Single-Sourcing vs. Multisourcing: An Empirical Analysis of Large Information Technology Outsourcing Arrangements

2023 | Information Systems Research | Citations: 0

Authors: Bapna, Ravi; Gupta, Alok; Ray, Gautam; Singh, Shweta

Abstract: As the information technology (IT) services landscape matures, clients are incre ... Expand

Abstract: As the information technology (IT) services landscape matures, clients are increasingly adopting multisourcing arrangements that involve multiple vendors. Although a large body of information systems (IS) literature addresses issues of whether to outsource (to a single vendor), what types of contracts to use, and how to achieve optimal relational governance, little is known about the antecedents and consequents of the single versus multisourcing decision. Moreover, while conceptual and analytical models of single-sourcing versus multisourcing have been developed, there is no empirical IS research using a large-scale data set with rigorous econometric analysis that examines the antecedents and consequents of multisourcing in the IT context. This paper fills this void, using the transaction cost economic lens and a data set of 49,057 large IT outsourcing arrangements that spans multiple industries and dates back 25 years. We find that there is a curvilinear relationship between number of IT services in an IT outsourcing arrangement and the likelihood of multisourcing. This relationship increases as the number of IT services increases to up to five services and then decreases. For managers who plan to multisource IT outsourcing arrangements, this research provides guidance to minimize exchange hazards through a better understanding of the relationship between sourcing choice, client IT outsourcing capabilities, the competitiveness of the vendor landscape, and the number of IT services in an IT outsourcing arrangement. We provide empirical evidence that the choice between single-sourcing and multisourcing is material to the performance of outsourcing contracts as an incorrect sourcing choice is likely to result in negative contract outcomes. History: Paul A. Pavlou, Senior Editor; Ning Su, Associate Editor. Collapse

Topics: outsourcing system integration IS management service desk data center

Methods: XGBoost robustness check machine learning k-nearest neighbor statistical hypothesis test

Theories: transaction cost economics game theory

Competing on price and guarantee compensation: Heeding cloud consumer's quality perception

2023 | Information & Management | Citations: 0

Authors: Chen, Fuzan; Lu, Aijun; Wu, Harris; Li, Minqiang; Feng, Haiyang

Abstract: As frequent service failures raise user concerns, guarantee compensation has bec ... Expand

Abstract: As frequent service failures raise user concerns, guarantee compensation has become a competitive instrument for cloud service providers (CSPs) in addition to price. This study proposes a game-theoretical model where two CSPs compete on both price and compensation. We consider two roles of compensation: (1) remedying user losses and (2) helping users to form quality perception. The results indicate that the higher-quality CSP should always guarantee higher compensation but may not always charge a higher price. We further investigate the signaling policies and find that the lower-quality CSP is more likely to signal a higher-than-actual quality. Collapse

Topics: IS economics consumer surplus service quality cloud computing privacy

Methods: game theoretical model optimization model cross sectional research theory development experiment

Theories: game theory

Impact of Own Brand Product Introduction on Optimal Pricing Models for Platform and Incumbent Sellers

2023 | Information Systems Research | Citations: 0

Authors: Cheng, Hsing Kenneth; Jung, Kyung Sung; Kwark, Young; Pu, Jingchuan

Abstract: Sales on the e-commerce platform in the United States have experienced explosive ... Expand

Abstract: Sales on the e-commerce platform in the United States have experienced explosive growth and are projected to surpass $740 billion in 2023. The expansion of the platform’s traditional role as a reseller into an online marketplace and the introduction of its own brand products have stoked a huge fear among the incumbent sellers. The platform’s unfair anticompetitive practice further aggravates the situation. Consequently, politicians and regulators have proposed prohibiting platforms from introducing own brand products to protect the incumbent sellers. This study addresses two questions of critical interest to both the policymakers and the incumbent sellers. First, how does the platform’s introducing its own brand product affect the incumbent sellers? Second, how effective is the proposed policy in terms of protecting the incumbent sellers? We examine the impact of the platform’s own brand introduction on the incumbent sellers under two prevailing sell-on and sell-to pricing contracts. We find that the proposed legislation “that prohibits platforms from both offering a marketplace for commerce and participating in that marketplace” does not have the desired outcome of helping the incumbent sellers. Instead, it forces the platform to adopt only the sell-to contract with the own brand introduction that hurts the sellers under most market conditions. Interestingly, when the own brand introduction is banned under the sell-to contract, the incumbent sellers can be better off because the platform’s strategic reaction to the enforcement can lead to the best scenario for the incumbent sellers. If the ban is imposed on both the sell-on and sell-to contracts, the platform’s best response is to add another new brand competing with the incumbent sellers, which can also help the incumbent sellers, however, not as much as in the case of the enforcement only under the sell-to contract. History: Ram Gopal, Senior Editor; Hong Xu, Associate Editor. Supplemental Material: The online appendices are available at https://doi.org/10.1287/isre.2022.1175. Collapse

Topics: price management electronic commerce duopoly competitive advantage marketing management

Methods: cross sectional research

Theories: game theory

The Economic Implications of Privacy Dark Patterns (PDPs)

2023 | International Conference on Information Systems | Citations: 0

Authors: Chen, Dawei; Hahn, Jungpil

Abstract: This study investigates the economic implications of privacy dark patterns (PDP ... Expand

Abstract: This study investigates the economic implications of privacy dark patterns (PDPs) through which firms "wisely" play privacy games. It is believed that PDPs advantage firms by deceiving consumers. However, it could also hinder firms' credibility. Thus, we aim to examine whether PDPs always benefit firms and hurt consumers. We also seek to answer whether market forces are sufficient to keep PDPs at relatively low levels. Our results show that PDPs make users weakly worse off and the seller weakly better off. Nevertheless, the seller has incentives to not utilize any PDPs when users' privacy cost is high, and the ratio of privacy concern and search cost is either too high or too low under which market shrinkage effect dominates market division effect. Finally, we show that a welfare maximizing social planner would allow the presence of PDPs when users' privacy cost is sufficiently low. Collapse

Topics: privacy information privacy concern price management data breach IS economics

Methods: cross sectional research game theoretical model literature study

Theories: game theory

Sequential IT Investment: Can the Risk of IT Implementation Failure Be Your Friend?

2023 | Information Systems Research | Citations: 0

Authors: Choudhary, Vidyanand; Xin, Mingdi; Zhang, Zhe

Abstract: An extensive literature studies the benefits for a firm to be the first to inves ... Expand

Abstract: An extensive literature studies the benefits for a firm to be the first to invest in innovative technologies such as information technologies (ITs). However, IT investment often faces the risk of implementation failure. How would such risk affect an early adopter’s incentive to invest? Do late adopters benefit from information about the early adopter’s investment? In this paper, we investigate these questions in a context in which two firms, a leader and a follower, invest in a cost-reducing IT sequentially. This paper differs from prior literature in two aspects: First, IT adoption is nonexclusive and available to all client firms. Second, IT implementation can fail. In this case, the follower may have information about the leader’s IT investment level or implementation outcome before making an investment decision. We use a Hotelling model of duopoly competition to examine how IT implementation failure risks and the follower’s knowledge about the leader’s IT investment may affect the firms’ incentive to sequentially invest in IT. Our results show that the risk of IT implementation failure impacts the firms’ investment incentives and profits through three distinct effects: the first mover advantage mitigation; competition mitigation; and uncertainty-driven, cost-based differentiation effects, and these three effects may drive the firms’ investment and profits in opposite directions. The follower’s knowledge about the leader’s IT investment level before making an IT investment decision gives the leader a first mover advantage and the follower a disadvantage. In contrast, the follower’s knowledge about the leader’s IT implementation outcome can benefit both the leader and the follower. Finally, we find that a spaced-out sequential IT investment schedule, in which the follower makes the investment decision after the leader’s IT investment level and implementation outcome are both known, leads to the highest industry-wide IT investment and social surplus. History: Kai-Lung Hui, Senior Editor; Sameer Hasija, Associate Editor. Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.1115. Collapse

Topics: IT investment systems implementation IS economics IS implementation success economic surplus

Theories: prisoner's dilemma game theory

The Generalized Shapley Value of Cooperative Games as a Social Preference Function

2023 | Group Decision and Negotiation | Citations: 0

Authors: Dutta, Ritu; Roy, Souvik; Borkotokey, Surajit

Abstract: We introduce a cardinal social preference rule (CSPR) which accounts for interpe ... Expand

Abstract: We introduce a cardinal social preference rule (CSPR) which accounts for interpersonal comparisons of alternatives in groups and satisfies several desirable properties. The proposed rule transforms voters’ individual ordinal preferences to obtain a score for each alternative given by the generalized Shapley value of cooperative games with transferable utilities. Since every CSPR induces an ordinal social preference rule (OSPR) in a natural way, the score vector, we propose in our model, induces a weak preference on the set of alternatives. The proposed CSPR is characterized by using some intuitive axioms. Collapse

Topics: shapley additive explanation

Theories: game theory cooperative game theory

Adversarial Outlier Detection Methods for Health Care Fraud

2023 | Americas Conference on Information Systems | Citations: 0

Authors: Ekin, Tahir

Abstract: Outlier detection is widely used for identification of unusual suspicious patte ... Expand

Abstract: Outlier detection is widely used for identification of unusual suspicious patterns in health care fraud detection. However, the impact of adversarial perturbations on outliers and the related decisions are not well studied. In the health care fraud detection domain, standard practice does not consider health care billings being subject to intentional data manipulations. This paper presents a decision theoretic approach for outlier detection in adversarial environments. Proposed adversarial risk analysis-based framework allows incomplete information and adversarial perturbations on the data inputs. While the work with actual health care fraud data is ongoing, the proposed novel adversarial outlier detection method has the potential to support health care fraud audit decision support systems. KeywordsAdversarial unsupervised learning, adversarial risk analysis, health care fraud, fraud analytics, Bayesian. Collapse

Topics: fraud detection

Methods: anomaly detection unsupervised learning Monte Carlo simulation machine learning

Theories: game theory

Fair Play for Fair Pay: Fighting Digital Piracy through Revenue Sharing

2023 | International Conference on Information Systems | Citations: 0

Authors: Fereidouni, Meysam; Vijairaghavan, Vaarun

Abstract: ... Expand

Abstract: Collapse

Topics: digital piracy IS economics participatory design consumer surplus producer surplus

Methods: design methodology

Theories: game theory

Building an Equilibrium: Rules vs. Principles in Relational Contracts

2023 | Organization Science | Citations: 0

Authors: Gibbons, Robert; Grieder, Manuel; Herz, Holger; Zehnder, Christian

Abstract: Effective collaboration within and between organizations requires efficient adap ... Expand

Abstract: Effective collaboration within and between organizations requires efficient adaptation to unforeseen change. We study how parties build relational contracts that achieve this goal. We focus on the “clarity problem”—whether parties have a shared understanding of the promises they make to each other. Specifically, (a) a buyer and seller play a trading game in several periods; (b) they know their environment will change but do not know how; and (c) before any trading occurs, they can reach a nonbinding agreement about how to play the entire game. We hypothesize that pairs whose initial agreement defines a broad principle rather than a narrow rule are more successful in solving the clarity problem and in achieving efficient adaptation after unforeseen change. In our baseline condition, we indeed observe that pairs who articulate principles achieve significantly higher performance after change occurred. Underlying this correlation, we also find that pairs with principle-based agreements were more likely to both expect and take actions that were consistent with what their agreement prescribed. To investigate a causal link between principle-based agreements and performance, we implement a “nudge” intervention that induces more pairs to articulate principles. The intervention succeeds in coordinating more pairs on efficient quality immediately after the unforeseen change, but it fails to coordinate expectations on price, ultimately leading to conflicts and preventing an increase in long-run performance after the shock. Our results suggest that (1) principle-based agreements may improve organizational performance but (2) high-performing relational contracts may be difficult to build.History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory.Funding: We gratefully acknowledge financial support from the Massachusetts Institute of Technology Sloan School's Program on Innovation in Markets and Organizations.Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.1503. Collapse

Topics: competitive advantage organizational productivity organizational culture anonymity

Methods: experiment descriptive statistic survey laboratory experiment statistical power analysis

Theories: game theory organizational theory

Security defense against long-term and stealthy cyberattacks

2023 | Decision Support Systems | Citations: 0

Authors: Han, Kookyoung; Choi, Jin Hyuk; Choi, Yunsik; Lee, Gene Moo; Whinston, Andrew B.

Abstract: Modern cyberattacks such as advanced persistent threats have become sophisticate ... Expand

Abstract: Modern cyberattacks such as advanced persistent threats have become sophisticated. Hackers can stay unde­ tected for an extended time and defenders do not have sufficient countermeasures to prevent advanced cyber­ attacks. Reflecting on this phenomenon, we propose a game-theoretic model to analyze strategic decisions made by a hacker and a defender in equilibrium. In our game model, the hacker launches stealthy cyberattacks for a long time and the defender decides when to disable a suspicious user based on noisy observations of the user’s activities. Damages caused by the hacker can be enormous if the defender does not immediately ban a suspicious user under certain circumstances, which can explain the emerging sophisticated cyberattacks with detrimental consequences. Our model also predicts that the hacker may opt to be behavioral to avoid worst cases. This is because behavioral cyberattacks are less threatening and the defender decides not to immediately block a sus­ picious user to reduce cost of false detection. Collapse

Topics: IT security data breach electronic mail IT security threat intrusion detection system

Methods: first-hitting-time model optimization model

Theories: game theory lemon market theory