ECRA co-editors' introduction for volume 8, issue 6, November - December 2009

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Journal Article

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In this issue of Electronic Commerce Research and Applications, we present five new articles from our regular submissions, and one research directions article. The contributions span a number of different topics, including software industry alliances, supply chain management and electronic procurement, mechanism design for relaying peer-to-peer messages, electronic cash systems design, and strategies that artists can use for the management of digital media content.We have chosen to showcase the work of Lucia Silva Gao and Bala Iyer, whose contribution leads off this issue. The article is entitled “Value Creation Using Alliances within the Software Industry,” and is prominently positioned in this issue based on our sense of the importance of the study of the software industry in the context of other issues that relate to technology and strategy, electronic commerce, and technology and economic analysis. Their paper asks several interesting questions related to the software stack, which they define as “modular clusters of software products that are organized into horizontal layers, with firms within a layer producing components that can be substituted, and firms in other layers producing components that complement the ones in the first layer.” The authors research questions include: (1) Do alliances between software firms that produce components in the same layer earn higher abnormal returns on their stock? (2) As the stack distance – the extent of the difference between two companies when they are classified according to the layers of the software stack that they produce – increases, will the abnormal returns to stock decline? (3) And what happens to the abnormal returns on stock when there are announcements about a firm that produces in a given layer of the software stack will become involved in a merger and acquisition (M&A) with another firm in a similar or more distant layer of the software stack?To answer these questions, the authors studied the abnormal returns to stock for software firms over a three-day window using data on 103 software industry alliances from 1999 to 2002. In contrast to results that they obtained in a prior study, they found that value creation was the highest for alliances involving firms that create software products in adjacent parts of the software stack. They earlier established that M&As produced the greatest abnormal returns when firms that occupied different layers of the software stack were involved. These results are intriguing because they point to the refinement of our current understanding of how business value can be best derived from alliances and M&As, and suggest a somewhat different basis for the conduct of strategy at software firms. It appears, as the authors hypothesized, that value creation for alliances in the software industry reaches its highest point when the firms have similar or adjacent software stack component production capabilities. Their work points out the importance of studying the benefits of the range of hybrid organizational forms that have appeared in the software industry – and in the pharmaceutical and medical technology industries earlier – and which now can be extended to firms in all sorts of e-commerce-related business activities. The authors’ results also suggest new ways to interpret the intense competition and the variety of technical solutions that we see being produced by firms within the same layers of the software stack, as opposed to those who desire strong compatibility and standards when they offer products that occupy different layers of the software stack. The stack model proposed in this article provides an essential new analytical tool for understanding why loose coupling and alliances can mitigate uncertainty that firms may have when they are attempting to discover the extent of the similarities of a particular firm’s software product and service offerings. We believe that the stack model, and some modifications of it to suit other settings, provide unique opportunities for senior managers of technology to understand the technology ecosystem around their firms.The second article is entitled “Coordinated Selection of Procurement Bids in Finite Capacity Environments,” by Jiong Son and Norman Sadeh. The authors are computer scientists whose research evinces their interdisciplinary interests in procurement and supply chain management, manufacturing and e-commerce. This research explores the area of electronic bidding in supply chain procurement. In the past fifteen years, information technology has made it possible for firms that wish to buy supplies to engage many potential suppliers through electronic data interchange protocols and standards, and the Internet and electronic markets. Although there is evidence that market forces have been instrumental in encouraging procurement managers to balance spot market and longer-term contract-based procurement, it is clear that web services and the associated standards have reduced the cost for the firm to evaluate bids from multiple suppliers. A key issue that most firms face, however, is that not all of the suppliers they deal with are able to deliver to the exact specifications and needs they express for their supplies. Some suppliers do better in matching certain attributes, while other suppliers address some of the other needs better. This makes such procurement a combinatorial problem, and one that requires careful evaluation and selection – a process that is generally called winner determination. A related problem is whether a supplier is able to deliver on time, which would cause the procurer to experience unexpected production costs if delays occur.The present work lays out analytical models and heuristics that emphasize the solution of the winner determination problem with temporal and finite capacity constraints. The authors argue that this is not characteristic of models in the literature, though it nevertheless is a critical aspect of manufacturing and service support procurement. The authors specify, analyze and evaluate winner determination outcomes using a model they have built that addresses an analogous pseudo early-tardy scheduling problem. Since the complexity of finding a solution is high, the authors develop an heuristic search procedure that will efficiently prune the search space for solutions. The authors successfully tested the performance of their heuristic solution approach, and provide evidence that is value-maximizing for the procuring firm, when it considers how its suppliers’ capacity may impact its procurement performance.The third article of this issue is by Ing-Long Wu and Cheng-Hung Chuang, who offer new insights through their work on “Analyzing Contextual Antecedents for the Stage-Based Diffusion of Electronic Supply Chain Management.” There has been much published work on technology adoption and diffusion in contexts where there is a single technology, or different generations of technologies. The authors’ context is different though. They study how electronic supply chain management practices are adopted and diffused in multiple stages involving trading partners. The authors report that different technology and collaboration structures within the firms affect adoption and diffusion across three different stages somewhat differently. They comment that “technological structure is a more important indicator for the adoption stage while collaborative structure is a higher concern in the assimilation stage. This is because the focus of innovation diffusion at the earlier stages is on the improvement of perceived usefulness, ease of use, and information security. Innovation diffusion at the later stages mainly lies in building a good cooperative relationship among trading partners to facilitate their transactions.” They also report that industry and firm size affect the diffusion of electronic supply chain management practices. The authors’ empirical results were established using email survey methods. They offer interesting insights for firms that are going through the process of implementing e-procurement practices.The fourth article in the section of regular submissions, “An Incentive Mechanism for Message Relaying in Unstructured Peer-to-Peer Systems,” coauthored by Cuihong Li, Bin Yu and Katia Sycara, is an example of mechanism design research in electronic commerce, an important thrust of current exploration. In this article, the authors use economic theory to explore the issue of how to best design a mechanism that relays distributed messages in an unstructured peer-to-peer system to support the identification of new service providers. The authors report that there are operational problems that characterize the use of current search protocols. They include inappropriately long system response times, performance that is unreliable and unstable, unacceptably high costs associated with communication, and free-riding by self-interested peers in the system. The authors take an interesting approach to this problem through the use of monetary rewards that can be tied to messages that are created in the system.The essence of the proposed mechanism, the authors claim, is that a “peer is rewarded if a service provider is found via a relaying path that includes this peer. The mechanism allows peers to rationally trade off communication efficiency and reliability while maintaining information locality.” The authors use analytical modeling, and a series of definitions, propositions and proofs as a means to establish their primary results. They also propose an algorithm that creates the foundational elements of the mechanism. The authors frame the technical and business problems in this research in game-theoretic terms, with defined utilities for the system peers – or nodes – and the technical strategies that involve network hops, the applicable input reward incentive, a transmission effort, and an output incentive.A combination of these modeling elements, and a solution involving symmetric Nash equilibrium strategies of this game, permits the authors to approximate the equilibrium outcomes. Their simulations involve single and multiple service providers, and explore the effects of communication costs, and network size and topology. The authors’ approach also relies upon the recognition that the payment that a peer in a system will promise to or receive from other peers is based on the value of information and its network position. The dynamic price of the reward will change as a result, depending on the activity in the peer-to-peer network. The reward will aid in determining whether a node will be traversed. The authors also conduct experiments to show the robustness of their solution approach, and how it produces better outcomes than breadth-first search and random walk-based approaches.The fifth article is entitled “A Traceable E-Cash Transfer System against Blackmail via the Subliminal Channel,” by Chin-Ling Chen and Ming-He Liu. A subliminal channel is a “covert signal that can be used to send a secret message to the designated receiver, but the message cannot be recognized by any undesignated receiver”. This general solution was proposed in the 1980s to address the problem of fraud through blackmail, where a person is forced to transfer funds to a designated account by a criminal who is able to effectively coerce the person to abide by his will. Although the current state-of-the-art in digital cryptography supports the use of digital signature applications that use subliminal channels to transmit secret messages, to date these kinds of messages apparently have not been traceable by an auditor. It is especially desirable for a person who wishes to transmit a secret message to a bank to have such a mechanism in place so that when an electronic payment is being coerced, and prevent any external reader from identifying that there are secret contents attached or what those contents are. In addition, as a means to protect against fraudulent reports of electronic payments blackmail, there is a concomitant desire to provide the technical means for a bank to ensure that an audit trail exists so that the electronic payment message’s details can be traced. The authors report that a secure electronic cash transfer system needs to have the following key properties to be viable: (1) Activity in a problematic account needs to be traceable. (2) The protocol for the system must prevent false reporting by a putative perpetrator of fraud that owns the account. (3) A digital signature must be accepted as proof of non-repudiation, in other words, that a contractual commitment cannot be denied after a transaction has taken place by either of the parties to it. And finally, (4) there must be exchange in advance of the secret key that permits decryption of the covert message in the subliminal channel, so no exchange needs to occur at the time a transaction is made. The authors present the analytical modeling details and the associated algorithms to lay out the details of their subliminal channel encryption scheme. They also conduct a series of analyses to determine the extent to which their proposed protocol matches the four-point requirements listed above. They also show the inner workings of the cryptographic approach based on the what happens in exchange transaction-related messages between the criminal and victim, the victim and the victim’s bank, the victim’s bank and an official agency for bank oversight, as well as links between the criminal’s bank and the victim’s bank, on the one hand, and the criminal’s bank and the official agency on the other. Through exhaustive analysis of these links and the key properties of the secret message-preserving encryption scheme, the authors are able to demonstrate the effectiveness of their proposed protocol and solution.“An Artist Life Cycle Model for Digital Media Content: Strategies for the Light Web and the Dark Web,” by Tobias Regner, Javier A. Barria, Jeremy V. Pitt, and Brendan Neville, is the final article of the issue. The authors contrast the “Light Web,” in which digital media content is mostly created by large media firms, and the “Dark Web,” in which content is created by the unorganized and often uncompensated masses. The authors explore several questions, including: (1) Should different business models apply for the protection of intellectual property and payment for people who are in different parts of their life cycle as digital media artists? (2) What are the critical bases for which payments and intellectual property rights should be decoupled for new digital media goods? And (3), what can we learn from the different characteristic activities of consumption by consumers, including pre-consumption and post-consumption activities, and the act of consuming the digital media goods itself? By exploring how different protection and payment regimes for newly-emerging, well-established and now-retired artists, the authors are able to evaluate how DRM-based, voluntary payment-based, complementary product and service-based, and government regulation-based models are expected to work in practice. They evaluate these alternatives in terms of their social costs and benefits, and more specifically the convenience of use, the extent of the potential exposure they give to a digital media artist, the ease of compliance and the relative challenge of implementation, and the effectiveness of their administration in terms of centralized control versus market control of the solutions.The authors use of the artist’s life cycle is especially effective, since it permits them to characterize what happens when emerging digital media artists start by creating digital media content for pleasure with little or no profit motive in mind. The access of the masses to their content will be free. But with the support of social networking and content filtering websites in the artists’ area of digital media content (e.g., Facebook and CD Baby for emerging music artists), artists may rapidly gain reputation and notoriety, and find that there is increasing commercial demand for the kinds of digital media content they are creating. This may cause the artist to consider moving from the Dark Web to the Light Web, where it is increasingly possible to monetize the digital content that they produce. At this point, artists may seek out marketing agents, record labels and publishing companies that can help them build a strong and sustainable revenue stream. This will entail putting restrictions on the public’s access to the artists’ digital media content, however, and no longer will free access be supported. Most established artists who achieve high financial success on the Light Web reach a point where they become concerned about the access that people everywhere have to their digital media content, which is protected by copyrights, and limited in its access through pricing policies and other protections. The authors point to such famous examples as music artists, George Michael and Radiohead, who made their music available either for free or with a voluntary payment scheme, when they released recordings in the mid-1990s. Thus, the authors paint a very rich picture of how to apply their ideas, by showing how the level of protection, and time and popularity combine to make an artists selection of DRM-based, complements-based and voluntary payment-based models logical choices in the artist life cycle.We thank the authors, the anonymous reviewers, and the editorial board members who handled these articles for their thoughtful contributions to the contents of this issue ofElectronic Commerce Research and Applications. Great work!In closing, we would like to share several news items that will enable this journal to continue its development as a great outlet for interdisciplinary electronic commerce research. First, we will be expanding our editorial board to cover several additional academic disciplines, including urban and public affairs, communications and journalism, geography and regional studies, and statistics. Each of these areas offers unique opportunities to broaden the intellectual discourse of this journal and our academic community at large. For example, in urban and public affairs, there is increasing interest in the topics of electronic voting and political blogging, not to mention Internet-based government information and services. In communications and journalism, the pressures of a changing economy and the technologies of the Internet colliding to create the “perfect storm” for traditional newspapers, news and broadcast outlets, meanwhile creating new forms of immediate eyewitness journalism, and rapid-fire thrust-and-parry digital dialogue. In regional studies and geography, we have new and exciting developments with e-commerce services and emerging technical capabilities that are giving rise to ubiquitous computing and location-based services and information. All of the issues that we have been examining with empirical research methods in Electronic Commerce Research and Applications over the past eight years are also worthwhile to revisit with the burgeoning power of new statistical methodologies that emphasize spatial phenomena to a greater extent than ever before.Second, we are pleased to announce that the journal’s current Editor-in-Chief, Rob Kauffman, of the W.P. Carey School at Arizona State University, has been reappointed for a three-year term from 2010 to 2012. Rob is open to comments, suggestions and ideas from the readers and contributors of articles in this journal, and will be working closely with the Co-Editors, the Area Editors, and the Publisher at Elsevier B.V., to improve the journal’s processes, and expand its scientific interest and circulation.Finally, we are also happy to say that Arti Mann, currently the journal’s Editorial Assistant, has also been reappointed. We thank her for another year of strong contributions to the operations of the journal, and outstanding service to the Editorial Board, our authors, and our colleagues at Elsevier.


Computer Sciences

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Information Systems and Management


Electronic Commerce Research and Applications





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