MIS Research Center Director at Carlson School Wins INFORMS Research Prize

Minneapolis (November 1, 2003) -- On October 19, 2003, Professor Robert J. Kauffman, Information and Decision Sciences Department Chair and Director of the MIS Research Center, and Professor Hamid Mohtadi, Economics Department, University of Wisconsin, Milwaukee, and Visiting Professor in the Applied Economics Department of the College of Agriculture, Food and Environmental Studies, received the "Best Research Paper Award" at the 2003 INFORMS Conference on Information Systems and Technology (INFORMS CIST). Their paper, entitled "Analyzing Interorganizational Information Sharing Strategies for B2B E-Commerce Supply Chain," evaluates the strategy choices of buyer firms in e-procurement and supply chain management that would like to maximize the business value of investing in information technologies that permit sharing of final demand forecasts for the goods they sell. The authors show the circumstances under which it is appropriate for a competitive buyer firm to withhold information, as well as when it is appropriate to adopt information technology that permits sharing it. Their primary results suggest that higher levels of buyer firm uncertainty about demand and supply side variances, possibly leading to costly excess inventory or stock-outs, give it the rationale to withhold information and still be better off, if there is a chance that the supplier firm will exploit the buyer firm's information in setting prices. The results apply in many industry procurement settings where the buyer firm does not have large market power, and the supplier may be able to dictate supply prices in the short run. The results are especially applicable to single-sided information sharing systems solutions, such as vendor-managed inventory (VMI). The authors are exploring extensions of the work that will treat double-sided information sharing, for example, as occurs with collaborative planning, forecasting and replenishment (CPFR) systems.

Professors Kauffman and Mohtadi's article is one of several in this new line of research on information technology in supply chain management. A closely related work is "Information Technology in B2B E-Procurement: Open Vs. Proprietary Systems." This paper was selected as the "Best Research Paper in B2B E-Commerce Mini-Track" at the 26 th Hawaii International Conference on Systems Science (HICSS-26), in January 2002, and is now under review at a leading journal. It provides managerial guidance for senior executives who are faced with making large investments in proprietary extranet and electronic data interchange systems, as well as the new Internet-based electronic markets.

Three related papers in this research stream involve recent Carlson School Doctoral Program graduate, Professor Qizhi Dai, now of Drexel University. She and Professor Kauffman guest-edited an early 2002 special issue of Electronic Markets. Their special issue theme article, "B2B E-Commerce Revisited: Leading Perspectives on the Key Issues and Research Directions," is the product of pre-doctoral thesis proposal field study interviews of 15 senior managers, university research center directors and other leading research authorities. It identifies the managerial and research issues associated with technology platform investment, knowledge and information sharing, ownership and governance of interorganizational supply chain IS, and maps out a perspective for research that reflects recent theoretical developments in strategy, economics and operations management.

A follow up paper, "Business Models for Internet-Based E-Procurement Systems and B2B Electronic Markets: An Exploratory Assessment," appeared in International Journal of Electronic Commerce in Summer 2002. It establishes the theoretical basis for the authors' perspective on "business process perfection" in e-procurement. The article evaluates the multiple tactics that B2B electronic market providers of procurement services have been undertaking to ensure their survival in the market.

Another article "To Be or Not to B2B? An Evaluative Model for E-Procurement Channel Adoption" (forthcoming in Information Technology and Management in 2004), develops managerial guidance through the specification of a game-theoretic analytical model. Its managerial results point to the importance of "negative network externalities" as a limiting factor for the adoption of Internet-based e-procurement solutions by supplier firms. As each new supplier adopts, conditions become more favorable for the buyer firm to obtain lower supply prices from its e-procurement network. As a result, according to Professors Dai and Kauffman, there is a likelihood that good technology solutions may stall out in the market. The authors show how to use a supplier adoption subsidy policy to push the development of a procurement network beyond the critical point to ensure viability, while taking into consideration important aspects of the costs and benefits of different e-procurement channel choices.

In addition to their theory-building and analytical modeling work, Professors Dai and Kauffman recently completed a major empirical study of the strategic alliance formation behavior and interfirm governance choices of B2B e-market firms and their business partners. The paper is "Understanding B2B E-Market Alliances," and was presented at the Workshop on IS and Economics (WISE) in Barcelona, Spainin December 2002. Consistent with their proposed "business process perfection theory," the authors argue that B2B e-market intermediaries will be observed to form alliances that create "functionality" and "business value" for market members that is consistent with what is demanded for second-generation electronic procurement intermediation. Instead of the basic market functions of search cost reduction, lower prices, transaction matching and settlement, recent demands in the market have migrated to systems integration services and technology adaptation in the absence of standards, management consulting for refining procurement operations. Their empirical results confirm the efficacy of the theoretical predictions.

Professor Kauffman and another IDS PHD Program colleague, Kunsoo Han, are in the process of extending this research stream to include the coverage of firm strategies for the ownership of interorganizational systems. Together with Barrie R. Nault, holder of the Robson Professorship at the University of Calgary, they released a new article in Spring 2003: "Who Should Own 'IT'? Ownership and Incomplete Contracts in Interorganizational Systems." The authors discuss multiple theoretical perspectives for determining interorganizational systems investments, including Hart and Moore's (1990) theory of incomplete contracts. The article applies this thinking to investments in vendor-managed inventory systems, and suggests the importance of adopting appropriate evaluation perspectives and methods, so as to reduce the likelihood of IT underinvestment.