Working papers

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  • Author(s)

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

We examine empirically how different information types and information channels affect both the intention and the decision to adopt photovoltaic (PV) technology as affected by adoption stage. Analyzing data on a large European utility’s current and potential clients reveals how the effects of various drivers of adoption can change across phases of the adoption process. Our results challenge the common wisdom that information necessarily and homogeneously supports innovation adoption; instead, they strongly support the hypothesis that information types and channels have distinct effects on adoption rates. These results also highlight that, throughout the adoption process, the value of information changes. In addition, we clarify the effects of economic incentives on both the intention to adopt PV technology and actual adoption behavior. Our findings have critical implications for policy makers and for any technology manufacturing company that must optimize its marketing strategy and distribution channels to promote renewable energy systems.

Keywords: innovation adoption; renewable energy; information characteristics; empirical studies

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Research has suggested that firms may benefit from price uncertainty - about input commodities - because it creates an "option value". We use a stylized mathematical model to explore and generalize this claim and to specify its implications for firms' investment decisions under various setups. In particular, we study firms' motivation for investing in such risk management measures as financial hedging (FH) and technology improvement (TI): technology changes that result in less consumption of an input commodity, fewer waste products and emissions, and lower production costs. We derive a simple expression that explicitly quantities firm's attitude toward input-price risk by considering the firm's (positive or negative) risk premium (i.e., what it would pay to "lock in" the unit input price at its mean) and linking that premium to various firm and industry-level characteristics. Also, we examine the comparative risk management advantages of TI and FH and characterize conditions under which these strategies are complements or substitutes. We find that although input-price uncertainty may be beneficial even for risk-averse firms, they can benefit from investing in risk reduction measures (e.g., TI, FH) because they could increase the option value of that uncertainty. A firm's ability to adjust its price in response to both market competition and input-price variation mediates the benefit of risk-reducing measures and also affects the two strategies' complementarity.

Keywords: Risk Management, Risk Exposure, Technology Improvement, Financial Hedging

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

This paper examines how a restaurant’s online review ratings affect consumers to endorse deal vouchers sold by the restaurant via social media before they redeem the vouchers. While the effect of the average of review ratings is straightforward, we focus on examining how the effect is moderated by the dispersion of review ratings and the discount threshold set for the group-buying deals. A comprehensive literature review suggests that a large rating dispersion can deliver two different messages to consumers (uncertainty in product quality and uniqueness of product taste) and thus may either positively or negatively moderate the effect of average rating on social media endorsement. Discount threshold may serve as a quality signal, reinforcing the effect of average rating. The empirical results show that the effect of average rating is greater when review ratings are more dispersed and discount threshold is relatively large. The findings generate important managerial and research implications.

Keywords: social media endorsement, online reviews, average rating, dispersion of review ratings, discount threshold

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Energy efficiency projects are often executed by specialized entities, namely energy service companies (ESCOs). A typical ESCO's core business is conducted using performance-based contracts, whereby payment terms depend on the energy savings achieved. Despite their success in public, commercial, and industrial sectors, ESCOs in the residential sector are involved in fewer projects and face several challenges. First, an energy efficiency project often leads to changed consumption behavior; hence it is more difficult to evaluate the energy savings that are due to the project itself. The second challenge is that residential clients are more risk averse and, thus, less willing to contract for projects whose outcomes are uncertain. Third, a lack of monitoring protocols leads to ESCO's moral hazard problems. This paper studies ESCO contract design issues, focusing primarily on the residential market for energy efficiency. As opposed to other sectors, coordinating contracts do not exist. We show, however, that simple piecewise linear contracts work reasonably well. To improve their profitability, ESCOs can reduce uncertainty about the technology employed and/or develop ways of verifying post-project energy efficiency. Since policy makers are understandably keen to promote energy efficiency, we show also how regulations and monetary incentives can reduce inefficiencies in ESCOs' relationships and thereby maximize environmental benefits

Keywords: Sustainable Energy, Energy Efficiency, Performance-Based Contracts, Double Moral Hazard

Departments: Information Systems and Operations Management, Management & Human Resources

The digital economy has now a widespread impact on the whole economy and leads companies to transform and adopt new competition rules. Our objectives in this paper are:1) to analyze these evolutions and,2) to understand the role of informations systems in these changes. We have investigated two opposite environments: a pure Internet player selling an SaaS offering, and a traditional business that distributes products through a physical network of thousands of outlets. Our results show that both Internet players and traditional companies experience changes in the industry value chain, a growing importance of services, and develop new business models focused on an extended value proposition and cooperation with customers. The role of information systems is characterized by the evolution of the IT infrastructure, the expansion of inter organizational information systems and digital platforms and the development of new IT capabilities.

  • MOSI-2016-1135
  • Could Deal Promotion Improve Merchants' Online Reputations? The Moderating Role of Prior Reviews
  • X. LI

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

It is by now almost accepted as a stylized fact that offering deal promotion (such as via Groupon or LivingSocial) deteriorates local merchants’ online reputations (e.g., the average of Yelp review ratings). However, in this paper we show that the stylized fact is not true in certain circumstances. We theorize that the valence and volume of prior reviews can play an important moderating role in the effect of deal promotion. Empirically, we show that restaurants with a relatively low prior average rating and a relatively small review volume have improved their online reputations by offering Groupon promotion. The proportion of such restaurants is substantial. The findings are robust to multiple identification strategies and econometric specifications. The results underscore the substantial heterogeneity in the effect of deal promotion on local merchants’ online reputations. Merchants need understand the moderating role of prior reviews (e.g., the valence and volume of prior reviews) and design appropriate strategies to maximize the returns from offering deal promotion.

Keywords: Online reviews, Deal promotion, Moderating role, Difference-in-differences, Propensity score matching

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Despite the potential benefits, many organizations have failed in service-oriented architecture implementation projects. Prior research often used a variance perspective and neglected to explore the complex interactions and timing dependencies between the critical success factors. This study adopts a process perspective to capture the dynamics while providing a new explanation for the mixed outcomes of SOA implementation. We develop a system dynamics model and use simulation analysis to demonstrate the phenomenon of “tipping point.” That is, under certain conditions, even a small reduction in the duration of normative commitment can dramatically reverse, from success to failure, the outcome of an SOA implementation. The simulation results also suggest that (1) the duration of normative commitment can play a more critical role than the strength, and (2) the minimal duration of normative commitment for a successful SOA implementation is associated positively with the information delay of organizational learning of SOA knowledge. Finally, we discuss the theoretical causes and organizational traps associated with SOA implementation to help IT managers make better decisions about their implementation projects.

Keywords: Service-oriented architecture (SOA), System dynamics, Tipping point, Organizational traps, Normative commitment

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

To reduce preventable readmissions, many healthcare systems are transitioning from Fee-for-Service (FFS) to other reimbursement schemes such as Pay-for-Performance (P4P) or Bundled Payment (BP) so that the funder of a healthcare system can transfer to the hospital some of the financial risks associated with patient re-hospitalizations. To examine the effectiveness of different schemes (FFS, P4P, and BP), we develop a "health co-production" model in which the patient's readmissions can be "jointly controlled" by the efforts exerted by both the hospital and the patient. Our analysis of the equilibrium outcomes reveals that FFS cannot entice the hospital and the patient to exert readmission-reduction efforts. Relative to BP, we find that P4P is more "robust" in the sense that it can induce readmission-reduction efforts under milder conditions. However, BP can induce greater efforts compared to P4P. More importantly, we characterize the conditions under which BP (or P4P) is the dominant scheme from the funder's perspective. Finally, we find that patient cost-sharing can generate two benefits: (a) it provides incentive for patients to exert efforts; and (b) if not excessive, it can reduce the readmission rate.

Keywords: co-productive services, hospital readmissions, pay-for-performance, bundled payment

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

This paper models a multi-player environment comprising a grid operator responsible for meeting electricity demands, a photovoltaic (PV) manufacturer, customers who might install PV (solar) systems, and a regulator charged with setting an optimal feed-in tariff (FIT). The grid operator must meet exogenous electricity demand and also buy back all electricity (produced by PV systems) at the FIT set by a regulator, which seeks to minimize grid operator costs. Customers decide whether or not to invest in a PV system. Adoption rates affect the manufacturer and operator by (respectively) establishing the demand for PV and determining how much electricity is fed into the grid. The PV manufacturer's decision variable is the sales price per PV unit. The decisions of all players in the model are intertwined in a way that clearly affects their respective welfare. We demonstrate in particular how technology and market characteristics -- including PV manufacturing cost and market competition -- change the optimal decisions of players and thereby influence the effectiveness of FITs, the number of PV adopters, and the cost to provide the social benefit of on-demand electricity. Our findings confirm the importance of considering technology manufacturers when devising schemes to incentivize adoption of PV systems.

Keywords: Feed-in tariff policy, Renewables, Technology adoption

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Evidence shows that suppliers refrain from investing in energy efficiency (EE) measures because they fear that a buyer with greater bargaining power will use the EE-related cost reductions to push prices down, in the purchase bargaining process, and thereby further reduce the supplier's profit margin. Suppliers are also discouraged from EE investment by the uncertainty associated with new technologies. These issues are studied via our model of the bargaining process, in a two-tier supply chain, between a single supplier and buyer; we analyze how the supplier's EE technology adoption is affected by the buyer's relative bargaining power and also by technology uncertainty. We compare various contracting arrangements commonly used in industry to overcome these obstacles, including price commitment by the buyer and shared investment contracts while characterizing their optimal properties with respect to different criteria - in particular, supply chain profit and the equilibrium level of EE investment. In terms of both criteria, we find that shared investment contracts perform better than price commitment contracts, although the latter increase supplier profit when a buyer's bargaining power is relatively high. We also show that, in a two-player model, the bargaining process between firms moderates how uncertainty affects supplier's investment behavior.

Keywords: Energy Efficiency, Supply chain coordination, Bargaining process, Technology uncertainty

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