An Empirical Investigation of Web Site Use Using a Commitment‐Based Model

Companies throughout industry are interested in retaining existing customers, because customers' continuous consumption of products and services is critical to the long‐term value propositions of most organizations. Thus, decision‐making strategies that promote continuous use and customer retention are of research interest, both theoretically and practically. In the present research, we investigate one important area of continuous usage, that of Web site use. In particular, we use several theories of commitment to understand how an individual's decision to continue to use a Web site is influenced by his or her commitment toward that Web site and the vendor that supports it. Results derived from data collected from 335 users of a variety of Web sites indicated that affective commitment, calculative commitment, quality of alternatives, and trust were significantly associated with an individual's behavioral intention to continue to use a Web site. Implications for customer retention and decision‐making strategies are discussed.     

Feedback Mechanisms,Judgment Bias,and Trust Formation in Online Auctions*

Online markets, like eBay, Amazon, and others rely on electronic reputation or feedback systems to curtail adverse selection and moral hazard risks and promote trust among participants in the marketplace. These systems are based on the idea that providing information about a trader's past behavior (performance on previous market transactions) allows market participants to form judgments regarding the trustworthiness of potential interlocutors in the marketplace. It is often assumed, however, that traders correctly process the data presented by these systems when updating their initial beliefs. In this article, we demonstrate that this assumption does not hold. Using a controlled laboratory experiment simulating an online auction site with 127 participants acting as buyers, we find that participants interpret seller feedback information in a biased (non‐Bayesian) fashion, overemphasizing the compositional strength (i.e., the proportion of positive ratings) of the reputational information and underemphasizing the weight (predictive validity) of the evidence as represented by the total number of transactions rated. Significantly, we also find that the degree to which buyers misweigh seller feedback information is moderated by the presentation format of the feedback system as well as attitudinal and psychological attributes of the buyer. Specifically, we find that buyers process feedback data presented in an Amazon‐like format—a format that more prominently emphasizes the strength dimension of feedback information—in a more biased (less‐Bayesian) manner than identical ratings data presented using an eBay‐like format. We further find that participants with greater institution‐based trust (i.e., structural assurance) and prior online shopping experience interpreted feedback data in a more biased (less‐Bayesian) manner. The implications of these findings for both research and practice are discussed.     

Understanding the Determinants of Service Channel Preference in the Early Stages of Adoption: A Social Cognitive Perspective on Online Brokerage Services*

In today's increasingly technology‐mediated world, individuals are often confronted with a decision of whether to obtain services through online, self‐service technologies or traditional, nontechnological alternatives. Understanding the mechanisms by which consumers choose among these competing service channels represents an important concern for organizations, consumers, and Web site designers. This study develops a research model based on Social Cognitive Theory to explain and predict service channel preferences that arise in the early stages of adoption, before a consumer conducts business using a particular channel. The model is subsequently tested in the brokerage services context, using observations obtained via survey. Given the growing popularity of online investing combined with the challenging prospect of making optimal decisions in an inherently risky environment, the context offers insights of practical and theoretical importance. The results suggest that task‐specific self‐efficacy beliefs serve as the activating mechanism kicking off a chain of psychological events that entice consumers to favor a particular service channel. Higher levels of self‐efficacy induce individuals to prefer the online approach. In addition to its direct effect on preference for the online service channel, higher levels of self‐efficacy influence one's propensity to take risks and expectations of performance‐oriented rewards, which, in turn, sway consumers to favor the online service channel. Furthermore, self‐efficacy and perceptions concerning the credibility of online information interact to affect service channel preference. Consumers are more likely to prefer the online service channel when they view themselves as capable and perceive online sources to be credible. Implications for theory and practice are discussed in light of the findings.     

Usability of Online Services: The Role of Technology Readiness and Context*

An important prerequisite for the success of any online service is ensuring that customers' experience—via the interface—satisfies both sensory and functional needs. Developing interfaces that are responsive to customers' needs requires a perspective on interface design as well as a deep understanding of the customers themselves. Drawing upon research in consumer behavior concerning consumer beliefs about technology, we deploy an alternative way to describe customers based on psychographic characteristics. Technology readiness (TR), a multidimensional psychographic construct, offers a way to segment online customers based upon underlying positive and negative technology beliefs. The core premise of this study is that the beliefs form the foundation for expectations of how things should work and how specific online service interfaces are evaluated by customers. At the same time, usability evaluations of specific online services might be contingent on contextual factors, specifically the type of site (hedonic vs. utilitarian) and access method (Web vs. wireless Web). The aspects of usability examined here are those incorporated into the usability metric and instrument based on the Microsoft Usability Guidelines (MUG). The results of an empirical study with 160 participants indicate that (i) TR customer segments vary in usability requirements and (ii) usability evaluations of specific online service interfaces are influenced by complex interactions among site type, access method, and TR segment membership. As organizations continue to expand their online service offerings, managers must recognize that the interface exists to serve the customers, so their design must be matched to market needs and TR.     

Consumer trust in e-commerce in the United States,Singapore and China

This study examines the antecedents and consequences of consumer trust in the United States, Singapore and China. The results show that reputation and system assurance of an Internet vendor and consumers’ propensity to trust are positively related to consumer trust. Consumers’ trust has a positive relationship with attitude and a negative relationship with perceived risk. Implications of the results are discussed.     

Incentives in a Stage‐Gate Process

Many large organizations use a stage‐gate process to manage new product development projects. In a typical stage‐gate process project managers learn about potential ideas from research and exert effort in development while senior executives make intervening go/no‐go decisions. This decentralized decision making results in an agency problem because the idea quality in early stages is unknown to the executive and the project manager must exert unobservable development effort in later stages. In light of these challenges, how should the firm structure incentives to ensure that project managers reveal relevant information and invest the appropriate effort to create value? In this study, we develop a model of adverse selection in research and moral hazard in development with a go/no‐go decision at the intervening gate. Our results show that the principal's uncertainty regarding early‐stage idea quality—a term we refer to as idea risk—alters the effect of late‐stage development risk. The presence of idea risk can alter the incentives offered to the agent and may lead the principal to reject projects that otherwise seem favorable in terms of positive net present value. A simulation of early‐stage ideas, found through search on a complex landscape, shows that the firm can mitigate the negative effects of idea risk by encouraging breadth of search and high tolerance for failure.     

Modeling Reputation as a Time‐Series: Evaluating the Risk of Purchase Decisions on eBay*

Reputation systems based on buyer feedback play an important role in today's online markets. In this article, we provide a rigorous methodology to establish a relationship between a seller's feedback history and risk of default. We validate this method against eBay's reputation system, using a dataset of terminated users (Not‐A‐Registered‐User or NARU) and the feedback left for them by buyers. By treating feedback rating data as a function of time, we characterize the tendency of change in seller feedback ratings in order to predict the behavior of a seller. We find that NARU sellers have significantly more negative feedback in their final weeks. Applying functional principal component analysis and classification tree methods, we find that when projecting the feedback data to an appropriate space, NARU and non‐NARU sellers can be distinguished at better than 92% accuracy. We use this to provide a quantitative mechanism for evaluating the risk of trading with a seller who has less than perfect feedback, and offer advice on how much a buyer should offer to pay, given an asking price on a commodity item and a seller's feedback history.     

The Influence of Cost and Quality Priorities on the Propensity to Outsource Production*

Outsourcing of production has escalated over the past decade due to unprecedented competition and worldwide access to low‐cost labor markets. This article examines how cost and quality priorities—two key attributes of manufacturing strategy—influence a manufacturer's propensity to outsource. By doing so, we bridge the existing gap between research on manufacturing strategy and firm boundaries. We develop a theory‐based model that links a manufacturer's cost and quality priorities to its plans to outsource production. Our empirical analyses, based on survey data obtained from 867 manufacturing business units, control for firm‐specific factors previously shown to impact outsourcing, including asset specificity, uncertainty, and current capabilities in cost and quality. We found that the competitive priority placed on cost played an integral role in sourcing decisions, while, surprisingly, conformance quality priorities did not. The cost result is consistent with our expectations and observations in practice. The significant effect of cost priority on outsourcing shows that any theory of firm boundaries that fails to consider competitive priorities is incomplete. The finding regarding quality, which was counter to our expectations, may partially explain why there is an emergence of so many nonconforming products associated with outsourcing. Taken together, our results provide theoretical insights for future research into how manufacturing managers can improve their decision making on outsourcing production.     

Why Competition from a Multi‐Channel E‐Tailer Does Not Always Benefit Consumers*

Empirical studies have delivered mixed conclusions on whether the widely acclaimed assertions of lower electronic retail (e‐tail) prices are true and to what extent these prices impact conventional retail prices, profits, and consumer welfare. For goods that require little in‐person pre‐ or postsales support such as CDs, DVDs, and books, we extend Balasubramanian's e‐tailer‐in‐the‐center, spatial, circular market model to examine the impact of a multichannel e‐tailer's presence on retailers' decisions to relocate, on retail prices and profits, and consumer welfare. We demonstrate several counter‐intuitive results. For example, when the disutility of buying online and shipping costs are relatively low, retailers are better off by not relocating in response to an e‐tailer's entry into the retail channel. In addition, such an entry—a multichannel strategy—may lead to increased retail prices and increased profits across the industry. Finally, consumers can be better off with less channel competition. The underlying message is that inferences regarding prices, profits, and consumer welfare critically depend on specifications of the good, disutility and shipping costs versus transportation costs (or more generally, positioning), and competition.     

A Dynamic Collaboration Capability as a Source of Competitive Advantage

The resource‐based view of the firm argues the essence of decision making is to determine how firm and supply chain resources can be configured to achieve inimitable advantage and superior performance. However, combining resources found among diverse members of a supply chain requires higher levels of coordination than exist at most companies. Manifest cross‐functional and interorganizational conflict impedes the relational advantages of collaboration. This research employs a multimethod—survey and interview—approach to evaluate collaboration's influence on operational and firm performance. Our findings show that collaboration, as a dynamic capability, mediates the conflict resulting from functional orientations, and improves performance. Specific structural enablers to enhance an organization's collaborative capability are identified and described, providing insight into how firms can exploit interfirm resources for competitive advantage.     

The Protective Action Decision Model: Theoretical Modifications and Additional Evidence

The Protective Action Decision Model (PADM) is a multistage model that is based on findings from research on people's responses to environmental hazards and disasters. The PADM integrates the processing of information derived from social and environmental cues with messages that social sources transmit through communication channels to those at risk. The PADM identifies three critical predecision processes (reception, attention, and comprehension of warnings or exposure, attention, and interpretation of environmental/social cues)—that precede all further processing. The revised model identifies three core perceptions—threat perceptions, protective action perceptions, and stakeholder perceptions—that form the basis for decisions about how to respond to an imminent or long‐term threat. The outcome of the protective action decision‐making process, together with situational facilitators and impediments, produces a behavioral response. In addition to describing the revised model and the research on which it is based, this article describes three applications (development of risk communication programs, evacuation modeling, and adoption of long‐term hazard adjustments) and identifies some of the research needed to address unresolved issues.     

The Effects of Information Overload on Software Project Risk Assessment*

Managers are responsible for providing effective information technology governance of the software development process. Ineffective governance leads to serious resource misallocations and negative consequences concerning Sarbanes‐Oxley compliance. In order for managers to make informed decisions about software development projects, they often need more information than is available through normal information channels, that is, they need an in‐depth review of the at‐risk project. Such in‐depth reviews, however, are costly. Hence, accurate identification of at‐risk projects for in‐depth review is critical to management's ability to govern. This research considers how two factors, information load and time pressure, affect the quality of the project‐selection process. We examine quality by observing the decision strategies involved and then relating these strategies to subsequent decision making. An experiment was conducted with experienced information systems auditors using a combination of policy‐capturing and computerized process‐tracing techniques. The participants in our study cope with information overload by accelerating their decision‐making process and adopting noncompensatory decision processes. Contrary to prior research, our process‐tracing analysis suggests that participants rarely filter information, thus implying that decision makers are unable to process all the information. Coping by resorting to noncompensatory strategies did not decrease decision quality unless combined with accelerated information processing. Participants also increase their weight on the software project risk factors that they repeatedly access and that they view for longer periods of time. The theoretical contributions and practical implications regarding what actions managers can take to reduce the negative impact of information overload are discussed.     

Determining Uses and Gratifications for the Internet

Uses and gratifications (U&G) is a media use paradigm from mass communications research that guides the assessment of consumer motivations for media usage and access. It has been used previously in research and decision making related to the promotion of emerging radio and television media. Recent adaptations of U&G research to the Internet are incomplete and have not identified important new Internet‐specific gratifications. This paper empirically derives dimensions of consumer Internet use and usage gratifications among customers of a prominent Internet Service Provider (ISP). Results describe three key dimensions related to consumer use of the Internet, including process and content gratifications as previously found in studies of television, as well as an entirely new social gratification that is unique to Internet use. All three dimensions of gratification are relevant to managing the Internet as a commercial medium, and measures developed from the gratification profiles identified here can serve as trait‐valid scales in future Internet and e‐commerce research.     

Push or Pull? Design of Content Delivery Systems

Advances in information technology, especially the expansion of cellular and WiFi networks, are dramatically changing how people consume digital content. These changes in user access behavior present a challenge of delivering content to a diversified consumer base. This article addresses this challenge by identifying the key factors for the design of content delivery systems (gross value of content, delivery delay, sensitivity to delivery delay, accessing cost, and processing cost) and explicitly modeling their interactions. We investigate two content delivery systems—push and pull systems, and solve for the content provider's optimal push frequency decision and consumers’ push versus pull decisions. We show that the content provider's selection of push frequency plays a critical role determining the segmentation of the consumer market into the push group and the pull group. Our findings suggest that firms should set a relatively high push frequency to cater to high‐type consumers, which leads to two consumer groups with low‐type consumers belonging to the pull group and high‐type consumers belonging to the push group.     

How Provider Selection and Management Contribute to Successful Innovation Outsourcing: An Empirical Study at Siemens

It is becoming increasingly common to involve external technology providers in developing new technologies and new products. Two important phases involved in working with technology vendors are vendor selection and vendor management. Because for both steps theory development of key decision guidelines is still immature, we use detailed case studies of 31 innovation outsourcing projects at Siemens to develop grounded theory on provider selection criteria and on project management success drivers. A selection criterion often associated with successful outsourcing is the provider's “track record” or previous experience. Our cases suggest that there is no standard “track record” for success but that a “match” between the client firm's outsourcing motivation and the provider's strengths appears to be a necessary condition for a successful outsourcing collaboration. As to the second phase—managing the vendor—we identify a number of operational project success drivers. There seems to be no universal checklist, but the most important drivers seem to be contingent on the type of vendor chosen and on the maturity of the technology. We compare five provider types—universities, competitors, customers, start‐up companies, and component suppliers—and find that some success drivers are common to all providers, while others are relevant only for certain types of provider. Moreover, drivers in the case of a mature technology are more focused on successful transfer to manufacturing than on development itself. Our findings offer guidelines for innovation managers on how to select innovation providers and how to manage them during the project.     

Context,Cultural Bias,and Health Risk Perception: The “Everyday” Nature of Pesticide Policy Preferences in London,Calgary, and Halifax

Risk perception and the cultural theory of risk have often been contrasted in relation to risk‐related policy making; however, the local context in which risks are experienced, an important component of everyday decision making, remains understudied. What is unclear is the extent to which localized community beliefs and behaviors depend on larger belief systems about risk (i.e., worldviews). This article reports on a study designed to understand the relative importance of health risk perceptions (threat of harm); risk‐related worldviews (cultural biases); and the experiences of local context (situated risk) for predicting risk‐related policy preferences regarding cosmetic pesticides. Responses to a random telephone questionnaire are used to compare residents’ risk perceptions, cultural biases, and pesticide bylaw preferences in Calgary (Alberta), Halifax (Nova Scotia), and London (Ontario), Canada. Logistic regression shows that the most important determinants of pesticide bylaw preference are risk perception, lack of benefit, and pesticide “abstinence.” Though perception of health risk is the best single predictor of differences in bylaw preferences, social factors such as gender and situated risk factors like conflict over chemical pesticides, are also important. Though cultural biases are not important predictors of pesticide bylaw preference, as in other studies, they are significant predictors of health risk perception. Pesticide bylaw preference is therefore more than just a health risk perception or worldview issue; it is also about how health risk becomes situated—contextually—in the experiences of residents’ everyday lives.     

Decision Making in Cross‐Functional Teams: The Role of Decision Power*

Through a series of game‐theoretical models, this study systematically examines decision making in cross‐functional teams. It provides a framework for the design of an organization‐specific decision‐making process and for the alignment of a team's microdecision with the “optimal” decision that maximizes the firm's payoff. This study finds that even without changing the team leader, firms could change and even dictate the team's microdecision outcome via adjusting the team member's seniority, empowering team members with veto power or involving a supervisor as a threat to overrule the team decision. This finding implies that to reposition products in the marketplace, structuring cross‐functional teams’ microdecision‐making processes is essential.     

Supply Networks as a Complex Adaptive System: Toward Simulation‐Based Theory Building on Evolutionary Decision Making

In this article, we examine how the firms embedded in supply networks engage in decision making over time. The supply networks as a complex adaptive system are simulated using cellular automata (CA) through a dynamic evolution of cooperation (i.e., “voice” decision) and defection (i.e., “exit” decision) among supply network agents (i.e., firms). Simple local rules of interaction among firms generate complex patterns of cooperation and defection decisions in the supply network. The incentive schemes underlying decision making are derived through different configurations of the payoff‐matrix based on the game theory argument. The prisoner's dilemma game allows capturing the localized decision‐making process by rational agents, and the CA model allows the self‐organizing outcome to emerge. By observing the evolution of decision making by cooperating and defecting agents, we offer testable propositions regarding relationship development and distributed nature of governance mechanisms for managing supply networks.     

Exploring the Impact of Social Axioms on Firm Reputation: A Stakeholder Perspective

This study proposes a model of how deeply held beliefs, known as ‘social axioms, moderate the interaction between reputation, its causes and consequences with stakeholders. It contributes to the stakeholder relational field of reputation theory by explaining why the same organizational stimuli lead to different individual stakeholder responses. The study provides a shift in reputation research from organizational‐level stimuli as the root causes of stakeholder responses to exploring the interaction between individual beliefs and organizational stimuli in determining reputational consequences. Building on a conceptual model that incorporates product/service quality and social responsibility as key reputational dimensions, the authors test empirically for moderating influences, in the form of social axioms, between reputation‐related antecedents and consequences, using component‐based structural equation modelling (n = 204). In several model paths, significant differences are found between responses of individuals identified as either high or low on social cynicism, fate control and religiosity. The results suggest that stakeholder responses to reputation‐related stimuli can be systematically predicted as a function of the interactions between the deeply held beliefs of individuals and these stimuli. The authors offer recommendations on how strategic reputation management can be approached within and across stakeholder groups at a time when firms grapple with effective management of diverse stakeholder expectations.     

The Impact of Geographic Proximity on What to Buy,How to Buy,and Where to Buy: Evidence from High‐Tech Durable Goods Market*

Social contagion effects due to geographical proximity refer to the social effects wherein the behavior of an individual varies with the behavior of other individuals who are geographically close. Although the influence of such effects on consumer choices has been established in several contexts, much of the extant studies have focused on its effect on consumers’ decision of whether to buy a new product or adopt a new innovation. There has been no systematic examination of the influence of geographic proximity on other aspects of consumers’ product buying process such as what to buy (i.e., brand choice), how to buy (i.e., the channel), and where to buy (i.e., retailers). Such effects can matter significantly in high‐technology and durable goods markets and therefore, it is critical to understand the scope of these on consumers’ choice of retailers and channel as well. Drawing on literatures from word of mouth effects, ecommerce, and consumers’ perception of risk in their purchase process, we develop a set of hypotheses on the effect of geographic proximity on consumers’ choices of what to buy, how to buy, and where to buy. Leveraging a microlevel dataset of purchases of personal computers, we develop brand‐, retailer‐, and channel‐related measures of proximity effects at the individual consumer level and estimate a joint disaggregate model of the three choices that make up a product purchase process to test these hypotheses. Our results indicate a significant contagion effect on each of the three choices. Furthermore, we find evidence of a greater effect of geographic proximity on inexperienced consumers—those who are new to the product category. Our results thus help develop a holistic understanding of the influence of social contagion effects on consumers’ decision making.