bluuebunny/crossref_metadata_2025 huggingface dataset:
Commercializing Knowledge: University Science, Knowledge Capture, and Firm Performance in Biotechnology
Authors: Zucker Lynne G. , Darby Michael R. , Armstrong Jeff S.
Published: December 2003

Commercializing knowledge involves transfer from discovering scientists to those who will develop it commercially. New codes and formulae describing discoveries develop slowly-with little incentive if value is low and many competing opportunities if high. Hence new knowledge remains naturally excludable and appropriable. Team production allows more knowledge capture of tacit, complex discoveries by firm scientists. A robust indicator of a firm's tacit knowledge capture (and strong predictor of its success) is the number of research articles written jointly by firm scientists and discovering, “star” scientists, nearly all working at top universities. An operationally attractive generalization of our star measure-collaborative research articles between firm scientists and top research university scientists-replicates the impact on firm success. In panel analyses, publications by firm scientists with stars and/or top 112 university scientists increase the number and citation rate for firm patents. Further, star articles increase these rates significantly more than other top 112 university scientists' articles. Cross-sectional analyses of products and employment show a similar pattern of positive effects on firms' success of collaborations with stars or top university scientists, but estimates of differential effects are nonrobust due to multicollinearity. Venture capital funding has significant, usually positive effects on firm success.
Putting Patents in Context: Exploring Knowledge Transfer from MIT
Authors: Agrawal Ajay , Henderson Rebecca
Published: December 2003

In this paper we explore the degree to which patents are representative of the magnitude, direction, and impact of the knowledge spilling out of the university by focusing on the Massachusetts Institute of Technology (MIT), and in particular, on the Departments of Mechanical and Electrical Engineering. Drawing on both qualitative and quantitative data, we show that patenting is a minority activity: a majority of the faculty in our sample never patent, and publication rates far outstrip patenting rates. Most faculty members estimate that patents account for less than 10% of the knowledge that transfers from their labs. Our results also suggest that in two important ways patenting is not representative of the patterns of knowledge generation and transfer from MIT: patent volume does not predict publication volume, and those firms that cite MIT papers are in general not the same firms as those that cite MIT patents. However, patent volume is positively correlated with paper citations, suggesting that patent counts may be reasonable measures of research impact. We close by speculating on the implications of our results for the difficult but important question of whether, in this setting, patenting acts as a substitute or a complement to the process of fundamental research.
Who Is Selling the Ivory Tower? Sources of Growth in University Licensing
Authors: Thursby Jerry G. , Thursby Marie C.
Published: December 2003

Historically, commercial use of university research has been viewed in terms of spillovers. Recently, there has been a dramatic increase in technology transfer through licensing as universities attempt to appropriate the returns from faculty research. This change has prompted concerns regarding the source of this growth-specifically, whether it suggests a change in the nature of university research. We develop an intermediate input model to examine the extent to which the growth in licensing is due to the productivity of observable inputs or driven by a change in the propensity of faculty and administrators to engage in commercializing university research. We model licensing as a three-stage process, each involving multiple inputs. Nonparametric programming techniques are applied to survey data from 64 universities to calculate total factor productivity (TFP) growth in each stage. To examine the sources of TFP growth, the productivity analysis is augmented by survey evidence from businesses who license-in university inventions. Results suggest that increased licensing is due primarily to an increased willingness of faculty and administrators to license and increased business reliance on external R&D rather than a shift in faculty research.
Network Ties, Reputation, and the Financing of New Ventures
Authors: Shane Scott , Cable Daniel
Published: December 2003

Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments, which draw on the concept of social obligation, are oversocialized. Drawing on the organizational theory literature, and in-depth fieldwork with 50 high-technology ventures, we examine the effects of direct and indirect ties between entrepreneurs and 202 seed-stage investors on venture finance decisions. We show that these ties influence the selection of ventures to fund through a process of information transfer.
Complementary Product Integration by High-Technology New Ventures: The Role of Initial Technology Strategy
Authors: Nambisan Satish
Published: December 2003

In this paper, we investigate the relationship between complementary product integration and the initial technology strategy of a high-technology new venture. With customers placing considerable emphasis on cross-product integration, the success of a new venture is dependent as much on its ability to integrate its product with relevant complementary products as on the core product functionality itself. We identify three types of complementary product integration: value-added internal, add-on module, and data interface. We argue that the adoption of proactive initial technology strategy critically determines the ability of a high-technology new venture to rapidly and efficiently integrate its product with new and emerging complementary products. More specifically, we offer hypotheses that relate initial design and development strategies to the number and the type of complementary product integrations achieved by a new venture in the initial years. The hypotheses are tested using data from a set of U.S.-based software new ventures. The results support our arguments and imply the need for high-technology new ventures to adopt an explicit complementary product focus during initial product design.
Generalized Column Generation for Linear Programming
Authors: Oğuz Osman
Published: December 2003

Column generation is a well-known and widely practiced technique for solving linear programs with too many variables or constraints to include in the initial formulation explicitly. Instead, the required column information is generated at each iteration of the simplex algorithm. This paper shows that, even if the number of variables is low enough for explicit inclusion in the model with the available technology, it may still be more efficient to resort to column generation for some class of problems.
Process and Product Improvement in Manufacturing Systems with Correlated Stages
Authors: Zantek Paul F. , Wright Gordon P. , Plante Robert D.
Published: December 2003

Manufacturing systems typically contain processing and assembly stages whose output quality is significantly affected by the output quality of preceding stages in the system. This study offers and empirically validates a procedure for (1) measuring the effect of each stage's performance on the output quality of subsequent stages including the quality of the signal product, and (2) identifying stages in a manufacturing system where management should concentrate investments in process quality improvement. Our proposed procedure builds on the precedence ordering of the stages in the system and uses the information provided by correlations between the product quality measurements across stages.

The starting point of our procedure is a computer executable network representation of the statistical relationships between the product quality measurements; execution automatically converts the network to a simultaneous-equations model and estimates the model parameters by the method of least squares. The parameter estimates are used to measure and rank the impact of each stage's performance on variability in intermediate stage and final product quality. We extend our work by presenting an economic model, which uses these results, to guide management in deciding on the amount of investment in process quality improvement for each stage.

We report some of the findings from an extensive empirical validation of our procedure using circuit board production line data from a major electronics manufacturer. The empirical evidence presented here highlights the importance of accounting for quality linkages across stages in (a) identifying the sources of variation in product quality and (b) allocating investments in process quality improvement.
Multistage Production to Order with Rework Capability
Authors: Grosfeld-Nir Abraham , Gerchak Yigal
Published: December 2003

This study considers multistage production systems where defective units can be reworked repeatedly at every stage. Production, as well as rework, is in lots requiring set-up and variable production costs, and orders need to be filled in their entirety. The yield of each stage is uncertain, so several production runs may need to be attempted until the quantity of finished products is sufficient. The trade-off at each stage is between using small lots, possibly necessitating repeated rework set-ups and large lots, which may result in costly overproduction. Multistage manufacturing facilities with rework capabilities are quite common in practice, but their optimal operation when orders have to be met in full has been virtually unexplored. We show that a multistage system where only one of the stages requires a setup (a “single-bottleneck system”) can be reduced to a single-stage system. Moreover, if it is possible to arrange the operations in any order, we prove that it is best to make the “bottleneck” the first stage of the system. We also develop recursive algorithms for solving two- and three-stage systems, where all stages require set-ups, optimally. Generalizations to systems where rework yields and costs differ from those of initial processing are also discussed.
Bounding Option Prices by Semidefinite Programming: A Cutting Plane Algorithm
Authors: Gotoh Jun-ya , Konno Hiroshi
Published: December 2003

In a recent article, Bertsimas and Popescu showed that a tight upper bound on a Europeantype call option price, given the first n moments of the distribution of the underlying security price, can be obtained by solving an associated semidefinite programming problem (SDP). The purpose of this paper is to improve and extend their results. We will show that a tight lower bound can be calculated by solving another SDP. Also, we will show that these problems can be solved very quickly by a newly developed cutting plane algorithm when n is less than six or seven.
Modeling and Analysis of Congestion in the Design of Facility Layouts
Authors: Benjaafar Saifallah
Published: December 2003

Reducing manufacturing lead times and minimizing work-in-process (WIP) inventories are the cornerstones of popular manufacturing strategies such as Lean, Quick Response, and Just-in-Time Manufacturing. In this paper, we present a model that captures the relationshipbetween facility layout and congestion-related measures of performance. We use the model to introduce a formulation of the facility layout design problem where the objective is to minimize work-in-process (WIP). In contrast to some recent research, we show that layouts obtained using a WIP-based formul ation can be very different from those obtained using the conventional quadratic assignment problem (QAP) formulation. For example, we show that a QAP-optimal layout can be WIP-infeasible. Similarly, we show that two QAP-optimal layouts can have vastly different WIP values. In general, we show that WIP is not monotonic in material-handling travel distances. This leads to a number of surprising results. For instance, we show that it is possible to reduce overall distances between departments but increase WIP. Furthermore, we find that the relative desirability of a layout can be affected by changes in material-handling capacity even when travel distances remain the same. We examine the effect of various system parameters on the difference in WIP between QAP- and WIP-optimal layouts. We find that although there are conditions under which the difference in WIP is significant, there are those under which both layouts are WIP-equivalent.
Note: Ranking DMUs with Infeasible Super-Efficiency DEA Models
Authors: Xue Mei , Harker Patrick T.
Published: December 2003

It has been suggested in the data envelopment analysis (DEA) literature that it is impossible to obtain a full ranking of decision-making units (DMUs) when infeasible subproblems arise in the so-called super-efficiency DEA models under different returns to scale (RTS) assumptions other than constant returns to scale (CRS) andconsequently the application of the super-efficiency DEA models under different RTS conditions other than CRS should be restricted. The implications of the infeasibility in super-efficiency DEA models with respect to the efficiency ranking of the DMUs is explored. Based on the analysis, we show that it is still possible to obtain the full ranking of the entire observation set when infeasibilities arise in super-efficiency DEA models.
The Impact of the Secondary Market on the Supply Chain
Authors: Lee Hau , Whang Seungjin
Published: December 2003

This paper investigates the impacts of a secondary market where resellers can buy and sell excess inventories. We develop a two-period model with a single manufacturer and many resellers. At the beginning of the first period resellers order and receive products from the manufacturer, but at the beginning of the second period, they can trade inventories among themselves in the secondary market. We endogenously derive the optimal decisions for the resellers, along with the equilibrium market price of the secondary market. The secondary market creates two interdependent effect—a quantity effect (sales by the manufacturer) and an allocation effect (supply chain performance). The former is indeterminate; i.e., the total sales volume for the manufacturer may increase or decrease, depending on the critical fractile. The latter is always positive; i.e., the secondary market always improves allocative efficiency. The sum of the effects is also unclear—the welfare of the supply chain may or may not increase as a result of the secondary market. Lastly, we study potential strategies for the manufacturer to increase sales in the presence of the secondary market.
Do Better Customers Utilize Electronic Distribution Channels? The Case of PC Banking
Authors: Hitt Lorin M. , Frei Frances X.
Published: December 2003

Many service firms are pursuing electronic distribution strategies to augment existing physical infrastructure for product and service delivery. But little systematic study has been made for whether and how characteristics or behaviors might differ between customers who use electronic delivery systems and those who use traditional channels. We explore these differences by comparing customers who utilize personal-computer-based home banking (PC banking) to other bank customers. Case studies and detailed customer data from four institutions suggest that PC banking customers are apparently more profitable, principally due to unobservable characteristics extant before the adoption of PC banking. Demographic characteristics and changes in customer behavior following adoption of PC banking account for only a small fraction of overall differences. It also appears that retention is marginally higher for customers of the online channel.
Breaking Through the Clutter: Benefits of Advertisement Originality and Familiarity for Brand Attention and Memory
Authors: Pieters Rik , Warlop Luk , Wedel Michel
Published: December 2003

Rising levels of advertising competition have made it increasingly difficult to attract and hold consumers' attention and to establish strong memory traces for the advertised brand. A common communication strategy to break through this competitive clutter is to increase ad originality. However, ad originality may have detrimental effects when consumers pay more attention to the ad at the expense of the advertised brand. Moreover, the positive effects of originality may quickly wane when the ad becomes familiar. Surprisingly, no research to date has examined such brand attention and memory effects of ad originality and familiarity. The current study aims to fill this void. We use a stochastic model of the influence that ad originality and familiarity have on consumers' eye fixations to the key elements of advertisements—brand, text, and pictorial—and how the information extracted during eye fixations promotes memory for the advertised brand. The model explicitly accounts for heterogeneity due to consumers and advertisements. Infrared eye tracking was applied to collect eye fixation data from 119 consumers who paged through two general-audience magazines containing 58 full-page advertisements. Memory for the advertised brands was assessed with an indirect memory task. The model was estimated using Markov Chain Monte Carlo (MCMC) methods. In support of our hypotheses, original advertisements drew more attention to the advertised brand. More importantly however, advertisements that were both original and familiar attracted the largest amount of attention to the advertised brand, which improved subsequent brand memory. In addition, original and familiar ads were found to promote brand memory directly. Implications of these findings for communication and media planning strategy are discussed.
A Context-Dependent Model of the Gambling Effect
Authors: Bleichrodt Han , Schmidt Ulrich
Published: December 2003

This paper presents a context-dependent theory of decision under risk. The relevant contextual factor is the presence of a riskless lottery in a preference comparison. The theory only deviates from expected utility if the set of options contains both riskless and risky lotteries. The main motivation for the theory is to explain the gambling effect. Contrary to previous theories of the gambling effect, the present theory is consistent with stochastic dominance. It can, however, violate transitivity. The theory allows for a decomposition of the interaction between risk aversion and gambling aversion and thereby extends the classical Arrow-Pratt measure of risk aversion.
Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design
Authors: Chiang Wei-yu Kevin , Chhajed Dilip , Hess James D.
Published: December 2003

The advent of e-commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales. The model conceptualizes the impact of customer acceptance of a direct channel, the degree to which customers accept a direct channel as a substitute for shopping at a traditional store, on supply-chain design. The customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers. Here, direct marketing is used for strategic channel control purposes even though it is inefficient on its own and, surprisingly, it can profit the manufacturer even when so direct sales occur. Specifically, we construct a price-setting game between a manufacturer and its independent retailer. Direct marketing, which indirectly increases the flow of profits through the retail channel, helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization. While operated by the manufacturer to constrain the retailer's pricing behavior, the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction. This combination of manufacturer pull and push can benefit the retailer in equilibrium. Finally, we show that the mere threat of introducing the direct channel can increase the manufacturer's negotiated share of cooperative profits even if price efficiency is obtained by using other business practices.
Optimal Conflict in Preference Assessment
Authors: Delquié Philippe
Published: December 2003

Conflict arises in decision making when the choice alternatives present strong advantages and disadvantages over one another, that is, when the trade–offs involved are large. Conflict affects human response to choice, in particular, it increases decision difficulty and response unreliability. On the other hand, larger trade–offs, i.e., higher conflict, reveal more information about an individual's preferences and mitigate the influence of measurement unreliability on preference model estimation. This suggests, somewhat counterintuitively, that there may exist some optimal level of conflict for efficient measurement of preferences. How to determine this level? This issue is examined from behavioral and analytical angles. We outline a general analysis of the interaction between trade–off size and modeling accuracy, and demonstrate its application on a simple example. The kind of analysis developed here can be conveniently implemented in a computer spreadsheet, and would be especially valuable when large amounts of preference data are to be collected, as in consumer preference studies, experimental research, and contingent valuation surveys.
Individual Centrality and Performance in Virtual R&D Groups: An Empirical Study
Authors: Ahuja Manju K. , Galletta Dennis F. , Carley Kathleen M.
Published: December 2003

Communication technologies support virtual R&D groups by enabling immediate and frequent interaction of their geographically-distributed members. Performance of members in such groups has yet to be studied longitudinally. A model proposes not only direct effects of functional role, status, and communication role on individual performance, but also indirect effects through individual centrality. Social network analysis was performed on e-mail samples from two time periods separated by four years. Analysis revealed both direct and indirect effects as hypothesized; however, the indirect effects were more consistent in both time periods. The clearest findings were that centrality mediates the effects of functional role, status, and communication role on individual performance. Interestingly, centrality was a stronger direct predictor of performance than the individual characteristics considered in this study. The study illustrates the usefulness of accounting for network effects for better understanding individual performance in virtual groups.
Learning by Doing Something Else: Variation, Relatedness, and the Learning Curve
Authors: Schilling Melissa A. , Vidal Patricia , Ployhart Robert E. , Marangoni Alexandre
Published: December 2003

Many organizational learning studies have an implicit assumption that the learning rate is maximized through specialization: the more an individual or organization focuses on a particular task, the faster it will improve. However, through contrasting the various learning process theories described in the research on organizational, group, and individual learning, we develop a set of competing hypotheses that suggest some degree of variation might improve the learning rate. Furthermore, such comparison yields competing arguments about how related or unrelated such task variation should be to improve the learning rate. This research uses an experimental study to answer the following research questions: Is the learning rate maximized through specialization? Or does variation, related or unrelated, enhance the learning process? We find that the learning rate under conditions of related variation is significantly greater than under conditions of specialization or unrelated variation, indicating the possibility of synergy between related learning efforts consistent with an implicit learning or insight effect. We find no significant differences in the rates of learning under the conditions of specialization and unrelated variation. These results yield important implications for how work should be organized, and for future research into the learning process.
Investment Under Uncertainty in Information Technology: Acquisition and Development Projects
Authors: Schwartz Eduardo S. , Zozaya-Gorostiza Carlos
Published: December 2003

In this paper, we develop two models for the valuation of information technology (IT) investment projects using the real options approach. The IT investment projects discussed in this paper are categorized into development and acquisition projects, depending upon the time it takes to start benefiting from the IT asset once the decision to invest has been taken. The models account for uncertainty both in the costs and benefits associated with the investment opportunity. Our stochastic cost function for IT development projects incorporates the technical and input cost uncertainties of Pindyck's model (1993), but also considers the fact that the investment costs of some IT projects might change even if no investment takes place. In contrast to other models in the real options literature in which benefits are summarized in the underlying asset value, our model for IT acquisition projects represents these benefits as a stream of stochastic cash flows.
Is Subsidizing Inefficient Bidders Actually Costly?
Authors: Rothkopf Michael H. , Harstad Ronald M. , Fu Yuhong
Published: December 2003

A widespread practice, particularly in public-sector procurement and dispersal, is to subsidize a class of competitors believed to be at an economic disadvantage. Arguments for such policies vary, but they typically assume that benefits of subsidization must be large enough to outweigh a presumed economic cost of the subsidy. When disadvantaged competitors compete in auctions, the subsidy serves to make them more competitive rivals. Other bidders rationally respond by bidding more aggressively. We consider a model of procurement auctions and show that a policy of subsidizing inefficient competitors can lower expected project cost and also enhance economic efficiency. Some subsidy is generally better than no subsidy for a wide range of parameters.
Analysis and Design of Business-to-Consumer Online Auctions
Authors: Bapna Ravi , Goes Paulo , Gupta Alok
Published: December 2003

Business-to-consumer online auctions form an important element in the portfolio of mercantile processes that facilitate electronic commerce activity. Much of traditional auction theory has focused on analyzing single-item auctions in isolation from the market context in which they take place. We demonstrate the weakness of such approaches in online settings where a majority of auctions are multiunit in nature. Rather than pursuing a classical approach and assuming knowledge of the distribution of consumers' valuations, we emphasize the largely ignored discrete and sequential nature of such auctions. We derive a general expression that characterizes the multiple equilibria that can arise in such auctions and segregate these into desirable and undesirable categories. Our analytical and empirical results, obtained by tracking real-world online auctions, indicate that bid increment is an important factor amongst the control factors that online auctioneers can manipulate and control. We show that consumer bidding strategies in such auctions are not uniform and that the level of bid increment chosen influences them. With a motive of providing concrete strategic directions to online auctioneers, we derive an absolute upper bound for the bid increment. Based on the theoretical upper bound we propose a heuristic decision rule for setting the bid increment. Empirical evidence lends support to the hypothesis that setting a bid increment higher than that suggested by the heuristic decision rule has a negative impact on the auctioneer's revenue.
E-Business and Management Science: Mutual Impacts (Part 1 of 2)
Authors: Geoffrion Arthur M. , Krishnan Ramayya
Published: December 2003

This begins a two-part commentary on management science and e-business, the theme of this two-part special issue. After explaining the topical clusters that give organization to both parts, we pose two key questions concerning the impact of the emerging digital economy on management science research: What fundamentally new research questions arise, and what kind of research enables progress on them. We sketch the papers appearing in this part from the perspective of both these questions, and offer summary comments on the first question based on the papers in both parts. The principal conclusion is that the digital economy is giving birth to new research questions in three main ways (not all independent): by enabling and popularizing several types of technology-mediated interactions, by spawning large-scale digital data sources, and by creating recurring operational decisions that need to be automated.
Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions
Authors: Elmaghraby Wedad , Keskinocak Pınar
Published: December 2003

The benefits of dynamic pricing methods have long been known in industries, such as airlines, hotels, and electric utilities, where the capacity is fixed in the short-term and perishable. In recent years, there has been an increasing adoption of dynamic pricing policies in retail and other industries, where the sellers have the ability to store inventory. Three factors contributed to this phenomenon: (1) the increased availability of demand data, (2) the ease of changing prices due to new technologies, and (3) the availability of decision-support tools for analyzing demand data and for dynamic pricing. This paper constitutes a review of the literature and current practices in dynamic pricing. Given its applicability in most markets and its increasing adoption in practice, our focus is on dynamic (intertemporal) pricing in the presence of inventory considerations.
Internet-Based Virtual Stock Markets for Business Forecasting
Authors: Spann Martin , Skiera Bernd
Published: December 2003

The application of Internet–based virtual stock markets (VSMs) is an additional approach that can be used to predict short– and medium–term market developments. The basic concept involves bringing a group of participants together via the Internet and allowing them to trade shares of virtual stocks. These stocks represent a bet on the outcome of future market situations, and their value depends on the realization of these market situations. In this process, a VSM elicits and aggregates the assessments of its participants concerning future market developments. The aim of this article is to evaluate the potential use and the different design possibilities as well as the forecast accuracy and performance of VSMs compared to expert predictions for their application to business forecasting. After introducing the basic idea of using VSMs for business forecasting, we discuss the different design possibilities for such VSMs. In three real–world applications, we analyze the feasibility and forecast accuracy of VSMs, compare the performance of VSMs to expert predictions, and propose a new validity test for VSM forecasts. Finally, we draw conclusions and provide suggestions for future research.
Models for Supply Chains in E-Business
Authors: Swaminathan Jayashankar M. , Tayur Sridhar R.
Published: December 2003

Supply chain management is likely to play an important role in the digital economy. In this paper, we first describe major issues in traditional supply chain management. Next, we focus our attention on the supply chain issues of visibility, supplier relationships, distribution and pricing, customization, and real-time decision technologies that have risen to importance with the prevalence of e-business. We present an overview of relevant analytical research models that have been developed in these areas, discuss their contributions, and conclude with a discussion on future modeling opportunities in this area.
World Wide Wait: A Study of Internet Scalability and Cache-Based Approaches to Alleviate It
Authors: Datta Anindya , Dutta Kaushik , Thomas Helen , VanderMeer Debra
Published: December 2003

The Internet is growing rapidly in terms of both use and infrastructure. Unfortunately, demand is outpacing the capacity of the infrastructure, as evidenced by unacceptably long response times. To support current load and further growth, we must address this problem. Several caching strategies have been proposed in the literature; many have been implemented to improve the quality of service on the Web. In this paper, we identify the main causes of delay on the Web, and provide a review of the various caching strategies employed to mitigate these delays. We also survey the application of Operations Research/Management Science (OR/MS) techniques to caching on the Web. Finally, we identify several open OR/MS research problems related to Web caching.
E-Business and Management Science: Mutual Impacts (Part 2 of 2)
Authors: Geoffrion Arthur M. , Krishnan Ramayya
Published: December 2003

This concludes a two-part commentary on management science and e-business, the theme of this two-part special issue. After reviewing the topical clusters that give organization to both parts, we sketch the papers appearing in this second part from the perspective of two key questions concerning the impact of the emerging digital economy on management science research: What fundamentally new research questions arise, and what kind of research enables progress on them. We then offer summary comments on the second question based on the papers in both parts. The principal conclusions are that, in meeting the challenges posed by the digital economy, management science researchers are (a) making greater use of parts of economics and computer science/information technology, and (b) exploiting the improving productivity advantages of empirical and methodological work in comparison with theoretical work.
Managing Online Auctions: Current Business and Research Issues
Authors: Pinker Edieal J. , Seidmann Abraham , Vakrat Yaniv
Published: December 2003

The Internet's computational power and flexibility have made auctions a widespread and integral part of both consumer and business markets. Though online auctions are a multi-billion dollar annual activity, with a growing variety of sophisticated trading mechanisms, scientific research on them is at an early stage. This paper analyzes the current state of management science research on online auctions. It develops a broad research agenda for issues such as the behavior of online auction participants, the optimal design of online auctions, the integration of auctions into the ongoing operation of firms, and the use of the data generated by online auctions to inform future trading mechanisms. These research areas will draw from applied and theoretical work spanning management science, economics, and information systems.
Combinatorial Auction Design
Authors: Pekeč Aleksandar , Rothkopf Michael H.
Published: December 2003

Combinatorial auctions have two features that greatly affect their design: computational complexity of winner determination and opportunities for cooperation among competitors. Dealing with these forces trade-offs between desirable auction properties such as allocative efficiency, revenue maximization, low transaction costs, fairness, failure freeness, and scalability. Computational complexity can be dealt with algorithmically by relegating the computational burden to bidders, by maintaining fairness in the face of computational limitations, by limiting biddable combinations, and by limiting the use of combinatorial bids. Combinatorial auction designs include single-round, first-price sealed bidding, Vickrey-Clarke-Groves (VCG) mechanisms, uniform and market-clearing price auctions, and iterative combinatorial auctions. Combinatorial auction designs must deal with exposure problems, threshold problems, ways to keep the bidding moving at a reasonable pace, avoiding and resolving ties, and controlling complexity.
Costly Bidding in Online Markets for IT Services
Authors: Snir Eli M. , Hitt Lorin M.
Published: December 2003

Internet-enabled markets are becoming viable venues for procurement of professional services. We investigate bidding behavior within the most active area of these early knowledge markets—the market for software development. These markets are important both because they provide an early view of the effectiveness of online service markets and because they have a potentially large impact on how software development services are procured and provided. Using auction theory, we develop a theoretical model that relates market characteristics to bidding and transaction behavior, taking into account costly bidding. We then test our model using data from an active online market for software development services, which yields contracts for 30%–40% of posted projects. In its current format, however, the studied market may induce excessive bidding by vendors. Consistent with our theoretical predictions and those of Carr (2003), higher-value projects attract significantly more bids, with lower average quality. Greater numbers of bids raise the cost to all participants, due to costly bidding and bid evaluation. Perhaps as a consequence, higher-value projects are also much less likely to be awarded.
Note on Online Auctions with Costly Bid Evaluation
Authors: Carr Scott M.
Published: December 2003

As seen in the data of Snir and Hitt (2003), online service procurement auctions often end without achieving a contract despite active bidding, yet the existing auction literature is silent on why this occurs. One explanation for these unconsummated auctions may be that perfectly acceptable bids are submitted but disregarded because of the cost of assessing the bids' viability and the bidders' capabilities. This note examines this possibility by characterizing optimal and equilibrium bidding and bid-evaluation decisions in the presence of these costs.
An Inverse-Optimization-Based Auction Mechanism to Support a Multiattribute RFQ Process
Authors: Beil Damian R. , Wein Lawrence M.
Published: December 2003

We consider a manufacturer who uses a reverse, or procurement, auction to determine which supplier will be awarded a contract. Each bid consists of a price and a set of nonprice attributes (e.g., quality, lead time). The manufacturer is assumed to know the parametric form of the suppliers' cost functions (in terms of the nonprice attributes), but has no prior information on the parameter values. We construct a multiround open-ascending auction mechanism, where the manufacturer announces a slightly different scoring rule (i.e., a function that ranks the bids in terms of the price and nonprice attributes) in each round. Via inverse optimization, the manufacturer uses the bids from the first several rounds to learn the suppliers' cost functions, and then in the final round chooses a scoring rule that attempts to maximize his own utility. Under the assumption that suppliers submit their myopic best-response bids in the last round, and do not distort their bids in the earlier rounds (i.e., they choose their minimum-cost bid to achieve any given score), our mechanism, indeed, maximizes the manufacturer's utility within the open-ascending format. We also discuss several enhancements that improve the robustness of our mechanism with respect to the model's informational and behavioral assumptions.
Group Buying on the Web: A Comparison of Price-Discovery Mechanisms
Authors: Anand Krishnan S. , Aron Ravi
Published: December 2003

Web-based group-buying mechanisms are being widely used for both business-to-business (B2B) and business-to-consumer (B2C) transactions. We survey currently operational online group-buying markets, and then study this phenomenon using analytical models. We build on the literatures in information economics and operations management in our analytical model of a monopolist offering Web-based group-buying under different kinds of demand uncertainty. We derive the monopolist's optimal group-buying schedule under varying conditions of heterogeneity in the demand regimes, and compare its profits with those that obtain under the more conventional posted-price mechanism. We further study the impact of production postponement by endogenizing the timing of the pricing and production decisions in a two-stage game between the monopolist and buyers. Our results have implications for firms' choice of price-discovery mechanisms in e-markets, and for the scheduling of production and pricing decisions in the presence (and absence) of scale economies of production.
Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers
Authors: Brynjolfsson Erik , Hu Yu (Jeffrey) , Smith Michael D.
Published: December 2003

We present a framework and empirical estimates that quantify the economic impact of increased product variety made available through electronic markets. While efficiency gains from increased competition significantly enhance consumer surplus, for instance, by leading to lower average selling prices, our present research shows that increased product variety made available through electronic markets can be a significantly larger source of consumer surplus gains.

One reason for increased product variety on the Internet is the ability of online retailers to catalog, recommend, and provide a large number of products for sale. For example, the number of book titles available at Amazon.com is more than 23 times larger than the number of books on the shelves of a typical Barnes & Noble superstore, and 57 times greater than the number of books stocked in a typical large independent bookstore.

Our analysis indicates that the increased product variety of online bookstores enhanced consumer welfare by $731 million to $1.03 billion in the year 2000, which is between 7 and 10 times as large as the consumer welfare gain from increased competition and lower prices in this market. There may also be large welfare gains in other SKU-intensive consumer goods such as music, movies, consumer electronics, and computer software and hardware.
Probabilistic Error Bounds for Simulation Quantile Estimators
Authors: Jin Xing , Fu Michael C. , Xiong Xiaoping
Published: December 2003

Quantile estimation has become increasingly important, particularly in the financial industry, where value at risk (VaR) has emerged as a standard measurement tool for controlling portfolio risk. In this paper, we analyze the probability that a simulation-based quantile estimator fails to lie in a prespecified neighborhood of the true quantile. First, we show that this error probability converges to zero exponentially fast with sample size for negatively dependent sampling. Then we consider stratified quantile estimators and show that the error probability for these estimators can be guaranteed to be 0 with sufficiently large, but finite, sample size. These estimators, however, require sample sizes that grow exponentially in the problem dimension. Numerical experiments on a simple VaR example illustrate the potential for variance reduction.
Replenishment Strategies for Distribution Systems Under Advance Demand Information
Authors: Özer Özalp
Published: December 2003

Customers with positive demand lead times place orders in advance of their needs. A portfolio of customers with different demand lead times gives rise to what we call advance demand information. We develop effective inventory policies for a distribution system to account for this information. In particular, we study a centralized system with one warehouse serving multiple retailers under advance demand information. The inventory manager replenishes the warehouse from an outside supplier. Units arriving to the warehouse are allocated to the retailers. To control this system, we develop a lower bound and proposed a close-to-optimal heuristic for which the optimality gap is on average 1.92%. We also provide a closed-form solution to approximate the system-wide inventory level. Using this explicit solution, the model and the heuristic, we investigate (1) the benefit of advance demand information, and its impact on allocation decisions, (2) the joint role of risk pooling and advance demand information, and (3) the system performance with respect to supplier and retailer lead times. We illustrate how advance demand information can be a substitute for lead times and inventory, and how it enhances the outcome of delayed differentiation.
Solving Project Scheduling Problems by Minimum Cut Computations
Authors: Möhring Rolf H. , Schulz Andreas S. , Stork Frederik , Uetz Marc
Published: December 2003

In project scheduling, a set of precedence-constrained jobs has to be scheduled so as to minimize a given objective. In resource-constrained project scheduling, the jobs additionally compete for scarce resources. Due to its universality, the latter problem has a variety of applications in manufacturing, production planning, project management, and elsewhere. It is one of the most intractable problems in operations research, and has therefore become a popular playground for the latest optimization techniques, including virtually all local search paradigms. We show that a somewhat more classical mathematical programming approach leads to both competitive feasible solutions and strong lower bounds, within reasonable computation times. The basic ingredients of our approach are the Lagrangian relaxation of a time-indexed integer programming formulation and relaxation-based list scheduling, enriched with a useful idea from recent approximation algorithms for machine scheduling problems. The efficiency of the algorithm results from the insight that the relaxed problem can be solved by computing a minimum cut in an appropriately defined directed graph. Our computational study covers different types of resource-constrained project scheduling problems, based on several notoriously hard test sets, including practical problem instances from chemical production planning.
Cultural Conflict and Merger Failure: An Experimental Approach
Authors: Weber Roberto A. , Camerer Colin F.
Published: December 2003

We use laboratory experiments to explore merger failure due to conflicting organizational cultures. We introduce a laboratory paradigm for studying organizational culture that captures several key elements of the phenomenon. In our experiments, we allow subjects in “firms” to develop a culture, and then merge two firms. As expected, performance decreases following the merging of two laboratory firms. In addition, subjects overestimate the performance of the merged firm and attribute the decrease in performance to members of the other firm rather than to situational difficulties created by conflicting culture.
Knowledge and Productivity in Technical Support Work
Authors: Das Amit
Published: December 2003

In this paper, we examine the process of technical support work and the role of knowledge in enhancing the productivity of such work. We develop the concepts of problem-solving tasks and moves to describe technical support work, while using call resolution time and problem escalation as measures of productivity. Using hierarchical log-linear modeling, we establish the link between problem-solving moves and productivity. We find that the mix of moves exercised in technical support strongly depends on the formulation of tasks by those requesting support. Because the formulation of tasks is performed by users, knowledge management initiatives must target users as well as support providers to have the desired impact on productivity.