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                                Journal of Management Information Systems

                                Volume 17 Number 2 2000 pp. 5-7

                                Special Issue: Technology Strategy for Electronic Marketplaces

                                Clemons, Eric K and Yu-Ming, Wang

                                THIS SPECIAL SECTION SHOWCASES NEW RESEARCH that was initially presented at the 33d Hawaii International Conference on Systems Science (HICSS-33) held in January 2000. The work included here illustrates contemporary thinking in competitive strategy and technology applied to product design and pricing on the Internet, the bundling of insurance products and public policy with respect to healthcare coverage, and the valuation of investments in electronic commerce technologies. Three different mini-tracks from HICSS-33 are represented by the articles "Economics and Electronic Commerce," "Information Technology and Market Structure," and "Strategic and Competitive Information Systems." These minitracks continue to be a vibrant forum for the discussion of current directions in Information Systems and Electronic Commerce research.

                                In the first article, "Adoption of Internet-Based Product Customization and Pricing Strategies," Rajiv Dewan, Bing Jing, and Abraham Seidmann (all from the University of Rochester), examine the potential of special features, such as one-to-one marketing, personalization, and product customization in e-commerce. Today the Internet provides a new marketplace in which such powerful tracking technologies as web page registration, Internet cookies, collaborative filtering, and data mining combine to recast the basic relationship between buyers and sellers. Using these technologies, it is possible for a firm to create a continuous learning relationship with its customers, and, in the process, exploit the information it gathers to offer customized goods at special prices. Moreover, it is possible to apply this technique to production, using it to create further leverage for competitive value. But this also changes the competitive dynamics and relationships among similar firms in the marketplace. For example, early adopters will greatly benefit from these technologies, since such firms can sell more products and set a price with higher margins than competing conventional suppliers can. Flexible manufacturing technologies further enhance these firms' competitive advantage, making it more sustainable. Latecomers, in contrast, may find themselves in a difficult position. For them, offering customized products becomes a "hook up or lose out" proposition: to get any customers at all, the late-to-market firms must over-invest in technology to support product customization at a time when such an approach is no longer a differentiating strategy. The authors' analytical modeling results show that corporate adoption of product customization and one-to-one marketing approaches represent an equilibrium strategy brought on by competitive necessity.

                                The second article shifts gears to examine policy issues in the individual insurance market in the healthcare industry that are made prominent by changing uses of information technology. In the article entitled "Managing the Costs of Informational Privacy: Pure Bundling as a Strategy in the Individual Health Insurance Market," Matt E. Thatcher (University of Arizona) and Eric K. Clemons (University of Pennsylvania) analyze the inefficiencies of current legislative prescriptions for how to deal with the possibility of health insurance discrimination based upon genetic screening. Advances in biomedical research and genetic testing make it possible for healthcare organizations to provide ever more accurate assessments of the risks of specific kinds of health problems that healthcare consumers are likely to encounter during their lives. Insurance companies, which have recently invested heavily in advanced data warehousing and data mining technologies, are similarly able to evaluate the risks associated with insuring specific individuals. The authors apply methods from industrial dynamics to develop simulation results that describe the efficacy of new approaches to bundling health insurance packages. The authors propose the idea of a pooling equilibrium, in which healthcare consumers who evaluate insurance bundles are shown to exhibit the same overall willingness-to-pay for a comprehensive insurance policy. Such large bundle insurance packages are shown to maximize the number of people who are insured, while safeguarding the viability of the insurance market, and maintaining equitable costs for those who are insured.

                                The final article, "Limits to Value in Electronic Commerce-Related IT Investments," by Alina M. Chircu and Robert J. Kauffman (both of the University of Minnesota), presents a general evaluative framework for business process-level investments in technology infrastructures and information systems. The authors' conceptual framework characterizes ways in which the potential value of a technology for an adopter is eroded, resulting in less desirable levels of realized value. The authors examine several in-depth industry cases involving large-scale corporate travel systems investments that were studied in a multiyear, industry-sponsored field study. They find that the value flows that occur after the implementation of such systems are hindered by various kinds of limits to value, which act as inhibitors of value appropriation for the firm. The authors find that such limits to value can be overcome by collateral investments in co-specialized assets to the system, such as sponsorship, adoption subsidies, training, and so on, that unlock potential value. The outcomes of this research offer a theory-based road map for the study of business value in a variety of e-commerce technology investment settings. They will also enable corporate investors in Internet-based travel reservation systems to build more realistic expectations about the potential value of these innovations, and what pieces need to fall into place for these implementations to be successful.

                                        
                                        

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