Electronic Markets, Search Costs and Firm Boundaries

We study how firm boundaries are affected by the reduction in search costs when business-to-business electronic markets are adopted. Our paper analyzes a multi-tier industry in which upstream parts suppliers incur procurement search costs, and downstream manufacturers incur incentive contracting costs with these parts suppliers. We develop a model that integrates search theory into the hidden-action principal-agent model and characterize the optimal contract, showing that the delegation of search results in an outcome analogous to an effective increase in the search cost of the intermediary, reflected in the magnitude of the cutoff price in the second-best stopping rule. This contract is used to specify the manufacturer's make versus buy decision, and to analyze how the technological changes associated with electronic markets affect vertical organizational scope. Our main results show that when search is information-intensive, electronic markets will result in constant decreases in search costs that reduce the vertical scope of organizations. In contrast, when search is communication-intensive, electronic markets will result in proportionate reductions in search costs that lead to an increase in vertical integration; the latter outcome also occurs if search costs converge. We also discuss the implications of our results for the general problem of designing contracts that optimally delegate costly search to an intermediaryfirm boundaries, vertical integration, search, moral hazard, incentives, principal-agent, electronic markets, B2B markets.

Electronic Markets, Search Costs and Firm Boundaries

We study how electronic markets that facilitate broader inter-firm transactions affect the vertical scope of emerging IT-enabled extended enterprises. We do so by modeling firms in a three-tier value chain who are each connected to a common electronic market that facilitates direct business transactions across tiers, and that lowers the search costs associated with finding an appropriate trading partner for each of them. The extent to which search costs are reduced depends on the complexity of B2B search, and the nature of the supporting technologies that the electronic market facilitates. Variation in search costs affect firms across the value chain in three key ways: by a change in the transaction costs of interaction between firms; by a change in the contracting costs associated with outsourcing owing to changes in the costs of moral hazard for delegated search, and by a change in the price dispersion of upstream input commodities. We capture each of these effects in a new model that integrates search theory into the principal-agent framework, and establish that the optimal outsourcing contract has a simple "all or nothing" performance-based structure under fairly general assumptions. We then apply this model to contrast the effect that different information technologies have on the relative B2B search costs of different firms in the value chain, contrasting the predicted changes of proportionate, constant and convergent changes in search costs. When integrated with a detailed analysis of the nature of B2B search, these results predicts that when B2B search is information-intensive, electronic markets will facilitate an increase in outsourcing, market-based transactions and a reduction in the vertical scope of extended enterprises. In contrast, when B2B search is primarily communication-intensive, electronic markets will lead to tighter integration and an increase in the vertical scope of the extended enterprise. Our research suggest that the nature of the information technologies and of the business activities supported by an electronic market are crucial determinants of the organizational and industry changes they induce, and our results have important implications for a variety of industries in which both technological and agency issues will influence the eventual success of global IT-facilitated extended enterprise initiatives.Information Systems Working Papers Serie

Neural Machine Translation for Low Resource Languages using Bilingual Lexicon Induced from Comparable Corpora

Resources for the non-English languages are scarce and this paper addresses this problem in the context of machine translation, by automatically extracting parallel sentence pairs from the multilingual articles available on the Internet. In this paper, we have used an end-to-end Siamese bidirectional recurrent neural network to generate parallel sentences from comparable multilingual articles in Wikipedia. Subsequently, we have showed that using the harvested dataset improved BLEU scores on both NMT and phrase-based SMT systems for the low-resource language pairs: English--Hindi and English--Tamil, when compared to training exclusively on the limited bilingual corpora collected for these language pairs.Comment: 8 pages, 3 figures, 4 tables, NAACL-SRW (2018

Negative Blogs, Positive Outcomes: When Should Firms Permit Employees toBlog Honestly

Weblogs or blogs have recently received a lot of attention, especially in the business community, with a number of firms encouraging their employees to publish blogs to reach out and connect to a wider audience. It is beginning to be recognized that employee blogs can cast a firm in either a positive or a negative light, thereby enhancing or harming the firm’s reputation. Paradoxically, under certain conditions negative postings by employees can actually help the overall reputation of the firm. The rationale for this is that negative posts raise the credibility of an employee blog and attract more readers, who then will also be exposed to the positive posts on the blog. Drawing from the literature on customer advocacy and the stage model theory of information processing in cognitive psychology, we develop a model to decipher the relationship between the extent of negative posts and the overall positive Word of Mouth (WOM) generated by the employee blogs for the firm. An empirical model is developed to account for the inherent non-linearities, endogeneity and unobserved heterogeneity concerns, and potential alternative specifications. Our results suggest that negative posts act as a catalyst to increase the readership of an employee blog, with readership increasing exponentially in the initial stages and then stabilizing. The empirical findings are used to generate an analytical framework that firms can use to formulate employee blogging policies. We illustrate the application of the framework using blogging data from Sun Microsystems

The effects of social media based brand communities on brand community markers, value creation practices, brand trust and brand loyalty

Social media based brand communities are communities initiated on the platform of social media. In this article, we explore whether brand communities based on social media (a special type of online brand communities) have positive effects on the main community elements and value creation practices in the communities as well as on brand trust and brand loyalty. A survey based empirical study with 441 respondents was conducted. The results of structural equation modeling show that brand communities established on social media have positive effects on community markers (i.e., shared consciousness, shared rituals and traditions, and obligations to society), which have positive effects on value creation practices (i.e., social networking, community engagement, impressions management, and brand use). Such communities could enhance brand loyalty through brand use and impression management practices. We show that brand trust has a full mediating role in converting value creation practices into brand loyalty. Implications for practice and future research opportunities are discussed

Exclusive Licensing in Complementary Network Industries

This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform

The Flavonoid Metabolite 2,4,6-Trihydroxybenzoic Acid Is a CDK Inhibitor and an Anti-Proliferative Agent: A Potential Role in Cancer Prevention

Flavonoids have emerged as promising compounds capable of preventing colorectal cancer (CRC) due to their anti-oxidant and anti-inflammatory properties. It is hypothesized that the metabolites of flavonoids are primarily responsible for the observed anti-cancer effects owing to the unstable nature of the parent compounds and their degradation by colonic microflora. In this study, we investigated the ability of one metabolite, 2,4,6-trihydroxybenzoic acid (2,4,6-THBA) to inhibit Cyclin Dependent Kinase (CDK) activity and cancer cell proliferation. Using in vitro kinase assays, we demonstrated that 2,4,6-THBA dose-dependently inhibited CDKs 1, 2 and 4 and in silico studies identified key amino acids involved in these interactions. Interestingly, no significant CDK inhibition was observed with the structurally related compounds 3,4,5-trihydroxybenzoic acid (3,4,5-THBA) and phloroglucinol, suggesting that orientation of the functional groups and specific amino acid interactions may play a role in inhibition. We showed that cellular uptake of 2,4,6-THBA required the expression of functional SLC5A8, a monocarboxylic acid transporter. Consistent with this, in cells expressing functional SLC5A8, 2,4,6-THBA induced CDK inhibitory proteins p21Cip1 and p27Kip1 and inhibited cell proliferation. These findings, for the first time, suggest that the flavonoid metabolite 2,4,6-THBA may mediate its effects through a CDK- and SLC5A8-dependent pathway contributing to the prevention of CRC

Negative Blogs, Positive Outcomes: When Should Firms Permit Employees toBlog Honestly

Weblogs or blogs have recently received a lot of attention, especially in the business community, with a number of firms encouraging their employees to publish blogs to reach out and connect to a wider audience. It is beginning to be recognized that employee blogs can cast a firm in either a positive or a negative light, thereby enhancing or harming the firm’s reputation. Paradoxically, under certain conditions negative postings by employees can actually help the overall reputation of the firm. The rationale for this is that negative posts raise the credibility of an employee blog and attract more readers, who then will also be exposed to the positive posts on the blog. Drawing from the literature on customer advocacy and the stage model theory of information processing in cognitive psychology, we develop a model to decipher the relationship between the extent of negative posts and the overall positive Word of Mouth (WOM) generated by the employee blogs for the firm. An empirical model is developed to account for the inherent non-linearities, endogeneity and unobserved heterogeneity concerns, and potential alternative specifications. Our results suggest that negative posts act as a catalyst to increase the readership of an employee blog, with readership increasing exponentially in the initial stages and then stabilizing. The empirical findings are used to generate an analytical framework that firms can use to formulate employee blogging policies. We illustrate the application of the framework using blogging data from Sun Microsystems

Exclusive Licensing in Complementary Network Industries

This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform