A key issue facing IT researchers and practitioners has been the difficulty
in realizing strategic payoff from IT investment. This study, drawn on soc
iological theories of embeddedness, addresses this key issue, with particul
ar attention to the perspective of EDI network initiator. Cross-case analys
is is conducted comparing three initiators of sophisticated EDI networks, w
ho realized different levels of strategic payoffs. Results reveal that the
achievement of strategic payoffs is a function of EDI embeddedness, which i
s defined as how central or peripheral a specific EDI network is to managin
g interfirm interdependence. In a model of EDI initiator strategic payoff,
we argue that EDI embeddedness, which is influenced by existing interfirm r
elationship, moderates the impact of adopter EDI use on initiator strategic
payoff derived from the EDI investment. Specifically, while high embeddedn
ess motivates adopter strategic use, low embeddedness deters such use. The
model is validated against three reported cases in the literature.