ISeB (2003) 1:13%155

Information
Systems
and
e-Business
Management
9 Springer-Verlag2oo3

Adoption and impact of collaboration electronic

marketplaces
M. Lynne Markus ~, Ellen Christiaanse 2
1 Bentley College (e-malt: mlmarkus@bentley.edu)
2 University of Amsterdam (e-mail: echristiaanse@fee.uva.nl) and ESADE Business School,
Barcelona, Spain

Received: December 2002 / Accepted: January 2003

Abstract. This paper reviews and assesses several theoretical perspectives on

one type of business-to-business electronic marketplace collaboration
marketplaces. Whereas transaction-oriented marketplaces are characterized
by catalogs, auctions or exchanges, and support for negotiated pricing,
collaboration marketplaces are characterized by planning capabilities such as
continuous planning, forecasting, and replenishment or product life-cycle
management. Collaboration marketplaces have different benefits than
transaction-oriented marketplaces and different adoption considerations.
Therefore, theoretical frameworks such as transaction cost theory, which
apply quite well to transaction-oriented marketplaces, provide only a partial
explanation of collaboration marketplace adoption. We compare alternative
theoretical perspectives on collaboration marketplaces and discuss their
implications for future research.

Key words: e-business, B2B exchanges, collaboration electronic market-

places, supply chain management

1 Introduction

Much research and theorizing about business-to-business electronic market-

places (B2B EMPs) is based on certain assumptions about what these
organizations do. B2B EMPs are usually understood as "spaces" where are
buyers can discover products and their prices by means of electronic
catalogs, auctions or exchanges, and IT-capabilities that support negotiated
pricing. In this view, B2B EMPs aggregate products and act as middlemen
between buyers and sellers. When B2B EMPs are viewed in this way, their
potential economic impacts are great: higher price transparency is likely to
result in lower prices for products traded on EMPs. Thus, B2B EMPs lend
themselves naturally to the traditional micro-economic analyses of transac-
tion cost theory, price theory, and the theory of incomplete contracts.
140 M . L . Markus, E. Christiaanse

While use of these theories has yielded important insights, not all B2B
EMPs fit the assumptions outlined above. Rather than acting as purchasing
intermediaries, some B2B EMPs act more as purchasing process facilitators,
enabling interorganizational systems integration and providing specialized
supply chain collaboration capabilities. Where traditional EMPs might be
labeled transaction-oriented, the latter type might be referred to as
collaboration EMPs. The potential impacts of collaboration EMPs are great,
but they are likely to be quite different from those of transaction EMPs.
Therefore, when deciding whether to join collaboration EMPs, companies
are likely to employ different logics than when deciding whether to join
transaction EMPs. Because collaboration EMPs may exhibit different
adoption and impact behavior, it is worthwhile to consider different
theoretical frameworks in addition to traditional microeconomic theory.
In this paper, we discuss supply chain collaboration, describe collaboration
EMPs and give an example. We then explain briefly why one particular
microeconomic theory (transaction cost theory) may not adequately explain
the adoption of collaboration EMPs, and we review and assess several
alternative theoretical perspectives. We conclude with implications for future
research.

2 Collaboration in supply chains and collaboration EMPs

In this section, we first discuss the importance of collaboration in supply

chain performance. We then show how collaboration EMPs differ from other
types of EMPs and give an example.

2.1 Collaboration in supply chains

Organizations have long known the benefits of better relationships with the
customers and suppliers. Better interorganizational relationships both
require and follow from increased information sharing (Anderson and Weitz
1989). And information technology has long been viewed as a means to
promote better information sharing and better relationships with customers
and suppliers. For example, interorganizational systems like electronic data
interchange (EDI) have permitted firms to exchange information on a more
timely and frequent basis (Damsgaard and Lyytinen 1998; Swatman et al.
1994).
Until quite recently, however, most attempts to improve information
sharing with customers and suppliers have focused on pairs of business
partners (Corbett et al. 1999). Despite standardization efforts, EDI is usually
customized and implemented on a pair-wise basis, incurring considerable set
up and maintenance costs (Markus et al. 2002). And when closer coordi-
nation is sought, efforts required to achieve electronic integration increase
(Webster 1995; Zaheer and Venkatraman 1994). Interorganizational
improvement efforts have generally, therefore, relied quite heavily on costly
"relationship-specific" IT and process investments.
Three things have started to change in recent years. First, companies are
increasingly recognizing that their performance depends upon the compet-
itiveness of their extended supply chains. Extended supply chains consist of at
Adoption and impact of collaboration electronic marketplaces 141

least three parties, such as a manufacturer and its suppliers and customers, or
a manufacturer and its first and second tier suppliers. The importance of
extended supply chain relationships is illustrated by the huge inventory losses
Cisco incurred through lack of visibility into the ordering behavior of its first
tier suppliers (Kaihla 2002).
Second, organizations are starting to recognize that better supply chain
performance requires information sharing beyond the boundaries of both
organizations and their pair-wise relationships. The importance of informa-
tion sharing in supply chain performance is now well understood. Informa-
tion sharing has been found to augment supply chain profits in game
theoretic models. Information sharing throughout the supply chain can
considerably reduce inventory levels and other information asymmetry costs.
Exchange of information in a timely, effective way is a key driver of supply
chain performance (Fisher et al. 1997; Klobas 1998).
Third, organizations are recognizing the need for new approaches to using
IT for interorganizational information sharing. Although IT has been a
known factor in improved supply chain performance since the 1980s (Porter
1985), only recently have companies started experimenting on a moderate
scale with "network" type IT arrangements for B2B buying and selling. So,
for example, to avoid future supply chain information visibility problems,
Cisco is currently building an "eHub" to automate the flow of information
between Cisco, its contract manufacturers, and its component suppliers
(Kaihla 2002).
Arrangements like the eHub involve unprecedented levels of information
openness; unfortunately, there are numerous inhibitors to information
exchange in collaborative efforts (Damsgaard 1998; Jap 1999; Jarvenpaa and
Staples 2000; Kumar 1996). Capturing the benefits of tighter coordination
requires focusing on a larger portion of the supply chain than familiar buyer-
supplier dyads. As Anderson and Hakansson (Anderson and HSkansson
1994; p. 37) have noted: "if business networks are to possess advantages
beyond the sum of the involved dyadic relations, this must be due to
considerations that take place within dyadic business relationships about
their connectedness with other relationships". A characteristic of extended
supply chains is that optimizing the performance of the chain overall may
result in what one partner perceives as a suboptimal relationship with an
adjacent party. This means that the real benefits of improved supply chain
integration can only be achieved by creating a trusting environment in which
firms not only look toward their own outcomes, but also toward joint
outcomes. Consequently, high quality relationships among supply chain
members are a major determinant of the success of IT-based collaborative
agreements.

2.2 EMP functionality

There are many different ways to differentiate EMPs (Corsten 2001; Soh and
Markus 2002). EMPs can be classified according to the type of goods traded
(e.g., direct or indirect, single vertical industry or multiple vertical industry,
commodity or differentiated), by the type of trading mechanism supported
(catalog, auction or exchange, negotiated pricing, or combination), by the
types of support activities provided (e.g., inspection, warehousing, transpor-
142 M.L. Markus, E. Christiaanse

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tation, insurance, financing), or by ownership (private trading exchanges,

public independent EMPs, or industry consortia).
An increasingly important way to distinguish among EMPs is by the
functionality they provide to members. For example, Holzmuller (2002),
classified the core service offerings of EMPS in three major groups:
transaction services, interaction services, and support services. Transaction
services are those concerned with supplier, product, or price search, with
product selection, and with executing a purchase. Interaction services include
planning capabilities, like CPFR (continuous planning, forecasting, and
replenishment) and product life-cycle management, and/or capabilities for
collaboration around new product design. Support services include such
things as consulting services, software integration, application service
provision, and so forth.
Brunn et al. (2002) discuss three types of EMP functionality. Content
functionality, in their framework, refers to non-core tools and competencies
that provide extra information on the industry to members, but which do not
generate cash flow for the EMP. Examples of content functionality are
industry news, newsletters, and discussion fora. Commerce functionality
enables members to conduct transactions and, through transaction fees,
provides cash flow to the EMP. Collaboration functionality includes services
that facilitate collaboration among members, for example, shared work
spaces for joint new product design efforts and CPFR software for sharing
forecast information.
Building on the Brunn et al. (2002) framework, Christiaane and van
Oosterhout (2003) break commerce functionality into two types: transaction
driven and support driven. Both types may generate cash flow for the EMPs
through various fees. But transaction driven functionality (e.g., auctions,
catalogs) enables the execution of a sale, whereas support functionality (e.g.,
logistics, inspection, insurance) contributes to its fulfillment. Sometimes
support functionality is provided by a business partner rather than by the
EMP itself. Table 1 elaborates on this functionality based classification of
EMPs.

3 Typing EMPs on the basis of functionality

Following Christiaanse and van Oosterhout (2003), we distinguish between

two types of B2B EMPs depending on whether they primarily provide
transaction driven functionality or collaboration functionality. We refer to
the first type as transaction EMPs and to the second type as collaboration
EMPs. Both types of EMPs may provide content functionality to augment
their primary functionality.
We recognize that hybrids are possible, but we believe that few EMPs will
try to give equal weight to these different capabilities (cf., Soh and Markus
2002). Similarly, Corsten and Hofstetter (2001) see considerable differenti-
ation in EMPs' business strategies. Today, some EMPs offer little in the way
of collaboration services (e.g., Global Sources in the electronics industry),
whereas others offer little in the way of transaction services (e.g., Elemica in
the chemicals industry).
Both types of EMPs are likely to prosper. In a Delphi study, industry
experts expected that companies would need transaction services and
Adoption and impact of collaboration electronicmarketplaces 145

Channel
functions

Service
function -
alties

Transaction focus Collaboration focus

Fig. 1. Channel function and service functionalityof transaction versus collaboration B2B
exchange

collaboration services equally in the future (Holzmuller 2002). This result is

consistent with industry analysts' predictions that "by 2005, collaboration
services could represent 40-50% of the total revenues of the e-marketplaces
that provide such services (p. 2).
Collaboration EMPs are less well known than transaction EMPs. The
distinction between the two can be illustrated in relation to the classical
functions of a marketing channel: attracting potential customers, informing
them, negotiating, conducting a transaction, order fulfilment and settlement,
and after sale service (see Fig. 1). Collaboration functions take place both
before and after the execution of a transaction.
Collaboration EMPs benefit participants by reducing the costs and
increasing the quality of multiparty information exchange. In addition to
the benefits of information sharing, participating in such collaborative efforts
can yield benefits in terms of reduced IT costs. Information sharing through
shared IT-based collaboration platforms reduces companies' required
investments in relationship-specific IT assets. And these reduced IT costs
can be a factor in collaboration success: A recent Forrester report ("Net
Success in Direct Proportion to Commitment" 2001) concluded that "60%
of successful online buyers use the internet to collaborate with suppliers,
compared with 39% of less successful organisations".

3.1 Example of a collaboration EMP

An example of a collaboration EMP is Elemica (http://www.elemica.com), a

consortium marketplace in the chemicals industry. Twenty-two chemical
companies contributed more than $100 million to develop the site, which
handled its first transaction on January 1, 2001.
146 M.L. Markus, E. Christiaanse

Elemica does not provide transaction-oriented functionality such as

auctions. Its services fall into two broad categories: an IT platform that
enables hub-and-spoke connectivity ("connect once-connect to all" is
Elemica's slogan), and various value-added collaboration services such as
CPFR. See the text box for more details.
All-in-all, Elemica is completely dissimilar in value proposition and
functionality to transaction EMPs like ChemConnect that offer online
auctions and exchanges. Elemica is probably best conceptualized as a shared
private trading exchange platform. Whereas transaction EMPs emphasize
spot and futures trading, disposing of excess inventory, and risk management,
Elemica emphasizes reducing the costs (and errors) involved in placing orders
with established business partners. Both types of EMPs promise considerable
benefits, but the benefit types differ, and participation considerations differ as
well. In the next section, we consider several alternative theoretical perspec-
tives on participation in collaboration EMPs.

4 Theoretical perspectives on E M P s

Within the IS literature, the dominant perspective on electronic marketplaces

is traditional microeconomics (Kauffman and Walden 2001). Perhaps the
best-known IS analysis of EMPs is Malone et al.'s (1987) application of
transaction cost theory. Arguing that IT would reduce the costs of
transacting with external parties relative to internal coordination costs,
Malone et al. predicted a shift from hierarchical arrangements to market-
type relationships among firms in a phrase, a shift from "make" to "buy".
The importance of such a shift can hardly be understated, since the greater
price transparency associated with electronic markets is hypothesized to
drive down the prices of products traded on EMPs (Bakos 1997) - an impact
expected to be greater in the case of commodity goods and services.

4.1 Transaction cost theory limitations

As useful as transaction cost theory is for the analysis of transaction EMPs, it

has two notable limitations for the analysis of collaboration EMPs, only the
first of which has received much attention in the IS literature. First, TCT
overemphasizes "communication" effects (more information at lower cost)
and "brokerage" effects (matching buyers and suppliers) at the expense of
"integration effects" (Malone et al. 1987). Integration effects - tight coupling
of buyer and supplier processes enabling lower inventory levels and greater
responsiveness - are outcomes of Holzmuller's "interaction services"
(Holzmuller 2002) and the core service offerings of collaboration EMPs like
Elemica. As noted by number of IS researchers (Clemons and Reddi 1995;
Holland and Lockett 1997; Sarkar et al. 1995), Malone et al's (1987)
predicted shift from hierarchies to markets is inconsistent with the
observation that many firms have downsized and now "make" less and
outsource more, but do so not with many suppliers in arms-length market-
type relationships, but rather with few suppliers in tightly-knit "network"
relationships. "Network" relations among firms have been defined as
Adoption and impact of collaborationelectronicmarketplaces 147

"subsets of markets" (Thorelli 1986) and are viewed either as a hybrid,

intermediate form between hierarchies and markets (Clemons and Reddi
1995) or as a distinct third type (Van Alstyne 1997).
Second, transaction cost theory neglects extended supply chains and
preexisting relationships among transacting firms. Extended supply chain
relationships, involving three or more members, can be considered "net-
work" arrangements, rather than hierarchical or market arrangements. To
improve information visibility across the extended supply chain, EMPs like
Elemica are developing multiparty "collaborative planning, forecasting, and
replenishment" capabilities similar to those Cisco seeks to develop for its
eHub mentioned earlier. Preexisting relationships characterize long-term
contractual relationships between buyers and suppliers, in contrast to spot
purchasing, where no prior relationship may exist. Support for preexisting
relationships is common in collaboration EMPs. For example, Elemica calls
attention to the fact that member companies retain full control of which
other members they connect with. Despite Elemica's claim that members
need "connect once" to access any other member, in practice, pairs of
members execute "trading partner agreements", as is common with EDI.
In summary, transaction-oriented EMPs support buying and selling, search
and selection; they enable buyers to find new sources and sellers to find new
customers. For these EMPs, traditional microeconomic theories such as
transaction cost theory and price theory apply quite well. But collaboration
EMPs do not have buying and selling as their primary focus. Their emphasis is
on tighter linkages among existing partners and their extended supply chain
networks. For these EMPs, traditional microeconomic theories afford only a
partial explanation. Additional theoretical perspectives are needed to fully
explain the dynamics of member participation and EMP impact. Below, we
examine several such perspectives: a motivation-ability framework developed
expressly to account for participation in EMPs, models of EDI adoption
behavior, and two supply chain relationship frameworks.

4.2 The motivation-ability framework

A recent study conceptualized organizational participation in transaction-
oriented B2B EMPs in terms of a motivation-ability framework (Grewal et al.
2001): how companies participate (in an exploratory fashion to learn EMP
capabilities, in an expert mode, or in a passive "maintain a presence" mode)
was hypothesized to be a function of a company's motivation and ability.
Motivation was understood as consisting of both efficiency and legitimacy
components - where efficiency motives include concerns with economic
performance (in particular with transaction cost economics) and legitimacy
motives refer to justification in terms of prevailing social norms and
institutional expectations. The legitimacy motive construct captures such
factors as media hype and consultants' recommendations (but it does not
capture the exercise of power by business partners). Ability was understood
as consisting of IT capabilities and learning (a function of length of
experience plus the effort companies put into their EMP operations).
The strengths of this model are its inclusion of ability as a factor in
participation as well as motivation (e.g., the benefits of reducing transaction
costs), its consideration of learning as an ability factor, and its explicit
148 M.L. Markus, E. Christiaanse

recognition of non-economic motivations (legitimacy) in addition to

economic motivations. Its weakness is that it does not pay adequate
attention to the interdependent aspects of EMP participation. In the case of
transaction-oriented EMPs (the stated focus of the Grewal et al. (2001)
framework) one important interdependence consideration would surely be
network externalities (critical mass) - the ability to obtain benefits from
participating is a function of the number and nature of other participants. In
the case of collaboration EMPs - the focus of this paper - one important
interdependence consideration would be the behavior of the company's
current business partners - the ability to obtain benefits from participating is
a function of the willingness, ability, and choice of partners to participate. To
a great extent this limitation of the motivation-ability framework for
explaining EMP participation has been addressed in the sizable body of
research and theorizing on the adoption of electronic data interchange
(EDI), a literature we consider next.

4.3 EDI adoption research

Given its great potential benefits, the slow and relatively low rate of EDI
adoption has long intrigued IS researchers. Research and theorizing about
EDI potentially applies quite well to collaboration EMPs, because both
arrangements involve IT support for relationships among established
business partners. The key difference is that, whereas EDI involves
standardization of data (business documents like purchase orders), collab-
oration EMPs also involve process standardization (Markus 2000). In the
US, separate trading partner agreements are usually set up by each EDI
transacting pair, reflecting the considerable "interpretive openness" of EDI
document standards. Intermediaries called value added networks provide
telecommunications services and switch messages among EDI-able compa-
nies. In Europe, true hub-and-spoke ED! networks have been established:
here the difference from collaboration EMPs lies mainly in the underlying
interconnection standards and technologies.
Unlike the motivation-ability framework, most EDI research pays
considerable attention to the interdependence among EDI users. And some
EDI research focuses on the quality of preexisting relationships among
business partners.

4.3.1 Benefits, readiness, external pressure

Chwelos, Benbasat and Dexter (2001) augmented and tested a model of EDI
adoption originally developed by Iacovou, Benbasat and Dexter (1995) to
explain the relatively low rate of EDI adoption by small businesses. The
Iacovou et al. model, derived from a review of prior studies, posited EDI
adoption by small businesses as a function of perceived benefits (e.g., reduced
transaction costs), organizational readiness (financial resources and IT
sophistication), and external pressure (competitive pressure and pressure
from large trading partners); the researchers found support for the model in
seven case studies.
Adoption and impact of collaborationelectronicmarketplaces 149

Chwelos et al. (2001) augmented the Iacovou et al. (1995) model with the
additional construct of "trading partner readiness" (which includes the trad-
ing partner's IT sophistication and willingness to change, as well as the
adopting company's trust in the trading partner and the adequacy of legal
and financial controls). Chwelos et al. (2001) found considerable support for
their model and concluded that the adoption of "other emerging forms of
interorganizational systems" (such as B2B EMPs) was likely to involve
constructs at three levels of analysis: the technological, the organizational,
and the interorganizational.
The strength of this model for understanding collaboration EMPs is its
explicit recognition of both interdependence and quality of prior relation-
ships among trading partners. The weaknesses of the model concern its focus
on small business adopters and its lack of attention to the potential
competitive risks of participation.
Large size is generally viewed as a strong indicator of a company's
willingness to adopt EDI. The small businesses of interest in the Iacovou
et al. and Chwelos et al. studies are generally assumed to be followers
rather than initiators of electronic interconnections. However, in collab-
oration EMPs, at least some of the supported relationships are peer-
to-peer. Consequently, the focus of theorizing should not be solely on
small business suppliers with low power relative to large buyer initiators:
the focus should be on initiators as well as followers, on large companies
as well as small, and on suppliers who initiate collaborations as well as
buyers. (Some supply chain improvement initiatives are initiated by
large suppliers, cf. Corbett et al. (1999). Industry analysts currently
envision that collaboration EMPs will support both highly customized
relationships with a handful of strategically critical business peers and
standardized relationships with numerous other less important (possibly
smaller or occasional) partners. A complete theoretical model of collab-
oration EMP adoption would have to recognize and explain both patterns
of adoption.
A second limitation of the Chwelos et al. (2001) model is its narrow view of
the risks of participating in interorganizational systems. The Chwelos et al.
model addresses excessive costs, untrustworthy partners, and inadequate
controls, but it does not address a number of competitive risk factors. In
studies of transaction-oriented EMPs, competitive risks factors have been
shown to promote failure. For example, Christiaanse and Damsgaard (2001)
found that suppliers were unwilling to join an air cargo EMP that would
reveal prices, and Salmi and Tuunainen (2001) found that suppliers declined
to enhance an auto parts EMP that reduced buyers' switching costs.
Similarly, EDI failure studies have identified analogous competitive risks
likely to be important in the adoption of collaboration EMPs. One such
factor is the perception that partners might receive a greater share of the
benefits (van Baalen et al. 2000). Differential ability to benefit can also lead
companies to avoid participating in EMPs. Some companies have already
achieved considerable benefits from heavy investments in IT for internal and
external integration and may view their proprietary systems as a competitive
advantage (Varon 2001). These companies may perceive public EMPs as
"leveling the playing field" for competitors they currently outperform.
Because of "critical mass" dynamics, joining an EMP may help it succeed,
150 M.L. Markus, E. Christiaanse

and not joining may contribute to its failure. Thus, companies who are
performing well and have an IT-based competitive advantage may refuse to
join EMPs as a competitive ploy to preserve their favorable position at the
expense of their competitors. In short, a more complete theoretical model of
collaboration EMP adoption would have to incorporate the threat of
competitive risks and defensive reactions taken to respond to them.

4.3.2 Complementarity

In a recent study of EDI (non)adoption, Tan et al. (2002) noted that the
Chewlos et al. (2001) model focuses on intent to adopt, rather than on
adoption per se. Analyzing a case in which near-peers failed to adopt EDI
after having previously expressed the intention to adopt, Tan et al. found it
useful to introduce the concept of organizational complementarity - defined
as general compatibility among partners in terms of information and control
systems, decision-making processes, and organizational culture. Tan et al.'s
complementarity concept highlights the fact that interorganizational systems
require shared governance. The extent to which collaboration EMPs like
Elemica are able to create a shared governance framework for partner
members, thereby facilitating more widespread adoption, is an interesting
research question.

4.4 Relational exchange theory

Yet another perspective on participation in collaboration EMPs is afforded

by relational exchange theory. Relational exchange theory developed in the
marketing channels literature to address some of the limitations of
transaction cost theory as an explanation of marketing channel structure.
"Marketing channel" refers to the chain of inter-organizational relationships
involved in getting goods to market: A simple marketing channel consists of
a manufacturer, a wholesaler, and a distributor. One key relational exchange
theory contribution is Mallen's (1973) explanation of the evolution of
marketing channel structure in terms of total distribution costs, which
enhance or diminish opportunities for specialized functional intermediaries.
Mallen's observation helps explain the role of EMPs in B2B supply/channel
relationships.
Relational exchange theory also provides a more complete view of dyadic
relationship structures within supply chains than does transaction cost
theory. Relationship structure, defined as a continuum of relationships
ranging from discrete (market-like) to relational (or network-like) (Mohr and
Nevin 1990) is similar to concepts used in prior EMP literature, such as
Kaplan and Sawhney's (2000) discussion of spot sourcing vs. systematic
sourcing. Relational structure has two dimensions (Stern and Reve 1980): 1)
decision making structure and 2) operational integration. Decision-making
structure includes information exchange, centralization (Dwyer and Welsh
1985; John 1984; Reve and Stern 1979), and formalization (Dwyer and Welsh
1985). The concept of operational integration includes process standardiza-
tion and external systems integration (Markus 2000).
Adoption and impact of collaborationelectronicmarketplaces 151

Research in the relational exchange theory tradition has yielded findings

relevant to the adoption and impacts of EMPs. For instance, high quality
information exchange involving participation and feedback are essential for
increased goal compatibility and co-operation (Anderson et al. 1987). And
information sharing in collaborative relationships has been shown to be
intensive, relationship building communication consisting of high frequency,
bi-directionality, formal content and influence attempts (Mohr and Nevin
1990).

4.5 Political economy theory

A substantial stream of marketing channel research has relied either implicitly

or explicitly on political economy views (Mohr and Nevin 1990; Reve and Stern
1979; Stern and Reve 1980). According to the theory of political economy, a
social system comprises interacting sets of internal and external economic and
socio-political forces that affect collective behavior and performance (Stern
and Reve 1980). The main concepts of the theory are (Stern and Reve 1980):
9 internal economy economic forces within the channel, such as transaction
form, or vertical economic arrangements and decision mechanisms used to
decide the terms of the transaction (factors considered by transaction cost
theory)
9 internal polity socio-political forces within the channel, such as power/
dependence balance, co-operation and conflict
9 e x t e r n a l e c o n o m y - the prevailing and prospective economic environment
in which the channel exists
9 e x t e r n a l p o l i t y - the external socio-political system in which the channel
operates
A number of integrative theoretical frameworks have resulted from the
convergence of relational exchange theory and political economy (Ander-
son and Weitz 1989; Anderson and Narus 1990). These frameworks
subsume transaction cost theory considerations.
The key contributions of relational exchange theory augmented with the
theory of political economy for the analysis of EMPs are twofold. First, like
the motivation-ability framework, the theory of political economy distin-
guishes between economic factors and non-economic factors that affect the
structure of interorganizational relationships. Among the non-economic
factors addressed by the theory of political economy are legitimacy - a
concept recognized in the motivation-ability framework - and power - a
concept that prior research on EDI has given a central place. Second, like the
EDI literature, the theory of political economy considers factors both internal
and e x t e r n a l to the interorganizational relationship, allowing for consider-
ation of such factors as industry-wide data standardization agreements
(Markus et al. 2002). The chief weakness of this theoretical perspective is that,
not having been expressly developed for I T - m e d i a t e d supply chain collabo-
ration as the EDI literature was, it is relatively insensitive to IT features and
design issues of collaboration marketplaces.
152 M . L . Markus, E. Christiaanse

5 Suggestions for future research

As Barrington and Harrington (2000) found in their review of six theoretical

perspectives on interorganizational alliances, our review of four theoretical
perspectives on EMP adoption finds that each has something to offer, and that
there is considerable overlap among them. While we are a long way from being
able to propose a parsimonious integration of the perspectives, our review
suggests several recommendations for future studies of B2B EMP adoption.
First, EMP adoption studies cannot afford to examine, as the motiva-
tion-ability framework does, individual adopters without reference to
interdependent others. As the EDI literature does, future studies must also
examine the behavior of business partners. In addition, unlike the EDI
literature, future adoption studies should also address the B2B market-
place itself as an important third-party. The actions different EMPs take
as change agents to promote adoption is clearly a potentially important
factor in EMP adoption.
Second, as both the EDI literature and the relational exchange theory
literature do, future research should consider factors both within adopting
organizations and outside them. External factors should include not only
business partners and the B2B EMP, but also non-business partner
members of the EMP, non-adopters of the EMP, standards bodies, trade
associations, and other marketplaces that might form part of a "hub-to-
hub" solution or compete with the EMP. Non-adopters, even those who
are not the business partners of an adopting organization, are important to
consider, because their refusal to participate might prevent the formation
of a critical mass of participants in the EMP and thereby ensure its failure.
Third, future studies should explicitly focus on technology, as the EDI
literature does. The specific IT design features of the collaboration EMP are
clearly relevant, as are the level and type of internal systems integration for
each interacting business partner. Also important are the technologies of
interconnection between companies and the EMP and the EMP's specific
collaboration and decision support capabilities.
In summary, the EDI literature suggests the importance of three
categories of factors: technology, intraorganizational, and interorganiza-
tional. The relational exchange and political economy perspectives identify
four categories of factors: internal-economy, internal-polity, external-
economy, and external-polity). We suggest the need to consider six sets
of factors in EMP adoption: internal-technology, internal-economy, inter-
nal-polity, external-technology, external-economy, and external-polity,
where "external" is defined more broadly than business partners alone.
The additional complexity of analysis will pay off, we believe, in a deeper
understanding of this undoubtedly complex phenomenon.
Adoption and impact of collaboration electronic marketplaces 153

The chemical industry value chain

upply chai

Text box l: Overview o f elemica

The chemical industry supply chain differs from other industries. What makes the sector
unique is that its biggest customer is the chemical industry itself. About 33% of total chemical
products are used by other chemical companies.
The industry is fragmented and viewed by insiders as inefficient. This is the business
environment in which, on May 17th 2000, a group of 22 major chemical companies
announced the formation of the Elemica consortium.

Market positioning

Elemica positions itself as a neutral network serving the entire chemical industry, Elemica
"'... address[es] supply chain inefficiencies and offer[s] integrated solutions and services for
buying and selling basic, intermediate, specialty and fine chemicals".
According to Charles Gruber, Elemica vice president, the supply chain costs to support $600
billion annual chemical sales in Europe and North America are estimated at $120 billion, including
transportation. In developing its business plan, Elemica determined there was a potential savings
of$15 billion to $20 billion in transaction efficiencies, connection efficiencies, and supply chain and
transportation cost efficiencies for all e-business tools and marketplaces. According to Joseph
Steed, DuPont's development manager, e-business ventures, the opportunity available to Elemica
itself is pegged at some fraction of $6 billion. In the words of Andrew Liveris, co-chairman
Elemica's board of directors: "Elemica will deliver value through reduced transaction costs and
streamlined business processes both on the buy side and the sell side of our business".

Solutions o,ffered

Collaboration and connectivity are Elemica's watchwords. The Elemica Connected Solution is
the core of Elemica's offering. This IT platform ensures that the various protocols, business
processes and data standards work together. While ERP systems integrate within an enterprise,
the Elemica Connected Solution connects the ERP systems among enterprises,
In addition to this backbone Elemica offers the Supply Chain Planning solution set that
consists of three compartments: Collaborative Planning and Forecasting (CPF), Vendor
Managed Inventory (VMI) and Supply Chain Optimization (SCO).
CPF enables connected trading partners to share information such as projected materials
requirements, historical data trends, and consumption activity to synchronize planning and
forecasting futures. These collaborative plans offer the benefits of improved forecast accuracy and
production planning that reduce the inventory levels required to meet customer service target.
VM1 enables electronic monitoring of inventory levels and proactive replenishment of
inventory stocks based upon established reorder requirements.
SCO evaluates cost parameters across the distribution network of single or cross-client
enterprises. Based on this evaluation, a supply and distribution network is designed that
maximizes efficiencies.
Source: http://www.elemica.com and Christiaanse et al. (2003)
154 M.L. Markus, E. Christiaanse

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