This study, drawing upon research in innovation theory and Information systems, investigates the relationship among the organizational and innovation characteristics and the extent of internal and external diffusion of EDI in Korean firms. The data for this study were collected from 131 firms that have implemented EDI. The results of the correlation and the multiple regression analysis show that elapsed time and organizational compatibility are the major predictors of EDI diffusion. Specifically, the extent of communication, elapsed time and organizational compatibility are the major predictors of internal diffusion, while centralization, organizational compatibility and elapsed time are closely related to external diffusion of EDI. The results of this study imply that to facilitate the use of EDI widely within and beyond organizations, EDI system should be compatibile with the organizational tasks, values systems and existing information systems.