Inter-firm IT governance in power-imbalanced buyer‐supplier dyads: exploring how it works and why it lasts

Using a multiple case study design, we investigate the issue of inter‐firm IT governance and its impact on information sharing in buyer–supplier dyadic relationships. We interviewed 38 managers of operations, purchasing, and IT in five dyadic relationships, and identified and examined one type of inter‐firm IT governance: unilateral IT governance. In this type of IT governance, one party of the dyad dominates the relationship and the decision rights regarding inter‐firm IT systems and data sharing. We find that unilateral inter‐firm IT governance develops under contract‐based and relationship‐supplemented inter‐firm governance arrangements in which significant power imbalance exists. However, contrary to the prediction of resource dependence theory, power‐imbalanced governance can survive and thrive over a long period of time. We find that the inter‐firm relational norms and trust that develop between these dyads constrain opportunistic and myopic behaviors in both parties, thus sustaining the seemingly unstable unilateral inter‐firm IT governance. We also find that the operational necessity of the buyers and the IT capability of the suppliers are two primary factors that constrain inter‐firm information sharing in these dyads. On the basis of these findings, we propose a process model for understanding and managing this type of inter‐firm IT governance.