Monthly Archives: January 2018
|Chellappa et al. (2010)||Sid|
|Chi et al. (2010)||Xi|
|Tanriverdi and Uysal (2011)||Leting|
|Ceccagnoli et al. (2012)||Jack|
|Tafti et al. (2013)||Joe, Heather|
Dr. Ali Tafti at University of Illionis, Chicago, will be joining us as a guest speaker on Feb 7 at 10:40 AM. His bio is available is here.
Please read his Management Science paper on strategic alliance closely and come up with a question to him.
Prof: Two principles of advisors: your advisor is not your boss; your advisor will not do research for you
What that means?
Xi: In Asia culture, the perception for advisor is different from that of Western culture, we will do whatever the advisor asks to. But in the Western culture, we may critically think what is right and wrong from the advisor.
Zhe: It depends on how we define “boss”. Some students are dependent on their advisors, but advisors expect students to be more independent and live on their own. As Zhe pointed out, he is more independent and would like to spend nights to develop his own program. But we as students all need the general guidance from our advisors
Sid: When students join the program, we all have the mentality what a PhD looks like, but as we grow up in the program, we develop our own research ideas, working patterns, and perception for research.
Prof: In Asia, we treat teacher’s guidance and order as God truth and hold no doubt on them. But it is nor right, we should have the courage to disagree with our advisors. In Asia, the knowledge is one-way straight, the knowledge imparted from advisors to students, but in Western culture, the knowledge is two-way communication.
HK: In her class, she tries to build up collaboration atmosphere and encourage discussion about disagreement. It also depends on the stage we are in the program, as first year PhD students, we may follow completely on what our advisors ask us to do; but when we start to develop our own research, we will be more independent from our advisors and stand on our own points.
Prof: In terms of the second principle, we majorly focus on the research project that we are the lead authors.
Leting: Do not expect our advisors will do everything for us. As doctoral students, we need to initiate and lead our own project. The earlier we start our own work, the more we could grow up. But as young scholars, we do need inspiration and guidance from our advisors. We need to better plan our communication strategy with our advisors and get their support to deal with challenges.
Prof: Our advisors are very busy. They are working on multiple projects at the same time, and they can not help us for detailed work. We could not expect our advisors spend much time to take care of us for every minute. Thus, Do not blame your advisors when your research goes south. We have to take leadership and responsibility for our own research. Advisors will help us and disagree with us, but at the end of the day, it is us who make the decision and lead the project. In the PhD program, we are trained to be independent researchers. Handoff advisors may let the students suffer from the program, but the ones who survive in the program usually are very successful in future career.
Prof: My advisor does not review my Stata code and even my data. If she/he wants to see the data and code, probably she/he is too hands-on. What if advisors are too hands off? It is a good idea to have two advisors: one is senior and experienced advisor who will give us big idea and general guidance; the other is junior advisor that is willingness to offer more hands-on guidance. The senior advisor may give us very great help to deal with the positioning of the paper, the contribution of the paper, and how to respond to the reviewer’s comment.
Zhe: To some degree, our research with the advisor is a kind of training. Thus, learning from the process could be more important than publishing the paper itself.
HK: If we have two advisors, we may face to deal with contradicting opinions. What shall we do?
Prof: We need to make the decision on choosing the opinion because it is our project and we need to think who right and which opinion is more reasonable. Like choosing coauthors, it is best to have 3 coauthors in one paper.
The paper develops a conceptual model to understand the effect of cross-functional coordination and cross-organizational coordination on firm-level manufacturing performance.Before this study,previous papers have talekd about manufacturing performance in the context of interfunctional and interorganizational coordination, but have proceeded as parallel literature streams.This paper provides a more wholistic picture by considering integrated information systems construct and manufacturing-IS coordination in conjunction with manufacturing-marketing and manufacturing-supply chain coordination.The paper goes on to hypothesize that coordination between a firm’s manufacturing and marketing functions,between manufacturing and supply chain partners and manufacturing and IS functions will have a positive relationship with integrated IS capability.The data comes from PIMS email contacts provided by APICS. To measure each coordination activity the authors use scale for each while creating a composite measure for manufacturing performance metrics comprising of operating margins, on-time (backlog) ratios, and inventory turns.The authors use an OLS specification for measuring manufacturing performance.The IVs include coordination activities, IS integration capability and their interaction.To rule out endogeniety the authors employ a number of robustness checks including a heckman model to rule out endogeniety of manufacturing performance.Due to the survey nature of the design there are few concerns like respondent bias which the authors acknowledge as limitations of the design.The final results show that firm’s integrated IS capability, and its complementary effect with other verticals(manufacturing, marketing, and supply chain) are significant predictors of manufacturing performance.
Paper: Sundar Bharadwaj, Anandhi Bharadwaj, Elliot Bendoly, (2007) The Performance Effects of Complementarities Between Information Systems, Marketing, Manufacturing, and Supply Chain Processes. Information Systems Research 18(4):437-453.
The authors develop a conceptual model to understand how cross-functional coordination within a firm and cross-organizational coordination will affect firm-level manufacturing performance. The focus of this paper is on manufacturing organizations that need to coordinate internal resource and information across different functional department, and across the supply chain. In the conceptual model, the authors list three coordination activities-manufacturing and marketing coordination, manufacturing and IS coordination, manufacturing and supply chain coordination, and it also mentions integrated IS capability.
The data are collected through survey. The authors then create scale for each coordination activity and develop a composite measurement for manufacturing performance that made up of multiple manufacturing performance metrics. the objective performance index was composed of operating margins, on-time (backlog) ratios, and inventory turns.
The empirical estimation section is quite intuitive and straightforward, the authors build up a OLS regression with manufacturing performance as DV, and the coordination activities, IS integration capability and interaction terms between coordination activities and IS integration capability as IVs. The IS integration capability is also a function of manufacturing -marketing coordination activities.
Results show that a firm’s integrated IS capability, as well as the complementary effects of IS capability with manufacturing, marketing, and supply chain processes, are significant predictors of manufacturing performance.
Tambe, P., Hitt, L. M., & Brynjolfsson, E. (2012). The Extroverted Firm: How External Information Practices Affect Innovation and Productivity. Management Science, 58(5), 843–859.
Falling internal communication costs and new internal information practices enable a firm’s external focus, which is the ability of a firm to detect and therefore respond to changes in its external operating environment. The benefits from IT are valuable only with appropriate changes in decision rights and organizational practices. This paper argues that the combination of external focus, changes in decision rights, and IT investments form a three-way system of complements resulting in higher productivity levels.
The organizational practice measures are generated by a survey that was administered to 253 senior human resource managers in 2001. IT employment data are obtained from a large sample of U.S.-based IT workers. Capital, labor, research and development expense for the firms are using the Compustat database.
Since providing direct evidence of complementarities is challenging because of endogeneity problem, the existing literature on organizational complements has therefore focused instead on providing evidence of the economic implications of complementarities between organizational practices. In this paper, Tambe et al. first find that external focus is correlated with both organizational decentralization, and IT investment. Second, they find that a cluster of practices including external focus, decentralization and IT investment is associated with improved product innovation capabilities and high productivity. Moreover, when these complements are included in a production model, main effect estimates of IT and other organizational factors essentially disappear, indicating that firms derive the most benefits from implementing the system of technological and organizational resources, not IT alone. Third, this paper introduces a new set of instrumental variables and find that the results are robust.
Rai, A., Arikan, I., Pye, J., & Tiwana, A. (2015). Fit and Misfit of Plural Sourcing Strategies and IT-Enabled Process Integration Capabilities: Consequences of Firm Performance in the US Electric Utility Industry. Mis Quarterly, 39(4), 865-885.
Plural sourcing is a strategy used commonly in industry. It involves a firm’s simultaneous use of multiple modes of governance to source a good or service. This paper investigates an interesting question in terms of the interactions between IT capabilities and plural strategies, and how the interaction influence a firm’s performance.
The research model is built on transaction cost economics, coordination costs, and IT capabilities. It also introduces a new concept – Market Sourcing Intensity, which indicates the extent of a firm source from the market. The higher the market sourcing intensity is, the more necessary for a firm to coordinate with other firms, otherwise, a firm should pay more attention to its vertical organizations. The core idea behind the research model is that of discriminating alignment between the development of IT capabilities and changes in adopted plural sourcing strategies. Specifically, there is a fit between IT-enabled interfirm process integration capability and high MSI, IT-enabled intrafirm process integration capability and low MSI. The fit could improve the firm performance, but misfit could cause penalty.
The paper is situated in the U.S. electric utility industry. It collects data from several sources, including industry files from authority, financial and accounting information from WRDS. What’s more, it classifies IT investment into five types firstly and then aggregates them into three types: inter, intra and infra. Also, it uses return on assets (ROA) as a measure of firm performance. Then pooled OLS equations are established and the results support hypotheses. This study has implications for the understanding of business value from IT-enabled process integration capabilities and the management of plural sourcing, and put importance on the alignment between these two important factors.
Tambe, P., Hitt, L.M., and Brynjolfsson, E. (2012) “The Extroverted Firm: How External Information Practices Affect Innovation and Productivity,” Management Science (58:5) pp. 843-859.
Tambe, Hitt, and Brynjolfsson (2012) combined various data sources including survey-based measures and COMPUSTAT information to identify and demonstrate the value of organizations embracing external focuses. An external focus is the ability of a firm to identify and respond to changes in the external operating environment. Extreme examples of firms successfully embracing external focuses are internet based companies, such as Google and Amazon, who record users’ keystrokes and analyze these data to optimize their products, processes, and marketing strategies. Using survey based measures, Tambe et al. (2012) first identified the correlation between external focus and IT investment and organizational decentralization. Next, the authors found that these three practices are all associated with improved production innovation capabilities. Finally, a three-way complementarities model indicated that the combination of the three practices of external focus, IT investment, and organizational decentralization are associated with significantly higher productivity.
Prior to Tambe et al.’s efforts (2012) research had demonstrated the value of organizational decentralization on IT investments. Tambe et al. (2012) confirmed this finding and highlighted that IT has the strongest impact on productivity in firms assuming that they are embracing the appropriate organizational structure. Furthermore, the authors added to past research findings by introducing the third factor of external focus into the IT productivity framework. Results indicated that product development was one of the principle mechanisms through which external focus impacts productivity. Overall, the key managerial implication of Tambe et al.’s findings is that firms with an external focus are more productive and reap disproportionate benefits from advances in IT and workplace organization. It is worth noting that to derive the maximum amount of benefits from complements organizations must embrace them all. Thus, firms with decentralized structures should look to embrace a more external focus to fully realize the returns of their IT investments.
Rai, A., Arikan, I., Pye, J., & Tiwana, A. (2015). Fit and Misfit of Plural Sourcing Strategies and IT-Enabled Process Integration Capabilities: Consequences of Firm Performance in the US Electric Utility Industry. MIS Quarterly, 39(4), 865-885.
Plural sourcing refers to a company’s simultaneously use and allocation of external procurement and internal production to source its good/service. It remains obscure that how a firm’s use of plural sourcing can change the value of developing interfirm and intrafirm IT capabilities after a survey of the past literature. This study addresses this gap by focusing on the following research question: How does the (mis)fit between a firm’s plural sourcing strategies and the development of IT-enabled interfirm and intrafirm process integration capabilities influence firm performance?
The authors wisely choose power-generation segment of the U.S. electric utility industry (EUI) to explore the moderating effects of plural sourcing, measured by a proposed concept called “Market Sourcing Intensity(MSI)”, on the relationship between firm performance (assessed by ROA) and two IT-enabled process integration capabilities, IT-enabled interfirm process integration capability and IT-enabled intrafirm process integration capability. With data from archival sources for 342 utility firms in the power-generation segment to construct a panel dataset for the period 1994–2004, the authors use pooled OLS to the following results: 1) fit between MSI and the development of IT-enabled interfirm process integration capability improves firm profitability and 2) misfit between MSI and the development of IT-enabled intrafirm process integration capability extracts penalties in firm profitability. The result from one of the robustness check also offer evidence that fit between MSI and the development of IT-enabled interfirm process integration capability improves market valuation (assessed by Tobin’s Q) and asset turnover (assessed by operating revenue/total assets).
This study extends past by revealing how explanations of firm capabilities for IT-enabled process integration and transaction costs economics(TCE) for plural sourcing interact to explain firm performance. The authors nicely collect viewpoints that internal costs of organizing production and transaction costs need to be considered in making governance choices and apparently show the empirical limitations.
I am pleased to announce that Dr. Peng Huang at Smith School of Business, University of Maryland will join us as a guest speaker on January 31 at 10 AM. His website is at http://penghuang.com/
Please be sure to read his paper from Week 4 by next week and come up with a question to him (although we will discuss this paper on Feb 7).
Ceccagnoli, M., Forman, C., Huang, P., and Wu, D.J. (2012) “Cocreation of Value in a Platform Ecosystem: The Case of Enterprise Software,” MIS Quarterly (36:1) pp. 263-290.
|Bharadwaj et al. (2007)||Sid, Jack|
|Tambe et al. (2012)||Xi, Heather|
|Rai et al. (2015)||Joe, Leting|
We will discuss Rai et al. (2012) when we have time. Please be sure to read this, however.
Two perspectives have been persistent in previous research. One, says that in the face of disruption the reactive ability of firms determine how much superior profits it can garner until a new equilibrium is reached. Two, that firms are more interconnected than ever before often sharing and utilizing each other’s resources and inputs. This paper asks the research question of how operation disruption of firms which is dependent on shared resources affects not just the disrupted firm but also other firms that are sharing the resource. Further, the paper wants to investigate whether this effect is moderated by the routine complexity of the firm who is disrupted and also their own routine complexity. The context of the research is the US airline industry and especially episodes of major disruption (37 between 2000-2017 out of which 4 major ones are taken into account here). The shared resource is the airports while the performance data is gathered from BTS On-time Performance(OTP).The paper uses simple OLS specification while trying to measure the departure delay, arrival delay and excess travel times as measures of on-time performance. With a data set of 75,051 flights during the 4 disrupted periods, the paper finds that disruptions to one airline may have negative effects on the on-time performance of competitors who share the same resource. Further, results indicate that when FSCs ie those with more complicated routines are disrupted there are significant and negative spillovers onto competing LCCs and FSCs. These results reverse when LCCs are disrupted with positive performance improvements. The analysis section does extensive robustness checks to ensure robust identification. The research has important implications for both firms, IT designers and regulators. The research also contributes to the literature by being the first to show the effect of focal firm’s disruption on competitors with whom it shares resources.
Ray, G., Wu, D., & Konana, P. (2009). Competitive environment and the relationship between IT and vertical integration. Information Systems Research, 20(4), 585-603.
Information technology (IT) can reduce coordination costs for companies, both internally and externally, minimizing barriers preventing the use of markets. Based on this premise, it is proposed that increasing the use of IT will in turn decrease the employment of vertical integration (VI). Past research has found that less vertically integrated firms have a higher need for external coordination and thus a higher demand for IT capital (Dewan et al., 1998; Hitt, 1999). Despite this premise and its empirical support, the average level of VI has increased over the past 25 years. This prompted Ray, Wu, and Konana (2009) to examine firms included in InformationWeek 500 from 1995 to 1997 using COMPUSTAT data to better understand this incongruence. Ray et al. (2009) considered demand uncertainty and industry concentration as boundary conditions which impact VI and IT spend. Demand uncertainty captures the degree of unpredictability in consumers’ tastes and preferences as well as in production and service technologies. Industry concentration is high when a leader or leaders control an industry with high barriers to entry; diluted industries are those with many small firms.
Results found that when demand uncertainty is high or industry concentration is low, results were consistent with past literature; IT is associated with a decrease in VI. In these conditions, an increase in the level of VI is associated with an increase in product and coordination costs and thus, less VI is ideal. On the other hand, when demand uncertainty is low or industries are highly concentrated, IT is associated with an increase in VI; this is contrary to past literature. In these environments, VI is associated with a decrease in production and coordination costs and thus, is ideal. Effectively, these findings indicate that the industry environment impacts the value of VI and IT.
Tae et al. (2018) When Your Problem Becomes My Problem: The Impact of Airline IT Disruptions on On-Time Performance of Competing Airlines
Disruption within the competitive environment and its subsequent effect on firm performance has been a crucial topic, yet there is few research about the effect on the competitive environment on rival firms when a resource-sharing firm experience an operational disruption. As is well established, the disruption of organizational routines often leads to performance degradation. This paper argues that, in the presence of a shared resource, the disruption of the focal firm’s routines will also lead to the disruption of the competitors, and subsequently diminish the competitor’s performance. In addition, following the idea of routines as coordination mechanism, the study also examines how the complexity of routines, of both the disrupted firm and the competitor, affects the ability to react.
The empirical context is U.S. airline industry, where individual airports are the shared resource. Airlines have been subject to multiple recent large-scale disruptions. This paper examines the change in on-time performance (OTP) of airlines with and without IT disruptions, for flights departing from and arriving at hub airports of the airline experiencing IT disruptions, relative to all other flights. Complexity of routines could be indicated by full-service carriers (FSC) and low-cost carriers(LLC).
Using a sample data of 75,051 flights during four IT outrage incidents, this paper conducts fixed effect empirical models, and find that disruptions to one airline may have negative effects on the on-time performance of competitors who share the same resource. The direction and the magnitude of the effect is conditional on the routine complexity of the firms. This study complements the literature on firm adaptability under environmental change by considering the role of firm interdependence, and shed light on the impact of routine complexity on firm adaptability and performance.
Baker, G. P., & Hubbard, T. N. (2004). Contractibility and asset ownership: On-board computers and governance in US trucking. The Quarterly Journal of Economics, 119(4), 1443-1479.
How informational capabilities affect the boundaries of the firm, specifically, the ownership of assets? In the context of U.S. trucking, the paper investigates the impact of OBD(On-board computers) adoption on two kinds of ownership by changing the contracting environment.
The analytic framework is based on property rights theories, it expalains how contractual incompleteness can affect the comparative advantage of using an owner-operator for a haul relative to a company driver. There are two main costs two ownerships face, company driver has higher agency costs compared to owner driver who faces a higher bargain costs. Agency costs are from the seperation between residual right and residual claimant. Bargain costs are from the inefficiencies associated with bargaining over the truck’s use. However the OBD could reduce the agency costs. Based on the framework, the paper proposes that (1). longer hauls are more likely to be completed by owner-operators; (2) unidirectional hauls are more likely to be carried by owner-operator; (3) driver-ownership should decline with OBC adoption; (4) the relationships between OBC adoption and ownership should be stronger for long hauls than for short hauls.
In the analysis part, the paper uses Truck Inventory and Use Surveys from 1987 and 1992. Firstly it examines cross-sectional relationships and test the first two hypotheses, then it constructs cohorts and take several approaches including first difference estimation, instrumental variables to solve the endogeneity and test the main hypotheses.
The results suggests that improved contracting, using on-board computers in the context, leads to more integrated asset ownership. In another word, the changes in monitoring technology could change the industry structure in this sector. The implications could also be applied to other sector, like medicine.
Ray, G., Wu, D., & Konana, P. (2009). Competitive environment and the relationship between IT and vertical integration. Information Systems Research, 20(4), 585-603.
As information technology(IT) can reduce coordination costs, the electronic markets hypothesis indicates that increased use of IT in the economy may suggest decreased levels of vertical integration (VI). The empirical work of related topics, however, contradicts previous research in the way that vertical integration (VI) has increased rather than decreased. The authors claim that the demand uncertainty and industry concentration, two measures of the competitive environment, can moderate the relationship between IT and VI.
The authors adopt firm-level IT spending data from 1995 to 1997 drawn from InformationWeek 500 that had been used in prior research. To overcome the simultaneity bias of VI and IT, the authors propose a 2-equation model to uncover the causality. The results suggest that in uncertain demand and in the unstable competitive environment, IT is associated with decreased VI. While in more predictable and concentrated environment, IT is associated with increased VI. Also, they find that firms made rational strategies about VI and IT in different competitive environments to decrease the coordination and production cost. Compared with the previous literature, this paper provides a more refined understanding of the relationship between IT and VI.
This article empirically addresses the key endogeneity issue, a firm will choose its IT investment given its VI level, and vice-a-versa, when people tried to discuss the benefit of IT on the use of markets for companies. It contributes to the literature by showing the difference in the use of IT across different competitive environments. The implication of this research is that the level of VI should be chosen strategically based on the nature of the competitive environment. The research question of this paper is clear and straightforward. This work could be a remarkable econ-IS paper in 2009.
I am pleased to announce that Dr. Keongtae Kim at Chinese University of Hong Kong, a lead author of the bond-market paper at MISQ that we discussed last week, will join us this Wednesday as a guest speaker via a virtual meeting for 20-30 minutes. You can find his bio here.
He will join us at 9 AM (10 PM at Hong Kong time). Please don’t be late for class. In our meeting with him, we will ask him about his experiences in writing and publishing his MISQ paper. Please prepare for a question that you might want to ask him.
Paper: Rawley, Evan, and Timothy S. Simcoe. “Information technology, productivity, and asset ownership: Evidence from taxicab fleets.” Organization Science 24, no. 3 (2013): 831-845.
The authors examine how technology adoption impacts firm’s vertical integration and worker’s skills. The paper applies a formal productivity-based theory of asset ownership and tests it by measuring the impact of information technology adoption on asset ownership in the taxicab industry. The authors posit that improvements in technology lead to increased integration and a greater reliance on unskilled labor.
There are three types of organizations in the proposed model: 1. independent owner-operators; 2. fleet-affiliated drivers who own a car but contract for dispatching; 3. shift drivers who rent both a car and dispatching service from a fleet. The empirical results show that adopting a computerized dispatching system causes taxicab firms to increase the percentage of vehicles they own from affiliated drivers.
This paper contributes to two streams of literatures: firm-boundary and skill-biased technical change. The paper provides a theory-based model and empirical results that technology adoption causes firms to increasingly vertically integrate, even without changes in asset specificity. Moreover, the paper also provide additional support on the limitation to the standard skill-biased technical change hypothesis that information technology typically increases the demand for skilled labor.
|Baker and Hubbard (2004)||Leting|
|Ray et al. (2009)||Joe, Heather|
|Rawley and Simcoe (2013)||Jack|
|Tae et al. (2018)||Sid, Xi|
We will discuss Dewan and Ren (2011) if we have time.
I also ask Leting to be a scribe for survival skill discussions next Wednesday.
While other departments of universities like Physics, Math etc need PhD students to assist Professors in their research, Business schools don’t necessarily do so. They want to cultivate new scholars in the field. Scholars who create new knowledge. PhD students in business schools bring in fresh perspective and new ideas. The university wants to create independent research scholars for the future with support from faculty members. When these students graduate with great quality papers and go to reputable schools the university’s reputation goes up. Also, when these students make tenure in good research schools the university’s reputation as a research driven school goes up. All this attracts new and better students to the school thus making the entire process cyclic in nature. The school invests a lot in the students and its their duty to reward the school back through not only great research publications but also through increasing the reputation of the school in the broader research community.