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Abstract:
Large sunk costs of development, negligible costs of reproduction and distribution and substantial economies of scale make information goods distinct from physical goods. Consequently,how to take advantage of the specific characteristics of information goods is an important managerial problem. Price discrimination and product differentiation are common ways this issue has been addressed. In previous literature, vertical differentiation and related pricing strategies have been researched in contexts such as nonlinear utility functions,network externalities, competition and anti-piracy.

Little attention has been paid to the relationship between market segmentation and product differentiation. In this paper, we emphasize the interaction of market segmentation and product differentiation as we believe that any product differentiation must be based on existing market segmentation. In our model, we treat vertical differentiation as a special case of horizontal differentiation, and we model the interaction between different market segments showing the differences in product differentiation strategies when moving from horizontal to vertical differentiation. We find that it is always sub-optimal to differentiate information goods if the market is not fully differentiated or if characteristics of the information goods are not specifically designed for certain market segments. We divide characteristics of information goods into four categories according to the ease of differentiation and design guidelines for firms to differentiate their goods based on these characteristics. We further provide guidance on whether to merge one or several versions when costs for versioning information goods are significant.

Information Goods, Market Segmentation, Product Differentiation, Versioning Strategies, Pricing Strategies

Abstract:
Many studies measure the value of Information Technology (IT) by focusing on how much value is added rather than on the mechanisms that drive value addition. We argue that value from IT arises not only directly through changes in factor input mix but also indirectly through IT enabled changes in the underlying production technology. In this latter role IT augments non-IT capital and labor. We develop an augmented form of the simple Cobb-Douglas production function to separate and measure these two productivity-enhancing effects of IT. Using industry-level data from the manufacturing sector and our augmented Cobb-Douglas form, we find evidence that both direct and indirect effects of IT are significant. Partitioning industries into IT intensive and non-IT intensive, we find that the indirect effects of IT predominate in the IT intensive sector. In contrast, the direct effects of IT predominate in the non-IT intensive sector. These results indicate fundamental differences in the role of IT in production between those industries that are IT intensive and those industries that are not. The implication for decision-makers is to recognize that for ITintensive industries the gains from investments in IT come primarily as a result of changes in the underlying production technology resulting in enhanced productivity of non-IT capital and labor.

IT Productivity, Indirect Effects, IT Investment, Output Eleasticity, Technological Change, Production Theory

Abstract:
This paper demonstrates that globalization, taking the form of a higher import component of consumption and a larger export component of GDP, is the cause of the apparent breakdown in the relationship between excess demand and inflation. Within a parsimonious empirical framework, we show that increasing openness of the U.S. economy is all that is needed to reestablish the relationship between inflation and capacity utilization. We also show that international trade has a significant separate influence on inflation, and is important for identifying a Phillips curve relationship between unemployment and inflation.

Abstract:
This paper demonstrates that globalization, taking the form of a higher import component of consumption and a larger export component of GDP, is the cause of the apparent breakdown in the relationship between excess demand and inflation. Within a parsimonious empirical framework, we show that increasing openness of the US economy is all that is needed to re-establish the relationship between inflation and capacity utilization. We also show that international trade has a significant separate influence on inflation, and is important for identifying a Phillips curve relationship between unemployment and inflation.

Abstract:
Reengineering projects have proven difficult to complete on time with satisfactory outcomes. Swanson's (1994) tri-core model of IS innovations suggests that a deficiency in one or more of the cores - the administrative core, the technical (business) core and the IS core - can cause process innovations, such as IT-based reengineering projects, to fail. Using reengineering projects in health care, we study the extent of which each core in the tri-core model explains performance, whether alignment among the cores improves that explanation, and how the cores differ in the dimension of project performance they explain. We find that a set of reengineering issues derived from the literature separates into constructs representing the three cores, indicating that know-how to manage these issues are core specific. Next, we find that together the main effects of the tri-core model do not explain project performance, however core alignment in the form of interactions explains both process and product measures of project performance.

The process measure of project performance, the duration of project delay, is explained by the IS core and interactions between the IS core and the other two cores. In contrast, the product measure of project performance, client satisfaction, is explained by the administrative core and interactions with the other cores. Thus, the administrative core responsible for management and coordination know-how, rather than the logical IS unit, is responsible for satisfaction with the reengineered process. Finally, we show that the antecedent to the tri-core model, the dual core model where the IS core is embedded in the other cores, does not explain reengineering project performance even when alignment is considered.

Reengineering, Information Technology, Project Management, Healthcare Operations, MIS/Operations Interface

Abstract:
With the rapid growth of business-to-business electronic commerce and the increasing need for supply chain collaboration, systems that support supply procurement are becoming ever more important. Due to the substantial costs of hardware, software and effort needed for implementation success, firms that participate in developing e-procurement systems want to reap as much value as possible. We use the theory of incomplete contracts to understand the different ways to organize the ownership of IT assets in procurement systems across two or more firms. The purpose is to maximize the value that the participants can appropriate and give them the proper incentives to invest. Based on the theory, we investigate the primary determinants of optimal ownership for e-procurement systems, focusing on the relative importance of participants' investments, which is a measure of the marginal value that each participant adds to any proposed ownership structure for the IT assets. We also provide a framework for analyzing e-procurement system ownership structures. We apply our approach to vendor managed inventory systems, as an illustration of the range of e-procurement systems ownership settings that we can treat with this theoretical perspective.

Economic theory, e-procurement systems, incomplete contracts, IT investments, interorganizational IS, ownership, systems implementation, supply chain management, vendor managed inventory.

Abstract:
We examine whether cooperative planning and uncertainty affect the magnitude of rework in concurrent engineering projects with upstream and downstream operations, and explore the impact of such rework on project delays. Using survey data from a sample of 120 business process (BP) redesign and related information technology (IT) development projects in healthcare and telecommunications, our results indicate upstream (BP) rework and downstream (IT) rework is mediated and mitigated by cooperative planning - through BP/IT strategy coupling and cross-functional involvement. In addition, uncertainty related to a lack of firm or industry experience with such projects increases the magnitude of upstream rework but not downstream rework or the amount of cooperative planning. After accounting for project scope, implementation horizon and whether delays are anticipated, we find that project delay is primarily influenced by the magnitude of downstream rework and downstream delay: the magnitude of both upstream and downstream rework significantly increases downstream delay, which significantly increases project delay. However, the magnitude of upstream rework does not directly affect project delay. These results suggest that project delay is under managerial control as cooperative planning is a managerial function that reduces downstream rework, while uncertainty from a lack of experience with the design affecting upstream rework is not directly under managerial control.

Abstract:
In this research we model and estimate the effects on productivity downstream from information technology (IT) investments made upstream. Specifically, we examine how one industry's productivity is affected by the IT capital stock of its suppliers. These supplier-driven IT spillovers occur because, due to competition in the supplying industry, quality benefits from suppliers' IT investments can pass downstream. If the output deflators of supplying industries (consequently the intermdediate input deflator of the using industries) do not capture the quality improvement from IT, then the output productivity of the supplying industries is mis-measured or mis-assigned. We develop and empirically test a model capturing these supplier-driven effects using data on 85 three-digit SIC manufacturing industries. We find that for a 10.5% increase in suppliers' IT capital, the suppliers' output increases by 0.63%-0.70%, more than covering the cost of the increase in suppliers' IT capital. In addition, this increase in suppliers' IT capital increases the average downstream industry's output by between $66M and $72M, thereby confirming substantial supplier-driven IT spillovers downstream. We also infer the magnitude of the measurement error of the price deflator of the intermediate input resulting from the failure to account for IT-related quality improvement, finding that the measured price deflator overestimates the true deflator by approximately 30% at the mean level of IT capital.

value of IT, IT investment, IT quality, inter-organization systems (IOSs), production function framework, input-output tables, price deflator

Abstract:
In this research we study how existing market coverage affects the outcome of the Internet channel entry game between an existing retailer and a new entrant. A market is not covered when some consumers with low reservation prices are priced out by existing retailers and do not purchase. In a model with multiple existing retailers and a potential new entrant, we demonstrate that when costs are equal, one of the existing retailers enters the Internet channel first. However, if the market is covered by existing retailers before entry, then because of the threat of Internet channel entry by the potential new entrant, retailer entry cannibalizes existing retail profits - cannibalizing at a loss. In addition, if a potential new entrant has a slight advantage in Internet channel entry costs and the market is not covered by existing retailers, then the new entrant enters the Internet channel first. If the market is covered by existing retailers, then the new entrant must have a larger Internet channel entry cost advantage to be first to enter the Internet channel.

Abstract:
We propose a general and precise model of a network alliance that addresses both the role of membership and the role of incentives in the coordination of actions and interactions of network alliance members. Using examples in such disparate industries as professional engineering, accounting services and commercial fueling as the basis of our model, we show that a commission fee chosen by the network provider can be combined with a classical exclusivity agreement - which does not restrict where members recruit customers while at the same time protecting the members' locations where customers are served - to motivate increases in member investment and, consequently, in network profits. We also show that the most profitable network size emerges naturally. That is, the most profitable network size restricts membership, and emerges as a consequence of the exclusivity agreement and the setting of the commission fee. Our results require that members' investments are more valuable with increases in other members' investments, that prospective members are sufficiently different that there is an adequate range in the business potential of members, and that the effect of other members' investments on a given member's business potential is moderately low.

Network Alliance, Cannibalization, Incentives and Coordination, Exclusivity

Abstract:
In many industries agent-intermediated markets are inefficient because information about latent demand and supply never gets to market. We demonstrate how information technology in the form of an agent-intermediated electronic market (EM) alleviates this problem by enhancing the agent-as-market-maker using the international freight transportation industry as an example. We find that an EM increases agent participation and investment thereby increasing demand and supply. Because of tradeoffs between incentives for investment the EM chooses a profit allocation between agents resulting in limited agent participation. In addition, when price depends on demand and supply balances, price and volume in the market can increase simultaneously.

Electronic Markets, Intermediation, Transportation

Abstract:
When using electronic marketplaces as a method to exchange goods and services in business-to-business markets, investments are required to integrate this method of buying and selling into the internal systems of the market participants. These investments are typically information technology (IT) investments by buyers and sellers, and additionalinvestment by owners of the electronic market (EM). In our model we include specifications of the relationships within IT investments by buyers and sellers, the relationships between IT investments and EM investment, as well as the impact of increasing standardization of the market. We find that buyer and seller IT investments and EM investment can be coordinated so that a pure strategy Nash equilibrium obtains over a certain range of EM investment, and demonstrate that this continues to be true whether buyers and sellers are independent of the EM, or if subsets of buyers or sellers own the EM. In the latter case buyers or sellers that own the EM have higher IT investments. We also find that increasing standardization of the market increases equilibrium levels of EM investment.

Electronic Markets, Information Technology Investment, Industrial Markets, Market Structure, Game Theory, Pricing Research

Abstract:
Drawing on the resource-based view, we propose a configurational perspective of how IT assets and capabilities affect firm performance. Our premise is that IT assets and IT managerial capabilities are components in organizational design, and, as such, their impact can only be understood by taking into consideration the interactions between those IT assets and capabilities and other non-IT components. We develop and test a model that assesses the impact of explicit and tacit IT resources by examining their interactions with two non-IT resources (open communication and business work practices). Our analysis of data collected from a sample of firms in the third party logistics (3PL) industry supports the proposed configurational perspective, showing that IT resources can either enhance (complement) or suppress (by substituting for) the effects of non-IT resources on process performance. More specifically, we find evidence of complementarities between shared business-IT knowledge and business work practice, and between the scope of IT applications and an open communication culture in affecting the performance of the customer-service process; but there is evidence of substitutability between shared knowledge and open communications. For decision making, our results reinforce the need to account for all dimensions of possible interaction between IT and non-IT resources when evaluating IT investments.

Complementarity, Customer Service Process, Firm Performance, IT Business Value, IT Resources Interaction, Organizational Design, Process Design, Process Coordination, Process Performance, Resource-Based View, Third Party Logistics, Supply Chain Management

Abstract:
There has been much speculation that information technology can be used to enhance coordination across organizations. The research on the matter is less than convincing, in part due to the absence of models that capture the complexity of the phenomenon, and in part due to problems of measurement. In this research we use the framing device of the information processing model of organization, extended to interorganizational operations. We test the information processing model in the interorganizational context of the scheduled air cargo industry. Using data from a survey of US forwarders, we find that interactions between several dimensions of information processing requirements and information processing capabilities significantly explain variance in operational performance. In particular we find that the information systems variables interact with task variability, task analyzability, buyer independence and supplier independence on the dependent variable, on-time performance. The findings provide partial support for the proposed information processing model and suggest that information systems do enhance interorganizational coordination, although many challenges remain in fully explicating the ways in which this occurs.

Abstract:
The true nexus of any firm or industry is its customers. A sustained competitive advantage comes from the firm's ability to nurture a closer enduring relationship with it customers. Despite these longstanding truisms, the customer, as a stakeholder group, has been widely overlooked in the ongoing debate regarding the role and contribution of information technology (IT) in determining firm performance. Recognizing that IT is most likely to affect firm performance through its impact at the process level, we developed and tested hypotheses based on an integrated structural framework representing a complementary relationship between IT resources and managerial capability, and non-IT (human, and business process) resources, in keeping with the tenets of the resource-based view (RBV). These hypotheses are tested in the context of the third-party logistics (3PL) industry, which is founded on the premise of customer service through outsourcing, and in which it is widely perceived that information technology is of key strategic importance. We find evidence that IT does, in fact, contribute to firm customer service performance by way of its complementary interaction with other firm-specific resources, namely human resources. Our findings also suggest that the customer service perspective is a valid proposition to be included in the ongoing debate regarding IT and its contribution to firm (financial) performance. Furthermore, there is the implication that past models which sought to evaluate IT contributions strictly on the basis of its possible direct effect may have undervalued its true impact.

Customer-centric Business Process, Business Value of IT, Firm Performance, IT interaction effect, IT complementarity