Decision Sciences Volume 36 Number 3 August 2005 Printed in the U.S.A. Examining the Impact of Interorganizational Systems on Process Efficiency and Sourcing Leverage in Buyer–Supplier Dyads Khawaja A. Saeed † Department of Finance, Real Estate, and Decision Sciences, W. Frank Barton School of Business, Wichita State University, 1845 Fairmount, Wichita, KS 67260, e-mail: khawaja.saeed@wichita.edu Manoj K. Malhotra Department of Management Science, The Moore School of Business, University of South Carolina, Columbia, SC 29212, e-mail: malhotra@moore.sc.edu Varun Grover Department of Management, 101 Sirrine Hall, Clemson University, Clemson, SC 29634, e-mail: vgrover@clemson.edu ABSTRACT Manufacturing firms are increasingly seeking cost and other competitive advantages by tightly coupling and managing their relationship with suppliers. Among other mecha- nisms, interorganizational systems (IOS) that facilitate boundary-spanning activities of a firm enable them to effectively manage different types of buyer–supplier relationships. This study integrates literature from the operations and information systems fields to create a joint perspective in understanding the linkages between the nature of the IOS, buyer–supplier relationships, and manufacturing performance at the dyadic level. Ex- ternal integration, breadth, and initiation are used to capture IOS functionality, and their effect on process efficiency and sourcing leverage is examined. The study also explores the differences in how manufacturing firms use IOS when operating under varying lev- els of competitive intensity and product standardization. In order to test the research models and related hypothesis, empirical data on buyer–supplier dyads is collected from manufacturing firms. The results show that only higher levels of external integration that go beyond simple procurement systems, as well as who initiates the IOS, allow manufacturing firms to enhance process efficiency. In contrast, IOS breadth and IOS ini- tiation enable manufacturing firms to enhance sourcing leverage over their suppliers. In addition, firms making standardized products in highly competitive environments tend to achieve higher process efficiencies and have higher levels of external integration. The study shows how specific IOS decisions allow manufacturing firms to better manage their dependence on the supplier for resources and thereby select system functionalities that are consistent with their own operating environments and the desired supply chain design. † Corresponding author. 365