The Evaluation of Investment in Inter-Organizational Information System

Today inter-organizational information system (IOS) provides supply chains with new opportunities to promote communication efficiency and create competitive advantage. However, IOS adoption is costly and time-consuming. Enterprises that are not well prepared may run a loss from the project. Therefore, the primary concern before IOS installation is at what cost the project is fulfilled to achieve the maximal profit. To address the problem, this paper sets up a two-player model based on the profit generated by IOS. The model helps companies determine the level of IOS investment that produces the best utility. Furthermore, after figuring out the optimal amount of investment, we work out a solution to the problem of cost sharing between trading partners with different power by applying asymmetric Nash bargaining solution.