Special Section:

Information and Competitive Strategy in a

Networked Economy
Robert J. Kauffman, Thomas A. Weber, and D.J. Wu,
Guest Editors

Robert J. Kauffman is currently the 2012–2013 Lee Kuan Yew Fellow for Research
Excellence and a professor of information systems and strategy at the School of Infor-
mation Systems and the Lee Kong Chian School of Business at Singapore Management
University. He also serves there as associate dean of research and deputy director of
the Living Analytics Research Center. He is also a Distinguished Visiting Fellow at the
Center for Digital Strategies of the Tuck School of Business, Dartmouth College. Previ-
ously he was on the faculty at Arizona State University, the University of Minnesota,
New York University, and the University of Rochester. He also visited in the Research
Department of the Federal Reserve Bank of Philadelphia and worked in international
banking and finance prior to beginning his academic career. His articles have recently
appeared in Information Systems Research, Journal of Management Information
Systems, MIS Quarterly, IBM Research and Development Journal, Decision Support
Systems, and Review of Economics and Statistics. Dr. Kauffman’s research focuses
on technology and strategy, the economics of IT, technology in financial services and
e‑business, managerial decision making, and innovations in research methods. He
served as a co-chair for the 2011 ICIS Doctoral Consortium and will also do this for
the 2012 ACM SIGMIS Doctoral Dissertation Award Competition. He played a similar
role for the 2012 Summer Institute on Analytics for Business, Consumer and Social
Insights at Living Analytics Research Centre (LARC), and the 2012 International
Conference on Electronic Commerce in Singapore in August 2012.

Thomas A. Weber is head of the Management of Technology and Entrepreneurship

Institute at the Swiss Federal Institute of Technology in Lausanne, where he holds the
chair of Operations, Economics and Strategy. Between 2003 and 2011 he was a faculty
member in the Department of Management Science and Engineering at Stanford Uni-
versity. Professor Weber is ingénieur des arts et manufactures (Ecole Centrale Paris)
and diplom-ingénieur in electrical engineering (Technical University Aachen). He holds
an S.M. in both technology and policy and electrical engineering and computer science
from the Massachusetts Institute of Technology, and a Ph.D. in managerial science
and applied economics from the Wharton School of the University of Pennsylvania.
In 2008, he was a visiting faculty member in the Department of Economics at the
University of Cambridge, and in 2009 in the Department of Mathematics at Moscow
State University. Between 1998 and 2002 he was a senior consultant at the Boston
Consulting Group. His current research interests include the economics of informa-
tion and uncertainty, the design of contracts, and strategy. Professor Weber’s papers
have appeared in American Economic Journal: Microeconomics, Information Systems
Research, Decision Support Systems, Economics Letters, Economic Theory, Journal

Journal of Management Information Systems / Fall 2012, Vol. 29, No. 2, pp. 7–9.
© 2012 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com
ISSN 0742–1222 (print) / ISSN 1557–928X (online)
DOI: 10.2753/MIS0742-1222290201
8 Kauffman, Weber, and Wu

of Mathematical Economics, Journal of Economic Dynamics and Control, Journal

of Environmental Economics and Management, Journal of Optimization Theory and
Applications, Journal of Regulatory Economics, Operations Research, Optimal Control
Applications and Methods, and Theory & Decision. He is the author of Optimal Control
Theory with Applications in Economics, published by MIT Press in 2011.

D.J. Wu is an associate professor of information technology management at the Col-

lege of Management, Georgia Institute of Technology. He received his Ph.D. from
the Wharton School of the University of Pennsylvania. His current research interests
include electronic markets, economics of enterprise software, platform ecosystems, and
cloud computing economics. Dr. Wu’s work has appeared in journals such as Manage-
ment Science, MIS Quarterly, Journal of Management Information Systems, European
Journal of Operational Research, Decision Support Systems, among others. His work
won the “Best Paper in Valuing IT Opportunities” award, the “Best Paper in Web-Based
Information Systems and Applications” award at ICIS 2006, and the Runner-Up Best
Conference Paper Award at ICIS 2009. He currently serves as an associate editor for
Management Science, Manufacturing and Service Operations Management, and as
a senior editor for Production and Operations Management. He served as a co-chair
for the 2011 Workshop on Information Systems and Economics.

One of the transformative changes over the past decade has been the way networks
have enabled the distributed generation of value and how businesses and organizations
have managed to capture a portion of this value. This has resulted in a plethora of
innovative business ideas and new strategies. The present special section deals with
the incentives for distributed content generation; counterintuitive network effects in
the security software market, which features an intrinsic negative externality; and the
possibility for collaboration between different platforms in a two-sided market. The
included papers offer an interesting mix of theoretical and practical insights. All of
the contributions are rooted in practical applications and present field observations
that are instantiated in a microeconomic model to allow out-of-sample predictions
about the mechanisms at hand. Such a data-driven and at the same time model-based
approach is ideal to develop counterintuitive insights for competitive strategy; the
insights become logical consequences of the assumptions in the model-based analysis.
The tools vary from network analysis, structural dynamic estimation techniques and
dynamic programming, to game-theoretic modeling.
A surprising side-effect of social networking is the creation of content that, when
properly organized, markedly increases social welfare. Xiaoquan (Michael) Zhang
and Chong (Alex) Wang, in “Network Positions and Contributions to Online Public
Goods: The Case of Chinese Wikipedia,” examine the impact the network structure may
have to encourage social content contribution. The authors take advantage of several
natural experiments in China, triggered by various Internet content blocks between
2004 and 2008, when the government on the mainland made Wikipedia unavailable.
The blocks changed the network positions of the remaining editors, which is used to
 Information and Competitive Strategy in a Networked Economy 9

establish that a contributor’s network centrality tends to significantly influence the

editor’s incentives to contribute.
A different angle on user incentives is provided by “Content Contribution for Rev-
enue Sharing and Reputation in Social Media: A Dynamic Structural Model,” by Qian
Tang, Bin Gu, and Andrew B. Whinston. Based on an assumption that contributors to
YouTube value content views, subscribers to their respective channels, and reputation,
the authors estimate a dynamic structural model for the payoff function. At the heart
of this estimation procedure is the dynamic programming problem that underlies each
agent’s intertemporal decision about the intensity of the contribution effort.
Network externalities as the key first-order consequence of the connectedness of
many agents have been thoroughly explored in the literature ever since the early 1970s.
Those externalities are usually positive, because as the number of users, say, in a com-
munication network, increases, the utility of participating in the network increases
for each agent (e.g., by Metcalfe’s law, the increase is quadratic in the number of
participants). Debabrata Dey, Atanu Lahiri, and Guoying Zhang provide an interesting
twist on this standard story in their paper “Hacker Behavior, Network Effects, and
the Security Software Market,” where a higher penetration, and thus larger, network,
tends to decrease a user’s ex ante benefit. This occurs because the likelihood of indirect
attacks via unprotected users is diminished, similar to the well-known vaccination
problem. As a result, in a fulfilled-expectations equilibrium, it becomes unprofitable
for firms to fully cover the market.
Finally, Ravi Mantena and Rajib L. Saha provide insights on the “Co-opetition Be-
tween Differentiated Platforms in Two-Sided Markets.” They show that co-opetition
(competition and cooperation) between platforms depends on technology asymmetries.
While small asymmetries in platform technologies can translate into large differences
in their profitability, large technology asymmetries soften the degree of competition,
generally favoring the sharing of networks. The degree of cooperation in a network
economy therefore depends on the size of the competitive advantage of the technologi-
cally dominant firm. Because of the heterogeneous consumer base, a dominant firm
is unable to capture the entire market, and the authors obtain more nuanced findings
than in the usual setting where customers are of a single type.
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