One step ahead: using predictive inference to select service providers in loosely coupled electronic markets

The rapid growth of service-oriented electronic markets implies a common belief among managers that participation in these dynamic, loosely coupled markets can yield many benefits for their firms. At present, however, very little is known about organizational behavior in these nascent markets. By utilizing a sophisticated simulation of a loosely coupled interorganizational service market, this paper demonstrates that customer organizations seeking to purchase and consume services in such markets can benefit from the application of predictive inference in the provider selection process. Specifically, it is shown that a customer organization employing a simple predictive method to select service providers can, in the aggregate, achieve notably superior outcomes in terms of price, quality of service received, and several other metrics when compared to competitors who act opportunistically in selecting their business partners. The implications of these findings for managers and researchers are presented and discussed in the context of the rising popularity of loosely coupled electronic markets.