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

Cooperation with Strangers: Spillover of Community Norms

2023 | Organization Science | Citations: 1

Authors: Molina, Mario; Nee, Victor; Holm, Hakan

Abstract: Why do leaders of organizations cooperate with players with whom they may never ... Expand

Abstract: Why do leaders of organizations cooperate with players with whom they may never transact again? Such transactions can involve the incentives to exploit the other party because these interactions are not recurrent or embedded in networks. Yet, in a market economy, organizational actors learn to cooperate with strangers; otherwise, they risk closure from new ideas and business opportunities outside of their local community. With a large random sample of CEOs of manufacturing firms in the Yangzi River Delta region of China, we measured social norms using vignettes that describe hypothetical situations illustrating the social mechanisms of norm enforcement in respondents’ local communities. Several years later, in a laboratory-in-the-field experiment, we asked the same participants to play a one-shot Prisoner’s Dilemma (PD) game with a complete stranger. Our findings suggest that belief in the reliability of robust norm enforcement is positively associated with a higher probability of cooperation with strangers. To our knowledge, this mixed-method study is the first to explore the relationship between social norms and cooperation with strangers using a large sample of leaders of organizations outside the environment of the laboratory. Finally, to explore the generalizability of our behavioral findings, we experimentally manipulated norm vignettes and study the PD game in online experiments with managers in the Yangzi River Delta region.History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory.Funding: V. Nee gratefully acknowledges funding for research from the John Templeton Foundation (2005-2009 and 2015-2018), and from the College of Arts and Sciences at Cornell University. H. Holm thanks the Jan Wallander’s and Tom Hedelius’ Foundation for funding lab-in-the-field behavioral game.Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.1521. Collapse

Topics: social norm crowdsourcing website organization structure organizational success

Methods: experiment survey logistic regression statistical power analysis simulation

Theories: prisoner's dilemma organizational behavior theory

Value Destruction in Information Technology Ecosystems: A Mixed-Method Investigation with Interpretive Case Study and Analytical Modeling

2023 | Information Systems Research | Citations: 0

Authors: Sahaym, Arvin; Vithayathil, Joseph; Sarker, Suprateek; Sarker, Saonee; Bjørn-Andersen, Niels

Abstract: Many of today’s software systems are created by leveraging ecosystems consisting ... Expand

Abstract: Many of today’s software systems are created by leveraging ecosystems consisting of heterogeneous “complementors” and “hub” firms. In fact, the reliance on ecosystems is prevalent in the enterprise resource planning (ERP) domain, where larger ERP vendors form collaborative relationships with smaller industry-specific vendors to co-create value for themselves and their customers. However, value creation and destruction processes are often intertwined. A key motivation for this study is to shed light on the behavioral contingencies and underlying mechanisms that might lead to value destruction over time instead of the initially intended value co-creation. Furthermore, although value co-creation in collaborative relationships associated with ecosystems is often highlighted, research has been scarce on offering an in-depth analysis of the challenges in these relationships that can destroy value. This study attempts to address this issue by uncovering the underlying mechanisms that lead a hub firm and its complementors toward value destruction. Our mixed-methods approach involves the use of a combination of interpretive case study and analytical modeling to highlight nuances and develop conceptual propositions about the conditions that can potentially lead to value destruction. Our context is a globally reputed information technology (IT) firm known for providing business solutions (SOFTCo, a pseudonym) and numerous relatively small, less powerful customer-facing service firms (PartnerCos, a pseudonym). Our findings show that opportunism, unjust appropriation of rents, shirking, exploitation of asymmetric power, and undue dependence can initiate a value destruction process. Furthermore, our study revealed an unexpected emergence of a “pack of wolves,” where resentful PartnerCos formed a collective to tackle the opportunistic behaviors of SOFTCo by starting to align with its competitor, further destroying value for SOFTCo’s ecosystem. Overall, this study contributes to the literature on value co-creation/destruction in IT ecosystems. It also offers an illustration of a mixed-methods study where seemingly incommensurable approaches are harnessed to develop a theoretical understanding.History: Ola Henfridsson, Senior Editor; Likoebe Maruping, Associate Editor.Funding: The authors acknowledge the financial support of the 3gERP project at the Copenhagen Business School in Denmark, the Dean’s Summer Research Fund of the McIntire School of Commerce, University of Virginia, and the Huber Dean’s Fellowship of the Carson College of Business, Washington State University.Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.1119. Collapse

Topics: participatory design enterprise resource planning digital ecosystem value creation pseudonymity

Methods: design methodology case study mathematical model qualitative interview mixed method

Theories: game theory prisoner's dilemma organizational behavior theory

Stimulating Feedback Contributions Using Digital Nudges: A Field Experiment in a Real-time Mobile Feedback Platform

2023 | International Conference on Information Systems | Citations: 0

Authors: Rivera, Michael; Guo, Xue; Shan, Guohou; Qiu, Liangfei

Abstract: In the contemporary remote work environment, the demand for effective and timel ... Expand

Abstract: In the contemporary remote work environment, the demand for effective and timely feedback has significantly grown. Despite the adoption of feedback systems, many employees still find these platforms lacking in delivering meaningful insights. This study delves into the potential of digital nudges-reminder notifications sent to users-as a strategy to enhance feedback contributions on mobile platforms. A randomized field experiment was conducted in collaboration with a prominent organization, exploring variations in nudge send times and the emphasis on task significance. Spanning five weeks, the experiment evaluated the efficacy of these nudges in fostering feedback engagement among employees. Our findings indicate that the timing, content of nudges (i.e., task significance message), and a combination of these two, can significantly influence feedback behavior. The study's findings have potential implications for organizations aiming to bolster their feedback systems, making them more responsive and effective in the digital age. Collapse

Topics: decision making smartphone IS effectiveness individual impact marketing management

Methods: experimental group experiment randomized field experiment qualitative interview Student's t-test

Theories: elaboration likelihood model prisoner's dilemma

Cooperation Beyond the Network

2022 | Organization Science | Citations: 0

Authors: Burt, Ronald S.; Opper, Sonja; Holm, Håkan J.

Abstract: It is well known in economics, law, and sociology that reputation costs in a clo ... Expand

Abstract: It is well known in economics, law, and sociology that reputation costs in a closed network give insiders a feeling of being protected from bad behavior in their relations with one another. A person accustomed to doing business within a closed network is, therefore, likely to feel at unusual risk when asked to cooperate beyond the network because of absent reputation-cost security. It follows that business leaders in more closed networks should be less likely to cooperate beyond their network (Hypothesis 1). Success reinforces the status quo. Business leaders successful with a closed network associate their success with the safety of their network, so they should be even less likely to cooperate with a stranger (Hypothesis 2). We combine network data from a heterogeneous area probability survey of Chinese CEOs with a behavioral measure of cooperation to show strong empirical support for the two hypotheses. CEOs in more closed networks are less likely to cooperate beyond their network, especially those running successful businesses: successful CEOs in closed networks are particularly likely to defect against people beyond their network. The work contributes to a growing literature linking network structure with behavior: here, the closure that facilitates trust and cooperation within a network simultaneously erodes the probability of cooperation beyond the network, thereby reinforcing a social boundary around the network. Taking our results as a baseline, we close sketching new research on personality, homophily, network dynamics, and variation in the meaning of “beyond the network.” Collapse

Topics: network effect personality electronic mail anonymity organizational success

Methods: survey qualitative interview cross sectional research descriptive statistic regression analysis method

Theories: prisoner's dilemma

An Integer Programming Approach to Solving the Inverse Graph Model for Conflict Resolution with Two Decision Makers

2022 | Group Decision and Negotiation | Citations: 0

Authors: Han, Yu; Xu, Haiyan; Fang, Liping; Hipel, Keith W.

Abstract: Operational algorithms for solving the inverse problem for the graph model for c ... Expand

Abstract: Operational algorithms for solving the inverse problem for the graph model for conflict resolution are presented for the case of two decision makers (DMs) under a variety of solution concepts, including Nash stability (Nash), general metarationality (GMR), symmetric metarationality (SMR), and sequential stability (SEQ). The algorithms based on integer programming enable a DM, an analyst, or a mediator to obtain all of the preferences required to make a specified state to be an equilibrium or resolution. For the cases of Nash, GMR, and SMR, the respective inverse algorithm for the focal DM is formulated as a 0–1 integer linear programming problem even when both DMs’ preferences are unknown. For the situation of SEQ, when both DMs’ preferences are unknown, the focal DM’s algorithm is a 0–1 integer nonlinear programming problem while, under the condition that the opponent’s preferences are known, the focal DM’s 0–1 integer programming problem is linear. The usefulness of the algorithms developed is demonstrated by applying them to an illustrative dispute. Collapse

Methods: integer programming computational algorithm linear optimization integer linear programming

Theories: prisoner's dilemma

Raising Skepticisms on the Feasibility of Algorithmic Tacit Collusion

2022 | International Conference on Information Systems | Citations: 0

Authors: Kang, Songhee; Kim, Myung Ho; Kim, Kibae

Abstract: Advances in artificial intelligence accelerate the digitization of pricing in v ... Expand

Abstract: Advances in artificial intelligence accelerate the digitization of pricing in various industry domains, from home appliances to hotels. At the same time, economic theories and legal cases claim that the advances benefit some players through synchronous algorithmic pricing, so-called Algorithmic Tacit Collusion (ATC). However, the previous studies rely on artificial intelligence's broad collusion mechanisms in various pricing scenarios. The paper unravels the mixture of ATC problems by specifying the algorithmic pricing context in platform providers' oligopoly and adjusting the underlying assumptions to the context. Our simulation of Iterative Prisoner's Dilemma (IPD) games with various heterogeneous pricing algorithms show that ATC emerges in rare conditions (i.e., algorithm and information symmetries). Our findings suggest that understanding the technology and business architectures should precede deriving the theories of ATC and implementing the legal cases and policies of digitization for the next generation's pricing. Collapse

Topics: price management digital platform digital distribution mobile application market virtual world

Methods: computational algorithm experiment simulation sensitivity analysis theoretical contribution

Theories: lemon market theory prisoner's dilemma

Freemium Strategy in Competitive App Markets: Maintaining Profitability with Product Fit Uncertainty

2022 | Journal of the Association for Information Systems | Citations: 0

Authors: Luo, Xiaoxiao; Zhang, Jie; Lu, Minqiang

Abstract: Today's app market is highly competitive and rapidly growing. This study consid ... Expand

Abstract: Today's app market is highly competitive and rapidly growing. This study considers two app developers with substitutable apps and a continuum of consumers with heterogeneous preferences. Each developer decides between offering a paid app and offering a free basic app with in-app purchases. Because of product fit uncertainty, consumers are not sure about the degree of misfit between the app and their preferences, and that uncertainty can be reduced by trying the free basic app. Using a game-theoretic modeling framework, we analyze how product fit uncertainty affects competing developers' profits and examine the scenario in which each developer offers a paid app or a free basic app with in-app purchases in a duopoly setting. The analytical results suggest that the developer can offer a free basic app for consumer learning even if the app is not underestimated. When either developer offers a free trial, the developer with the higher-quality app will prefer higher product fit uncertainty, but the one with the lower-quality app will favor lower product fit uncertainty. Additionally, as the app quality increases or consumer preferences become stronger, developers may switch the strategy depending on the reduction in product fit uncertainty caused by the free trial. Our study establishes the usefulness of the freemium strategy beyond the contexts analyzed in the literature. The results explain empirical observations of the app market and provide recommendations about the information disclosure of fit attributes in a competitive market. Collapse

Topics: mobile application duopoly mobile application market digital distribution data breach

Theories: prisoner's dilemma game theory

Platform Policies and Sellers' Competition in Agency Selling in the Presence of Online Quality Misrepresentation

2022 | Journal of Management Information Systems | Citations: 5

Authors: Pu, Jingchuan; Nian, Tingting; Qiu, Liangfei; Cheng, Hsing Kenneth

Abstract: On e-commerce platforms, consumers rely heavily on online reviews, sales volume, ... Expand

Abstract: On e-commerce platforms, consumers rely heavily on online reviews, sales volume, and social media discussions to infer product quality. As a result, the past decade has witnessed an explosive growth of seller-initiated misrepresentation of quality through fake reviews, fake sales, and fake posts. We develop an analytical model to investigate sellers' competition in quality misrepresentation in agency pricing and the platform's policies. The platform can discourage sellers' quality misrepresentations by increasing the cost of misrepresentation or implementing a more lenient product return policy. We find that while a stricter anti-misrepresentation policy deters the misrepresentation of the high-quality seller, such a strategy may unintendedly incentivize the low-quality seller to misrepresent the quality more. Furthermore, increasing return leniency deters low-quality seller's misrepresentation in a wider range of market conditions than increasing the misrepresentation cost. We show sellers' online quality misrepresentation behaviors in a competitive setting, and our results have practical implications for platform policies. Collapse

Topics: price management horizontal differentiation electronic market electronic commerce online review

Methods: mathematical model

Theories: prisoner's dilemma

Platform Competition Under Network Effects: Piggybacking and Optimal Subsidization

2021 | Information Systems Research | Citations: 7

Authors: Dou, Yifan; Wu, D. J.

Abstract: A repeated challenge in launching a two-sided market platform is how to ignite t ... Expand

Abstract: A repeated challenge in launching a two-sided market platform is how to ignite the cross-side network effects to jump-start adoption. Prior literature often addresses this issue by using pricing controls—a high price on one side to raise the margin and a low price on the other to attract users—or the “seesaw principle.” More recently, platforms are increasingly embracing nonpricing controls to accelerate user adoptions. Little is known, however, about the role of nonpricing controls and their interplay with pricing controls. In this research note, using a game-theoretic framework, we study “piggybacking”—that is, expanding the focal market to recruit exclusive users from external networks—as a new and nonpricing control to launch platforms in conjunction with pricing controls. We first consider consumer-side piggybacking. In a standard “competitive bottlenecks” setting in which consumers single home and providers multihome, we provide a rich set of novel insights into strategies that platforms use to monetize exclusive access to external users with nontrivial characterizations of the interplay among piggybacking, cross-side network effects, and price competition. We identify necessary and sufficient conditions when piggybacking is profit improving and when it leads to a prisoner’s dilemma, depending on the piggybacking cost and strengths of cross-side network effects. Among others, we show that, if the platforms’ equilibrium strategies were to subsidize consumers (when provider-side network effects are stronger than consumer-side network effects), piggybacking may intensify rather than ease price competition. In contrast, if the platforms’ equilibrium strategies were to subsidize providers (when provider-side network effects are weaker than consumer-side network effects), piggybacking may ease price competition. Interestingly, piggybacking reinforces the seesaw principle for the piggybacking platform. We provide a full characterization on such nontrivial equilibrium outcomes. We then consider provider-side piggybacking, and we show that the insights are qualitatively the same as consumer-side piggybacking except that the prisoner’s dilemma disappears if piggybacking providers multihome. Managerial implications for platform practitioners are also discussed. Collapse

Topics: network effect price management digital platform Uber advertising management

Methods: literature study mathematical model

Theories: prisoner's dilemma game theory