Embeddedness of Organizational Capabilities*

Managers must regularly make decisions on how to access and deploy their limited resources in order to build organizational capabilities for a sustainable competitive advantage. However, failure to recognize that organizational capabilities involve complex and intricately woven underlying processes may lead to an incomplete understanding of how capabilities affect competitive advantage. As a means of understanding this underlying complexity, we discuss how managerial decisions on resource acquisition and deployment influence capability embeddedness and argue that capability embeddedness has an incremental effect on firm performance beyond the effects from organizational resources and capabilities. To investigate these issues, we present a hierarchical composed error structure framework that relies on cross‐sectional data (and allows for generalizations to panel data). We demonstrate the framework in the context of retailing, where we show that the embeddedness of organizational capabilities influences retailer performance above and beyond the tangible and intangible resources and capabilities that a retailer possesses. Our results illustrate that understanding how resources and capabilities influence performance at different hierarchical levels within a firm can aid managers to make better decisions on how they can embed certain capabilities within the structural and social relationships within the firm. Moreover, understanding whether the underlying objectives of the capabilities that are being built and cultivated have convergent or divergent goals is critical, as it can influence the extent to which the embedded capabilities enhance firm performance.     

Instrumental Variable Estimation of Nonlinear Errors‐in‐Variables Models

This paper establishes that instruments enable the identification of nonparametric regression models in the presence of measurement error by providing a closed form solution for the regression function in terms of Fourier transforms of conditional expectations of observable variables. For parametrically specified regression functions, we propose a root n consistent and asymptotically normal estimator that takes the familiar form of a generalized method of moments estimator with a plugged‐in nonparametric kernel density estimate. Both the identification and the estimation methodologies rely on Fourier analysis and on the theory of generalized functions. The finite‐sample properties of the estimator are investigated through Monte Carlo simulations.     

Decision Sciences Research in China: A Critical Review and Research Agenda—Foundations and Overview*

This article focuses on decision sciences research in China, providing an overview of current research and developing a foundation for future China‐based research. China provides a unique research opportunity for decision sciences researchers, owing to its recent history, rapid economic development, and strong national culture. We examine recent economic reforms and their impact on the development of research questions in the decision sciences, as well as discuss characteristics of the diverse regions in China and their potential as sites for various types of research. We provide a brief overview of recent China‐based research on decision sciences issues relating to national culture, supply chain management, quality management, production planning and control, operations strategy, and new product development and discuss some of the unique methodological challenges inherent in China‐based research. We conclude by looking forward to emerging research opportunities in China.     

Multiproduct,Multicriteria Model for Supplier Selection with Product Life‐Cycle Considerations

In industrial purchasing contexts firms often procure a set of products from the same suppliers to benefit from economies of scale and scope. These products are often at different stages of their respective product life cycles (PLCs). Firms consider multiple criteria in purchasing such products, and the relative importance of these criteria varies depending on the PLC stage of a given product. Therefore, a firm should select suppliers and choose sourcing arrangements such that product requirements across multiple criteria are satisfied over time. The extant models in sourcing literature for evaluating and selecting suppliers for a portfolio of products have not considered this important and practical issue faced by firms. This article proposes a mathematical model that effectively addresses this issue and contributes to the sourcing literature by demonstrating an approach for optimally selecting suppliers and supplier bids given the relative importance of multiple criteria across multiple products over their PLC. The application of the model on a hypothetical data set illustrates the strategic and tactical significance of such considerations.     

Service Personnel,Technology, and Their Interaction in Influencing Customer Satisfaction*

Managing both the technologies and the personnel needed for providing high‐quality, multichannel customer support creates a complex and persistent operational challenge. Adding to this difficulty, it is still unclear how service personnel and these new communication technologies interact to influence the customer's perceptions of the service being provided. Motivated by both practical importance and inconsistent findings in the academic literature, this exploratory research examines the interaction of media richness, represented by three different technology contexts (telephone, e‐mail, and online chat), with six customer service representative (CSR) characteristics and their influences on customer satisfaction. Using a large‐sample customer survey data set, the article develops a multigroup structural equation model to analyze these interactions. Results suggest that CSR characteristics influence customer service satisfaction similarly across all three technology‐mediated contexts. Of the characteristics studied, service representatives contribute to customer satisfaction more when they exhibit the characteristics of thoroughness, knowledgeableness, and preparedness, regardless of the richness of the medium used. Surprisingly, while three other CSR characteristics studied (courtesy, professionalism, and attentiveness) are traditionally believed to be important in face‐to‐face encounters, they had no significant impact on customer satisfaction in the technology‐mediated contexts studied. Implications for both practitioners and researchers are drawn from the results and future research opportunities are discussed.     

Measuring the Implications of Sales and Consumer Inventory Behavior

Temporary price reductions (sales) are common for many goods and naturally result in large increases in the quantity sold. Demand estimation based on temporary price reductions may mismeasure the long‐run responsiveness to prices. In this paper we quantify the extent of the problem and assess its economic implications. We structurally estimate a dynamic model of consumer choice using two years of scanner data on the purchasing behavior of a panel of households. The results suggest that static demand estimates, which neglect dynamics, (i) overestimate own‐price elasticities by 30 percent, (ii) underestimate cross‐price elasticities by up to a factor of 5, and (iii) overestimate the substitution to the no‐purchase or outside option by over 200 percent. This suggests that policy analysis based on static elasticity estimates will underestimate price–cost margins and underpredict the effects of mergers.     

The Effect of Competition on Recovery Strategies

Manufacturers often face a choice of whether to recover the value in their end‐of‐life products through remanufacturing. In many cases, firms choose not to remanufacture, as they are (rightly) concerned that the remanufactured product will cannibalize sales of the higher‐margin new product. However, such a strategy may backfire for manufacturers operating in industries where their end‐of‐life products (cell phones, tires, computers, automotive parts, etc.) are attractive to third‐party remanufacturers, who may seriously cannibalize sales of the original manufacturer. In this paper, we develop models to support a manufacturer's recovery strategy in the face of a competitive threat on the remanufactured product market. We first analyze the competition between new and remanufactured products produced by a monopolist manufacturer and identify conditions under which the firm would choose not to remanufacture its products. We then characterize the potential profit loss due to external remanufacturing competition and analyze two entry‐deterrent strategies: remanufacturing and preemptive collection. We find that a firm may choose to remanufacture or preemptively collect its used products to deter entry, even when the firm would not have chosen to do so under a pure monopoly environment. Finally, we discuss conditions under which each strategy is more beneficial.     

Coordination and Priority Decisions in Hybrid Manufacturing/Remanufacturing Systems

Companies are increasingly realizing the need to coordinate their manufacturing and remanufacturing operations. This can be a challenge due to the inherent variability in the condition and amount of returns, which has a direct impact on remanufacturing costs and leadtimes. In this paper, we develop a modeling framework to compare two alternative strategies that use either manufacturing or remanufacturing as the primary means of satisfying customer demand. Of course, in the event that the demand cannot be met by the prioritized process, the secondary process is used as a contingency. In our basic model, the priority decisions are made at the component level in replenishing the serviceable inventory, while the disposal and new component ordering decisions are made independently. The second model represents the coordination of remanufacturable and new component inventory control decisions. Using simulation‐based optimization on a large number of experiments, we observe that when prioritization is in the upstream echelon and there is no coordination in managing component stocks, there exists a critical return ratio, below which it is beneficial to give priority to manufacturing and above which it is beneficial to give priority to remanufacturing. We also see that coordinated control of the component inventories considerably reduces the importance of prioritization. These observations remain valid when congestion in the shop floor is also taken into account. We also study the benefits of state‐dependent dispatching policies in a realistic case.     

Unlocking the Value of RFID

RFID (Radio‐Frequency Identification) technology has shown itself to be a promising technology to track movements of goods in a supply chain. As such, it can give unprecedented visibility to the supply chain. Such visibility can save labor cost, improve supply chain coordination, reduce inventory and increase product availability. Industry reports and white papers are now filled with estimates and proclamations of the benefits and quantified values of RFID. Early adopters are now rallying more and more followers. However, most such claims are educated guesses at best and are not substantiated, that is, they are not based on detailed, model‐based analysis. This paper argues that there is a huge credibility gap of the value of RFID, and that a void exists in showing how the proclaimed values are arrived at, and how those values can be realized. The paper shows that this credibility gap must be filled with solid model analysis, and therefore presents a great opportunity for the Production and Operations Management (POM) research community. The paper reviews some of the ongoing research efforts that attempt to close the credibility gap, and suggests additional directions for further strengthening the POM's contribution to help industry realize the full potentials of RFID.     

Item‐Level RFID in the Retail Supply Chain

Analyzing the proliferation of item‐level RFID, recent studies have identified the cost sharing of the technology as a gating issue. Various qualitative studies have predicted that conflict will arise, in particular in decentralized supply chains, from the fact that the benefits and the costs resulting from item‐level RFID are not symmetrically distributed among supply chain partners. To contribute to a better understanding of this situation, we consider a supply chain with one manufacturer and one retailer. Within the context of this retail supply chain, we present analytic models of the benefits of item‐level RFID to both supply chain partners. We examine both the case of a dominant manufacturer as well as the case of a dominant retailer, and we analyze the results of an introduction of item‐level RFID to such a supply chain depending on these market power characteristics. Under each scenario, we show how the cost of item‐level RFID should be allocated among supply chain partners such that supply chain profit is optimized.