Knowledge that Transforms

As one of the most important financial innovations in the last two decades, credit default swap (CDS) contracts have been initiated and actively traded in the market to hedge against credit risks. However, little is known about how these financial innovations affect an underlying firm's operations. In this empirical study, we find that an underlying firm's operational efficiency is significantly improved with the inception of CDS trading. Our results are robust to multiple causal identification strategies. Further analysis suggests that the inception of CDS tends to enhance the operational efficiency of a firm through the supply chain financing capability and trade credit. We also postulate that CDS leads to enhanced efficiency through institutional monitoring and improvements in management effectiveness. We then obtain suggestive evidence. Our findings have direct implications concerning the ongoing policy debate surrounding CDS. We contribute to operations management research by exploring how innovations in the financial market would, in turn, affect the operational performance of firms.

Recent years have seen robust growth in online medical consultation platforms. These platforms allow patients to access various healthcare services provided by doctors (e.g., health assessment, diagnosis, consultation, and supervision). In China, many such platforms allow patients to give small monetary gifts to doctors as an expression of gratitude. The implicit assumption is that expensive gifts influence doctors' medical service and generate conflicts of interest but small gifts do not. However, there is little empirical evidence to support this assumption. In order to fill this gap in the literature, our study investigates whether small gifts from patients impact the quality of service provided to the gift‐givers (i.e., direct effect) and the nongivers (i.e., spillover effect). We examine three aspects of online medical service quality: (i) patient wait time, (ii) the amount of information in doctors' responses, and (iii) the degree of emotional support in doctors' responses. We find that despite the gifts' negligible monetary value, doctors who receive gifts do reciprocate to the gift‐givers by providing them with more timely responses and greater emotional support. Furthermore, after receiving the small gifts, doctors may be slower in responding to nongivers and offer them less emotional support. We also investigate whether these effects (both direct and spillover effects) vary with doctors' backgrounds, including their professional experience and geographic location. Our findings have both theoretical and practical implications for patients, online medical consultation platforms, and healthcare policy makers.

Emerging technologies such as artificial intelligence, blockchain, additive manufacturing, advanced robotics, autonomous vehicles, and the Internet of Things are frequently mentioned as part of “Industry 4.0.” As such, how will they influence operations and supply chain management? We answer this question by providing a brief review of the evolution of technologies and operations management (OM) over time. Because terms such as “Industry 4.0” do not have a precise definition, we focus on more fundamental issues raised by Industry 4.0 emerging technologies for research in OM. We propose a theory of disruptive debottlenecking and the SACE framework by classifying emerging technologies in terms of the functionalities they enable: sense, analyze, collaborate, and execute. Subsequently, we review the nascent but rapidly growing literature at the interface between digital technologies and OM. Our review suggests that one way to assess the value of Industry 4.0 technologies can be via their influence on adding revenues, differentiating, reducing costs, optimizing risks, innovating, and transforming business models and processes. Finally, we conclude by proposing an agenda for further research.

Disasters mobilize hundreds of organizations, but coordination among them remains a challenge. This is why the United Nations has formed clusters to facilitate information and resource exchange among humanitarian organizations. Yet, coordination failures in prior disasters raise questions as to the effectiveness of the cluster approach in coordinating relief efforts. To better understand barriers to coordination, we developed a grounded theory and augmented the theory with an agent‐based simulation. Our theory discerns a cluster lead's roles of facilitating coordination, but also investing in its own ground operations. We find that specifically serving such a dual role impairs swift trust and consequent coordination among cluster members. The additional simulation findings generalize the detrimental effect of the cluster lead's dual role versus a pure facilitator role and specify it against various boundary conditions.

Failing to sell fresh produce before expiration not only hurts the bottom line of grocery retailers, but also leads to food waste. This work combines dynamic pricing and information disclosure to help retailers to effectively sell fresh produce and promote sustainability. We focus on a quality‐based pricing strategy and whether retailers should disclose information on food quality to customers. We consider a model where a monopolistic retailer sells fresh produce to customers who have different perceptions about food quality within a given time period. We employ a deep reinforcement learning algorithm to derive the optimal pricing and information strategies. Our simulation results show that a quality‐based pricing strategy yields lower prices than a pricing strategy that does not consider quality. Lower prices drive demand, thus improving profits and reducing food waste. Additionally, we show that, when an information strategy is allowed, the prices in a quality‐based pricing strategy stay the same or even increase during the selling season. This is because information disclosure helps align customers’ biased perceptions on food quality with the actual levels. We show that a combination of quality‐based pricing and information disclosure further improves profits and reduces food waste when a large portion of customers consider quality to be lower than actual levels. To implement our ideas, we propose a cloud‐based automated system that integrates sensor data, artificial intelligence, and customer communications. Our results have profound implications for the food industry on managing fresh produce.

The phenomenon of copycats is common in a wide range of industries. Recently, to indicate product authenticity and combat copycats, many brand name companies (BNCs) have started selling products through retailers. These BNCs deploy a scalable protocol that is integrated into a permissioned blockchain technology (PBT) platform. We examine how PBT combats copycats in the supply chain and how it benefits BNCs. Although PBT implementation helps novice customers identify product authenticity and the real quality of products, that is, to take advantage of a quality disclosure effect , we show that, if and only if the number of novice customers is large enough, then selling through a PBT retailer can effectively combat copycats. Thus, PBT increases the profit of the BNC, consumer surplus, social welfare, and reduces the profit of a copycat. Moreover, conventional wisdom tells us that PBT ensures supply chain transparency and motivates a firm to improve its product quality. However, the BNC reduces the quality of its products when using PBT, because an improvement in product quality is not profitable if consumers can distinguish between genuine and imitation products. Furthermore, we extend the model by considering the case where the BNC itself implements PBT. Without the double marginalization effect , even if the number of novice customers is small, blockchain technology may exist in the market (the BNC self‐implements). In addition, if the unit production cost of a genuine product is large enough, social welfare increases when production cost increases.

This study centers on the roles of marketing and operations capabilities in preventing future recalls. However, prior literature identifies operations capability as critical for recall prevention, the current research highlights the equivalent importance of marketing capability. Furthermore, rather than limiting marketing's role to damage control efforts after a recall, this study identifies its potential for preventing future recall incidents. With research conducted in the consumer packaged goods industry, the authors determine that firms that improve their marketing and operations capabilities after a recall lower their likelihood of future recalls. A proposed motivation‐based model for post‐recall marketing and operations capability improvement predicts that recalling public firms, by default, do not invest in capability improvements. The test of the propositions, with a sample of 276 product recalls using joint estimation, reveals that stock market penalties for recalls, combined with analyst following and independent boards, push recalling firms to make capability improvements. However, well‐reputed firms and those whose competitors recently engaged in recalls push back against investors' demands.

Business platforms have become widespread in business to consumer (B2C) markets and their adoption is on the rise in the business to business (B2B) world. However, our understanding of platform adoption in B2B is less developed than for B2C. In the few cases where B2B platforms have been explicitly examined, it is often assumed that they can be understood using principles developed from the study of B2C platforms. However, the two types of platforms have important differences that often require different managerial policies to be successful. B2B supply chains are much more complex because of multiple echelons, the sophistication of their purchasing and other organizations, the competition they face, and the value of their data. The result is that, among other things, the nature of their value exchange is likely different. To address this gap, we create a novel framework. The value creation lens is grounded in theory and creates a better understanding of the dynamics of platform creation and growth by separating the platform's value into three components: (1) the standalone value of the product, such as a smartphone's ability to take pictures, (2) the value of other participants on the platform, such as the number of friends on Instagram or merchants on eBay, and (3) the value created by complementary products from third‐party providers, such as apps for a smartphone. A dynamic perspective explores the trajectory of differences in value between B2B and B2C platforms along with managerial implications.

The past decade has seen significant pressure to return manufacturing to developed countries. Such movements call for import tariffs to be raised and consumers' valuation of products made from locally sourced components increased. These factors are believed to stimulate firms operating in a single market to source components locally. However, it is not clear that they are equally effective for multinational firms that produce and sell products in multiple markets. To enrich the understanding of this issue, we build a game‐theoretical model to analyze the sourcing decisions of a global manufacturer that maintains production sites and sells products in both domestic and foreign markets in a competitive environment. The firm can choose either to source components from suppliers located in the same markets as the manufacturing sites to gain tariff savings and a price premium from consumers' higher valuation, or to source all components from a single foreign supplier to obtain a lower sourcing cost. We find that the structure of the global supply chain plays a critical role in the firm's sourcing strategy. Consumers' higher valuation of locally manufactured goods always promotes local sourcing. Raising tariffs, however, might backfire and discourage local sourcing because of the firm's global supply chain structure and the foreign supplier's strategic response to higher tariffs. Finally, local sourcing may reduce the consumer surplus even though consumers place a higher value on locally manufactured goods. This paper sheds light on recent movements to return manufacturing to developed countries and demonstrates the importance of taking the manufacturer's global supply chain structure and vertical interaction with suppliers into account.

We study service triads by examining the member‐to‐member exchanges underpinning service formation, functioning, and feedback. A service triad comprises two serviced customers from the supplier's standpoint and two service providers from the end user's standpoint, which can cause operational complexity and challenges. We view the service triad as an operating entity and study four information‐rich cases to improve our understanding of this operational complexity. Leveraging scholarly knowledge related to service operations management and ecosystems theory, we uncover several interesting patterns related to the formation, functioning, and feedback exchanges. First, the formation exchanges depend on the value creation goal of the service triad. Second, the service buyer engages in operational coordination, despite delegating the delivery of services to the supplier. Third, feedback exchanges allow the service triad to monitor service performance for further improvement and innovation. Our qualitative inquiry focusing on the visualization and codification of members’ participation in exchanges advances our collective understanding of service triads beyond the dominant focus on structure and governance.