E‐Procurement Infusion and Operational Process Impacts in MRO Procurement: Complementary or Substitutive Effects?

The procurement of maintenance, repair, and operating (MRO) goods has remained a relatively understudied topic in the literature. Though vital cost efficiencies can be extracted from procurement processes through investments in e‐procurement systems, there is little empirical work that addresses how such systems should be deployed within organizations. In this study, we focus on the role of e‐procurement systems in MRO procurement and study two critical aspects of infusion. The first dimension captures the depth of e‐procurement use within the procurement function, while the second dimension depicts the breadth of use. We argue that these two dimensions of e‐procurement use, and their interaction, will be related to the performance of the MRO procurement process. Using survey data from 193 service organizations and structural equation modeling techniques, we show that the two infusion dimensions are significantly associated with improved process performance. Additionally, we show a substantial substitutive effect between the two use dimensions on performance. Our work has significant implications for managers who seek to gain efficiencies by the deployment of Internet‐based technologies within operational processes. Our conceptualization of e‐procurement infusion along two dimensions provides a more fine‐grained analysis of performance benefits accruing from the infusion of information technologies within organizations.     

Split‐Award Procurement Auctions—Can Bayesian Equilibrium Strategies Predict Human Bidding Behavior in Multi‐Object Auctions?

We analyze if and when symmetric Bayes Nash equilibrium predictions can explain human bidding behavior in multi‐object auctions. We focus on two sealed‐bid split‐award auctions with ex ante split decisions as they can be regularly found in procurement practice. These auction formats are straightforward multi‐object extensions of the first‐price sealed‐bid auction. We derive the risk‐neutral symmetric Bayes Nash equilibrium strategies and find that, although the two auction mechanisms yield the same expected costs to the buyer, other aspects of the two models, including the equilibrium bidding strategies, differ significantly. The strategic considerations in these auction formats are more involved than in single‐lot first‐price sealed‐bid auctions, and it is questionable whether expected utility maximization can explain human bidding behavior in such multi‐object auctions. Therefore, we analyzed the predictive accuracy of our equilibrium strategies in the laboratory. In human subject experiments we found underbidding, which is in line with earlier experiments on single‐lot first‐price sealed‐bid auctions. To control for regret, we organize experiments against computerized bidders, who play the equilibrium strategy. In computerized experiments where bid functions are only used in a single auction, we found significant underbidding on low‐cost draws. In experiments where the bid function is reused in 100 auctions, we could also control effectively for risk aversion, and there is no significant difference of the average bidding behavior and the risk‐neutral Bayes Nash equilibrium bid function. The results suggest that strategic complexity does not serve as an explanation for underbidding in split‐award procurement auctions, but risk aversion does have a significant impact.     

Transparency in Buyer‐Determined Auctions: Should Quality be Private or Public?

We study buyer‐determined procurement auctions where both price and non‐price characteristics of bidders matter for being awarded a contract. Although, in scoring auctions bidders perfectly know how price and non‐price attributes determine the awarding of the contract, this remains uncertain in buyer‐determined auctions where the buyer is free to choose once all bids have been submitted. We analyze the impact of information bidders have with respect to the buyer's awarding decision. As we show theoretically whether it is in the buyer's interest to conceal the impact of non‐price characteristics depends on how important the quality aspects of the procured good are to the buyer: The more important quality aspects are, the more interesting concealment becomes. In a counterfactual analysis using data from a large European procurement platform, we analyze the reduction of non‐price information available to the bidders. Confirming our hypothesis, for auction categories where bidders’ non‐price characteristics strongly influence buyers’ decisions concealment of non‐price information leads to an increase in buyers’ surplus of up to 15% due to higher competitive pressure and lower bids. Conversely, for categories where bidders’ non‐price characteristics are of little importance concealment of non‐price information leads to a decrease in buyers’ surplus of up to 6%.     

Level‐k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private‐Value Auctions?

This paper proposes a structural nonequilibrium model of initial responses to incomplete‐information games based on “level‐k” thinking, which describes behavior in many experiments with complete‐information games. We derive the model's implications in first‐ and second‐price auctions with general information structures, compare them to equilibrium and Eyster and Rabin's (2005) “cursed equilibrium,” and evaluate the model's potential to explain nonequilibrium bidding in auction experiments. The level‐k model generalizes many insights from equilibrium auction theory. It allows a unified explanation of the winner's curse in common‐value auctions and overbidding in those independent‐private‐value auctions without the uniform value distributions used in most experiments.     

Extended Producer Responsibility for E‐Waste: Individual or Collective Producer Responsibility?

We investigate the implications of collective and individual producer responsibility (CPR and IPR, respectively) models of product take‐back laws for e‐waste on manufacturers’ design for product recovery (DfR) choices and profits, and on consumer surplus in the presence of product competition. We show that IPR offers superior DfR incentives as compared to CPR, and provides a level competitive ground. CPR may distort competition and allow free‐riding on DfR efforts to reduce product recovery costs. Thus, manufacturer preferences for IPR or CPR may differ because of the free‐riding implications under CPR, with even high‐end manufacturers having incentives to free‐ride under certain competitive conditions. The policy choice between IPR and CPR is not clear cut from an economic welfare perspective. This choice involves a comparison between the effects of superior recovery cost reduction through improved DfR under IPR and the operational cost‐efficiency under CPR.     

Do Business Cycles Have Long‐Term Impact for Particular Cohorts?

Do business cycle fluctuations and changes in employment produce cohorts with permanently different labour market attachment? Taking an explicit cohort perspective and based on Danish register data, we find noticeable age dependent persistence in employment rates at the cohort level. Younger workers tend to be more exposed to business cycle fluctuations than older workers, but importantly they recover more quickly than older workers for whom persistence is stronger. Moreover, following the employment trajectories of cohorts, no cohorts have been permanently ‘scarred’ in terms of employment due to a sequence of adverse shocks. Finally, an explicit account of overlapping cohorts is shown to affect assessments of persistence in aggregate employment rates.     

Does Corporate Culture Affect Bank Risk‐Taking? Evidence from Loan‐Level Data

Using comprehensive corporate and retail loan data, we show that the corporate culture of banks explains their risk‐taking behaviour. Banks whose corporate culture leans towards aggressive competition are associated with riskier lending practices: higher approval rate, lower borrower quality, and fewer covenant requirements. Consequently, these banks incur larger loan losses and make greater contributions to systemic risk. The opposite behaviour is observed among banks whose culture emphasizes control and safety. Our findings cannot be explained by heterogeneity in a bank's business model, CEO compensation incentives or CEO characteristics. We use an exogenous shock to the US banking system during the 1998 Russian default crisis to support a causal inference.     

Do Chief Executives’ Traits Affect the Financial Performance of Risk‐trading Firms? Evidence from the UK Insurance Industry

We examine the effects of four key dimensions of Chief Executive Officers’ (CEOs’) traits on six financial performance metrics using panel data for 1999?2012 drawn from the UK's property?casualty insurance industry. We find that CEO insurance experience and CEO financial expertise enhance financial performance, while two other CEO traits ? power and age ? are generally not significant. Our results thus reinforce the importance of CEO insurance industry expertise and CEO financial expertise in the management and trading of risks. Our results have potential commercial and policy implications.     

When Do Multinational Companies Consider Corporate Social Responsibility? A Multi‐country Study in Sub‐Saharan Africa

While African countries are becoming more and more relevant as host countries for suppliers of multinational companies little is known about corporate social responsibility (CSR) in this region. To fill this gap, the present article explores CSR considerations of foreign affiliates of multinational companies when choosing local African suppliers. The article suggests a model of three types of determinants, namely firm characteristics, exports, and intra‐trade. Analyses of a large‐scale and quite unique firm level data for more than 2,000 foreign owned firms in 19 sub‐Saharan African countries demonstrate that firms importing intermediates from their parent company abroad are more likely to implement CSR. Similarly, CSR plays a larger role for affiliates that export to developed countries. Different determinants affect environmental and social CSR activities.     

Does Security Impact E‐procurement Performance? Testing a Model of Direct and Moderated Effects

Despite the widespread adoption of e‐procurement and the critical role of information security in these situations, academic research examining the relationship between information security and e‐procurement performance has been surprisingly minimal. This study represents an interdisciplinary approach to present and test a theoretical model that links security in e‐procurement processes to e‐procurement performance. E‐procurement performance is measured as a combination of cost savings, order quality, and satisfaction of fulfillment as perceived by buyers. The model also posits that two aspects of the procurement process will enhance the value of security in e‐procurement, namely, process complexity and process interdependence. We empirically examine these relationships using data collected from procurement managers. Our results have important implications for managing the e‐procurement process.     

Do Reports on Drinking Water Quality Affect Customers' Concerns? Experiments in Report Content

The Safe Drinking Water Act Amendments of 1996 required U.S. utilities to report on drinking water quality to their customers annually, beginning in fall 1999, on the assumption that such reports would alert them to quality problems and perhaps mobilize pressure for improvement. A random sample of New Jersey customers read alternative versions of a water quality report, in an experiment on reactions to water quality information under U.S. Environmental Protection Agency (USEPA) rules. Experiment design was 2 x 3 + 1: two versions each--one with, one without, a violation of a health standard--of a report that was (1) Qualitative (without water quality numbers, thus not meeting USEPA rules); (2) Basic, with minimal information meeting the rules; or (3) Extended, adding reading aids and utility performance information; plus a control instrument without any hypothetical report. Results of ANOVA suggest the reports will have less effect than hoped or feared. These manipulations were successful: people reading the Qualitative versions were less likely to say that the report gave the amounts of substances found in the water, and those reading Violation versions were more likely to report a violation of a health standard. The main differences in responses to the report involved the judged adequacy of the information, and to a lesser extent responses on a Concern scale (constructed from measures of concern, judged risk, clean-up intentions, distrust of utility information, and doubt that the utility was doing all it could to improve water quality). Overall judgments of water quality and utility performance did not change, either relative to the controls or in before versus after responses. Qualitative reports performed worse than others, confirming the decision to have utilities report actual contaminant levels. Extended reports did only slightly better than the Basic versions on these measures. Many respondents had trouble identifying the presence or absence of substance amounts or violations, despite their seeming obviousness (e.g., in a "bottom line" summary on the front page of each report), suggesting many were not processing this information carefully. However, the pattern of responses for those who accurately identified the presence or absence of substance amounts or violations did not differ substantially from that for the group as a whole. Generic risk beliefs (serious local environmental problems; lack of control over risks to one's health) dominated demographic variables, attitudes toward utility water quality or trustworthiness, and the content and format of water quality reports in influencing concern about drinking water quality. Previous empirical and theoretical evidence for lack of change in public risk attitudes due to one-time or infrequent communications--e.g., role of personal experience, perseverance of prior trust or distrust--seems to be confirmed for annual water quality reports.     

Why Do Established Practices Deinstitutionalize? An Actor‐Centred Approach

Drawing on 63 in‐depth interviews from three American multinationals, we investigate how individual actors negotiate the interplay of insider and outsider pressures on the deinstitutionalization of four employment practices in an institutionally complex setting. Existing institutional theory highlights different degrees of deinstitutionalization, from complete abandonment of practices to partial erosion, with an underlying presumption of organizations and actors striving for stability and stasis. However, the present study finds that actor reconciliation of interacting insider and outsider pressures can result in three distinct phases of deinstitutionalization (complete, partial and negotiated deinstitutionalization), which crucially coexist, suggesting perpetual instability and change. The authors conceptualize the individual‐level enabling conditions for each of these different phases of deinstitutionalization, highlighting a range of actor responses as well as differences in how actors exercise agency across each phase. Examining actor negotiation of the interplay of insider and outsider pressures improves our understanding of how individuals engage in differential institutional work when responding to practice deinstitutionalization.     

Potential Pitfalls for the Purchasing‐Power‐Parity Puzzle? Sampling and Specification Biases in Mean‐Reversion Tests of the Law of One Price

The PPP puzzle is based on empirical evidence that international price differences for individual goods (LOOP) or baskets of goods (PPP) appear highly persistent or even nonstationary. The present consensus is these price differences have a half‐life that is of the order of five years at best, and infinity at worst. This seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons, typically days or weeks. However, current empirics rely on a particular choice of methodology, involving (i) relatively low‐frequency monthly, quarterly, or annual data, and (ii) a linear model specification. In fact, these methodological choices are not innocent, and they can be shown to bias analysis towards findings of slow convergence and a random walk. Intuitively, if we suspect that the actual adjustment horizon is of the order of days, then monthly and annual data cannot be expected to reveal it. If we suspect arbitrage costs are high enough to produce a substantial “band of inaction,” then a linear model will fail to support convergence if the process spends considerable time random‐walking in that band. Thus, when testing for PPP or LOOP, model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets.     

Efficiency or Competition? A Structural Econometric Analysis of Canada's AWS Auction and the Set‐Aside Provision

In 2008, Industry Canada auctioned 105 MHz of spectrum to a group of bidders that included incumbents and potential new entrants into the Canadian mobile phone market, raising $4.25 billion. In an effort to promote new entry, 40 MHz of spectrum was set‐aside for new entrants. In order to estimate the implicit cost of the set‐aside provision, we estimate the parameters of the bidders' profit function via a maximum match estimator based on the notion of pairwise stability in matches. We find that all telecommunications firms valued both geographic complementarities across auction licenses as well as absolute spectrum. Under a reasonable alternative scenario, our results indicate that the set‐aside led to a total profit loss of approximately 10%.     

Affirmative Action in Higher Education: How Do Admission and Financial Aid Rules Affect Future Earnings?

This paper addresses how changing the admission and financial aid rules at colleges affects future earnings. I estimate a structural model of the following decisions by individuals: where to submit applications, which school to attend, and what field to study. The model also includes decisions by schools as to which students to accept and how much financial aid to offer. Simulating how black educational choices would change were they to face the white admission and aid rules shows that race‐based advantages had little effect on earnings. However, removing race‐based advantages does affect black educational outcomes. In particular, removing advantages in admissions substantially decreases the number of black students at top‐tier schools, while removing advantages in financial aid causes a decrease in the number of blacks who attend college.     

Do the Falling Earnings of Immigrants Apply to Self‐employed Immigrants?

It is well known that the earnings of recent cohorts of immigrant men have fallen further behind native‐born men. Using several years of Canadian Census data, this study finds that immigrants have turned to self‐employment at a much faster rate than the native born. In addition, the earnings gap between self‐employed immigrant and native‐born men has not grown with successive cohorts, but rather has followed a cyclical movement: narrowing at the peak, and widening in times of weaker economic activity. However, immigrants choosing self‐employment still face challenges, as their earnings are far below native‐born earnings, and convergence is a lengthy process.     

Encounter Satisfaction in E‐tailing: Are the Relationships of Order Fulfillment Service Quality with its Antecedents and Consequences Moderated by Historical Satisfaction?

This study focuses on whether historical satisfaction with an e‐tailer (HSat) moderates baseline relationships in order fulfillment service quality models. HSat is defined as satisfaction with the e‐tailer spanning all transactions except the current encounter. Encounter satisfaction (ESat) is defined as the consumer's satisfaction with the current transaction. In the baseline model, four order fulfillment service quality (OFSQ) dimensions managerially relevant to consumer e‐tailing are examined: timeliness, availability, condition, and billing accuracy. The baseline structural model results support that OFSQ dimensions impact ESat, which in turn predicts two key consequences—repurchase intention and word‐of‐mouth. Adaptation theory is used to model the role of HSat, while controlling for transaction recency, vendor familiarity, and competitive pricing. HSat is shown to have pervasive main and interaction effects upon all baseline model relationships. These moderation effects have great managerial relevance. For example, the results illustrate a phenomenon similar to the service recovery paradox, wherein when a negative service encounter is followed by a highly positive service recovery event, previously dissatisfied consumers, as compared to previously satisfied consumers, respond with higher levels of current satisfaction. For managers, this finding is encouraging because policies that create highly positive events for consumers can thus supersede past negative experiences. Our results show however that HSat cannot be completely superseded by current OFSQ or current ESat.     

Hazardous Times for Monetary Policy: What Do Twenty‐Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk‐Taking?

We identify the effects of monetary policy on credit risk‐taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality, and the volume of demand. We employ a two‐stage model that analyzes the granting of loan applications in the first stage and loan outcomes for the applications granted in the second stage, and that controls for both observed and unobserved, time‐varying, firm and bank heterogeneity through time*firm and time*bank fixed effects. We find that a lower overnight interest rate induces lowly capitalized banks to grant more loan applications to ex ante risky firms and to commit larger loan volumes with fewer collateral requirements to these firms, yet with a higher ex post likelihood of default. A lower long‐term interest rate and other relevant macroeconomic variables have no such effects.     

How Safe Is Safe Enough for Self‐Driving Vehicles?

Self‐driving vehicles (SDVs) promise to considerably reduce traffic crashes. One pressing concern facing the public, automakers, and governments is “How safe is safe enough for SDVs?” To answer this question, a new expressed‐preference approach was proposed for the first time to determine the socially acceptable risk of SDVs. In our between‐subject survey (N = 499), we determined the respondents’ risk‐acceptance rate of scenarios with varying traffic‐risk frequencies to examine the logarithmic relationships between the traffic‐risk frequency and risk‐acceptance rate. Logarithmic regression models of SDVs were compared to those of human‐driven vehicles (HDVs); the results showed that SDVs were required to be safer than HDVs. Given the same traffic‐risk‐acceptance rates for SDVs and HDVs, their associated acceptable risk frequencies of SDVs and HDVs were predicted and compared. Two risk‐acceptance criteria emerged: the tolerable risk criterion, which indicates that SDVs should be four to five times as safe as HDVs, and the broadly acceptable risk criterion, which suggests that half of the respondents hoped that the traffic risk of SDVs would be two orders of magnitude lower than the current estimated traffic risk. The approach and these results could provide insights for government regulatory authorities for establishing clear safety requirements for SDVs.     

Parameters of a Dose‐Response Model Are on the Boundary: What Happens with BMDL?

It is well known that, under appropriate regularity conditions, the asymptotic distribution for the likelihood ratio statistic is χ². This result is used in EPA's benchmark dose software to obtain a lower confidence bound (BMDL) for the benchmark dose (BMD) by the profile likelihood method. Recently, based on work by Self and Liang, it has been demonstrated that the asymptotic distribution of the likelihood ratio remains the same if some of the regularity conditions are violated, that is, when true values of some nuisance parameters are on the boundary. That is often the situation for BMD analysis of cancer bioassay data. In this article, we study by simulation the coverage of one- and two-sided confidence intervals for BMD when some of the model parameters have true values on the boundary of a parameter space. Fortunately, because two-sided confidence intervals (size 1–2α) have coverage close to the nominal level when there are 50 animals in each group, the coverage of nominal 1−α one-sided intervals is bounded between roughly 1–2α and 1. In many of the simulation scenarios with a nominal one-sided confidence level of 95%, that is, α= 0.05, coverage of the BMDL was close to 1, but for some scenarios coverage was close to 90%, both for a group size of 50 animals and asymptotically (group size 100,000). Another important observation is that when the true parameter is below the boundary, as with the shape parameter of a log-logistic model, the coverage of BMDL in a constrained model (a case of model misspecification not uncommon in BMDS analyses) may be very small and even approach 0 asymptotically. We also discuss that whenever profile likelihood is used for one-sided tests, the Self and Liang methodology is needed to derive the correct asymptotic distribution.