Decision Sciences Journal
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Connections
Forthcoming
(issues 43-2 and later)
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Author(s)
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Title
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Zhaolin Li and Daewon Sun
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Acquisition and Disclosure of Operational Information
Hide Abstract
We study a firm’s strategy for acquisition and disclosure of operational information by establishing linkages among information quality, managerial self-interest, and production planning. We develop a multi-stage model in which a manager of a publicly traded firm first receives private information about the product demand and then uses it to make production and disclosure decisions. We consider two prevalent disclosure models employed in the accounting literature: all-or-nothing and cheap-talk models. In the all-or-nothing model, it is assumed that any disclosure must be truthful, but the manager can strategically withhold information. We show that the manager commits to acquire the value-added operational information if i) the managerial self-interest in the interim share price is low or ii) the managerial self-interest in the interim share price is high, but the fixed disclosure cost is either sufficiently low or sufficiently high. We demonstrate that the firm is better off if the production level is observable to the financial market because multi-dimensional signaling reduces costs. In the cheap-talk model, we assume that the manager’s disclosure may not be truthful. We show that the manager’s incentive to acquire value-added operational information increases along with the penalty cost for misleading investors. Therefore, a high penalty cost for misleading investors can encourage the manager to obtain more precise information, which in turn improves the firm’s cash flow.
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Ganesh Vaidynathan, Sarv Deveraj, and John D’Arcy
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Does Security Impact E-Procurement Performance? Testing a Model of Direct and Moderated Effects
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Despite the widespread adoption of e-procurement and the critical role of information security in these situations, academic research examining the relationship between information security and e-procurement performance has been surprisingly minimal. This study represents an interdisciplinary approach to present and test a theoretical model that links security in e-procurement processes to e-procurement performance. E-procurement performance is measured as a combination of cost savings, order quality, and satisfaction of fulfillment as perceived as buyers. The model also posits that two aspects of the procurement process will enhance the value of security in e-procurement, namely, process complexity and process interdependence. We empirically examine these relationships using data collected from procurement managers. Our results have important implications for managing the e-procurement process.
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Tinglong Dai, Zhaolin Li, and Daewon Sun
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Equity-Based Incentives and Supply Chain Buy-Back Contracts
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We analyse the effect of equity-based incentives in a supply chain with a downstream firm and an upstream supplier. By using the operational decision as a signal to influence external investors’ beliefs, the downstream firm’s manager intends to maximize a convex combination of the interim share price and the terminal cash flows. We show that equity-based incentives create a side-effect. Specifically, with a universal buy-back contract, the deadweight loss of signalling induced by equity-based incentives could spread throughout the supply chain and cause chain-wide damages. To mitigate such undesirable consequences, we propose a new mechanism to eliminate the inefficiency. We derive the optimal mechanism that maximizes the downstream firm’s profits subject to the constraint that the supply chain efficiency is not undermined. In contrast to the full-information benchmark, this mechanism gives positive surplus to the supplier.
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Toyin Clottey, W. C. Benton, Jr., Rajesh Srivastava
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Forecasting Product Returns for Remanufacturing Operations
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Driven by legislative pressures an increasing number of manufacturing companies have been implementing comprehensive recycling and remanufacturing programs. The accurate forecasting of product returns is important for procurement decisions, production planning, and inventory and disposal management in such remanufacturing operations. In this study, we consider a manufacturer that also acts as a remanufacturer, and develop a generalized forecasting approach to determine the distribution of the returns of used products, as well as integrate it with an inventory model to enable production planning and control. We compare our forecasting approach to previous models and show that our approach is more consistent with continuous time, provides accurate estimates when the return lags are exponential in nature and results in fewer units being held in inventory on average. The analysis revealed that these gains in accuracy resulted in the most cost savings when demand volumes, for remanufactured products, where high compared to the volume of returned products. Such situations require the frequent acquisition of cores to meet demand. The results show that significant cost savings can be achieved by using the proposed approach for sourcing product returns.
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Xinxin Li
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Group Buying, Buyer Heterogeneity and Seller’s Bargaining Power
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Group buying enables collective bargaining opportunity that individual buyers lack to negotiate prices with sellers. This potential negotiation capability has two opposing effects. On the one hand, the prospect of the group being able to negotiate price with its rival forces each seller to lower its price offer, as too high a price will induce the group to give its rival an opportunity to undercut its price via negotiation likely taking away all the buyers. On the other hand, the potential negotiation opportunity may also discourage sellers from competing aggressively in their price offers, as the benefit of charging a low price could be offset by competitors in negotiation, thus yielding overall higher prices for the buyers. In this study, we find that compared to individual purchase, buyers benefit from collective bargaining opportunity by group buying only if sellers’ bargaining power relative to the buyer group is low and/or buyers’ preferences towards the sellers are sufficiently differentiated. Given buyers’ strategic choice of group purchase, sellers may be worse off with a further increase in bargaining power, and so may social welfare.
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Qing Hu, Tamara Dinev, Paul Hart, and Donna Cooke
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Managing Employee Compliance with Information Security Policies: The Critical Role of Top Management and Organizational Culture
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We develop an individual behavioral model that integrates the role of top management and organizational culture into the theory of planned behavior in an attempt to better understand how top management can influence security compliance behavior of employees. Using survey data and structural equation modeling, we test hypotheses on the relationships among top management participation, organizational culture, and key determinants of employee compliance with information security policies. We find that top management participation in information security initiatives has significant direct and indirect influences on employees’ attitudes toward, subjective norm of, and perceived behavioral control over compliance with information security policies. We also find that the top management participation strongly influences organizational culture which in turn impacts employees’ attitudes towards and perceived behavioral control over compliance with information security policies. Furthermore, we find that the effects of top management participation and organizational culture on employee behavioral intentions are fully mediated by employee cognitive beliefs about compliance with information security policies. Our findings extend information security research literature by showing how top management can play a proactive role in shaping employee compliance behavior in addition to the deterrence oriented remedies advocated in the extant literature. Our findings also refine the theories about the role of organizational culture in shaping employee compliance behavior. Significant theoretical and practical implications of these findings are discussed.
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Lara Khansa and Christopher Zobel
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Quantifying Cyberinfrastructure Resilience against Multi-event Attacks
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This paper introduces a general approach for characterizing cyber infrastructure resilience in the face of multiple malicious cyber-attacks, such as when a sequence of denial-of-service attacks progressively target an already weakened information system. Although loss assessment frequently focuses on a single overall measure such as cost or downtime, the proposed technique considers both the timing and the amount of loss associated with each individual attack, as well as whether this loss is incurred suddenly or is “slow onset.” In support of this, an underlying mathematical model is developed to represent the relative impact of each attack and the corresponding length of time that its effects persist within the system, as well as to illustrate the tradeoffs between these two factors. The model is extended to represent uncertainty in its parameters and thus to support
comparative analyses among various security configurations with respect to a baseline estimate of resilience. Monte Carlo simulation is then used to illustrate the model's capabilities and to support a discussion of its ability to provide for more effective decision making in the context of disaster planning and mitigation.
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I-Chieh Hsu and Rajiv Sabherwal
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Relationship between Intellectual Capital and Knowledge Management: An Empirical Investigation
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Two important streams of literature have examined intellectual capital (IC) and knowledge management (KM). Surprisingly, they have developed in parallel, without empirical research on the relationship between IC and KM. This paper empirically examines how IC and KM affect each other, and also investigates their consequences, viewing three intermediate consequences (dynamic capabilities, efficiency, and innovativeness) to mediate their effects on firm performance. In addition, the paper examines the effects of the organization’s culture on IC and KM. A comprehensive model is developed to address these issues, and is tested using a combination of survey and secondary data on 533 companies in Taiwan. The results support the theoretical model. Major findings include the following: IC affects KM and dynamic capabilities; KM facilitates innovation but not dynamic capabilities or IC; a learning culture facilitates IC and innovation but not KM; firm performance depends on efficiency and innovation, but not directly on dynamic capabilities; and efficiency does not depend on any of the other constructs in the study. The paper’s implications for research and practice are examined.
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Travis Tokar, John A. Aloysius, and Matthew A. Waller
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Supply Chain Inventory Replenishment: The Debiasing Effect of Declarative Knowledge
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Previous experimental research demonstrates that inefficient replenishment decision making in the supply chain can be caused by specific judgment and decision biases. Based on the literature we use controlled experiments involving both student subjects and supply chain managers to test debiasing interventions that provide declarative knowledge, which is theorized to enhance the acquisition of procedural knowledge. We first investigate the effects of three debiasing components in a single echelon setting: knowledge of bullwhip, inventory position, and use of a target order-up-to quantity. Experiment 1 (N=1608 decisions by 67 student subjects) using a 2x2x2 factorial design for the three components finds that the conceptual understanding of inventory position is salient for efficient replenishment decisions. We next examine the effects of the components in a simulated, multi-echelon, serial supply chain, which introduces the additional complexity of coordination risk. Experiment 2 (N=3072 decisions by 128 student subjects) using a 2x2x2 factorial design finds that while subjects benefit from training components, there is evidence of cognitive overload with an increased quantity of information. Finally we test whether these debiasing components may be an effective training program for practicing supply chain managers who can be expected to have higher levels of procedural knowledge through experience gained in the field. Experiment 3 (N=864 decisions by 36 supply chain managers) using a 2x1 design investigates the effects of an instructional training intervention which includes all three debiasing components and finds the intervention to reduce costs by 14%. We provide avenues for future research and successful practice.
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Yuliang Yao, Yan Dong, and Martin Dresner
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Supply Chain Learning and Spillovers in Vendor Managed Inventory
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Despite extensive literature on the value of supply chain collaboration programs, little research has examined the issue from the perspective of organizational learning. Using a unique, operational level dataset, we empirically examine the learning curves through which performance improvements are realized under Vendor Managed Inventory (VMI). Performance is measured at the downstream distributor locations by examining inventory levels after controlling for customer service performance (stockouts). We identify and assess three sources of learning – a supply chain dyad’s self-learning, learning spillovers from Electronic Data Interchange (EDI), and learning spillovers from other supply chain dyads. We find that self-learning, learning spillovers from EDI, and learning spillovers from other supply chain dyads, all have positive and significant impacts on a distributor’s inventory performance. In addition, we find that self-learning may exhibit a U-shaped learning curve (i.e., performance first improves and then plateaus or declines). These findings suggest that the various learning experiences with VMI and EDI can lead to improved performance over time, but the path to improvement may be complex.
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Yongbo Xiao and Jian Chen
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Supply Chain Management of Fresh Products with Producer Transportation
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This paper considers a class of fresh-product supply chains in which products need to be transported by the upstream producer from a production base to a distant retail market. Due to high perishability, a portion of the products being shipped may decay during transportation, and therefore become unsalable. We consider a supply chain consisting of a single producer and a single distributor, and investigate two commonly adopted business models: (i) In the \pull" model, the
distributor places an order, then the producer determines the shipping quantity, taking into account potential product decay during transportation, and transports the products to the destination market of the distributor; (ii) In the \push" model, the producer ships a batch of products to a distant wholesale market, and then the distributor purchases and resells to end customers. By considering a price-sensitive end-customer demand, we investigate the optimal decisions for supply chain members, including order quantity, shipping quantity, and retail price. Our research shows that both the producer and distributor (and thus the supply chain) will perform better if the pull model is adopted. To improve the supply chain performance, we propose a \¯fed inventory-plus factor" (FIPF) strategy, in which the producer announces a pre-determined inventory-plus factor and the distributor compensates the producer for any surplus inventory that would otherwise be wasted. We show that this strategy is a Pareto improvement over the pull and push models for both parties. Finally, numerical experiments are conducted, which reveal some interesting managerial insights on the comparison between different business models.
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Thomas J. Kull, Ram Narasimhan, and Roger Schroeder
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Sustaining the Benefits of a Quality Initiative through Cooperative Values: A Longitudinal Study
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Although research has shown that organizational cultural values influence the success of quality initiatives, how and when cultural values are influential is unclear. This longitudinal study asserts that quality management should be viewed from dynamic perspective in order to better understand the role of cooperative cultural values in a quality initiative. We use a multilevel model of quality management, and develop time-oriented hypotheses using a sociotechnical systems perspective to examine the role of cooperative values. Our analysis uses longitudinal data from over 30 US federal government agencies, collected during an enterprise-wide quality initiative. We find that over time the influence of organization-level quality practices diminishes, but that the influence of cooperative values increases; workgroup-level quality practices remain consistently important. Our findings reveal the unexplored influences of cooperative values to sustain the benefits of quality management.
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