Performance in Electronic Marketplaces: Theory in Practice

Theories of interorganizational coordination propose that that the fit between information processing capabilities (structure, process and technology) and information processing needs (environmental, partnership and task uncertainty) is a strong determinant of IOS performance. Recently, electronic marketplaces have replaced many traditional interorganizational systems (IOS). While traditional IOS models predominately operationalize one-to-one relationships, electronic marketplaces are mainly characterized as one-to-many and many-to-many. Consequently, it is reasonable to question whether the performance of electronic marketplaces can be adequately explained by the fit between information processing needs and information processing capabilities. This paper develops a conceptual model in an effort to explain more adequately the performance of electronic marketplaces. The argument advanced is that performance is dependent on not only the fit between (a) the information processing needs and information processing capabilities, but also between (b) the value added and value demanded, (c) governance and investment, and (d) trust and security based mechanisms constructs. A case study of an electronic marketplace operating in the cotton industry is used to test the applicability of the model.