Abstract: Institution-based trust is a buyer's perception that effective third-party institutional mechanisms are in place to facilitate transaction success. This paper integrates sociological and economic theories about institution-based trust to propose that the perceived effectiveness of three IT-enabled institutional mechanisms-specifically feedback mechanisms, third-party escrow services, and credit card guarantees-engender buyer trust in the community of online auction sellers. Trust in the marketplace intermediary that provides the overarching institutional context also builds buyer's trust in the community of sellers. In addition, buyers' trust in the community of sellers (as a group) facilitates online transactions by reducing perceived risk. Data collected from 274 buyers in Amazon's online auction marketplace provide support for the proposed structural model. Longitudinal data collected a year later show that transaction intentions are correlated with actual and self-reported buyer behavior. The study shows that the perceived effectiveness of institutional mechanisms encompasses both "weak" (market-driven) and "strong" (legally binding) mechanisms. These mechanisms engender trust, not only in a few reputable sellers, but also in the entire community of sellers, which contributes to an effective online marketplace. The results thus help explain why, despite the inherent uncertainty that arises when buyers and sellers are separated in time and in space, online marketplaces are proliferating. Implications for theory are discussed, and suggestions for future research on improving IT-enabled trust-building mechanisms are suggested.

Abstract: Although trust has received much attention in many streams of information systems research, there has been little theorizing to explain how trust evokes sentiments and affects task performance in IT-enabled relationships. Many studies unquestionably assume that trust is intrinsically beneficial, and dismiss the possibility that the effects of trust may be dependent on the situation (or conditions) at present. This paper theoretically and empirically examines outcomes of an individual's trust in global virtual teams under differing situations (or conditions). In Study 1, we find that early in a team's existence, a member's trusting beliefs have a direct positive effect on his or her trust in the team and perceptions of team cohesiveness. Later on, however, a member's trust in his team operates as a moderator, indirectly affecting the relationships between team communication and perceptual outcomes. Study 2 similarly suggests that trust effects are sensitive to the particular situation or condition. Combined, the studies find that trust affects virtual teams differently in different situations. Future studies on trust will need to consider situational contingencies. This paper contributes to the literature on IT-enabled relationships by theorizing and empirically testing how trust affects attitudes and behaviors.

Abstract: Online spaces that enable shared public interpersonal communications are of significant social, organizational, and economic importance. In this paper, a theoretical model and associated unobtrusive method are proposed for researching the relationship between online spaces and the behavior they host. The model focuses on the collective impact that individual information-overload coping strategies have on the dynamics of open, interactive public online group discourse. Empirical research was undertaken to assess the validity of both the method and the model, based on the analysis of over 2.65 million postings to 600 Usenet newsgroups over a 6-month period. Our findings support the assertion that individual strategies for coping with "information overload" have an observable impact on large-scale online group discourse. Evidence was found for the hypotheses that: (1) users are more likely to respond to simpler messages in overloaded mass interaction; (2) users are more likely to end active participation as the overloading of mass interaction increases; and (3) users are more likely to generate simpler responses as the overloading of mass interaction grows.The theoretical model outlined offers insight into aspects of computer-mediated communication tool usability, technology design, and provides a road map for future empirical research.

Abstract: Information technology (IT) outsourcing success requires careful management of customer-supplier relationships. However, there are few published studies on the ongoing relationships, and most of these adopt a customer perspective, de-emphasizing suppliers. In this study, we look at both customer and supplier perspectives, by means of the psychological contract of customer and supplier project managers. We apply the concept of psychological contract to perceived mutual obligations, and to how such fulfillment of obligations can predict success. Our research questions are (1) What are the critical customer-supplier obligations in an IT outsourcing relationship? and (2) What is the impact of fulfilling these obligations on success?We use a sequential, qualitative-quantitative approach to develop and test our model. In the qualitative study, we probe the nature of customer-supplier obligations using in-depth interviews. Content analysis of interview transcripts show that both customers and suppliers identify six obligations that are critical to success. Customers perceive supplier obligations to be accurate project scoping, clear authority structures, taking charge, effective human capital management, effective knowledge transfer, and effective interorganizational teams. Suppliers perceive customer obligations as clear specifications, prompt payment, close project monitoring, dedicated project staffing, knowledge sharing, and project ownership. In the second quantitative study, we assess the impact of fulfilling these obligations on success through a field study of 370 managers. Results show that fulfilled obligations predict success over and above the effects of contract type, duration, and size.

Abstract: In today's competitive environment, an increasing number of firms are buildingcommon information systems, which will be deployed globally, to support their strategic globalization initiatives. These systems are designed to meet the requirements of a diverse set of stakeholders with different business needs, priorities, and objectives. One managerial tool for addressing and reconciling such differences is control, which encompasses all attempts to motivate individuals to act in a manner that is consistent with organizational objectives. This paper examines two research questions. How do stakeholders exercise control during different phases of large IS projects? Why do control choices change across project phases? Results of two case studies suggest control is exercised differently for each phase. During the initial phase of a project, control is exercised as "collective sensemaking," in which both IS and business stakeholders utilize mostly informal mechanisms of control. During development, "technical winnowing" of mechanisms occurs such that control is vested primarily in IS managers, who structure hierarchical relationships with subordinates and who rely extensively on formal control mechanisms. Both IS and business stakeholders employ formal and informal mechanisms during implementation to exercise control as "collaborative coordinating." The results also suggest that changes in control choices from one project phase to another are triggered by factors in the project, stakeholder, and global contexts. As factors change across phases, so too do control choices. Further, problems that surface in one project phase trigger changes to controls in subsequent phases. These findings are integrated into a model of the dynamics of control. Implications of these results are drawn, and directions for future research are suggested.

Abstract: The proliferation of information on the Internet poses a significant challenge on humans' limited attentional resources. To attract online users' attention, various kinds of animation are widely used on websites. Despite the ubiquitous use of animation, there is an inadequate understanding of its effect on attention. Focusing on flash animation, this study examines its effects on online users' performance and perceptions in both task-relevant and task-irrelevant information search contexts by drawing on the visual search literature and two theories from cognitive psychology. In the task-relevant context, flash is applied on the search target; while in the task-irrelevant context, flash is applied on a nontarget item. The results of this study confirm that flash does attract users' attention and facilitates quicker location of the flashed target item in tightly packed screen displays. However, there is no evidence that attracting attention increases recall of the flashed item, as is generally presumed in practice, and may even decrease the overall recall. One explanation is that when users have to use their limited attentional resources on suppressing the distraction of flash, they will have less mental resources to process information. Moreover, the results suggest that processing information about an item depends not only on the attention it attracts per se, but also on the attention that other items on the same screen attract. While flashing an item may not increase the recall of that item, it can reduce the recall of other items (especially the nontarget items) on the screen. Finally, flash has negative effects on users' focused attention and attitude towards using the website. These results have implications for website interface design, online product promotion, online advertising, and multimedia training systems, among others.

Abstract: Peer-to-peer (P2P) file sharing networks are an important medium for the distribution of information goods. However, there is little empirical research into the optimal design of these networks under real-world conditions. Early speculation about the behavior of P2P networks has focused on the role that positive network externalities play in improving performance as the network grows. However, negative network externalities also arise in P2P networks because of the consumption of scarce network resources or an increased propensity of users to free ride in larger networks, and the impact of these negative network externalities--while potentially important--has received far less attention.Our research addresses this gap in understanding by measuring the impact of both positive and negative network externalities on the optimal size of P2P networks. Our research uses a unique dataset collected from the six most popular OpenNap P2P networks between December 19, 2000, and April 22, 2001. We find that users contribute additional value to the network at a decreasing rate and impose costs on the network at an increasing rate, while the network increases in size. Our results also suggest that users are less likely to contribute resources to the network as the network size increases. Together, these results suggest that the optimal size of these centralized P2P networks is bounded--At some point the costs that a marginal user imposes on the network will exceed the value they provide to the network. This finding is in contrast to early predictions that larger P2P networks would always provide more value to users than smaller networks. Finally, these results also highlight the importance of considering user incentives--an important determinant of resource sharing in P2P networks--in network design.

Abstract: This paper analyzes the optimal choice of pricing schedules and technological deterrence levels in a market with digital piracy where sellers can influence the degree of piracy by implementing digital rights management (DRM) systems. It is shown that a monopolist's optimal pricing schedule can be characterized as a simple combination of the zero-piracy pricing schedule and a piracy-indifferent pricing schedule that makes all customers indifferent between legal usage and piracy. An increase in the quality of pirated goods, while lowering prices and profits, increases total surplus by expanding both the fraction of legal users and the volume of legal usage. In the absence of price discrimination, a seller's optimal level of technology-based protection against piracy is shown to be at the technologically maximal level, which maximizes the difference between the quality of the legal and pirated goods. However, when a seller can price discriminate, its optimal choice is always a strictly lower level of technology-based protection. These results are based on the following digital rights conjecture: that granting digital rights increases the incidence of digital piracy, and that managing digital rights therefore involves restricting the rights of usage that contribute to customer value. Moreover, if a digital rights management system weakens over time due to the underlying technology being progressively hacked, a seller's optimal strategic response may involve either increasing or decreasing its level of technology-based protection. This direction of change is related to whether the DRM technology implementing each marginal reduction in piracy is increasingly less or more vulnerable to hacking. Pricing and technology choice guidelines are presented, and some welfare implications are discussed.

Abstract: We use an economic model to formalize the complex relationships among IT investments, intermediate performance measures (e.g., product quality and output levels), and economic performance (e.g., productivity, profits, and consumer surplus). We demonstrate that a profit-maximizing monopolist invests in IT (modeled as changes in parametric characteristics of the firm) to design a better-quality product and charge a higher price. While this profit-maximizing adjustment generates more consumer surplus, it also increases production costs in a way that adversely affects productivity. In contrast, a simple model extension shows that when a firm is unwilling or unable to improve product quality, then IT investments result in suboptimal improvements in profits, an increase in consumer surplus, and an increase in productivity. Together, these models highlight the way in which product quality moderates the relationship between IT investments and economic performance. We also demonstrate that these relationships are robust to the socially optimal case in which a social planner chooses price and quality to maximize social welfare. In addition, we demonstrate that the results of the monopoly model hold when considering the design and development of products offered free of charge (e.g., free online content), but that provide indirect benefits to the firm (e.g., more advertising revenues).

Abstract: This paper presents an approach to organizational modeling that combines both agent-centric and activity-centric approaches. Activity-centric approaches to process modeling capture the mechanistic components of a process (including aspects of workflow, decision, and information), but agent-centric approaches capture specific aspects of the human component. In this paper, we explore an integrative viewpoint in which the transactional aspects of agent-centric concerns--for example, economic incentives for agents to perform--are integrated with decision and informational aspects of a process. To illustrate issues in this approach, we focus on modeling incentive mechanisms in a specific sales process and present results from an extensive simulation experiment. Our results highlight the importance of considering the effects of incentives when decision and informational aspects of a process undergo changes.

Abstract: Information technology (IT) security has emerged as an important issue in the last decade. To promote the disclosure and sharing of cyber-security information amongst firms, the US federal government has encouraged the establishment of many industry based Information Sharing & Analysis Centers(ISACs) under Presidential Decision Directive-63. We develop an analytical framework to investigate the competitive implications of sharing information about security breaches and investments in technologies which promote security. Using a game-theoretic model, we point out how firm and industry characteristics affect the incentives for information sharing amongst competing firms and their impact on firms’ profits. We find that security technologies and information sharing act as “strategic complements in equilibrium”. Our paper points out that by joining such alliances, firms can benefit from a “direct effect” which increases demand and a “strategic effect ” which alleviates price competition. Our results suggest that information sharing is more valuable when product substitutability is higher, suggesting that information is of greater value in more competitive industries. We also highlight that sharing security information is more valuable for larger firms and in larger industries. Finally we show that “demand-side spillover” effects boosts sharing levels and lead to higher prices. Conversely, “cost-based spillovers” might lead to lower sharing and lower technology investments.

Abstract: In this paper we address the problem of increasing software maintenance costs in a custom software development environment, and develop a stochastic decision model for the maintenance of information systems. Based on this modeling framework, we derive an optimal decision rule for software systems maintenance, and present sensitivity analysis of the optimal policy. We illustrate an application of this model to a large telecommunications switching software system, and present sensitivity analysis of the optimal state for major upgrade derived from our model. Our modeling framework also allows for computing the expected time to perform major upgrade to software systems.

Abstract: Embedded relationships with customers have been key in generating repeat business and economic advantage, especially in business-to-business settings. Such relationships are typically maintained through interpersonal interactions between customers and their providers. Lately, however, firms have been seeking to make their service operations more scalable by offering customers access to Internet-based, self-serve technology. This raises questions about the implications of inserting self-serve technology into embedded relationships. Recent research on the role of information technology (IT) within interfirm network relations suggests that relationships and the use of IT are complementary. However, most of this research focuses on the organizational level and fails to consider the instantiation of these interfirm relations by the actions and interactions of individual actors (e.g., customers and salespeople) representing their respective firms. In this paper, we explore the implications of using IT within interfirm relations through an analysis of customers' and sales representatives' (reps) work activities and interpersonal relationships. We apply a practice perspective that highlights how macrolevel phenomena such as interfirm relations are created and recreated through the microlevel actions taken by firm members. This analysis reveals that managing the complementarity between relationships and IT in practice is fraught with considerable tension. This study of WebGA, a bricks-and-clicks dotcom, highlights how the use of the self-serve technology made it more difficult for sales reps to build and maintain embedded relationships with their customers. The use of IT altered the nature and quality of information shared by the participants, undermined the ability of sales reps to provide consulting services to customers, reduced the frequency of their interaction, and prompted sales reps to expend social capital to promote customers' technology adoption. These changes produced intended and unintended shifts in the network relations enacted by WebGA and its customers, and raised serious challenges to the viability of WebGA's business model.

Abstract: This paper presents a project management policy in which the appearance of software faults during system construction is used to determine the timing of system integration activities (e.g., team meetings, analyzing modules for interface inconsistencies, system fault correction, and so on). System integration is performed only if a threshold fault count has been exceeded; otherwise, module development is allowed to continue. We derive an expression for calculating fault thresholds and analyze the policy to reveal the presence of three operating regions: (1) a region in which development should continue with no system integration, (2) a region in which system integration occurs if a threshold fault count has been exceeded, and (3) a region in which system integration should always take place. Analytical and numerical results demonstrate how the fault thresholds change with system complexity, team skill, development environment, and project schedule. We also show how learning that occurs during each round of system integration leads to less frequent integration in the future, and lower total construction effort. Simulation experiments reveal that the fault threshold policy can be applied even if several homogeneity assumptions in the model are relaxed, allowing for differences in the propensity among modules to accumulate faults and the effort needed to correct these faults. Finally, the fault threshold policy outperforms a fixed-release policy in which system integration occurs whenever a fixed number of modules has been released.

Abstract: Internet fraud has been on the rise in online consumer-to-consumer (C2C) auction markets, posing serious challenges to people's trust in electronic markets. Among various remedies to promote trust and reduce trader's risk, online escrow service has been proposed as a trusted third party to protect online transactions from Internet fraud. However, whether an escrow service constitutes a viable business model for a trusted third party to effectively block Internet fraud remains an open question. This research proposes a dynamic game model for online traders and a profit maximization model for the escrow service provider. Through the investigation of the optimal strategies of online traders, we explore the relationships among traders' decision making, escrow service fee rates, and adoption rates. We reveal the demand for escrow services and establish the optimal pricing rule for the escrow service provider. A numerical study based on the theoretical analysis is conducted to provide detailed guidelines of the model application for an escrow service provider and to explore if the escrow service is a viable business model in C2C auction markets.

Abstract: Focus on individual outsourcing decisions in IT research has often yielded contradictory findings and recommendations. To address these contradictions, we investigate a holistic, configurational approach with the prevailing universalistic or contingency perspectives in exploring the effects of IT outsourcing strategies on outsourcing success. Based on residual rights theory, we begin by identifying three dimensions of IT outsourcing strategies: degree of integration, allocation of control, and performance period. We then develop a model of fit-as-gestalt, drawing from literatures on strategy, governance, interorganizational relationships, and outsourcing.Next, based on data from 311 firms in South Korea, we test universalistic and contingency perspectives in explaining the relationship between IT outsourcing strategies and outsourcing success. We then identify three congruent patterns, or gestalts, of IT outsourcing strategies. We term these strategiesindependent, arm's-length, andembedded strategies. To establish the predictive validity of these gestalts and the viability of a configurational perspective, we then explore the effects of these congruent gestalts vis-A -vis noncongruent patterns on three dimensions of outsourcing success:strategic competence,cost efficiency, andtechnology catalysis. We also contrast the effects of each of the three gestalts on each of the three dimensions of outsourcing success. Our findings indicate the superiority of the configurational approach over universalistic and contingency perspectives in explaining outsourcing success.

Abstract: The decision processes surrounding investments in innovative information technology (IT) platforms are complicated by uncertainty about expected payoffs and irreversibilities in the costs of implementation. When uncertainty and irreversibility are high, concepts from real options should be used to properly structure the evaluation and management of investment opportunities, and thereby capture the value of managerial flexibility. However, while innovation researchers have posited that option value can influence the motivations of early adopters, and options researchers have identified emerging IT as a promising area for application of options valuation techniques, there has yet to be a systematic theoretical integration of work on IT innovation and real options.This paper seeks to fill this gap by developing a model of the determinants of option value associated with investments in innovative IT platforms. In so doing, the model addresses a central question in the innovation field: When should a firm take a lead role in innovation with emerging technologies? The analysis begins with an explanation of real options analysis and how it differs from conventional approaches for evaluating new technologies. Then a set of 12 factors--drawn from 4 complementary perspectives on organizational innovation (technology strategy, organizational learning, innovation bandwagons, and technology adaptation)--is synthesized into a model of the option value of IT platform investments. Rationales are provided to explain the direct effects of these factors on option value, and selected interactions among the factors are also considered. Finally, the implications of the model are presented in three areas: predicting IT platform initiation and adoption, valuing IT platform options, and managing IT platform implementation.

Abstract: Today, more than ever before, organizations are faced with the task of processing volumes of information under more uncertain and more competitive environments. This study investigates the impact of environmental uncertainty and task characteristics on user satisfaction with data by using IS and organizational theories. Responses were matched from 77 CEOs and 166 senior managers, who were end users of IS. The partial least squares technique indicated that environmental uncertainty has a positive impact on task characteristics. Task characteristics have a direct and mediating impact on user satisfaction with data. Our findings also demonstrated that user satisfaction with data could be better understood by overlapping IS and organizational theories, rather than by treating the subject matter in disjoint fields. The paper concludes with discussions and implications for researchers and practitioners.

Abstract: We study the process by which model-based decision support systems (DSSs) influence managerial decision making in the context of marketing budgeting and resource allocation. We focus on identifyingwhether andhow DSSs influence the decision process (e.g., cognitive effort deployed, discussion quality, and decision alternatives considered) and, as a result,how these DSSs influence decision outcomes (e.g., profit and satisfaction both with the decision process and the outcome). We study two specific marketing resource allocation decisions in a laboratory context: sales effort allocation and customer targeting. We find that decision makers who use high-quality, model-based DSSs make objectively better decisions than do decision makers who only have access to a generic decision tool (Microsoft Excel). However, their subjective evaluations (perceptions) of both their decisions and the processes that lead to those decisions do not necessarily improve as a result of DSS use. And expert judges, serving as surrogates for top management, have a difficult time assessing the objective quality of those decisions.Our results suggest that what managers get from a high-quality DSS may be substantially better than what they see. To increase the inclination for managerial adoption and use of DSS, we must get users to "see" the benefits of using a DSS. Our results also suggest two ways to bridge the perception-reality gap: (1) improve the perceived value of the decision process by designing DSSs both to encourage discussion (e.g., by providing explanation and support for alternative recommendations) as well as to reduce the perceived complexity of the problem so that managers invest more cognitive effort in exploring additional options and (2) provide feedback on the likely market/business outcomes of various decision options.

Abstract: The widespread use of the Internet has led to the emergence of numerous information intermediaries that bring buyers and sellers together and leverage their knowledge of the marketplace to provide value-added services. Infomediaries offer matching services that facilitate establishment of a buyer-seller agreement, and value-added services that either provide a standalone benefit or enhance benefits from matching services. This paper develops and analyzes economic models of intermediaries to examine their pricing and product line design strategies. Intermediaries provide aggregation benefits: Buyers find an intermediary's service more valuable if it provides access to more sellers, and sellers value it more if it provides access to more buyers, but also when they compete with fewer sellers. Due to this unique combination of network effects, we find that an intermediary has stronger incentives to provide quality-differentiated versions of its service relative to other information goods sellers. When buyers have constant marginal valuations for service quality, the intermediary should offer only two levels of service. While it is optimal for the intermediary to offer two levels of service, increasing the quality of the low-level service reduces the intermediary's profits due to increased cannibalization of the premium service. Hence, the optimal menu consists of a basic matching service and a premium service that includes matching and value-added services. The intermediary's profits are larger when positive network effects are stronger, and lower when negative network effects are stronger.