Editorial Introduction 1(3)
Erik K. Clemons, Bruce W. Weber, Jeffrey Sampler, & James Short, Guest Editors
International Journal of Electronic Commerce
Volume 1, Number 3, Spring 1997, pp. 3 – 6.
The five papers in this special issue were all initially presented at the Workshop on Information Systems Economics (WISE) in London. The conference remains true to the model originally envisioned by Chris Kemerer and Yannis Bakos when they ran the first WISE in Boston in 1989: The conference presents the best work in progress in the field of information systems economics and competitive strategy. As a presentation of works in progress, there rarely are papers, and there are always lively discussions. We selected work that we felt engendered the most lively discussion and then encouraged the authors to present their work quickly and informally for publication in the International Journal of Electronic Commerce. In his introductory article in the premier issue of this journal, Editor-in-Chief Vladimir Zwass suggested that the journal would focus on electronic commerce broadly construed. It would encompass far more than electronic marketing; indeed, through electronic markets and electronic hierarchies, it would encompass virtually all impacts of technology on commerce. The papers in this issue address the impacts of emerging technology upon distribution (electronic markets) and upon coordination and productivity (electronic coordination or electronic hierarchies).
The first paper in this issue, “An Exploratory Study of the Emerging Role of Electronic Intermediaries,” by Joseph P. Bailey and J. Yannis Bakos, includes a novel model for pricing information goods that can be sold and distributed electronically. Their work demonstrates that, under even the most modest assumptions of consumer heterogeneity, producer profits can be maximized and social (dead weight) loss can be minimized by combining different products into bundles and selling these bundles well below the sum of the prices of the individual components. This applies well to industries such as cable television bundles of software product suites; we are currently exploring its application to very different industries such as bundling different forms of insurance coverage.
The second paper, “Adverse Self-Selection and the Changing Competitive Balance between Stock Exchanges and Off-Exchange Trading Venues,” by Eric K. Clemons and Bruce W. Weber, examines how electronic trading changes the nature of competition among trading venues and the strategies available to established securities markets. Historically, one of the greatest strengths available to an established exchange was its liquidity: There was a real financial advantage to trading where other traders traded. Technology has recently created contestable markets for market services, and new off-exchange trading systems are now able to attract only those customers who are profitable for the exchanges or their financial intermediaries.
The third and fourth papers deal with the impact of information technology upon agency relationships. “Communications in Hierarchical Organizations and Standards Policies for Information Technology,” by Rajiv M. Dewan, Abraham Seidmann, and Shankar Sundaresan, explores ways in which organizations can develop standards for more effective electronic communication within the organization and examines the differences between mandating standards for systems, mandating the mechanism by which each group can choose its systems, and allowing each group to make its first best individual choice.
“Agency Relationships and Monitoring in Electronic Commerce,” by David C. Croson and Michael Jacobides, extends the concept of agency cost to include agency value. Agency-cost theory traditionally assumes that any loss to the principal is a cost when, indeed, it may simply represent an unintended and unverifiable transfer payment from the principal to the agent. Croson and Jacobides examine agency relationships, considering both the question of creating value as well as the question of allocating this value to the two parties in the relationship, and examine the impact of power to initiate and power to terminate a change in a relationship. As electronic commerce transforms the nature of business-to-business cooperation, and as agency relationships increasingly replace vertical integration, future extensions to this work will be profoundly important. The final paper, “Direct and Indirect Impacts of Information Technology Applications on Productivity: A Field Study,” by Tridas Mukhopadhyay and Vandana Mangal, examines the impacts of information technology on productivity and performance. It examines both direct impacts on productivity (e.g., processing time) and indirect impacts (e.g., staff turnover).
Our challenge for this issue was to preserve the excitement and timeliness of WISE, while preparing an archival record of what we paradoxically call “finished work in progress.” That is, we pushed our authors to produce papers rapidly that summarize the work presented in London and that incorporates the comments and results of lively interaction with their fellow researchers at that conference; we did not go through multiple rounds of refereeing, nor did we allow our authors the luxury of making major extensions to the work they presented.
Eric K. Clemons is Professor of Operations and Information Management at The Wharton School of the University of Pennsylvania. His research and teaching interests include strategic information systems, information economics, the changes that information technology enables in the competitive balance between new entrants and established, previously dominant industry participants, and the impact of information technology on procurement and outsourcing. Industries of focus include international securities markets and financial services firms, consumer packaged goods retailing, telecommunications, and travel. He specializes in assessing the competitive implications of information technology, and in managing the risk of large-scale implementation efforts. Dr. Clemons is also Project Director for the Reginald H. Jones Center’s Sponsored Research Project on “Information: Industry Structure and Competitive Strategy” and senior fellow in the Wharton Financial Institutions Center. His education includes an S.B. in physics from MIT and an M.S. and Ph.D. in operations research from Cornell University. Dr. Clemons has twenty years on the faculties of Wharton, Cornell, and Harvard, and consulting experience in the private and public sectors both domestically and abroad. Dr. Clemons is currently a member of the editorial board of the Journal of Management Information Systems and the International Journal of Electronic Commerce. He served on the Congressional Office of Technology Assessment study of securities markets and on the Quality of Markets Advisory Board of the London Stock Exchange.
Bruce W. Weber is Assistant Professor in the Information Systems Department of the Stern School of Business at New York University, where he has been a member of the faculty since 1992. He has an A.B. in applied mathematics from Harvard University and an M.A. and Ph.D. in decision sciences from the Wharton School of the University of Pennsylvania. His research examines new trading mechanism designs and market structure innovations in the securities industry and the effects of information systems on the financial-services sector. A theme emerging from his work is that technologies that facilitate broad market access, market transparency, and trade-cost signaling can play critical roles in improving market quality and changing economic outcomes. Dr. Weber teaches M.B.A. and executive education courses on financial information systems, managing information technology, and a joint course with NYU’s finance department on equity markets: trading and structure. He has consulted for several major securities exchanges and financial firms in the United States and overseas. He is on the board of directors of the Futures Industry Association Operations and Technology Division. Prior to joining the Stern faculty, he held a faculty position in Information Management at the London Business School and, in 1995, was a visiting faculty member in the Operations and Information Management Department at the Wharton School.
Jeffrey L. Sampler is Assistant Professor of Information Management at the London Business School. He received his Ph.D. in 1992 from the University of Pittsburgh. His research interests include electronic commerce and the relationship between information technology and knowledge management, with its implications for strategy and organizational design. His work has appeared or is forthcoming in such journals as Accounting, Management, and Information Technology, Journal of Management Information Systems, and MIS Quarterly. His paper with John Cross and Michael Earl on the “Transformation of IT at British Petroleum Exploration” won first prize in the Society of Information Managers’ 1996 paper competition. Dr. Sampler is currently researching the Internet as a driving force in the transformation of many industries. In particular, he is studying the development of new, small start-up firms and how they are altering the pace of innovation and challenging traditional industry leaders.
James Short is Associate Professor of Strategy and Information Management at the London Business School and Director of the School’s new CyberLab media laboratory. He joined the faculty in 1993. Previously, he held posts at the MIT Sloan School of Management and at Harvard University’s Office for Information Technology. Dr. Short’s current research and teaching interests are in market creation and growth strategies for new information businesses, and the protection of intellectual capital and property rights in cyberspace. With Tom Davenport, he published one of the two inaugural articles on business process redesign, winning Sloan Management Review’s best paper of the year award in 1991. He holds an S.B., an S.M., and a Ph.D. from the Massachusetts Institute of Technology.