In the Analytic Hierarchy Process (AHP), priorities are derived via a deterministic method,
the eigenvalue decomposition. However, judgments may be subject to error. A stochastic
characterization of the pairwise comparison judgment task is provided and statistical models
are introduced for deriving the underlying priorities. Specifically, a weighted hierarchical
multinomial logit model is used to obtain the priorities. Inference is then conducted from the
Bayesian viewpoint using Markov chain Monte Carlo methods. The stochastic methods are
found to give results that are congruent with those of the eigenvector method in matrices of
different sizes and different levels of inconsistency. Moreover, inferential statements can be
made about the priorities when the stochastic approach is adopted, and these statements may
be of considerable value to a decision maker. The methods described are fully compatible
with judgments from the standard version of AHP and can be used to construct a stochastic
formulation of it.
Subject Areas: Analytic Hierarchy Process, Bayesian Inference, Stochastic Multicriteria Decision Making (MCDM), Logit Modeling, Markov Chains, Simulation, Stochastic AHP.
Bunyaratavej, K. & Hahn, E.D. (2003). Convergence and its implications for a common currency in ASEAN, ASEAN Economic Bulletin, 20(1), 49-59. (Full text available from ASEAN Economic Bulletin or ProQuest).
The successful introduction of the euro brings renewed interest to the topic of whether similar approaches might be successfully implemented in other regions. One region that may be a promising candidate for this process is Southeast Asia, the region comprised of the ASEAN nations. These nations have long seen the value of cooperation in order to promote peace, stability and economic growth. Nonetheless, important differences between the euro area and the ASEAN zone may suggest that a wholesale importation of the European approach may be inopportune at the moment. The issues are examined by using economic convergence modeling perspectives. In general, the findings clearly suggest that further work remains for ASEAN before it will be able to fully benefit from having a single currency area.
Subject Areas: Economic Convergence, ASEAN, Currency Union, Exchange Rates, Currency Map.
Bunyaratavej, K. & Hahn, E.D. (2005). An integrative approach to measuring economic convergence: The case of the European Union, Global Economy Journal, 5(2), 8.
Empirical convergence analyses have helped provide insight as to whether economies are converging. Previous works on convergence have tended to focus on a particular economic indicator exclusively, even though the convergence process has multiple components. Improved estimates of convergence are likely to result from an integrated approach wherein several indicators are considered simultaneously. The proposed model integrates convergence analyses for three convergence variables to estimate the overall rate of economic convergence in the EU during 1960 to 1990. The research indicates that convergence is occurring overall, but that employment convergence is happening at a considerably slower pace than are the other types of convergence.
Subject Areas: Economic Convergence, EU, Bayesian inference, Markov chain Monte Carlo (MCMC) methods
Hahn, E.D. & Doh, J.P. (2006). Using Bayesian methods in strategy research: An extension of Hansen et al. Strategic Management Journal, 27, 783-798.
Hansen, Perry and Reese (2004) recently argued for and demonstrated the utility of Bayesian methods for research associated with the resource-based view (RBV) of the firm. In this paper, we propose that Bayesian approaches are highly relevant not only for strategy problems based on the RBV, but also to its extensions in the areas of dynamic capabilities and co-evolution of industries and firms. Further, we argue that Bayesian methods are equally applicable for a wide range of strategy research questions at both the micro- and macro-level. Bayesian techniques are especially useful in addressing specific methodological challenges related to firm- and individual-level effects, firm-level predictive results, precision with small samples, asymmetric distributions, and the treatment of missing data. Moreover, Bayesian methods readily permit the engineering and updating of more realistic, complex models. We provide a specific illustration of the utility of Bayesian approaches in strategy research on entry order and pioneering advantage to show how they can help to inform research that integrates micro- and macro- phenomena within a dynamic and interactive environment.
Subject Areas: Strategy Methodology; Bayesian Methods; Resource-based View; Entry Order
Bunyaratavej, K., Hahn, E.D. & Doh, J.P. (2006). International offshoring of services: A parity study. Journal of International Management, 13(1), 7-21.
Conventional wisdom suggests that firms engage in international offshoring of services primarily to reduce wage costs associated with a given service activity. Drawing on international business research on the costs of doing business abroad (CODBA), liability of foreignness (LOF), and institutional theory, we investigate the factors that contribute to the location choices for services offshoring activity, including wage differentials between the home and host countries. We find that consistent with a parity perspective but contrary to conventional expectations, a country is more likely to be a destination of services offshoring as the average wage of a country increases, given that host country wages are at least somewhat lower than that of the home country. We also find that education level and cultural similarity are significant drivers of offshoring location choices, again consistent with a parity perspective. This study contributes to debates about the economic impact of services offshoring by showing that firms locate offshoring facilities in destinations that are closer in wages to the home country and those with higher education levels and cultural similarity.
Subject Areas: Services, Offshoring, Outsourcing, Government policy, Empirical
Bunyaratavej, K, Hahn, E.D. & Doh, J.P. (2008). Multinational investment and host country development: Location efficiencies for services offshoring. Journal of World Business, 43(2), 227-242..
Services offshoring has become an important source of investment and development in many countries. While much attention has been paid to companies’ use of services offshoring to lower costs, not all of these offshoring activities have yielded the anticipated results. Thus, the choice of where to locate offshore facilities is an important yet complex one that has substantial implications for both the investing firm and host country. In this paper, we adopt the perspectives of service firms located in the U.S. and empirically examine the attractiveness of host countries for offshoring of services. Using Data Envelopment Analysis (DEA), we examine which countries use their resource or inputs most efficiently in order to produce outputs that make them attractive for services offshoring. We find that China, India, Ireland, the Netherlands, Pakistan, Slovakia, Spain, and the U.K. are particularly attractive locations for services offshoring. All of these countries have at least one core efficiency-creating competency among the key inputs of wages, education, and infrastructure. We discuss implications for firms and government policy makers and offer recommendations for future research.
Subject Areas: Services, Offshoring, Outsourcing, Relative efficiency, Market structure.
Hahn, E.D., Doh, J.P., & Bunyaratavej, K. (2009). The evolution of risk in IS offshoring: The impact of home country risk, firm learning and competitive dynamics. MIS Quarterly, 33(3), 597-616.
IS offshoring has emerged as a significant force in the global political-economy, an important source of firm-specific competitive advantage, and a focal point for debates over the benefits and costs of globalization. As worldwide competition exerts increasing pressure on the IS function of firms to become geographically unbundled, and IS services are dispersed among increasingly distant and unfamiliar locations, the issue of risk emerges as a significant factor in decisions about where to locate offshore facilities. Drawing from prior research in IS outsourcing/offshoring and theoretical perspectives from international strategy and multinational management, we examine the determinants of risk firms bear in their offshoring decisions. In particular, the current paper explores firm-level and environment-level “push” factors that drive firms to accept increasingly greater degrees of host country risk. We predict that firm-level risk outcomes for locating IS offshore facilities will be influenced by prior firm-specific experience, the relative gap between home and host country risk levels, and the overall movement by IS offshore services providers toward increasingly riskier locations. We test these hypotheses on a proprietary data set of more than 850 IT and software offshoring projects in 55 host countries worldwide during the period 2000-2005. We find that firm-specific experience and the core “risk gap” between home and host country are predictive of companies pursuing progressively riskier locations, but that their effects dissipate as environment-wide experience is incorporated into our model. Our analysis suggests that broader dynamics in the competitive environment are powerful contributors to the overall observation that IS offshoring is moving to increasingly high-risk locations. This trend has implications for the management, security, and global integration of information systems. Our study contributes to the literature on risk and IS offshoring in providing the first worldwide empirical examination of the determinants of actual firm IS offshoring behavior with respect to offshoring location risk.
Subject Areas: IS offshoring, risk, FDI, offshore outsourcing, firm experience, empirical, longitudinal
Hahn, E.D., & Bunyaratavej, K. (2010). Services cultural alignment in offshoring: The impact of cultural dimensions on offshoring location choices. Journal of Operations Management, 28(3), 186-193.
Empirical research on the growing wave of services offshoring has examined the impact of several key factors such as wages and personnel quality on firm choices of offshore locations. However, examinations of culture in services offshoring to date have largely been confined to the relatively coarse concept of aggregate cultural differences between the home and host countries. We propose that specific cultural attributes are more closely aligned with successful service provision. We empirically examine our theoretical development of service cultural alignment and investigate the impact of cultural dimensions on the location of service offshoring projects. In addition, we examine whether Western and Asian firms have different cultural preferences in terms of the location of services offshoring projects. We find that host countries with lower levels of Hofstede's uncertainty avoidance as well as higher levels of individualism and power distance are able to attract greater numbers of service offshoring projects, even after controlling for macroeconomic, linguistic, and risk-related factors. We did not find that Western and Asian firms have different cultural preferences in this regard. We discuss implications of the findings with respect to theory, managerial practice, and governmental policy.
Subject Areas: Culture, offshore services, FDI, empirical research, international/global issues
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