Research Report: Information Technology and Investment Incentives in Distributed Operations.

Author List: Nault, Barrie R.;
Information Systems Research, 1997, Volume 8, Issue 2, Page 196.
In distributed operations with positive externalities between branches, local underinvestment occurs because one branch does not account for the impact of its actions on other branches. Previous work found that an IT-enabled incentive mechanism called "ownership of customers" (OoC) reduced the problem of local underinvestment by accounting for inter-branch transactions. This report examines the impact of including investment by a central office on the set of previously developed results for local investment by branches. It shows that ownership of customers can reduce the problem of both central and local underinvestment. It also demonstrates how central investment can yield second-best levels of profitability-optimal profits given contracting problems in local investment with branches. It highlights how charging branches a unit fee to fund the needed level of central investment is consistent with that second-best solution.
Keywords: Branch Operations; Centralization; Channels; Decentralization; Franchising; Ownership of Customers; Positive Network Externalities; Underinvestment
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List of Topics

#288 0.187 customer customers crm relationship study loyalty marketing management profitability service offer retention it-enabled web-based interactions operations sales strategy channels set
#70 0.158 contract contracts incentives incentive outsourcing hazard moral contracting agency contractual asymmetry incomplete set cost client parties examine effort structures double
#271 0.136 technology investments investment information firm firms profitability value performance impact data higher evidence diversification industry payoff return findings decisions greater
#209 0.072 results study research information studies relationship size variables previous variable examining dependent increases empirical variance accounting independent demonstrate important addition
#291 0.066 local global link complex view links particularly need thought number supports efforts difficult previously linked achieving simple poor individual rise
#43 0.063 architecture scheme soa distributed architectures layer discuss central difference coupled service-oriented advantages standard loosely table services classification layered included update
#31 0.051 problem problems solution solving problem-solving solutions reasoning heuristic theorizing rules solve general generating complex example formulation heuristics effective given finding