THE IMPACT OF MALICIOUS AGENTS ON THE ENTERPRISE SOFTWARE INDUSTRY 1

Abstract In this paper, a competitive software market that includes horizontal and quality differentiation, as well as a negative network effect driven by the presence of malicious agents, is modeled. Software products with larger installed bases, and therefore more potential computers to attack, present more appealing targets for malicious agents. One finding is that software firms may profit from increased malicious activity. Software products in a more competitive market are less 1 Peter Gutmann was the accepting senior editor for this paper. Lech Janczewski served as the associate editor. The appendix for this paper is located in the "Online Supplements" section of the MIS Quarterly's website (http://www.misq.org). likely to invest in security, while monopolistic or niche products are likely to be more secure from malicious attack. The results provide insights for IS managers considering enterprise software adoption

The Impact of Malicious Agents on the Enterprise Software Industry

In this paper, a competitive software market that includes horizontal and quality differentiation, as well as a negative network effect driven by the presence of malicious agents, is modeled. Software products with larger installed bases, and therefore more potential computers to attack, present more appealing targets for malicious agents. One finding is that software firms may profit from increased malicious activity. Software products in a more competitive market are less likely to invest in security, while monopolistic or niche products are likely to be more secure from malicious attack. The results provide insights for IS managers considering enterprise software adoption

Linking Pollution Toxicity and Human Exposure to Firm Idiosyncratic Risk

Despite significant academic literature examining the link between pollution and firm performance, the firm risk implications of releasing pollution where humans face exposure has received very little attention from the academic community. In this study we use information processing theory to examine the impact of not only the toxicity level of a firm\u27s emissions, but also the extent of human exposure to those emissions. We consider the extent to which both pollution performance and the pollution dispersion pathway influence idiosyncratic risk for U.S. firms. Our findings suggest that the quantity of pollution alone has no direct impact on a firm\u27s idiosyncratic risk, but that the type of pollution and its degree of human exposure, which we term ‘environmental risk’, highly influences idiosyncratic risk. Moderators of the relationship between environmental risk and idiosyncratic risk are also examined and discussed

Design for Reusability and Product Reuse Under Radical Innovation

Many industries, including consumer electronics and telecommunications equipment, are characterized with short product life-cycles, constant technological innovations, rapid product introductions, and fast obsolescence. Firms in such industries need to make frequent design changes to incorporate innovations, and the effort to keep up with the rate of technological change often leaves little room for the consideration of product reuse. In this paper, we study the design for reusability and product reuse decisions in the presence of both a known rate of incremental innovations and a stochastic rate of radical innovations over time. We formulate this problem as a Markov Decision Process. Our steady-state results confirm the conventional wisdom that a higher probability of radical innovations would lead to reductions in the firm's investments in reusability as well as the amount of reuse the firm ends up doing. Interestingly, the design for reusability decreases much more slowly than the actual reuse. We identify some specific scenarios, however, where there is no tradeoff between the possibility of radical innovations and the firms reusability and reuse decisions. Based on over 425,000 problem instances generated over the entire range of model parameters, we also provide insights into the negative impact of radical innovations on firm profits, but show that the environmental impact of increased radical innovation is not necessarily negative. Our results also have several implications for policy makers seeking to encourage reuse