Smart services and privacy, can we have both?

Abstract

Smart services’ data-intensive nature means their convenience for users comes with privacy concerns. This poses challenges for the supply of smart services. This paper analyses the impact of user-differentiated privacy costs on smart service supply strategies. It also discusses the effects of privacy protections and data utilisation capabilities on the improvement of smart service levels. We find that providers tend to segment the market based on user privacy sensitivity to capture the maximum consumer surplus. Strict privacy protection requirements may cause providers to sacrifice service quality. Privacy protection is conducive to improving the level of smart services only when users fully recognise these services’ value. Interestingly, our study finds improvements in service levels by providers are driven by two factors. On the one hand, providers choose to improve their service levels to obtain more data and create more profits. On the other hand, to reduce the opportunity costs of early investments to develop services, providers need to improve their capabilities to utilise the value of data, ultimately leading to improved service levels. This study brings a new perspective to the supply of smart services and offers suggestions for how to resolve the contradiction between smart service use and privacy preservation.

KEYWORDS:

• Servitisation
• privacy concerns
• smart services
• information asymmetry
• quality discrimination

Acknowledgements

The authors would like to express their deepest gratitude to the editor and other anonymous expert referees for their endeavours and valuable comments, which greatly improved the paper.

Data availability statement

The authors confirm that the data supporting the findings of this study are available within the article and its supplementary materials.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [grant NO. U2268209, 72271111, 72272070, 72002088].

Notes on contributors

Sihua Chen

Sihua Chen is a professor of information technology of Jiangxi University of Finance and Economics. He received his Ph.D. in management in 2011. Currently, he is the director of Scientific Research Division in Jiangxi University of Finance and Economics. His research interests include management science and E-commerce. He is a vice executive chairman of China information economics association.

Weidong Wang

Weidong Wang is a Ph.D. candidate of the Management Science and Engineering program at Jiangxi University of Finance and Economics. Currently, he is working at the School of Business, Minnan Normal University. His research interests include human–computer interaction and hybrid intelligence.

Xiang Wen

Xiang Wen, born in 1998, is a master candidate of School of Information Management, Jiangxi University of Finance and Economics. His research interest is business intelligence in management science and engineering.

Han Qiu

Han Qiu, born in 1979, is a doctoral candidate in the school of information management of Jiangxi University of Finance and Economics. His research interests focus on artificial intelligence, text analysis, information communication and computer simulation. He has published three papers until now. These publications analyzed the impact of modern technologies such as intelligent recommendation or information communication on users and consumers.

Wei He

Wei He received a Ph.D. degree in Management Science and Engineering from the Jiangxi University of Finance and Economics, Jiangxi Nanchang, China, in 2010. Now she is a Professor of Management at the Jiangxi University of Finance and Economics. Her current research interests include Organizational Theory, E-commerce, and Professionalism.

Mikko Siponen

Mikko Siponen is a Professor of Information Systems at the University of Jyväskylä. He has served as the Vice Dean for Research, the Department Head, Vice Head, and as the Director of an IS Security Research Center. His degrees include Doctorate of Social Sciences, majoring in Applied Philosophy; M.Sc. in Software Engineering; and a Ph.D. in Information Systems. He has received several million euros in research funding from corporations and many other funding bodies. He is an invited member of The Finnish Academy of Science and Letters.

Xiaoming Zhang

Xiaoming Zhang received the Ph.D. degree in Management Science and Engineering from Harbin Engineering University (HEU), Harbin, China, in 2022. He is currently working in School of Information Management, Jiangxi University of Finance and Economics. He has published several journal papers in Finance Research Letters, Computers & Operations Research and International Review of Financial Analysis and conference papers. His research interests include data mining and credit risk management.