Adoption of inter-organizational systems (IOS) to improve supply chain efficiency has proved to be difficult because it spans organizational boundaries. Most IOS adoption studies have employed the factor approach that typically involves an identification of situational factors that affect the adoption by individual firms. This study argues that such an approach is unable to completely capture the richness of IOS adoption experience of organization and demonstrates the necessity to use a dynamic interactional model of IOS adoption to overcome the limitations of the factor approach. Using the findings of Category Management adoption in Australia, the paper illustrates how the dynamic interactional model captures the reciprocal interactions between the adopting firms with their inter-organizational environment in the course of adoption.