Institutional Environments for B2B Ecommerce Adoption: A Quantitative Study of Electronics and Texti

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Institutional Environments for B2B E-commerce
AdoptionA Quantitative Study of Electronics
and Textile Firms in Greater China and the U.S.
U.S.-China Young Scholars Forum on ST
PolicyOctober 19, 2006 Beijing, China

• Ling Zhu
• Ph.D. Candidate
• Department of Management Information Systems
  (MIS)
• Eller College of Management
• The University of Arizona

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• E-commerce Policy Project
• Data originally from a study funded by the Center
  for Advanced Purchasing Studies (CAPS)
• Dr. Sherry Thatcher, Business-to-business
  E-commerce A Study of Greater Chinese and U.S.
  Electronics and Textile Firms, CAPS, Tempe,
  Arizona
• Zhu Thatcher, B2B e-commerce adoption
  decisions in Taiwan The interaction of cultural
  and other institutional factors, Electronic
  Commerce Research and Applications (52) 2006, pp
  92-104.
• Zhu Thatcher, Institutional environment for
  B2B e-commerce adoption A quantitative study of
  electronics and textiles firms in Greater China
  and the U.S., International Journal of
  Networking and Virtual Organizations (forthcoming)

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• Definitions
• E-commerce
• Commercial transactions (of goods or services)
  made using some form of information technology
  (IT)
• B2B commerce
• Commercial transactions between business entities
• B2B e-commerce adoption
• Use of IT in B2B transactions
• Email product or service information for
  marketing purpose
• Customer Relationship Management (CRM)
• Supply Chain Management (SCM)
• Enterprise Resource Process (ERP) systems

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• Research motivation
• Revolutionary impact of IT Internet becomes the
  major worldwide distribution channel for goods
  and services (Peter Drucker, 2002)
• Reality
• E-commerce adoption uneven in different countries
  and industries
• Due to different national and organizational
  environment (Gibbs, Kraemer Dedrick, 2003)
• Different government approaches
• Hands-offthe U.S.
• Actively involvedEuropean Union

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• E-strategies
• Business perspective
• Corporation IT strategy (actively/passively)
• Supplierbusinesscustomer (in global market)
• Policy perspective
• Global and national IT policies
• Governmental and regulatory initiatives
• External environments for B2B e-commerce
• Political wisdom, social awareness and
  stakeholder involvement

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• Challenge for IT Policy
• Difficult to identify and measure cause and
  effect of policy outcomes
• Therefore lack of reliable base for policy making
• Knowing when and how to act is crucial

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• Research questions
• Does external environment matter in B2B
  e-commerce adoption?
• Which environmental factors play significant
  roles in B2B e-commerce adoption?
• Empirical study
• Survey data from 179 firms
• U.S. and Greater China (China, Taiwan and Hong
  Kong)
• Electronics and textile firms
• Environments industry, government, regulation
  culture

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• Government Intervention
• Regulations, public policies public-private
  partnerships
• Rejected by neoclassical economics after World
  War IIobstacle to economic social development
  (Ahrens 2000)
• Market and state not mutually exclusive
• New Institutional Economics (North 1986)
• Emphasis on the role of institutions
• Central Eastern European transition/1997
  Southeast Asian financial crisis
• Economic development will be ineffective if
  lacking a sound institutional environment
• Institutional Theory
• How social economic choices shaped by
  institutional arrangements (DiMaggio et al. 1991)
• Institutions can reduce organizational
  uncertainty by providing dependable and efficient
  frameworks for economic exchange (North 1986)

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Application in IT Information Ecology
An Information Ecosystem of Organization
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• Insights from the New Institutional Economics
  suggest that we should look beyond those
  proximate indicators i.e. physical
  infrastructure to examine how the institutional
  environment in a country contributes to (or
  undermines) confidence in e-commerce and supports
  or hinders private investment in the new medium
  of business transaction. (Oxley et al. 2001)

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• Institutional Environment
• The set of fundamental political e.g.
  governmental, social e.g. industrial
  cultural and legal including regulatory rules
  that establishes the basis for production,
  exchange and distribution (Oxley et al. 2001)
• Consists of customers, suppliers, competitors,
  other trading partners, regulatory agencies and
  societythe external environment in which the
  organization conducts business (Gibbs et al. 2004)

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• H1 Firms perceiving greater industrial
  encouragement will be more likely to adopt
  e-commerce.
• Trend-setting companies (King et al. 1994)
• Multinational companies (King et al. 1994)
• Suppliers and customers (Chen 2003 Dyer et al.
  1998 Shore 2000)
• Industries that are internationally competitive
  (Gibbs et al 2003)
• Industry associations (Gibbs et al 2003)

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• H2 Firms perceiving more governmental
  encouragement will be more likely to adopt
  e-commerce.
• Government promotion and incentive (Gibbs et al
  2003)
• National IT policies (Wang 1999)
• Subsidies and tax deductions (Thatcher Zhu,
  2006)
• Procurement requirements (Thatcher Zhu, 2006)

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• H3 Firms perceiving more regulation changes will
  be more likely to adopt e-commerce.
• More than 50 countries with legislations and
  regulations (Baker McKenzie, 2004)
• International and regional organizations (UN,
  WTO, EU, APEC, etc.)
• Regulatory changes
• Marketing privacy, IP
• Transaction information security,
  e-contract/e-signature
• Post-transaction e-payment, dispute,
  jurisdiction
• In the countries without new principles
  e-commerce adoption slow (Shih et al. 2005)
• U.S.more supportive legal and regulatory
  environmenthigher percentage of firms using
  e-commerce
• Chinaless friendly regulatory environmentfewer
  adopting e-commerce

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• H4 Firms perceiving more compatibility of the
  local culture will be more likely to adopt
  e-commerce.
• Organizational choices and preferences within the
  cultural frameworkcultural biases (DiMaggio et
  al. 1991 Douglas 1986)
• Perceptions and use of IT differ between Japanese
  and US workers (Gefen et al. 1997 Straub 1994 )
• Cultural factors for the lack of IT diffusion in
  Middle East (Goodman et al. 1992)
• Incompatible with Chinese culture, in which
  commercial transactions are personalized
• Cultural inhibitor of EDI service in Hong Kong
  (Burn 1995)

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• Discussion of findings
• Industrial and governmental encouragements exert
  powerful direct effects on B2B e-commerce
  adoption
• Cultural compatibility has marginal effect
• No significance of regulatory effect
• Chinese firms are less likely to adopt e-commerce
  than US firms
• Textile firms are less likely to adopt e-commerce
  than electronics firms
• Good model fit ? appropriate conceptual framework
  based on institutional theories

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• Limitation and future research
• Measures subjectiveperceptions on Likert-scale
• Regulatory and cultural instruments need
  refinement
• Level of e-commerce adoption as dependent
  variables
• Controlled internal (organizational) factors
• Small sample sizeunable to run
  country-by-country
• Further investigation on interactions
• Follow-up interviews survey (longitudinal
  comparison) on the same sample
• Same measurements in other countries and
  industries
• Expand the research scope from b2b e-commerce to
• General IT adoption and innovation
• Intellectual property (such as open source)
• Outsourcing

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• Policy implications
• Uneven diffusion of e-commerce ? digital divide
• Supportive environment formed by government and
  industry
• In developing countries
• At the infant stage of B2B e-commerce
• Government in partnership with industry

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• Diffusion of Innovation Theory (Everett Rogers,
  2003)
• How a Digital Divide is created
• Innovators (2.5) fast followers (13.5)
• Mainstream (34) Beginner (34) laggards (16)

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External Intervention
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Has the world gotten too small and too fast for
human beings and their social and political
systems to adjust in a stable manner? Tom
Friedman, The World is Flat (2005)