Byungtae Lee

Productivity of Information Systems in the Healthcare Industry

This research paper analyzes the impact of information technology (IT)in a healthcare setting using a longitudinal sample of hospital data from 1976 to 1994. We classify production inputs into labor and capital categories. Capital is classified into three components--medical IT capital, medical capital, and IT capital--and labor is classified into two components, medical labor and IT labor. Results provide evidence that IT contributes positively to the production of services in the healthcare industry.

An Economic Analysis of the Introduction of an Electronic Data Interchange System

Although electronic data interchange EDI holds the promise of significantly increasing the efficiency of business transactions, an installed base of proprietary implementations has been detrimental to the widespread acceptance of the technology. Thus, an important research issue involves strategies for facilitating EDI adoption. We analyze the introduction of an EDI system in a vertical market involving one manufacturer and two suppliers. The manufacturer initiates an EDI network, and penalizes a supplier for not joining the system by reducing its volume of business with the supplier. Along with a “stick,” the manufacturer can also use a “carrot” in the form of a subsidy to partially offset a suppliers setup cost. The competition between the suppliers is characterized by incentive types for joining the EDI system “motivating” or “threatening” and the Information Technology IT efficiency “efficient” or “inefficient”. We show that regardless of its cost structure, a supplier may have to join the EDI network out of “strategic necessity,” due to the presence of an IT-efficient supplier. Our analysis further shows that depending on the supplier competition structure, the EDI system may prove to be a “beneficial” strategic necessity for a large supplier and an “unfortunate” strategic necessity for a small supplier. Another key result is that by increasing the severity of the penalty, both the manufacturer and the follower supplier can be worse off under certain conditions. The analysis of subsidy strategies reveals that unless leadership and followership positions are reversed due to a subsidy, subsidizing a supplier has no impact on the joining time of its competitor. Thus the EDI initiator cannot induce both suppliers to join earlier by subsidizing one supplier. Also, the larger the slack capacity of the leader, the higher lower the manufacturers incentive to subsidize the leader follower. These results offer insights for initiators and adopters regarding penalty and subsidy strategies, impact on competition structure, joining decisions and network growth.

An integrated assessment of productivity and efficiency impacts of information technology investments: Old data, new analysis and evidence

We reexamine the •Information Technology (IT) productivity paradox• from the standpoints of theoretical basis, measurement issues and potential inefficiency in IT management. Two key objectives are: (i) to develop an integrated microeconomic framework for IT productivity and efficiency assessment using developments in production economics, and (ii) to apply the framework to a dataset used in prior research with mixed results to obtain new evidence regarding IT contribution. Using a stochastic frontier with a production economics framework involving the behavioral assumptions of profit maximization and cost minimization, we obtain a unified basis to assess both productivity and efficiency impacts of IT investments. The integrated framework is applied to a manufacturing database spanning 1978–1984. While previous productivity research with this dataset found mixed results regarding the contribution from IT capital, we show the negative marginal contribution of IT found in an important prior study is attributable primarily to the choices of the IT deflator and modeling technique. Further, by ignoring the potential inefficiency in IT investment and management, studies that have reported positive results may have significantly underestimated the true contribution of IT. This positive impact of IT is consistent across multiple model specifications, estimation techniques and capitalization methods. The stochastic production frontier analysis shows that while there were significant technical, allocative and scale inefficiencies, the inefficiencies reduced with an increase in the IT intensity. Given that the organizational units in our sample increased their IT intensity during the time period covered by the study, management was taking a step in the right direction by increasing the IT share of capital inputs. Our results add to a small body of MIS literature which reports significant positive returns from IT investments.

Herding behavior in online P2P lending: An empirical investigation

We study lender behavior in the peer-to-peer (P2P) lending market, where individuals bid on unsecured microloans requested by other individual borrowers. Online P2P exchanges are growing, but lenders in this market are not professional investors. In addition, lenders have to take big risks because loans in P2P lending are granted without collateral. While the P2P lending market shares some characteristics of online markets with respect to herding behavior, it also has characteristics that may discourage it. This study empirically investigates herding behavior in the P2P lending market where seemingly conflicting conditions and features of herding are present. Using a large sample of daily data from one of the largest P2P lending platforms in Korea, we find strong evidence of herding and its diminishing marginal effect as bidding advances. We employ a multinomial logit market-share model in which relevant variables from prior studies on P2P lending are assessed.

The Information Technology Productivity Paradox Revisited: A Theoretical and Empirical Investigation in the Manufacturing Sector

The lack of empirical support for the positive economic impact of information technology (IT) has been called the IT productivity paradox. Even though output measurement problems have often been held responsible for the paradox, we conjecture that modeling limitations in production-economics-based studies and input measurement also might have contributed to the paucity of systematic evidence regarding the impact of IT. We take the position that output measurement is slightly less problematic in manufacturing than in the service sector and that there is sound a priori rationale to expect substantial productivity gains from IT investments in manufacturing and production management. We revisit the IT productivity paradox to highlight some potential limitations of earlier research and obtain empirical support for these conjectures. We apply a theoretical framework involving explicit modeling of a strategic business units (SBU)1 input choices to a secondary data set in the manufacturing sector. A widely cited study by Loveman (1994) with the same dataset showed that the marginal contribution of IT to productivity was negative. However, our analysis reveals a significant positive impact of IT investment on SBU output. We show that Lovemans negative results can be attributed to the deflator used for the IT capital. Further, modeling issues such as a firms choice of inputs like IT, non-IT, and labor lead to major differences in the IT productivity estimates. The question as to whether firms actually achieved economic benefits from IT investments in the past decade has been raised in the literature, and our results provide evidence of sizable productivity gains by large successful corporations in the manufacturing sector during the same time period.

Information technology value through different normative lenses

Abstract: The influence of IT investments on organizational performance is revisited. Bounded rationality, organizational controls, and political forces may constrain optimal selection of inputs and appropriate substitution between inputs. For example, firms may not be able to attain an optimal level of IT by substituting IT for labor (for reasons such as pressure from the labor union). Besides estimating a link between IT investments and firm output, this paper presents a study of the link between IT investment levels and the efficiency of processes. Nonparametric and parametric techniques were applied to financial data on hospitals collected over a period of eighteen years. We found that cost and technical and allocative efficiencies are statistically significant in the production framework. We also found that hospitals that were characterized by high technical efficiency also used a greater amount of IT capital than firms that exhibited low technical efficiency. A group of hospitals exhibiting high technical efficiency also exhibited low allocative efficiency, indicating that, while processes may have been efficient, resource allocation and budgeting between various categories of capital and labor have not been efficient. Our results also differ from previously published results because we find that IT labor had a negative contribution to productivity and that non-IT capital had a greater contribution to productivity than IT capital.

From the wisdom of crowds to my own judgment in microfinance through online peer-to-peer lending platforms

Information asymmetry is one of the fundamental problems that online peer-to-peer (P2P) lending platforms face. This problem becomes more acute when platforms are used for microfinance, where the targeted customers are mostly economically under-privileged people. Most of the prior empirical studies have been based on data from Prosper.com or similar sites that compete in traditional consumer loan markets. Our study examines P2P lending in microfinance for which borrowers are unbankable so that signals on creditworthiness of new borrowers are very limited. In addition, microfinance customers have more incentive to repeatedly seek loans from the market. Under this microfinance setting, we examine how lenders change their decisions as creditworthiness inference becomes increasingly possible through the accumulation of transaction history. Our findings confirm that lenders seek the wisdom of crowds when information on creditworthiness is extremely limited but switch to their own judgment when more signals are transmitted through the market. Different information sets are utilized according to the structures of decisions. Due to the possibility of a repeated game, it is also shown that borrowers try to maintain a good reputation, and direct communication with lenders may adjust incorrect inference from hard data when their creditworthiness is questioned.

Cost control and production performance enhancement by IT investment and regulation changes: evidence from the healthcare industry

Abstract By using panel data spanning a period of 18 years and by estimating a general cost function in a cost minimization setting, we conducted an analysis of information technology (IT) investments and production performance in the healthcare industry. The span of years from 1976 to 1994 in the healthcare industry is characterized by major regulatory changes and several organizational changes such as technological (IT and medical) advances and structural changes (multi-hospital systems [MHSs], vertical integration, etc.). This offers a unique setting to study the effect of regulation on the performance of the entire hospital and also of each input factor used in the production of services in the hospital. The cost function approach and the panel data technique allow us to test various hypotheses regarding technical change, substitution, and complementarity effects between IT investments, medical capital investments and labor expenses, and the role of regulation on the cost structure of hospitals. We find that while IT labor expense rose at an increasing rate due to regulatory effects, hospitals were moving in the right direction towards cost containment. 2

Social Welfare Implications of the Digital Divide

Abstract The Internet plays a critical role in informing individuals about society, politics, business, and the environment. So much so that it has been said that the digital divide makes the segment of society on the “right side” of the divide (the digitally endowed group) better off and that on the “wrong side” (the digitally challenged group) worse off. This is not always true, however, in a social choice situation where members of a society collectively choose one alternative from a set of alternatives. To identify conditions when this does not hold, a model of the digital divide is setup in which the digitally endowed group receives better information than the digitally challenged group. Preferences of all individuals over outcomes are distributed over a scale. This distribution is correlated with the digital divide: the outcome preferred by the digitally endowed group differs from that preferred by the other group. The alternative chosen by majority becomes the choice of the overall society. The ensuing analysis shows that individuals located centrally on the preference scale are sensitive to information about the state. The choice of centrally located digitally challenged individuals, made on a lack of information, makes the digitally challenged group worse off as has been predicted before. In some cases, the digitally endowed group is worse off as well. In the case of highly polar alternatives, social welfare decreases due to the welfare loss of the digitally endowed group. Results suggest that policymakers must manage the digital divide in a customized manner depending on the preferences context. They should not only focus on improving the welfare of the digitally challenged, but also focus on the welfare of the digitally endowed group so that this welfare does not decrease.

Thumbs Up, Sales Up? The Contingent Effect of Facebook Likes on Sales Performance in Social Commerce

Abstract In this study we investigate whether social reference systems, such as Facebook “likes” (FBLs), promote sales in social commerce, wherein adverse selection and quality uncertainty often severely damage consumer trust and impede efforts to achieve sustainable growth. We also examine the extent to which product characteristics (product uncertainty and product franchising) and deal characteristics (tipping points, discount rates, and deal durations) moderate the social selling stimulated by FBLs. On the basis of 1,327 samples collected from a major social commerce platform provider, we identify several interesting empirical regularities regarding the relationship between FBLs and social commerce sales. The findings suggest that FBLs drive traffic and increase sales. Information technology artifacts and social technologies, such as FBLs, can endow a consumer’s shopping experience with a socialization component and induce social selling in collective buying platforms. Nevertheless, significant variations occur across products and deals. For example, consumers who purchase experience goods more frequently depend on FBLs than do those who buy search goods. FBLs exert a far greater influence on the sales of goods from independent stores than those from franchise chains. Social commerce consumers are unaffected by heavy discount rates as they make purchase decisions, but they extensively rely on FBLs, particularly when purchasing products that have low tipping points. Our results suggest that social commerce can be a powerful marketplace when the economic utility that is driven by price incentives is further strengthened and protected by the social utility that originates from trust and sharing.