[Show abstract][Hide abstract] ABSTRACT: This paper broadens the scope of evaluating the design of economic mechanisms that is traditionally done solely from an economic perspective. We introduce and demonstrate the application of acceptability to evaluate complex economic mechanisms. In particular, we apply our approach to the evaluation of continuous combinatorial auctions, which represent a complex, sophisticated market mechanism that has not been generally available in the online marketplace but has the potential to enhance the economic efficiency of trade for assets with interdependent values. Such auctions are being increasingly used in industry, e.g., to procure logistical services. Intuitively, acceptance and usage of a complex mechanism can be fostered by a design that provides information and tools that meet the users’ task demands. Based on prior research and an analysis of the auction tasks, we discuss practical and innovative information feedback schemes for reducing the cognitive burden of formulating bids in combinatorial auctions. Then, we use constructs from the technology acceptance model (TAM) – which have been consistently shown to be key determinants of technology acceptance in the extant literature – to compare the acceptability of the mechanism under three different information regimes. In addition, we borrow constructs from marketing theory to assess the potential growth in adoption of the mechanism. We compare user perceptions of the three alternative designs in a laboratory experiment with over 130 subjects. Our study constitutes a complementary and novel approach in evaluating the design of complex economic mechanisms. Results indicate a higher adoption and usage potential of the mechanism with advanced information feedback, supporting the potential of combinatorial auctions as a user-acceptable market mechanism with appropriate feedback.
[Show abstract][Hide abstract] ABSTRACT: We contend that in order to compete effectively in a digital business environment, firms should develop a transparency strategy by selectively disclosing information outside the boundaries of the firm. We make the case for transparency strategy by showing why it is relevant in the digital business world, and the consequences of not having such a strategy. We then provide some foundations to develop the strategy and make a call for research.
[Show abstract][Hide abstract] ABSTRACT: The rapid pace of technological innovation necessitates that information technology IT services firms continually invest in replenishing the skills of their key asset base, the human capital. We examine whether human capital investments directed toward employee training are effective in improving employee performance. Our rich employee level panel data set affords us the opportunity to link formal training with performance at the individual employee level. Using a dynamic panel model, we identify a significant positive impact of training on employee performance. A unit increase in training is linked to a 2.14% increase in an employee's performance. Interestingly, we find that in the IT sector, skills atrophy and consequently high-experience employees reap higher returns from training, which highlights the uniquely dynamic nature of IT knowledge and skills. We also find that general training that an employee can utilize outside the focal firm improves employee performance. However, specific training pertinent to the focal firm is not positively linked to performance. On the other hand, although domain and technical training both enhance employee performance individually, the interaction between the two suggests a substitutive relationship. Thus, our findings suggest that the value of training is conditional on a focused curricular approach that emphasizes a structured competency development program. Our findings have both theoretical and practical significance. Most important, they justify increased human capital investments to fuel future growth in this important component of the global economy. This paper was accepted by Lorin Hitt, information systems.
[Show abstract][Hide abstract] ABSTRACT: Advancements in information technology offer opportunities for designing and deploying innovative market mechanisms that can improve the allocation and procurement processes of businesses. For example, combinatorial auctions--in which bidders can bid on combinations of goods--have been shown to increase the economic efficiency of a trade when goods have complementarities. However, the lack of real-time decision support tools for bidders has prevented this mechanism from reaching its full potential. With the objective of facilitating bidder participation in combinatorial auctions, this study, using recent research in real-time bidder support metrics, discusses several novel feedback schemes that can aid bidders in formulating combinatorial bids in real-time. The feedback schemes allow us to conduct continuous combinatorial auctions, where bidders can submit bids at any time. Using laboratory experiments with two different setups, we compare the economic performance of the continuous mechanism under three progressively advanced levels of feedback. Our findings indicate that information feedback plays a major role in influencing the economic outcomes of combinatorial auctions. We compare several important bid characteristics to explain the observed differences in aggregate measures. This study advances the ongoing research on combinatorial auctions by developing continuous auctions that differentiate themselves from earlier combinatorial auction mechanisms by facilitating free-flowing participation of bidders and providing exact prices of bundles on demand in real time. For practitioners, the study provides insights on how the nature of feedback can influence the economic outcomes of a complex trading mechanism.
[Show abstract][Hide abstract] ABSTRACT: We use an economic experiment to demonstrate that socially mediated trust levels are higher in online social networks, even though the notion of friendship formation in such networks is understood less than physical-world tie formation. We do so by designing a novel Facebook application to play a non-anonymous Investment Game that allows us to study the linkage between three different “strength of social ties” measures derived from users’ Facebook activity and an experimentally derived measure of trust. For the average user, we find that each additional “wall-post” made on a friend’s Facebook wall is associated with a 6.5% increase in trust. Similarly, we find that each additional photo in which two friends jointly appear (a signal of social affinity and physical world ties) is associated with a 2.3% increase in trust. Our study endogenously uncovers latent heterogeneity in Facebook users’ notion of friendship. For non-selective pairs of users, who are less selective in tie formation, we find that the shared friendships associated with their ties are do not predict trust. This provides the first evidence that traditional measures of dyadic-trust like embeddedness that are widely used in the analysis of physical world social networks do not directly carry over to online social networks. In contrast, both revealed preference style measures, which we obtain from the Facebook API, that capture dyadic interactions between users, as well as credible indicators of offline friendships, such as being tagged on a photograph together, are strongly predictive of trust for the average user. Methodologically, our study showcases how large-scale online social networks can serve as platforms that takes social science and experimental economics research that is traditionally done in the physical laboratory to real-world subjects in a highly generalizable setting. .
[Show abstract][Hide abstract] ABSTRACT: Managed Security Service Provider (MSSP) networks are a form of collaboration where several firms share resources such as diagnostics, prevention tools, and policies to provide security for their computer networks. While decisions to outsource security operations of an organization may seem counterintuitive, there are potential benefits from joining a MSSP network due to pooling of risk and access to more security-enabling resources and expertise. We provide structural results that explain the reasons for firms to join a MSSP network. We also characterize the growth of MSSP network size under different forms of ownership (monopoly vs. consortium). Our results illustrate the need for initial investment in MSSP networks to overcome initial stalling effect and illustrate that while need for initial investment may increase the optimal network size for a consortium, it has no impact on the optimal network size for a profit maximizing monopolist.
[Show abstract][Hide abstract] ABSTRACT: External financing is critical to ventures that do not have a revenue source but need to recruit employees, develop products, pay suppliers, and market their products/services. There is an increasing belief among entrepreneurs that electronic word-of-mouth (eWOM), specifically blog coverage, can aid in achieving venture capital financing. Conflicting findings reported by past studies examining eWOM make it unclear what to make of such beliefs of entrepreneurs. Even if there were generally agreed-upon results, a stream of literature indicates that because of the differences in traits between the prior investigated contexts and venture capital financing, the findings from the prior studies cannot be generalized to venture capital financing. Extant studies also fall short in examining the role of time and the status of entities generating eWOM in determining the influence of eWOM on decision making. To address this dearth of literature in a context that attracts billions of dollars every year, we investigate the effect of eWOM on venture capital financing. This study entails the challenging task of gathering data from hundreds of ventures along with other sources including VentureXpert, surveys, Google Blogsearch, Lexis-Nexis, and Archive.org. The key findings of our econometric analysis are that the impact of negative eWOM is greater than is the impact of positive eWOM and that the effect of eWOM on financing decreases with the progress through the financing stages. We also find that the eWOM of popular bloggers helps ventures in getting higher funding amounts and valuations. The empirical model used in this work accounts for inherent selection biases of entrepreneurs and venture capitalists, and we conduct numerous robustness checks for potential issues of endogeneity, selection bias, nonlinearities, and popularity cutoff for blogs. The findings have important implications for entrepreneurs and suggest ways by which entrepreneurs can take advantage of eWOM.
Information Systems Research 12/2012; 23(3-part-2):976-992. DOI:10.2307/23274656 · 2.15 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Healthcare is an important social and economic component of modern society, and the effective use of information technology in this industry is critical to its success. As health insurance premiums continue to rise, competitive bidding may be useful in generating stronger price competition and lower premium costs for employers and possibly, government agencies. In this paper, we assess an endeavor by several Fortune 500 companies to reduce healthcare procurement costs for their employees by having HMOs compete in open electronic auctions. Although the auctions were successful in generating significant cost savings for the companies in the first year, i.e., 1999, they failed to replicate the success and were eventually discontinued after two more years. Over the past decade since the failed auction experiment, effective utilization of information technologies have led to significant advances in the design of complex electronic markets. Using this knowledge, and data from the auctions, we point out several shortcomings of the auction design that, we believe, led to the discontinuation of the market after three years. Based on our analysis, we propose several actionable recommendations that policy makers can use to design a sustainable electronic market for procuring health insurance.
International Journal of Health Care Finance and Economics 12/2012; 12(4):303-22. DOI:10.1007/s10754-012-9118-x · 0.49 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Managed security service provider (MSSP) networks are a form of collaboration where several firms share resources such as diagnostics, prevention tools, and policies to provide security for their computer networks. While the decision to outsource the security operations of an organization may seem counterintuitive, there are potential benefits from joining an MSSP network that include pooling of risk and access to more security-enabling resources and expertise. We examine structural results explaining the reasons firms join an MSSP network, and characterize the growth of MSSP network size under different forms of ownership (monopoly versus consortium). We find that the need for an initial investment in MSSP networks (which is necessary to overcome the stalling effect) only affects the optimal network size for a consortium but has no impact on the optimal network size for a profit-maximizing monopolist. Our results provide an explanation why the majority of the MSSPs are for-profit entities and consortium-based MSSPs are less common. Such a market structure can be attributed to the potential for larger size by the for-profit MSSP owner combined with beneficial pricing structure and a lack of growth uncertainty for the early clients.
MIS Quarterly 12/2012; 36(4):1109-1130. · 5.31 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: In the aftermath of many natural and man-made disasters, people often wonder why those affected were underprepared, especially when the disaster was the result of known or regularly occurring hazards (e.g., hurricanes). We study one contributing factor: ...
[Show abstract][Hide abstract] ABSTRACT: Organizations today have access to enormous data sets, and sophisticated business analytical tools are needed to harness the tremendous potential of these data to improve day-to-day decision making. To encourage further developments in this rapidly growing area of interdisciplinary research, Management Science will publish a special issue dedicated to business analytics. Applications of business analytics extend to nearly all managerial functions in an organization. Using microlevel data, mathematical models can become more realistic, be validated more easily, and match more closely true behavioral phenomena. Through business analytics, historical data can be used to discover relationships among important elements in an organization's environment, make more formal statistical inferences regarding the structure or strength of these relationships, and improve actions taken by the organization. Because these relationships are often not static, the entire cycle of identification, estimation, prediction, and decision making is repeated frequently and on an ongoing basis, leading to real-time and highly targeted data-driven decisions. We envision business analytics applied to many domains, including, but surely not limited to: digital market design and operation; network and social-graph analysis; pricing and revenue management; targeted marketing and customer relationship management; fraud and security; sports and entertainment; retailing to healthcare to financial services to many other industries. We seek novel modeling and empirical work which includes, among others, probability modeling, structural empirical models, and/or optimization methods. Submission: Please submit your manuscript online via http://mc.manuscriptcentral.com/ms You must select "Special Issue" as the Manuscript Type in Step 1 and select one of the issue's four coeditors in Step 5. Manuscripts will generally be assigned to one of the Associate Editors for this issue (see below; please recommend three in Step 4), but you may also recommend guest Associate Editors.
[Show abstract][Hide abstract] ABSTRACT: We provide evidence that firms appoint independent directors who are overly sympathetic to management, while still technically independent according to regulatory definitions. We explore a subset of independent directors for whom we have detailed, microlevel ...
[Show abstract][Hide abstract] ABSTRACT: We gather detailed data on organizational practices and information technology (IT) use at 253 firms to examine the hypothesis that external focus---the ability of a firm to detect and therefore respond to changes in its external operating environment---increases ...
[Show abstract][Hide abstract] ABSTRACT: Electronic auctions are increasingly being used to facilitate the procurement of goods and services in organizations. Multiattribute auctions, which allow bids on multiple dimensions of the product and not just price, are information technology–enabled sourcing mechanisms that can increase the efficiency of procurement for configurable goods and services compared to price-only auctions. Given the strategic nature of procurement auctions, the amount of information concerning the buyer's preferences that is disclosed to the suppliers has implications on the profits of the buyer and the suppliers and, consequently, on the long-term relationship between them. This study explores novel feedback schemes for multisourcing multiattribute auctions that require limited exchange of strategic information between the buyer and the suppliers. To study the impact of feedback on the outcomes and dynamics of the auctions, we conduct laboratory experiments wherein we analyze bidder behavior and economic outcomes under three different treatment conditions with different types of information feedback. Our results indicate that, in contrast to winner-takeall multiattribute auctions, multisourcing multiattribute auctions, with potentially multiple winners, allow bidders (i.e., suppliers) to extract more profit when greater transparency in terms of provisional allocations and prices is provided. We develop several insights for mechanism designers toward developing sustainable procurement auctions that efficiently allocate multiple units of an asset with multiple negotiable attributes among multiple suppliers.
Journal of Management Information Systems 04/2012; 28(4):199-229. DOI:10.2307/41713862 · 2.06 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: Combinatorial auctions—in which bidders can bid on combinations of goods—can increase the economic efficiency of a trade when goods have complementarities. Recent theoretical developments have lessened the computational complexity of these auctions, but the issue of cognitive complexity remains an unexplored barrier for the online marketplace. This study uses a data-driven approach to explore how bidders react to the complexity in such auctions using three experimental feedback treatments. Using cluster analyses of the bids and the clicks generated by bidders, we find three stable bidder strategies across the three treatments. Further, these strategies are robust for separate experiments using a different setup. We also benchmark the continuous auctions against an iterative form of combinatorial auction—the combinatorial clock auction. The enumeration of the bidding strategies across different types of feedback, along with the analysis of their economic implications, is offered to help practitioners design better combinatorial auction environments.
[Show abstract][Hide abstract] ABSTRACT: Many professions are plagued by disparities in service delivery. Racial disparities in policing, mortgage lending, and healthcare are some notable examples. Because disparities can result from a myriad of mechanisms, crafting effective disparity mitigation ...
[Show abstract][Hide abstract] ABSTRACT: We compare two strategies for outsourcing the development of information services projects: multisourcing and single-sourcing. We model these sourcing strategies when incentive contracts are based on a verifiable project metric that may or may not be aligned with the project outcome. We also model the interdependence of client and vendor efforts so that the verifiable metric may or may not be separable in these efforts. When the verifiable metric and the project outcome are aligned, single-sourcing performs better than multisourcing if the client and vendor efforts are interdependent, and as well as multisourcing if the efforts are independent. When the metric and outcome are misaligned: (i) multisourcing performs better than single-sourcing if the client effort is independent of the vendor efforts; (ii) the choice of sourcing strategy is nuanced based on the trade-off between the degree of misalignment and moral hazard if the client and vendor efforts are interdependent.