Demand-side Benefits Research Articles

Providers or users of Industry 4.0-based solutions: how does the innovation ecosystem affect a company’s decision to engage in Industry 4.0?

PurposeCompany goals, behaviors and decision-making processes may differ depending on whether a given company decides to engage in the Industry 4.0 (I4.0) paradigm as a user or as a provider of I4.0-based solutions. This paper will consider this question in-depth by focusing on the extent to which the innovation ecosystem (IES) affects these two main strategies.Design/methodology/approachThe authors' study aims to analyze the impact of a regional information and communication technology (ICT) ecosystem on the implementation of I4.0 at the company level by using an original survey of 123 companies that are already engaged in the implementation of I4.0 in the French region of Hauts-de-France and by employing two sets of logit models.FindingsThe authors' empirical study demonstrates the importance of an innovation ecosystem-based strategy for I4.0 technology provision. It reveals that engaging in R&D collaborative projects and developing links and complex relationships with heterogeneous actors within the IES positively affects the likelihood of a given firm deciding to implement I4.0 as a provider of I4.0-based solutions. This does not, however, affect the probability of a firm engaging in the I4.0 paradigm as a user of technologies and solutions.Practical implicationsFrom a policy standpoint, this study could encourage decision-makers to engage with I4.0 development by developing policies targeting the reinforcement of IES at a regional level. This could also help to accelerate the adoption of I4.0 technologies by manufacturing companies and foster the development of I4.0-based solutions through specific company-targeted policies. The authors' study supports the need for manufacturing company managers to evaluate and identify the best technological strategies related to the I4.0 paradigm that meet their specific needs.Originality/valueThe authors' study shows that the decision to engage in the I4.0 paradigm as providers of I4.0-based solutions is more likely to rely on an innovation ecosystem-based strategy, while the decision to engage in the I4.0 paradigm as users of I4.0-based solutions is more likely to rely on the company’s internal strategies, resources and demand-side benefits.

Recycled content claims under demand benefit and supply uncertainty: Multi-period model and application to glasswool insulation

Manufacturers often declare recycled content claims that are specific (e.g., to each production period) or average (e.g., across many production periods). Such claims are manifested through the choice of certification and generate demand for the manufacturer’s recycled content product. However, since the amount of usable recycled input available from local sources is often limited and uncertain, and external (non-local) sources are expensive, a manufacturer needs to balance the demand-side benefits of a recycled content claim with the associated sourcing and inventory costs. In this paper, we develop a multi-period model over a planning horizon, where a manufacturer makes a product’s source mix decision (recycled input vs. virgin content) and recycled input carryover decision each period in the presence of a stochastic supply and external sourcing cost. We solve for the manufacturer’s optimal recycled content claim decision over a planning horizon and calculate the manufacturer’s profit, recycled input, and virgin raw material usage at the optimal claim. Our key contributions are as follows. We show that (i) a shorter (longer) planning horizon may sometimes increase (decrease) the recycled content claim, (ii) demand stimulation for recycled products may sometimes decrease the optimal recycled content claim, and (iii) supply stabilization (i.e., lowering variability in the municipal stream) may decrease the recycled content claim. We provide numerical results for parameters driven by European data from the fiberglass insulation industry and use our analysis to quantify the impact of several European policies relevant to the glasswool insulation industry on a manufacturer’s incentive to incorporate recycled content.

Evolution delayed decision game based on carbon emission and capacity sharing in the Chinese market

Based on the carbon emission policy and low-carbon capacity sharing, this paper studies the optimal product pricing and capacity matching strategies of competition and cooperation between two companies in a duopoly market. And the optimal strategies with or without capacity sharing are discussed. In addition, a differential game model based on carbon emission constraints, low-carbon capacity sharing, and delayed decision-making is established. We also study the evolution of duopoly enterprises from the initial state to the equilibrium state. Besides, the influence of delayed decision variables, price adjustment speed and decision weights on the stability of the game system is analyzed. The results show that the government can effectively intervene and guide the enterprises’ low-carbon production strategy through carbon emission restriction policy. Low-carbon capacity sharing is beneficial to both enterprises, and the demand side benefits more than the supply side. We discuss the impact of stable and unstable systems on enterprises’ decisions. When the system is stable, enterprises can converge from different initial game states to equilibrium states. The adoption of a delay strategy will not affect the tendency of convergence to the equilibrium. Furthermore, the system using the variable feedback control method is of higher stability.

Market Orchestrators: The Effects of Certification on Platforms and Their Complementors

We study how a multisided platform’s decision to certify a subset of its complementors affects those complementors and ultimately the platform itself. Kiva, a microfinance platform, introduced a social performance badging program in December 2011. The badging program appears to have been beneficial to Kiva—it led to more borrowers, lenders, total funding, and amount of funding per lender. To better understand the mechanisms behind this performance increase, we study how the badging program changed the bundle of products offered by Kiva’s complementors. We find that Kiva’s certification leads badged microfinance institutions to reorient their loan portfolio composition to align with the certification and that the extent of portfolio reorientation varies across microfinance institutions, depending on underlying demand- and supply-side factors. We further show that certified microfinance institutions that do align their loan portfolios enjoy stronger demand-side benefits than do certified microfinance institutions that do not align their loan portfolios. We therefore demonstrate that platforms can influence the product offerings and performance of their complementors—and, subsequently, the performance of the ecosystem overall—through careful enactment of governance strategies, a process we call “market orchestration.”

Inventory Sharing and Demand-Side Underweighting

Problem definition : Transshipment/inventory sharing has been used in practice because of its risk-pooling potential. However, human decision makers play a critical role in making inventory decisions in an inventory sharing system, which may affect its benefits. We investigate whether the opportunity to transship inventory influences decision makers’ inventory decisions and whether, as a result, the intended risk-pooling benefits materialize. Academic/practical relevance : Previous research in transshipment, which is focused on finding optimal stocking and sharing decisions, assumes rational decision making without any systematic bias. As one of the first to study inventory sharing from a behavioral perspective, we demonstrate a persistent stocking-decision bias relevant for inventory sharing systems. Methodology : We develop a behavioral model of a multilocation inventory system with transshipments. Using four behavioral studies, we identify, test, estimate, and mitigate a demand-side underweighting bias: although inventory sharing brings both a supply-side benefit and a demand-side benefit, players underestimate the latter. We show analytically that such bias leads to underordering. We also explore whether reframing the inventory sharing decision reduces this bias. Results : Our results show that subjects persistently reduce their order quantities when transshipments are allowed. This underordering, which persists even when a decision-support system suggests optimal quantities, causes insufficient inventory in the system, in turn reducing the risk-pooling benefits of inventory sharing. Underordering is evidently caused by an underweighting bias; although players correctly estimate the supply-side potential from transshipment, they only estimate 20% of the demand-side potential. Managerial implications : Although inventory sharing can profitably reduce inventory, too much underordering undermines its intended risk-pooling benefits. The demand-side benefits of transshipment need to be emphasized when implementing inventory sharing systems.

Market Orchestrators: The Effect of Platform Certification on Complementor Performance and Behavior in the Context of Kiva (2010-2013)

We study how a multisided platform’s decision to certify a subset of its complementors affects those complementors and ultimately the platform itself. Kiva, a microfinance platform, introduced a Social Performance badging program in December 2011. The badging program appears to have been beneficial to Kiva—it led to more borrowers, lenders, total funding, and amount of funding per lender. To better understand the mechanisms behind this performance increase, we study how the badging program changed the bundle of products offered by Kiva’s complementors. We find that Kiva’s certification leads badged microfinance institutions to reorient their loan portfolio composition to align with the certification and that the extent of portfolio reorientation varies across microfinance institutions, depending on underlying demand- and supply-side factors. We further show that microfinance institutions that do align their loan portfolios enjoy stronger demand-side benefits than certified microfinance institutions that do not align their loan portfolios. We therefore demonstrate that platforms can influence the product offerings and performance of their complementors—and subsequently the performance of the ecosystem overall—through careful enactment of governance strategies, a process we call “market orchestration.”

The New Global Politics of Sovereign International Tax: Space, Time, and Why BEPS is Not the Final Frontier

International tax is undergoing an epochal shift, reminiscent of the genesis of the current bilateral state-centric network of diplomatic agreements in the 1920s. The paradigm of Westphalian tax sovereignty is being assailed by efficient corporate tax planning, resulting in considerable profit shifting and base stripping by multinational enterprise. The supply side of policy is engaged in a race to the bottom competition, and the demand side benefits from treaty shopping and elective residence. Tax is at the heart of the social contract, and the welfare state is having an existential moment. Current efforts coordinated through the G-20 and OECD are likely to produce mock compliance or outright failure. Observing the comparative experience of financial regulation through the Basel Accords employing the constructivist ontology of international relations, this paper argues for constitutional anti-majoritarian paternalism in national tax administrations, together with global tax governance supported and implemented by a transnational epistemic community insulated from democratic interference. Indeed, the problem of space and time occasioned by the current era of globalization portend significant policy coordination problems and distributive contests. In light of the application of globalization theory to a futurist frame, however, it is clear BEPS is not the final frontier for the imagination of sovereign tax.

Additive manufacturing technology adoption: an empirical analysis of general and supply chain-related determinants

Despite experiencing immense growth in the past decade, additive manufacturing (AM) technologies—colloquially known as 3D-printing—are still rarely used in industrial fabrication. Being at the interface between technology, innovation, behavioral science and operations management research, this paper identifies multifaceted factors that determine the decision to adopt AM technologies for the production of industrial parts. A review of the relevant literature revealed eight potential factors. These can be classified into four interdisciplinary categories: technology-related factors, firm-related-factors, market structure-related factors, and supply chain-related factors. Special focus is placed on the impact of supply chain-related issues, because there are indicatives that these aspects have an influence on the decision to adopt AM technologies since AM may offer distinct opportunities for both, the supply- and demand-side of a firm’s operations. No work in the field of manufacturing technology adoption has examined the role of such inter-organizational factors before. The results of an empirical study among 195 firms indicate that demand-side benefits and compatibility are the main determinants of AM technology adoption. This suggests that not only intra- but also inter-organizational factors should be considered when investigating the adoption of technological innovations. Furthermore, it is carved out that the adoption of AM technologies has an interdisciplinary nature.

Implications of Workplace Accommodations for Persons With Disabilities

Demand-side and supply-side factors are explored related to workplace accommodations for individuals with disabilities. Employers who had sought and received consultation from the Job Accommodation Network were later contacted for a follow-up interview. The data from these 1,293 interviews include effectiveness of customized employment, direct benefits to employers, and indirect benefits to employers. The primary demand-side benefits of effective accommodation implementation identified by these employers were (a) retained a qualified employee, (b) increased the overall company's productivity as well as employee's productivity, (c) eliminated cost of having a new employee, (d) increased overall company morale, and (e) increased the accommodated employee's attendance.

Vaporware, Suddenware, and Trueware: New Product Preannouncements Under Market Uncertainty

A firm may want to preannounce its plans to develop a new product in order to stimulate future demand. But given that such communications can affect rivals' incentives to develop the same new product, a firm may decide to preannounce untruthfully in order to deter competitors. We examine an incumbent's preannouncement strategy when there is uncertainty regarding the commercial viability of a new product opportunity and a threat of rival entry. Each firm has a private assessment of the market potential for the new product. Two competitive incentives arise for the incumbent in terms of discouraging rival entry: it can use preemptive communication or it can remain silent and instill a pessimistic market potential outlook. We find that an incumbent prefers to follow a vaporware strategy—i.e., declares plans to pursue a new product opportunity even when it may have no development intentions—when its market forecasting capabilities are weak and the demand-side benefits from preannouncing are small. By contrast, when the incumbent has strong market forecasting capabilities and the demand-side benefits are small, the incumbent adopts a suddenware strategy—i.e., remains silent about its new product plans even when it actually plans to develop the new product. Finally, when its market forecasting capabilities are strong and the demand-side benefits are large, the incumbent prefers to engage in a trueware strategy—i.e., truthfully preannounces development plans. We show that an interplay between competition-related and demand-related considerations is what allows trueware to emerge as an equilibrium in the absence of any ex post cost to engaging in vaporware. In an extension, we let the incumbent's actual development plans leak out and allow the entrant to wait and learn those plans prior to setting a research and development level. We identify conditions for the entrant to postpone development despite the risk of being late to market, as well as conditions for the entrant to commence development immediately despite not knowing the incumbent's plans based on the observed preannouncement strategy.

Toward a Model of Venture Capital Investment Decision Making

Venture capital investment decision-making can be modeled as a six-stage process that employs fifteen criteria and produces both supply- and demand-side benefits to the market.