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RAJIV D. BANKER
INDRANIL R. BARDHAN
This white paper is also available from the Working Paper series of the PRISM Center at the
University of Texas at Dallas (www.utdallas.edu/prism). An earlier version was presented at
the Workshop on Information Systems and Economics (WISE) in December 2001 in New
Orleans, LA. Please do not quote without written permission from the authors. All
correspondence may be directed to bardhan@utdallas.edu.
Banker and Bardhan, 2002
Abstract
New collaboration-based information technologies have enabled companies to compete more efficiently
in a global networked economy by enhancing the interactions and information transfer in the supply
chain associated with the product design and development lifecycle. In this research, we empirically
investigate the relationships between investment in collaborative product commerce (CPC) and product
development process variables such as product quality, complexity, development cycle time, and user
satisfaction. Our findings indicate that collaboration in product design and development, resulting from
implementation of a CPC solution, had a significant and positive impact on product quality, product
time-to-market, and user satisfaction. This research also provides insights into the role of business
process maturity in moderating the impact of CPC software on the outcomes of product development.
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1.0 Introduction
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(1995) reported a field study that provided Figure 3: CPC Model Framework
empirical evidence for the significance of
process effectiveness in enhancing process Time to
Market
(-)
yield and product quality in semiconductor (-)
manufacturing. (-)
(+)
(+)
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number of requests for design changes that product quality and process maturity has
are fed into the product design process been viewed from two perspectives. One
Process maturity provides a measure of view is that time-to-market must be traded
the overall effectiveness of the process, off in terms of improvements in quality.
based on the dynamics of the specific However, a contrasting view is that these
company and industry’s environment (such variables are complementary and that
as those driven by customers, markets, improvements in process and quality can
competition and regulatory demands). lead to improvements in the time-to-market
Process maturity was measured based on a (Harter et al., 2000). Our next hypothesis is
modification of the Capability Maturity stated as follows:
Model (CMM) framework to account for the
process dynamics of the industry. The Hypothesis 2 (Time-to-Market and
CMM practices aid in reducing product Collaboration):
errors and in early identification of defects. Collaboration in product design and
As a result, the number of product errors development is associated with reduced
should be lower for products that are time-to-market for the product being
designed with mature business processes developed.
(Harter et al., 2000). This implies:
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Change in
Cost Structure
Benefits by phase Before CPC After CPC
Product Concept &
initiation 5% 3-5%
Product
Development
Proposal 5% 3-5%
Research and
Development 10-15% 5-10%
Product
Development &
Manufacturing
Design 40-50% 40-45%
Product Design
Verification &
Manufacturing
Development 15-20% 10-15%
Pilot Production and
Product Introduction 10-15% 10-15%
100% 75-80%
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change in relative magnitude before and Table 6: SUR Estimation Results for
after implementation of CPC. Product Quality3
3
An asterisk (*) indicates statistical significance at
the 5% level. A double asterisk (**) indicates
statistical significance at the 10% level.
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Table 7: SUR Estimation Results for Table 8: SUR Estimation Results for
Product Time-to-Market Product Development Cost
Variable Parameter t-statistic p-value Variable Parameter t-statistic p-value
Intercept -0.211 -1.05 0.303 Intercept -4.72 ** -1.72 0.096
∆(Process 0.290** 1.90 0.061 ∆(Time-to- 1.63** 1.79 0.083
Maturity)* Market)
∆(Collaboration)
∆(Design -0.282 -1.46 0.155
∆(Collaboration) 0.464 * 2.20 2.340
Complexity)
∆(Design 0.223 1.62 0.116 ∆(Product 1.36 0.97 0.341
Complexity) Quality)
∆(Product 0.002 0.01 0.99 R-square 0.30
Quality)
∆(Process -0.087 -0.60 0.556
Maturity)
R-square 0.37 7.4 Estimation results for user
satisfaction
7.3 Estimation results for product The primary drivers of user satisfaction
development cost are product quality and collaboration. The
results show that collaboration in product
The primary driver of product design and development has a significant
development cost is product time-to-market. and positive impact in reducing product
Reduction in product time-to-market has a time-to-market and improving quality
positive and statistically significant effect in which, in turn, has a positive and significant
reducing product development cost. impact on user satisfaction. In other words,
Neither product quality nor product collaboration software enables design
design complexity play a significant role in engineers to improve communication, share
determining product development cost. data, and design products faster and more
These results are consistent with our easily, which reduces the product
hypotheses and prior research in software development cycle time and product
development. From a managerial defects/errors, which in turn has a positive
perspective, the results indicate that design and significant impact on user satisfaction.
engineers use collaboration software to Furthermore, our results also indicate that
share designs electronically, store design reduction in product development cost does
documentation, and speed up the design not have a significant impact on user
review process, which reduces the product satisfaction. This is consistent with prior
development cycle time which, in turn, research in product development (Adler et
reduces product development costs. al., 1995).
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Table 9: Estimation Results for User The ability to collaborate effectively and
Satisfaction efficiently across inter-organizational
boundaries becomes critical as companies
Variable Parameter t-statistic p-value conduct a significant number of transactions
through collaborative entities such as e-
Intercept -0.014 -0.06 .953 Markets and other types of “internet
marketplaces.” CPC solutions provide the
∆(Collaboration) 0.482 ** 1.72 .095
transparency and visibility necessary for
companies to share vital supply chain
∆(Time-to- 0.002 0.01 .991
information with their partners, suppliers
Market)
and customers in an effective manner.
∆(Product 0.075 0.43 .668
Development
Figure 5: Impact of CPC on the Product
Cost)
0.364 * 2.30 .029
Development Lifecycle
∆(Product
Quality) User
R-square 0.28 Positive Cost Satisfactio
Cash Reduction
Increased Sustained user
Quality Profitability satisfaction
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ACKNOWLEDGEMENTS
The authors gratefully acknowledge the research support provided by MatrixOne for this
research project and their help in facilitating the data collection from several companies. The
authors also acknowledge comments on an earlier version of this research from Lorin Hitt, Eric
Clemons, Thomas Davenport, and participants at the Workshop on Information Systems and
Economics (WISE) held in New Orleans in December 2001, as well as feedback received from Mark
O’Connell, John Donovan, Lori Webber, Frank Kang, and senior executives of MatrixOne, Inc.
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AUTHORS
Rajiv D. Banker is the Ashbel Smith Chair in Accounting and Information Management and the
Director of Accounting and Information Management Programs at the University of Texas at
Dallas. Prior to joining the University of Texas at Dallas he served as a Professor of
Management at Carnegie Mellon University and as the Arthur Andersen Chair in Accounting
and Information Systems at the University of Minnesota.
Dr. Banker is internationally recognized as a leader in interdisciplinary research in
management information systems and software engineering economics. He has received
numerous awards for his research. He has published more than 100 articles in prestigious
research journals including Management Science, MIS Quarterly, Information Systems Research,
Communications of ACM, IEEE Transactions in Software Engineering, Journal of MIS,
Information Technology and Management, Information Economics and Policy, Journal of
Organizational Computing, Operations Research, Accounting Review, Journal of Accounting
and Economics, Journal of Accounting Research, Academy of Management Journal, Strategic
Management Journal, and Econometrica. Dr. Banker has co-edited a book on Strategic
Information Technology Management. He is the Department Editor of the Information Systems
section for Management Science and a Senior Editor for Manufacturing and Service Operations
Management. He has also co-edited special issues on Economics of Operations Management
and on Software Technology Management. His research articles are cited frequently by other
researchers in a wide range of disciplines.
Dr. Banker is an expert in the analysis of complex and emerging strategic problems in the
information age. He specializes in information based competitive strategy, performance
measurement and incentive compensation, productivity and quality metrics, and management of
software development and maintenance. He is the originator of object points and reuse leverage
metrics for software cost estimation. His research has been supported by the National Science
Foundation, the Financial Executives Research Foundation, the Institute of Management
Accountants, and several leading corporations. He has consulted extensively with many
organizations and has been invited to lecture to executives and academics at leading institutions.
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