Organizations and Markets

Gong, F., Nault, B.R., and M. Rahman, “An Internet-Enabled Move to the Market in Logistics,” Information Systems Research, 27(2), June 2016, 440-452.  PDF (last working version) Appendix

Logistics outsourcing has increased with the commercialization of the Internet, implying a reduction in the corresponding transaction costs. The Internet – with its universal connectivity and open standards – radically enhanced information technology (IT) capabilities, and we hypothesize this has reduced external transaction costs relatively more than internal governance costs. Using transaction cost theory as a lens, we examine whether the commercialization of the Internet coincided with a move to the market in logistics – one of the most connected industries in the economy. We estimate the relationship between IT and outsourced logistics in a production function based on two datasets from 1987 to 2008. We find that the effects of IT on outsourced logistics have changed in the post-Internet era. After the commercialization of the Internet, an industry’s own IT investment and outsourced logistics became complements whereas they were not before. It suggests that because of the unique characteristics of the Internet as an enabler, IT reduced external transaction costs relatively more than internal governance costs. Consequently, industries favored the market form of the provision of logistics. We also find similar impacts of customers’ IT investments on a focal industry’s outsourced logistics. Previous studies argued that IT led to the shift from hierarchies to markets, or provided indirect evidence through measures of firm size or integration. Using a production theory model our study provides systematic empirical evidence to support that the Internet enabled a move to the market in the provision of logistics.

Mitchell, V.L., and Nault, B.R., "Cooperative Planning, Uncertainty, and Managerial Control in Concurrent Design," Management Science, 53(3), March 2007, 375-389. PDF

We examine whether cooperative planning and uncertainty affect the magnitude of rework in concurrent engineering projects with upstream and downstream operations, and explore the impact of such rework on project delays. Using survey data from a sample of 120 business process (BP) redesign and related information technology (IT) development projects in healthcare and telecommunications, our results indicate that upstream (BP) rework and downstream (IT) rework is mediated and mitigated by cooperative planning through upstream/downstream strategy coupling and cross-functional involvement. In addition, uncertainty related to a lack of firm or industry experience with such projects increases the magnitude of upstream rework but not downstream rework or the amount of cooperative planning. After accounting for project scope, implementation horizon and whether delays are anticipated, we find that project delay is primarily influenced by the magnitude of downstream rework and downstream delay: the magnitude of both upstream and downstream rework significantly increases downstream delay, which significantly increases project delay. However, the magnitude of upstream rework does not directly affect project delay. These results suggest that project delay is under managerial control as cooperative planning is a managerial function that reduces downstream rework, while uncertainty from a lack of experience with the design affecting upstream rework is not directly under managerial control.

Bakos, J.Y. and Nault, B.R., "Ownership and Investment in Electronic Networks," Information Systems Research, 24(4), December 1997, 321-341. PDF 

The theory of incomplete contracts is employed to examine the relationship between ownership and investment in electronic networks such as the Internet and interorganizational information systems. An electronic network is defined as a set of participants and a portfolio of assets. The salient concept in this perspective is the degree to which network participants are indispensable in making network assets productive. Three main results are derived. First, if one or more assets are essential to all network participants, then all assets should be owned together. Second, participants that are indispensable to an asset essential to all participants should own all network assets. Third and most important, in the absence of an indispensable participant, as long as the cooperation of at least two participants is necessary to create value, sole ownership is never the best form of ownership for an electronic network.

Nault, B.R. and A.S. Dexter, "Added Value and Pricing with Information Technology," MIS Quarterly, 19(4), December 1995, 449-463. PDF , Also available in Full Text on ABI/Inform. MIS Quarterly retains copyright. Published version available here

The extent to which the added value to customers from a supplier's application of information technology is manifested through premium prices of a traded good is evaluated. It is demonstrated that IT can add value to an otherwise undifferentiated good, and it is shown how these benefits accrue to customers from the adoption of IT. Analyzing a case in which the traded good is a homogeneous commodity - commercial fueling - it is shown that the critical impacts of IT are convenience and control - that is, convenience that provides improved access to fuel and control that reduces problems of delegating purchasing authority for the customer. The value of this additional service is exhibited in premium prices customers are willing to pay for the IT-enhanced traded good, relative to the same good without IT. Compared to the price without IT, statistical analysis of the supplier's pricing history demonstrates that the application of IT to commercial fuel yielded price premiums of between 5% and 12% of the retail fuel price.