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Abstract:
Digital technologies and, especially, the Internet are profoundly reshaping the motion picture industry. Video-on-demand heightens the trend toward digitization and disintermediation. In the short term, the increasing use of digital technologies may result in significant cost reductions throughout the value chain. In the long term, the digitization of film production and distribution may induce a significant restructuring of the motion picture industry. Digital film delivery may displace physical films, videos and DVDs, thus threatening the long-term survival of video rental stores and other middle layers in the value chain. Taking an economic and strategic perspective, this paper examines the impacts of digitization on the motion picture industry with a focus on disruption and disintermediation of the value chain.

Digitization, Internet, e-commerce, disintermediation, value chain, motion pictures

Abstract:
Drawing from recent literature on bundling theory, this paper explores the implications of digital bundling for the music industry. Bundling can be very effective as both a profit-maximizing tool and a competitive weapon, particularly as electronic distribution of digital music files gains momentum. Contrary to the popular belief that digital distribution will lower barriers of entry and allow many new firms to enter, this study finds that bundling will lead to greater industry concentration and increasing market power for the large music companies. Despite the disrupting forces caused by digital technologies, the economics of bundling, the control of content, and the existing industry structure suggest that the major record labels will retain their power and the industry will continue to be concentrated, perhaps even becoming more so in the future.

Bundling, digital goods, music, digitization, competition, industry structure

Abstract:
Viewing investment projects in new technologies as real options, this paper studies the effects of endogenous competition and asymmetric information on the strategic exercise of real options. We first develop a multi-period, game-theoretic model and show how competition leads to early exercise and aggressive investment behaviors and how competition erodes option values. We then relax the typical full-information assumption found in the literature and allow information asymmetry to exist across firms. Our model shows, in contrast to the literature that payoff is independent of the ordering of exercise, that the sequential exercise of real options may generate both informational and payoff externalities. We also find some surprising but interesting results such as having more information is not necessarily better.

Technology investment, competition, real options, game theory, dynamic games, incomplete information, technological systems, and technology innovation

Abstract:
In this paper we explore strategic decision making in new technology adoption by utilizing economic analysis. We show how asymmetric information affects firms' decisions to adopt the technology. We do so in a two-stage game-theoretic model where the first-stage investment results in the acquisition of a new technology that, in the second stage, may give the firm a competitive advantage in the product market. We compare two information structures under which two competing firms have asymmetric information about the future performance (i.e., post-adoption costs) of the new technology. We find that equilibrium strategies under asymmetric information are quite different from those under symmetric information. Information asymmetry leads to different incentives and strategic behaviors in the technology adoption game. In contrast to conventional wisdom, our model shows that market uncertainty may actually induce firms to act more aggressively under certain conditions. We also show that having better information is not always a good thing. These results illustrate a key departure from established decision theory.

Technology adoption, strategic decisions, asymmetric information, technology-based competition, information economics

Abstract:
The abundance of transaction data available on the Internet tends to make information more transparent in electronic marketplaces. In such a transparent environment, it becomes easier for suppliers to obtain information that may allow them to infer their rivals' costs. Is this good news or bad news? In this study, we focus on the informational effects of business-to-business (B-to-B) exchanges, and explore firms' incentives to join a B-to-B exchange that provides an online platform for information transmission. We then study the equilibria by developing a game-theoretic model under asymmetric information. We examine whether the incentives to join a B-to-B exchange would be different under different competition modes (quantity and price), different information structures, and by varying the nature of the products (substitutes and complements). Our results challenge the "information transparency hypothesis" (i.e., open sharing of information in electronic markets is beneficial to all participating firms). In contrast to the popular belief, we show that information transparency could be a double-edged sword. The individual rationality of participation in the online exchange reflects the tradeoff between information transparency and data confidentiality. This may have important implications for the microstructure design (e.g., data access rules) of B-to-B electronic marketplaces.

Information economics, information transparency, economics of electronic markets, online exchange, asymmetric information, game theory, information transparency hypothesis

Abstract:
In this study we developed a conceptual model for studying the adoption of electronic business (e-business or EB) at the firm level, incorporating six adoption facilitators and inhibitors, based on the technology-organization-environment theoretical framework. Survey data from 3,100 businesses and 7,500 consumers in eight European countries were used to test the proposed adoption model. We conducted confirmatory factor analysis to assess the reliability and validity of constructs. To examine whether adoption patterns differ across different e-business environments, we divided the full sample into high EB-intensity and low EB-intensity countries. After controlling for variations of industry and country effects, the fitted logit models demonstrated four findings: (1) Technology competence, firm scope and size, consumer readiness, and competitive pressure are significant adoption drivers, while lack of trading partner readiness is a significant adoption inhibitor; (2) As EB-intensity increases, two environmental factors - consumer readiness and lack of trading partner readiness - become less important, while competitive pressure remains significant; (3) In high EB-intensity countries, e-business is no longer a phenomenon dominated by large firms; as more and more firms engage in e-business, network effect works to the advantage of small firms; (4) Firms are more cautious in adopting e-business in high EB-intensity countries - it seems to suggest that the more informed firms are less aggressive in adopting e-business, a somehow surprising result. Explanations and implications are offered.

Electronic business, adoption, empirical data, technology competence, readiness, firm scope, Europe, technology-organization-environment framework

Abstract:
In this study we developed a set of constructs to measure e-commerce capability in Internet-enhanced organizations. The e-commerce capability metrics consist of four dimensions - information, transaction, customization, and supplier connection. These measures were empirically validated for reliability, content and construct validity. Then we examined the nomological validity of these e-commerce metrics in terms of their relationships to firm performance, with data from 260 manufacturing companies divided into high IT-intensity and low IT-intensity sectors. Grounded in the dynamic capabilities perspective and the resource-based theory of the firm, a series of hypotheses were developed. After controlling for variations of industry effects and firm size, our empirical analysis found a significant relationship between e-commerce capability and some measures of firm performance (e.g., inventory turnover), indicating that the proposed metrics have demonstrated value for capturing e-commerce effects. However, our analysis showed that e-commerce tends to be associated with increased cost of goods sold for traditional manufacturing companies, but an opposite relationship for technology companies. This result seems to highlight the role of resource complementarity for the business value of e-commerce - traditional companies need enhanced alignment between e-commerce capability and their existing IT infrastructure in order to reap the benefits of e-commerce.

Electronic commerce, IT intensity, e-commerce metrics, measurement, validation, firm performance, Net-enhanced organizations