IDEAS home Printed from https://ideas.repec.org/a/spr/binfse/v67y2025i2d10.1007_s12599-024-00864-9.html
   My bibliography  Save this article

Internet of Things Network Security Improvement Investment

Author

Listed:
  • Xiufeng Li

    (Tianjin University)

  • Zhen Zhang

    (Cainiao Network Technology Co., Ltd.)

Abstract

At present, businesses can reap impressive benefits from the Internet of Things (IoT). However, with the increasing number of IoT devices and the complexity of the IoT ecosystem, there is a growing concern about security vulnerabilities. This study aims to address the network security investment problem in an IoT environment by developing a game-theoretical model. It examines the impact of IoT service level and customer characteristics on the incentives for both the IoT platform and the manufacturer to invest in security, as well as the platform's profitability. Through analytical analysis, several noteworthy findings are obtained. Firstly, it is found that a higher IoT platform service level corresponds to a higher security responsibility. As a result, the platform needs to carefully consider the costs and benefits associated with security investment and service provision. Additionally, the research demonstrates that both the platform and the manufacturer's efforts to enhance security do not diminish, even when faced with increasing customer losses due to security breaches. This is because the IoT platform indirectly benefits a larger number of consumers who purchase smart devices, thus motivating the platform to prioritize network security efforts. Furthermore, the study reveals the influence of the unit security cost and the amount of highly sensitive customers on the security efforts undertaken by both the IoT platform and the smart device manufacturer. These results have important practical implications for firms operating within an IoT-based supply chain. Specifically, the findings can provide valuable decision-making guidance for enterprises seeking digital transformation and trying to make informed choices regarding platform operations.

Suggested Citation

  • Xiufeng Li & Zhen Zhang, 2025. "Internet of Things Network Security Improvement Investment," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 67(2), pages 209-225, April.
  • Handle: RePEc:spr:binfse:v:67:y:2025:i:2:d:10.1007_s12599-024-00864-9
    DOI: 10.1007/s12599-024-00864-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12599-024-00864-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s12599-024-00864-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Xiao, Wei & Li, Kai & Fu, Hong, 2021. "Quality investment in a decentralized assembly system with backward shareholding," International Journal of Production Economics, Elsevier, vol. 242(C).
    2. Kai-Lung Hui & Ping Fan Ke & Yuxi Yao & Wei T. Yue, 2019. "Bilateral Liability-Based Contracts in Information Security Outsourcing," Information Systems Research, INFORMS, vol. 30(2), pages 411-429, June.
    3. Can Sun & Yonghua Ji, 2022. "For Better or For Worse: Impacts of IoT Technology in e‐Commerce Channel," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1353-1371, March.
    4. Morvarid Rahmani & Guillaume Roels & Uday S. Karmarkar, 2018. "Team Leadership and Performance: Combining the Roles of Direction and Contribution," Management Science, INFORMS, vol. 64(11), pages 5234-5249, November.
    5. Konstantinos Ladas & Stylianos Kavadias & Christoph Loch, 2022. "Product Selling vs. Pay-Per-Use Service: A Strategic Analysis of Competing Business Models," Management Science, INFORMS, vol. 68(7), pages 4964-4982, July.
    6. Guillaume Roels, 2014. "Optimal Design of Coproductive Services: Interaction and Work Allocation," Manufacturing & Service Operations Management, INFORMS, vol. 16(4), pages 578-594, October.
    7. Basaure, Arturo & Vesselkov, Alexandr & Töyli, Juuso, 2020. "Internet of things (IoT) platform competition: Consumer switching versus provider multihoming," Technovation, Elsevier, vol. 90.
    8. Sim, Jeongeun & Kim, Bosung, 2021. "Sourcing decision in the presence of a complementary component," Omega, Elsevier, vol. 101(C).
    9. Chernonog, Tatyana & Levy, Priel, 2023. "Co-creation of mobile app quality in a two-platform supply chain when platforms are asymmetric," European Journal of Operational Research, Elsevier, vol. 308(1), pages 183-200.
    10. Pedro Valderas & Victoria Torres & Estefanía Serral, 2023. "Towards an Interdisciplinary Development of IoT-Enhanced Business Processes," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 65(1), pages 25-48, February.
    11. Eva Ascarza & Bruce G. S. Hardie, 2013. "A Joint Model of Usage and Churn in Contractual Settings," Marketing Science, INFORMS, vol. 32(4), pages 570-590, July.
    12. Rong, Ke & Hu, Guangyu & Lin, Yong & Shi, Yongjiang & Guo, Liang, 2015. "Understanding business ecosystem using a 6C framework in Internet-of-Things-based sectors," International Journal of Production Economics, Elsevier, vol. 159(C), pages 41-55.
    13. Nitin Joglekar & Edward G. Anderson & Kyungmin (Brad) Lee & Geoffrey Parker & Ettore Settanni & Jagjit Singh Srai, 2022. "Configuration of digital and physical infrastructure platforms: Private and public perspectives," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4515-4528, December.
    14. Zhu, Weijun & Xie, Jiaping & Xia, Yu & Wei, Lihong & Liang, Ling, 2023. "Getting more third-party participants on board: Optimal pricing and investment decisions in competitive platform ecosystems," European Journal of Operational Research, Elsevier, vol. 307(1), pages 177-192.
    15. Junghee Lee & Vish Krishnan & Hyoduk Shin, 2020. "Business Models for Technology-Intensive Supply Chains," Management Science, INFORMS, vol. 66(5), pages 2120-2139, May.
    16. Soroush Saghafian & Brian Tomlin & Stephan Biller, 2022. "The Internet of Things and Information Fusion: Who Talks to Who?," Manufacturing & Service Operations Management, INFORMS, vol. 24(1), pages 333-351, January.
    17. Suyuan Luo & Tsan‐Ming Choi, 2022. "E‐commerce supply chains with considerations of cyber‐security: Should governments play a role?," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 2107-2126, May.
    18. Gérard P. Cachon & Pnina Feldman, 2011. "Pricing Services Subject to Congestion: Charge Per-Use Fees or Sell Subscriptions?," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 244-260, June.
    19. Terrence August & Duy Dao & Kihoon Kim, 2019. "Market Segmentation and Software Security: Pricing Patching Rights," Management Science, INFORMS, vol. 65(10), pages 4575-4597, October.
    20. Vishal Agrawal & Nektarios Oraiopoulos, 2020. "The Role of Decision Rights in Codevelopment Initiatives," Manufacturing & Service Operations Management, INFORMS, vol. 22(4), pages 832-849, July.
    21. Terrence August & Marius Florin Niculescu & Hyoduk Shin, 2014. "Cloud Implications on Software Network Structure and Security Risks," Information Systems Research, INFORMS, vol. 25(3), pages 489-510, September.
    22. Sui, Ronghua & Zhang, Xumei & Dan, Bin & Zhang, Haiyue & Liu, Yi, 2023. "Bilateral value-added service investment in platform competition with cross-side network effects under multihoming," European Journal of Operational Research, Elsevier, vol. 304(3), pages 952-963.
    23. Mohamed Ben-Daya & Elkafi Hassini & Zied Bahroun & Hafsa Saeed, 2023. "Optimal pricing in the presence of IoT investment and quality-dependent demand," Annals of Operations Research, Springer, vol. 324(1), pages 869-892, May.
    24. Benitez, Guilherme Brittes & Ghezzi, Antonio & Frank, Alejandro G., 2023. "When technologies become Industry 4.0 platforms: Defining the role of digital technologies through a boundary-spanning perspective," International Journal of Production Economics, Elsevier, vol. 260(C).
    25. Anupam Agrawal & Suresh Muthulingam & Tharanga Rajapakshe, 2017. "How Sourcing of Interdependent Components Affects Quality in Automotive Supply Chains," Production and Operations Management, Production and Operations Management Society, vol. 26(8), pages 1512-1533, August.
    26. Mosch, Philipp & Majocco, Philipp & Obermaier, Robert, 2023. "Contrasting value creation strategies of industrial-IoT-platforms – a multiple case study," International Journal of Production Economics, Elsevier, vol. 263(C).
    27. Oktay Turetken & Paul Grefen & Rick Gilsing & O. Ege Adali, 2019. "Service-Dominant Business Model Design for Digital Innovation in Smart Mobility," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(1), pages 9-29, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Xiufeng & Li, Lei & Ma, Shaojun, 2025. "Identifying the role of contracts in driving value cocreation between the internet of things platform and smart product manufacturer," Technovation, Elsevier, vol. 140(C).
    2. Xing Gao, 2023. "A competitive analysis of software quality investment with technology diversification and security concern," Electronic Commerce Research, Springer, vol. 23(4), pages 2691-2712, December.
    3. Mingwen Yang & Varghese S. Jacob & Srinivasan Raghunathan, 2021. "Cloud Service Model’s Role in Provider and User Security Investment Incentives," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 419-437, February.
    4. Morvarid Rahmani & Luyi Gui & Atalay Atasu, 2021. "The Implications of Recycling Technology Choice on Extended Producer Responsibility," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 522-542, February.
    5. Shubham Gupta & Abhishek Roy & Subodha Kumar & Ram Mudambi, 2023. "When Worse Is Better: Strategic Choice of Vendors with Differentiated Capabilities in a Complex Cocreation Environment," Management Science, INFORMS, vol. 69(5), pages 2833-2851, May.
    6. Meena, Abhilasha & Dhir, Sanjay & Sushil, Sushil, 2024. "Coopetition, strategy, and business performance in the era of digital transformation using a multi-method approach: Some research implications for strategy and operations management," International Journal of Production Economics, Elsevier, vol. 270(C).
    7. Xi, Xuan & Zhang, Yulin & Goh, Mark, 2025. "Consumer data collection strategies in two-sided platforms: The role of data ownership assignment and privacy concerns," International Journal of Production Economics, Elsevier, vol. 280(C).
    8. Culot, Giovanna & Orzes, Guido & Sartor, Marco & Nassimbeni, Guido, 2020. "The future of manufacturing: A Delphi-based scenario analysis on Industry 4.0," Technological Forecasting and Social Change, Elsevier, vol. 157(C).
    9. Bo Li & Subodha Kumar, 2022. "Managing Software‐as‐a‐Service: Pricing and operations," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2588-2608, June.
    10. Siqin, Tana & Yang, Lu & Chung, Sai-Ho & Wen, Xin, 2024. "Cross-channel influences in mobile-app-website e-commerce supply chains: When to weaken the influence?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
    11. Tang, Hua & Chen, Jing & Ai, Xingzheng & Li, Xiaojing & He, Haojia, 2023. "First-party content decision under competitive hardware/software platforms: Free vs. charge," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1068-1083.
    12. Gu, Wei & Heese, H. Sebastian & Kemahlıoğlu-Ziya, Eda & Ziya, Serhan, 2024. "Pricing for services with cross-segment externalities, capacity constraints, and competition," European Journal of Operational Research, Elsevier, vol. 313(2), pages 801-813.
    13. Philipp Afèche & Mojtaba Araghi & Opher Baron, 2017. "Customer Acquisition, Retention, and Service Access Quality: Optimal Advertising, Capacity Level, and Capacity Allocation," Manufacturing & Service Operations Management, INFORMS, vol. 19(4), pages 674-691, October.
    14. Zhang, Mengdi & Yang, Wanting & Zhao, Zhiheng & Wang, Shuaian & Huang, George Q., 2024. "Do fairness concerns matter for ESG decision-making? Strategic interactions in digital twin-enabled sustainable semiconductor supply chain," International Journal of Production Economics, Elsevier, vol. 276(C).
    15. Angelovska, Nina, 2021. "Analysis Of Customer Activity, The Importance Of Timing For Effective Marketing Actions: Case Of Group Buying Site, Grouper," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 12(2), pages 156-170.
    16. José A. Novo‐Peteiro, 2023. "Product design with attribute dependence," Manchester School, University of Manchester, vol. 91(4), pages 361-385, July.
    17. Debabrata Dey & Atanu Lahiri & Guoying Zhang, 2015. "Optimal Policies for Security Patch Management," INFORMS Journal on Computing, INFORMS, vol. 27(3), pages 462-477, August.
    18. Debabrata Dey & Abhijeet Ghoshal & Atanu Lahiri, 2021. "Support Forums and Software Vendor’s Pricing Strategy," Information Systems Research, INFORMS, vol. 32(2), pages 653-669, June.
    19. Kjell Hausken, 2017. "Security Investment, Hacking, and Information Sharing between Firms and between Hackers," Games, MDPI, vol. 8(2), pages 1-23, May.
    20. Alina Ferecatu & Arnaud Bruyn & Prithwiraj Mukherjee, 2024. "Silently killing your panelists one email at a time: The true cost of email solicitations," Journal of the Academy of Marketing Science, Springer, vol. 52(4), pages 1216-1239, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:binfse:v:67:y:2025:i:2:d:10.1007_s12599-024-00864-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.