Suresh Muthulingam

Energy Efficiency in Small and Medium-Sized Manufacturing Firms: Order Effects and the Adoption of Process Improvement Recommendations

In many manufacturing operations, profitable energy efficiency opportunities remain unexploited. Although previous studies have tried to explain the underinvestment, we focus on how the way in which a portfolio of opportunities is presented in a list affects adoption decisions. We use information on over 100,000 energy-saving recommendations made to more than 13,000 small and medium-sized manufacturing firms under the Industrial Assessment Centers program of the U.S. Department of Energy. We find that adoption rates are higher for initiatives appearing early in a list of recommendations. This sequence effect is consistent and large: simply moving a recommendation one position lower has the same effect on average as increasing up-front implementation cost by at least 17% from the average value. Given this impact of sequence on adoption of individual recommendations, we utilize variations within our data to examine how various sequencing approaches affect adoption at the portfolio level. Sequences in which recommendations are listed from best to worst payback achieve higher potential energy savings given the investments in energy efficiency made by the firms. We also observe a choice overload effect at the portfolio level, but the magnitude of this effect is small.

Adoption of Voluntary Environmental Standards: The Role of Signaling and Intrinsic Benefits in the Diffusion of the Leed Green Building Standards

We examine the role of signaling and of intrinsic benefits in the adoption of the individual elements of the voluntary LEED (Leadership in Energy and Environmental Design) standards for green buildings. We use goodness-of-fit tests on data for all 442 LEED certified buildings and find that neither signaling nor pursuit of intrinsic benefits can independently explain the observed adoption pattern, but that a combination of the two factors can. We also find tentative evidence that the adoption decision is made sequentially: organizations first choose a level of certification (consistent with signaling), and then choose how many LEED elements to adopt given their chosen level of certification consistent with pursuing intrinsic benefits). We relate our findings to some open questions in the literature on diffusion of technology and draw implications for the design and the future development of similar voluntary standards and eco-labels.

Does Organizational Forgetting Affect Vendor Quality Performance? An Empirical Investigation

The development of organizational knowledge and the depreciation of knowledge within organizations are processes that invariably occur concurrently. In the quality domain, many researchers have examined how the development of organizational knowledge organizational learning enhances quality performance. We build on this literature and investigate how the depreciation of organizational knowledge organizational forgetting affects quality performance. We analyze information on 2,732 quality improvement initiatives implemented by 295 vendors of a car manufacturer and find that organizational forgetting affects quality gains obtained from both learning-by-doing autonomous learning and quality improvement initiatives induced learning; more than 16% of quality gains from autonomous learning and 13% of quality gains from induced learning depreciate every year. Furthermore, the impact of organizational forgetting i differs across the types of quality improvement efforts quality gains from process improvement initiatives depreciate, whereas those from quality assurance initiatives do not, and ii depends on where quality knowledge was embedded depreciation is lower for knowledge embedded in technology than for knowledge embedded in organizational routines or organizational members. Our results highlight the ubiquity of organizational forgetting and suggest the need for continued attention to sustain and enhance quality performance in supply chains.

Stockout-Based Substitution and Inventory Planning in Textbook Retailing

We demonstrate the value of utility-based choice models to estimate demand and plan inventory for new and used textbooks in the presence of consumer choice and stockout-based substitution at a university textbook retailer. Demand information is censored, the exact time of stockout is not observed, and the short selling season often does not allow for replenishment. Using data for 26,749 book titles from 2007 to 2011 and a simulation experiment calibrated on real data, we show that an attribute-based choice model generates accurate demand estimates (mean absolute percentage error less than 1%) even when nearly 90% of the textbooks in the fit sample experience stockout. This performance is driven by the heterogeneity of product attributes and is robust to the occurrence of product returns. We implement this model at the bookstore in a controlled field experiment and obtain over 10% increase in profit. The results show that accounting for asymmetric and stockout-based substitution in demand estimation and inventory planning enables us to make systematic corrections in inventory mix and inventory level compared to the existing process.

Does Quality Knowledge Spillover at Shared Suppliers? An Empirical Investigation

We use a unique empirical setting to investigate the spillover of quality knowledge across supply chains and to the examine contingencies that affect such spillover. We analyze the quality performance of 191 suppliers, who utilize the same facilities to manufacture similar products for two distinct businesses: one that makes cars and the other that makes commercial vehicles. From 2006 to 2009, the car business undertook 2,121 quality improvement initiatives at these suppliers, while the commercial vehicles business did not undertake any such initiatives. We find that the quality knowledge developed through the quality improvement initiatives undertaken by the car business does not easily spill over to benefit the commercial vehicles business. Quality knowledge spills over under three conditions: (1) when quality improvement efforts are focused on organizational members, as opposed to when they focus on routines or technology; (2) when quality improvement efforts focus on the output activities of suppliers...

Impact of Bayesian Learning and Externalities on Strategic Investment

We investigate the interplay between learning effects and externalities in the problem of competitive investments with uncertain returns. We examine a game theoretic duopoly investment model in which (i) a firm can learn about the profitability of the investment by observing the performance of the first mover and (ii) externalities exist between the investments of two firms. We find a region of a war of attrition between the two firms in which the interplay between externalities and learning gives rise to counterintuitive effects on investment strategies and payoffs. In particular, we find that, contrary to the conventional war of attrition where an increase in benefits for the follower generally delays the first move, an increase in the rate of learning—which tends to benefit the follower—can hasten the first investment. This paper was accepted by James Smith, decision analysis.