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Information & Management 37 (2000) 241±255

An empirical study of EDI trading partner selection
criteria in customer-supplier relationships
Rebecca Angeles (Ph.D.)a,*, Ravinder Nath (Ph.D.)b,1
a

Department of Information and Decision Sciences, School of Business, Montclair State University Upper Montclair, NJ 07043, USA
b
Department Chair, Information Systems and Technology, Director, The Joe Ricketts Center, College of Business,
Creighton University 2500 California Plaza, Omaha, NE 68178, USA
Received 12 July 1999; accepted 26 September 1999

Abstract
Electronic data interchange (EDI)-enabled trading partnerships are even more important now that EDI and electronic
commerce-based technologies are underlying long-term strategic business partnerships. This study investigates the trading
partner selection criteria used by ®rms in a customer-supplier dyad and their relative importance according to EDI
implementation level is also established. Using the survey method implementing paired questionnaires for a dyad of customersupplier ®rms, the study gathered data from 152 respondent ®rms. Factor analysis yielded six factors in trading partner
selection: strategic commitment, trading partner ¯exibility, joint partnering for EDI, readiness for high-level EDI, EDI
infrastructure, and communications. MANOVA and t-tests were used to test differences in the means of the responses of
customer and supplier ®rms to the selection criteria. Overall, customer ®rms assigned higher means to all six factors than did

the supplier ®rms. The gap between the two groups of ®rms were widest for the factors readiness for high-level EDI, trading
partner ¯exibility, and communications. # 2000 Elsevier Science B.V. All rights reserved.
Keywords: Electronic data interchange (EDI); Internet-EDI; Inter-organizational systems; Trading partnerships; Strategic alliances; Customer
®rms; Supplier ®rms

1. Introduction
The environment in which electronic data interchange (EDI) has been used has changed: we now
have a `digital nervous system' made possible by
wired organizations and Internet-based technologies
that allow ®rms to exchange information, act, and
*

Corresponding author. Tel.: ‡1-973-655-5336;
fax: ‡1-973-655-7678.
E-mail addresses: angelesr@mail.montclair.edu (R. Angeles),
rnath@creighton.edu (R. Nath)
1
Tel.:‡1-402-280-2439; fax: ‡1-402-280-5565.

react within shorter windows of time. Traditional EDI

has evolved to Internet-EDI, which means using
cheaper technology to allow small- and medium-sized
businesses to participate in the electronic marketplace.
A far more discriminating and demanding customer
base that is now accustomed to highly individualized
products and services is driving companies towards
strategies enhancing mass customization.
Highly integrated supply chain management (SCM)
and accompanying logistics services have now
become the basis of competition in the increasingly
electronic and web-driven marketplace. One de®nition
of SCM is the integrative approach that covers the ¯ow

0378-7206/00/$ ± see front matter # 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 3 7 8 - 7 2 0 6 ( 9 9 ) 0 0 0 5 4 - 3

242

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255


of the channel from the time raw materials are sourced
from the ®rst supplier up to the time the ®nished
products reach the last customer and beyond, including the disposal process in some systems [14]. Firms
that have used EDI are now reexamining themselves
so that they could move into the higher trajectory of
implementing more highly integrated systems with
EDI components that provide robust electronic links
throughout the supply chain. New organizational
forms such as the `extended' or `agile' enterprise
have been emerging to allow for tighter links among
strategic partners±customers, suppliers, or other
third party service providers±that decide to dovetail
their capabilities to provide a seamless and electronically enabled closed loop of unimpeded business
processes.
The question, then, arises for the ®rm: how many
strategic trading partners should it partner with under
more demanding market conditions? In looking at the
customer-supplier dyad, Bakos and Brynjolfsson [3]
found that ®rms are ®nding it more pro®table to work
with a smaller number of suppliers. Use of information

technology is lowering coordination costs (i.e. search
costs, the cost of setting up a relationship, and transaction costs), thus, inviting a situation where a ®rm
could deal with a potentially larger number of suppliers. However, with the movement towards more
integrated and agile `extended enterprises', hub ®rms
(i.e. ®rms that initiate EDI linkages) have been forced
to provide incentives to their suppliers to make noncontractible investments in information sharing, quality initiatives, and innovation to enable them to ful®ll
the requirements of more tightly connected and integrated information networks. It makes better sense,
then, to reduce the number of suppliers one could deal
with as `partners'.
While the rationale for selecting trading partners
at the least transaction cost has been suggested by
transaction cost economics [4], there has been no
comprehensive framework presented addressing the
organizational aspects of EDI trading partnerships that
directly affect the selection process. Many ®rms doing
EDI have had previous relationships with their trading
partners even before electronic linkages were established between them. In the case of these ®rms, the
EDI connection is merely an extension of this
relationship. It is also understood that most EDI networks involve the `cluster' pattern where the hub


company has sets of trading partners±customers and
suppliers for particular line product lines. Their trading partners, in turn, form their own network clusters
with other customers or suppliers in the marketplace.
A global view of these relationships will present the
image of a series of interconnected electronically
linked spider-like `webs'.
This study seeks to investigate the trading partner
selection criteria used by ®rms in a customer-supplier
dyad. The importance of these selection criteria is also
investigated across the different levels of EDI implementation.
EDI is the direct computer-to-computer exchange
of information stored in standard formatted business
documents, such as invoices, bills of lading, purchase
orders, etc., among organizations participating in a
trading partnership network [10,18,21,33,40,44].
According to Sprague and McNurlin [67], EDI
systems are a speci®c form of `cooperative' systems±automated systems shared by two or more
organizations. These are also referred to as `Interorganizational Information Systems (IOS)' [6,9,11,
12,46]. Certain characteristics distinguish EDI IOSs
[43] from other systems:

1. The availability of a computer system that is
compatible with that of one's trading partner is
essential if a direct linkage between partners will
be established and a third party service network
such as a value-added network (VAN) is not used
[16].
2. The adoption of data and communications standards is critical in implementing IOSs.
3. Education is important. Trading partner firm
personnel need to be informed about the requirements and implications of such systems to ensure
success.
4. The involvement of a third-party entity such as a
value-added network or VAN is typical. They train
IOS participants, maintain EDI standards, and
connect trading partners.
5. Work activities must be synchronized among IOS
participants, especially when structured data
format standards need to be changed or updated.
6. Work processes need to be reevaluated and
possibly, reengineered.
7. The interdependent nature of business activities

and processes requires that EDI trading partners

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

share information. The initiator of the IOS is
usually the powerful entity since it selects the
other firms that will be allowed to join the
network.
There are several reasons for carefully selecting
one's EDI trading partners. First, it is well established
that ®rms need to be capable of mounting projects
involving highly integrated EDI. Examples of EDI
requiring considerable integration include `Just-inTime (JIT)' in manufacturing; `Quick Response' that
adapts those principles in the apparel retailing industry
and uses complementary technologies such as barcoding; and `Ef®cient Consumer Response' that also
adapts the concepts but in the grocery and food
distribution business, and in all these industries, the
practice of vendor-management inventories [15,19].
These involve `channel partnerships' ideally cemented by mutual trust and a shared sense of collaboration
and common destiny [27]. A channel partnership

occurs when `. . . the parties agree on objectives,
policies, and procedures for ordering and physical
distribution of the supplier's products. . ..' [8].
Second, as more ®rms cluster into such technologybacked partnerships based on IOSs, the locus of
market rivalry will shift from competition between
®rms to competition between IOSs [22]. It is imperative, therefore, for the IOS to effectively manage its
logistical, ®nancial, technical, and design interdependencies to allow it to behave as one effective unit.
Doing so with carefully selected partners will simplify
this complex coordination task. Studies have shown
that EDI hub ®rms that make specialized investments
such as in hardware, software, transmission facilities,
data/databases, and expertise tend to improve the
`transactional climate' or sentiments that exist
between itself and its trading partners [34].
Third, the technological issues of managing even
high-end EDI networks will eventually be inconsequential and the basis for competitive advantage will
be on `relationship management' [30]. Riggins and
Mukhopadhyay [39] have promoted the concept of
`business partner reengineering' to strengthen an
IOS's ability to consolidate its resources, coordinate

its actions, streamline its procedures, and forge
increasing trust levels among partners. Subsequent
research studies show that cooperation among EDI
trading partners shown, for instance, by increasing the

243

amount of information exchanged, is signi®cantly
related to channel performance [47].
Fourth, although collaborative IOSs is the vision
behind the clustering of ®rms into networks, the reality
in the marketplace is that of a `lopsided' IOS, with the
power accruing to the hub of the network, which is
usually a large customer with a prominent presence in
industry. What EDI networks have engendered in
these cases is con¯ict and disgruntled compliance
with the mandate of the more powerful trading partner.
In the apparel retailing industry, retailers enjoy
reduced inventory carrying costs, but the suppliers
have had to bear EDI and inventory costs. Increased

sales for the suppliers usually compensate for the
increased inventory carrying costs.
The economic and ®nancial aspects of maintaining
an EDI network also argue for selectivity in evaluating
potential trading partners. One study, using extensive
analysis of the EDI network with a two-level hierarchical model consisting of one buyer and a number
of heterogeneous, competing suppliers, arrived at the
conclusion that it is better for a dominant buyer to
subsidize its suppliers especially when the buyer
stands to derive a signi®cant reduction in its operating
expenses and when the suppliers' EDI adoption costs
are fairly high [49]. This same study also found that a
buyer's pro®t potential from production will increase
as the number of suppliers hooking up the EDI network increases and that adoption by a very productive
supplier can have a great impact on the buyer's pro®tability. The problem, though, is that the marginal pro®t
increment for the participating suppliers decreases
monotonically as more of their competitors are signed
into the network.
In another study, a model of EDI network growth
helps determine bene®ts when a buyer initiates an IOS

with its suppliers [38]. The two-stage model showed
that suppliers joining the network in the ®rst stage
could reap economic bene®ts from increased market
share or a higher price; however, these bene®ts start to
diminish once the number of competitors increases
and the network grows in size. Thus, the `rush' of
supplier adoption may be followed by a `stalling' due
to this degradation in experiencing network bene®ts
once a certain `point of saturation' is reached. Then,
the buyer may have to subsidize the participation of
the suppliers so that transition to the second stage can
be made.

244

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

The results of these studies should alert EDI coordinators and managers to allocate the costs of subsidization in the feasibility stage of the project and to
tolerate suboptimal bene®ts from the network for a
period of time. Because of this, it is imperative that an
EDI network hub carefully choose trading partners.
There is, however, one way for a hub to work±just say±
`if you want us to sell your products, join our network'.
There is a paucity of research on just how hub ®rms
choose their trading partners (TP). Prior history of
doing business together, volume of business or sales
generated, and possession of EDI experience have
been the most common bases of the selection. The
objectives of our study, therefore, are to:
1. Identify selection criteria that ®rms use in
establishing EDI linkages;
2. Compare and contrast the selection criteria that
customer and supplier firms use in creating EDI
partnerships;
3. Compare and contrast the criticality of the
selection criteria according to level of EDI
implementation, and
4. Provide prescriptive guidelines for establishing
EDI linkages.
1.1. Definition of `level of EDI implementation'
There are three EDI implementation levels: (a)
Level 1: simple data exchange without integration
into any of the ®rm's internal processes; (b) Level 2:
data is being exchanged between applications of the
two ®rms; and (c) Level 3: business process reengineering is performed to allow EDI to change the way
the ®rm performs its activities [17]. A comprehensive
study noting the number of ®rms at each level of
implementation has not been conducted across all
EDI users in the US. However, it has been observed
that the higher the level of EDI implementation, the
greater the bene®ts experienced by the network participants [7].

2. Methodology
Data for this research were collected using a questionnaire instrument.

2.1. Questionnaire instrument for EDI trading
partnerships
There is no comprehensive study as of yet indicating the usefulness of selecting trading partners
for vertical EDI alliances. One indicative study,
though, by Williams et al., [50] found that ®rms that
undertook EDI trading partner veri®cation programs
were more likely to achieve greater range (i.e. the
percentage of trading partners with whom a ®rm
shares EDI information), depth (i.e. percentage of
data processing done through EDI in relation to
manual processing), and width of EDI usage (i.e.
extent to which a ®rm uses EDI for multiple business
applications).
This study looks at electronic partnerships that
involve the supply value-chain IOS as de®ned by
Kumar and van Dissel [26], which support customer-supplier relationships also referred to as pipeline
management systems [29]. These relationships
embody sequential interdependencies or interactions
that may extend from tracking EDI-based purchase
orders, searching the database for adjacent partners in
the chain to forecast customer needs, to transferring
computer-aided-design (CAD)-based speci®cations
from customer to supplier. Firms that agree to participate in these vertical SCM alliances primarily seek
to reduce uncertainties in the supply chain in order to
gain cost, cycle time, and quality advantages over rival
supply chains in the industry [32].
While many EDI trading partner relationships have
been responses to customer directives to be EDI
compliant [25,48], the transition from a competitive
to a more cooperative posture in dealing with potential
trading partners appears to be taking place [23,26].
This study is premised on the need to carefully select
trading partners, particularly those involved in highly
integrated alliances, to ensure the survival of the
relationship over the long term.
Literature reviews and interviews with electronic
commerce managers or coordinators guided the
choice of the 31 items considered to be useful and
relevant EDI trading partner selection criteria that
were eventually used in the survey instrument
(Table 1). Literature citation in support of each
item is placed next to the item. Each item is worded
so that a ®ve-point Likert type scale (1 ˆ not critical
at all; 5 ˆ very critical) can be ®lled in. To further

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

245

Table 1
Selection criterion items and related literature
Criterion

References

1. Trading partner's flexibility and Willingness to meet your information
and other needs
2. Provision of funding by your trading partner's top management for
business process reengineering efforts in their firm required by
your EDI connection with them
3. Strategic direction and business vision of trading partner

Hendrick and Ellram, 1993 [31]

4. Trading partner's openness to taking risks
5. Trading partner's fulfilment of the requirements of `just-in-time'
6. Trading partner's readiness to adopt innovative information technologies
just `to stay in the game'
7. Trading partner's willingness to trust and view your firm as a collaborator
rather than an adversary
8. Cross-functional orientation of your trading partner's internal working
relationships, such as the extent to which cross-functional work teams
and task forces are used
9. Assignment of valuable personnel by your trading partner's top management
to the business process reengineering work for the EDI network
10. Your trading partner's fulfillment of the requirements of total
quality management programs
11. Use of participative rather than authoritative management and decision
making style by your trading partners
12. Your trading partner wants and expects to have a long-term relationship
with you
13. Your trading partner's willingness to participate in joint committees
to plan for and manage the EDI network
14. Your trading partner's willingness to work with your firm in correcting
or retransmitting data when previous EDI data transmissions are
inaccurate, untimely, or faulty
15. Your trading partner's fulfillment of the requirements of high customer
service quality levels
16. The extent to which your trading partner's top management envisions
the business process reengineering effort for the EDI network as essential
to their business strategy
17. Your trading partner's commitment to the goals of the EDI network
18. Your trading partner's rewards for business process reengineering efforts
related to the EDI network
19. Open and frequent communications between your trading partner
and your firm
20. Your trading partner's ability to send you timely, accurate, and
complete information, which lets your firm serve your customers better
21. EDI `readiness' of your trading partner: possession of technology
(hardware/software) and expertise on EDI
22. Your trading partner properly assigns liability and responsibility in cases
of errors in transmission, translation, storage, deletion, and destruction
of data
23. Your trading partner's willingness to adapt to changes and reengineer
business processes to achieve the goals of the EDI network
24. Your trading partner's fulfillment of the requirements of `quick
response'
25. Your trading partner's ability to respond to data transmissions on time
26. Your trading partner's fulfillment of the requirements of
continuous improvement programs

[5]

Bhimji (interview); 1995; Hendrick and Ellram, 1993;
Grover, 1990; La Londe and Cooper, 1989 [5,17,36,42]
Hendrick and Ellram, 1993; Grover, 1990 [5,17,42]
La Londe and Cooper, 1989 [17,42]
[17,31,42]
Hendrick and Ellram, 1993 [17,31,42]
[5,17,31,36,42]

[5,17,36,42]
Hendrick and Ellram, 1993 [17,31,42]
Grover, 1990 [5,17,31,42]
Hendrick and Ellram, 1993 [17]
Hendrick and Ellram, 1993 [17,31,42]
[17,42]

Hendrick and Ellram, 1993; La Londe and Cooper, 1989
[17,42]
Bhimji (interview), 1995; Barber (interview), 1995
[5,17,42]
Hendrick and Ellram, 1993 [5,17,42]
[5]
Hendrick and Ellram, 1993 [5,17,31,42]
Hendrick and Ellram, 1993; La Londe and
Cooper, 1989 [17,42]
Grover, 1990; La Londe and Cooper, 1989 [17,36,42]
[17]

Barber (interview), 1995 [5,17,42]
[17,42]
La Londe and Cooper, 1989 [17,42]
Hendrick and Ellram, 1993; La Londe and
Cooper, 1989 [17,42]

246

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

Table 1 (Continued )
Criterion

References

27. Your trading partner's readiness to adopt innovative information
technologies to gain competitive advantage
28. Your trading partner's performance expectations and goals for the EDI
network
29. Your trading partner's willingness to handle exceptions and problems
by negotiating
30. Your trading partner's perception of the future of the industry and how
their firm will position itself in response to this scenario
31. Existence of free-flowing and open communications within each of
the participating firms, the buyer and the supplier

Grover, 1990 [5,17,36,42]

re®ne the list, it was shown to several EDI managers,
faculty members, and MIS Ph.D. students. They
were asked to comment on the readability and
completeness of the items. Their feedback led to
the rewording of several items. These 31 items were
made part of a questionnaire which also asked for
additional information concerning the responding
®rm.
2.2. Sampling
Several ways were used to gather data. First, the
support of the National Association of Purchasing
Management (NAPM) was enlisted; they gave us
access to their mailing list. A random sample of
2000 ®rms was selected from this list. The research
packet (a copy of the questionnaire, self-addressed
pre-paid envelope, and a cover letter explaining the
purpose of the study) was mailed to the person in
charge of EDI or electronic commerce in each ®rm.
With the tendency towards downsizing in most information technology or management information systems shops regardless of company size, it was fairly
reasonable to assume that the person in charge will be
reasonably familiar with both the technical and business issues involved in an EDI network. A total of 140
questionnaires was returned resulting in a response
rate of 7 percent. Additional questionnaires were
distributed to prospective respondents at a national
conference of the EDI professional association, and
mailed to volunteers who responded to an advertisement in EDI World magazine. These sources netted 12
useable questionnaires resulting in a total of 152
responses. The seemingly low response rate raised

Hendrick and Ellram, 1995 [5,17,31,42]
Hendrick and Ellram, 1993
Grover, 1990; La Londe and Cooper, 1989 [17,42]
Hendrick and Ellram, 1993 [5,17,31,42]

concerns about non-response bias and generalizability
of results. However, a response rate between 5 and 10
percent for studies of this nature is considered normal
[1].
When key characteristics of the population sampled
are not known, a simple yet powerful method to
check for non-response bias is the time trend extrapolation test [2,37]. A key assumption underlying
this test is that non-respondents are more like late
respondents than early respondents. Therefore, similarities in key variables between the early respondents
and late respondents would indicate the absence
of non-response bias. No statistically signi®cant differences were detected in ®rm size (number of
employees), sales, industry type, and whether a ®rm
is a customer or supplier in the two groups of respondents.

3. Results
3.1. Profile of firms
Table 2 shows the pro®les of the responding customer and supplier ®rms. The number of customer and
supplier ®rms were almost even in the sample (77 and
75, respectively). More customer ®rms had over
10,000 employees (46.8 percent) than supplier ®rms
(24 percent). In terms of net sales, a greater percentage
of customer ®rms earned over a billion dollars as
opposed to supplier ®rms. Eighty-one percent of the
supplier ®rms were in manufacturing while about half
(48 percent) of the customer ®rms were also in
manufacturing.

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255
Table 2
Profile of firms

No. of employees
Under 200
200±1000
1001±5000
5001±10,000
Over 10,0000
Not reported
Net sales (in millions)
Under 10
10±100
100±1000
Over 1 billion
Not reported
Firm type
Manufacturing
Service
Retailing
Other
Not reported

Customer firms (%)
(n ˆ 77)

Supplier firms (%)
(n ˆ 75)

10.4
9.10
22.1
5.2
46.8
6.5

29.3
18.7
20.0
5.3
24.0
2.7

7.8
3.9
18.2
61.0
9.1

12.0
20.0
18.7
38.7
10.7

48.0
12.0
19.5
11.5
9.0

81.0
2.0
2.7
5.2
9.1

3.2. A factor analysis of trading partner selection
criteria
Factor analysis is used to identify underlying constructs from a large number of interrelated variables.
Principal components analysis was used for factor
extraction in order to obtain estimates of the initial
factors that account for the largest variance in the
sample. Table 3 shows the initial statistics generated
for the six candidate factors. The rule used to ®nally
determine the number of factors to include was Kaiser's eigenvalue greater than 1 criterion [24]. This

Table 3
Eigenvalues and percentage variation explained
Factor

Eigenvaluea

% Variance

1
2
3
4
5
6
Total

12.29
2.30
2.11
1.64
1.38
1.13

38.4
7.2
6.6
5.1
3.5
2.9
68.1

a

Only the first six eigenvalues are shown.

247

resulted in a six-factor solution that explains 68
percent of the variation. Varimax rotation was chosen
as the method for transforming the initial factors into a
more meaningful con®guration.
A total of 31 items were factor analyzed. Stevens
[45] recommended a cases-to-variables ratio of 5 : 1 to
guarantee a reliable factor analysis procedure; however, some researchers such as Fuller and Swanson
[20] have worked with ratios as low as 2 : 1. There
were a total of 152 cases for the 31 items, thus,
resulting in a cases-to-variables ratio of roughly
5 : 1. This is more than satisfactory, considering the
suggested ratio limits. Factor loadings resulting from
the varimax rotation were evaluated using the threshold of 0.35 recommended by Churchill [13]. One item
(#I7) had a factor loading of 0.34 (slightly below the
recommended value of 0.35), but was kept as it was
deemed to be an important item. After assembling the
®rst set of items under each factor based on the
speci®ed factor loadings, the list was reevaluated to
streamline the items and ensure that its content and
meaning ®t the theme of each respective factor. An
item that had the highest loading on a factor but did not
quite match the theme of that factor was moved to
another factor with which it had a better ®t in terms of
content and where its loading was still fairly high.
Repositioning items under each factor to ®t a thematic
criterion justi®ed by theory is recommended by Sethi
and King [41].
A careful examination of the items bonded with
each of the six factors (Tables 4 and 5) leads us to
name the six factors as follows:
Factor
Factor
Factor
Factor
Factor
Factor

1:
2:
3:
4:
5:
6:

Strategic commitment.
Trading partner flexibility.
Joint partnering for EDI.
Readiness for high-level EDI.
EDI infrastructure.
Communication.

In order to determine the degree of emphasis placed
on the EDI partner selection criteria by customer and
supplier ®rms, scores for the six factors were computed. Table 6 shows the mean and standard deviation
of the six factors for the two groups of ®rms.
Note that both groups rated `Communication' and
`EDI Infrastructure' as number one and two, respectively. To measure the extent to which the rankings
given by the two groups agree, Kendall's coef®cient of

248

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

Table 4
Matrix of factor loadingsb
Itemsa

1

I32
I20
I29
I18
I30
I19
I6
I3
I1
I2
I31
I8
I25
I7
I14
I9
I10
I13
I15
I5
I28
I26
I12
I17
I23
I16
I11
I33
I22
I21
I27

0.72
0.65
0.57
0.56
0.55
0.52
0.42
0.39

2

3

4

5

6

0.73
0.66
0.57
0.53
0.47
0.34
0.75
0.68
0.49
0.44
0.42
0.70
0.68
0.68
0.58
0.41
0.72
0.64
0.62
0.76
0.70
0.70
0.47

a
The following are the six congruence factors: 1: Top-level
strategic commitment, 2: Trading partner flexibility, 3: Joint
partnering for EDI, 4: Readiness for high-level EDI implementation, 5: EDI infrastructure, and 6: Communications.
b
Loadings below 0.34 are not shown.

concordance [35] was calculated. It showed that the
rankings are not statistically signi®cantly different at
the 0.05 level.
To determine whether the mean scores of factors for
customer ®rms are different from those of supplier
®rms, a series of t-tests were conducted. First, note
that the means for customer ®rms are higher than
means for supplier ®rms in each of the six factors.
The last two columns of Table 6 show the results of
these t-tests. At the 0.05 level, statistically signi®cant
differences were found for all factors except `joint
partnering for EDI' and `strategic commitment'.

Table 7 reports the results when the level of EDI
implementation (Level 1, 2, or 3) is taken into account.
Among ®rms at Level 1, customer ®rms indicated a
signi®cantly higher degree of emphasis on `communication', `trading partner ¯exibility', and `readiness
for high level EDI implementation' compared to
supplier ®rms. At Level 2, the two groups differed
on the latter two factors. At Level 3, differences
existed on the last factor±`readiness for high level
EDI implementation'.
Figs. 1 and 2 display the mean factor scores for
customer and supplier ®rms, respectively, when broken down by the level of EDI implementation. Using
multivariate analysis of variance (MANOVA), it was
found that the customer ®rms signi®cantly differed
with respect to the six factors across the three levels of
EDI implementation at the 0.05 level. Follow-up
analysis using univariate F-tests revealed that the
differences are signi®cant on Factor 3 (joint partnering for EDI) and Factor 5 (EDI infrastructure). Also,
Level 1 means are statistically signi®cantly lower than
the means for Level 2 and Level 3. Similar analysis for
supplier ®rms showed that ®rms at Level 1 have
signi®cantly lower means on the six factors than ®rms
at levels 2 or 3.
3.3. Comparison of selection factors
In order to examine whether customer ®rms use
different criteria than supplier ®rms, the scores for the
six factors were compared for the two types of ®rms
using two-sample t-tests. Table 6 shows these results
for each of the six factors. Statistical signi®cant
differences were found at p < 0.05 between customer
and supplier ®rms on all factors except joint partnering
for EDI and strategic commitment. The factor strategic commitment was, however, signi®cant at p < 0.10.
It is worthwhile to note that the mean scores for
customer ®rms are consistently higher than those
for supplier ®rms for each factor, indicating that while
selecting suppliers, customer ®rms emphasize these
factors to a higher degree.
Differences between customer and supplier ®rms
both at the overall and detailed EDI implementation levels are greatest for the following factors:
readiness for high-level EDI (p < 0.001), trading
partner ¯exibility (p < 0.001), and communications
(p < 0.01).

249

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255
Table 5
Six trading partner selection factors
Variable
Corresponding questionnaire itema

Factor 1: Top-level strategic commitment
I3 ˆ strategic direction and business vision of this trading partner; I6 ˆ your trading partner's readiness to adopt innovative technologies just
to `stay in the game'; I18 ˆ the extent to which your trading partner's top management envisions the business process reengineering effort for
the EDI network as essential to their business strategy; I19 ˆ your trading partner's commitment to the goals of the EDI network; I20 ˆ your
trading partner's rewards for business process reengineering efforts related to the EDI network; I29 ˆ your trading partner's readiness to adopt
innovative information technologies to `gain a competitive advantage'; I30 ˆ your trading partner's performance expectations and goals for
the EDI network; I32 ˆ your trading partner's perception of the future of the industry and how their firm will position itself in response to this
scenario
Factor 2: Trading partner flexibility
I1 ˆ your trading partner's flexibility and willingness to meet your information needs and other needs; I2 ˆ provision of funding by your
trading partner's top management for business process reengineering efforts in their firm required by your EDI connection with them;
I7 ˆ your trading partner's willingness to share information; I8ˆyour trading partner's willingness to take risks; I25 ˆ your trading partner's
willingness to adapt to changes and reengineer business processes to achieve the goals of the EDI network; I31 ˆ your trading partner's
willingness to handle exceptions and problems by negotiating
Factor 3: Joint partnering for EDI
I9 ˆ your trading partner's willingness to trust and view your firm as a collaborator rather than an adversary; I10 ˆ cross-functional
orientation of your trading partner's internal working relationships, such as the extent to which work teams and task forces are used; I13 ˆ use
of participative (rather than authoritative) management and decision making style by your trading partner; I14 ˆ your trading partner wants
and expects to have a long-term relationship with you; I15 ˆ your trading partner's willingness to participate in joint committees to plan for
and manage the EDI network
Factor 4: Readiness for high-level EDI implementations
I5 ˆ your trading partner's fulfillment of the requirements of `just-in-time'; I12 ˆ your trading partner's fulfillment of the requirements of
total quality management programs; I17 ˆ your trading partner's fulfillment of the requirements of high customer service quality levels;
I26 ˆ your trading partner's fulfillment of the requirements of `quick response'; I28 ˆ your trading partner's fulfillment of the requirements of
continuous improvement programs
Factor 5: EDI Infrastructure
I11 ˆ assignment of valuable personnel by your trading partner's top management to the business process reengineering work for the EDI
network; I16 ˆ your trading partner's willingness to work with your firm in correcting or retransmitting data when previous EDI data
transmissions are inaccurate, untimely, or faulty; I23 ˆ EDI `readiness' of your trading partner: possession of technology (hardware/software)
and expertise on EDI
Factor 6: Communications
I21 ˆ open and frequent communications between you and your trading partner; I22 ˆ your trading partner's ability to send you timely,
accurate, and complete information, which lets your firm serve your customers better; I27 ˆ your trading partner's ability to respond to data
transmissions on time; I33 ˆ existence of free-flowing and open communications within each of the participating firms, the buyer and the
supplier
a

All references to `trading partner' in the questionnaire item column was worded using either `customer' or `supplier', depending on the
set of questionnaire being used. **I3, for instance, is to be read `item 3'.
Table 6
t-test results for customer and supplier firmsa
Factors

Mean (Customer)
(n ˆ 74)

Communications
EDI infrastructure
Joint partnering for EDI
Strategic commitment
Trading partner flexibility
Readiness for `High Level' EDI implementation

4.44
4.15
3.72
3.76
3.92
4.02

a
b

(0.56)b
(0.70)
(0.77)
(0.64)
(0.49)
(0.76)

***Significant at p < 0.01; **Significant at p < 0.05; *Significant at p < 0.10.
Numbers in parentheses are the standard deviations.

Mean (Supplier)
(n ˆ 78)

t

p

4.12
3.88
3.57
3.52
3.38
3.28

2.83
2.29
1.15
1.84
4.76
5.26

0.005***
0.023
0.251
0.068*
0.000***
0.000***

(0.79)
(0.79)
(0.88)
(0.92)
(0.88)
(0.97)

250

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

Table 7
Comparison of customer and supplier firms by implementation levela
Factor

Communications
EDI infrastructure
Strategic commitment
Joint partnering for EDI
Trading partner flexibility
Readiness for high-level EDI
a

Level 1

Level 2

Level 3

Customer
(n ˆ 74)

Supplier
(n ˆ 78)

Customer
(n ˆ 74)

Supplier
(n ˆ 78)

Customer
(n ˆ 74)

Supplier
(n ˆ 78)

4.37*
3.98
3.62
3.44
3.84*
3.91*

3.90*
3.71
3.35
3.29
3.10*
3.02*

4.48
4.27
3.84
3.93
4.00*
4.07*

4.28
3.99
3.51
3.81
3.47*
3.42*

3.45
4.33
3.92
3.99
3.94
4.17*

4.34
4.05
3.98
3.76
3.86
3.63*

*Indicates significant at the 0.05 level.

3.4. MANOVA results comparing trading partner
selection factor means
One-way multiple analysis of variance (MANOVA)
was also performed to determine if there are signi®-

cant differences between the two groups of ®rms,
customers and suppliers, in their evaluation of the
six trading partner selection factors, which are the
dependent variables in this case. Customers consistently assigned higher mean values for the six factors

Fig. 1. Mean scores for customer firms by EDI level.

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

251

Fig. 2. Mean scores for supplier firms by EDI level.

than did suppliers. MANOVA results reveal signi®cant
differences between the two types of ®rms based on
the Pillais, Hotellings, and Wilks tests, all with a
signi®cance of F-value of 0.000 (p < 0.001). It shows
the results of the univariate F tests disclosing in greater
detail the level of differences between the ®rms for
each of the six factors.
Customers and suppliers agree on the importance of
only one factor, joint partnering. Otherwise, there are
signi®cant differences between the ®rms in their perception of the criticality of the remaining ®ve factors.
Customers and suppliers are most distant in their
evaluation of trading partner ¯exibility, readiness
for high-level EDI, and communications (p < 0.01).
The gap between the ®rms closes slightly in their
evaluation of EDI infrastructure (p < 0.05) and is
narrowed even more so in their assessment of strategic
commitment (p < 0.10). These MANOVA results
recon®rm the t-test results obtained.

4. Discussion of results
This study presents the organizational dimensions
to consider when selecting EDI trading partners.
Various trading partner selection criteria for EDI
partnerships and a methodology for operationalizing
its component factors, which focus on certain themes
were presented. The customer ®rm, which is usually
the hub ®rm, is more insistent about certain technological initiatives that directly affect the EDI network.
The importance of being selective is demonstrated by
a study which found that the ®rms that were more
discriminating in choosing their EDI trading partners
were able to implement systems that have greater
range, width, and depth [50].
Factor analysis yielded six factors in trading partner
selection: strategic commitment, trading partner ¯exibility, joint partnering for EDI, readiness for highlevel EDI, EDI infrastructure, and communication. A

252

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

comparison of customer and supplier ®rms showed
that both types of ®rms equally considered communication and EDI infrastructure important in terms of
the ranking of means. A series of t-tests of the
differences of means were conducted to detect if
customer ®rms expressed their preferences differently
from supplier ®rms. Overall, customers had higher
means for all factors than did suppliers. Both types of
®rms, though, were similar in their evaluation of all
factors except joint partnering for EDI and strategic
commitment at the 0.05 level.
An analysis of differences of the means was also
conducted across the three levels of EDI implementation. Using MANOVA, it was found that customer
®rms differed signi®cantly from supplier ®rms in their
evaluation of the six factors across the three levels of
EDI implementation at the 0.05 level. MANOVA
results con®rmed t-test results in ®nding out that
the differences between customer and supplier ®rms
were greatest for readiness for high-level EDI, trading
partner ¯exibility, and communications.
It makes sense that these two groups of ®rms should
differ the most in their evaluation of these three factors
which are more heavily involved in the high-level and
long-term implementation of EDI. Customer ®rms in
the sample, which are much larger both in terms of
number of employees and net sales, assigned a higher
level of criticality to the items of these factors. This
could indicate actual involvement in higher level EDI
implementation and/or a better conceptual appreciation of the bene®ts from these initiatives. It usually
takes experience, readiness to move up to more challenging levels of implementation, or a sophisticated
appreciation of the opportunities for more aggressive
initiatives for strategic advantage to be able to respond
to the factor items of these speci®c factors with a
greater sense of urgency. Business executives of the
more aggressive ®rms usually possess the savvy to
employ new telecommunications-based technologies
such as EDI to develop new strategies, to transform
their organization, and to survive competitive threats.
Elements of Factor 4, readiness for high-level EDI ,
suggest awareness of more advanced EDI initiatives
such as `just-in-time', total quality management programs, `quick response' in retailing [28], continuous
improvement programs or vendor-managed inventory
in manufacturing or services industries, and achieving
high customer service quality levels.

5. Conclusions
5.1. Limitations of the study
The response rate, though acceptable, could still be
improved in a future replication to strengthen the
representativeness of the ®ndings. The sample size
of 2000 ®rms to which the research packet was sent is
only a small part of the relevant population. Financial
and logistical constraints made it dif®cult to overcome
this limitation. Also, the study assumed that the views
of the head of the EDI or electronic commerce group
of the ®rm were accurate and representative of those of
the ®rm. Large EDI projects are usually undertaken in
teams pulling together the talents of cross-functional
members with multiple contributions and opinions.
Data was not captured on the length of the relationship
between the trading partners prior to their EDI connection. This experience may have had an effect on
their views of what constitutes a good partner. This
study looks only at the attributes of what makes a good
EDI trading partner. That is a narrow area within a
much larger domain investigating the concept of what
makes a good trading partner under different organizational and technological conditions.
5.2. Managerial implications
While there is a tendency for powerful hubs to
coerce potential trading partners into their EDI networks, this is true, to a large extent, if the hub is
dealing with much smaller ®rms. The aggressive
stance may not be a very prudent approach to take,
though, if the supplier under consideration is a much
larger ®rm with valuable and scarce resources and
therefore, has much more negotiating leverage. The
following discussion points out more speci®c recommendations that may be more appropriate for mediumto large-sized customer and supplier ®rms.
Larger suppliers or customers as opposed to smaller
ones, will be in a better position to take a proactive
stance toward EDI implementation by educating
themselves on the latest trends in the use of this
technology. This could help ameliorate the experience
of being unpleasantly `dragged' into an EDI trading
partnership, of which one has little or no understanding at all. By being `in sync' with the technological
times, a ®rm could shorten the learning curve involved

R. Angeles, R. Nath / Information & Management 37 (2000) 241±255

in collaborating with a potential hub ®rm and
also, participate more effectively in undergoing the
strategic, technological, and organizational changes
required by EDI.
5.2.1. Suppliers
Suppliers need to recognize and prepare for `highgear' performance that their customer counterparts
expect. This means developing the attributes that
make for trading partner ¯exibility, studying the
requirements of certain level 3 EDI implementations,
and facilitating open communications. Since suppliers, in effect, constitute a `direct appendage' to
customer ®rms that may desire to move in the direction of market leadership through high-level EDI, it
behoves these suppliers to be able to shift its
resources `on immediate notice'. `High-gear' performance refers to moving into level 3 EDI implementations such as `just-in-time' manufacturing, vendormanaged inventories or continuous replenishment
systems, `quick response' in retailing, `ef®cient consumer response' in the grocery and food distribution
business, etc.
5.2.2. Customers
Customers may also need to underwrite the costs of
being the `leader' trading partner in the dyad [23].
Customers that are in a position to be `hubs' and these
are usually the more prosperous and larger
®rms, should use the ®ndings of this study in more
carefully selecting and assessing its potential trading
partners. Obviously, suppliers that have the attributes
that customers in this study considered critical should
be considered ®rst in the short list of candidate
partners. If the customer has to absolutely deal with
certain suppliers that do not have the desired attributes, the customer could provide both educational
and technical subsidy to help close the gap between
itself and the supplier with the unique or much-needed
resources.
In their study of small ®rms and the adoption of
EDI, Iacovou, Benbasat, and Dexter [23] recommend
that large EDI network hubs mount in¯uence strategies, based primarily on promotional efforts and
noncoercive tactics. Since EDI partnerships are ideally cooperative endeavors, resorting to threats and
punishment basically amounts to sabotage and would
be counterproductive in the long run. An effective

253

customer hub ®rm could learn from the ®ndings of this
study by designing educational campaigns that
teach potential trading partners not only the bene®ts
of EDI but also the components that will best prepare
future trading partners especially for appreciating
the elements of trading partner ¯exibility, readiness
for high-level EDI, and communications. While
powerful large hubs still tend to coerce smaller ®rms
into their EDI network, this approach is inappropriate
and risky when applied to much larger potential
trading partners with scarce resources that are
much needed for long-term, collaborative partnering
arrangements.

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