Analyzing the Role of Interorganizational Systems on Coordination Cost between Firms

It is believed that the adoption of Interorganizational systems (IOS) can enable organization to use the information processing capabilities to reduce coordination costs and improve performance. However, the past researches have shown mixed results about the impact of IOS on coordination costs. While drawing on transaction cost analysis, this paper suggests that analyzing the association of IOS use and coordination costs of interorganizations should consider different levels of asset specificity. To illustrate the explanatory power of this analysis, this paper presents a case study from China. The findings from the case study show that, when asset specificity is high, IOS use can reduce coordination costs for monitoring or cooperative purpose. While under a condition of low asset specificity, the association between IOS use and coordination costs is negative.