Information Links and Electronic Marketplaces: The Role of Interorganizational Information Systems in Vertical Markets

Interorganizational information systems, i.e., systems spanning more than a single organization, are proliferating as companies become aware of the potential of these systems to affect interorganizational interactions in terms of economic efficiency and strategic conduct. This new technology can have far-reaching impacts on the structure of entire industries. This article identifies two types of interorganizational information systems, information links and electronic markets. It then explores how economic models can be employed to study the implications of information links for the coordination of individual organizations with their customers and their suppliers, and the implications of electronic market systems for efficiency and competition in vertical markets. Finally, the strategic significance of interorganizational systems is addressed, and certain potential long-term impacts on the structure of markets, industries and organizations are discussed. This research was supported in part with funding from an Irvine Faculty Research Fellowship and from the National Science Foundation (Grant Number IRI-9015497). The author is grateful to the three anonymous referees for their valuable comments during the review process.