorganizational theory. Their role may be especially helpful in understanding how technology, and, in particular, electronic media support strategic alliances that firms create to advance mutual goals.