Yasin Ozcelik

Productivity and Performance Effects of Business Process Reengineering: A Firm-Level Analysis

We empirically investigate whether business process reengineering (BPR), which requires substantial investment in information technology to integrate separate tasks into complete cross-functional processes, is associated with enhanced firm productivity and performance. We analyze firm-level panel data covering the period 1987-2008 using fixed effects and first differencing, standard methods that account for unobservable firm-level effects. We find that return on assets drops significantly during the project initiation year. According to fixed effects results, the performance and productivity measures improve in a decreasing manner after project initiation, suggesting that BPR indeed positively affects firm performance on average. We also find that enterprise-wide BPR projects are associated with more negative returns during project initiation than functionally focused projects. However, there is no clear evidence regarding their superiority over functionally focused BPR projects in terms of performance improvements after project initiation, perhaps because grand projects are risky and sometimes lead to grand failures.

Six Sigma implementation in the service sector: notable experiences of major firms in the USA

Six Sigma is a quality improvement methodology that has been popular among manufacturing firms for years. Given that the service sector employs most of the total workforce in developed countries, Six Sigma can be utilised to improve service quality in this sector as well. Since the application of Six Sigma to service industries is a relatively new concept, the number of studies on this topic is quite limited. In this paper, we report the Six Sigma experiences of major service firms in the USA, including Bank of America, Circuit City, Citibank, EMC Corporation, Home Depot, JPMorgan Chase and Merrill Lynch. We also highlight the significant benefits and improvements realised by these firms as a result of Six Sigma projects. Overall, our paper provides compelling evidence that the expansion of the scope of the Six Sigma methodology from the manufacturing to the service sector has been quite successful. We also provide managerial insights for service companies that plan to adopt Six Sigma as a quality improvement methodology.

Donor-to-Nonprofit Online Marketplace: An Economic Analysis of the Effects on Fund-Raising

Online intermediaries have recently started offering database services to donors and certification services to nonprofit organizations through the Internet. We conceptualize a donor-to-nonprofit (D2N) marketplace as an online intermediary that offers these two services and examine its effect on fund-raising strategies of nonprofit organizations using an analytical model based on spatial competition under incomplete information with donor search. We characterize the signaling equilibria where certification of quality conveys information about organizational effectiveness in generating socially valuable services. Interestingly, the emergence of the D2N marketplace may lead to a drop in total net fund-raising revenues in the market, despite the fact that the intermediarys database service eliminates search costs for some donors. We also explain why such a marketplace may deliberately lower the accuracy of its certification process.

The rise of teleworking in the USA: key issues for managers in the information age

Teleworking is a work arrangement by which a corporate employee regularly works at an alternate worksite, such as the employees home or a satellite office, by using Information Technology (IT) and the internet for collaboration. Many companies in the USA have successfully adopted teleworking as part of their employment policy and it may continue to be a business trend due to the prevailing financial turmoil that forces companies to cut costs while achieving operational excellence. In this paper, we first identify the major historical factors that have favoured teleworking in the USA for the past two decades. We then highlight certain benefits and risks of teleworking for employees, businesses, the society and the economy. We make several managerial and technical recommendations for corporate managers regarding a successful initiation and execution of teleworking projects. Finally, we contemplate on the future of teleworking under the light of advancements in IT and the internet.

A New Approach for Information Security Risk Assessment: Value at Risk

Most of the tools that are used for Information Security (ISEC) risk assessment are qualitative and are not grounded in theory. This paper presents and applies a well-known financial risk theory, Value at Risk (VaR), to the ISEC risk assessment. VaR in its most succinct form is defined as a figure that relates the amount of potential loss in a given portfolio to its probability, and describes the quantile of the projected distribution of losses over a given time period. From the ISEC perspective, VaR summarizes the worst loss due to a security breach over a target horizon, with a given level of confidence. Using this quantitative measure of risk, the best possible balance between risk and cost of providing security to mitigate the risk can be achieved.

Cash-back rewards versus equity-based electronic loyalty programs in e-commerce

Loyalty is a crucial part of today’s business because retaining a customer is generally less expensive than attracting a new one. This relationship also holds true in e-commerce. Most of the e-loyalty programs available on the Internet utilize cash-back rewards. A new type of e-loyalty program in which customers are offered a fraction of merchant firm’s equity is emerging recently. The profitability of this approach versus cash-back reward programs is still an open question. In this paper, we first survey current e-loyalty programs, and then develop a two-period duopoly model in which one of the firms gives customers a small fraction of its equity and the other offers cash-back reward for a purchase. We derive analytical conditions to compare the total profits generated through each loyalty program. In particular, we find that equity-based e-loyalty programs provide higher total profits than those of cash-back programs in markets where it is difficult for customers to switch between firms.

Effects of Business Process Reengineering on Firm Performance: An Econometric Analysis

This chapter examines whether implementation of Business Process Reengineering (BPR) projects improve firm performance by analyzing a comprehensive data set on large firms in the United States. The performance measures utilized in the chapter are labor productivity, return on assets, and return on equity. We show that firm performance increases after the BPR projects are finalized, while it remains unaffected during execution. We also find that functionally focused BPR projects on average contribute more to performance than those with a broader cross-functional scope. This may be an indication that potential failure risk of BPR projects may increase beyond a certain level of scope.

An Internet-Enabled Donor-to-Nonprofit (D2N) Marketplace

Online intermediaries have recently started offering database services to donors and certification services to nonprofit organizations through the Internet. We conceptualize a Donor-to-Nonprofit (D2N) marketplace as an online intermediary that offers these two services and examine its effect on fundraising strategies of nonprofit organizations using an analytical model based on spatial competition under incomplete information with donor search. We characterize the signaling equilibria where certification of quality conveys information about organizational effectiveness in generating socially valuable services. Interestingly, the emergence of the D2N marketplace may lead to a drop in total net fundraising revenues in the market, despite the fact that the intermediary’s database service eliminates search costs for some donors. We also explain why such a marketplace may deliberately lower the accuracy of its certification process.

Effects of Online Service Providers for Nonprofits on Fundraising Markets: An Economic Analysis

The Internet is transforming the way nonprofits have been disseminating information about themselves, interacting with potential donors, and fundraising. In this article, the authors focus on a special type of online service providers for nonprofits (OSPNs) that bring donors and nonprofits together in an electronic environment to help them find a suitable match. The authors investigate the effects of OSPNs on the outcomes of fundraising markets by developing an economic model. They compare the total net revenues of nonprofits competing for donations in two different settings: while nonprofits in the first market use both the traditional fundraising techniques and the services provided by OSPNs, those in the second market implement the traditional method only. They derive analytical conditions under which the first setting provides better outcomes than the second one can generate.

Market Transparency in Business-to-Business e-Commerce: A Simulation Analysis

Market transparency refers to the level of current trade information revealed to participants by market makers. This paper analyzes the effect of market transparency on the outcomes of posted-offer style Business-to-Business e-commerce markets. First, increasing market transparency improves the price-tracking ability of sellers, and results in higher efficiency. However, revelation of quantity information on transactions is not very crucial as opposed to price information. Second, although sellers extract significantly higher surplus profit than buyers can do in a posted-offer market, the difference vanishes with increasing market transparency. Lastly, sellers in posted-offer markets respond poorly to external demand shocks. Interestingly, the poor price-tracking performance of sellers hurts buyers more. In other words, seller profits are much less sensitive to demand shocks as compared to buyer surpluses.