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

Do Early Words from New Ventures Predict Fundraising? A Comparative View of Social Media Narratives

2023 | Management Information Systems Quarterly | Citations: 0

Authors: Havakhor, Taha; Golmohammadi, Alireza; Sabherwal, Rajiv; Gauri, Dinesh

Abstract: Online equity markets have significantly changed the dynamics of connecting ang ... Expand

Abstract: Online equity markets have significantly changed the dynamics of connecting angels and individual equity investors to new ventures that seek early-stage capital. However, for those early-stage investors, information pointing to the success of business-to-business (B2B) new ventures (B2BNVs) is scattered and disconnected. This paper focuses on social media narratives (SMNs) as a source of insight for such investors and proposes that predicting a B2BNV's likelihood of success requires a comparative view, i.e., a comparison of its SMNs with those of its competitors and customers. We expect that higher (lower) lingual similarity between the SMNs of an early-stage B2BNV and those of its prospective customers (competitors) predict its success. Using a longitudinal panel of 574 B2BNVs resulting in more than 2,700 venture-round observations, we find that a comparative view of a venture's SMNs can give early-stage investors reliable predictions about the B2BNV's ability to manage its market presence and its success in later stages. Our models show that a comparative view of SMNs increases the accuracy of predicting a B2BNV's later-stage fundraising success by an average of 15%. Furthermore, predictive models can reliably point to a successful market presence in later stages, including the landing of customers, the winning of awards and competitions, the receiving of endorsements, the generating of revenue, and the successful patenting of products. Our study contributes to existing literature that focuses on the business impacts of social media by demonstrating the usefulness of comparative linguistics in social media analytics, i.e., comparing the firm's social media communications to those of its competitors and business customers in the prediction of the entrepreneurial firm's success. Collapse

Topics: Twitter social media social media analytics social capital website

Methods: machine learning chi squared test latent dirichlet allocation robustness check theoretical contribution

Theories: lemon market theory

Product Differentiation in IT Industries: The Interplay between M&As and In-House Innovation and Exploitative Innovation Orientation

2023 | Journal of the Association for Information Systems | Citations: 0

Authors: Qi, Kangkang; Han, Sumin; Jeong, Yeasung; Rhamati, Pouya; Susarla, Anjana; Sambamurthy, Vallabh

Abstract: Firms in IT industries are under constant competitive pressure from incumbent f ... Expand

Abstract: Firms in IT industries are under constant competitive pressure from incumbent firms and startups to offer innovative products and services. This study explores the effect of mergers and acquisitions (M&As) on firms' product differentiation in IT industries. The unique characteristics of IT industries, namely hypercompetition, distributed innovation, modularity of products, and the tacit nature of knowledge, make M&As an attractive mechanism to enable IT firms to stay competitive. Drawing on product differentiation theory, we hypothesize a positive effect of M&As on product differentiation and suggest that this relationship is more potent in firms with higher in-house innovation, an exploitative innovation orientation, and under high levels of industry turbulence. We test our hypotheses using M&A transactions from 1996 to 2016 and a unique 10-K textual analysis-based measure of product differentiation. Using the difference-in-differences identification strategy, the following findings are supported: (1) M&As lead to higher product differentiation, (2) in-house innovation capability and exploitation-oriented innovation strategy positively moderate the positive effect of M&As. These results, which are robust to endogeneities and other robustness tests, contribute to theory and managerial practice by shedding light on the role of M&As as an essential mechanism for product innovation and the complementary role of in-house innovation capability and strategy for firms that intend to take advantage of M&As for creating a competitive edge through differentiating their products and services from competitors. These findings have important managerial value, providing an alternative narrative to the current view on M&As in IT industries as a means of absorbing and dismantling the competition. served or serves on the editorial boards of Information Systems Research and MIS Quarterly. Her research has been funded by prestigious organizations such as the National Institute of Health (NIH).Vallabh "Samba" Sambamurthy is the Albert O. Nicholas Dean of the Wisconsin School of Business at the University of Wisconsin. He is a leading expert on how businesses compete in the digital economy. He has published his work in several leading journals and served on the editorial boards of premier academic journals, including two terms as editor-in-chief of Information Systems Research, and has held leadership roles in professional associations. Sambamurthy has garnered several recognitions for contributions to teaching, research, outreach, and mentoring. Collapse

Topics: product differentiation innovation management database system environmental uncertainty research and development

Methods: robustness check longitudinal research statistical hypothesis test difference in differences propensity score matching

The platform's store-brand supplier selection and quality information provision decisions

2023 | Information & Management | Citations: 0

Authors: Sun, Fei; Chen, Jing; Yang, Hui; Zhang, Hui

Abstract: We investigate the strategies of an e-commerce platform (EP), selecting a suppli ... Expand

Abstract: We investigate the strategies of an e-commerce platform (EP), selecting a supplier for its store brand and determining whether to provide information that can reduce consumers’ uncertainty about their quality pref­ erences. The EP can choose either a non-competing outside supplier or a competing inside supplier that sells a high-quality brand product through the EP. Consumers have complete knowledge about the qualities of the two products, although they remain uncertain about which product best meets their need. We find that the EP has an incentive to disclose information when the ratio of the cost per unit quality of the inside supplier’s product relative to that of the EP’s own-brand product is high, and it prefers the inside supplier when this ratio is low. We identify the EP’s optimal strategy profile. Specifically, when this ratio is low, the EP selects the inside supplier and refrains from disclosing information when the ratio is sufficiently low. However, when the ratio is high, the EP selects the outside supplier and discloses information only if the ratio is sufficiently high. We also find that market competition softens both when the EP selects the inside supplier and when it discloses information. Collapse

Topics: data breach supply chain management outsourcing electronic commerce product differentiation

Theories: game theory

Moving Consumers from Free to Fee in Platform-Based Markets: An Empirical Study of Multiplayer Online Battle Arena Games

2023 | Information Systems Research | Citations: 0

Authors: Wang, Le; Lowry, Paul Benjamin; Luo, Xin (Robert); Li, Han

Abstract: Companies in platform-based business markets have widely embraced freemium busin ... Expand

Abstract: Companies in platform-based business markets have widely embraced freemium business models where profit primarily depends on a minority of paying customers. However, the key challenge of these models is transitioning participants from free users to paying consumers. To encourage paid consumption, companies often rely on product differentiation such as providing consumers who pay for products or services with enhanced features. However, limited research has addressed how such product differentiation may convert consumers from “free” to “fee.” Our research examines the multiplayer online battle arena (MOBA) game as a compelling example of a freemium platform-based business model. We contribute to the freemium literature by introducing three new MOBA-specific differentiations—character competency, character variety, and character-appearance differentiation. We also extend consumption values theory into a dual-path model to unveil the underlying mechanisms through which product differentiation influences in-game purchase. We empirically validate our dual-path model using data from a two-wave longitudinal experiment and three cross-sectional experiments. Our findings support opposing mediating paths for product differentiation in character competency and variety and indicate that these two types of differentiation can indeed undermine perceived game fairness. Conversely, character-appearance differentiation exerts only a positive influence on players’ purchasing of in-game items. Consequently, the findings of this study have important potential implications for platform-based companies leveraging freemium business models that seek to increase their share of paying customers.History: Eric Zheng, Senior Editor; Robert Gregory, Associate Editor.Funding: This work was supported by the National Natural Science Foundation of China [Grants 71901172, 72171189, and 72132007], the China Postdoctoral Science Foundation [Grant 2020M673434], and the Social Science Foundation of Shaanxi Province [Grant 2021D002].Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.1127. Collapse

Topics: product differentiation free to play game social identity business model electronic mail

Methods: experiment survey experimental group longitudinal experiment longitudinal research

Heterogeneous Demand Effects of Recommendation Strategies in a Mobile Application: Evidence from Econometric Models and Machine-Learning Instruments

2022 | Management Information Systems Quarterly | Citations: 0

Authors: Adamopoulos, Panagiotis; Ghose, Anindya; Tuzhilin, Alexander

Abstract: In this paper, we examine the effectiveness of various recommendation strategies ... Expand

Abstract: In this paper, we examine the effectiveness of various recommendation strategies in the mobile channel and their impact on consumers’ utility and demand levels for individual products. We find significant differences in effectiveness among various recommendation strategies. Interestingly, recommendation strategies that directly embed social proofs for the recommended alternatives outperform other recommendations. In addition, recommendation strategies combining social proofs with higher levels of induced awareness due to the prescribed temporal diversity have an even stronger effect on the mobile channel. We also examine the heterogeneity of the demand effect across items, users, and contextual settings, further verifying empirically the aforementioned information and persuasion mechanisms and generating rich insights. We also facilitate the estimation of causal effects in the presence of endogeneity using machine-learning methods. Specifically, we develop novel econometric instruments that capture product differentiation (isolation) based on deeplearning models of user-generated reviews. Our empirical findings extend the current knowledge regarding the heterogeneous impact of recommender systems, reconcile contradictory prior results in the related literature, and have significant business implications. Collapse

Topics: mobile system broadband cellular network mobile channel online review mobile application

Methods: econometric modeling instrumental variables estimation machine learning robustness check computational algorithm

Theories: symbolic interaction theory social network theory cognitive theory consumer search theory trust theory

Businessperson or Technologist: Stock Market Reaction to the Alignment between CIO Background and Firm Strategy

2022 | Journal of Management Information Systems | Citations: 1

Authors: Banker, Rajiv D.; Feng, Cecilia; Pavlou, Paul A.

Abstract: Chief Information Officers (CIOs) influence their firm's strategy implementation ... Expand

Abstract: Chief Information Officers (CIOs) influence their firm's strategy implementation and facilitate improved firm performance by effectively managing information technology (IT) resources. However, it remains unclear how firms select CIOs and how the stock market perceives the selection. We posit that firms' preferences regarding CIO background (business acumen versus technical expertise) depend on their strategic positioning. Also, we argue that the stock market pays attention to the alignment between the appointed CIO's background and firm strategy. To empirically examine this, we employ factor analysis on a sample of 1,287 CIOs with detailed biographic information on education, work experience, and certification to identify the CIO's background. Utilizing these measures, we examine whether the appointed CIO's background depends on the appointing firm's strategic positioning in a normative model. Then, we use a predictive model to test the stock market reactions to CIO appointments. We document that cost-leadership-leaning firms are more likely to appoint a CIO with a stronger business-oriented background, while differentiation-leaning firms are more likely to appoint a CIO with a stronger technical-oriented background. Interestingly, firms with misaligned CIO appointments suffer a negative stock market reaction. We discuss theoretical and practical implications of selecting aligned versus misaligned CIOs. Collapse

Topics: Chief Information Officer accounting organizational productivity database system financial performance

Methods: Capital IQ descriptive statistic data transformation Compustat factor analysis

Theories: contingency theory

Competitive Poaching in Search Advertising: Two Randomized Field Experiments

2022 | Information Systems Research | Citations: 0

Authors: Bhattacharya, Siddharth; Gong, Jing; Wattal, Sunil

Abstract: Keyword searches with brand names occur very commonly on search engines, enablin ... Expand

Abstract: Keyword searches with brand names occur very commonly on search engines, enabling firms to infer not only when consumers are searching for them but also when consumers are searching for their competitors. This enables firms to generate traffic from search advertising by bidding not only on their own keywords but also on competitors’ keywords. The strategy of bidding on competitors’ keywords, known as competitive poaching, presents unique opportunities for academic research. In this research, we examine the factors that influence the effectiveness of competitive poaching, specifically the role of different ad copies and the type of competitor (poached brand) from which a brand is poaching. We also examine how the presence of sponsored ads from the poached brand affects competitive poaching. We collected data from two randomized field experiments, one with a business school in the Northeastern United States and the other one with a leading automobile dealership company, where these firms bid on keywords of competing brands and randomly display different types of ad copies in the sponsored search listings. We find that, when poaching on keywords of high-quality brands, ad copies that feature vertical differentiation are more effective than the control ad copies, which do not convey any differentiation or prescriptive messages. We also find that when poaching from low-quality brands, ad copies featuring horizontal differentiation perform better than the control ad copies. Finally, we show that the presence of the poached brand’s own ad has a positive association with the ad effectiveness of the poaching brand when that poached brand is high quality and a negative association when the poached brand is low quality. The academic and managerial contributions are also discussed. Collapse

Topics: search engine search engine marketing vertical differentiation horizontal differentiation Google+

Methods: field experiment chi squared test experiment randomized field experiment Poisson regression

New-Media Advertising and Retail Platform Openness

2022 | Management Information Systems Quarterly | Citations: 0

Authors: Chen, Jianqing; GUO, Zhiling

Abstract: We have recently witnessed two important trends in online retailing: The advent ... Expand

Abstract: We have recently witnessed two important trends in online retailing: The advent of new media (e.g., social media and search engines) has made advertising affordable for small sellers, and large online retailers (e.g., Amazon and JD.com) have opened their platforms to allow even direct competitors to sell on their platforms. We examine how new-media advertising affects retail platform openness. We develop a game-theoretic model in which a leading retailer, who has both valuation and awareness advantages, and a third-party seller, who sells an identical product, engage in price competition. We find that the availability of relatively low-cost advertising through new media plays a critical role in influencing the leading retailer to open its platform and to form a partnership with the third-party seller, which is impossible when the cost of advertising is relatively high. Low-cost advertising can increase consumer surplus either directly via the third-party seller’s advertising or indirectly via the partnership on the leading retailer’s platform. We also find that the leading retailer has a greater incentive to open its platform and that the partnership is more likely to be formed when there are network effects, when the leading retailer can control the third-party seller’s exposure on its platform, or when the leading retailer can offer a direct advertising service to the third-party seller. Meanwhile, the constraint on the third-party seller’s advertising budget can reduce the leading retailer’s incentive to open its platform, making a partnership less likely. Our analysis offers important insights into the underlying economic incentives that help explain the emerging open retail platform trend in the era of new-media advertising. Collapse

Topics: advertising management consumer surplus network effect IS economics product differentiation

Theories: game theory

To Differentiate Or Not To Differentiate? The Role of Product Characteristics in the Sharing Economy

2022 | European Conference On Information Systems | Citations: 0

Authors: Demircan, Muhammed; Schroer, Karsten; Fritze, Martin Paul; Ketter, Wolfgang

Abstract: An important ambiguity in the sharing economy literature concerns the role of p ... Expand

Abstract: An important ambiguity in the sharing economy literature concerns the role of product variety. Do physical product characteristics provide scope for differentiation in a sharing economy context, and if so, under which circumstances? Resolving this ambiguity is important as it can have large operational and strategic implications for sharing economy businesses. We use discrete choice modeling on a unique carsharing dataset and behavioral online experiments to study how users select between product options of varying quality and brand in a shared consumption context. We find that, in general, there is a trend towards utilitarian access-based consumption in which product characteristics and product brand matter less. However, we observe that hedonistic use cases tend to shift preferences significantly toward more premium products. Our results highlight the need for a more nuanced consideration of product differentiation in sharing economy research. Collapse

Topics: sharing platform ride sharing platform product differentiation application programming interface mobile application

Methods: experiment conjoint analysis analysis of covariance quasi experiment qualitativ observational study

Theories: theory of affordance