Information & Management 47 (2010) 262–270

Contents lists available at ScienceDirect

Information & Management

journal homepage: www.elsevier.com/locate/im

Adoption of e-procurement and participation of e-marketplace on firm

performance: Trust as a moderator
Hsin Hsin Chang *, Kit Hong Wong
Department of Business Administration, National Cheng Kung University, 1 University Road, Tainan City 70101, Taiwan

A R T I C L E I N F O A B S T R A C T

Article history: Today, IT has a major influence on commercial activities, accelerating the adoption of e-procurement and e-
Received 26 September 2006 marketplace participation in many industries. We examined firm motivations for adopting e-procurement
Accepted 26 May 2010 for their operations in thee-marketplace and measured their performance to assess its benefits. Trust was
Available online 1 June 2010
considered as a moderating variable between the relationship of e-procurement adoption and e-
marketplace participation. A two-stage analysis, including both a qualitative and quantitative approach,
Keywords: was applied. Hypotheses were developed and a model constructed. A research questionnaire was
e-Procurement
developed and distributed followed by data analysis and testing. The results showed that firms that
e-Marketplace
Trust
adopted e-procurement were more likely to participate in the e-marketplace and that the firm’s
Firm performance performance was enhanced after such participation. Trust was shown to have a moderating effect upon
firm willingness to adopt e-procurement when it was considering participation in the e-marketplace.
Crown Copyright ß 2010 Published by Elsevier B.V. All rights reserved.

1. Introduction
Innovative IT not only enables firms to enhance their overall
performance and facilitate inter-organizational relationships and
transactions; it also effectively solves the problem of asset
specificity and product description. Therefore, future orientation
is mainly focused on market rather than hierarchy-based economic
activities. At the same time, the Internet has changed the way the
firms do business by reshaping of traditional buyer-seller
relationship, the improvement of core processes, and in ways to
reach new markets. The evolution of information and communi-
cation technology has already improved supply chain perfor-
mance, because of higher process efficiency and integration in B2B
e-commerce.
e-Commerce may be divided into three categories: e-procure-
ment led by buyers, e-distribution led by sellers, and e-market-
place led by a third party. The e-marketplace is an online
intermediary designed to establish buyer-seller relationships
and to facilitate the transactions between them; it generally
facilitates trading activities between partners who have not had
prior interaction; these are often trilateral, involving buyers,
sellers, and an e-marketplace provider [17]. The focus of our study,
e-procurement is one important element of the e-marketplace.
In recent years, e-procurement and the e-marketplace have
proliferated and been applied in an ever-extending set of domains.
* Corresponding author. Fax: +886 6 2080179.
E-mail address: easyhhc@mail.ncku.edu.tw (H.H. Chang).
Along with the efficiency, promptness, and ease of use, early
adopters have become proficient in web-based procurement
systems. The efficiency and automation of internal processes are
a prerequisite for process efficiency. Therefore, large enterprises
are more likely to possess adequate resources and the ability to
construct suitable systems for e-procurement.
An e-marketplace is a place for buyers and suppliers to conduct
trade in a more efficient way. More firms are experiencing e-
marketplace trading and due to its effectiveness and efficiency,
most firms are satisfied with its performance [12]. Therefore, the e-
marketplace is increasingly important to the firm’s procurement
and sales activities.
Trust is, however, an important factor. From the business
perspective, lack of personal contact and anonymity create
uncertainties that lead to greater perceived risk and privacy
concerns. As cyberspace adds a uncertainty and risk to a transaction,
the largest concern for buyers and sellers is incomplete and distorted
information and inappropriate behavior in this unproved market-
place. However a market that is untrustworthy and characterized by
cheating is likely to lead to market failure. Soliman and Janz [16]
discovered that with the advent of the Internet, trust significantly
influencing the adoption and use of inter-organizational systems
(IOSs). Because trust supports collaborative relationships, it is a
prerequisite for e-marketplace use.
Our study focused on the issue of e-procurement adoption and
e-marketplace participation in the manufacturing industry in
Taiwan. We proposed a conceptual model and examine the relation
between e-procurement adoption and e-marketplace participa-
tion. The importance of trust in e-commerce also deserved

0378-7206/$ – see front matter . Crown Copyright ß 2010 Published by Elsevier B.V. All rights reserved.
doi:10.1016/j.im.2010.05.002
 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270
attention. The absence of physical products and possible long
distances between buyers and sellers make trust a critical element
in establishing e-commerce relationships. Thus, we considered
trust as a moderating factor between e-procurement adoption and
e-marketplace participation. Four dimensions of firm performance
were adopted to verify the subsequent benefit of participating in
the e-marketplace.
The purposes of our study were: (1) to examine whether a firm
that has adopted e-procurement will be more likely to participate
in the e-marketplace, (2) since the aim of companies is to save costs
and improve performance, we examined firm performance after
participation in the e-marketplace to determine whether there has
been any improvement and (3) since uncertainties and risks exist
on the Internet, we tried to determine how trust affected the
willingness of companies to participate in the e-marketplace.
2. Literature review
2.1. e-Procurement adoption
Market makers use e-procurement as a means of creating value
and establishing relationships with their business partners
especially in small and medium-sized enterprises. Traditionally,
most organizations spend one-third of their turnover/income on
purchasing goods and services. Non-value added activities result in
insufficient time for corporate buyers to procure high-value or
high-volume materials. Procurement is responsible for identifying
customers’ needs, translating them into specifications, arranging
delivery of goods and services, and assessing customers’ satisfac-
tion with goods and services. Another role is in dealing with
suppliers, including sourcing, pricing, ordering, delivery, and
invoicing. Traditional practices have been plagued by problems,
such as inefficient buying, redundant and disconnected processes,
and non-strategic sourcing purchases, etc. [11].
Use of e-procurement can speed and reduce the cost of
corporate purchasing activities. This purchasing and supply
activity of organizations is one which span both internal and
B2B services in all organizations (private, governmental, and non-
profit). e-Procurement possesses all the functions that exist in
traditional manual systems, such as searching for products,
checking availability, ordering goods and services, tracking orders,
and payment on delivery through the web, but with more value
added, such as post-procurement analysis by data mining to
predict customers’ needs, etc.
e-Procurement technologies are credited with providing
significant benefits to the companies who have invested in them
[1]. It can be a useful instrument with which to obtain complete
information about products and services provided by buyers and
sellers, thereby making it more efficient to use IT for procurement
activities.
We defined e-procurement adoption as the implementation of a
technology for searching, quoting, and acquiring goods or
resources via the Internet. Its two dimensions are reduced cost
and process conformance.
(1) Cost: e-Procurement allows consolidation of sources and may
prevent maverick buying. Inter-organizational electronic net-
works are believed to be improving coordination between
firms by reducing the costs of searching for appropriate goods
and services. Large-scale enterprises with large IT budgets are
more likely to be able to construct suitable e-procurement
systems from the e-marketplace. Procurement is a high cost
activity with unnecessary paperwork, material costs, and
errors; typically the cost of per transaction using e-procure-
ment is reduced by 65% of the older manual procurement
transaction; labor costs also fall. The conversion from paper-
263
based ordering, invoicing, and tracking into electronic docu-
ments can reduce all costs related to procurement, such as
accounting and record keeping. Indeed, the objective of e-
procurement is not to lower suppliers’ prices or margins but to
achieve savings in procurement and administration.
(2) Process conformance: Most e-commerce sites now provide
interfaces for procurement, such as online ordering. As the
need for integrating activities and information flow increases;
optimizing the process has become a prerequisite for success in
all firms [2]. The most obvious stems from the elimination of
redundant or unnecessary processes, improved resource
allocation and system-wide standardization.
2.2. e-Marketplace participation
New technology allows producers to contact end-users directly
and helps electronic intermediary service providers, to exploit IT by
linking sellers and buyers [4]. The Internet allows business processes
to be consistent with the growing demand for increased speed and
efficiency at lower cost. The e-marketplace can be regarded as an
organizational platform that allows participants to exchange
information about prices and offerings. Based on the concept of
an e-hub, Albrecht et al. stated that the B2B e-marketplace can be
seen as a space where buyers can find new products and services and
sellers can identify new market opportunities and seek out new
customers, thereby lowering transaction costs for both. The role of
the e-marketplace is in matching buyers and sellers.
Some factors affecting e-marketplace participation are:
(1) Efficiency due to cost and time savings [3]. It has been suggested
that the e-marketplaces may give suppliers access to higher
levels of decision-making authority in buying organizations.
(2) Legitimacy because organizations must justify their actions and
perform according to societal norms and institutional expec-
tation. Generally these relate to perceived repercussions due to
non-participation. Other reasons include the desire to appear
technologically developed by mimicking the behavior of other
firms. Non-participation can also result in isolation and the
ultimate loss of trade opportunities with business partners.
(3) IT capabilities are needed; firms require a good infrastructure in
order to obtain benefit from marketplace participation. Building
sustainable competitive advantage while enhancing the firm’s e-
market participation is not easy or cheap [9]. However, lack of
participation may result in a firm becoming isolated.
2.3. Trust
Quigley, Tesluk, Locke, and Bartol [10] defined trust as a belief
that firm makes an effort to fulfill commitments, is honest, and
does not seek to take unfair advantage of opportunities. Richard,
Thirkell, and Huff [14] pointed out that trust has been conceptual-
ized as a willingness to rely on exchange partners in whom one has
confidence of their reliability and integrity. Son et al. indicated that
the reliability and integrity of a trustworthy partner are frequently
associated with competency, helpfulness, benevolence, fairness,
responsibility, consistency, and honesty. Trust not only facilitates
loyalty through reducing perception of risk, but also through
enhancing customer perceived value in a relationship built
through frequent, positive two-way communication.
Trust has a moderating effect on process and behavior [6]. It
facilitates business transactions between two parties in an
impersonal economic environment in which the parties lack prior
experience on mutual confidence. B2B e-marketplace providers
must also establish trust; they will fail if participants do not trust
them. McKnight and Chervany proposed four components of trust
in the B2B relationship: competency, benevolence, integrity, and
264 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270
predictability; we adopted four similar dimensions; ability,
friendliness, safety and predictability, via:
(1) Ability: the e-marketplace’s competency, technical expertise,
knowledge, and capability to perform its role. Lack of ability to
trust plays an important role in moderating with firm
participation in the e-marketplace.
(2) Friendliness: benevolent behavior occurs when participants
believe that the e-marketplace is friendly and cares about them
and that the parties will not take advantage of them [5]. It does
not imply unilateral behavior by providers toward all the
participants, but rather is bilateral behavior among all.
(3) Safety: implies fairness, integrity, responsibility, and a commit-
ment that participants perceive reliability and security when
they proceed with a transaction. Furthermore, the e-market-
place adheres to a set of principles that participants find safe and
acceptable, and will follow through on its promises and ethical
obligations. Thus, safety involves the character of the e-
marketplace providers rather than buyer–supplier relationships.
(4) Predictability: a belief that the e-marketplace will provide
sufficient knowledge and accurate information to the partici-
pants in order for them to make predictions and judgments.
Participants then believe that they can predict their partners’
future behavior. Predictability means that all partners are
willing to and capable of serving the participants’ interests and
do not alter or change over time.
3. The conceptual model and research methodology
3.1. Development of the research hypotheses
The growth of the Internet and ICTs has not only fundamentally
changed the process of communication, work, and business, but its
cost structure is radically different. The e-marketplace allows
businesses to collaborate in the design, development, production,
and distribution of products in the supply chain. e-Marketplace are
inter-organizational network-based IS that facilitate or support the
procurement process electronically on the Internet. Thus, e-
procurement is not only an e-ordering and a catalogue-buying
system, but also a means of information exchange among firms
that participate in the e-marketplace. The infrastructure for
Internet access, security mechanisms, middleware, databases,
payment schemes and distribution are also included [13].
The Internet also allows buyers and sellers to meet and trade
according to their needs. Indeed, e-commerce related activities
concentrate on the use of e-marketplaces that seek to improve
supply chain efficiency by automating business processes. Thus the
following hypothesis was proposed.
H1. There is a positive relation between e-procurement adoption
and e-marketplace participation.
The potential spatial and temporal separation between
business partners and the improved technologies have generated
Fig. 1. Conceptual model.
uncertainties in the B2B relationship. Because trust plays an
important role in the e-marketplace, it may also influence firms’
decision-making. Thus e-commerce may not succeed unless trust
exists. Hence, trust relieves anxiety about privacy issues and
enhances transactions in the e-marketplace.
In order to convince firms to adopt e-procurement, a
trustworthy marketplace (one that possesses ability, friendliness,
safety and predictability) is key. According to Pavlou and Gefen [8],
establishing a trusting atmosphere of an e-marketplace provider
can affect other participants in the e-marketplace, since partici-
pants who trust an e-marketplace provider are likely to trust other
participants within it. A trusting relationship can reduce the
expectation of opportunistic behavior; it can enhance the degree of
safety by reducing the risk of other partners taking advantage of
others. Thus we adopted trust as a moderating factor between e-
procurement adoption and e-marketplace participation, and made
a hypothesis reflecting this.
H2. Trust in the e-marketplace has a moderating effect on e-
procurement adoption and e-marketplace participation.
e-Marketplaces facilitate the buyer-supplier relationship and
enhance the supply chain, which create an efficient way of doing
business. There, firms can assist in managing coordination or
cooperation, in sharing information, leading to lower inventory
levels, reducing inventory holding costs and improving overall
efficiency.
In the e-marketplace, a partner can participate at any stage of
the supply chain and can remove some of the inefficient factors
traditionally associated with supply chains. The ultimate goal is to
reduce cost. The key generic benefits of the e-marketplace are the
strengthening of customer relationships, ease of reaching the
market, improved efficiency, reduced costs, and greater competi-
tive advantage. Undoubtedly, the main purpose of firms joining e-
marketplaces is to increase their performance, thus our final
hypothesis was as follows.
H3. e-Marketplace participation has a positive influence on a
firm’s performance.
3.2. Research conceptual model
Our conceptual model is shown in Fig. 1. We attempted to prove
that participating in the e-marketplace will improve firms’
business performance. Furthermore, that trust plays an important
role in the firm’s participation in the e-marketplace, being a
moderating factor in our model.
Firm motivation for adopting e-procurement and for partici-
pating in e-marketplaces were placed in one of four categories;
detailed definitions of the constructs and measuring variables are
shown in Table 1.
(1) e-Procurement adoption: These firms are implementing
procurement processes via the Internet.
 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270 265

Table 1
Definition of research constructs and measuring variables.

Construct Definition Variables

e-Procurement adoption Implementation of a technology designed for searching, quoting, and acquiring Cost, Process conformance
goods or resources by firms via a website.

e-Marketplace participation Firms play a part in a platform that allows business buyers and suppliers to Efficiency, Legitimacy, IT capability
meet, trade, exchange information and collaborate electronically.

Trust The subjective probability by which organizations believe that the e-marketplace Ability, Friendliness, Safety, Predictability
is capable of facilitating transactions according to their confident expectations.

Firm performance The metrics used to measure the firm’s performance. Efficiency, Sales performance, Customer
satisfaction, Relationship development

(2) e-Marketplace participation: These firms are trading in e-
marketplaces.
(3) Trust: This plays an important role for firms planning to adopt
e-procurement and participate in e-marketplaces. It is a
moderating factor in our study, as it changes the relationship
between e-procurement adoption and e-marketplace partici-
pation. Trust is measured by the extent of the ability to instill
trust, friendliness, safety, and predictability [7].
(4) Firm performance: This involves efficiency, sales performance,
and customer satisfaction and relationship development. Sales
performance is measured by assessing the increase in market
share, sales volume, customer acquisition, and customer
retention. Customer satisfaction is measured by assessing
the change in overall customer satisfaction, customer word of
mouth, and customer switching. Relationship development is
measured by assessing the improvement in the strength and
length of relationships with partners and suppliers.
3.3. Research mthodology
To improve the overall response, each interviewee’s point of
view and the firm’s intentions were solicited; thus the question-
naire was open-ended. All items were measured on a Likert seven-
point scale, from 1 = ‘‘strongly disagree’’ to 7 = ‘‘strongly agree’’.
The interviewees included the department manager of pro-
curement and MIS from China Steel Corporation; the sales manager
from Einstein Technology Co. Ltd., and the Director and IT manager
from Yu-Jen-Shin Pastry House. They to answered all the questions,
but were encouraged to share any other experiences with e-
procurement that they considered interesting. A brief history of
these firms is given in Appendix B.
The questionnaire was then modified as a result of the interviews.
Questionnaires were sent to companies that had adopted e-
procurement and participated in e-marketplaces. This study used
Amos 5.0 for data analysis. We tested for content validity, composite
reliability, convergent validity, and discriminate validity. SEM was
used to test the full conceptual model. Seven indices were measured
to verify the fitness of the model, which included CFI, RMSEA, GFI,
AGFI, NFI, NNFI and SRMR, respectively.

Our experiment was carried out in two parts. First, the
development of the questionnaire and improving it plus making
a first pass at proving the hypotheses by select interviews (using
the questionnaire as a starting point) with top managers of three
Taiwanese companies. The second involved asking a large sample
of people in Taiwan industries their opinion, using the improved
questionnaires as modified after the first phase.
3.3.1. Development of the questionnaire
Questionnaire items were first developed for each dimension of
the constructs that had become important from our analysis of
prior studies. In order to make sure that everyone had the same
understanding of these constructs, the questionnaire included a
definition of each item. The questionnaire formed the basis of the
interviews made to the top managers.
There were four parts to the questionnaire. The first addressed
company motivation for adopting e-procurement and the out-
come. It was assessed by asking: whether lowering cost and
conforming to a standard procurement process were the reasons
that the company adopted e-procurement. The second focused on
company motivation for participation in e-marketplaces. Inter-
viewees were asked if their companies participated in the e-
marketplace in an attempt to improve efficiency, legitimacy, and IT
capability. The third examined firm performance after participa-
tion in e-marketplaces; firm performance was measured using four
indices – efficiency, sales performance, customer satisfaction and
relationship development. The fourth was designed to verify the
role of trust when the firms were planning to participate in the e-
marketplace (how it influenced their decision); interviewees were
also asked to state their reasons for adopting e-procurement and
participating in the e-marketplace. We then asked whether there
was a need for improvements to further enhance their firm’s
performance.
4. Analyses
4.1. Factors affecting e-procurement adoption
(1) Cost: The three companies agreed that the adoption of e-
procurement can significantly reduce paperwork, labor cost,
time consuming, etc. e-Procurement also assists in transferring
information via the Internet. The procurement manager of CSC
stated that the use of e-procurement can have work done within
few minutes instead of few days to post document out to its
partners.
(2) Process conformance: The three firms indicated that discon-
formities and mistakes were reduced by adopting e-procure-
ment. Especially, the MIS manager of CSC strongly agreed that
adopting of e-procurement made it more convenient to
download, print out and revise information due, to the
consistent format of the information.
4.2. Factors affecting e-marketplace participation
(1) Efficiency: All interviewees agreed that participation in the e-
marketplace can increase efficiency by searching for buyers or
sellers, comparing price, etc. The interviewees of CSC indicated
that due to the evidence recorded in the database, they can rely
on computers. This is the main reason why they participated in
the e-marketplace.
(2) Legitimacy: In order to enhance competitiveness, the inter-
viewees of YJS and Einstein agreed that companies have to
upgrade their IS from manual to IT based. One of the main
clients of Einstein, CSC, the leading firm in the steel industry,
was the first firm to start an e-marketplace. Einstein had to
participate to meet CSC’s requirements and maintain a good
relationship with CSC.
266 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270
(3) IT capabilities: All interviewees agreed that companies should
set up and maintain all their systems for the e-marketplace. In
particular, CSC and YJS felt confident in setting up their own IT
because they had professional technical staff.
4.3. Trust
Basically, when the three companies obtained regular business
partners, trust among them was not the only concern. Trust in the
e-marketplace was crucial. All interviewees agreed that companies
would participate in the e-marketplace only when the system was
deemed trustworthy.
(1) Ability: All three companies agreed that the e-marketplace
could provide an effective forum to accomplish businesses. The
e-marketplace has allowed buyers and sellers to search, sell, and
purchase products faster and more conveniently; thus improv-
ing all three companies’ overall performance and efficiency.
(2) Friendliness: The three companies agreed that although some
information did not meet their needs, the e-market proactively
offered it. However, they indicated that the e-marketplace
always responded to their questions rapidly.
(3) Safety: The companies agreed that after their participation in the
e-marketplace, customer satisfaction was highly enhanced,
because the e-marketplace dealt with the information related to
them or their customers with reliability, accuracy, and security.
(4) Predictability: All three companies agreed that e-marketplace
could effectively predict the change in product specifications,
prices, and quality. They could easily and simply notice the
changes via the e-marketplace and thus avoid errors incurred
in their procurement operations.
4.4. Firm performance after participation in e-marketplaces
(1) Efficiency: The companies agreed that they were able to place
orders more efficiently by participating in the e-marketplace. It
enhanced their bargaining power when dealing with the
suppliers, stated the Director of YJS.
(2) Sales performance: Among the companies, only YJS felt that
participating in the e-marketplace significantly promoted sales
performance. CSC and Einstein regarded the e-marketplace as a
platform for coordinating with partners rather than as a tool for
increasing sales.
(3) Customer satisfaction: Only YJS claimed that customer satisfac-
tion was increased by simpler and convenient ordering by
participating in the e-marketplace. However, CSC and Einstein
believed product quality was important in enhancing customer
satisfaction.
(4) Relationship development: Only the sales manager of Einstein
felt that participating in the e-marketplace could develop
good relationships with customers. Both of the managers from
CSC said that building a long-term relationships through
cooperative experience was more important than the way
doing business. YJS pointed out that in a traditional industry,
companies often did business with partners rather than
deciding by lowest price. Disclosure of information to
competitors was the main worry they had in participating in
the e-marketplace.
4.5. Results
From these results, interviewees agreed that there was a
positive relationship between e-procurement adoption and e-
marketplace participation; and trust in the e-marketplace had a
moderating effect on e-procurement adoption and e-marketplace
participation. Hence, hypothesis 1 and 2 were fully supported.
However, participating in e-marketplaces had a negative
influence on YJS relationship development. Both the effect on
sales performance and customer satisfaction in CSC and Einstein
were also not statistically significant. Therefore, hypothesis 3 was
only partially supported. Since the two hypotheses were fully
supported, and one was partially supported, our model only
roughly fit reality and the questionnaire required some revision to
adapt to real situations.
5. Data analysis
5.1. Data collection
A total of 700 questionnaires were distributed to businesses,
including manufacturers and small-to-medium companies. The
population was randomly selected from the top 5000 companies in
Taiwan provided in the list by China Credit Information Service,
Ltd. One hundred and eight questionnaires were returned. The
respondents were from procurement or related departments to
ensure that they fully understand the procedures and possible
problems. The response rate was therefore 15%.
The demographics of the respondents showed that most
companies had been established for more than 15 years. The
majority were worth less than US$ 3,125,000 (42%) and more than
US$ 125,000,000 (36%); this indicated that the samples were mainly
large and small-to-medium companies. 78% had less than 1000
employees, and 22% had more than 4000 employees. 55% of the
companies were in the midstream position of the supply chain. Most
respondents were from sales and procurement departments. Others
were aware of the company’s situation regarding procurement and
selling. Most were senior managers or top executives of the
company.
5.2. Measurement
5.2.1. Content validity, composite reliability, and convergent validity
test
To examine content validity, professional subjective judgment
was required; it was obtained from three sources: literature,
representatives of the relevant populations, and experts.
To assess the measurement model, confirmative factor analysis
(CFA) was conducted to test if all measurement items were
appropriate for each construct. Items with factor loadings below
0.45 were deleted. Then composite reliability and convergent
validity of the data were assessed by computing the composite
reliability (CR) and variance extracted (VE) of the factors. Values of
these were greater than 0.7 and 0.5, respectively.
Table 2 shows the factor loadings of each measure; all of their
coefficients were above recommended thresholds. This demon-
strated that the measurement scales had good composite
reliabilities and convergent validities for the entire model.
5.2.2. Discriminant validity analysis
To assess the discriminant validity of each dimension, Chi-
squares of the two factors under constrained and unconstrained
condition were computed and the difference (Dx2) between the
two values was computed. If two factors have a value of 1, the two
are totally related. However, if the Dx2 of the two factors is greater
than 3.8, there is a discriminative validity between the two factors.
Table 3 shows that all the Dx2 values were greater than 3.8,
indicating that each factor was inherently different and therefore
had discriminant validity.
5.2.3. Result of SEM
SEM was conducted to verify the goodness fit of the full
framework. In Table 4, the column of fit indices before modifica-
 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270 267

Table 2 Table 3
Factor loading, reliability and validity analyses (all items are listed in Appendix A). Discriminant analysis.

Constructs/variables Items Factor Composite Variance e-Procurement adoption

loading reliability extracted Item Cost
Process conformance 31**
Cost Cos1 0.74 0.96 0.97
Cos2 0.79 e-Marketplace participation
Cos3 0.71 Item Efficiency Legitimacy
Legitimacy 270**
Process conformance PC1 0.70 0.82 0.61 IT capability 153** 123**
PC2 0.66
PC3 0.46 Trust
Item Ability Friendliness Safety
Efficiency Eff1 0.78 0.95 0.95 Friendliness 121**
Eff2 0.86 Safety 684** 86 **

Eff3 0.75 Predictability 75** 722** 89**

Eff4 0.70
Eff5 0.78 Firm performance
Item Efficiency Sales Customer
Legitimacy Leg1 0.46 0.91 0.91 performance satisfaction
Leg2 0.59 Sales performance 130 **

Leg3 0.63 Customer Satisfaction 65** 43**

Leg4 0.77 Relationship development 57** 110** 70**
Leg5 0.66
Leg6 0.60 Note: Discriminant coefficients are F-value: Dx21,0.05 > 3.8; **p < 0.01.

IT capability ITC1 0.46 0.85 0.58

ITC2 0.68 Table 4
ITC3 0.58 Fit indices before and after modification of the full model.
ITC4 0.60
Fit index Criterion Before modification After modification
Ability Abi1 0.76 0.83 0.79 2
x 125 78
Abi2 0.79
x2/df <3.0 2.1 1.4
Abi3 0.81
CFI >0.9 0.97 0.99
Friendliness Fri1 0.91 0.93 0.86 RMSEA <0.08 0.1 0.06
Fri2 0.84 GFI >0.90 0.85 0.90
Fri3 0.88 AGFI >0.80 0.77 0.84
NFI >0.90 0.95 0.97
Safety Safe1 0.87 0.91 0.83 NNFI >0.90 0.97 0.99
Safe2 0.81 SRMR <0.08 0.05 0.042
Safe3 0.81
Note: N = 108, degree of freedom (df) = 61.
Predictability Pred1 0.78 0.86 0.81
Pred2 0.81
(0.9), AGFI (0.84), and RMSEA (0.059). The modified model and the
Pred3 0.83
standardized coefficient of each relation are shown in Fig. 3. The fit of
Efficiency Effy1 0.77 0.94 0.74 the model was improved by adding efficiency to e-procurement
Effy2 0.77
adoption and e-marketing participation. Efficiency was shown by
Effy3 0.83
Effy4 0.86 the lower cost (including the opportunity cost of time) in performing
Effy5 0.64 various parts of the purchasing task. e-Commerce would probably
Effy6 0.56 enhance the effectiveness of these tasks.
Sales performance SP1 0.90 0.94 0.95 The t-values of the relation between each dimension (before
SP2 0.91 and after modification) are shown in Table 5. These show that the
SP3 0.70
SP4 0.67 Table 5
SP5 0.60 t-Values of relation between each dimension before and after modification.
Customer satisfaction CS1 0.81 0.92 0.78 Relation between dimensions t-Values t-Values
CS2 0.77 (before) (after)
CS3 0.77
e-Procurement adoption ! cost – –
Relationship RD1 0.93 0.96 0.93 e-Procurement adoption ! process conformance 8.6*** 9.1**
development RD2 0.92 e-Procurement adoption ! efficiency – 4.1**
e-Marketplace participation ! efficiency 9.5*** 3.1**
Overall Ove1 0.76 0.96 0.97
e-Marketplace participation ! legitimacy 6.7*** –
Ove2 0.79
e-Marketplace participation ! IT capability – 6.6**
Ove3 0.92
Firm performance ! efficiency 15.49*** –
Ove4 0.96
Firm performance ! sales performance 16.12*** 15.4**
Firm performance ! customer satisfaction 13.83*** 15.5**
Firm performance ! relationship development 5.34*** 14.2**
tion, showed that the x2/df ratio was 2.0, which was lower than the e-Procurement adoption ! e-marketplace 5.46*** 4.1**
recommended level of 3. Due to the sensitivity of chi-square to participation
sample size, more indices were therefore used for assessing the Trust ! e-procurement adoption 3.10*** 5.6**
model fit. As a result, all indices reached the recommended value Trust ! e-marketplace participation 9.90*** 3.60**
e-Marketplace participation ! firm performance 11.3*** 11**
except that for GFI (0.85), AGFI (0.77), and RMSEA (0.099). The full
Trust ! ability 11.0*** 11.6**
model of the SEM results is shown in Fig. 2 with the standardized Trust ! friendliness 13.5*** 12.5**
coefficient of each relation. Trust ! safety 13.9*** 12.3**
In order to provide a better fit, some modifications were made, Trust ! predictability – 12.9**
and the result of the modified model was shown in Table 4. It shows Note: (–) the parameter by others are set to 1, thus, no t-value; t > 1.96; **p < 0.01,
***
that all indices of the model fit were improved, especially the GFI p < 0.001.
268 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270

Fig. 2. SEM results of the full model.

Fig. 3. SEM results of the modification model.

Table 6
Summary results for hypotheses testing.

Hypotheses Results

H1: There is a positive relation between e-procurement adoption and e-marketplace participation. Supported
H2: Trust in the e-marketplace has a moderating effect on e-procurement adoption and e-marketplace participation. Supported
H3: e-Marketplace participation has a positive influence on a firm’s performance. Supported

relation between each dimension was statistically significant.
Table 6 provides the summary results of hypothesis testing; all
three hypotheses were supported.
6. Discussion and conclusions
6.1. Results of the study
The results showed firms that had adopted e-procurement were
more likely to participate in the e-marketplace. Trust was the
fundamental element that affected firms’ willingness to partici-
pate. Firm performance (e.g., efficiency, sales performance,
customer satisfaction, and relationship development) improved
after participating in e-marketplaces.
In our study, we found that e-procurement adoption had a
positive relationship on e-marketplace participation. However, the
final purpose of firm adoption of e-procurement was to enhance the
firm’s competitive advantage by increasing procurement activity
efficiency and serving customers efficiently. This in turn increased
sales performance due to increased customer satisfaction.
Firms wanted their e-market interface to project competence,
friendliness, safety, and predictability; such an e-marketplace is
required when dealing with unfamiliar clients or new partners.
Moreover, transferring information via the Internet is risky;
therefore, trust can reduce anxiety about information disclosure.
6.2. Managerial implications
From a managerial standpoint, firms adopt e-procurement to
reduce processing time and cost, and provide process conformity.
Indeed, the use of e-procurement facilitates the integration of the
supply chain, adding value of interconnecting with business
 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270 269

partners effectively. Firms who do not participate in the e-
marketplace may become less competitive. Of course, IT ability is
a prerequisite for participating. However, e-marketplace providers
should ensure that there is no opportunistic behavior in the
marketplace in order to retain their marketplace.
To conclude, a trustworthy e-marketplace requires effective e-
procurement. Firms can enhance sales performance, increase
customer satisfaction and develop tight relationships with their
business partners by offering convenient, faster, and accurate
services.
6.3. Research limitations
Some respondents suggested that the issues addressed in our
study should be conducted in specific industries because
different industries and firms of different sizes may have
different considerations in their adoption of e-procurement.
For traditional industries, such as YJS Pastry House, the e-
marketplace could have a negative influence on their relation-
ship with their business partners who continue doing business
with each other because of the trust built up over many years.
Some respondents even suggested that the confirmation and
specification of components or products cannot generally be
done through e-procurement. Technology and a firm readiness
(such as management support) could also be moderating factors,
especially in small firms, thus affecting adoption of e-procure-
ment and participating in the e-marketplace. As Shachaf [15]
pointed out, significant differences in technology use and
perception of task technology fit also exist between eastern
and western cultures.

Appendix A. Questionnaire
Measurement items for each construct/variable
e-Procurement adoption
Cost
Cos1 e-procurement helps to reduce the time spent on procurement activities.
Cos2 e-procurement helps to reduce the labor needed on procurement activities.
Cos3 e-procurement helps to reduce the cost related to procurement activities.

Process conformance
PC1 e-procurement makes formats of all sheets unified.
PC2 e-procurement helps to reduce the possibility of mistakes.
PC3 e-procurement makes it more convenient to acquire information.

e-Marketplace participation
Efficiency
Eff1 We thought it would increase our efficiency.
Eff2 We believed that it would reduce the cost associated with transacting business with our exchange partners.
Eff3 We expected it to reduce our time spent on running our business.
Eff4 We thought it would reduce the labor associated with transacting business with our exchange partners.
Eff5 We thought it would streamline our operations.

Legitimacy
Leg1 It portrays us as a high-tech organization.
Leg2 Leading companies in the business at this time are doing so.
Leg3 In this industry, companies that are not ready for e-marketplaces will be inferior.
Leg4 If companies don’t participate in e-marketplaces they will be considered as lagging behind technologically.
Leg5 Participating in e-marketplaces and being considered as a pioneer in this industry is important to our company.
Leg6 In this industry, lots of companies are willing to participate in e-marketplaces.

IT capability
ITC1 Good IT planning ability is important for a firm to participate in e-marketplaces.
ITC2 Our firm has strong technical staff to assist with e-marketplace participation.
ITC3 Our employees have an understanding of the possible benefits of IT applications.
ITC4 Our firm has adequate knowledge about IT.

Trust [15]
Ability
Abi1 Participating in the e-marketplace has helped us establish many relevant businesses.
Abi2 Participating in the e-marketplace has helped to rapidly accomplish agency services.
Abi3 in the e-marketplace has greatly improved overall performance.

Friendliness
Fri1 The e-marketplace proactively offers the information related to our business.
Fri2 The e-marketplace proactively answers FAQ (Frequently Asked Questions).
Fri3 The e-marketplace promptly responds to proposed questions.

Safety
Safe1 The e-market is honest.
Safe2 The e-market is reliable.
Safe3 The e-market is dependable.

Predictability
Pred1 The product specification from the e-marketplace lives up to our expectation.
Pred2 The quality of products or services from the e-marketplace lives up to our expectation.
Pred3 The price of products from the e-marketplace lives up to our expectation.

Firm performance
Efficiency
Effy1 After participating in an e-marketplace, the costs of production have been reduced.
Effy2 After —, the costs of transaction have been reduced.
Effy3 After —, the costs of general management activities have been reduced.
Effy4 After —, the costs of coordinating with suppliers, customers and business partners have been reduced.
270 H.H. Chang, K.H. Wong / Information & Management 47 (2010) 262–270

Appendix A (Continued )
Effy5 After —, the costs of marketing the product have been reduced.
Effy6 After —, the costs of acquiring new customers have been reduced.

Sales performance
SP1 participating in an e-marketplace, the market share of our products has increased.
SP2 After —, the sales volume of our products has increased.
SP3 After —, the price of our products has become more flexible.
SP4 After—, the number of new customers that we are able to acquire has increased.
SP5 After participating in an e-marketplace, the number of existing customers that we are able to retain has increased.

Customer satisfaction
CS1 After participating in an e-marketplace, our customers are more satisfied with us overall.
CS2 After —, our customers encourage other companies to do business with us.
CS3 After —, our customers are more loyal to us than before.

Relationship development
RD1 After participating in an e-marketplace, our company has been able to strengthen its existing business relationships with partners and suppliers.
RD2 After —, the relationships between our company and its suppliers and business partners are likely to last longer.

Overall
Ove1 The information won’t be stolen when using the e-marketplace.
Ove2 The information can be transferred correctly in the e-marketplace.
Ove3 We think it is secure to transfer information in the e-marketplace.
Ove4 Overall, the e-marketplace is a platform where information can be transferred securely.

Appendix B. A brief history of the three companies in out initial
case study
(1) China Steel Corporation (CSC) is the only integrated steelmaker
and slab producer in Taiwan. Its products range from small hand
tools to bridges; its steel plates are used for ships; wire rods are
used for nuts, bolts, and hand tools, etc. CSC conducts the
majority of its business in Taiwan, where it began as a private
enterprise and then transitioned into a state-owned corporation,
which privatized with the government retaining more than 40%
of the company. CSC has established its own e-marketplace for
20 years; it already has most of its production and working
process data digitalized and acts as an e-commerce pioneer.
(2) Einstein Technology Co. Ltd. was established in 1991. It has been
participating in the e-marketplace for 4 years. Its main business
is in selling high-end computer technology products, output
devices, disk arrays and storage. It is the agent for many famous
IT global brands, has obtained an OEM contract with HP, etc.
(3) Yu-Jen-Shin (YJS) Pastry House has been producing festive
treats for decades. Its ‘‘Crispy Butter Cake’’ is now one of the
‘‘Three Treasures of Da-Jia town’’. Although baking is a
traditional industry, business processes in YJS Pastry House
have been automated via computers for many years; they were
the first company to establish an e-marketplace in the baking
industry about 4 years ago.
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Hsin Hsin Chang is a Professor at the Department of
Business Administration and Institute of International
Business, National Cheng Kung University, Taiwan. She
holds a MBA from University of Wales and a PhD in IT &
Management from School of Management, University of
Bradford, UK. Her research interests are in related to e-
business (ERP, SCM, CRM), TQM, technology manage-
ment, collaborative commerce, and global logistics. She
has published in such journals as Information & Manage-
ment, Information Systems Journal, Technovation, Compu-
ters in Human Behavior, International Journal of Computers
Human Studies, Online Information Review, TQM & Business
Excellence, International Journal of CIM, etc.
Kit Hong Wong is a PhD student in the Department of
Business Administration at National Cheng Kung
University, Taiwan. His research interests include
business-to-business e-marketplace, SCM, e-com-
merce. His research has been published in 2009
proceeding of International Conference of Academy of
International Business.