Professional Documents
Culture Documents
Consumer Behavior
Consumer Behavior
Organizational
Development, and
Electronic Commerce:
Emerging Issues for Advancing
Modern Socioeconomies
Mehdi Khosrow-Pour
Information Resources Management Association, USA
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Consumer behavior, organizational development and electronic commerce : emerging issues for advancing modern socioeconomies / Mehdi
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Consumer Behavior, Organizational Development, and Electronic Commerce: Emerging Issues for Advacing Modern Socioeconomies is
part of the IGI Global series named Advances in Electronic Commerce (AEC) Series, ISBN: 1935-2921
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Advances in Electronic Commerce (AEC)
ISBN: 1935-2921
Editor-in-Chief: Mehdi Khosrow-Pour, D.B.A.
Consumer Behavior, Organizational Development, and Electronic Commerce: Emerging Issues for
Advancing Modern Socioeconomies
Mehdi Khosrow-Pour, Information Resources Management Association, USA
Information Science Reference • copright 2008 • 354pp • H/C (ISBN: 978-1-60566-126-1) • US $195.00 (our price)
Considering the global spread of e-commerce technologies and the rapid pace of organizational adoption
of these technological advancements, there is a need for reliable research results on e-services, outsourcing
applications, and consumer resources management. Consumer Behavior, Organizational Development, and
Electronic Commerce: Emerging Issues for Advancing Modern Socioeconomies offers readers a one-stop resource
for contemporary issues, developments, and influences in e-commerce. Through in-depth literature reviews
and inventive methodologies, academics, students, and practitioners will find this publication to be a ready
reference—suitable for university or corporate library collections and advanced coursework—for a complete
depiction of technologies and their impact on modern global socioeconomics.
A growing number of companies are opting to perform increasing types of professional services in foreign
countries, creating, for some companies, unprecedented opportunities to reduce costs and nucleate strategic
relationships, while, for others, representing a major threat to current prosperity. Outsourcing and Offshoring
of Professional Services: Business Optimization in a Global Economy discusses the considerations and impli-
cations surrounding the outsourcing and offshoring of professional services, such as software development
computer-aided design, and healthcare, from multiple global perspectives. This Premier Reference Source, of-
fering industry professionals, policymakers, students, and educators with a balance between a broad overview
and detailed analysis of offshore outsourcing, is an invaluable addition to academic, research, and corporate
libraries. This publication includes a foreward by Lester C. Thurow, Jerome and Dorothy Lemelson Professor
of Management and Economics and Former Dean, MIT Sloan School of Management.
The Advances in Electronic Commerce (AEC) Book Series is designed to provide comprehensive coverage and understanding of the social, cultural,
organizational, and cognitive impacts of e-commerce technologies around the world. These accounts can be viewed from the impacts of electronic com-
merce on consumer behavior, as well as the influence of e-commerce on organizational behavior, development, and management in organizations. The
secondary objective of this book series is to expand the overall body of knowledge regarding the human aspects of electronic commerce technologies and
utilization in modern business organizations, assisting researchers and practitioners to devise more effective systems for managing the human side of
e-commerce. It is through these objectives that the AEC Series seeks to make available literature on emerging research and methodologies in E-Commerce.
All audiences, students, researchers, academicians and practitioners, will find useful the breaking accounts of E-Commerce principles and will benefit
from the high-quality sources of reference this series intends to provide. By becoming a contributor to the Advances in Electronic Commerce (AEC) Book
Series , you will be granted an opportunity that few ever gain. Your work will be showcased in a collection that finds wide acceptance by both libraries
and international indexes, and it will be supported by a diverse international editorial advisory board. Given that this series is closely associated with the
Journal of Electronic Commerce in Organizations, many students, practitioners, and researchers who use the journal as a resource will now also turn to
the series to find new, salient content.
Stephen Burgess
Victoria University, Australia
Chuleeporn Changchit
Texas A&M University - Corpus Christi, USA
Mehdi Ghods
The Boeing Company
Nikos Karacapilidis
University of Patras, Greece
Matthew H. S. Kuofie
Illinois State University, USA
Craig Parker
Deakin University, Australia
Mahesh Raisinghani
University of Dallas, USA
Joseph Sarkis
Clark University
Tom Stafford
University of Memphis, USA
Bob Travica
University of Manitoba, Canada
Vishanth Weerakkody
Brunel University, UK
Editorial Review Board
Reima Suomi
Turku School of Economics, Finland
Table of Contents
Preface................................................................................................................................................xviii
Chapter I
Consumer-to-Consumer Electronic Commerce: An Emerging Stream of Research............................... 1
Kiku Jones, University of Tulsa, USA
Lori N. K. Leonard, University of Tulsa, USA
Chapter II
Online Consumers’ Switching Behavior: A Buyer-Seller Relationship Perspective............................. 18
Dahui Li, University of Minnesota Duluth, USA
Glenn J. Browne, Texas Tech University, USA
James C. Wetherbe, Texas Tech University, USA
Chapter III
From High Tech to High Touch: The Effects of Perceived Touch on .
Online Customers’ Intention to Return.................................................................................................. 30
Hong-Mei Chen, University of Hawaii, USA
Qimei Chen, University of Hawaii, USA
Rick Kazman, University of Hawaii, USA
Chapter IV
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data...................... 51
Andreas Aresti, University of Patras, Greece
Penelope Markellou, University of Patras, Greece
Ioanna Mousourouli, University of Patras, Greece
Spiros Sirmakessis, Technological Education Institute of Messolonghi, Greece
Athanasios Tsakalidis, University of Patras, Greece
Chapter V
Search Engine Optimization an Action Research Project: Initial Results
and Two Year Follow-Up....................................................................................................................... 69
Ross A. Malaga, Montclair State University, USA
Chapter VI
A Flow Theory Integrated Model of Web IS Success............................................................................ 86
Edward J. Garrity, Canisius College, USA
Yong Jin Kim, Sogang University, South Korea & State University of New York at
Binghamton, USA
Joseph B. O’Donnell, Canisius College, USA
Cheul Rhee, State University of New York at Buffalo, USA
G. Lawrence Sanders, State University of New York at Buffalo, USA
Chapter VII
Evolving a Strategy for Web-Based Shopping Systems...................................................................... 107
Changsu Kim, Yeungnam University, Korea
Robert D. Galliers, Bentley College, USA & London School of Economics, UK
Kyung Hoon Yang, University of Wisconsin-La Crosse, USA
Jaekyung Kim, University of Nebraska-Lincoln, USA
Chapter VIII
A Review of Single-Item Internet Auction Literature and a Model for Future Research.................... 124
Jeff Baker, Texas Tech University, USA
Jaeki Song, Texas Tech University, USA
Chapter IX
Changing IT Skills: The Impact of Sourcing Strategies on In-House Capability
Requirements....................................................................................................................................... 148
Christine V. Bullen, Stevens Institute of Technology, USA
Thomas Abraham, Kean University, USA
Kevin Gallagher, Northern Kentucky University, USA
Kate M. Kaiser, Marquette University, USA
Judith C. Simon, University of Memphis, USA
Chapter X
Understanding Outsourcing of Web-Based Applications in Organizations:
The Case of E-Insurance...................................................................................................................... 171
Teuta Cata, Northern Kentucky University, USA
Chapter XI
Business Process Outsourcing Modeling............................................................................................. 188
Lai Xu, SAP Research, Switzerland
Paul de Vrieze, SAP Research, Switzerland
Chapter XII
Innovative Technological Paradigms for Corporate Offshoring.......................................................... 207
Tapasya Patki, GGSIP University, New Delhi
A. B. Patki, Government of India, New Delhi
Chapter XIII
Factors Influencing the Extent of Deployment of Electronic Commerce
for Small- and Medium-Sized Enterprises........................................................................................... 229
Sandy Chong, Curtin University of Technology, Australia
Graham Pervan, Curtin University of Technology, Australia
Chapter XIV
Barriers to E-Commerce Adoption in SMEs: A Comparison of the Perception of Barriers
in a Developed and a Developing Country.......................................................................................... 256
Robert C. MacGregor, University of Wollongong, Australia
Mira Kartiwi, University of Wollongong, Australia
Chapter XV
A Parallel Methodology for Reduction of Coupling in Distributed
Business-to-Business E-Commerce Transactions................................................................................ 277
Anthony Mark Orme, Athens State University, USA
Letha H. Etzkorn, University of Alabama, USA
Chapter XVI
E-Business Triggers: Further Insights into Barriers and Facilitators amongst
Ghanaian Non-Traditional Exporters (NTEs)...................................................................................... 294
Olav Sorensen, Aalborg University, Denmark
Robert Hinson, Aalborg University, Denmark
Chapter XVII
Organizational Motivation and Interorganizational Systems Adoption Process:
Empirical Evaluation in the Australian Automotive Industry.............................................................. 311
Md. Mahbubur Rahim, Monash University, Australia
Graeme Shanks, Monash University, Australia
Robert Johnston, The University of Melbourne, Australia
Pradip Sarker, RMIT University, Australia
Chapter XVIII
Inter-Organizational E-Commerce in Healthcare Services: The Case of Global
Teleradiology....................................................................................................................................... 328
Arjun Kalyanpur, Teleradiology Solutions, India
Firoz Latif, Teleradiology Solutions, India
Sanjay Saini, Harvard Medical School, USA
Surendra Sarnikar, University of Arizona, USA
Index.................................................................................................................................................... 384
Detailed Table of Contents
Preface................................................................................................................................................xviii
Chapter I
Consumer-to-Consumer Electronic Commerce: An Emerging Stream of Research............................... 1
Kiku Jones, University of Tulsa, USA
Lori N. K. Leonard, University of Tulsa, USA
Chapter II
Online Consumers’ Switching Behavior: A Buyer-Seller Relationship Perspective............................. 18
Dahui Li, University of Minnesota Duluth, USA
Glenn J. Browne, Texas Tech University, USA
James C. Wetherbe, Texas Tech University, USA
Limited studies have investigated online consumer loyalty and retention from a relationship orientation
in electronic commerce research. It is important to understand the differences in relationship orientations
between people who have the propensity to stick to particular Web sites (“stayers”) and people who have
the propensity to switch to alternative Web sites (“switchers”). This study proposes a relationship-based
classification schema consisting of five dimensions: that is, commitment, trust, satisfaction, comparison
level of the alternatives, and nonretrievable investment. Data were collected from 299 college students
who had experience with e-commerce Web sites. Using discriminating analysis, we found that stayers
and switchers were significantly different along the five research dimensions. Satisfaction with the cur-
rent Web site was the most important discriminant factor, followed by trust, commitment, comparison
level of alternative Web sites, and nonretrievable investment in the current Web site. Implications of the
findings for researchers and practitioners are discussed.
Chapter III
From High Tech to High Touch: The Effects of Perceived Touch on
Online Customers’ Intention to Return.................................................................................................. 30
Hong-Mei Chen, University of Hawaii, USA
Qimei Chen, University of Hawaii, USA
Rick Kazman, University of Hawaii, USA
Companies are competing intensively using ‘high tech’ systems such as electronic customer relationship
management (eCRM or CRM) to interact with customers online over the Web, aiming to profit from
retaining customers through “high touch.” This chapter defines a new construct, Perceived Touch, and
provides theoretical underpinnings for the “high touch” assumption of eCRM systems. An empirical
study was conducted to examine both the cognitive and affective effects of Perceived Touch on online
customers’ intention to return after their initial visit in the eCRM context. While past studies of traditional
information systems paid more attention to cognition than affect, the affective effect is critical to examine
so that eCRM strategy and system design can be better informed. Our research results validate the ante-
cedent role of Perceived Touch to Perceived Ease of Use (of the technology acceptance model—TAM)
and further argue for the renewed importance of Attitude for user acceptance in the eCRM context.
This study illuminates the significance of the affective impact of Perceived Touch on online customers’
Behavioral Intention to Return through both the Affective Route and the Alternative Cognitive Route
where affective effect precedes cognitive effect. Practical implications of this study are discussed.
Chapter IV
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data...................... 51
Andreas Aresti, University of Patras, Greece
Penelope Markellou, University of Patras, Greece
Ioanna Mousourouli, University of Patras, Greece
Spiros Sirmakessis, Technological Education Institute of Messolonghi, Greece
Athanasios Tsakalidis, University of Patras, Greece
Recommendation systems are special personalization tools that help users to find interesting information and
services in complex online shops. Even though today’s e-commerce environments have drastically evolved
and now incorporate techniques from other domains and application areas such as Web mining, semantics,
artificial intelligence, user modeling, and profiling setting up a successful recommendation system is not
a trivial or straightforward task. This chapter argues that by monitoring, analyzing, and understanding the
behavior of customers, their demographics, opinions, preferences, and history, as well as taking into consid-
eration the specific e-shop ontology and by applying Web mining techniques, the effectiveness of produced
recommendations can be significantly improved. In this way, the e-shop may upgrade users’ interaction,
increase its usability, convert users to buyers, retain current customers, and establish long-term and loyal
one-to-one relationships.
Chapter V
Search Engine Optimization an Action Research Project: Initial Results
and Two Year Follow-Up....................................................................................................................... 69
Ross A. Malaga, Montclair State University, USA
A Web site that wants to increase its number of visitors can pay for search engine ads or attempt to im-
prove its natural search engine ranking. Nobody really knows, which, if either, of these methods provides
a positive return on investment. A search engine optimization (SEO) project was undertaken at a new
e-commerce site. The site’s search engine rankings and traffic were measured after each phase in the
project. The results indicate that SEO is an effective method for improving search engine rankings and
site traffic. In addition, the costs and benefits of the SEO project are compared with a pay-per-click (PPC)
search marketing campaign. The SEO project proved more cost effective than the PPC campaign.
Chapter VI
A Flow Theory Integrated Model of Web IS Success............................................................................ 86
Edward J. Garrity, Canisius College, USA
Yong Jin Kim, Sogang University, South Korea & State University of New York at
Binghamton, USA
Joseph B. O’Donnell, Canisius College, USA
Cheul Rhee, State University of New York at Buffalo, USA
G. Lawrence Sanders, State University of New York at Buffalo, USA
This chapter develops a new model of web IS success that takes into account both intrinsic and extrinsic
motivating factors. The proposed model begins with the Garrity and Sanders model of technologic ac-
ceptance and develops an extended nomological network of success factors that draws on motivation
and flow theory.
Chapter VII
Evolving a Strategy for Web-Based Shopping Systems...................................................................... 107
Changsu Kim, Yeungnam University, Korea
Robert D. Galliers, Bentley College, USA & London School of Economics, UK
Kyung Hoon Yang, University of Wisconsin-La Crosse, USA
Jaekyung Kim, University of Nebraska-Lincoln, USA
The world is witnessing a continuous expansion of electronic commerce into the global digital economy.
As an enabler of new businesses, Web-based shopping systems (WBSS) are at the heart of the major
issues surrounding electronic commerce growth. Their wide use has profoundly altered the ways in
which businesses and customers, and businesses and businesses interact on the basis of digital transac-
tions. Despite the importance of WBSS, the theoretical study of their strategies has been sparse. This
article offers a theoretical analysis of evolutionary processes in WBSS strategies. For that purpose, we
propose a classification model of WBSS. Based upon the model, WBSS are classified into four types:
(1) general-direct-sales (GDS); (2) general-intermediary-sales (GIS); (3) specialized-direct-sales (SDS);
and (4) specialized-intermediary-sales (SIS). On the basis of these four categories of WBSS, we analyze
the characteristics of WBSS and suggest five evolution strategies for WBSS, which have implications for
both theory and practice. Amazon.com’s strategic movements, such as product line expansion through
alliance and acquisition, provide an exemplary case of the evolution of WBSS strategy. We expect that
this article will serve as a guide for Internet businesses and as a catalyst for new research agendas rel-
evant to web-based shopping and electronic commerce.
Chapter VIII
A Review of Single-Item Internet Auction Literature and a Model for Future Research.................... 124
Jeff Baker, Texas Tech University, USA
Jaeki Song, Texas Tech University, USA
Internet auctions have received a considerable amount of attention from researchers. We review recent
empirical literature pertaining to single-item Internet auctions and observe that existing work has exam-
ined the roles of the auctioneer, bidder, and seller in Internet auctions. As this stream of research matures,
research will necessarily move from concept discovery and process explanation to theory deepening.
As a first step towards synthesis of findings in Internet auctions, we compile a comprehensive list of
the various factors that have been examined in empirical studies and note their general impact upon
auction outcome. Based upon this extant research, we propose a conceptual model of Internet auctions
as a framework for structuring future work into Internet auctions. We then note the existing economic,
psychological, sociological, and cognitive theoretical bases for work on Internet auctions. We conclude
by highlighting the potential for behavioral economics to bring unity to Internet auction research and by
calling researchers to engage in the work of forging a comprehensive theory of Internet auctions.
Chapter IX
Changing IT Skills: The Impact of Sourcing Strategies on In-House Capability
Requirements....................................................................................................................................... 148
Christine V. Bullen, Stevens Institute of Technology, USA
Thomas Abraham, Kean University, USA
Kevin Gallagher, Northern Kentucky University, USA
Kate M. Kaiser, Marquette University, USA
Judith C. Simon, University of Memphis, USA
The increasingly global sourcing of IT work and other socio-economic trends are prompting fundamen-
tal changes in the availability of IT skills needed in both client and vendor organizations. This article
analyzes the results of a survey conducted in 2005, in which IT executives were asked to describe the
skills they felt were critical to keep in house now and in 2008. The top ten current skills included three
in project management, five in business domain and three in technical. In 2008, the top five emerging
skills are almost all business domain while the top five exiting skills are all technical. Our findings
indicate that the critical skills to keep in-house are primarily client-facing skills, even when they are
technical. Respondents are moving away from traditional IT skills except when their business model
continues to value them. However, traditional technical skills are still important for all new hires while
project management skills are the most often cited for mid level hires. The projected number of full
time employees is expected to remain approximately the same by 2008 but there will be an increase in
sourcing to third party providers (3PP) and a shift from domestic to offshore 3PP staff. The patterns in
the data indicate that technical skills that are not client facing and can be done anywhere are the most
likely to be sourced. Findings indicate that IT professionals need to have a balance that demonstrates a
foundation in the traditional “hard skills” and experience with “softer” business-oriented skills.
Chapter X
Understanding Outsourcing of Web-Based Applications in Organizations:
The Case of E-Insurance...................................................................................................................... 171
Teuta Cata, Northern Kentucky University, USA
This article has investigated the insurance industry and provided insights into the relationships of or-
ganizational size and age with outsourcing and organizational structure. Also, this study investigated
the relationship between Web site age, outsourcing, and organizational structure. The main findings are
that firm size and maturity is related to the decision of Web-based development approach and the best
organizational structure to support online activity. The insights obtained by a new variable: Web site age
suggests that insurance companies are trying to develop their Web-based activities within their existing
organizational structures, rather than creating new e-commerce divisions.
Chapter XI
Business Process Outsourcing Modeling............................................................................................. 188
Lai Xu, SAP Research, Switzerland
Paul de Vrieze, SAP Research, Switzerland
Organizations in the new millennium face relentless pressure to perform better, faster and cheaper, while
maintaining high level of guaranteed results. To remain competitive, enterprises have to integrate their
business processes with those of their customers, suppliers and business partners. Increasing collabora-
tion is not only relevant within a global multi-national enterprise, but also considering the organization
and its relationship to and business processes with its business partners. While standards and technolo-
gies make it possible for business partners to exchange information, collaborate and carry out business
transaction in a pervasive Web environment, there is however very limited research activity on modeling
business process outsourcing underlying semantics. In this chapter, we demonstrate that an in-house
business process that has been gradually outsourced to third-parties and analyze how task delegations
cause commitments between multiple business parties. Finally we provide process semantics for model-
ing multi-party business process outsourcing.
Chapter XII
Innovative Technological Paradigms for Corporate Offshoring.......................................................... 207
Tapasya Patki, GGSIP University, New Delhi
A. B. Patki, Government of India, New Delhi
Internet technology has impelled us to develop faith in the modern practices of business, commerce,
and trade. Offshoring has been viewed as a global phenomenon on the economic frontier. While new
technologies need to be framed, stopgap arrangements in the form of transient solutions to upgrade the
current systems are also desired. Newer regulations and multi-jurisdictional compliance have profound
impacts on the growth of outsourcing projects. The development of new technological solutions must
challenge the myth that legislation and statutory practices are the only possible mechanisms to counter
the unscrupulous activities in the context of outsourcing. A change in the outlook toward such method-
ologies is essential to shed away the technological inertia and latency. This article opens up discussion
issues in the perspective of hardware and software requirements for efficient offshoring. The aim is
to achieve higher precision, protection, and throughput by applying core-computing techniques to the
existing practices of outsourcing.
Chapter XIII
Factors Influencing the Extent of Deployment of Electronic Commerce
for Small- and Medium-Sized Enterprises........................................................................................... 229
Sandy Chong, Curtin University of Technology, Australia
Graham Pervan, Curtin University of Technology, Australia
This study surveys the perceptions and experiences of Australian small- and medium-sized enterprises
(SMEs) in the implementation of Internet-based Electronic Commerce (EC) as seen from the perspective
of the extent of deployment. With a sample of 115 small businesses in Australia, this article uses regres-
sion modelling to explore and establish the factors that are related to the extent of deployment in EC. A
multiple regression analysis shows that seven factors: perceived relative advantage, trialability, observ-
ability, variety of information sources, communication amount, competitive pressure, and non-trading
institutional influences, significantly influence the extent of EC deployment by SMEs in Australia. The
managerial implications are discussed.
Chapter XIV
Barriers to E-Commerce Adoption in SMEs: A Comparison of the Perception of Barriers
in a Developed and a Developing Country.......................................................................................... 256
Robert C. MacGregor, University of Wollongong, Australia
Mira Kartiwi, University of Wollongong, Australia
It has long been known that small businesses have realised enhanced profits through the adoption of e-
commerce. However, a number of recent studies have suggested that it is the larger businesses that are
reaping the rewards of e-commerce rather than the smaller businesses. This slow growth of e-commerce
adoption in SMEs has been attributed to various adoption barriers that are faced by small business own-
ers/managers. These barriers have been well documented in numerous research studies. However, the
relationship between these barriers has not been fully examined, particularly in developing countries. Of
particular concern is the fact that the conclusions concerning the nature and role of barriers to e-commerce
adoption have simply been transferred from studies in developed economies to those in developing ones.
96 non-adopting SMEs in Indonesia are compared to 129 in Sweden to determine whether the percep-
tion of importance of barriers differs between the two locations. The data is also analysed to determine
whether the underlying factors of these barriers differs across the two locations.
Chapter XV
A Parallel Methodology for Reduction of Coupling in Distributed
Business-to-Business E-Commerce Transactions................................................................................ 277
Anthony Mark Orme, Athens State University, USA
Letha H. Etzkorn, University of Alabama, USA
Recently, new standards for business-to-business (B2B) e-commerce transactions, to reduce extended
record locking, relaxed standard database transaction properties. In this chapter, we provide a parallel
methodology employing a mobile/intelligent agent framework to alleviate extended record locking,
while adhering to standard database transaction properties. Our methodology provides a minimum 30%
reduction of record locking compared to new B2B standards.
Chapter XVI
E-Business Triggers: Further Insights into Barriers and Facilitators amongst
Ghanaian Non-Traditional Exporters (NTEs)...................................................................................... 294
Olav Sorensen, Aalborg University, Denmark
Robert Hinson, Aalborg University, Denmark
E-business is key to export development for developing economy firms. There are however key barriers
and facilitators to e-business adoption for small and large internationalizing firms the world over. This
chapter sets to find out, by means of the testing of key hypothesis, the main barriers and facilitators of
e-business adoption by Ghanaian export firms. We adopt a quantitative approach to this study and draw
our study sample from a directory of active non-traditional exporters (NTEs) in Ghana. We find that an
export firm’s international orientation, owner/management idiosyncrasies, e-sophistication of partners,
export firm’s characteristics (age, number of employees and location) and weak government regula-
tion have no significant influence on e-business adoption by Ghanaian NTE firms. On the other hand,
competitive pressure (as measured by competition from Ghanaian export firms and growth in size of
export operations) significantly facilitates e-business adoption. Internal resource constraints (measured
by technological and financial resources for e-business adoption and business culture) and environmental
bottlenecks (measured by lack of support from export sector regulators and export associations and high
internet access fees carged by ISPs) also reduce the likelihood of e-business adoption by Ghanaian NTE
firms. We find interestingly that Export facilitation (measured by pressures from GEPC and FAGE) and
digitalization (measured by perceived importance of e-business in digitalizing export operations and
improving export competitiveness) perceived to facilitate e-business adoption however exhibit significant
negative relationships with adoption. We proffer some explanations for this unusual finding and provide
general management implications for improving e-business practices amongst the various players in
Ghana’s non-traditional export sector.
Chapter XVII
Organizational Motivation and Interorganizational Systems Adoption Process:
Empirical Evaluation in the Australian Automotive Industry.............................................................. 311
Md. Mahbubur Rahim, Monash University, Australia
Graeme Shanks, Monash University, Australia
Robert Johnston, The University of Melbourne, Australia
Pradip Sarker, RMIT University, Australia
Interorganizational systems (IOS) play a critical role in today’s e-commerce environment. These systems
are introduced by different organizations following different adoption processes. Existing literature on
IOS adoption, however, does not explain the variations in the IOS adoption processes initiated by differ-
ent organizations. A theory of IOS adoption known as IOS Motivation Model (IMM) has recently been
developed by the authors that explains the differences in IOS adoption processes in terms of differences
in organizations’ adoption motivations for any given IOS project. This chapter reports an application
of the model in the Australian automotive industry. The findings provide support for the model and are
useful for IT managers.
Chapter XVIII
Inter-Organizational E-Commerce in Healthcare Services: The Case of Global
Teleradiology....................................................................................................................................... 328
Arjun Kalyanpur, Teleradiology Solutions, India
Firoz Latif, Teleradiology Solutions, India
Sanjay Saini, Harvard Medical School, USA
Surendra Sarnikar, University of Arizona, USA
Advances in healthcare information technology have enabled new models for electronic delivery of
healthcare services. In this article, we present the case of electronic delivery of radiological services and
describe the market-based and technological factors that have led to the development of Internet-based
service models for flexible delivery of radiological services. Specifically, we describe the technical,
regulatory, and security issues that affect teleradiology and propose a service delivery model for provid-
ing cost-effective and flexible radiological services.
Index.................................................................................................................................................... 384
xviii
Preface
Electronic commerce has seen extraordinary growth in the past decade, as businesses, educators, and
practitioners have begun to buy, sell, and trade on the Internet. In order to provide a comprehensive and
current assessment of the latest developments in the e-commerce revolution, a source containing the
latest research on the innumerable discoveries, advancements, and implementations of e-commerce has
emerged. Consumer Behavior, Organizational Development, and Electronic Commerce: Emerging Is-
sues for Advancing Modern Socioeconomies, part of the Advances in Electronic Commerce Book Series,
uncovers the rewarding prospects associated with the adaptation of e-commerce for business, academic,
and global organizations, while identifying the most effective strategies for employing them worldwide.
This book includes many valuable contributions from researchers discussing important social, manage-
rial and organizational issues of e-commerce applications and management in society.
Chapter I, Consumer-to-Consumer Electronic Commerce: An Emerging Stream of Research by Kiku
Jones and Lori N. K. Leonard, University of Tulsa (USA), presents a study which adapts constructs
from a B2C e-commerce study of satisfaction to determine what, if any, the differences are in the C2C
e-commerce arena. The constructs include elements of the technology acceptance model (TAM).
Participants in the study answered questions regarding these constructs in relation to their experiences
with C2C e-commerce. The findings indicate that TAM, TCA, and SERVQUAL all impact satisfaction
in C2C e-commerce. Reliability and responsiveness (areas of service quality) were found to influence
C2C e-commerce satisfaction, though they were not found to be an influence in the B2C study. These
findings warrant further research in the C2C e-commerce arena.
Chapter II, Online Consumers’Switching Behavior: A Buyer-Seller Relationship Perspective by Dahui
Li, University of Minnesota Duluth (USA), Glenn J. Browne, Texas Tech University (USA), and James
C. Wetherbe, Texas Tech University (USA) investigates online consumer loyalty and retention from a
relationship orientation, seeking to understand the differences in relationship orientations between people
who have the propensity to stick to particular web sites (“stayers”) and people who have the propensity
to switch to alternative web sites (“switchers”). This study proposes a relationship-based classification
schema consisting of five dimensions, i.e., commitment, trust, satisfaction, comparison level of the al-
ternatives, and non-retrievable investment. Using discriminant analysis, the authors found that stayers
and switchers were significantly different along the five research dimensions. Satisfaction with the cur-
rent website was the most important discriminant factor, followed by trust, commitment, comparison
level of alternative websites, and non-retrievable investment in the current website. Implications of the
findings for researchers and practitioners are discussed.
Chapter III, From High Tech to High Touch: The Effects of Perceived Touch on Online Customers’
Intention to Return by Hong-Mei Chen, Qimei Chen, and Rick Kazman, University of Hawaii (USA)
defines a new construct, Perceived Touch, and provides theoretical underpinnings for the “high touch”
assumption of eCRM systems. An empirical study was conducted to examine both the cognitive and
affective effects of Perceived Touch on online customers’ intention to return after their initial visit in the
eCRM context. While past studies of traditional information systems paid more attention to cognition
xix
than affect, the affective effect is critical to examine, so that eCRM strategy and system design can be
better informed. The current research results validate the antecedent role of Perceived Touch to Perceived
Ease of Use (of the Technology Acceptance Model—TAM) and further argue for the renewed importance
of Attitude for user acceptance in the eCRM context. This study illuminates the significance of the af-
fective impact of Perceived Touch on online customers’ Behavioral Intention to Return through both the
Affective Route and the Alternative Cognitive Route where affective effect precedes cognitive effect.
Chapter IV, A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
by Andreas Aresti, University of Patras (Greece), Penelope Markellou, University of Patras (Greece),
Ioanna Mousourouli, University of Patras (Greece), Spiros Sirmakessis, Technological Education Institute
of Messolonghi (Greece), Athanasios Tsakalidis, University of Patras (Greece) offers a perspective on
recommendation systems—special personalization tools that help users to find interesting information and
services in complex online shops. The authors contend that by monitoring, analyzing and understanding
the behavior of customers, their demographics, opinions, preferences and history, as well as taking into
consideration the specific e-shop ontology and by applying web mining techniques, the effectiveness of
produced recommendations can be significantly improved. In this way, the e-shop may upgrade users’
interaction, increase its usability, convert users to buyers, retain current customers, and establish long-
term and loyal one-to-one relationships.
Chapter V, Search Engine Optimization of an Action Research Project: Initial Results and Two Year
Follow-Up, by Ross A. Malaga, Montclair State University (USA) discusses the results of a search
engine optimization (SEO) project that was undertaken at a new e-commerce site. The site’s search
engine rankings and traffic were measured after each phase in the project. The results indicate that SEO
is an effective method for improving search engine rankings and site traffic. In addition, the costs and
benefits of the SEO project are compared with a pay-per-click (PPC) search marketing campaign. The
SEO project proved more cost effective than the PPC campaign.
Chapter VI, A Flow Theory-Driven Integrated Model of Web IS Success by Edward J. Garrity, Ca-
nisius College (USA), Yong Jin Kim, Sogang University (Korea), Joseph B. O’Donnell, Canisius College
(USA), and Cheul Rhee, State University of New York at Buffalo, (USA) offers a theoretical analysis
of evolutionary processes in Web-based shopping systems (WBSS) strategies. For that purpose, the
authors propose a classification model of WBSS. Based upon the model, WBSS are classified into four
types: (1) general-direct-sales (GDS); (2) general-intermediary-sales (GIS); (3) specialized-direct-sales
(SDS); and (4) specialized-intermediary-sales (SIS). On the basis of these four categories of WBSS,
the characteristics of WBSS are analyzed and five evolution strategies for WBSS are suggested, which
have implications for both theory and practice.
Chapter VII, Evolving a Strategy for Web-Based Shopping Systems by Changsu Kim, Yeungnam
University (Korea), Robert D. Galliers, Bentley College (USA), Kyung Hoon Yang, University of
Wisconsin-La Crosse (USA), and Jaekyung Kim, University of Nebraska-Lincoln (USA) develops a
new model of web IS success that takes into account both intrinsic and extrinsic motivating factors. The
proposed model begins with the Garrity and Sanders model of technologic acceptance and develops an
extended nomological network of success factors that draws on motivation and flow theory.
Chapter VIII, A Review of Single-Item Internet Auction Literature and a Model for Future Research
by Jeff Baker and Jaeki Song, Texas Tech University (USA) reviews recent empirical literature pertaining
to single-item Internet auctions and observes that existing work has examined the roles of the auctioneer,
bidder, and seller in Internet auctions. As this stream of research matures, research will necessarily move
from concept discovery and process explanation to theory deepening. As a first step towards synthesis
of findings in Internet auctions, the authors compile a comprehensive list of the various factors that have
been examined in empirical studies and note their general impact upon auction outcome. Based upon
xx
this extant research, a conceptual model of Internet auctions as a framework for structuring future work
into Internet auctions is proposed. The existing economic, psychological, sociological, and cognitive
theoretical bases for work on Internet auctions are noted.
Chapter IX, Changing IT Skills: The Impact of Sourcing Strategies on In-House Capability Re-
quirements by Christine V. Bullen, Stevens Institute of Technology (USA), Thomas Abraham, Kean
University (USA),Kevin Gallagher, Northern Kentucky University (USA), Kate M. Kaiser, Marquette
University (USA), and Judith C. Simon, University of Memphis (USA) analyzes the results of a survey
conducted in 2005, in which IT executives were asked to describe the skills they felt were critical to
keep in-house now and in 2008. The top ten current skills included three in project management, five
in business domain and three in technical. In 2008, the top five emerging skills are almost all business
domain, while the top five exiting skills are all technical. Findings indicate that the critical skills to
keep in-house are primarily client-facing skills, even when they are technical. Respondents are moving
away from traditional IT skills except when their business model continues to value them. However,
traditional technical skills are still important for all new hires while project management skills are the
most often cited for mid level hires. The projected number of full time employees is expected to remain
approximately the same by 2008 but there will be an increase in sourcing to third party providers (3PP)
and a shift from domestic to offshore 3PP staff. The patterns in the data indicate that technical skills that
are not client facing and can be done anywhere are the most likely to be sourced. Findings indicate that
IT professionals need to have a balance that demonstrates a foundation in the traditional “hard skills”
and experience with “softer” business-oriented skills.
Chapter X, Understanding Outsourcing of Web-Based Applications in Organizations: The Case of
e-Insurance by Teuta Cata, Northern Kentucky University (USA) investigates the insurance industry
and provides insights into the relationships of organizational size and age with outsourcing and organi-
zational structure. Also, this study contained within this chapter investigates the relationship between
web site age, outsourcing, and organizational structure. The main findings are that firm size and maturity
are related to the decision of Web-based development approach and the best organizational structure to
support online activity. The insights obtained by a new variable—Web site Age—suggests that insur-
ance companies are trying to develop their Web-based activities within their existing organizational
structures, rather than creating new e-commerce divisions.
Chapter XI, Business Process Outsourcing Modeling by Lai Xu and Paul de Vrieze, SAP Research,
(Switzerland) demonstrates an in-house business process that has been gradually outsourced to third-
parties and analyzes how task delegations cause commitments between multiple business parties. Since
organizations in the new millennium face relentless pressure to perform better, faster and cheaper, while
maintaining a high level of guaranteed results, enterprises have to integrate their business processes
with those of their customers, suppliers and business partners. While standards and technologies make
it possible for business partners to exchange information, collaborate and carry out business transaction
in a pervasive Web environment, there is very limited research activity on modeling business process
outsourcing underlying semantics.
Chapter XII, Innovative Technological Paradigms for Corporate Offshoring by Tapasya Patki, GG-
SIP University (New Delhi) and A. B. Patki, Government of India, (New Delhi) presents a discussion
of hardware and software requirements for efficient offshoring. The aim is to achieve higher precision,
protection and throughput by applying core-computing techniques to the existing practices of outsourc-
ing. Internet technology has impelled us to develop faith in the modern practices of business, commerce,
and trade. Offshoring has been viewed as a global phenomenon on the economic frontier. While new
technologies need to be framed, stopgap arrangements in the form of transient solutions to upgrade the
current systems are also desired. Newer regulations and multi-jurisdictional compliance have profound
xxi
impact on the growth of outsourcing projects. The development of new technological solutions must
challenge the myth that legislation and statutory practices are the only possible mechanisms to counter
the unscrupulous activities in the context of outsourcing.
Chapter XIII, Factors In.uencing the Extent of Deployment of Electronic Commerce for Small- and
Medium-sized Enterprises by Sandy Chong and Graham Pervan, Curtin University of Technology
(Australia) surveys the perceptions and experiences of Australian small- and medium-sized enterprises
(SMEs) in the implementation of Internet-based electronic commerce (EC) as seen from the perspec-
tive of the extent of deployment. With a sample of 115 small businesses in Australia, this chapter uses
regression modelling to explore and establish the factors that are related to the extent of deployment in
EC. A multiple regression analysis shows that seven factors: perceived relative advantage, trialability,
observability, variety of information sources, communication amount, competitive pressure, and non-
trading institutional influences, significantly influence the extent of EC deployment by SMEs in Australia.
The managerial implications are discussed.
Chapter XIV, Barriers to E-Commerce Adoption in SMEs: A Comparison of the Perception of Bar-
riers in a Developed and a Developing Country by Robert C. MacGregor and Mira Kartiwi, University
of Wollongong (Australia) examines the various adoption barriers that are faced by small business own-
ers/managers. These barriers have been well documented in numerous research studies. However, the
relationship between these barriers has not been fully examined, particularly in developing countries. Of
particular concern is the fact that the conclusions concerning the nature and role of barriers to e-commerce
adoption have simply been transferred from studies in developed economies to those in developing ones.
In this chapter, 96 non-adopting SMEs in Indonesia are compared to 129 in Sweden to determine whether
the perception of importance of barriers differs between the two locations. The data is also analysed to
determine whether the underlying factors of these barriers differs across the two locations.
Chapter XV, A Parallel Methodology for Reduction of Coupling in Distributed Business-to-Business
E-Commerce Transactions by Anthony Mark Orme, Athens State University (USA) and Letha H. Etzkorn,
University of Alabama (USA) reflects upon the recent, new standards for Business-to-Business (B2B)
e-commerce transactions intended to reduce extended record locking that have relaxed standard database
transaction properties. This chapter provides a parallel methodology employing a mobile/intelligent
agent framework to alleviate extended record locking, while adhering to standard database transaction
properties. The authors’ methodology provides a minimum thirty percent reduction of record locking
compared to new B2B standards.
Chapter XVI, E-Business Triggers: Further Insights into Barriers and Facilitators Amongst Gha-
naian Non-traditional Exporters (NTEs) by Olav Sorensen and Robert Hinson, Aalborg University
(Denmark) assesses the main barriers and facilitators of e-business adoption by Ghanaian export firms.
The authors adopt a quantitative approach to this study and draw their study sample from a directory
of active non-traditional exporters (NTEs) in Ghana. They find that an export firm’s international ori-
entation, owner/management idiosyncrasies, e-sophistication of partners, export firm’s characteristics
(age, number of employees and location) and weak government regulation have no significant influence
on e-business adoption by Ghanaian NTE firms. On the other hand, competitive pressure significantly
facilitates e-business adoption. Internal resource constraints and environmental bottlenecks also reduce
the likelihood of e-business adoption by Ghanaian NTE firms. Interestingly, the authors find that Export
facilitation and digitalization, perceived to facilitate e-business adoption, instead exhibit significant
negative relationships with adoption. Explanations for this unusual finding are offered and general
management implications for improving e-business practices amongst the various players in Ghana’s
non-traditional export sector are provided.
xxii
Chapter I
Consumer-to-Consumer
Electronic Commerce:
An Emerging Stream of Research
Kiku Jones
University of Tulsa, USA
Lori N. K. Leonard
University of Tulsa, USA
Abstr act
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Consumer-to-Consumer Electronic Commerce
INTR ODUCT ION tion was completed within the web-based forum.
Similar to how third-party consumer listing ser-
Electronic commerce (e-commerce) is a con- vices (such as Half.com) or online auctions (such
tinuously evolving phenomenon. While media as eBay) facilitate the transaction between sellers
attention of e-commerce has declined in focus, and buyers, so did the web-based forum in this
academic research of e-commerce appears to anecdote. The difference comes in the intent of
have increased. This can be seen in the amount the forum versus the third-party consumer listing
of e-commerce specific journals as well as the service and online auction. However, regardless
number of e-commerce related articles published of the intent of the venue, C2C e-commerce is
in the information systems’ main stream journals indeed being conducted in many areas in addi-
(Wareham et al., 2005). tion to online auctions. And as such, should be
In a meta-analysis of the critical themes of e- included in the stream of research surrounding
commerce research, Wareham, Zheng, & Straub C2C e-commerce.
(2005) performed a meta-analysis of the critical In a quick search for C2C e-commerce, only a
themes of e-commerce research. The analysis few articles could be found which did not solely
included a review of abstracts from “mainstream focus on online auctions and reputation systems.
IS journals”, both academic and professional (a For example, Lin, Li, & Huang (2007), Lin, Li,
full list of the journals used in the analysis can Janamanchi, & Huang (2006), Livingston (2005),
be found in the referenced article), between the and Melnik & Alm (2002) studied C2C online
years of 1997 and 2003 (65% of which fell be- auctions and reputation systems, and Yamamoto,
tween the years 2001 and 2003). At a top level, Ishida, & Ohta (2004) studied C2C reputation
there are four main areas: business-to-business management systems. Strader & Ramaswami
(B2B), business-to-consumer (B2C), strategy, (2002) examined consumer trust in C2C online
and technology adoption. They further refined markets, Jones & Leonard (2008) studied trust in
these broad areas into 17 different themes found C2C e-commerce, and Armstrong & Hagel (1996)
in e-commerce research. Of the 17, consumer-to- and Orman (2006) described the value of online
consumer (C2C) research was not listed. Some communities. Even with the online auction and
may argue that “Auctions” (one of the 17 themes) reputation system articles, Wareham, Zheng, &
covers the full realm of C2C e-commerce. How- Straub (2005) found that only 3% of the articles
ever, C2C e-commerce can encompass much more they reviewed dealt with this area. This lack of
than just auctions. research leads one to wonder whether or not C2C
C2C e-commerce can also take place in online e-commerce is a different enough research area to
communities, chat rooms, third-party consumer have its own stream of research. Anecdotal evi-
listing services, and web-based discussion fo- dence suggests that there are enough differences
rums. For example, one consumer recalled a to build a new area of research. This research is
recent C2C e-commerce transaction conducted an exploratory study to empirically determine
in a web-based discussion forum. He indicated if there are indeed differences found in C2C e-
to the other participants that he had a car part commerce and B2C e-commerce research which
to sell. Another participant indicated a need for indicate a need for C2C e-commerce to have its
that part. They exchanged address information own research stream. To do this, a previous study
through the forum. Once the seller received the by Devaraj, Fan & Kohli (2002) that focused on
check from the buyer, he sent the part to him. the satisfaction of B2C e-commerce over other
While the payment and product were sent via commerce methods is modified to reflect C2C
postal mail, all interaction regarding the transac- e-commerce, utilizing three well-known frame-
Consumer-to-Consumer Electronic Commerce
Consumer-to-Consumer Electronic Commerce
ing a particular system would be free of effort” and Straub (2000) state that PEOU is related to
(Davis, 1989 p. 320). the assessment of intrinsic characteristics of IT
Devaraj, Fan, & Kohli (2002) solicited potential (e.g., “ease of use, ease of learning, flexibility, and
respondents from online shoppers, undergraduate clarity”). Their study also utilized a free-simula-
and graduate students. Of this mix, 171 agreed tion experiment method and MBA students. The
to participate in the study. Participants were procedure was the same as the Gefen, Karahanna,
asked to purchase a product through a traditional & Straub (2003) study. They found that PEOU did
brick-and-mortar vendor and then complete an not affect a consumer’s intention to use a website
online survey regarding their experience with the for purchasing; however, PU did have a significant
channel (not the vendor). They also purchased the affect on intention. They found for inquiry based
same or similar product from an online vendor tasks, however, that both PEOU and PU were
and answered an online survey regarding their significant predictors. These studies support the
experience with that channel. Only the responses original conclusion that extrinsic motivation is
regarding the online channel were analyzed, how- more important than intrinsic motivation.
ever the respondents were unaware of this. The Pavlou (2003) conducted an exploratory study
study results indicated that both PU and PEOU and then a confirmatory study regarding the
were significantly related to satisfaction with the TAM components and an individual’s intention
e-commerce channel. to transact on a web site. The exploratory study
Gefen, Karahanna, & Straub (2003) performed utilized 103 students in experimental scenarios.
a free-simulation experiment with MBA and Three possible scenarios were used: using Ama-
senior undergraduate students. The students zon.com (36 students), selecting a web retailer
logged into the Internet and searched for the of their choice (41 students), and discussing web
course’s textbook on www.amazon.com. The retailers in general (25 students). Regardless of
students went through the process of buying their the scenario, the students were asked to search
textbook without the final step of completing the an item of their choice on the web retailer’s site
transaction. The students then were given an and discover the process of purchasing that item
instrument to fill out regarding their experience. without actually purchasing the item. The sub-
The researchers found that the PU of a given jects were then asked to complete a questionnaire
website played an important role in determining regarding their experience. This study found that
a repeat customer’s intention to purchase on that PU was a significant predictor of intention to trans-
website. Conversely, it was not significant for act; while PEOU was not found to be a significant
potential customers. This supports prior research predictor. The confirmatory study utilized 155
findings that indicate social factors initially affect on-line consumers. Invitation e-mails were sent to
intention to use. consumers with a URL link to an on-line survey
Davis, Bagozzi, & Warshaw (1992) explain instrument. The confirmatory study found that
that intrinsic motivation refers to performing an both PU and PEOU were significant predictors of
activity for no other reason than the process of a consumer’s intention to transact. Pavlou felt the
performing that activity (e.g., enjoyment of per- difference in finding was due to the real situation
forming the activity). While extrinsic motivation vs. the experimental scenario.
refers to performing an activity in order to reach Additionally, Chen, Gillenson, & Sherrell
a goal separate from the activity itself (e.g., PU). (2002) used TAM and the innovation diffusion
Davis, Bargozzi, & Warshaw (1992) indicate that theory (IDT) to examine consumer behavior
extrinsic motivation will have a stronger impact in a virtual store context. Surveying online
on IT adoption than intrinsic motivation. Gefen consumers, they found PU and PEOU to deter-
Consumer-to-Consumer Electronic Commerce
mine consumer attitudes towards virtual stores. pede their ability to act rationally. In uncertain
Vijayasarathy (2004) used TAM, among other environments, these constraints and limitations
constructs, to examine consumer intention to can become problematic (Rindfleisch & Heide,
use online shopping. Using a mail survey, 281 1997). Opportunism refers to an individual’s quest
consumers were assessed. Both PU and PEOU to serve his/her own self-interests. In uncertain
were found to predict attitude towards online environments, opportunism can increase transac-
shopping. Based on the theory of reasoned ac- tion costs in the form of incomplete or inaccurate
tion (TRA) and TAM, Shih (2004) developed an information (Devaraj et al., 2002). For example,
extended model to predict consumer acceptance the seller of a transaction may indicate to the
of electronic shopping. Data was collected from buyer that the product in question is in working
212 participants using questionnaires. The condition. However, the seller neglects to tell the
participants were employees of eight small and consumer that it has been repaired several times.
medium-sized organizations in Taiwan. He found The reason for the seller’s incomplete account of
PU and PEOU to affect an individual’s electronic the product may be explained by opportunism.
shopping attitude. Grandon & Pearson (2004) Asset specificity refers to any additional invest-
examined small and medium-sized organizations ments that have been made to support a relation-
in the U.S. to determine factors affecting the adop- ship. These investments can make it difficult
tion of e-commerce. Using an electronic survey, for the buyer and/or seller to switch. However,
they found PU and PEOU to be determinants of opportunism may cause the buyer/seller to exploit
e-commerce adoption. Finally, McCloskey (2006) the relationship in his/her favor (Rindfleisch &
studied the attitudes and e-commerce participation Heide, 1997).
of older Americans. TAM was used in the study Devaraj, Fan, & Kohli (2002) (study described
to examine the impact of their attitudes (of PEOU, in the TAM section) found that both uncertainty
PU, and trust) on e-commerce usage. She found and asset specificity are significantly related to
PU and trust to have a direct effect on usage. time. This indicates that the online channels pro-
These studies were based on B2C e-commerce. vided good information regarding the product and
There are no studies utilizing the TAM constructs price. In addition, the wider choice among online
in a C2C e-commerce setting. It is important to channels provided a positive contribution to time
determine if the TAM findings are consistent in savings that, in turn, resulted in a significantly
this environment. positive relationship between time and satisfac-
tion with the e-commerce channel. Devaraj, Fan,
T ransaction C ost Analysis (TC A) & Kohli (2006) also found uncertainty and asset
specificity of an electronic marketplace to be as-
TCA is a framework belonging to the New Insti- sociated with time responsiveness, personaliza-
tutional Economics paradigm. The framework is tion, reliability, security, and design.
based on two main assumptions of human behavior Liang & Huang (1998) did an empirical study
(i.e., bounded rationality and opportunism) and the utilizing 86 Internet users to determine their pur-
interplay of the two key dimensions of transactions chasing intentions of different products in a B2C
(i.e., asset specificity and uncertainty) (Rindfleisch e-commerce environment. They found support
& Heide, 1997). Bounded rationality refers to for their hypothesis that the higher the perceived
the constraints and limitations of individuals on transaction costs (determined by uncertainty and
their cognitive capabilities and rationality. Simon asset specificity), the less likely a product would
(1977) states that individuals’ limited information be purchased electronically.
processing and communication abilities may im-
Consumer-to-Consumer Electronic Commerce
Once again, TCA has only been tested in a B2C agreed with previous research that the indicated
e-commerce environment. It needs to be tested problems are not substantial enough to lose the
in a C2C e-commerce environment to determine capabilities found within the measure.
if the B2C findings hold true. Kettinger & Lee (2005) tested a new set of
scales for SERVQUAL. They posed two levels
S ervice Quality (S ER VQUAL) of IS service quality – desired service and ad-
equate service – and defined the two levels in a
SERVQUAL was developed to assess general ser- zone of tolerance (ZOT). The ZOT represented
vice quality. It measures the difference between the satisfactory range of IS service performance.
the individual’s expected level of service and Their research findings indicated validity for a
the perceived level of service. This difference four-dimension IS ZOT SERVQUAL instrument
is referred to as the gap score. A gap score is for desired, adequate, and perceived service qual-
calculated on five different dimensions: tangibles ity levels. Additionally, Wang & Tang (2003)
(appearance of facilities or Web site; equipment; proposed EC-SERVQUAL (e-commerce service
and personnel), reliability (ability to perform the quality) to measure customer perceived service
promised service dependably and accurately), quality of websites that market digital products/
responsiveness (willingness to help customers services, and Bauer, Falk, & Hammerschmidt
and provide prompt service), assurance (knowl- (2006) proposed eTransQual, a transaction pro-
edge and courtesy of employees and their ability cess-based scale for measuring service quality.
to inspire trust and confidence), and empathy Devaraj, Fan, & Kohli (2002) (study described
(providing caring and individualized attention to in the TAM section) found that only the empathy
customers) (Jiang, Klein, & Carr, 2002). and assurance components of SERVQUAL were
The use of SERVQUAL in the IS field has significantly related to the satisfaction of the
been the topic of debate (Alzola & Robaina, 2005; e-commerce channel. Devaraj, Fan, & Kohli
Jiang et al., 2002; Kettinger & Lee, 1997; Van (2002) offer a possible explanation for this find-
Dyke, Kappelman, & Prybutok, 1997; Watson, ing. It could be that the respondents weren’t
Pitt, & Kavan, 1998). Van Dyke, Kappelman, & presented with an opportunity to examine the
Prybutok (1997) found there were both conceptual responsiveness and reliability components. These
and empirical obscurities. Conceptual obscurities components tend to be established over time and
included using the gap score as the operationalized multiple transactions which was not represented
perceived service quality, using the ambiguous in the study.
expectations construct, and using a single measure Some additional research has been done
of service quality across industries. Empirical in the area of service quality and B2C e-com-
obscurities included reduced reliability, poor merce (Cao, Zhang, & Seydel, 2005; Gounaris
convergent validity, and unstable dimensionality. & Dimitriadis, 2003; Lee & Lin, 2005). Varying
Other researchers surveyed various populations results indicate that future research is needed to
of users to address pieces of these problems such determine additional mediating factors that may
as the reduced reliability (Pitt, Watson, & Kavan, be present. It is also easily seen that the issue of
1997) and dimensionality (Kettinger & Lee, 1997). how to measure service quality in IS continues
Jiang, Klein, & Carr (2002) used data from a to- to be debated. Since this research is based on
tal of 168 matched sets (IS professionals and IS the Devaraj, Fan, & Kohli (2002) study, the use
users) to determine whether or not the problems of a single survey that operationalizes perceived
indicated in the SERVQUAL method were big service quality through reliability, responsiveness,
enough to discredit its use in IS. Their research empathy, and assurance is used. SERVQUAL has
Consumer-to-Consumer Electronic Commerce
not been tested in the C2C e-commerce environ- Kohli (2002) used to collect data regarding the
ment; therefore, it needs to be tested to determine TAM, TCA, and SERVQUAL components (see
where, if any, the differences lie between the two individual statements listed in Tables 1, 2, 3
areas of e-commerce. and 4). Participants were asked to indicate on a
Figure 1 provides the research model of this seven-point Likert scale the degree to which they
chapter, which incorporates the three aforemen- agreed with the C2C e-commerce statements.
tioned constructs. In this model, TAM, TCA, and The participants were informed that the survey
SERVQUAL are theorized to impact a consumer’s was completely voluntary and their responses
satisfaction with C2C e-commerce. would be kept anonymous and only reported in
the aggregate. They were asked to answer the
questions regarding their experiences with C2C
MET HODOLOGY e-commerce. In addition to these questions,
participants were asked to fill out a brief demo-
Undergraduate students located in a Southwestern graphics survey. Out of a total of 104 potential
university in the United States of America were respondents, 83 chose to participate (80%).
used for this study. They were solicited based on A majority of the respondents (70%) had
their enrollment in an introduction to management participated in C2C e-commerce (such as online
information systems course. Drennan, Mort, & auctions, email groups, web-based discussion
Previte (2006) argue that University students are forums, and/or chat rooms) as either the buyer or
“representative of a dominant cohort of online seller. However, seventy-two percent had never
users” (p.6). College students represent the most been the seller of a C2C e-commerce transac-
connected (online) segment of the U.S. population, tion. A majority of the respondents (63%) have
shopping online and spending online. Therefore, purchased an item using this channel more than
they are experienced and frequent users of the once; sixty-nine percent of them have done so
Internet. in the past 12 months. Online auctions were
Participants were given a modified version the method of choice for 76% of those who have
of the instruments created by Devaraj, Fan, & participated in C2C e-commerce. The respon-
Consumer-to-Consumer Electronic Commerce
dents’ ages ranged from 19 to 41 with the largest lead to common method variance. Therefore,
majority (59%) between the ages of 20 and 30. Harman’s single-factor test was used in this study
A survey of American adults by Pew Internet & to test for this bias (Harman, 1967). This test
American Life Project (2006) found that 67% assumes that if a high level of common method
of Internet users surveyed had made a purchase variance is present, then when all of the variables
online (either B2C or C2C), and that the largest are entered together, all will load on one factor
age group of Internet users is between the ages of accounting for all of the variance or one factor
18 and 29. They also found a larger percentage will account for a majority of the variance. In this
of Internet users to have some college education study, an exploratory factor analysis (EFA) was
versus only a high school education. Therefore, performed and seven factors with an Eigenvalue
our sample’s demographics are consistent with greater than one emerged. The variance explained
the demographics of Internet users. ranged from 3% to 44% of the total variance. This
result provides evidence that common method
variance should not be a concern in this study.
Dat a Analys is and Re s ults The multi-item constructs used in the model
were tested for construct validity and reliability.
Validity and R eliability of Measures Factors were extracted using principal component
analysis (PCA). Each of the TAM constructs’
Self-reported data on two or more variables col- items loaded on one factor. The perceived ease
lected from the same source has the potential to of use construct yielded a Cronbach’s alpha score
Eigenvalue 2.43
Variance Explained 60.66%
Consumer-to-Consumer Electronic Commerce
of .77 and the percent of variation explained was explained was 67.18%, 57.15%, and 69.09%, re-
60.66%. The usefulness construct generated a spectively. Table 2 shows the results of the factor
Cronbach’s alpha score of .81 with 64.78% of the analysis for the TCA constructs. Variables for
variation explained. Table 1 shows the results each of the TCA constructs (UNC, ASSE, and
of the factor analysis for the TAM constructs. TIME) were calculated for each subject as the
Variables for each of the TAM constructs (PEOU average of those items.
and PU) were calculated for each subject as the The SERVQUAL construct items had similar
average of those items. results to the TAM and TCA constructs. The
The TCA construct items also loaded on one Cronbach’s alpha scores for these constructs were
factor for each construct. The Cronbach’s alpha found to be .83, .88, .60, and .84 for reliability,
scores for these constructs were calculated as responsiveness, empathy, and assurance, respec-
.83, .74, and .75 for uncertainty, asset specificity, tively. The percent of variation explained was
and time, respectively. The percent of variation 66.01%, 81.14%, 56.27%, and 75.95%, respectively.
It was easy for me to get/provide relevant quantitative (price, taxes, etc.) information using C2C e-commerce. .83
I believe that it was possible for me to evaluate the various alternative products using C2C e-commerce. .72
The C2C e-commerce environment provided adequate information. .90
The C2C e-commerce environment provided sufficient information about the buyer/seller. .82
Cronbach’s alpha .83
Eigenvalue 2.69
Variance Explained 67.18%
TIME (TIME)
C2C e-commerce helps me accomplish tasks more quickly. .69
I did not have to spend too much time to complete the transaction using C2C e-commerce. .86
I did not have to spend too much effort to complete the transaction using C2C e-commerce. .93
Cronbach’s alpha .75
Eigenvalue 2.07
Variance Explained 69.09%
Consumer-to-Consumer Electronic Commerce
I trust the C2C e-commerce seller/buyer to complete the transaction on time. .85
RESPONSIVENESS (RESP)
I believe that the C2C e-commerce seller/buyer is responsive to my needs. .90
In the case of any problem, I think the C2C e-commerce seller/buyer will respond promptly. .90
The C2C e-commerce seller/buyer will address any concerns that I have. .91
Cronbach’s alpha .88
Eigenvalue 2.43
Variance Explained 81.14%
EMPATHY (EMP)
The C2C e-commerce seller/buyer remembers or recognizes me as a repeat customer/seller
.78
(after the first time).
I think C2C e-commerce can address the specific needs of each buyer/seller. .81
I was satisfied with the payment options (e.g., money order, different credit cards) available
.65
with C2C e-commerce.
Cronbach’s alpha .60
Eigenvalue 1.69
Variance Explained 56.27%
ASSURANCE (ASSU)
I felt confident about the C2C e-commerce transaction decision. .89
I feel safe in my transactions with the C2C e-commerce environment. .84
The C2C e-commerce seller/buyer had answers to all my questions regarding the transaction. .88
Cronbach’s alpha .84
Eigenvalue 2.28
Variance Explained 75.95%
10
Consumer-to-Consumer Electronic Commerce
Table 3 shows the results of the factor analysis for Model T esting
the SERVQUAL constructs. Variables for each of
the SERVQUAL constructs (REL, RESP, EMP, Regression analysis was performed to test the
and ASSU) were calculated for each subject as relationships between the construct variables
the average of those items. and satisfaction. Residual plots were reviewed
The multi-item construct for satisfaction was for non-random scatter about the zero line. No
also tested. A Cronbach’s alpha score was found heteroscedasticity was found in the data. Variance
to be .85 with 77.64% of the variation explained. inflation factors (VIF) were examined for each
Table 4 shows the results of the factor analysis of the independent variables in the model. All
for the satisfaction construct. A variable for the values were small (below 10) suggesting there is
satisfaction construct (SAT) was calculated as the no problem with multicollinearity in the data.
average of the items. Each of the constructs in Table 5 shows the regression results using
the model exceeded the recommended Cronbach’s the TAM variables. Both perceived ease of use
alpha threshold score of .50 (Nunnally, 1967), and usefulness are positively significant at the
but one did not exceed the mostly commonly .001 level. This indicates respondents are more
used threshold in the literature, .70 (Nunnally & satisfied with C2C e-commerce when they find
Bernstein, 1994). However, it should be noted the process easy to complete and effective.
that lower (.60) and higher (.80) thresholds are Table 6 shows the regression results using the
used in the literature (Santos, 1999). TCA variables. Uncertainty is shown to be posi-
Independent Parameter
Standard Error t p VIF
Variable Estimate
11
Consumer-to-Consumer Electronic Commerce
tive and significantly associated with satisfaction seller’s specific needs (including possible payment
at the .001 level. Both asset specificity and time options), and the buyer/seller provides assurances
are positively significant at the .05 level. This that the online purchase is correct.
indicates that a respondent is satisfied with C2C
e-commerce when information is readily avail- Discussion
able, there are a variety of choices (both with
places to buy/sell and products to buy/sell), and The study findings indicate that many individuals
the process can be done quickly. are choosing to participate in C2C e-commerce,
Table 7 shows the regression results using the both as buyers and sellers. With the increase in
SERVQUAL variables. Reliability, responsive- this type of e-commerce, a look into the factors
ness, and empathy are all positively significant at affecting this area is appropriate. The findings
the .01 level. Assurance was shown to be positively confirm anecdotal evidence that C2C e-commerce
significant at the .001 level. This indicates that is different from B2C e-commerce and deserves
respondents are more satisfied with C2C e-com- its own research theme. Within this new research
merce when the process is reliable (including re- theme, models specifically dealing with the C2C
ceiving the correct products/payment in the agreed e-commerce area need to be developed and tested.
upon timeframe), the buyer/seller is responsive to The satisfaction model of C2C e-commerce pre-
the needs, questions, and concerns of the buyer/ sented and tested here can be a stepping stone for
seller, the buyer/seller recognizes each buyer’s/ further research.
12
Consumer-to-Consumer Electronic Commerce
All model variables from the three constructs, LIMIT AT IONS AND IMPLIC AT IONS
TAM, TCA, and SERVQUAL, were found to be FOR FUT UR E R ES EARC H
significant influencers on satisfaction. More
specifically, the ease of use and usefulness of the This research provides evidence that differences
C2C online environment (TAM); the amount of do exist in the C2C and B2C online realms.
information provided to eliminate uncertainty, Therefore, further investigation is warranted in
the additional avenues provided for buying and the broad area of C2C e-commerce, which has
selling (asset specificity), and the time saved when been given little attention up to this point. While
accomplishing buying/selling (TCA); and the buy- there are many articles on online auctions, the
ers/sellers being reliable, responsive, assuring and other methods for conducting C2C e-commerce,
empathetic (SERVQUAL) were found to predict for example, web based discussion forums, have
satisfaction. It appears that C2C e-commerce yet to make a dent in the potential research op-
relationships can be quite complex, with many portunities.
factors affecting a consumer’s satisfaction with One limitation of this study is that it gathered
this type of e-commerce. data regarding all forms of C2C e-commerce, but
When comparing these findings to those com- it did not test for differences between the methods.
pleted by Devaraj Fan, & Kohli (2002) for B2C e- Differences should be investigated between C2C
commerce, there are distinct differences. Devaraj, online auctions and the other forms of C2C e-com-
Fan, & Kohli (2002) found the same variables merce such as web forums and chat rooms.
to be significant in the B2C online arena except Another limitation of the study is that me-
reliability and responsiveness (two components diating factors and interactions between model
of service quality). With C2C e-commerce, this constructs were not investigated. Researchers
study found an individual’s satisfaction to depend may want to consider adding mediating factors
on all four aspects of service quality. The reli- to the present research model, as well as any in-
ability the consumer felt toward another consumer teractions between the constructs. For example,
predicted his/her satisfaction. The difference a person’s age or gender could mediate the factors
found in C2C e-commerce vs. B2C e-commerce provided in this model.
may have to do with the feeling of some guarantee This study provided evidence of differences
of the transaction when a business is involved. between C2C and B2C based on variables used in
This feeling may not be present when dealing a B2C study. There may be additional variables
directly with other consumers. Therefore, one that are worth investigating. For example, trust
would expect reliability to influence satisfaction in C2C e-commerce may be an avenue worth
in C2C e-commerce but not in B2C e-commerce. pursuing. The uncertainty found in C2C e-com-
The responsiveness of one consumer to another merce logically seems to be higher than in B2C
predicted his/her satisfaction in C2C e-commerce. e-commerce. This may affect how consumers
Again, in a B2C online environment, responsive- trust one another and their satisfaction level
ness would not be as large of a concern; consum- of C2C e-commerce. Another potential future
ers expect businesses to respond to their needs research study could involve product complex-
while they may not hold the same expectation of ity. Product complexity has been proposed as
individual consumers. Therefore, a display of an important factor in the study of buyer/seller
responsiveness from consumers would increase behaviors (Zhang & Reichgelt, 2006). Therefore,
the satisfaction of C2C e-commerce. a modification of the TCA could be pursued in
13
Consumer-to-Consumer Electronic Commerce
future C2C e-commerce studies. Also, it appears as trust) and differences between venues (such
that additional research is needed in the area of as between online auctions and online com-
service quality in IS research to determine if a munities). Focusing research in these areas will
universal measure can be obtained. provide consumers the needed information to
conduct C2C e-commerce in the most effective
and efficient way.
IMPLIC AT IONS FOR PR ACT IC E
14
Consumer-to-Consumer Electronic Commerce
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17
18
Chapter II
Online Consumers’
Switching Behavior:
A Buyer-Seller Relationship
Perspective
Dahui Li
University of Minnesota Duluth, USA
Glenn J. Browne
Texas Tech University, USA
James C. Wetherbe
Texas Tech University, USA
Abstr act
Limited studies have investigated online consumer loyalty and retention from a relationship orientation
in electronic commerce research. It is important to understand the differences in relationship orientations
between people who have the propensity to stick to particular Web sites (“stayers”) and people who have
the propensity to switch to alternative Web sites (“switchers”). This study proposes a relationship-based
classification schema consisting of five dimensions: that is, commitment, trust, satisfaction, comparison
level of the alternatives, and nonretrievable investment. Data were collected from 299 college students
who had experience with e-commerce Web sites. Using discriminating analysis, we found that stayers
and switchers were significantly different along the five research dimensions. Satisfaction with the cur-
rent Web site was the most important discriminant factor, followed by trust, commitment, comparison
level of alternative Web sites, and nonretrievable investment in the current Web site. Implications of the
findings for researchers and practitioners are discussed.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Online Consumers’ Switching Behavior
19
Online Consumers’ Switching Behavior
Variables in Wilson’s Model Definition and Similar Terms Used in Other Studies Selected Supporting Literature
Stayers have higher levels of commitment to current Web Garbarino & Johnson, 1999; Ganesh,
Commitment sites than consumers who switch Web sites. Arnold & Reynolds, 2000; Morgan &
Similar terms: bonding mechanism Hunt, 1994; Park & Kim, 2006
20
Online Consumers’ Switching Behavior
buyer-seller relationships. Following Wilson’s Trust. Trust is the basic mechanism used to
suggestion, we limit our focus to how consumers build and maintain a relationship and fosters a
view buyer-seller relationships in the consumer long‑term orientation in marketing relationships
market. We emphasize five factors from Wilson’s (Morgan & Hunt, 1994). In business-to-consumer
model, which are commitment, trust, satisfaction, relationships, trust is a predictor of Internet buyers’
comparison level of the alternatives, and nonre- positive attitudes toward online shopping (Gefen,
trievable investment. In the following sections, Karahanna & Straub, 2003). Many different posi-
we review the literature concerning these five tive outcomes may be generated from trusting the
variables and develop research hypotheses. A vendor’s Web site (Pavlou, 2003; Pavlou & Gefen,
summary of the research variables and our review 2004). If a consumer does not receive positive
of supporting literature are shown in Table 1. results, his trust belief toward the Web site will
be reduced or destroyed, and the consumer may
terminate further interactions and switch to other
Re s earc h Hypot hes es vendors. Thus we hypothesize:
Commitment. Commitment is the most important H2: Stayers trust current Web sites more than
relationship factor and is central to the success switchers trust current Web sites.
of many buyer-seller relationships (Ganesh, Ar-
nold & Reynolds, 2000; Morgan & Hunt, 1994). Satisfaction. We define satisfaction as a long-
People usually realize the importance of keeping term judgment based on past interactions with
a relationship because the benefits for them are an online Web site over time, rather than single
inseparable from the benefits for their partners. transaction‑based satisfaction that is usually an
Highly committed individuals generally believe immediate post‑buying judgment. Satisfaction is
that the relationship will continue in the future, an important predictor of the intention to use an
so they try to maximize their efforts to stay in information system continuously (Bhattacherjee,
the relationship (Garbarino & Johnson, 1999; 2001). Consumers’ future buying intentions and
Morgan & Hunt, 1994). behavior can be predicted by their satisfaction
Studying the effect of commitment in online with a product or service (e.g., Burnham, Frels
buyer-seller relationships is important because & Mahajan, 2003; Ganesh, Arnold & Reynolds,
commitment may be difficult to develop. However, 2000). Using data collected from the customers
we posit that it is possible for an individual to of a national online service provider, Keaveney
develop commitment to a particular Web site. A and Parthasarathy (2001) found that people who
consumer’s consistent interactions with the Web continued to use the online service could be sig-
site may be attributed to his or her commitment nificantly discriminated from switchers in terms
level toward the business. If a consumer stays of their level of satisfaction with the service. The
with a Web site, this may result from the com- significant effect of satisfaction on online cus-
mitment level toward maintaining his relationship tomer loyalty has also been reported in several
with the Web site (Park & Kim, 2006). Thus, we studies of online buyer-seller relationships (e.g.,
hypothesize: Bhattacherjee, 2001; Park & Kim, 2006). Thus,
we hypothesize:
H1: Stayers have higher levels of commitment to
current Web sites than switchers. H3: Stayers are more satisfied with their current
Web sites than are switchers.
21
Online Consumers’ Switching Behavior
Comparison Level of the Alternatives. Com- for alternative sites and then learning how to use
parison level of the alternatives refers to the one may discourage consumers from abandon-
perceived desirability of alternative Web sites ing the current Web site for another. Thus, we
to the present relationship with the current Web hypothesize:
site (Anderson & Narus, 1990). It measures how
much an individual’s needs could be fulfilled by H5: Stayers value nonretrievable investment more
other relationships. In the IS literature, Hart and than do switchers.
Saunders (1997) have suggested that the smaller
the “supplier pool size,” the greater the buyer’s
dependence on the supplier in an EDI relationship. Re s earc h Met hod
Marketing research has also shown that depen-
dence on a current supplier will be low if there All the scales were adapted from Morgan and
are many good alternative suppliers available in Hunt (1994) and Rusbult, Martz, and Agnew
the marketplace (e.g., Anderson & Narus, 1990). (1998) (we have omitted the scales for space pur-
In online consumer markets, comparison level of poses). Seven‑point Likert scales were utilized.
the best alternative Web site also influences the Preliminary investigations were conducted to test
dependence of online consumers on the present the validity of these scales.
Web site (Chen & Hitt, 2002). If there is a group The survey method was used to collect data.
of high quality Web sites available, dependence Student subjects at a large public university were
on the present Web site will be affected and online the respondents of the survey. To ensure appropri-
consumers are more likely to switch to an alterna- ate motivation, students were given course credit
tive Web site. Thus, we hypothesize: for completing the questionnaire. One of the major
advantages of collecting data from university
H4: Switchers are more aware of the comparison students is that they typically have considerable
level of alternative Web sites than are stayers. experience with different types of e-commerce
Web sites. Students are very active users of Inter-
Nonretrievable Investment. Nonretrievable net applications and participants in e-commerce
investment refers to the extent and importance activities. In fact, 18-34 year-olds are the heaviest
of resources attached to the relationship with users of the Internet (comScore, 2004; Forrester
the current Web site (Anderson & Narus, 1990; Research, 2005) compared with other groups in
Burnham, Frels & Mahajan, 2003; Chen & Hitt, the population. Further, consumers around age
2002). The value of such resources will be low- 20 have been found to be savvy about online
ered or lost if the relationship is ended. Thus, shopping (Forrester Research, 2005). Therefore,
nonretrievable investment acts as a powerful student samples have been found feasible for re-
psychological incentive to persist in a relation- search concerning online behavior and have been
ship. According to Burnham, Frels, and Mahajan used in several recent studies (e.g., Agarwal &
(2003), switching costs can be classified further as Karahanna, 2000; Gefen, Karahanna & Straub,
extra expenditure of time and effort (procedural 2003; Meinert, Peterson, Criswell & Crossland,
cost), loss of financial resources (financial cost), 2006). In our study, the sample statistics indicate
and psychological discomfort (relational cost). In that our college student sample is representative
the online environment, a consumer could feel of 18-34 year-old users.
tied to the present Web site whenever he recalls The questionnaires were formatted into two
the time, money, and effort invested. Further, the versions. One version asked the student to name
anticipation of switching costs such as searching an e-commerce Web site (defined as a Web site
22
Online Consumers’ Switching Behavior
that conducts business transactions) that the in the college. 54 respondents who had used the
student would continue using in the near future, reported Web site for less than three months and
while the other version asked the student to name no more than ten times were excluded from the
an e-commerce Web site with which the student study. In the classification step, noted above, 12
did not intend to continue. Asking respondents responses were excluded. In the end, 299 responses
to subjectively report switching behaviors among were kept in the sample, of which 158 were staying
a group of service providers has been utilized in responses and 141 were switching responses.
previous literature (e.g., Chakravarty, Feinberg &
Rhee, 2004; Ganesh, Arnold & Reynolds, 2000;
Keaveney & Parthasarathy, 2001). In our study, Dat a Analys is and Re s ults
each student randomly received one version of
the questionnaire. Two screening questions were We examined the reliability and validity of the
asked to check whether the respondent had enough scales using LISREL 8.3 (Tables 2 and 3). While
experience with the e-commerce Web site to be the overall chi-square for the measurement model
evaluated. The first question was: How long have was significant (χ(142) = 223.02, p < 0.001), other
you used this Web site? The second was: During fit indices showed that the model had a good fit
the time period you checked in question (1), how with the data (RMSEA = 0.046, SRMR = 0.042,
often did you visit this Web site? Following the GFI = 0.92, AGFI = 0.90, NFI = 0.96, NNFI =
screening questions, the respondents were asked to 0.98, CFI = 0.98). To evaluate scale reliability and
respond to survey questions. Finally, demographic convergent and discriminant validity, we followed
information was collected. the guidelines from Fornell and Larcker (1981).
We adopted a two-step approach to classify All item loadings were significant and exceeded
a respondent as a stayer or a switcher. The first 0.7. Composite reliabilities of research constructs
step was based on the version of the question- ranged from 0.88 to 0.95. Average variance ex-
naire. If a questionnaire asked a respondent to tracted (AVE) ranged from 0.64 to 0.78 and all the
report a Web site that the individual did not plan square roots of AVEs exceeded their respective
to use in the future, the respondent was classi- inter-construct correlations. Thus, the validity and
fied as a “switcher”; otherwise, the respondent reliability of the scales were acceptable.
was classified as a “stayer.” In the second step, After the scales were validated, we tested the
we examined the respondent’s answers to three research hypotheses using multiple discriminant
survey questions about his intention to stay with analysis (Hair, Anderson, Tatham & Black, 1995).
the Web site. Using intention to measure actual The independent variables were commitment,
behavior is consistent with the Theory of Reasoned trust, satisfaction, comparison level of the alter-
Action (Fishbein & Ajzen, 1975). The scale used natives, and nonretrievable investment.
was from Agarwal and Karahanna (2000). If a Results of the analyses are shown in Table 4.
respondent was classified as a “switcher” in the The overall canonical discriminant function was
first step, but the intention to stay was high (above significant, with Wilks’ Lambda = 0.278 and χ(5)
the median score), the response was removed. If = 377.44 (p < 0.001). This indicated that stayers
a respondent was classified as a “stayer,” but the can be discriminated from switchers. As for the
intention was below the median score, the response predictability of the discriminant function, the
was also removed. percentages correctly classified (or hit ratios)
365 questionnaires were distributed in eight for the analysis sample (93.3%) and the holdout
business courses. Juniors, seniors, and graduate sample (93%) were above the proportional chance
students were surveyed, representing all majors criterion (50%) and the maximum chance criterion
23
Online Consumers’ Switching Behavior
Fit Indices: χ(142) = 223.02 (p < 0.001), RMSEA = 0.046, SRMR = 0.042, GFI = 0.92, AGFI = 0.90,
NFI = 0.96, NNFI = 0.98, CFI = 0.98
24
Online Consumers’ Switching Behavior
(53%). This indicates that the classification was Disc uss ion
highly accurate.
As shown in Table 4, all tests of the group- This study has investigated the differences be-
mean differences were significant at the χ = tween switchers and stayers in the context of online
0.001 level. The directions of the mean differ- buyer-seller relationships, based on an integrated
ences between switchers and stayers show that buyer-seller relationship model (Wilson, 1995).
all the hypotheses were supported. Compared Our empirical study has shown that stayers are
with switchers, stayers were more committed to more committed to online businesses than switch-
maintaining the relationship with the current Web ers. However, the mean value of commitment
site (H1) (mean difference = 2.00, F(1,297) = 178.83, for stayers (4.20) in this study is relatively low
p < 0.001), consistent with studies in conven- compared with the commitment levels reported in
tional buyer-seller relationships (e.g., Garbarino other types of relationships (e.g., Morgan & Hunt,
& Johnson, 1999). Stayers showed a higher level 1994; Garbarino & Johnson, 1999). This suggests
of trust in the current Web site than did switch- that due to the limited capacity of the Internet as
ers (H2) (mean difference = 2.09, F(1,297) = 250.31, a transmission medium between consumers and
p < 0.001). Stayers were more satisfied with the Web sites, commitment is not easily developed
interactive experience with the current Web site in the online consumer market.
(H3) (mean difference = 2.99, F(1,297) = 740.13, p < Stayers were also found to trust online busi-
0.001), and less aware of the comparison level of nesses more than switchers, consistent with other
the alternative Web sites (H4) (mean difference studies (e.g., Gefen, Karahanna, & Straub, 2003).
= 2.07, F(1,297) = 174.82, p < 0.001), consistent with Unlike commitment, trust was quite high on a
previous studies (e.g., Anderson & Narus, 1990; relative basis for consumers in the present study
Keaveney & Parthasarathy, 2001). Finally, stayers (mean values: 5.73 for stayers, 3.64 for switch-
were more aware of the size of the nonretrievable ers). It is reasonable to speculate that consumers
investment (H5) (mean difference = 0.81, F(1,297) are well aware of the potential risk inherent in
= 24.37, p < 0.001). online transactions. If a consumer decides to
* p < 0.001; Canonical Discriminant Function: Eigenvalue = 2.6, Canonical correlation = 0.85, Wilks’ Lambda =
0.278, χ(5) = 377.44 (p < 0.001)
Classification Results: Percentage correctly classified (hit ratio): Analysis Sample: 93.3%; Holdout Sample: 93%;
Proportional chance criterion = 50%; Maximum chance criterion = 53%.
25
Online Consumers’ Switching Behavior
26
Online Consumers’ Switching Behavior
research. After adopting, adapting, accepting, to stay with a Web site or switch to another was
and using an IS, a user may have developed a shown to depend on commitment, trust, satisfac-
relationship orientation toward using the IS in the tion, comparison level of the alternatives, and
latter stages of IS implementation. Future studies nonretrievable investment. Future research can
could conduct empirical tests of the relational add additional insights into this important area
variables in the context of conventional IS. Future of electronic commerce research.
studies may also investigate whether and how an
IS user develops a relationship with an IS during
the IS-user interaction process. Refe r enc es
Implications for Practice Agarwal, R., & Karahanna, E. (2000). Time flies
when you’re having fun: Cognitive absorption and
For online companies such as Dell Computers, beliefs about information technology usage. MIS
eBay.com, and Amazon.com, consumer retention Quarterly, 24(4), 665-694.
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Anderson, J. C., & Narus, J. A. (1990). A model
this study, as well as some previous research, show
of distributor firm and manufacturer firm work-
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42-58.
clear inclination toward loyalty and their behaviors
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markets. The five factor classification schema can tion challenges: A value network perspective. In
serve as an alternative for businesses to capture G. W. Dickson & G. DeSanctis (Eds.), Information
the profiles of online consumers. Adopting such technology and the future enterprise: New models
an approach will improve the effectiveness of for managers (pp. 144-162). Upper Saddle River,
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Consumers’ commitment to online businesses
Bhattacherjee, A. (2001). Understanding informa-
is difficult to develop and is not as strong as com-
tion systems continuance: An expectation confir-
mitment in other contexts. This suggests that it
mation model. MIS Quarterly, 25(3), 351-370.
is not practical for online businesses to expect
persistent and long-term relationship orienta- Burnham, T. A., Frels, J. K., & Mahajan, V. (2003).
tions from online consumers. However, various Consumer switching costs: A topology, anteced-
incentive mechanisms other than those focused ents, and consequences. Journal of the Academy
on relationship building and maintenance may of Marketing Science, 31(2), 109-126.
need to be initiated. An online business may
Chakravarty, S., Feinberg, R., & Rhee, E. (2004).
adopt different methods to enhance its customer
Relationships and individuals' bank switching
satisfaction level. For example, a company may
behavior. Journal of Economic Psychology, 25(4),
use its Web site to retain, or “lock,” a consumer,
507-527.
by keeping personal data. When people enter a
significant amount of personal data at a Web site, Chen, P. Y., & Hitt, L. M. (2002). Measuring
they are typically reluctant to change vendors and switching costs and the determinants of customer
enter the data again (White, 2004). retention in Internet-enabled businesses: A study
In summary, the present research has examined of the online brokerage industry. Information
online consumers’ switching behavior among Systems Research, 13(3), 255-274.
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Online Consumers’ Switching Behavior
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Hart, P., & Saunders, C. (1997). Power and trust:
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An exploratory study of the role of selected at-
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This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 5, Issue 1, edited by M. Khosrow-
Pour, pp. 30-42, copyright 2007 by IGI Publishing, formerly known as Idea Group Publishing (an imprint of IGI Global).
29
30
Chapter III
From High Tech to High Touch:
The Effects of Perceived Touch on
Online Customers’ Intention to Return
Hong-Mei Chen
University of Hawaii, USA
Qimei Chen
University of Hawaii, USA
Rick Kazman
University of Hawaii, USA
Abstr act
Companies are competing intensively using ‘high tech’ systems such as electronic customer relationship
management (eCRM or CRM) to interact with customers online over the Web, aiming to profit from
retaining customers through “high touch.” This chapter defines a new construct, Perceived Touch, and
provides theoretical underpinnings for the “high touch” assumption of eCRM systems. An empirical study
was conducted to examine both the cognitive and affective effects of Perceived Touch on online customers’
intention to return after their initial visit in the eCRM context. While past studies of traditional informa-
tion systems paid more attention to cognition than affect, the affective effect is critical to examine so that
eCRM strategy and system design can be better informed. Our research results validate the antecedent
role of Perceived Touch to Perceived Ease of Use (of the technology acceptance model—TAM) and fur-
ther argue for the renewed importance of Attitude for user acceptance in the eCRM context. This study
illuminates the significance of the affective impact of Perceived Touch on online customers’ Behavioral
Intention to Return through both the Affective Route and the Alternative Cognitive Route where affective
effect precedes cognitive effect. Practical implications of this study are discussed.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
From High Tech to High Touch
31
From High Tech to High Touch
Whether an online customer’s Behavioral (1987, 1991) has suggested—as an umbrella term
Intention to Return is positively influenced by to include emotions, feelings, preferences, beliefs,
Perceived Touch in the eCRM context is our and attitudes. By contrast, cognition involves a
central research question. Behavioral intention structured reasoning process emphasizing on
has been extensively studied in the field of tech- information transformations (Zajonc 1980, Zajonc
nology acceptance (Venkatesh et al., 2003 ) and and Markus 1982, 1984). The affective system
consumer behavior (Cheung et al, 2005). Previous is judgmental, assigning positive and negative
research in these areas has provided a basis for valence to the environment rapidly and efficiently
our investigation in the new eCRM context. In the while the cognitive system interprets and makes
past, technology acceptance was broadly studied sense of the world (Norman, 2002). Previous
in an organizational context and a vast body of research results have primarily focused on the
literature has shown that Perceived Usefulness cognitive impact on behavioral intention, even
and Perceived Ease of Use conceptualized in the though affective effects happens before cogni-
technology acceptance model (TAM) (Davis tive effects and are often intertwined (Norman,
1989) are two strong predictor of a consumer’s 2002; Russell, 2003). Recently, Bagozzi (2007)
behavior intention and actual usage of a system. stresses the need to strengthen the theories of
Perceived Usefulness is defined as the degree the role of affect in TAM research. The design
to which a user believes that using a particular intention of eCRM systems is to build toward
system would enhance his or her job performance old-fashioned one-to-one relationships and to be
while Perceived Ease of Use is a user’s assessment a decision aid at a customer’s “pleasure” to sup-
that technology interaction will be relatively free port their task. The purpose of communication,
of cognitive burden (Davis, 1989, p. 320). In a hence, is to cause an affective reaction as well as
comprehensive review of the past five years of a cognitive one. The neuroimaging literature has
research on the behavior of online consumers, already shown that consumer decision-making
attitude which is a positive or negative feeling involves the orbitofrontal (cognitive area) and
(evaluative affect) about performing a target be- the amygdala (emotional area) of a consumer
havior, was widely studied as a determinant of (Hsu, et al., 2005). Therefore, it is posited that
consumers’ online purchase intention (Cheung, the Behavioral Intention is jointly impacted by
2005). Decision Satisfaction—the cognitive both affective and cognitive effects of Perceived
evaluation of decision support received from the Touch. We argue that it is particularly important
system—has been shown to influence Behavioral to study affective impact in the present context
Intention in both Marketing and Information due to the emphasis of the interactive customer
Systems (IS) studies (Garrity et al. 2005; Bharati “touching” aspect or affective quality embedded
& Chaudhury, 2004). in eCRM systems.
These important variables are synthesized The remainder of this chapter is structured
in our research model (depicted in Figure 1). as follows: Section 2 describes the conceptual
Behavioral Intention to Return is the same as foundations and hypothesis development in our
Behavioral Intention to Use (Fishbein & Ajzen research model. Section 3 details the experi-
1975; Ajzen 1985; Ajzen 1988) due to the dual- mental survey research method used to test this
ity of on-line customers as system users in the research model. Section 4 presents the results of
new context of eCRM. Furthermore, the model hypothesis testing using a structured equation
provides a distinction between cognitive and af- modeling (SEM) technique. Section 5 includes the
fective routes from Perceived Touch to Behavioral discussion, limitations and possible explanation
Intention to Return. We use affect—as McLeod of the results and directions for future research.
32
From High Tech to High Touch
Section 6 concludes with the study’s theoretical 1995). Relationship generalization theory (Crosby
contributions and the practical implications of & Stephens 1987) posits that a relationship is a
the findings. quality surrogate and that buyers generalize posi-
tive feelings about the provider to core aspects of
the service which is different from rational evalu-
C ONC EPT UAL FOUNDAT ION AND ation. For instance, Gronoroos (1986) finds that
HYPOT HES IS DEVELOPMENT buyers will become enamored with the interactive
aspects of the service and fail to analyze price
In this section, we first provide theoretical “rationally” in relation to an objective standard
background for eCRM applications emphasiz- of core service (technical) quality.
ing its affective aspect. We then define the focal This assertion from relationship generalization
construct, Perceived Touch. We further provide theory underlies the importance of the affective
rationale for including four established constructs quality of an eCRM system. Schlosberg (1952)
in the IS and Marketing literature: Perceived Ease has mapped affect according to two dimensions:
of Use, Attitude Toward the System, Usefulness, attention-rejection and pleasantness-unpleasant-
and Decision Satisfaction. Finally, we present the ness. Essentially, pleasant things work better and
hypotheses for the relationships in the research are easier to use (Russell 2003). As users aren’t
model. always rational beings, affect plays an important,
yet often overlooked role in user acceptance of
eCR M C onceptual B ackground technology (Zhang & Li, 2005). The neuroimag-
ing literature has shown that consumer decision-
eCRM systems strive under assertions approxi- making involves the orbitofrontal (cognitive area)
mating those of relationship marketing theories, and the amygdala (emotional area) of a consumer
even though the meaning of “relationship” may (Hsu, et al., 2005). The importance of affect is
be arguable in a Web-based e-business context. re-emphasized by findings from a recent study,
“…Interactive means relationships and relation- where researchers observed that affect increases
ships often translate to brand loyalty” (Upshaw customers’ tolerance of functional (i.e., techni-
Affective Route
Attitude
H1a Perceived H1b
Toward the
Ease of Use H1c
System
Behavioral
Perceived Touch H3 Intention to
Return
Cognitive Route
33
From High Tech to High Touch
cal) problems (Barnes, Hinton & Mieczkowska, than as partners in general computer-mediated
2005). communication (CMC). Finally, interactivity
distinguishes differences between the older one-
Perceived T ouch to-many static model of CRM and the current
one-to-one dynamic customer interaction model
The word “touch,” although not formally defined of eCRM. Although interactivity is viewed as a
in the Marketing or IS literature, is commonly technical characteristic of the medium by some
used by businesses, practitioners in business, and researchers (Zack, 1995), in the eCRM context
academicians in textbooks (e.g. Laudon & Traver, what we are interested in is the perception and
2004, p. 416). Perceived Touch is a customer’s actual usage of interactivity functions (e.g., touch
belief or subjective assessment of touch rendered options) rather than the normative presence or ab-
by the eCRM system. Touch is a multi-dimen- sence of interactivity in the media. As mentioned,
sional concept which encompasses three aspects: the intended touch level by the system is not the
(1) communication media characteristics (e.g., focus of this chapter. Our focus is on Perceived
media richness), (2) the affective quality of touch Touch which is the customers’ perception of be-
options (e.g., humanization) and (3) interactivity lief of touch from both affective and cognition
between the online customers and the system. A evaluation. In general, beliefs are important not
rich literature exists in defining media richness only because they influence subsequent behavior,
in that each medium or communication channel but also because they are amenable to strategic
varies in its ability to improve communication. managerial manipulation through appropriate
Media can be characterized as high or low in interventions such as system design (Agarwal
“richness” depending on their ability to facili- 2002). The purpose of our study is to offer insight
tate shared meaning based on four criteria: (1) for such manipulation.
the ability to give immediate feedback which
generates and reinforces understanding; (2) the Perceived Ease of Use and
ability to provide multiple cues such as body Perceived Usefulness (Davis, 1989)
gesture, voice tone, and graphical symbol; (3)
the ability to provide language variety such as Several theoretical models have been proposed to
natural language, numbers and language symbols better understand and explain individual attitudes
for precisely conveying concepts and ideas; and and behaviors of IT usage: innovation diffusion
)4) the ability to tailor-make or personalize the theory (Rogers 1995), the technology acceptance
communication medium (Daft et al, 1987). As model (Davis 1989; Davis et al. 1989), the theory
to the affective quality of the touch options, the of reasoned action (Fishbein & Ajzen 1975), and
eCRM system strives to provide system stimuli the theory of planned behavior (Ajzen 1985; 1988).
or human-like touch aspects that will evoke a Despite differences among these models regarding
positive emotional response via the interaction the specific constructs and relationships posited,
with the online customers. The affective quality there is some convergence among them that
refers to the ability to cause a change in affect: individual’s beliefs about or perceptions of IT have
feeling good/bad, like/dislike, pleasant/unpleas- a significant influence on usage. Perceived Ease
ant, etc. This is separate from the media richness of Use and Perceived Usefulness are two widely
aspect which is to facilitate communication. In studied beliefs that have a significant influence
the eCRM context, the live or intelligent system on usage behavior (Lee, Kozar, & Larsen 2003;
agents (in high touch deployment) are devised as Venkatesh, et al. 2003).
servants or assistants for online customers rather
34
From High Tech to High Touch
Attitude T oward the S ystem in the cognitive component. For this reason, we
model Attitude Toward the System in the Affec-
Attitude is defined as predisposition to respond in tive Route.
a particular way toward a specified class of objects
(Rosenberg, 1960). It is a positive or negative Decision S atisfaction
feeling (evaluative affect) about performing the
target behavior (Fishbein & Ajzen 1975, p. 216). Decision Satisfaction is a cognitive evaluation of
This construct reflects core affect (or feelings) of how satisfied the customer is with the decision
favorableness or unfavorableness, toward using support received from the system, including the
the system or the web-site in the eCRM context. system’s ability to deliver relevant information for
User attitude is important because it contributes decision making and to improve the customer’s
to a user’s intention to use a system (Ajzen, 1988) decisions (Garrity et al. 2005). It characterizes the
and the user’s intention is believed to be the best ability of the system to support decision-making
predictor of actual system use (Davis et al, 1989). and cognitive tasks (Bharati & Chaudhury, 2003).
This prediction has been validated by many In the IS field, due to interest in system usage,
technology acceptance related studies (e.g., Lee, user (decision) satisfaction has been identified as
Kozar, & Larsen, 2003; Venkatesh, 2003). a critical IS success factor (Delone & McLean,
In our model, the major affective impact of 2003) while in the Marketing field, customer
Perceived Touch is posited to be mediated by satisfaction has been identified as the key for re-
Attitude Toward the System. Although the origi- taining customers (Crosby, 1987; Krishnan, 1999;
nal formulation of the TAM included attitude as Haubl, 2000). Traditionally user satisfaction and
a construct mediating the effects of beliefs on customer satisfaction are two different subjective
intentions (Davis, 1989), it was subsequently measures and are found in different domains
dropped from the specification of the TAM due of investigation. However, these two concepts
to the absence of mediation effects (Davis et al, are converging in the eCRM context because
1989). The present study is conducted to re-exam- online customers are the system users (O’Keefe
ine the mediation effect of attitude in the eCRM & McEachern, 1998). Specifically, eCRM tools
context, given its importance today as evidenced are provided specifically to serve as decision
by recent studies (e.g., Vehovar et al., 2001;Teo aids (Haubl & Trifts, 2000) for online customers
et al., 2003). Online customers’ attitude is espe- to meet their task goals, for example, to choose
cially important to commercial web sites because products, configure products, plan travel, etc. In
purchase intentions resulting from online visits this context, the assessment of online customer
are found to improve as attitude toward the web satisfaction is closely tied to assessing system
site improves (Stevenson et al., 2000). users’ Decision Satisfaction. Hence, this study
Some researchers posit that attitude is com- focuses on the measure of customers’ decision
prised of both affective and cognitive components satisfaction that results from completion of a task,
(Perloff, 1993). However, the affective component using the system as a decision aid.
is found to be a crucial element of Attitude. It is
believed that one cannot have an attitude until
she/he has some feelings about the object in ques- HYPOT HES ES
tion (Teo, 2003). Attitude can be based entirely
on affective feelings (Oskamp, 1991). Rosenberg The hypotheses in our study are developed in
(1960) demonstrated that changes in the affective three paths in our research model: Affective
component can create continuing parallel changes Route, Cognitive Route and Alternative Route. As
35
From High Tech to High Touch
shown in our research model, Perceived Touch is Stemming from the theory of reasoned action
posited to influence Behavioral Intention to Return (Fishbein & Ajzen 1975), Perceived Ease of Use
through both affective and cognitive routes, medi- is the determinant of Attitude in the original
ated through Perceived Ease of Use and Attitude TAM model (Davis 1989). This study will test
Toward the System in the Affective Route and this relationship in the new eCRM context. It is
through Perceived Usefulness and Decision Sat- hypothesized that the belief that the system is easy
isfaction in the Cognitive Route. An Alternative to use will evoke favorable feelings from online
Cognitive Route (Perceived Touch Perceived customers. Ease of use means that customers
Ease of Use Perceived Usefulness Decision should require less cognitive effort and thus will
Satisfaction Behavioral Intention) is established have more attention to “socialize” or enjoy the
based on the previously widely validated relation- interactivity with the system, particularly with a
ship that Perceived Ease of Use is a determinant friendly and personable on-line agent.
of Perceived Usefulness (Teo 2003).
H1c: Attitude Toward the System has a positive
1. Affective Route Hypothesis: effect on online customer’s Behavioral Intention
Perceived Touch Perceived Ease of to Return
Use Attitude Behavioral Intention
As mentioned above, many studies have vali-
H1a: Perceived Touch has a positive effect on dated that attitude is important because it contrib-
Perceived Ease of Use of the eCRM system. utes to a user’s intention to use a system (Ajzen,
1988) and the user’s intention is believed to be the
One practical implication of the TAM model best predictor of actual system use (Davis et al,
stems from the fact that a system designer has 1989). This prediction has been validated by many
some degree of control over Perceived Ease of TAM-related studies (e.g. Lee, Kozar, & Larsen,
Use and Perceived Usefulness (Taylor, 1995) by 2003 and Venkatesh, 2003) and will be tested in
altering their antecedent. Although there is limited the eCRM context in the present study.
prior work examining the determinants of ease
of use and usefulness, we argue that Perceived 2. Cognitive Route Hypothesis:
Touch has a salient influence on Perceived Ease Perceived Touch Perceived
of Use. We postulate that richer media will allow Usefulness Decision Satisfaction
users to communicate more effectively with the Behavioral Intention
system while higher humanization will enable
users to perceive a more personal focus as well H2a: Perceived Touch has a positive effect on
as immediate assistance, which will reduce their Perceived Usefulness
cognitive burden. A higher level of interactivity
with the system indicates that users can seek Perceived Usefulness is a cognitive evaluation
consultation and assistance in performing their and belief indicating whether an eCRM system
tasks. This is hypothesized to also reduce their actually helps in task performance. Since an
cognitive effort and thus increase the perception eCRM system is designed to be a decision aid for
of ease of use. the online customer, Perceived Touch is therefore
hypothesized to enhance an online customer’s task
HIb: Perceived Ease of Use has a positive effect performance and hence has a positive effect on
on Attitude Toward the System Perceived Usefulness. Online customers may have
36
From High Tech to High Touch
certain task goals that are complex and they are tion to Return. TAM-related studies have shown
consciously looking for system functions to reduce that Perceived Usefulness is the determinant of
their cognitive burden. When online customers Behavioral Intention and we posit that it could be
have a perception of a high level of touch from mediated through Decision Satisfaction, for the
the system or have a higher level of interaction reasons stated in H2b.
with the system, they must have recognized some
useful system functions that may increase their 3. Alternative Cognitive Route:
task performance. Perceived Touch Perceived Ease of
Use Perceived Usefulness
H2b: Perceived Usefulness has a positive effect Decision Satisfaction Behavioral
on Decision Satisfaction Intention
We further hypothesize that the relationship H3: Perceived Ease of Use has a positive effect
between Perceived Touch and Decision Satisfac- on Perceived Usefulness
tion is mediated through Perceived Usefulness.
Humans tend to adapt their decision making This Alternative Cognitive Route is developed
strategies to specific situations and environments due to the “Golden Triangle Relationship” among
(Payn, 1982). Individuals can be described as cog- Perceived Ease of Use, Perceived Usefulness,
nitive misers who strive to reduce the amount of and Behavioral Intention (Teo et al., 2003): (1)
cognitive effort associated with decision making Perceived Ease of Use Perceived Usefulness
(Shugan, 1980). When online customers perceive Behavioral Intention and (2) Perceived Ease
that the system has been useful, by reducing their of Use Behavioral Intention. A number of
cognitive effort, helping them make better deci- empirical studies have affirmed the hypothesized
sions and improving the quality of their decisions, influence of Perceived Ease of Use on Perceived
they feel more satisfied. This requires a cognitive Usefulness (Lee, Kozar & Larson, 2003). These
evaluation of touch options supporting task goals: relationships are supported by the notion that the
whether they get enough information for making lower cognitive burden imposed by a technology
a decision and whether the tools were “useful” frees up attentional resources to focus on other
for their purpose. This is why this relationship is matters, serving the ends of a user (Davis et
placed in the Cognitive Route. al, 1989). This link establishes an Alternative
Cognitive Route.
H2c: Decision Satisfaction has a positive effect
on an online customer’s Behavioral Intention to
Return. MET HODOLOGY
The positive relationship between Decision Satis- S tudy C ontext and S ample
faction and Behavioral Intention has been reported
in the IS literature and the marketing literature To empirically test the relationships implied by
(Anderson, Sullivan, 1993; Mittal, Kumar, Tsiros, our research model and hypotheses we adopted
1999; Varki, Colgate, 2001). an experimental survey methodology. Four tasks
Better Decision Satisfaction generated from were designed to include a broad range of eCRM
interacting with an eCRM system that meets services, from routine transactional tasks for
customers’ “service expectations” (Bhattacherjee, financial/tax sectors to information search for pre-
2001) is likely to positively impact on their Inten- purchase decision making. The tasks were: (1) a
37
From High Tech to High Touch
mortgage application, (2) an IRS tax withholding The agents in the experimental system (most
calculation, (3) a date movie recommendation, of them Business School graduate students) were
and (4) a mobile PC selection.1 For each task we all extensively trained and well-versed in the task-
created a descriptive booklet that included sce- related eCRM services, so they could help subjects
narios and decision criteria. Experimental web navigate and point them to the right information
pages were set up such that all the tasks had the while talking to them. All agents were trained in
same startup screen. The tasks, booklets, and the the four tasks and in the use of the commercial
experimental systems were iteratively refined and collaborative eCRM system. The agents were
tested in a pilot study. To increase the variance of given a script for answering the most frequently
the perceived touch, subjects in each task randomly asked questions. Via the collaborative system, the
received either low or high touch eCRM services: agents were able to interact with subjects via VoIP
the low touch treatment was equipped with product or text chat. In addition, desktop sharing tech-
information, a search engine, a FAQ, chat, and an nology allowed the agents to see the customers’
email address for Q&A; the high touch treatment screens. An agent could also take direct control
was additionally equipped with professional hu- of the customer’s mouse or keyboard to indicate
man agents via a commercial collaborative eCRM where to find information or to show search results
system (WebArrow, 2006). requested by the customer. Being decision aids,
These four different tasks were then randomly the agents were not allowed to tell the subjects
assigned to the subjects. These subjects were re- “answers” or to correct wrong answers (which
cruited, promised a cash compensation of $10 upon the agents could plainly see) unless the subjects
completion, scheduled for an one-hour session, and specifically asked for help.
directed to go to one of the experimental rooms For example, Figure 2 shows a typical display
(either connected to a live agent using the eCRM that an agent would see. The commercial collabor-
system or not), and to use the computer equipment ative eCRM system is running (as indicated by the
there to access and complete a randomly assigned meeting control window in the upper right-hand
task. They were also instructed to fill out the sur- corner of the display) and this shows that there
vey as completely as possible. 256 business school are three active services: VoIP (as indicated by the
undergraduate students at a major state university icon), desktop sharing/viewing (as indicated
participated in the study; 2 were dropped due to by the and icons), and chat (as indicated
incompletion, leaving a total sample size of 254. by the icon). In the desktop viewer window,
Among them, 58% were females and 42% were the agent is able to see exactly what the subject
males. The majority of them (91%) were in the is seeing (and doing). In the example shown in
age range 20-35. All of the subjects used comput- Figure 2, the subject is working through a with-
ers regularly, and they spent an average of 11.64 holding calculation on the IRS’s web-site.
hours on the Internet every week. Among all the The agents were thus able to talk with the
subjects, 18% identified themselves as having subjects freely and saw what they were doing in
used online customer services (live agents with real time as though they were sitting side by side.
VoIP and screen sharing) before. These subjects In addition, via the desktop viewer window the
seem to have had “so so” experiences with these agent was also able to take direct control of the
eCRM systems (n=46; M=4.83). The subjects, subject’s mouse or keyboard, if requested. The
on average, however were very confident about agents would do this to show the subjects where
their comfort level (n=252; M=6.15), knowledge to find information or to indicate new information,
(n=252; M=5.31), and familiarity (n=252; M=5.58) such as search results requested by the subjects.
with the Internet.
38
From High Tech to High Touch
39
From High Tech to High Touch
Table 1. Means, standard deviations, and standardized loadings for the exogenous and endogenous
measures
Item M SD Loadings
Construct
Perceived 1. I could easily explain things using the system 4.85 1.52 .53
T o u c h 2. The communication conditions helped me communicate quickly 4.76 1.60 .65
(α=.88) 3. The communication condition helped me effectively with my task 4.59 1.50 .64
4. Interacting with this system is like having a conversation with a sociable, 4.21 1.75 .82
knowledgeable and warm representative from the company
5. I felt as if this system talked back to me while I was navigating 3.91 1.74 .73
6. I perceive the system to be sensitive to my needs for information 4.47 1.59 .86
7. My interaction level with the system was high 4.45 1.67 .73
Ease of Use 1. It was difficult to learn how to use this system. 2.82 1.59 -.47
(r=.63) 2. It was easy to operate the equipment in this system. 5.30 1.60 .41
Usefulness 1. The system will be of no benefit to me. 2.81 1.54 -.59
(α=.87) 2. Using the system will improve my performance. 4.92 1.37 .78
3. The advantages of the system will outweigh the disadvantages. 5.23 1.30 .92
4. Overall, using the system will be advantageous. 5.35 1.36 .94
Attitude 1. Using the eCRM system is a good idea 5.72 1.30 .90
Toward the 2. Using the eCRM system is a wise idea 5.51 1.33 .79
System 3. I like the idea of using the eCRM system. 5.44 1.33 .91
(α=.92) 4. Using eCRM would be (pleasant, unpleasant) 5.30 1.42 .84
Decision 1. Utilization of the system has enabled me to make better decision. 4.98 1.48 .93
M a k i n g 2. The system has improved the quality of decisions I made. 4.84 1.49 .94
Satisfaction 3. As a result of the system, the speed at which I analyze decisions has increased. 4.81 1.54 .84
(α=.94) 4. As a result of the system, more relevant information has been available to me for 5.00 1.43 .89
decision making.
Behavioral 1. I intend to use the system to fulfill similar task. 4.84 1.58 .94
Intention 2. I intend to use the system in the future. 4.90 1.59 .96
(α=.91) 3. I intend to use the system frequently. 4.04 1.61 .74
Note: All constructs were measured on a 7-point scale where 7 represents greatest agreement with the statement.
40
From High Tech to High Touch
available to them for decision making; and im- ing from .92 for attitude toward system usage
proved the quality of decisions they made. to .63 for ease of use—all were higher than 0.6,
Attitude Toward the System Usage was cap- the lowest acceptable limit for Cronbach's alpha
tured using a four-item, seven-point Likert scale suggested by (Hair et al., 1998).
similar to (Taylor & Todd, 1995). The first three
items state: (1) Using the eCRM system is a good
idea, (2) Using the eCRM system is a wise idea, R ES ULTS
(3) I like the idea of using the eCRM system.
Responses were recorded on a one-to-seven scale, The hypothesized paths in the research model
with the endpoints labeled “definitely disagree” described earlier (Figure 1) were tested using
and “definitely agree”. The last item asks the Amos 5.0 with maximum likelihood estima-
respondent “Using the eCRM system would be tion. Overall the fit index suggest a good fit
unpleasant (1) or pleasant (7). between our proposed research model and the
Behavioral Intention to Return was captured data (χ2=435.823; df=234; p=0.000; χ2/df=1.862;
by a three-item, seven point scale anchored by GFI=.877 AGFI=.877; NFI=.922, TLI=.955,
“definitely disagree” and “definitely agree” similar CFI=.962, RMSEA=.059). Although the χ2 statistic
to (Taylor & Todd, 1995). This scale measures is significant, it is not always the best indication of
respondents’ future intentions to use the system: model fit (e.g., Bagozzi and Yi, 1988; Mulaik et al.,
(1) to fulfill similar tasks; (2) in the future; and 1989) since it has the drawback of being sensitive
(3) frequently. to sample size and the number of parameters in the
The means, standard deviations, reliability model (Bentler & Bonett, 1980). The alternative
alpha and standardized loadings for the exogenous fit indices—(a) the goodness-of-fit index (GFI),
and endogenous variable measures are provided in which outperformed other alternative indices in
Table 1. Convergent validity and reliability tests a study by Marsh et al. (1988), (b) the adjusted
were then conducted for the instrument. Based on goodness-of-fit index (AGFI), which adjusts the
the steps proposed by Straub (1989), convergent va- GFI for degrees of freedom, (c) (Steiger, 1990) root
lidity is fathomed by the item-to-total correlation. mean square error of approximation (RMSEA),
Items with item-to-total correlation score lower which is recommended by (Browne & Cudeck,
than .40 were dropped from further analysis (Park 1993)—are all within the ranges suggestive of
& Kim, 2006) thus reducing Perceived Touch from a reasonably good fit. The regression estimate
a ten to a seven item scale. Further, as measures for each hypothesized path is detailed in Table
of all six constructs are derived from existing IS 2. Specifically, H1a, b and c are supported; H2a
literature, as a result of our extensive literature is not supported while H2b and c are supported.
review, content validity was thus achieved. Next, Finally, H3 is supported. Figure 3 displays the
we conducted the confirmatory factor analysis final analytical model showing the paths found
to investigate the distinctions among the four to be significant.
constructs. As shown in Table 1, all but four Hence, the results demonstrate that the effect
factor loadings for six constructs were greater of Perceived Touch is completely mediated by
than 0.60. However, all estimates are significant Perceived Ease of Use and ultimately impacts on
at p<.001. Discriminate validity was hence sup- the eCRM users’ Behavior Intention to Return
ported. Finally, the internal consistency reliability through both the affective route as well as the
was captured by the Cronbach alpha coefficient cognitive route. The direct path from Attitude
(Straub, 1989). As shown in Table 1, reliability to Behavioral Intention to Return suggests the
alphas were acceptable for all constructs, rang- important roles that affect might play in predict-
41
From High Tech to High Touch
Behavioral
Perceived Intention to
Touch Return
Perceived Decision
Usefulness Satisfaction
ing behavioral outcomes. Identification of this effect is through the Alternative Cognitive Route
significant path argues for the future inclusion of in which the effect is mediated through Perceived
the Attitude construct to the TAM in the eCRM Ease of Use from Perceived Touch to Perceived
context. Usefulness. Although no amount of ease of use
will compensate for low usefulness, in the cur-
rent e-business world online customers will not
DISC USS ION use a system if it is not perceived as easy to use.
This indicates that the affective effect may have
Our model illuminates the importance of the af- to take place first, before the cognitive effect.
fective impact of Perceived Touch. In our results, This finding is consistent with previous results
Perceived Touch is found to be a significant ante- (Norman 2002, Russell 2003). Further, according
cedent to Perceived Ease of Use as hypothesized to our results, the system should be appealing
but not to Perceived Usefulness. The cognitive to the customers’ affect for online customers to
42
From High Tech to High Touch
perceive it as easy to use. We conjecture that this Usefulness lies in the context: eCRM tasks de-
result may be influenced by the fact that going mand actual decision support from the system
online is a way of life for most people in the last and thus the cognitive evaluation of touch options
five years2 and online customers generally have are not as simple as, for instance, evaluating the
a high expectation of system ease of use which appearance of a web page. More investigations
must be met as a gateway for cognitive elaboration are needed to understand the multi-dimensional
(of usefulness of the system) to incur. complexity (e.g., media richness, affective quality
This study supports previous TAM work or humanization, and interactivity) of Perceived
but takes it in a new direction. That Perceived Touch and whether these underlying dimensions
Ease of Use acts as a significant antecedent to can be separated and whether they influence
Perceived Usefulness in the eCRM context is in variables in the affective and cognitive routes
line with what the TAM predicts. One explanation differently or independently.
is that there may be an inherent expectation (by
online customers) of ease of use that is separate Limitations
from the utilitarian aspect of the system (e.g.,
usefulness) and must be achieved by the eCRM Several limitations in this study need to be pointed
system. In fact, 69 of 101 previous TAM studies out. First, our study is limited due to the inherent
found a significant link between Perceived Ease nature of the experimental survey where internal
of Use and Perceived Usefulness, depending on validity is high but the results cannot be easily
the context (Lee, Kozar, & Larsen, 2003). Our generalized to other contexts beyond the eCRM
study adds to the previous studies (and also adds experimental set up. Our study is also limited by
data from a new generation of users in the age the laboratory setup for the experimental system
range of 20 to 35) and shows that in the context and the fact that our subjects are college students.
of eCRM the mediating effect of Perceived Ease Even though we strongly believe the age group of
of Use between Perceived Touch and Perceived subjects, 20 to 35, is the group that is currently
Usefulness is critical. Our finding also showed most immersed in the e-business world, the gen-
that Perceived Touch’s affective impact on Behav- eralization of our findings is nonetheless limited.
ioral Intention is mediated by Attitude Toward We also found this group of subjects may not be
the System. The significant mediating effect of representative regarding their limited experience
Attitude found in our study is contrary to most of with real-world eCRM tasks and technology. As
the prior TAM related studies where the mediat- the eCRM touch technologies used—desktop
ing effect was found not significant. Our finding sharing, VoIP, etc.—were quite new at the time of
resonates a recent study revisiting the important the study, the results may not generalize to more
role of attitude in TAM (Yang & Yoo, 2004) and experienced eCRM customers. Second, ideally,
validates the increasing importance of attitude one would measure actual customer return by
in Electronic Commerce (Vehovar et al, 2001, observing customers over time. Such a longitu-
Teo et al. 2003). dinal study is difficult to realize and to control.
Furthermore, the importance of perceived Our study, therefore, used customer intention to
affective quality was previously established as return, not actual return visits, to measure this
the determinant of Perceived Ease of Use and outcome. Future research may want to use both
Perceived Usefulness (Zhang and Li, 2005). Our longitudinal and objective measures to validate
results establish the antecedent effect of Perceived the findings from the present study. Third, as one
Touch to Perceived Ease of Use. We conjecture of the endogenous constructs, ease of use (r=.63)
that the difference in findings regarding Perceived has reliabilities lower than 0.8 (Nunnally, 1978),
43
From High Tech to High Touch
further refinement of this construct is warranted away. Initial adoption by consumers is a critical
in future research. Finally, this research only first step toward overall success (Cheung, 2005).
offers one plausible network of relationships for Although this study contributes to understanding
Perceived Touch in three different paths. While the effect of Perceived Touch on online customers’
others might propose alternative causal pathways, intention to return at the first encounter, further
we present theoretical arguments supporting the longitudinal study may provide insights as to how
proposed paths and subsequently present data customers are retained over time and can test the
from our experimental survey in support of loyalty effect (Smith, 2000) or the effect on the
these relationships. Thus, our goal is not theory continuance behavior (Bhattacherjee, 2001) of
testing per se to establish whether one model is Perceived Touch.
more powerful than another; rather, we seek to Finally, this study did not investigate why on-
examine the possible consequences of Perceived line customers came to the site or how they were
Touch, integrating and extending the understand- attracted to the site. Our model cannot distinguish
ing of existing theories in IS and Marketing to a planned or unplanned first visit. Perhaps the
the eCRM context. visitors were brought to the site by eCRM target
marketing effort via a segmentation technology
Future R esearch (Albert, Goes & Gupta, 2004) or by the brand
image, or by referral, or by search engine results.
This study serves as a starting point for further This is an interesting research question calling
research. While emphasizing the affective im- for future investigation.
pact of Perceive Touch, which has been lacking
in previous research, the labeling of the affec-
tive and cognitive route is more for conceptual C ONC LUS ION
distinction than scientific differentiation. When
discussing affect and cognition, the complexity Drawing on theories in technology acceptance
lies in the individual’s traits or personality or and online consumer behavior, the present study
preferences, demographics, gender, ethnicity or distinguishes the affective and cognitive paths
cultural background. This is a topic we are cur- where Perceived Touch impacts on online cus-
rently researching, exploring a Person-Touch fit tomers’ intention to return in the eCRM context.
model that matches different persons with differ- It provides a theoretical underpinning for the
ent touch options. Furthermore, different eCRM central proposition underlying eCRM system
applications can be used to attract, interact with, design rationale where touch options with rich
or retain customers. This study focused on provid- media, humanized features, and interactivity can
ing understanding only in customer interaction be manipulated to increase affective and cogni-
applications. The customer relationship building tive impacts on customers’ intention to return.
issue for retaining customers is not addressed in This study hence contributes theoretically in
this study as we only tested a one-time encoun- several ways: first, it defines an important new
ter. There are important variables such as com- construct, Perceived Touch, for studying online
mitment (Park & Kim, 2006) and trust (Gefen, customers’ behavioral intention in the eCRM
Karahanana, & Straub, 2003) that will need to be context; second, it provides empirical evidence
explored to fully understand relationship build- that Perceived Touch positively influences online
ing and customer retention in the eCRM context. customers’ Behavior Intention to Return via the
Companies, however, have started to realize that, Affective Route (Perceived Touch Perceived
in the digital economy, competitors are just a click Ease of Use Attitude Behavioral Intention)
44
From High Tech to High Touch
and the Alternative Cognitive Route (Perceived Perceived Usefulness Decision Satisfaction
Touch Perceived Ease of Use Perceived Behavioral Intention). Our results hence caution
Usefulness Decision Satisfaction Behavioral eCRM system designers against putting too much
Intention); third, it establishes Perceived Touch emphasis on technically sophisticated system
as a salient antecedent to Perceived Ease of Use, functions which may not be pleasing to customers
but not directly to Perceived Usefulness, in the in their first encounter with the web site. This
eCRM context, indicating the importance of suggests that e-business managers should invest in
affective impact; forth, this study demonstrates the design and evaluation of the users’ perception
that the behavioral outcome of customer return of touch options to be deployed and pay special
is determined jointly by affective and cognitive attention to affective quality manipulation. The
determinants; finally, the results renewed the positive feelings toward the system are likely to be
importance of an affective construct, Attitude generalized to other aspects of the core service, as
Toward the System, as a mediating variable for theorized by Relationship Marketing researchers
Perceived Touch to predict Behavioral Intention and validated by the present study.
in the eCRM context.
This new predictor, Perceived Touch, is more
fundamental as it has a positive impact on well- R EFER ENC ES
known predictors for behavior intention, such as
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50
51
Chapter IV
A Movie E-Shop Recommendation
Model Based on Web Usage and
Ontological Data
Andreas Aresti
University of Patras, Greece
Penelope Markellou
University of Patras, Greece
Ioanna Mousourouli
University of Patras, Greece
Spiros Sirmakessis
Technological Education Institute of Messolonghi, Greece
Athanasios Tsakalidis
University of Patras, Greece
Abstr act
Recommendation systems are special personalization tools that help users to find interesting information and
services in complex online shops. Even though today’s e-commerce environments have drastically evolved
and now incorporate techniques from other domains and application areas such as Web mining, semantics,
artificial intelligence, user modeling, and profiling setting up a successful recommendation system is not a
trivial or straightforward task. This chapter argues that by monitoring, analyzing, and understanding the
behavior of customers, their demographics, opinions, preferences, and history, as well as taking into consid-
eration the specific e-shop ontology and by applying Web mining techniques, the effectiveness of produced
recommendations can be significantly improved. In this way, the e-shop may upgrade users’ interaction,
increase its usability, convert users to buyers, retain current customers, and establish long-term and loyal
one-to-one relationships.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
52
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
pages. This was very restrictive since it relied structures. The Web will reach its full potential
on users being able to know and specify their when it becomes an environment where data can
preferences in advance. Moving towards more be shared and processed by automated tools, as
intelligent approaches, collaborative filtering well as by people. The notion of being able to
(CF) or social filtering (Goldberg, Nichols, Oki, semantically link various resources (e.g., docu-
& Terry, 1992; Jung, Na, & Lee, 2003) was de- ments, images, people, concepts, etc.) is essential
ployed for implementing personalization based on for the personalization domain. With this we can
knowledge about likes/dislikes of past users that begin to move from the current Web of simple
are considered “similar” to the current one (using hyperlinks to a more expressive, semantically
a certain similarity measure). These techniques rich Web, where we can incrementally add mean-
required users to input personal information ing and express a new set of relationships (e.g.,
about their interests, needs, and/or preferences isAuthorOf, dependsOn, worksFor, hasSubjectOf,
but this posed in many cases a big obstacle, since hasLocation, etc.) among resources and making
Web users are not usually cooperative in reveal- explicit the particular contextual relationships
ing this type of data. In contrast, observational that are implicit in the current Web. The semantic
personalization is based on the assumption that Web will allow the application of sophisticated
we can find “clues” about how to personalize mining techniques, which require more struc-
information, services or products in records of tured input (Markellou, Rigou, Sirmakessis, &
users’ previous navigational behavior (Mulvenna, Tsakalidis, 2004). This will open new doors for
Anand, & Bchner, 2000). effective information integration, management,
Web mining is defined as the use of data min- and automated e-services. Especially e-shops will
ing techniques for discovering and extracting become smarter and more comprehensive; will
information from Web documents and services enhance searching and information retrieval; and
and is distinguished as Web content, structure, will provide intelligent recommendations (Ding,
or usage mining depending on which part of the Fensel, Klein, Omelayenko, & Schulten, 2004).
Web is mined (Kosala & Blockeel, 2000). In the This article introduces an approach for generat-
majority of cases, Web applications base per- ing personalized e-commerce recommendations.
sonalization on Web usage mining. This process We focus on the movie domain and extract the
involves the tasks of gathering and extracting all knowledge about customers and products from
required data for constructing and maintaining usage mining and ontological data in conjunc-
user profiles. These structures can be either indi- tion with customer-product ratings and match-
vidual or aggregate (when working with groups of ing techniques between similar customers. The
users) and include information for users’ behavior underneath ontology consists of movie attributes
as recorded in server logs (Markellou, Rigou, & and the relationships among movies. This rep-
Sirmakessis, 2005a). resentation can enrich the semantics of movies,
A relatively recent development that is foreseen as well as various relationships that may exist
to greatly affect personalization (and more spe- among them in order to increase recommendation
cifically the Web mining subtasks) is the creation effectiveness. This integration provides additional
of the semantic Web (Berners-Lee, Hendler, & knowledge about customers’ preferences and may
Lassila, 2001). Semantic web mining (Berendt, contribute significantly to the search of related
Hotho, & Stumme, 2002) combines the two movies in recommendation process by utilizing
fast-developing research areas of semantic Web information inherently embedded within ontology
and Web mining with the purpose of improving such as semantics of attributes. Even in the case
Web mining by exploiting the new semantic of cold-start problem, new-user problem, and
53
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
new-item problem where no initial behavioral Grant and McCalla (2001) propose the Mov-
information is available, it can offer logical and ieMagician system that combines collaborative
relevant recommendations to the customers. The and content-based filtering by creating relativistic
provided recommendations are expected to have cliques (cliques of users having similar interest
higher accuracy in matching customers’ require- about movies of a certain kind). Movies’ features
ments and thus higher acceptance by them. are organized in a granularity hierarchy, having
The remainder of this chapter is structured broader terms at the top, like “genre” and nar-
as follows. The related work section reviews rower terms at the bottom levels, like “action.”
and compares our approach to other efforts from This way, each movie can be realized as an
various domains. The next section describes the instantiation of this hierarchy and the similarity
e-shop ontological schema. The fourth and fifth of two movies can be determined by how much
sections present data acquisition and analysis tasks their hierarchies overlap. Each time a movie is
correspondingly. The sixith section introduces instantiated a similarity list is created, that is, a
the approach for finding recommendations based list of all similar movies to that movie. User pref-
on Web usage mining and ontological data. The erence is acquired through an overall rating on a
seventh section summarizes the most interesting 7-point scale about the movie or through individual
conclusions of the article and presents open issues feature rating (i.e., actors, plot, etc.). In order to
and thoughts for future research. predict a rating for an unseen movie, the system
calculates cliques of users having similar interest
with the active user about the specific movie and
Rela t ed Work its similarity list and then ranks users with regard
to how similar they are with the active user. The
The need to provide personalized services over recommended rating will be the rating of the
the Web has been a strong driving force behind most similar user in the clique. A very important
numerous research efforts. Most of movie e-shops feature that MovieMagician incorporates is the
combine CF and content-based filtering tech- explanation of movie recommendations by means
niques; CF (Basilico & Hofmann, 2004; Goldberg of personalized reviews.
et al., 1992; Jung et al., 2003; Resnick, Iacovou, Melville, Mooney, and Nagarajan’s (2002)
Suchak, Bergstrom, & Riedl, 1994; Sarwar, approach called content-boosted collaborative
Karypis, Konstan, & Riedl, 2001; Shardanand filtering uses a content-based predictor to create a
& Maes, 1995) typically based on product rat- full pseudo user-ratings matrix based on the sparse
ings explicitly defined by the users. The system user-ratings matrix provided by the EachMovie
recommends which products have been evaluated dataset. Then, CF is used by applying the Pearson
positively by similar user(s) whose ratings are in correlation formula on the full pseudo user-rat-
the strongest correlation with the current user. ings matrix. The content-based predictor uses a
In a general perspective, it tries to model the naïve Bayesian text classifier on the movie content
way people take recommendations from friends, having a vector of bag-of-words like title or cast
which would be the ideal situation. Content-based as input and producing the predicted rating to the
filtering (Balabanovic & Shoham, 1997; Mooney unseen movies as output. The CF algorithm used
& Roy, 2000; Pazzani, 1999) on the other hand, is a neighborhood-based algorithm that firstly
uses product features and recommends products computes with the Pearson correlation the similar-
to users that have similar features with those they ity of all users with the active user, it selects the
rated highly during the past. N top highest similarities, and then it computes
54
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
the prediction with the weighting combination of The rating of the active user is acquired by the
the top-N most similar users. weighted mean of the neighborhood users’ ratings.
Garden (2004) proposes a cross-domain system Afterwards the CF recommendation list is fed to
called Recommendz that uses both collaborative the content-based filtering algorithm. Here, each
and content-based filtering to generate recom- movie’s rating is added to the score of each of the
mendations and the final recommendation is movie’s features (actors, directors, genre, etc.)
created with a weighted combination. It provides and then the mean is calculated for each feature.
users with the ability, just like MovieMagician, The three scores calculated express the degree
to rate individual features of a movie. Moreover, of user’s preference towards each feature. Then,
the system encourages the provision of different for each actor, the system searches the movies
types of feedback: overall rating of movie, selec- they have appeared in and adds up the actor’s
tion of a relevant movie’s feature, specification score to each movie’s score. The same procedure
of quantity of that feature in the item, and of the is followed for the directors and genres. Finally,
degree to which the presence of this feature is the average of the scores is calculated for each
positive or negative. Also, users can add their movie and so the final predicted ratings for the
own features that they think best characterize movies are acquired.
a movie, although such ability can import many Schafer, Konstan, and Reidl (2004) propose a
redundant features. The hybrid filtering algorithm slightly different kind of recommendation model,
incorporates three similarity metrics to measure a meta-recommender system. A meta-recom-
the similarity between two users: (1) Pearson mender system accesses many different informa-
correlation of the overall ratings of the items, (2) tion sources and/or recommender systems and
Pearson correlation of particular features, and returns results related to a user query that reflects
(3) Pearson correlation of the common features an ephemeral need. An instance of this model
rated. These three similarities are combined into for the movie domain, Metalens, has an initial
a weighted average to produce the recommended preference screen where the active user can select
rating of the active user towards a movie. the features that the recommended movies like to
Salter & Antonopoulos (2006) propose Cin- have and the weight of each feature. The system
emascreen (2006), a system that provides movie forms the user demands as a query and forwards it
recommendations. Firstly, it uses collaborative to the sources of information, specifically Yahoo
filtering to produce an initial recommendation list Movies, Rotten Tomatoes, and Movielens. Yahoo
and then it passes that list as input to a content- Movies provides movie information; Rotten To-
based algorithm. This way the system bypasses the matoes provides movie reviews; and Movielens
new item problem, as the final recommendation provides personalized recommendations based
list may contain movies that it has not rated, but on CF. The results returned from all sources are
it has features similar to movies that other people united and ranked according to the extended
have rated. The system uses a Web robot to col- Boolean model and then are displayed to the
lect information about movies and show times active user. The strengths of such recommender
from multiple sources on the Internet. The CF systems are the capability for both ephemeral and
algorithm is a typical neighborhood-based one, persistent recommendations and the combination
that is, it calculates the users having similar rat- of multiple recommendation techniques. A recent
ing history with the active user using the Pearson optimisation on Metalens’ interface had resulted
correlation. However, the system uses a threshold to DynamicLens (Schafer, 2005), which uses Met-
to distinguish significantly similar users, that is, alens inner engine as is and additionally unites
users showing high similarity with the active user. the preference and recommendation screens into
55
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
one. The user can select the features he/she likes based recommendation algorithms are used to
and see dynamically the recommendations they recommend papers seen by similar people on their
induce, making it easier for the user to select the current topics of interest. They use the ontological
correct features and weights. relationships between topics of interest to infer
Beyond the movie domain, a variety of applica- other topics not yet browsed and recommend
tions that combine algorithms and techniques from them to the users.
Web usage mining, semantic Web, and ontologies Mobasher, Jin, and Zhou (2004) introduce an
can be reported. The variety of these applications approach for semantically enhanced CF. In this
is a solid indication of the area maturity. In the work, structured semantic knowledge about items,
next paragraphs some characteristic applications extracted automatically from the Web based on
are presented. domain-specific reference ontologies, is used in
Berendt (2001) proposes concept hierarchies conjunction with user-item ratings (or weights) to
for analyzing complex Web usage data of visitors. create a similarity measure for item comparisons.
These hierarchies are used as a basic method for Provided experimental results on two different
aggregating Web pages. Moreover, interval-based data sets demonstrate that their approach yields
coarsening and its inverse zooming are described significant advantages both in terms of improving
as a technique to mine Web usage at different levels accuracy, as well as in dealing with very sparse
of abstraction. Basic and coarsened stratograms data sets or new items.
have been exploited to visualize Web usage at Choa and Kimb (2004) propose a recommenda-
different degrees of detail. Using a case study of tion methodology based on Web usage mining and
online shopping with an anthropomorphic agent product taxonomy to enhance the recommendation
has been demonstrated that this kind of abstraction quality and the system performance of current CF-
offers new possibilities of understanding complex based systems. Web usage mining populates the
paths through a semi-structured, interaction-rich rating database by tracking customers’ shopping
environment. behaviors on the Web, thereby leading to better
Eirinaki, Lampos, Paulakis, and Vazirgiannis quality recommendations. The product taxonomy
(2004) propose a recommendation method that is used to improve the performance of searching
integrates content semantics and navigational for nearest neighbors through dimensionality
data. Their technique uses the terms of a domain reduction of the rating database.
ontology in order to uniformly characterize both Our intention was to construct a new recom-
the content and the users’ navigational patterns mendation model based on Web usage mining and
and thus produce a set of recommendations that ontological data. Most movie RSs do not take into
are semantically related to the user’s current visit. consideration semantic characteristics resulting
The work deals with the important problem of in poor prediction accuracy. Without the deeper
multilingualism, which arises when the content of semantic knowledge about the underlying domain,
a Web site appears in more than one language and the RS cannot handle heterogeneous and complex
is integrated in the personalization system SEWeP objects based on their properties and relationships.
(Eirinaki, Vazirgiannis, & Varlamis, 2003). Our approach combines usage and ontological data
Middleton, Shadbolt, and De Roure (2004) in the off-line phase in order to generate the user
describe an ontological approach to user profil- navigational model. It distinguishes between new
ing within recommender systems, working on and known user and further incorporates ratings
the problem of recommending online academic and similarities with other users in the online phase
research papers. The papers are classified using to sort the recommendations. By combining dif-
ontological classes. Collaborative and content- ferent available information channels, we succeed
56
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
to better meet users’ needs and preferences. The can be depicted as a tree, where the root represents
advantages of our approach include the capability the most general class, the internal nodes all inter-
of application in cross-domain recommenders and mediate classes, and the leaves the specific items.
the simplicity compared to other recommendation Its role is important, especially in the knowledge
techniques. Moreover, it overcomes the drawbacks discovery process, since it represents e-shop’s
of CF: new-item problem where a new item is not dependent knowledge and may affect the results.
recommended unless a notable number of users In this framework, the proposed recommenda-
rate it and new-user problem, where a new user tion approach is based on an ontological schema
is registered and has not rated enough items so and has been incorporated in a pilot e-shop that
that the recommender can make accurate recom- rents movies to customers. Specifically, the Web
mendations. The integration of ontological data site consists of a collection of pages containing
provides additional knowledge about customers’ information about movies’ attributes such as title,
preferences and allows the production of logical category, studio, actor, director, producer, awards,
and relevant recommendations. In the next sec- year, duration, audience, story, and so forth. The
tion, we introduce a movie RS approach that tries initial data has been retrieved from the Internet
to overcome the shortcomings of most RSs and Movie Database (http://www.imdb.com), organ-
produce full personalization. In this way, we can ized in the ontological schema and enhanced in
offer every user different recommendations that order to comprise a rich superset covering all
change during their navigation. needed concepts and relations.
The underneath ontological schema for-
mulates a representation of the e-shop domain
E-s hop Ont ologic al by specifying all of its concepts, the relations
S c hema between them, and other properties, conditions,
and “regulations.” It allows semantic annotation
In many online shops a basic classification schema and has the ability to perform semantic query-
for the provided items is available. This schema ing and ontology-based browsing. The ontology
Figure 1. Part of the e-shop ontology (Extended version of Mobasher et al., 2004)
Movie
Title Category Actor Director Producer Studio Award Year Duration Audience Story
Person
Award
57
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
58
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
sumers and e-businesses. This model represents data are completed. Moreover, data compression
the overall consumer purchase decision cycle and algorithms are used in this stage in order to reduce
investigates the issues that affect Web users, from the size and dimension of the data and achieve
selecting a specific e-shop to the delivery of the efficient mining of the data. The problems that
product and the overall assessment of the shop- we face during this phase include: user identifica-
ping experience. This process has been divided tion, session identification, path completion, and
into 13 states under three successive stages: (1) transaction identification.
outside the e-shop, (2) inside the e-shop, and (3)
after sales, with each stage analyzed on the ba- • User identification: Registration and log-
sis of customer states and transition conditions. in/password procedures, as well as the
Special focus is set on identifying the data that combination of other heuristics are used
the Web site gathers from customers’ interac- for assuring the identification of unique
tions and that can be used for mining purposes. users.
The most important data sources that our model • Session identification: Session is a set of
uses are: registration, log-in/password, history user clicks across one or more Web servers
file, navigation, search keywords, support, and and session identification aims to group the
product/service evaluation. page accesses of each individual user into
sessions. Time windows are used to identify
the different sessions of a user.
Dat a Analys is • Path completion: This problem is caused
from local caching and proxy server activi-
The step following the data acquisition (a task ties creating gaps in the users’ access paths.
that is in continuous execution) and the building Referrer log for identifying the page that the
of user profiles is data analysis. Initially, some request came from and also the site topology
preparation activities take place in order to clean are used to fully cover this issue.
the data and facilitate their manipulation. Data • Transaction identification: This problem
cleaning removes all irrelevant entries from the (grouping the references of each user) is
Web server logs in order to facilitate their ma- solved by using time windows that parti-
nipulation. For instance, entries that do not reveal tions a user session based on time intervals
actual usage information are removed and missing (specified thresholds).
59
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
Then follows the application of statistical and navigate the e-shop; select movies from the online
data mining techniques in order to detect interest- cataloge or use the search facility; be informed
ing patterns in the pre-processed data. The most about their features, for example, story, cast, and
well-known techniques used for data analysis in- so forth; add them to his/her basket and pay for
clude clustering (Hand, Mannila, & Smyth, 2001), the renting total. Moreover, the user can rate a
classification (Chakrabarti, 2003), and association specific movie using a range from 1 to 10, where 1
rules mining (Agrawal & Srikant, 1994). means a very bad movie and 10, a very good one.
Our recommendation approach is depicted So “excellent” movies have ratings from 8 to 10,
in Figure 2. As we have mentioned before, the “good” movies have ratings 6 to 7, “indifferent”
pilot e-shop rents movies to the customers. The movies have ratings 4 to 5 and “poor” movies
production of recommendations is based on Web have ratings 1 to 3. But other than that, the model
usage mining techniques and semantic metadata, recommends to the user the movies with the upper
as well as customer-product ratings and matching ratings from a specific list of movies. This list is
techniques between customers. The operation created according to the algorithm presented in
of the e-shop is straightforward. In the case of next sections. The approach incorporates clas-
a new customer the e-shop motivates the user to sification and association rules mining. In the
become a member by filling in the registration following sections, the way that recommendations
form. In this way the e-shop collects the necessary are produced is described.
initial information about the customer in order to
support him/her in their navigation. In the case Customers Classi.cation
of an old customer, the e-shop identifies them
via a log-in/password procedure and provides The main objective of the classification step is to
a personalized greeting. Then the customer can assign customers to a set of predefined classes.
These classes represent different user profiles,
and classification is performed by using selected
features with high discriminative ability as refers
to the set of classes describing each profile. The
Table 1. Part of a user profile features that determine a specific class can be
age “30” tuned and typically include age, sex, nationality,
sex “Male” occupation, as well as education, and preferences
occupation “seller” (Registration Form’s Data). For example, from
education “higher” the class “rent comedies,” customers that like to
rent comedies and customers that do not can be
extracted. Table 1 depicts the profile of an active
Table 2. A snapshot of the database
buyer. Consider the attributes and the values pre-
userID age sex occupation education
class:rent
comedies
sented in Table 2 and suppose we want to decide
if the next unknown user X rents or not com-
1 30 F engineer higher yes
edies: X={age=22, sex=F, occupation=student,
2 25 M student medium no
education=medium}.
3 34 F salesman lower yes
Classification requires a training data set with
4 18 M student lower yes
pre-assigned class labels, since it is categorized as
5 45 F director higher no
a supervised machine learning technique. Then
… … … … … …
the classifier (by observing the class assignment
100 28 F artist higher yes
in the training set) learns to assign new data
60
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
items in one of the classes. It is often the case The model tracks all user actions as successive
that clustering is applied before classification to page requests recorded in server logs. Log files are
determine the set of classes. then cleaned from all redundant information (such
We have based our categorization model on a as secondary, automatically generated requests
Naïve Bayes classifier (Hand et al., 2001), where for page images, etc.). Combining the remaining
each snapshot X consists of a set of attributes x1, requests with information about the way the Web
x2, … xn. We have defined m classes C1, C2, … site content is structured, the system distills user
Cm. Given an unknown snapshot X for which we accesses to movies pages. The set of movies that
do not know its class, the classifier predicts that have been accessed by a certain user during all
X belongs to the class with the higher probability. past visits to the e-shop are stored in the user
The classifier assigns X in class Ci if P(Ci|X) > profile, and this is where the generator seeks for
P(Cj|X) for 1≤j≤m, j≠i. According to Bayes theo- discovering association rules.
rem P(Ci|X)=P(X|Ci)*P(Ci)/P(X). P(X) is constant An association rule example is {moviei,
for all snapshots, so we need to maximize the moviej} -> {moviex}, with support=0.02 and con-
expression P(X|Ci)*P(Ci). For categorizing X, fidence=0.68. This rule conveys the relationship
we compute the probability P(X|Ci)*P(Ci) for that users who accessed moviei and moviej also
each class Ci. X will be assigned in class Ci if tend (with a confidence of 68%) to be interested
P(X|Ci)*P(Ci) > P(X|Cj)*P(Cj) for 1≤j≤m, j≠i. in moviex. Support represents the fact that the
This means that X is assigned in the class with set {moviei, moviej, moviex} is observed in 2%
the maximum probability. the sets of movies accessed. Other examples of
This classification model may be revised as association rules are the following:
time passes and updated based on collected trans-
actions data. User assignment to classes might • Sixty percent of users that rent the movie
also be used for provoking interactions among Lord of the Rings—The Fellowship of the
users and enhancing, this way, collaboration and Ring in sequence select Lord of the Rings—
communication, as well as for allowing e-shop to The Two Towers and Lord of the Rings—The
perceive a useful insight of the “virtual communi- Return of the King.
ties.” For each class a set of recommendations is • Seventy-five percent of users who visited
attached. These recommendations are lists with, the Shrek movie belong to the 15-20 age
for example, the best and worst movies that other group.
users “close” to the current have contributed. • Twenty-five percent of users who rent the
movie Harry Potter and the Philosopher's
Association R ules Mining on Stone, were in the 20-30 age group and lived
C lickstreams in Athens.
Association’ rules connect one or more events. The discovered association rules may use as
Their aim is to discover associations and cor- input, either the sets of movies accessed by all
relations between different types of information users, or just the ones accessed by users that be-
without obvious semantic dependence. Moreover, long to the same class as the current one. Another
correlations between pages not directly connected option is to use both approaches and suggest the
and previously unknown associations between union of discovered topics. This scenario is very
groups of users with specific interests may be useful when association rules inside classes fail
revealed. to produce reliable recommendations due to lack
of adequate input.
61
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
Pr oduct ion of Movie define as UK the set of users in the class that have
Re c ommendat ions similar attributes with the current one. These at-
tributes are the information that the user gave to
This section describes in detail the algorithm the system after filling the registration form. For
used for the production of movie recommenda- example age, sex, occupation, education, prefer-
tions. These recommendations are suggested ences, and so forth. Every user Ui that belongs
to the customer in the form of “customers who to UK is associated with a number si that depicts
liked/rented this movie also rented…”. The filter- the similarity of Ui with the current user accord-
ing procedure is based on different kinds of data. ing to the aforementioned attributes. We define
More precisely it depends on the cluster in which as UM the set of users that belong to U K and have
the user was classified; his/her click-streams; seen movie M. Every class is attached with a set
transaction history and ratings; and the Web site of movies. We define as Rcluster the recommended
ontology metadata. The main idea is to generate movies according to the user’s class.
an initial set of recommendations combining all Continuing, we define as Wcurrent the current
the aforementioned data and then prune (using session window, which contains the movies that
a pre-defined threshold –α) this set and sort the the user has accessed in the current transaction.
remaining items in an ascending order (first the We can produce recommendations in accordance
movie with the higher predicted rate). to the user’s current clickstream by using associa-
We separate between two cases according to tion rules and the site ontology. So R rules-current are
the existence of user’s history data: the recommendations that derive from the current
session window and association rules mining and
•` Case 1: When the user is an existing one Rontology-current are those that derive from the current
and system has kept track of his history. session window and the ontology.
We use two methods for processing the in-
We define as MHistory the set of movies that the formation of current sessions because by their
user has seen and rated. In this case, the system combination we achieve better predictions. Each
according to MHistory finds the users “close” to method uses different ways to predict user’s pref-
him/her with similar history and ratings. We define erences, that is, association rules encapsulate the
this set of users as UL. Every user Ui that belongs navigational behavior of users, while the ontology
to UL is associated with a number si, which depicts reflects the connections between items’ attributes
the similarity of Ui with the current user. Also, and discovers patterns that explain user’s prefer-
we define as UM the set of users that belong to UL ences. In sequence, we name Rinitial the initial
and have seen movie M. Moreover, according to recommendation set that will be filtered by the
MHistory the model uses the ontology to discover algorithm and ordered in ascending form. It is
the associations between the items that the user computed by the union of Rontology-current, R rules-current,
has rated. Therefore, we define as Rontology the list and in the first case (when the user has historical
of recommendations that derive from the ontology data) we use the Rontology, while in the second case
based on user’s history file. (when the user is a new one) we use the Rcluster.
Consequently, we compute Rinitial for each case
• Case 2: When the user is a new one. as follows:
In this case, the system uses information from • Case 1: Rinitial = Rontology-current ∪ R rules-current ∪
the user’s registration and consequently the initial Rontology
class in which he/she has been assigned to. We
62
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
• Case 2: Rinitial = Rontology-current ∪ R rules-current ∪ (movies that belong to C). A limitation that arises
Rcluster in this step concerns the percentage of common
rated movies in relation to all rated movies. For
The algorithm used for producing recom- example, if the user X has rated 60 movies, R X=60,
mendations to the e-shop customers is presented and the user Y has rated 40 movies, RY=40, and
in Table 3. As far as similarity among users is their common movies are only 5, C=5, then these
concerned, we consider that every user has a users are not similar. For considering two users
vector with the movies he/she has rated (i.e., a as similar they should have in common more than
history vector). For example, let X and Y be two 50% of the one with the fewer rated movies.
users. We define as XR and YR their history vec- Another limitation of our approach is that the
tors respectively and R X and RY the sets with the algorithm uses users’ ratings. If users do not take
rated movies. Then C is the set with the rated the time to evaluate the movies that they saw then
movies that they have in common, so C = R X ∩ the system will record only what movies the users
RY. If the users do not have any movie in common saw but will not understand which of them were
then C=∅. Additionally, we define XC and YC the liked most. Also, this raises some problems with
vectors with the movies that both users have rated the computation of similarity between users. On
63
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
the other hand the algorithm could extract us- can only be modified if the user changes his/her
ers’ preferences from their choices according to preferences, that is, his/her registration data. On
e-shop’s ontology schema and association rules the other hand, we have used the association rules
mining. and the ontology of the site. This information
Then the similarity between users X and Y is derives dynamically from user’s navigational
the distance between vectors XC and YC and can activity. Rules’ extraction is performed during the
be computed from the following type: off-line process, while the discovery of the proper
s = sim( X C , YC ) =
ones (according to the current session window) is
performed during the online process. Association
∑
N
( R( X C , M i ) − R(YC , M i )) 2
i =1 rules are created by Apriori Algorithm (Agrawal,
Imielinski, & Swami, 1993) and the algorithm is
Note that sim(XC,YC) is a heuristic artifact that implemented in C++.
is introduced in order to be able to differentiate For the evaluation of our approach we use two
between levels of user similarity (e.g., to be able to data sets. The first set includes 100 snapshots of
find a set of “closest peers” or “nearest neighbors” the ontological scheme of the pilot movie e-shop.
for each user) and at the same time simplify the A spider is used to mine the information from
rating estimation procedure. Different recom- HTML pages and store them in the database. The
mendation approaches can use their own user second set includes data for the navigation users’
similarity measure, as long as the calculations behaviors that was collected from the log files.
are normalized. The most commonly used simi- This set includes now 25 users and 218 separate
larity measures are Euclidean Distance, Pearson visits. Then, we follow the next steps:
Correlation, Cosine, and so forth (Adomavicius
& Tuzhilin, 2005; Papagelis, 2005). • We collect samples of users’ ratings for the
When the user is a new one, we compute the movies that they have seen.
similarity among users in the same class. In this • For each user u we calculate the rating rum
case we use the attributes that derived from the that the model predicts the user will give to
registration form. These attributes have a certain the movie m that he/she has not see.
position in the vector that describes the user’s • We present to the user the Web page that
profile. For example, if the attributes are sex, includes all information about the movie m
age, occupation, and education an instance of that has the biggest rum .
this vector for user X could be {0, 22, 3, 2}. This • We ask the user to rate the movie m without
means: {sex=Male, age=22, occupation=student, seeing the movie based on the Web page
education=medium}. In other words, every at- data.
tribute takes values that correspond to certain • We ask the user to see the movie and re-rate
information, for example, occupation=3 denotes it.
a student.
To sum up, we have used the explicit data that We define as estimated rating erum the rating
the user provides during registration in order that the user u gives without seeing the movie m
to categorize him/her into a class of predefined and as actual rating erum the rating after the user
groups. These groups (classes) are static and gen- has seen the movie. We use the mean absolute error
erated according to the system’s characteristics. (MAE) to calculate the mean deviation between
A user can belong in many different classes. This the prediction and the actual ratings of a user.
classification cannot be altered in accordance First, we calculate the absolute error (AE) of every
to user’s navigational activity. It is static and it prediction and then we compute the MAE as the
64
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
sum of all AE divided by the number of predic- strengthened by the combination of ontology, his-
tions. The smaller the MAE the better technique tory files, registration data, usage data, and asso-
efficiency is. Specifically, we calculate the MAE ciation rules that incorporate essential knowledge
for evaluating the RS model in conjunction with for the navigational behavior of users. Screenshots
the estimated rating ( Eer ) and actual rating ( Ear ) of the RS are depicted in Figure 3.
and between them ( E ): ear
• Eer =
∑ ∑
u∈U ’ m∈M ’
erum − rum , Con c lus ion and
# predictions
Fut ur e Work
• Ear =
∑ ∑
u∈U ’ m∈M ’
arum − rum , In this article we introduce a recommendation ap-
# predictions
proach for e-shops that extends Web usage-based
techniques by incorporating semantic annotations,
• Eear =
∑ ∑
u∈U ’ m∈M ’
erum − arum . in order to better meet the customers’ preferences.
# predictions
The preliminary evaluation experiments show
that the whole process has been enhanced by the
for measuring the accuracy of recommendations combination of site’s ontology, user’s history files,
where U' is the set of users for which the RS made user’s registration data, and association rules,
predictions and M' is the set of movies that they which encompasses all necessary knowledge
have not seen yet. The experiments showed firstly about users’ navigational attitudes. Currently we
that estimated ratings from the actual ratings of are working on collecting further data in order
user differ by 8.99%. The RS predicted ratings to extensively evaluate the approach using more
rum deviates from the estimated ratings by 9.68%, metrics such as coverage that measure the ability
while from the actual ratings by 10.38%. These of the system to produce all pages that are likely
percentages indicate that the whole process is users to visit.
65
A Movie E-Shop Recommendation Model Based on Web Usage and Ontological Data
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69
Chapter V
Search Engine Optimization an
Action Research Project:
Initial Results and Two Year Follow-Up
Ross A. Malaga
Montclair State University, USA
Abstr act
A Web site that wants to increase its number of visitors can pay for search engine ads or attempt to im-
prove its natural search engine ranking. Nobody really knows, which, if either, of these methods provides
a positive return on investment. A search engine optimization (SEO) project was undertaken at a new
e-commerce site. The site’s search engine rankings and traffic were measured after each phase in the
project. The results indicate that SEO is an effective method for improving search engine rankings and
site traffic. In addition, the costs and benefits of the SEO project are compared with a pay-per-click (PPC)
search marketing campaign. The SEO project proved more cost effective than the PPC campaign.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Search Engine Optimization an Action Research Project
A recent report from iProspect (2006) revealed was appropriate in this instance since the com-
that 62% of search engine users click on results pany wanted the authors to apply their knowledge
appearing on the first results page and 90% click of search engine optimization to their problem.
on results on the first three pages. In addition, In addition, both the authors and the company
MarketingSherpa’s study (2005) of the search en- believed that action must be taken in order to
gine marketing industry shows that Web sites that solve the problem of low site traffic. The action
are optimized to appear higher in search engine research methodology has been used successfully
results pages (SERPs) have a higher conversion in a number of information systems studies (Kohli
rate (sales per visit) (4.2%) than PPC ads (3.6%). & Kettinger 2004; Street & Meister 2004) and is
Clearly, it is important for a site to rank well on the discussed in more detail below.
SERPs—within the first three pages and prefer- This research makes the following three
ably on the first page. Therefore, some Web site specific contributions to knowledge in the fields
owners attempt to manipulate where their sites of search engine optimization and search engine
appear on the SERPs through a process called marketing: (1) it examines SEO in the context of
search engine optimization (SEO). a working e-commerce site, (2) unlike previous
According to a report by Sherman (2005), 45% research it uses an integrative approach to SEO,
search marketers cannot determine whether SEO incorporating three main concepts—indexing, use
or pay-per-click advertising provides a higher re- of links, and on-site factors, and (3) since it uses an
turn on investment. Sherman (2005) specifically e-commerce site, the monetary value of the SEO
found that, “35% [of search marketers] said that effort can be determined and compared to other
algorithmic search engine optimization produces search engine marketing approaches—namely
higher ROI than search ads. Just 11% said that pay-per-click advertisements.
search engine optimization produces lower ROI The next section of the chapter provides a
than search advertising. Fully 45% said they review of the literature on search engine optimi-
cannot determine whether SEO or pay-per-click zation. The research approach and actions taken
provides a higher ROI.” (para. 10). are then described. Conclusions are then detailed,
The goal of this chapter is to ascertain the along with an analysis of the value of search en-
impact of a search engine optimization (SEO) gine optimization as compared to pay-per-click
project on Web site traffic and determine if such advertising. Finally, the chapter concludes with
a project provides monetary value to the business. a discussion that examines the limitation of this
The goal was achieved by implementing an SEO study, contributions for academic and practitioner
project at a new e-commerce Web site, called My- research, and future directions.
BestiPodStuff.com (this name has been changed
to protect the identity of the actual site) that sells
iPods and iPod accessories. At the time of the LIT ER AT UR E R EVIEW
study, the site has little traffic and no profits. The
goal of the SEO project was to increase the site’s A search engine is simply a database of Web pages
ranking on the search engines and drive more (called an index), a method for finding Web pages
traffic (and eventually profits) to the site. and indexing them, and a way to search the data-
Since the goals of the research were aligned base. Search engines rely on spiders—software
with the company’s goals and an intervention (in that follows hyperlinks—to find new Web pages
the form of a search engine optimization project) to index and insure that pages that have already
was required in order to gather data, an action been indexed are kept up to date.
research approach was chosen. Action research
70
Search Engine Optimization an Action Research Project
There are currently dozens, perhaps hun- results of major search engines” (p. 202). This
dreds, of search engines available on the World process includes manipulation of dozens or even
Wide Web (WWW). However, the majority of hundreds of Web site elements. For example,
searches are conducted on just three sites—Google some of the elements used by the major search
(www.google.com), Yahoo (www.yahoo.com), engines to determine relevance include, but are
and MSN (search.msn.com). Figure 1 shows the not limited to: age of the site, how often new
relative share of searches conducted by each of content is added, the ratio of key words or terms
these sites. Since these three sites account for to the total amount of content on the site, and the
almost 84% of all searches, this study focused quality and number of external sites linking to
exclusively on them. the site (Sullivan 2003).
Although more complex searches are possible,
most Web users conduct simple searches on a key R eview of Academic Literature
word or key phrase. Search engines return the
results of a search based on a number of factors. Zing and Lin (2006) state, “As a new phenomenon,
All of the major search engines consider the rel- while SEO is drawing much of the attention in
evance of the search term to sites in its index when online advertising industry, there has been very
returning search results. So a search for the word few published academic research in this area”
“car” would return Web pages that have something (p.519). However, the academic community
to do with automobiles. The exact algorithms used is beginning to turn its attention to SEO. Sen
to determine relevance are constantly changed (2005), for example, developed a purely theoreti-
and often kept secret. For example, Google’s cal model to compare search engine optimization
algorithm considers over 60 factors to determine with paid placement. While he found that SEO is
relevance (“Google’s Patent,” n.d.). never an optimal search marketing strategy, his
model assumes that SEO always costs more than
S earch Engine Optimization paid placement and it does not consider that paid
advertisements usually produce lower conversion
Curran (2004) states, “search engine optimization rates (MarketingSherpa 2005).
is the process of improving a website’s position so Raisinghani (2005) and Curran (2004) point
that the webpage comes up higher in the search out there are a number of steps a Webmaster can
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Search Engine Optimization an Action Research Project
take to raise a Web site’s search engine ranking. review of practitioner best practices. This review
Some of these steps include—fine tuning the site’s revealed two major gaps in the academic literature.
title tag and ensuring that the search engines can First, practitioners point out the importance of
easily index the site. Curran (2004) also sug- attracting the search engine spiders in order to
gests conducting extensive key word or key term have them quickly index a site (Morgan and Hunt
research to determine what people are searching 2006). Second, all of the major search engines
for. In addition, he stresses the importance of consider the number of back links (incoming
choosing a good site title, as well, as proper use links) to a Web page (Sullivan 2003). Back links
of Meta tags and site content. are links coming into a Web page from external
Raisinghani’s and Curran’s recommendations sites. The precise manner in which search engines
are further supported by the work of Zhang and use back links varies considerably. Google, for
Dimitroff (2005b) who examined a large number instance, places a considerable amount of weight
of SEO components in controlled experiments. on back links (Google 2004). Each page indexed
Their results show that sites that make proper use by Google is given a Page Rank (PR) based on
of Meta tags achieve better search engine results. the number and quality of back links to the page.
Zhang and Dimitroff (2005a) also found that sites Page Rank is measured from 0 to 10 and higher
with key words that appear in both the site title and numbers are better. A site with a high PR will
throughout the site’s text have better search engine usually rank higher in Google’s SERPs than a
results than sites that only optimize the title. lower PR site. Web sites can increase their own
The academic community has contributed PR by having high PR pages link to them.
to the development of links-based ranking algo-
rithms. Links-based algorithms use the number of C omprehensive S EO Approach
incoming links, their anchor text, and the linking
site to determine, in part or whole, where a target We combined the academic and practitioner
Web site should rank. The most successful imple- literature to develop the following three phase
mentation of a links-based ranking algorithm is approach to search engine optimization: (1) index-
Google (see Brin and Page (1998). However, very ing, (2) back links, and (3) on-site optimization.
little research has been done on how links can be Indexing refers to the process of getting a site
manipulated in order to improve a site’s ranking included in a search engine. Therefore, this is an
in the search engines. obvious first step. Back links are one of the major
Curran (2004) points out the importance of a factors used by the three main search engines to
site’s inclusion in the various search engines as a determine relevance. They also play a potential
part of SEO. However, Curran only makes some role in indexing, since search engine spiders will
general recommendations concerning paying for follow links in order to find new sites. Thus, this
inclusion in certain directories. Rapidly attracting was a natural second phase. Finally, many of the
search engine spiders has been largely overlooked recommendations made by Zhang and Dimitroff
in the academic literature. (2005a; 2005b), Raisinghani (2005), and Curran
(2004), such as use of Meta tags, good site title, key
R eview of Practitioner Literature words in content can be grouped into a category
called on-site optimization. On-site optimization
Since an action research approach was used, includes any Web site element that can be directly
relying solely on the academic literature was not manipulated by the Webmaster.
appropriate. We therefore conducted an extensive
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Search Engine Optimization an Action Research Project
The conceptual framework for this research is A widely cited definition of action research comes
detailed in Figure 2. from Rapoport (1970), who states, “action research
As the figure shows, site profit is dependent, aims to contribute both to the practical concerns of
in part, on site traffic. As traffic increases, rev- people in an immediate problematic situation and
enue should increase as well. Search engines to the goals of social science by joint collaboration
are a major traffic driver for many sites. Search within a mutually acceptable ethical framework”
engine traffic may be increased through the use (p. 499). According to Baskerville and Wood-
of pay-per-click advertising or search engine op- Harper (1996), “action research methods are
timization. Finally, search engine optimization highly clinical in nature, and place IS researchers
is influenced by indexing, back links, and on-site in a `helping-role’ within the organizations that are
optimization. being studied” (p. 1). In this case the researchers
A number of factors, such as hosting costs and were the search engine optimization consultants.
general overhead, may have a negative impact In addition, the goal of the project and the research
on site profit. However, in this research we are goals were closely aligned.
interested only in those factors that are involved This study uses the five step action research
with increasing traffic. Thus pay-per-click adver- cycle (ARC) put forward by Susman and Evered
tising and the purchase of back links are shown (1978). The five ARC steps are: (1) diagnos-
as negative factors (dashed lines). ing, (2) action planning, (3) action taking, (4)
Other
Indexing Advertising
Methods
Average
Profit Per
Sale
On-Site Factors Search Engine
• Meta Tags
• Title
Ranking
• Key Word Web Site Site Profits
Density Traffic
Pay-Per-Click
Back Links
Advertising Conversion
Rate
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Search Engine Optimization an Action Research Project
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Search Engine Optimization an Action Research Project
site also had an average profit per sale of $18.25. engines, like Yahoo, charge for expedited review
Thus, for every 100 visitors the site would expect of submitted sites, but do not guarantee the site
a profit of about $21.90 ($18.25 x 1.2). A PPC will be included in the search engine’s index.
advertising campaign would cost about $40 for Second, the Webmaster can attempt to have a
every 100 visitors—resulting in an expected loss site that is already indexed include a link to the
of $18.10. Clearly, a PPC campaign would not be target site. As the search engine spiders revisit
a profitable endeavor. the indexed site, they will follow the link to the
In August 2005 the site’s owner decided to new site.
implement a search engine optimization initia- Third, there are a number of SEO tricks that
tive. The authors were brought in to oversee the have been reported as successfully having new
SEO project. The goal of the project was to have sites indexed very quickly. These include using
the major search engines to index the site and multiple Blogs with a link to the target site (Abayo-
rank it well for chosen keywords and phrases. miPaul 2005) and using really simple syndication
Based on an analysis of the competition it was (RSS) feeds (Wall 2005). The RSS feed approach
determined that the site should be optimized for is further detailed in the next section
the key phrase “discount iPod accessories.” As
a baseline the site’s search engine rankings and Action Taking
traffic statistics were recorded at the beginning
of the project (see Table 1). RSS is a method for syndicating Web based con-
tent by creating an extensible markup language
Intervention One: (XML) formatted file. Each RSS XML file con-
Indexing (Yahoo and MS N) tains title, link, description, and other optional
information.
Diagnosing According to Wall (2005) adding an RSS feed
from a Web site to either MyYahoo or MyMSN
Indexing is concerned with quickly getting the (both of these allow users to develop a custom
search engines to index the site. It is the obvi- Web portal) will make their associated spiders
ous first step in any search engine optimization aware of the site and thus index it quickly. Since
project. Morgan and Hunt (2006) point out Google did not have a customized portal at the
the importance of attracting the search engine time of this study, this technique was only used
spiders—usually the first step in the indexing with Yahoo and MSN.
process. In addition, Raisinghani (2005) points An RSS feed of the site’s featured products was
out that the ability of search engine spiders to created using Tristiana (a RSS creation tool). Ac-
easily index a site is a vital characteristic of good counts were established on MyYahoo and MyMSN
search engine optimization. and the site’s feed was added to both.
There are a number of methods that can be used Search engine spiders have known Internet
to have a site indexed by the search engines. First, Protocol (IP) addresses, so determining which
all of the major search engines have a page that spiders were visiting the site was easy. The site’s
allows users to suggest a new site that should be log files show that Yahoo’s spider began indexed
included in the index. However, using this process the site within three days of adding the RSS feed.
is typically very slow. In addition, certain search MSN’s spider took eight days to begin indexing the
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Search Engine Optimization an Action Research Project
0
r ank
MSN Rank
0
Yahoo Rank
0
0
Aug. , 00 Aug. , 00 Aug. , Aug. , Aug. , Sep., 00 - Sep., 00 Sep., 00
- Aug. , - Aug. , 00 - Aug. 00 - Aug. 00 - Sep. Sep. , - Sep. , - Sep. ,
00 00 , 00 , 00 , 00 00 00 00
Week
000
000
Visitors
000
Page Views
000
000
0
Aug. , Aug. , Aug. , Aug. , Aug. , Sep., 00 Sep., Sep.,
00 - Aug. 00 - Aug. 00 - Aug. 00 - Aug. 00 - Sep. - Sep. , 00 - Sep. 00 - Sep.
, 00 , 00 , 00 , 00 , 00 00 , 00 , 00
Visitors 0
Page Views 0 0 0
Week
76
Search Engine Optimization an Action Research Project
site. Indexing by Yahoo and MSN, of the site’s Another approach that may be used to attract
main page and first level sub-pages, was largely the Google spider is submitting a sitemap to
complete by August 22, 2005. After the site was Google. A sitemap is a file that specifies each
indexed we checked its rank for the chosen key of the pages in a Web site. Search engines use
phrase. At this point the site ranked 15th on Yahoo sitemaps to help them index a site more quickly.
and 34th on MSN (see Figure 3). In addition, the Google’s sitemap program was still in a beta
number of weekly visitors increased 580% over period at this point.
the preceding week (see Table 1 and Figure 4).
Action Taking
Specifying Learning
The site’s owner decided to spend $100 to pur-
Based on the results detailed above we conclude chase a link to his site from a well known site
that using RSS is an effective means of attract- with a Google page rank of eight. The link was
ing Yahoo’s and MSN’s spiders to a new site. In purchased on August 29, 2005 and remained in
addition, simply having the site indexed for a place for one month.
moderately competitive key term led to fairly good In addition, the SEO team downloaded and
rankings and a huge increase in site traffic. modified an active server page (ASP) script that
automatically generated an XML file that com-
Intervention T wo: Google Indexing plied with the Google Sitemap Protocol (GSP).
This file was uploaded to MyBestiPodStuff.com’s
Diagnosing server and the URL for the file was submitted to
Google. The sitemap was submitted on Septem-
At this point the site had not been indexed by ber 8, 2005.
Google. As the most widely used search engine,
a listing in Google was seen as an important part Evaluating
of the project.
Logs from MyBestiPodStuff show that the
Action Planning Google spider visited the site within three days
of purchasing the link. However, the spider only
Google does have a page that allows site owner’s visited 20 times and was responsible for only 30
to submit their site for consideration by Google. page views. This is fairly low for a site with over
However, submission does not guarantee that 100 pages and indicates that the Google spider
Google will include the site and there is anecdotal did not visit every page. The sitemap file was
evidence to suggest that it might consider submit- retrieved by Google within 24 hours of submitting
ted site as less important than those the Google it. The sitemap system indicated that the Google
spider finds on its own. spider encountered no errors in attempting to
One of the main methods SEO consultants crawl the site.
use to attract Google’s spider is to include a The Google spider continued to visit the site
link to the target site on another site with a high periodically. However, by the end of this study,
Google PageRank (PR). Sites with a high PR are the site still had not been included in Google’s
visited more often by the Google spider. When index. A final check of Google on October 1,
the spider visits it should see and follow the link 2005 revealed that MyBestiPodStuff.com had
to the target site. still not been included in Google’s index.
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Search Engine Optimization an Action Research Project
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Search Engine Optimization an Action Research Project
iPod mini, iPod shuffle, and iPod Photo. We carry key word density further without making major
iPod FM transmitters, iPod cases, iPod chargers, changes to the site.
iPod skins, iPod batteries, iPod speakers, and other
cool iPod gear all at discount prices.” Evaluating
The final phase of the analysis compared the
keyword density of each high-ranking site versus At the conclusion of this intervention the site’s
the keyword density of MyBestiPodStuff.com. ranking in both Yahoo and MSN improved
This analysis was performed using the Keyword dramatically and quickly. Within two days of
Density tool from SEOchat.com (http://www.seo- making the changes the site ranked 3rd on Yahoo
chat.com/seo-tools/keyword-density/). Keyword and 2nd on MSN for the key phrase (see Figure
density is a measure of how often a key word or 3). In addition, site traffic increased 60% over
phrase appears on a page. It is shown as a per- the preceding week.
centage, so a page containing ten words total, one
of which is a key word, would have a key word Specifying Learning
density of ten percent. The analysis indicated that
the high ranking sites had a key word density of The main conclusion from this intervention is
1.2—1.6% for the phrase “discount iPod acces- that small, easily made, changes to a Web site can
sories.” However, MyBestiPodStuff.com had a lead to dramatic improvements in search engine
density of only 0.3% for the key phrase. Zhang rankings. In addition, Web developers would be
and Dimitroff (2005a) specifically conclude that well served to check on the competition prior to
increasing the keyword density increases search the development process. High ranking sites in
engine rank. the same industry should be analyzed to generate
There are two ways to increase the keyword a list of Meta tags and determine an appropriate
density of a Web page. The first, obviously, is to key word density.
add more of the keyword to the page. However,
this must be done in a natural way. Simply add- S ix Month Follow-Up
ing line after line of the keyword or adding it
out of context will cause the search engines to We rechecked the site in each of the three major
penalize the site and in the worst case scenario search engines in March 2006—after about six
actually ban the site from the search engine index. months. The site ranked first for the key phrase on
Therefore, the key phrase was added cautiously Yahoo and second on MSN. However, while the
and in a natural manner. This resulted in a key site was included in Google’s index, the site still
word density of 0.65%, which was still too low. did not appear within the first 500 results returned
The second way to increase key word density is for the key phrase on Google. The poor results
to reduce the overall number of non-key words on on Google are most likely a result of an aborted
the page. The main page for MyBestiPodStuff. link building campaign on the part of the site’s
com contained a number of featured products, each owner. A check of the number of links at this
with a detailed description. The main page was time showed that the site only had 36 incoming
redesigned to eliminate the detailed descriptions links from other sites. This resulted in a Google
and only show the products’ names. After this Page Rank of zero. By comparison, the top ranked
was completed the key word density rose to 0.91%. site on Google for the key phrase had almost 300
While this is still lower than competing sites, it links and a Page Rank of five.
was felt that it would be difficult to increase the
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Search Engine Optimization an Action Research Project
Long T erm Follow-up that Google applies an aging filter to its index
(SEOmoz 2005). Basically, it prefers older sites
After the initial SEO project no further changes to newer sites. In addition, Google wants to be
were made to the site. In fact, the site was sold, sure a site is going to be around for a while before
but the new owner abandoned it (did not update it adds it to the index. Therefore, new sites are
or maintain it). Approximately 8 months after “sandboxed”—excluded from Google for a period
the project concluded the site was ranked #1 on of about 6-8 months.
Google for “discount Ipod accessories.” A follow-
up at 1year showed that the site maintained the top R eturn on Investment
rankings on both Google and Yahoo. However,
during that time MSN had undergone a major The cost of this SEO effort was $1200 ($1100 for
change to its algorithm and the site appeared on consultant time and $100 for the high page rank
the second page of the results. link). It should be noted that the consultant fees
An additional follow-up was conducted in were relatively low for a complete SEO project.
December 2007, more than two years after the Many SEO consultants charge $5000 or more
project. No changes had been made to the site for a project like that described above. As men-
and no backlinks had been added since the initial tioned above the site has had a conversion rate
project. At this follow-up the site was ranked sec- of 1.2%, which is in line with most other online
ond on Yahoo, 14 on Google, and 11 on MSN. retailers in this sector. The average profit per
sale is $18.25.
Before the SEO project the site had about 60
C ONC LUS ION unique visitors and perhaps 1 sale per month.
Due to hosting fees of $57 per month, the site
This research has two main goals: (1) determine was actually losing about $40 per month. At
the impact of search engine optimization on a the conclusion of the SEO project the site had
site’s ranking and traffic and (2) determine if a about 7,500 unique visitors per month and about
search engine optimization project provides a 90 sales per month. This leads to an average
positive return on investment. monthly profit of about $1,585 per month and a
return on investment of over 30%. In addition, the
Site Ranking and Traffic SEO project was expected to continue to produce
positive returns, with little or no additional cost,
Clearly, the search engine optimization project led into the future.
to a dramatic improvement in the site’s rankings
on both Yahoo and MSN. Merely having the C omparison with Pay-Per-C lick
search engines index the site led to an increase
in traffic of over 500%. During the project’s The real value of an SEO project is increased site
two month time frame site traffic increased over traffic. Online marketing is another method for
125 times. increasing site traffic. Therefore, the value of the
We were not successful in our attempts to SEO project was compared with the potential value
have Google index and rank the site. While we of a search marketing campaign. Search market-
were able to attract the Google spider, indexing ing measures cost per click (CPC). The cost per
proceeded at a very slow pace. The main reason click for the SEO project was $0.16 ($1200/7500).
for this failure may be due to the so called Google In addition, the CPC for the SEO project will
“sandbox.” The “sandbox” refers to the fact continue to decrease over time. This is due to
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Search Engine Optimization an Action Research Project
the fact that monthly traffic should continue with that SEO is a more cost effective search engine
little additional cost. marketing mechanism, in this particular case.
Due to the competitive nature of the iPod acces- This finding contrasts directly with the economic
sories market, MyBestiPodStuff.com would need model developed by Sen (2005). In his model Sen
to pay about $0.40 per click to run pay-per-click found that SEO is never an optimal search engine
ads on Google and $0.30 to run Overture (Yahoo) marketing strategy. The Sen Model is somewhat
search ads. These figures are in line with those supported by a recent study from the Search
charged by product search sites, such as Shopping. Engine Marketing Professional Organization
com ($0.50/click), Bizrate.com ($0.30/click), and (SEMPO). In its annual survey of search engine
Nextag.com ($0.30/click). We therefore conclude marketers the organization found that 81.8% used
that a successful SEO project is a cost effective pay-per-click advertising, but only 12% used
means of driving traffic to a new Web site. search engine optimization (SEMPRO 2004).
However, the Sen Model assumes that a site has
a fixed probability of becoming listed on the first
DISC USS ION page of the SERPs. As this research shows, it is
possible to manipulate that probability.
Academic C ontributions
C ontributions for Practice
This chapter contributes to academic literature in
the area of search engine optimization and search The research presented above has a number of
engine marketing in three specific ways. First, this practical applications for those involved in SEO
research examined SEO in the context of a work- and search engine marketing. First, rapid indexing
ing e-commerce site. While previous researchers, is a vital element in any search engine optimiza-
notably Raisinghani (2005) and Curran (2004), tion project. Simply getting the site indexed, in
make useful suggestions for SEO, their work is this case, led to a rapid increase in site visitors
based on a review of the practitioner literature and and eventually profits.
not empirical data. Zhang and Dimitroff (2005a, Second, Web developers and site owners
b) do manipulate a Web site in their experiments, should include SEO as part of the Web develop-
but the site was informational (not e-commerce), ment process. Specifically, they should review
was developed specifically for their study and was competing, well ranking sites, to determine the
not revenue generating. best site title, Meta tags, and key word density.
Second, most previous research has focused Third, due to the rise in popularity of Google,
on only one aspect of SEO. For instance, Zhang obtaining back links has become a primary focus
and Dimitroff’s (2005a; 2005b) primary focus is of many optimizers. This phenomenon has led
on-site factors (those that can be manipulated by to two new industries—brokering the purchase
the Webmaster). This study combines both aca- and sale of links (see www.textlinkbrokers.com),
demic and practitioner knowledge to develop an and systems that help Webmasters manage link
integrated approach to SEO based on indexing, exchange (such as www.linkmetro.com and www.
on-site optimization, and the use of back links. gotlinks.com). However, this study shows that
Third, since this chapter uses an e-commerce even a single link from a highly regarded source
site, the monetary value of the SEO effort was can lead to large improvements in a site’s rank-
determined and compared to other search engine ing. It should be noted that this might not hold
marketing approaches—namely pay-per-click true for a more established site that already has
advertisements. The result of this analysis is a substantial number of back links. In addition,
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Search Engine Optimization an Action Research Project
link building campaigns are time consuming and The SEO project described also reveals the
often expensive. On page optimization techniques difficultly involved in having a site added to the
can usually be accomplished quickly and with Google index. Therefore, the impact of on site
minimal expense. optimization and outside links on Google rank-
Fourth, focus on Yahoo and MSN first. Based ing could not be determined. As Google is the
on the fact that Google has a dominate amount most widely used search engine, this is a serious
of market share in the search arena, this advice limitation of this research.
might seem counter intuitive, . However, Google’s
“sandbox” means that a new site is unlikely to be Future Directions
included in Google’s search engine results for at
least a few months. Therefore, the best search The conceptual framework detailed in Figure
engine marketing strategy may be to optimize 2, can act as a guide for future research. The
initially for Yahoo and MSN, and purchase ads academic and practitioner communities require
from Google. As the site emerges from the a better understanding of the impact and correla-
Google “sandbox” the optimizer can focus more tions of the elements specified in the framework.
on building links and improving the sites PageR- Such research would require extensive data
ank. Further investigation into this approach is from a number of e-commerce sites, in multiple
an interesting area for future research. industries.
Fifth, the follow-up after two years is reveal- Future research should specifically focus on
ing. While the search engines have changed the interaction between position in the SERPs and
their algorithms and other sites have emerged to e-commerce conversion. Obviously, converting
compete with MyBestIpodStuff.com, the site has Web site traffic to buyers is essential for e-com-
maintained strong positions in the SERPs. This merce success. A recent study (WebSideStory
was achieved without any additional changes to 2006) found that while Google is responsible for
the site or backlinks. In fact, the site had not a majority of Web searches; however, its traffic
been updated in two years. This result flies in also has the lowest conversion rate of the major
the face of SEO practitioner wisdom that the search engines—only 3.83 percent, as compared
search engines like fresh content and will penal- with 4.07 percent for Yahoo and 6.03 percent for
ize static sites. For practitioners and site owners MSN.
it may mean that SEO does not require constant Most previous research on SEO (including this
updates and tweaking. This is another ripe area chapter) has used fairly simple scenarios—opti-
for future research. mizing for one or a few key words. However, many
e-commerce sites contain hundreds, thousands,
Limitations and even tens of thousands of products. Each
of these is a potential target for search engine
The one obvious limitation of this study is the fact optimization efforts. How should practitioners
that it uses only one Web site. The fact that the site manage an SEO effort that contains hundreds or
sells iPod accessories, which is a very competitive thousands of key words and terms? This question
market, may have skewed the conclusions away can be combined with the previous suggestion
from pay-per-click advertising. Therefore, future to develop a very complex SEO situation where
research should extend this chapter by observing there are thousands of key words that need to be
the results of SEO on other sites and for a variety optimized for the best search engine (in terms of
of products. conversion potential).
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Search Engine Optimization an Action Research Project
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a volatile situation? Are there any methods or
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85
86
Chapter VI
A Flow Theory Integrated Model
of Web IS Success
Edward J. Garrity
Canisius College, USA
Joseph B. O’Donnell
Canisius College, USA
Cheul Rhee
State University of New York at Buffalo, USA
G. Lawrence Sanders
State University of New York at Buffalo, USA
Abstr act
This chapter develops a new model of web IS success that takes into account both intrinsic and extrinsic
motivating factors. The proposed model begins with the Garrity and Sanders model of technologic ac-
ceptance and develops an extended nomological network of success factors that draws on motivation
and flow theory.
INTR ODUCT ION for nearly twenty years (Keil, Beranek, & Kon-
synski, 1995). In particular, research has found
The technology acceptance model (TAM) has that perceived usefulness and perceived ease of
been the dominant framework for explaining the use are important predictors of the acceptance of
acceptance and use of information technology information systems technologies (Adam, Nelson,
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
A Flow Theory Integrated Model of Web IS Success
& Todd, 1992; Davis, 1989; Doll, Hendrickson, consistent with flow theory (Ghani & Deshpande,
& Deng, 1998). 1994; Trevino & Webster, 1992), motivation
The difficulty comes in applying the TAM theory (Deci, 1971; Scott et al., 1988) as well as
model to the Web shopping experience. Unlike environmental psychology (Mehrabian & Rus-
traditional organizational information systems, sel, 1974).
web systems are used for a variety of activities This chapter contributes to the literature in
including both work and pleasure. This leads to three ways. Firstly, the proposed model provides
a disconnect in terms of applying the perceived a nomological network of success factors that
usefulness and perceived ease of use constructs provides a better understanding of how intrinsic
to the shopping experience because they are typi- and extrinsic motivation factors impact the use
cally not the only driving forces behind web use of systems in general and websites in particular.
(Moon & Kim, 2001). Secondly, this chapter incorporates two dimen-
Recent research has extended the TAM model sions, decision support satisfaction and interface
to the Web environment by including intrinsic satisfaction, as antecedent variables to expand our
motivating factors to take into account a wider understanding of perceived usefulness (imple-
and more realistic assessment of users’ goals mented as task support satisfaction). Thirdly,
(Hackbarth, Grover, & Yi, 2003; Koufaris, 2002; decision support satisfaction not only provides for
Moon & Kim, 2001; Venkatesh, 2000). enhanced explanatory power in the model, but it
For example, Koufaris (2002) examined the can also offer important insights into the decision
dual role of the consumer in using a web-based support provided by consumer shopping-oriented
system environment, where an individual can be web information systems (Garrity et al., 2005).
viewed as both a computer user and a consumer. This is especially important because consumer
When viewed as a consumer, Koufaris (2002) shopping-oriented web information systems dif-
argues that perceived shopping enjoyment (an fer from conventional DSS in a number of ways,
intrinsic motivator) is important for on-line shop- including and most notably that consumers have
ping since it can have an impact on attitudes and an extensive and different decision making process
usage intentions. His rationale was based on the from managers (O’Keefe & McEachern, 1988).
findings of Jarvenpaa & Todd (1997a; 1997b).
However, their studies did not adequately
explain perceived usefulness and ease of use LIT ER AT UR E R EVIEW
and their nomological net did not integrate TAM
with their intrinsic motivation factor, perceived Research in IS success has tended to concentrate
shopping enjoyment. on user satisfaction and technology acceptance
This chapter uses the Garrity and Sanders (Wixom & Todd, 2005). Research on the IS success
(1998) model as a vehicle to integrate the individual focuses on user attitudes toward information
as a consumer perspective, wherein shopping and systems (DeLone & McLean, 1992) while
enjoyment is used as an intrinsic motivator, and research on technology acceptance focuses on
the individual is also viewed as a computer user, how individuals perceive ease of use to predict
wherein an extrinsic motivator is implemented their behavioral attitudes and actions (Venkatesh
using task support satisfaction. Our approach et al. 2003).
treats shopping enjoyment as a state variable that Wixom’s & Todd’s (2005) research builds a
emerges from the interaction between the user conceptual bridge between evaluating system
and the information system. This perspective is success and predicting system use. They contend
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A Flow Theory Integrated Model of Web IS Success
that information-related attitudes and system- quality such as completeness, accuracy, format,
related attitudes can converge through behavioral and currency cannot be easily measured. Thus,
beliefs about such factors as ease-of-use. researchers have instead measured users’
The goal satisfaction-based IS success model perceptions about information, but this is not ideal,
(Kim et al. 2004) also integrates two research ap- either, because perceived information quality is in
proaches. Instead of dividing information-based fact the information within the system. Informa-
beliefs and systems-based beliefs, this model tion quality in its purest sense could be measured
combines decision-support satisfaction and task- if a text-based set of information were given to
support satisfaction. This model is especially survey participants.
useful when the evaluative function of a model Rather than perceived information quality,
is stressed. In a rigorous sense, information in the goal satisfaction-based IS success model,
System Use
User Satisfaction
Task Support
Satisfaction
Interface Satisfaction
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A Flow Theory Integrated Model of Web IS Success
decision support satisfaction and task support essence, usefulness is expanded in the GSISS
satisfaction with information systems are both model into two components: usefulness toward
measured because users’ ultimate behaviors may task accomplishment or overall job support (task
be affected by complete information systems, not support satisfaction) and usefulness toward deci-
by information alone. sion making (decision support satisfaction). Since
most jobs are composed of both decision making
Garrity and S anders Model of IS and clerical or processing tasks, the GSISS model
S uccess and the GS ISS Model provides additional precision and usefulness above
and beyond TAM.
Garrity and Sanders (1998) adapted the DeLone &
McLean (1992) model and proposed an alternative Extrinsic and Intrinsic Motivation:
model in the context of organizational systems Flow T heory and S hopping
and socio-technical systems. They developed a Enjoyment
user satisfaction inventory comprised of questions
from six well‑developed instruments. Garrity Extrinsic motivation is defined as the motivation
and Sanders expand on the DeLone and McLean to perform an activity because it is perceived
model by identifying four major factors they to produce valued outcomes that are distinct
assert are the basic underlying constructs that from the activity itself (Webster & Martocchio,
make up existing success measures in the IS field 1992). For example, one may be motivated to use
(Figure 1). They validate these constructs using a information technology because it helps one to
modified Delphi technique whereby IS research achieve better job performance. Thus, Perceived
experts mapped existing measurement items into usefulness or task support satisfaction would be
one of four factors. regarded as extrinsic motivators. In contrast to
The four factors they identify are task sup- this, intrinsic motivation is the motivation to per-
port satisfaction, decision support satisfaction, form the activity due to the direct reinforcement
interface satisfaction, and quality of work life of performing the activity per se΄. An example
satisfaction. of this is Enjoyment towards the system (Davis,
In order to better understand the underlying Bagozzi, & Warshaw, 1992).
dimensions, Kim et al. (2004) developed and TAM was first modified and extended to
tested a revised model, which arranges the IS include intrinsic motivation using the variable
success dimensions into a nomological net in Enjoyment (Davis, Bagozzi, & Warshaw, 1992).
order to further understand IS success and to test An intrinsic motivating variable or construct that
the construct validity of their dimensions. The has recently received a great deal of attention
revised or detailed model, called Goal Satisfac- in web-based technology utilization studies is
tion-based IS Success Model (GSISS Model) is “computer playfulness” or “playfulness” (Hoff-
presented in Figure 2. man & Novak 1996; Novak, Hoffman, & Yung,
Although the origins of the GSISS model are 2000; Moon & Kim, 2001; Novak, Hoffman, &
derived from general systems theory and TAM Duhachek, 2003; Pace, 2004). Playfulness has
is derived from the Theory of Reasoned Action been operationalized in a number of ways how-
(Ajzen & Fishbein, 1980; Fishbein & Ajzen, ever, most researchers start with the definition
1975), the GSISS model is related to TAM. Es- based on the pioneering work on flow theory by
sentially, interface satisfaction is equivalent to Csikszentimihalyi (1975).
perceived ease of use; and task support satisfac- Flow theory focuses on the state of playfulness
tion is equivalent to perceived usefulness. In which emphasizes the interaction of the individual
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A Flow Theory Integrated Model of Web IS Success
in a specific context, whereas a strict interpreta- in shopping, consumers will leave an e-commerce
tion of the original TAM model, which is based Web site before they get bored. On the other hand,
on the theory of reasoned action (TRA), requires consumers may be less anxious when the Web
that individual beliefs impact attitudes through site is easy to use and useful. Thus, interface
perceived usefulness and perceived ease of use satisfaction and task support satisfaction will
(Davis, et al., 1989). Thus, TAM forces researchers affect shopping enjoyment. And also, consumers
to treat all variables as antecedents to ease of use are more likely to use the Web site when they feel
and perceived usefulness. Therefore, intrinsic mo- the enjoyment.
tivation factors such as playfulness or enjoyment
cannot be easily incorporated into TAM unless
these variables are treated as traits of individuals R ES EARC H MODEL AND
(as done by Moon & Kim, 2001), but this is in HYPOT HES ES
direct contradiction to flow theory.
According to f low theory, people feel Integrating intrinsic motivation into a model of
enjoyment when perceived action opportunities IS success requires decisions on two major is-
are in balance with action capabilities (Nakamura sues: (1) the selection of a variable or construct to
& Csikszentmihalyi, 2002). In the context of operationalized intrinsic motivation, and (2) the
internet shopping experience, consumers may decision to model intrinsic motivation as either
be motivated to use an e-commerce Web site a state variable or as a trait variable.
unless they are bored or anxious, which are the First, we prefer the use of shopping enjoyment
results of imbalance between perceived action as a measure of intrinsic motivation since intrin-
opportunities and action capabilities. Unlike walk- sic motivation is concerned with, and defined as
Extrinsic Motivation
Task Support
Satisfaction
(Usefulness)
Shopping
Enjoyment
Intrinsic Motivation
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A Flow Theory Integrated Model of Web IS Success
the performance of an activity for the inherent ment is the “willingness of the consumer to rely
reward of doing the activity itself; Enjoyment has on the [web retailer] when there is vulnerability
the advantage of simplicity and also has a great for the consumer” (Jarvenpaa et al., 1999, p. 2).
deal of face validity. Finally, shopping enjoyment Consumer vulnerability relates to the risk that
is a more specific measure that is applicable in customers encounter when visiting a problem-
the consumer-oriented, web-based application atic site during a purchase. In this context, web
domain. retailers may use personal information to the
Second, we view intrinsic motivation and detriment of the consumer, purchased products
specifically, shopping enjoyment, as a function of may not meet consumer specifications, and or the
the interaction of the individual within a specific delivery of purchased products may be late or may
context (with the computer-based artifact or in- not occur at all (O’Donnell, Ferrin, Glassberg, &
terface). Such an interpretation is consistent with Sanders, 2004).
flow theory and the perspective of environmental Consumers’ trust in the web retailer has been
psychology. According to Mehrabian and Russel empirically shown to influence their intention to
(1974), emotional responses to the environment use the merchant site for Ecommerce purposes
mediate the relationship between the environ- (Gefen, Karahanna, Straub, 2003; Jarvenpaa,
ment and one’s behavior. Figure 3 displays the Tractinsky, Saarinen, & Vitale, 1999; Jarvenpaa,
research model and hypotheses, now termed the Tractinsky & Vitale, 2000). Gefen, Karahanna
Integrated Web Information System Success & Straub (2003) suggest that trust increases the
Model (IWISSM). perceived usefulness of the site by improving the
perceived likelihood that consumers will gain
C onsumer T rust in the Web R etail expected benefits of product purchases from the
Environment site.
Table 1. Hypotheses
Hypothesis
H1a Interface satisfaction positively influences decision support satisfaction.
H1b Interface satisfaction positively influences task support satisfaction.
H1c Interface satisfaction positively influences shopping enjoyment.
H2 Decision support satisfaction is positively associated with task support satisfaction.
H3 Task support satisfaction positively affects intention to use EC Website.
H4a Decision support satisfaction positively affects shopping enjoyment.
H4b Task support satisfaction positively affects shopping enjoyment.
H4c Shopping enjoyment positively affects intention to use EC Website.
H5a Product involvement positively affects shopping enjoyment.
H5b Web skills positively affects shopping enjoyment.
H5c Trust positively affects intention to use EC Website.
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A Flow Theory Integrated Model of Web IS Success
enjoyment. Webster and Martocchio (1992) and subjects and 104 observations. It was used to test
Hackbarth et al. (2003) found strong associations the experimental procedure and to refine the items
between computer experience and playfulness and constructs used in the study. It also enabled
(which has a component of shopping enjoyment). the researchers to clarify the wording, content and
Koufaris (2002) also found strong correlations general layout of the survey instrument.
between a consumer/computer user’s product Next, the actual experiment was conducted.
involvement and shopping enjoyment. Product Students in an introductory computer course at a
involvement is defined as the degree to which a large research university were given a question-
consumer is involved with or finds a particular naire set consisting of two identical sets of survey
product to be interesting, fascinating, or enjoy- items for each of the two websites assigned. Stu-
able to use. Since a user of a web-based consumer dent subjects were assigned at random to one of
purchasing website is both a consumer and a com- 6 possible website combinations. Subjects were
puter user, one’s experience level (or Self-Efficacy) given an overview of the task and told that they
and one’s degree of product involvement should had a budget of $200 and were asked to select
influence one’s degree of shopping enjoyment in a the best camera from the website. This budget
particular web information system context. Table restriction was used to ensure a moderately
1 summarizes the study hypotheses. involved cognitive task. Specifically, subjects
were instructed to visit the website listed on their
questionnaire packet, select a digital camera from
MET HODOLOGY the website, and then to fill-out the questionnaire.
Each questionnaire included a section requiring
Data C ollection and Experimental subjects to list the price, make and model of the
Procedure camera selected from the website. Subjects were
then told to repeat this procedure for the second
In order to examine the proposed model in this website listed on their packet. Subjects were given
study, we identified three diverse, commercial web one week to complete the experiment and were
sites for selecting a digital camera: myCamera. given extra credit in the course for their participa-
com, Active Buyers Guide, and Amazon.com. tion. In addition, as extra incentive subjects were
“myCamera.com” is a digital camera comparison informed that completed questionnaires would be
guide that lists products and their corresponding placed in a raffle drawing for gift certificates to
critical attributes in a table or list format. “Active Circuit City. A total of 300 sets of questionnaires
Buyers Guide,” is a sophisticated decision guide were distributed. One-hundred and ninety (190)
for the purchase of digital cameras. This website questionnaire sets were returned for a response
provides a number of features and functions to rate of 63% (190/300).
guide a user to “narrow down” the large potential
list of products. “Amazon.com” was selected Demographics
because it represents a very successful commer-
cial website that includes a feature not present in Tables 2 and 3 show the demographic and web
the other two experimental sites – “the average access information and the web use and web skills
customer rating.” The average customer rating for the subjects of this study. Microsoft Internet
features gives users the opportunity to see how Explorer was the major Web browser used and
other consumers rate the various products. over 90% of the subjects had some prior experi-
The data collection was conducted in two steps. ence with Internet shopping. Interestingly, the
First, a pilot test was performed involving 52 majority (over 60%) of the subjects accessed the
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A Flow Theory Integrated Model of Web IS Success
Internet through their home office to perform the descriptive words listed below to indicate your
assignment given for this study. level of interest.” The instrument then listed
two 7-point semantic differential scales ranging
Operationalization of R esearch from Un-Exciting to Exciting and from Boring
Variables to Interesting. Web skills was implemented us-
ing a 7-point Likert scale, anchored by Strongly
Measures for product involvement and Web skills Disagree to Strongly Agree:
were adapted from Koufaris (2002). Product
involvement was described on the questionnaire 1. I am very skilled at using the Web,
as – “We would like to know how interested you 2. I know how to find what I want on the Web,
are in digital cameras. Please use the series of and
Std.
Web Use/Skills Information N Minimum Maximum Mean
Deviation
G6. I am very skilled at using the Web 188 1 7 5.74 1.333
G7. I know how to find what I want on the web 188 1 7 5.88 1.309
G8. I know more about using the web than most users 188 1 7 5.26 1.336
How would you rate your experience with Web
188 1 7 5.28 1.089
technology?
How many hours per week do you use the Internet? 187 0 100 16.21 13.584
How many hours per week do you spend overall on a
188 0 100 25.59 20.039
computer?
Between 1 and 1.5 years 170 (97.1%)
More than 3 years 2 (1.1%)
How long have you been using the Internet? 175
Less than 6 months 2 (1.1%)
Between 6 months and 1 years 1 (0.6%)
1-5 times 91 (48.1%)
Number of purchases you have made through the Internet 11 or more 53 (28.0%)
189
in the last year 6-10 times 32 (16.9%)
Never 13 (6.9%)
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A Flow Theory Integrated Model of Web IS Success
3. I know more about using the Web than most effects during the experiments were investigated.
users (See items G6-G8 in Table 3). The results of two-way ANOVA (Table 4) showed
that there was no statistically significant difference
The other major questionnaire items are shown in behavioral intention to use (the website) caused
in Appendices 1- 3. The variables in the study were by the order of the presentation of the Web sites
operationalized based on a variety of sources and on the questionnaire.
existing instruments. The order of site presentation (or evaluation)
did not appear to affect respondents’ decisions
Order Effects and T reatment Effects about which site they preferred to buy a digital
camera. As shown in Table 5, there was no sig-
The survey questionnaires were designed in six nificant interaction effect between the selected
different formats with identical measures (Each site to buy from and the order of evaluation of
set of the questionnaires includes two web sites e-commerce sites.
for assessment out of three with the order of web
sites reversed for each of the website pairs). Order
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A Flow Theory Integrated Model of Web IS Success
P4 0.8828 0.2778 G6 0.9568 0.3736 PI3 0.8920 0.4707 TR1 0.8709 0.1717
P5 0.9274 0.2800 G7 0.9382 0.3929 PI4 0.9389 0.6179 TR2 0.8584 0.1929
P6 0.9214 0.2637 G8 0.8753 0.3130 TR3 0.9230 0.1859
P7 0.9294 0.2722 TR4 0.8772 0.1526
TR5 0.9134 0.2104
TR6 0.9161 0.2054
Note: Items were not included if either: (1) loadings are less than 0.7 and (2) bivariate correlations are higher than .60.
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A Flow Theory Integrated Model of Web IS Success
R eliability and Validity T ests than 0.50. All AVEs for the constructs used in this
study are greater than 0.70. This indicates that
In assessing the internal consistency for a given more than 70% of the variance of the indicators
block of indicators, the composite reliability (CR), can be accounted for by the latent variables.
also referred to as convergent validity (see Werts, The AVE can also be used to assess discrimi-
Linn, & Joreskog, 1974), was calculated. All the nant validity. The AVEs should be greater than the
CR values are over 0.9, which suggests that the square of the correlations among the constructs.
parameter estimates are sound (Table 7). That is, the amount of variance shared between a
The Average Variance Extracted (AVE) was latent variable and its block of indicators should
also calculated. AVE measures the amount of vari- be greater than shared variance between the latent
ance that a construct captures from its indicators variables. In this study, the square-roots of each
relative to the variance contained in measure- AVE value are greater than the off-diagonal ele-
ment error. This statistic can be interpreted as a ments (Table 8). This indicates that there exists
measure of reliability for the construct and as a reasonable discriminant validity among all of
means of evaluating discriminant validity (Fornell the constructs. The correlation between decision
& Larker, 1981). AVE values should be greater support satisfaction and task support satisfaction
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A Flow Theory Integrated Model of Web IS Success
appears to be a little high although valid in terms over 0.10 thus satisfying both conservative crite-
of discriminant validity criteria. Such a close but ria and the suggested lower limit. They are also
distinctive relationship between decision support statistically significant at p = 0.001. Overall, the
satisfaction and task support satisfaction was IWISSM model explains a significant amount of
expected (see Garrity & Sanders, 1998)). Hence, variation in the dependent variable, intention to
decision support satisfaction together with task use the EC Website (R 2 = 0.57). Both task support
support satisfaction can be used to provide more satisfaction as a measure of extrinsic motivation
insight into the features of the Web site. and shopping enjoyment as a measure of intrinsic
motivation are significant predictors of intention
Assessment of the S tructural Model to use the EC Website.
The IWISSM model is also a nomological
The path coefficients in the PLS model represent network and can be used to test the construct
standardized regression coefficients. The sug- validity of the success dimensions. Constructs
gested lower limit of substantive significance for in a nomological network are considered valid
regression coefficients is 0.05 (Pedhazur, 1997). In if they predict or are predicted by the other con-
a more conservative position, path coefficients of structs consistent with theoretical models and
0.10 and above are preferable. As shown in Figure past research (Bagozzi, 1980; Straub, Limayem,
4, all path coefficients except product involvement & Karahanna-Evaristo, 1995). As shown in Figure
to shopping enjoyment, Web skills to shopping 4, a high R 2 for each endogenous variable in the
enjoyment, and trust to behavioral Intention are structural model demonstrates that this model can
Extrinsic Motivation
Trust
TSS
(Usefulness)
R2=0.53
0.418*** 0.071ns
***
0.273 0.527 ***
Web Skills
* p< 0.05, ** p< 0.01, *** p<0.001
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A Flow Theory Integrated Model of Web IS Success
be used to predict each of the success dimensions satisfaction, and the intrinsic motivating factor,
within the nomological net. shopping enjoyment, yielded significant paths to
Specifically, over 50% of the variance in task the dependent variable, intention to use the EC
support satisfaction is explained via interface Web site and helped to explain over 56% of the
satisfaction and decision support satisfaction, and variance (R 2 = 0.57). The model lends support to
by the indirect effects of interface satisfaction the IWISS model.
through decision support satisfaction. In addition, In the web-based, consumer shopping environ-
close to 40% of the variation in decision support ment, the primary intrinsic motivating factor is
satisfaction is explained by interface satisfaction. shopping enjoyment. That is, users are motivated
Over 40% of the variance in shopping enjoyment by the holistic experience of interacting with
is explained by interface satisfaction, decision computer technology in a manner that promotes
support satisfaction, and task support satisfaction enjoyment, (and perhaps also captivates their at-
and the indirect effects of interface satisfaction tention, and maintains their curiosity).
through decision support and task support satisfac- Interface satisfaction is shown as a significant
tion. However, product involvement, Web skills factor in determining decision support, task sup-
and trust do not provide for significant paths in port satisfaction and indirectly through those
the model. Table 9 summarizes the results of the dimensions to shopping enjoyment (intrinsic
hypothesis testing. motivation). This is consistent with the proposed
model, since computer tools that are easy to use
with well-designed interfaces should be enjoyable
DISC USS ION and captivating (shopping enjoyment), aid in the
support of decision making (decision support
Interestingly, the major IS success dimensions satisfaction), and support the entire task process
from the Garrity and Sanders model all yielded (task support satisfaction).
significant path coefficients in the structural It is interesting to note that the additional
model test of the IWISS model (Figure 4). Both variables from previous web use studies were not
the extrinsic motivating factor, task support statistically significant. That is, hypotheses H5a,
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A Flow Theory Integrated Model of Web IS Success
H5b, and H5c are not supported. Although trust tion to use, we divided the study sample into a
has a 0.40 correlation with Intent to Use the EC high risk group and a low risk Group based on
Website, its path is not significant in the model. In respondents’ answers to the following question-
other words, the IWISS model accounts for most of naire item: “I would use my credit card to purchase
the variation in Intent to Use the EC Website (R 2 = from this Web site.” Subjects that felt their use of
0.57) but trust does not add significant explanation the website was a high risk undertaking would be
of Intent to Use the EC Website above and beyond reluctant to use their credit card for purchases,
what is already explained by the main IS success whereas subjects in the low risk group are those
factors. The high correlations between trust and that are willing to use their credit card.
the main dimensions of the IWISS model can also The correlation between trust and intention
be observed in Table 8 and indicate the likelihood to use was 0.13 for the low risk group. This was
of shared variance within the model. not statistically significant at the 0.05 level. How-
Study results suggest that trust does not directly ever, the correlation between trust and intention
influence intention to use the web site which ap- to use for the high risk group was 0.33, which
pears contradictory to prior studies involving was significant at the 0.01 level. In addition, the
TAM constructs (Gefen, Karahanna, & Straub, difference in the correlations between the two
2003; O’Donnell, Ferrin, Glassberg, & Sanders, samples is significant2 (p<0.01, t-statistic = 3.5).
2004). However, in the development of the IWISS The results lend support to the notion that trust
model we were not specifically interested in mod- directly impacts behavioral intention to use, but
eling trust as an additional, endogenous variable only when the level of perceived risk is relatively
or dimension of IS success. In our view, the level high. Further research should investigate the
of trust of a website by a user is best modeled as influence of varying levels of perceived risk on
an independent variable or predictor but not as a the relative importance of trust on intention to
component of IS success. use a web site.
Upon closer examination, trust is significantly Finally, the shopping enjoyment factor (In-
related to the major dimensions of the model, trinsic Motivation) was modeled as a function
including task support (perceived usefulness) and of Interface, decision support, and task support
intention to use, which is consistent with prior satisfaction, as well as product involvement, and
studies of trust (Table 8). The major difference Web Skills. Although this model explained over
in this study is that the IWISS model already 40% of the variation in shopping enjoyment
accounts for significant variation in intention (R 2 = 0.40) both product involvement and Web
to use and trust (modeled only as a direct effect Skills did not have significant path coefficients to
on intention to use) does not explain significant shopping enjoyment. This suggests that shopping
variation above what is already predicted3. enjoyment, as implemented in our study, is cor-
A further explanation of trust in this study rectly modeled as a “state variable,” meaning that
relates to study participants’ perceived level of it is a situational characteristic of the interaction
vulnerability (Risk) in using the sites. In the ab- between an individual and the situation. Since
sence of risk, trust is not important in choosing interface satisfaction, decision support and task
one’s actions (Lewis & Weigert, 1985; Rousseau support satisfaction were the primary determi-
et al., 1998). It may be inferred that the level of nants of shopping enjoyment, this implies that the
perceived risk could have lessened the importance human computer interaction environment exerts
of trust in our study. a stronger influence on shopping enjoyment than
In order to test for moderating influences of these individual trait variables.
perceived risk on trust’s direct impact on inten-
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A Flow Theory Integrated Model of Web IS Success
The nomological network presented in this features, and for researchers, who wish to evaluate
chapter along with the results regarding shopping the system’s impact on Task Support or decision
enjoyment differ from other researchers find- support satisfaction (Figure 5).
ings on intrinsic motivation, such as Venkatesh An important goal of our research was to un-
(2000). Venkatesh (2000) and Moon & Kim (2001) derstand why users find web systems acceptable
view intrinsic motivation via playfulness as an and useful, and indeed this is important for both re-
individual difference variable (trait) that is sys- searchers and practitioners involved in web-based
tem-independent. Our results offer an alternative systems development. From a practical standpoint,
explanation of how intrinsic motivation (viewed systems that are judged successful become a part
as shopping enjoyment) fits within the realm of of the organizational decision making framework
web-based IS success and Use. Future research and or part of the organization’s system structure
will have to explore playfulness or Enjoyment as and processes. Additionally, IS success models
a component of the IS success model, especially are used by researchers who wish to build models
in web-based environments. and enhance our understanding of the factors
that generate successful systems. A by-product
of this empirical research is the development of
C ONC LUS ION normative guidelines that will then be used by
practitioners. It is thus imperative for IS success
The IWISS model extends the work of Koufaris models to be both valid and precise enough to be
(2000) and others by providing and validat- useful for developing practical guidelines.
ing a nomological network of factors based on The IWISS model provides for additional
motivation and flow theory and the Garrity and explanatory power and provides for a greater
Sanders (1998) model. One of the objectives of understanding of the complex factors that may
this research project was to compare the IWISS be used to predict web site use. As Table 10 il-
model to TAM. In the IWISS model, Perceived lustrates, this has received significant research
usefulnessis expanded into two closely related attention over the past decade.
but separate dimensions – task support satisfac- From a researchers perspective, the IWISS
tion and decision support satisfaction. The two model is both a nomological network that can be
dimensions provide additional precision and used to test the construct validity of the variables
explanatory power that is helpful to both system involved in technology acceptance and IS success
designers, who want to design specific support measurement as well as a path for conducting fu-
ture research. Future research can apply an empiri-
TAM Model
.608 .680
EOU PU BI
R2=.37 R2=.46
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A Flow Theory Integrated Model of Web IS Success
Table 10. Summary of selected studies of Web site usage and explained variance
Explained
Literature Dependent Independent Variance
(R2)
Task support, decision support, interface satisfaction,
This Paper, IWISSM Model Intention to Use EC Website shopping enjoyment, (trust, product involvement, Web 0.57
skills)
Perceived usefulness, shopping enjoyment, (perceived
Koufaris (2002) Intention to return 0.55
control, concentration, perceived ease of use)
Perceived usefulness, ease of use, attitude toward
Moon and Kim (2001) Behavioral intent to use Web 0.38
using
Perceived usefulness, computer self-efficacy,
perceptions of external control, computer anxiety,
Venkatesh (2000) Behavioral intention to use 0.35
objective usability (playfulness, perceived enjoyment,
ease of use)
Lederer et al., (2000) Web site usage Ease of use, usefulness 0.15
(Variables in parentheses are insignificant within the model tested).
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A Flow Theory Integrated Model of Web IS Success
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Endnot es
computer playfulness: Development of a measure
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16(2), 201-226. 1
Some items from frequently used instru-
ments were classified by the expert panel
Wixom, B.H. & Todd, P.A. (2005). A theoretical
as “out of place,” and were later identified
integration of user satisfaction and technology
as independent variables.
acceptance. Information System Research, 16(1), 2
The correlations were first converted to z-
85-102.
scores and a two-tailed test of significance
Werts, C.E.; Linn, R.L.; & Joreskog, K.G. (1974). was performed to determine if the correla-
Interclass reliability estimates: Testing structural tions were drawn from the same popula-
assumptions. Educational and Psychological tion.
Measurement, 34(1), 25-33. 3
Our main concern was to test the validity
of the integrated Web information system
Wold, H. (1974). Causal flows with latent variables,
success Model. Alternatively, trust could
European Economic Review, 5, 67-86.
also be modeled as an antecedent to task
support satisfaction.
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A Flow Theory Integrated Model of Web IS Success
Appendix 2. Oper at ionaliz at ion of Lat ent Var iab les: Behavior al
Int ent ion t o Us e, Shopping Enj oyment
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A Flow Theory Integrated Model of Web IS Success
Appendix 3. Oper at ionaliz at ion of Lat ent Var iab le: T r ust
Trust
I would be comfortable dealing with this retailer having responsibility for the
TR1 Adapted from Mayer & Davis (1999)
delivery of the product.
I would be comfortable dealing with this retailer, even if I could not monitor its
TR2 Adapted from Mayer & Davis (1999)
actions.
TR3 This retailer is trustworthy. Jarvenpaa et al. (2000)
TR4 This retailer wants to be known as one who keeps promises and commitments. Jarvenpaa et al. (2000)
TR5 I trust that this retailer keeps my interests in mind. Jarvenpaa et al. (2000)
TR6 This retailer’s behavior meets my expectations. Jarvenpaa et al. (2000)
* Note: All questionnaire items in Appendices use a 7-point Likert scale, varying from Strongly disagree to Strongly agree.
106
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Chapter VII
Evolving a Strategy for
Web-Based Shopping Systems
Changsu Kim
Yeungnam University, Korea
Robert D. Galliers
Bentley College, USA
London School of Economics, UK
Jaekyung Kim
University of Nebraska-Lincoln, USA
Abstr act
The world is witnessing a continuous expansion of electronic commerce into the global digital economy.
As an enabler of new businesses, Web-based shopping systems (WBSS) are at the heart of the major is-
sues surrounding electronic commerce growth. Their wide use has profoundly altered the ways in which
businesses and customers, and businesses and businesses interact on the basis of digital transactions.
Despite the importance of WBSS, the theoretical study of their strategies has been sparse. This article
offers a theoretical analysis of evolutionary processes in WBSS strategies. For that purpose, we pro-
pose a classification model of WBSS. Based upon the model, WBSS are classified into four types: (1)
general-direct-sales (GDS); (2) general-intermediary-sales (GIS); (3) specialized-direct-sales (SDS);
and (4) specialized-intermediary-sales (SIS). On the basis of these four categories of WBSS, we analyze
the characteristics of WBSS and suggest five evolution strategies for WBSS, which have implications for
both theory and practice. Amazon.com’s strategic movements, such as product line expansion through
alliance and acquisition, provide an exemplary case of the evolution of WBSS strategy. We expect that
this article will serve as a guide for Internet businesses and as a catalyst for new research agendas
relevant to web-based shopping and electronic commerce.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Evolving a Strategy for Web-Based Shopping Systems
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Evolving a Strategy for Web-Based Shopping Systems
Nour and Fadlalla (2000) also classified In- ability. Their study was one of the first to adopt
ternet-based virtual markets according to two the terminology of WBSS. Recently, Kim and
principal categories: product type and delivery Galliers (2006) addressed the development and
mode. They identified four distinct Internet- application of a configuration model of Web-
based virtual markets: electronic publishing based shopping systems. They highlighted the
and software, electronic tele-services, digitally- significance of a balanced view concerning the
enabled merchandising and digitally-enabled electronic commerce applications.
services. However, this is a broad conceptual In sum, most studies focused on a limited view
model for virtual markets rather than a model of of WBSS and considered WBSS only as a static
WBSS. This research, therefore, seems somewhat system, ignoring WBSS as an evolving system
limited in explaining the taxonomy and the evo- in dealing with environmental and organizational
lution of WBSS. Torkzadeh and Dhillon (2002) change. To understand the general characteristics
measured factors that influence the success of of WBSS, it is necessary to consider them as
Internet commerce. They suggested that the dynamic systems that evolve corresponding
relative strength of shopping convenience and to changes encountered. The strategic and
ecological issues are fundamental objectives. evolutionary paths of WBSS can provide
Heijden (2003) investigated an extension of the information that has been neglected in previous
Technology Acceptance Model (TAM) to explain WBSS studies. Therefore, this study attempts to
the individual acceptance and usage of a Dutch develop a WBSS classification model and provide
generic portal Website. Recently, Kim et al. (2007) strategic planning for each type of WBSS.
dealt with a theoretical analysis of evolutionary
patterns on Web-based shopping systems strategy.
The WBSS evolution model would provide an A C LASS IFIC AT ION MODEL OF
academic background for further study and a WBSS
practical implication.
Several studies explored the technical aspects According to Piercy and Cravens (1995),
of WBSS, including scalability, network traffic, marketing planning should integrate the type of
architecture, and virtual reality. Baty and Lee product and the approach to generating sales as
(1995) proposed a functional architecture of elec- the key enterprise process. As a global business
tronic shopping systems to promote comparison medium, it would appear helpful to classify various
and contrast between product differentiations. types of WBSS applications, therefore, by product
Choi et al. (1998) examined the issue of reduc- type and sales type.
ing the volume of network traffic in the cyber As a business channel, WBSS supports two
mall system. They also suggested that the basic sales types between the seller and the customer.
architecture of the cyber mall system consists of One is direct sales, in which the WBSS is di-
four major technical components: the cyber mall rectly responsible for the guarantee of quality
creator, the cyber mall server, the cyber mall and delivery of products or services (Ranchhod &
player, and the WWW server. They argued that Gurau, 1999). In the other type, indirect sales, the
the increasing demands for virtual reality are WBSS relays business transactions between the
placing excessive strain on the current network manufacturer, merchant, distributor and consumer
volume. Arlitt et al. (2001) investigated the is- (Kim et al. 2005).
sues affecting the performance and scalability Many dot.com companies such as Amazon.
of WBSS. They found that personalization and com and Dell are directly responsible for the
robots can have a significant impact on scal- products sold on their WBSS, while eBay.com, in
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Evolving a Strategy for Web-Based Shopping Systems
the role of intermediary, is indirectly responsible In order to gain meaningful insight into clas-
for sales products. On the basis of this observa- sifying different product types sold by WBSS,
tion, the sales types of WBSS are classified into this study explores the products sold by some
two types: direct sales and indirect sales, as seen well-known dot.com companies. For example,
in Figure 1. Dell.com and Amazon.com sell products directly
Another distinguishing factor of a WBSS is to global customers without any intermediaries.
the type of product being sold. There are vertical Dell.com handles only a vertically-related product
products and horizontal products. Vertical indus- line of computers and computer accessories, and
try product and unified group image products are Amazon.com carries unified group image prod-
two types of vertical products. Vertical industry ucts that have synergy effects with books, such
products are defined as the products that have a as CDs and software. In this chapter, these kinds
vertical relationship in an industry, such as auto of product lines will be referred to as vertical
parts, tires, and automobile accessories. Unified products. On the other hand, Walmart.com carries
group image products are defined as products a variety of products that do not have any related
that can create synergy effects even though synergy effects. Therefore, these are referred to
they belong to different industries.1 Examples horizontal products. Based on this observation,
of unified group image products are movies and the product types sold on WBSS are divided
movie-related toys, beer and baby diapers, and ski into two groups: vertical product and horizontal
and golf equipment.2 In contrast to these vertical product, as outlined in Table 1.
products, horizontal products are defined as two On the basis of the product and the sales type
or more industrial products that are not unified of WBSS, a classification model of WBSS can
into a group. This type of sales attracts customers be developed (Table 2). In the model, the vertical
by the variety of products. axis displays the product type and the horizon-
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Evolving a Strategy for Web-Based Shopping Systems
tal axis displays the sales type. This research guarantee for the product sold, comparable firms,
thereby proposes a model that classifies WBSS e-commerce strength, and recommended strategy
into the following types: 1) Specialized-Direct- (Piercy & Cravens, 1995; Looney & Chatterjee,
Sales (SDS); 2) General-Direct-Sales (GDS); 3) 2002; Molenaar, 2002; Thomas et al., 2005).
Specialized-Intermediary-Sales (SIS); and 4) These domains are well aligned with the logic
General-Intermediary-Sales (GIS). However, not of classifications of WBSS.
all WBSS conform to these four types: Hybrids First, the relationship between the seller and
are possible, for example. Nonetheless, this model the WBSS is examined. For example, some
serves primarily as a basic model of WBSS for sellers are owners of the WBSS, while others are
analytical purposes. Characteristics of each type a lessee or brokerage within the WBSS (Looney
of WBSS, with exemplary cases and their strategic & Chatterjee, 2002). Our second focus is on the
evolutionary paths, are introduced in detail in number of sellers (Piercy & Cravens, 1995), the
sections 4 and 5, respectively. third on product type, and the fourth on responsi-
bility of guarantee for the product sold (Molenaar,
2002). Based on these four analyses, a comparable
C HAR ACT ER IST ICS OF T HE FOUR WBSS is suggested. Next, we illustrate the
T YPES OF WBSS strength of the four types of WBSS (Looney &
Chatterjee, 2002). Finally, an attempt is made to
We analyzed the characteristics of the four analyze the strategic paths each WBSS follows, in
categories of WBSS based on eight analysis accordance with the strategic options suggested by
domains: seller/WBSS relationship, number of Rackoff et al. (1985). In their theory of strategic
sellers in WBSS, product type, responsibility of thrusts, five major competitive moves (defensive
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Evolving a Strategy for Web-Based Shopping Systems
or offensive) are introduced: differentiation, low WBSS of this type are in keen competition with
cost, innovation, growth and alliance. each other. Therefore, a differentiation strategy
While this theory is based on Porter’s would be well-matched with a GDS type to gain a
competitive strategy model (1980), Rackoff competitive advantage through differentiation of
et al. (1985) expanded the original generic service or products, in comparison to other com-
strategies with two additional strategies. They petitor WBSS. Detailed explanations follow.
also addressed the strategic use of information
systems to uncover opportunities related to Example 1: Overstock.com
supplier, customer and competitor. Since a WBSS
is an information system that can be strategically Overstock.com is an online closeout store selling
utilized to deliver more value to customers and excess inventory through the Internet, including
suppliers, and to achieve a competitive advantage bed-and-bath goods, home decor, kitchenware,
over competitors, we believe the theory of strategic watches, jewelry, electronics and computers,
thrusts can explain the strategic paths of WBSS sporting goods, apparel and designer accessories,
properly. According to the analysis domains among other products. Overstock.com offers
defined above, detailed characteristics of the four manufacturers, distributors and other retailers an
types of WBSS with four dot.com company cases alternative sales channel for liquidating their in-
are investigated. ventory. Overstock.com is a GDS WBSS because
it sells general merchandise to the customers.
General-Direct-S ales (GDS )
Example 2: Buy.com
The general-direct-sales type is applicable to
direct sales and horizontal products. This type Buy.com is a cyber department store, which means
uses the WBSS to sell many products that are that it does not have any physical shops and it sells
identical to those of an actual department store. several kinds of products that are identical to those
Examples of GDS are Buy.com and Overstock. of an actual department store. The product prices
com. In this type, the owner of the WBSS is the in this category are cheap because goods can be
only seller, selling several kinds of products to sold directly to the customer without a salesperson,
multiple buyers in the world. The GDS type is and intermediaries such as suppliers can be cut out.
therefore directly responsible for the guarantee In doing so, Buy.com can reduce the transaction
of the product sold. The strength of the GDS type costs of selling products. In addition, Buy.com
is that it provides a cyber warehouse that needs provides one-to-one marketing based on customer
less initial investment expense and fewer staffing management databases that store information
requirements in comparison to actual department to analyze customers’ needs and preferences.
stores. Therefore, the GDS type cannot only make Moreover, it carries out differentiation strate-
high profits due to a reduction in maintenance gies such as a “Bill Me Later" payment option,
and other costs. However, it can also solve traffic quick delivery, membership management and a
and parking problems, because customers do not variety of other services such as BuyMagazine.
need to leave home to go shopping. Furthermore, “Bill Me Later” is a payment option that provides
there are claims that this cyber department store customers with the flexibility to purchase without
reduces traffic congestion and avoids parking using their credit card.
difficulties because it does not have physical
stores or parking lots.
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Evolving a Strategy for Web-Based Shopping Systems
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Evolving a Strategy for Web-Based Shopping Systems
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Evolving a Strategy for Web-Based Shopping Systems
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Evolving a Strategy for Web-Based Shopping Systems
business and potentially helpful guidelines for or from direct to indirect sales type can be a suc-
practitioners seeking ways to gain sustainable cessful evolutionary path for WBSS.
advantages over their e-business competitors. The theory of strategic thrusts (Rackoff et al.
1985) provides an explanation for the success of
these evolutionary paths. There are five strategic
STR AT EGIC EVOLUT ION PAT HS thrusts proposed in this theory: differentiation,
OF WBSS low cost, innovation, growth, and alliance. Among
the five strategic thrusts, growth and alliance are
R eview of Evolutionary Path the most useful in explaining evolutionary paths
of WBSS. When a WBSS evolves from dealing
Organizations such as dot.com companies need with vertical product types to horizontal product
to continuously improve the functionality of their types (SDS → GDS or SIS → GIS), the evolu-
WBSS in order to survive and progress in the tionary path can be seen as a growth strategy
web-based shopping business world (Pinker et through which the WBSS achieves a competitive
al., 2002; Rifkin & Kurtzman, 2002; Thomas et advantage by volume or geographical expansion,
al., 2005). Therefore, these organizations must backward or forward integration, or product-line
consider multiple strategies to find the best ways or entry diversification. On the other hand, when
to expand. a WBSS evolves from selling products directly to
Based on our observations of evolutionary selling products indirectly (SDS → SIS or GDS →
paths of WBSS, we can suggest a model of strategic GIS), this path can be seen as an alliance strategy
planning for WBSS to provide useful guidelines through which a WBSS achieves competitive
for practitioners and for academic research. While advantage by forging marketing agreements,
it appears unprofitable to shift from horizontal to forming joint ventures, or making acquisitions
vertical products or from indirect to direct sales of other WBSS.
type, a shift from vertical to horizontal products
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Evolving a Strategy for Web-Based Shopping Systems
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Evolving a Strategy for Web-Based Shopping Systems
shop with the delivery and guarantee of quality Evolutionary Path from GDS to GIS
for the sales product. However, before shops can
be admitted into the partnership, they must be The GDS type of WBSS is similar to an actual
carefully reviewed by the company managing department store. Similarly, it is difficult to supply
the WBSS. This process can directly affect the all the products a customer may wish to purchase.
reliance of the customer on this type of WBSS. Therefore, it is an effective strategy to entrust the
Major businesses suitable for this type of strategic selling of certain products to other specialized
planning are furniture, clothes, real estate, books, sellers. Based on this strategy, organizations
tourist bureaus, stationary, computers, and soft- can concentrate their core competence on best-
ware. Through this strategic planning, businesses selling products, carrying out the sales of other
of small to medium size can strengthen national products through other vendors within its WBSS.
or global business power. However, this strategic Through this process, a GDS type can shift to
option might need considerable investment and a GIS type, which has various cyber shops and
time for advertising and publicizing to establish sells horizontal products. It is essential, however,
a critical mass-scale WBSS. that the quality of products or services supplied
by these other sellers is strictly maintained by
Evolutionary Path from SDS to GIS this kind of GIS.
Though the starting point is the same as the above Evolutionary Path from SIS to GIS
strategy, the strategic direction is different. SDS
shifts from a vertical cyber shop to a horizontal Organizations can carry out the SIS to GIS
cyber mall, as well as from vertical to horizontal evolutionary path more easily than others because
product types. In the final stage of this shift, an they can simply add product types for sale within
organization rents out shops in the cyber mall the same WBSS. At this time, it is a better approach
to businesses that want to provide products or to add a product type that is closely related to the
services via a WBSS. Throughout this proc- current product type of SIS. Based on this strategy,
ess, organizations can shift from the SDS type organizations can aim at arriving at a similar
to the GIS type of WBSS. This approach can level as Amazon.com which is one example of the
be well matched with venture businesses (e.g., GIS type. With regards to its responsibility for
finding new business models related to electronic products sold, an IT/telecommunication company
commerce). This is because venture businesses carrying out web-based shopping business on its
initially implement the SDS type of WBSS, WBSS seems to be best suited for this strategic
consisting of a vertical product such as software approach. This is because this sort of company
or CDs. After this, they increase the number of can easily switch from vertical to horizontal
cyber shops and products for sale. However, not product types.
all venture businesses can adopt this strategy
because of the risk associated with the heavy
investment required. EX EMPLAR Y C AS E OF STR AT EGY:
AMAZ ON.C OM
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Evolving a Strategy for Web-Based Shopping Systems
to find products through Amazon.com than on the com allow Borders.com to sell books, CDs, and
individual alliance partner’s WBSS. movies, it also allows virtually all categories of
One of the early efforts on the path from SDS products (Table 4) to be sold through numerous
to GIS was the acquisition of Drugstore.com in WBSS, off-line retailers and even individuals.
February, 1999 and Pets.com in March, 1999. This Products are sold and shipped through these
was an effort to provide a one-stop online shopping varying sources. The only part of the transaction
experience. Amazon.com launched a full-service that Amazon.com is involved in is information
pharmacy and health and beauty store with content listing and payment on which a commission for
and buying guides. Pets.com, the online category each transaction is based.
leader for pet products, information and services,
was acquired by Amazon.com in 1999.
Other major movements of Amazon.com are DISC USS ION AND C ONC LUS ION
its alliance with Toysrus.com in August, 2000, to
create a co-branded toy and video games store, its WBSS are spreading very rapidly across national
alliance with Ofoto in October, 2000, to provide boundaries. From groceries stores to department
information, products and service for cameras stores, from small and medium-sized enter-
and photos, and its alliances with AT&T, Sprint prises (SMEs) to large firms, and from young
PCS, and Voicestream Wireless in November, organizations to well-established organizations,
2000, for wireless phones and service. a growing number of companies are taking ad-
vantage of WBSS by selling products, services
Evolutionary Path from GDS to GIS and information. WBSS not only increase the
ability of organizations to trade with customers,
After becoming a GDS WBSS with direct sales but they also offer firms a new opportunity to
of horizontal products such as books, pharma- reach millions of consumers worldwide. WBSS
ceutical products, and pet products, Amazon. also have the potential to radically change the
com expanded its product line by allowing other way businesses interact with their customers.
WBSSs to join its platform to sell the same type However, many WBSS are disappearing from the
of products. This is indirect sales of similar hori- Internet, so organizations are struggling to find
zontal products that Amazon.com already sells. In new strategies in order to survive in the world of
this case, Amazon.com is now an e-marketplace electronic commerce (Arlitt et al., 2001; Lumpkin
where many products are sold from many sellers et. al, 2002; Van Slyke & Belanger, 2004; Thomas
in one single market place. Not only does Amazon. et al., 2005). In order to provide meaningful
120
Evolving a Strategy for Web-Based Shopping Systems
guidelines for such a situation, we have attempted academic insights for further WBSS research.
to provide a taxonomy of four types of WBSS. Their practical application seems to depend on
On the basis of four types of WBSS, this study organizational circumstances, considering the
presents five evolutionary paths for strategic whole organizational capability to determine
planning: (1) from SDS to GDS, (2) from SDS the most appropriate option. The discussion in
to SIS, (3) from SDS to GIS, (4) from GDS to this chapter is an on-going study of how we can
GIS, and (5) from SIS to GIS. As a consequence extend and apply the concept of WBSS strategic
of the discussion so far, the accompanying Table planning. The model of WBSS strategic planning
5 presents the characteristics of the five types of suggested in this chapter can be a useful guideline
strategic planning. for organizations seeking the best way to advance
As seen in Table 5, each of the five evolutionary their WBSS, for achieving continuous competitive
paths has its associated strengths and weaknesses, advantages, and surviving in a global electronic
which require shrewd consideration by potential commerce environment.
adopters before practical application. Although The limited number of analyzed cases may
we believe that the WBSS strategic planning be a weakness of this chapter. However we are
presented in this chapter is a fundamental hopeful that this chapter will provide researchers
concept, evolutionary paths of each taxonomy and practitioners with both a detailed understand-
category could prove useful in advancing ing of WBSS and a theoretical base for further
WBSS, in providing guidelines into new research of web-based shopping businesses and
business opportunities, and in providing electronic commerce.
121
Evolving a Strategy for Web-Based Shopping Systems
Gulati, R. & Garino, J. (2000). Get the right mix Kraemer, K.L., Dedrick, J. & Yamashiro, S.
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Hollander, J. (1999). Dell and amazon link sites, Lumpkin, G.T., Droege, S.B. & Dess, G.G. (2002).
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Howcroft, D. (2001). After the goldrush: decon- Molenaar, C. (2002). The Future of Market-
structing the myths of the dot.com market. Journal ing: Practical Strategies for Marketers in the
of Information Technology, 16(4), 195-204. Post-Internet Age. London: Financial Times
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Holzwarth, M., Janiszewski, C. & Neumann,
M.M. (2006). The influence of avatars on online
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Nour, M.A. & Fadlalla, A. (2000). A framework Spiller, P. & Lohse, G.L. (1998). A classification
for web marketing strategies: the e-commerce of internet retail stores. International Journal of
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17(22), 41-50.
Thomas, D., Ranganathan, C. & Desouza, K. C.
Paper, D., Pedersen, E. & Mulbery, K. (2003). An (2005), “Race to Dot.com ad Back: lessons on E-
e-commerce process model: perspectives from Business Spin-Offs and Reintegration,” Informa-
e-commerce entrepreneurs. Journal of Electronic tion Systems Management, 22(3), 23-30.
Commerce in Organizations, 1(3), 28-47.
Torkzadeh, G. & Dhillon, G. (2002). Measur-
Piercy, N.F. & Cravens, D.W. (1995). The network ing factors that influence the success of internet
paradigm and the marketing organization. Euro- commerce. Information Systems Research, 13(2),
pean Journal of Marketing, 29(3), 1995 7-34. 187-204.
Pinker, E. J., Seidmann, A. & Foster, R. C. (2002). Van Slyke, C., Comunale, C.L. & Belanger, F.
Strategies for transitioning ‘old economy’ firms (2002). Gender differences in perceptions of web-
to e-business. Communications of the ACM, based shopping. Communications of the ACM,
45(5), 77-83. 45(7), 82-86.
Porter, M.F. (1980). Competitive Strategy, New Van Slyke, C. & Belanger, F. (2004). Factors
York: The Free Press. influencing the adoption of web-based shopping:
the impact of trust. Database for Advances in
Porter, M. E. (2001). Strategy and the Internet.
Information Systems, 35(2), 32- 49
Harvard Business Review, 79(3), 63-76.
Worthington, S.L.S. & Boyes, W. (2001). E-
Rackoff, N, Wiseman, C. & Ullrich, W. (1985).
business in manufacturing: putting the Internet
Information systems for competitive advantage:
to work in the industrial enterprises, Research
implementation of a planning process. MIS Quar-
Triangle Park, NC: Instrumentation, Systems and
terly, 9(4), 285-294.
Automation Society.
Ranchhod, A. & Gurau, C. (1999). Internet-en-
abled distribution strategies. Journal of Informa-
tion Technology, 14(4), 333-346. Endnot es
Rifkin, G. & Kurtzman, J. (2002). Is your e-busi-
1
These can be considered complementary
ness plan radical enough? Sloan Management
goods
Review, 43(3), 91-95.
2
These are classical examples of products that
Sadeh, N.M. & Lee, J.K. (2003). advances in b2b e- have been found to have synergy effects.
commerce and e-supply chain management. Jour-
3
Since Amazon.com started as SDS, the SIS→
nal of Organizational Computing & Electronic GIS evolutionary path is not applicable.
Commerce, 13(3/4), 163-165.
4
These product expansions might be viewed
as SDS to GIS path if we regard audio books
SCCI (2006). Amazon timeline and history, Re-
or electronic books as separate types of
trieved December 8, 2006, from http://phx.cor-
product from different industries. Due to
porate-ir.net/phoenix.zhtml?c=176060&p=irol-
the expansion that occurred through the
corporateTimeline/
alliance, this is labeled as an evolutionary
path from direct sales to indirect sales.
123
124
Chapter VIII
A Review of Single-Item
Internet Auction Literature and
a Model for Future Research
Jeff Baker
Texas Tech University, USA
Jaeki Song
Texas Tech University, USA
Abstr act
Internet auctions have received a considerable amount of attention from researchers. We review recent
empirical literature pertaining to single-item Internet auctions and observe that existing work has
examined the roles of the auctioneer, bidder, and seller in Internet auctions. As this stream of research
matures, research will necessarily move from concept discovery and process explanation to theory deep-
ening. As a first step towards synthesis of findings in Internet auctions, we compile a comprehensive list
of the various factors that have been examined in empirical studies and note their general impact upon
auction outcome. Based upon this extant research, we propose a conceptual model of Internet auctions
as a framework for structuring future work into Internet auctions. We then note the existing economic,
psychological, sociological, and cognitive theoretical bases for work on Internet auctions. We conclude
by highlighting the potential for behavioral economics to bring unity to Internet auction research and
by calling researchers to engage in the work of forging a comprehensive theory of Internet auctions.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
A Review of Single-Item Internet Auction Literature and a Model for Future Research
lished fixed-price channels or dictating the price perspectives (Dholakia, 2005a). Theory develop-
they are willing to pay for an item. The unrivalled ment often takes many years and builds upon vast
dominance of the fixed-price marketing model numbers of studies. As research streams mature,
has diminished somewhat as a new avenue for there are a number of preliminary steps on the
purchases has gained popularity—the Internet road to full-fledged theory (Runkel & Runkel,
auction. Not only are consumers enjoying the 1984; Webster & Watson, 2002). For instance,
benefits of auction pricing, but Web technologies Weick (1995) argues that references, data, lists
have allowed businesses to conduct auctions with of variables, diagrams, and hypotheses all fall
other businesses to streamline their supply chains short of the standard for theory, but are neces-
and reduce transaction costs (Lucking-Reiley & sary steps in the development of theory. It can
Spulber, 2001). These auctions, unheard of a scant be argued that these five items listed by Weick
ten years ago, have transformed vast segments of accurately describe the present state of work in
the marketplace and rank among the most dramatic Internet auctions. As research into online auctions
business developments of the Internet Era. matures, it too must move from concept discov-
A host of questions have been asked with regard ery and process explanation to theory deepening
to Internet auctions. Do bidders in Internet auc- (Dholakia, 2005a).
tions behave in the same manner and according We believe this article may be a step towards
to the same principles as participants in tradi- crafting a comprehensive theoretical explanation
tional auctions? Do the various auction formats of the various phenomena associated with Internet
used on the Internet yield equivalent revenues? auctions. While our model is not yet full-fledged
Researchers have begun to examine the myriad theory, we believe it incorporates significant find-
factors sellers should consider when placing items ings over the past decade and is a meaningful
in an Internet auction (e.g., Ba & Pavlou, 2002; advance towards cohesion, synthesis, and most
Gilkeson & Reynolds, 2003; Standifird, Roelofs importantly, towards explanation of phenomena
& Durham, 2004). For instance, how does the associated with Internet auctions. This article
initial bid price, the use of an escrow service, the will proceed as follows. We will first examine
seller’s feedback rating, or the product description existing literature to introduce the topic of auc-
impact the revenue generated? Others scholars tions and, more specifically, Internet auctions.
have begun to examine the impact that consumer Second, we will examine the dependent variables
characteristics may have upon Internet auction that have been most frequently used to quantify
transactions (e.g., Stafford & Stern, 2002; Mol- the outcome of Internet auctions. Third, we will
lenberg, 2004; Dholakia, 2005b). Are all bidders compile a list of the independent variables that
motivated solely by value-maximization or are have been examined as determinants of auction
some participating in auctions out of a hedonic outcome and note the general findings regarding
motivation? Researchers and practitioners alike each of these variables. Fourth, we will place the
are interested in the answers to these and other aforementioned variables in a conceptual model
questions. In the following pages, we present a that may serve as a framework for future inquiry
model for investigating Internet auctions that may into the various aspects of the Internet auction
facilitate the investigation of many of the questions phenomenon. We will note the role various exist-
asked in each of these streams of research. ing theories may play in explaining phenomena
What has not yet emerged from research into associated with Internet auctions. We will con-
Internet auctions is a comprehensive theoretical clude by noting the implications of our findings
explanation that encompasses the aforementioned for both scholars as well as practitioners.
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
126
A Review of Single-Item Internet Auction Literature and a Model for Future Research
describes real world auctions, including Internet marketplaces relying on Internet services (such
auctions, where bidders may be influenced not as the World Wide Web) and Internet protocols
only by their own valuation of the item, but also to conduct auctions.1
by the behavior of other bidders. Researchers have classified Internet auctions
Recent empirical work noting the potential as business-to-business (B2B), business-to-
of competing bidders’ preferences to influence consumer (B2C), and consumer-to-consumer
a given bidder’s behavior supports the view that (C2C) (Bapna, Goes & Gupta, 2001). While all
the AV model is the most descriptive of Internet are fruitful areas for research, this review will be
auctions. For instance, Gilkeson and Reynolds confined to an examination of consumer-oriented
(2003) find that the number of bids in an auction auctions, both B2C and C2C. We circumscribe
influenced auction success and Dholakia and the scope of our study in this manner because of
Soltysinski (2001) observe a “herd behavior bias” our interest in the behavior of individual bidders
in which bidders are inclined to bid on items with rather than that of firms. Within the chosen do-
more bids, ignoring comparable or superior items main of B2C and C2C auctions, both single-item
with fewer bids. Other studies have also noted the and multiple-item auctions exist. Single-item
influence of bidder behavior upon other bidders auctions may include sales of electronics, col-
by noting that factors such as number of unique lectibles, autos, or a host of other items. Such
bidders, total number of bids submitted (Wilcox, auctions seem to have received the lion’s share
2000), bidder arrival rate, and number of bidders in of researchers’ interest. Multiple-item auctions
an auction (Segev, Beam & Shanthikumar, 2001) have also received a fair amount of attention in
influence auction outcome. The aforementioned literature (Bapna, Goes & Gupta, 2000, 2003a;
Internet auction studies all explicitly mention Bapna, Goes, Gupta & Karuga, 2002; Easley &
the merit of the AV model and demonstrate that Tenorio, 2004; Oh, 2002) and include a number
auction bidders are clearly influenced by the of interesting issues such as the development of
preferences of other bidders. algorithms for revenue optimization in iterative
combinatorial auctions (Bapna, Goes & Gupta,
Internet Auctions 2003b). Multiple-item auctions often involve B2B
or government-to-business (G2B) transactions,
Online auctions are a relatively recent develop- such as raw materials allotment or telecommunica-
ment in the history of auction research. The tions spectrum auctions. We will place multi-item
earliest such auctions took place in the early auctions outside the scope of our present review
1990s with the auction of pigs in Singapore (Neo, due to the additional theoretical complexities of
1992) and flowers in Holland (van Heck & van understanding revenue maximization and bidder
Damme, 1997). As the World Wide Web gained behavior when dealing with multiple items that
popularity, auctions began to be conducted via may be auctioned in a lot.
newsgroups or e-mail message discussion lists At this point, we will turn to a more detailed
(Lucking-Reiley, 2000a). The most well-known explanation of findings in Internet auction re-
examples of Internet auctions, however, are search. We will describe the various independent
those conducted by international market leader and dependent variables that have been examined
eBay, a company started in 1995 that has since in previous studies. After cataloguing these vari-
grown to include over 180 million registered ables, we will note general findings regarding
users and generated US$4.552billion in sales in the impact of particular variables upon auction
2005 (eBay, 2006). Following Möllenberg (2004), outcome and build a conceptual model of factors
we will define Internet auctions to mean virtual impacting auction outcome.
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
(2) Final Closing Price The highest bid in a successful auction (Brint, 2003; Bruce, Haruvy & Rao, 2004;
Dholakia & Soltysinski, 2001; Gilkeson &
Reynolds, 2003; McDonald & Slawson,
2002; Ottaway, Bruneau & Evans, 2003;
Standifird, 2001; Standifird, Roelofs &
Durham, 2004; Subramaniam, Mittal &
Inman, 2004; Wilcox, 2000)
(3) Seller Revenue The gross amount of the sale (Lucking-Reiley, 1999; Subramaniam,
Mittal & Inman, 2004; Ward & Clark,
2002)
(4) Price Premiums The monetary amount above the average (Ba & Pavlou, 2002; Pavlou, 2002a)
price received by sellers of identical
products
(5) Number of Bids The total number of bids placed for a (Bruce, Haruvy & Rao, 2004; McDonald &
given item Slawson, 2002; Ottaway, Bruneau & Evans,
2003; Subramaniam, Mittal & Inman, 2004;
Wilcox, 2000)
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
1997; Möllenberg, 2004). In Figure 1, we illus- the conclusion of this discussion, we will return
trate these three parties with the three largest to the Figure presented here to update and enrich
rectangles, which are entitled “Seller-Controlled it as a conceptual model of Internet auctions.
Factors,” “Auctioneer-Controlled Factors,” and
“Bidder-Controlled Factors.” Seller-controlled S eller-C ontrolled Factors
factors are simply variables under the control of
the seller that may impact the outcome of the auc- Variables under the control of the seller are nu-
tion. Likewise auctioneer-controlled factors and merous. Sellers are able to influence or control (1)
bidder-controlled factors are variables under the their reputation rating, (2) the initial bid price, (3)
control of the auctioneer and bidder, respectively, the option of setting a reserve price and the level
which may impact the outcome of the auction. of the reserve price, (4) the option to offer a buy-
The two arrows in Figure 1 depict the fact now price and the level of the buy-now price, (5)
that seller(s) and bidder(s) interact in the Inter- the number of payment options offered to bidders,
net marketplace. Echoing Mollenberg’s (2004) (6) the auction ending time, (7) the duration of
aforementioned definition of an Internet auction, the auction, (8) the amount, type, and specificity
we define the Internet marketplace as a virtual of the product information, (9) the number and
marketplace relying on Internet services (such type of delivery options, (10) the shipping cost,
as the World Wide Web) and Internet protocols (11) the auction mechanism, and (12) whether
to conduct auctions. The Internet marketplace is they (the seller) have a new or recently changed
located within the rectangle entitled “Auctioneer- Internet ID. It should be noted here that a few
Controlled Factors” to illustrate that the market- items, such as the number of payment methods
place is primarily constructed and controlled by and the auction format may be controlled by the
the auctioneer. Restated, the Internet marketplace seller, the auctioneer, or both. For instance, Inter-
and the rules for transacting business within it net auctioneer eBay, allows PayPal to be offered
are defined by the factors under the control of as a payment option, although each individual
the auctioneer. For instance, a seller might list an seller may choose whether or not they would like
item for sale on the popular eBay Internet auction to accept Paypal payments.
Web site where it would be viewed by potential Each of these variables has been investigated in
bidders. In this example, eBay is the auctioneer previous research for a linkage to one or more of
who constructs the Internet marketplace using the dependent variables mentioned earlier. Table 2
various Internet technologies. We will now turn lists these seller-controlled variables, defines each
our attention to recent findings and their signifi- of them, and notes the empirical studies in which
cance in the process of using this model to help they have been studied. We acknowledge that there
forge a cohesive theory of Internet auctions. At are slight variations in the definitions of some
129
A Review of Single-Item Internet Auction Literature and a Model for Future Research
130
A Review of Single-Item Internet Auction Literature and a Model for Future Research
variables from one study to the next. Interested reputable parties reduces uncertainty in decision
readers may consult the individual studies listed making. Additionally, it has been found that nega-
to locate the specific definition used. Our goal is tive feedback is highly influential in predicting
not to compare and contrast the various ways each auction outcome while positive feedback is only
variable has been measured, but instead to high- mildly influential (Standifird, 2001). The asym-
light the general variables of interest in Internet metric impact of positive and negative feedback
auction research. We wish to emphasize that there scores has been explained by an appeal to Pros-
is general agreement on many of these items. For pect Theory (Kahneman & Tversky, 1979)—a
instance, reputation rating is sometimes measured theory that explains that individuals evaluating
as an overall reputation score, sometimes as the potential gains and losses weight losses more
total number of positive feedback responses, or heavily than wins.
at other times as a ratio of positive to negative An item’s initial bid price has been investigated
feedback responses. In each case, the variable of to ascertain an impact upon the winning bid price.
interest can be generally referred to as “reputa- Findings here are mixed. Some have appealed to
tion rating” and the number of references cited in Signaling Theory (Spence, 1973) to explain that
Table 2 allows readers to understand that it is one high initial prices may indicate quality items and
of the most frequently studied factors influencing thereby result in successful sales and higher clos-
auction outcome. ing prices (Gilkeson & Reynolds, 2003). Other
As we now turn to a review of findings regard- studies have failed to find a significant relationship
ing seller-controlled factors, we will note theoreti- between initial price and final sales price (Stan-
cal explanations of observed relationships where difird, 2001). Reserve prices have been shown to
they have been provided. Some studies of Internet positively impact auction success and final closing
auctions, however, are exploratory in nature and price (Gilkeson & Reynolds, 2003). The presence
do not provide extensive theoretical explanation of a buy-now option has been found in one study
for their findings. In these cases, we will simply to be relatively insignificant to bidders; Standifird
report the studies’ findings and reserve possible and colleagues (2004) found that bidders at times
theoretical explanations for the final section of ignore the buy-now price even when that price is
this article. below prevailing market prices. This finding is
Within the realm of seller-controlled factors, explained by noting that some bidders may par-
seller reputation is one of the most thoroughly ticipate in auctions out of a hedonic rather than
examined predictors of auction outcome (Ba & a purely utilitarian motivation. This study stands
Pavlou, 2002; Brint, 2003; Dholakia, 2005b; Gil- in contrast to a theoretical paper that argues for a
keson & Reynolds, 2003; McDonald & Slawson, positive relationship between the availability of
2002; Ottaway, Bruneau & Evans, 2003; Pavlou a buy-now price and auction success (Budish &
& Gefen, 2005; Standifird, 2001; Standifird, Ro- Takeyama, 2001). All the findings relating initial
elofs & Durham, 2004; Strader & Ramaswami, bid price, reserve price, and buy-now options to
2002). Not surprisingly, these studies indicate auction outcome generally challenge prevailing
that sellers with high reputation scores are more notions about bidder rationality. Earlier experi-
successful by most any measure chosen. These mental research into auctions argued that positive
studies explain the linkage between reputation and outcomes would result from initial prices being
desirable auction outcomes such as higher clos- set as low as possible to allow as many potential
ing price, successful sale, or increased number of bidders as possible to enter the auction (Kagel,
bids by appealing to general behavioral econom- 1995).
ics arguments that explain that transacting with
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
The number of payment methods has not been Whether various auction mechanisms provide
conclusively linked to either auction success or revenue equivalence has been a topic of intense
increased revenues. The number of payment interest in traditional auction literature (Kagel,
methods, however, is frequently used as a control 1995). Auction mechanism, however, has been
variable, giving a level of informal credence to relatively infrequently investigated in the Internet
its status as a possible determinant of auction auction context—perhaps due to the dominance
outcome. If bidders value the ease with which a of the English or English-Vickrey hybrid auction
transaction can be completed, it is plausible that mechanism. One study found that Dutch auctions
they will patronize a seller who offers a large produced revenues thirty percent higher than
number of payment options (Gilkeson & Reynolds, first-price sealed bid auctions and also found that
2003). Other variables frequently used as control English and Vickrey auctions produce roughly
variables, but that have not been conclusively equivalent revenues (Lucking-Reiley, 1999).
linked to auction outcome include the time of Finally, it has been noted that a new or recently
day or week an auction ends and the duration of changed seller ID may influence final bid price
an auction (Brint, 2003; Dholakia & Soltysinski, under certain circumstances (Standifird, 2001).
2001; Gilkeson & Reynolds, 2003; McDonald & While that study fails to provide an extended
Slawson, 2002; Mehta, 2002; Standifird, 2001; explanation of this finding, we observe that, all
Standifird, Roelofs & Durham, 2004; Subrama- else equal, a seller with an established ID and
niam, Mittal & Inman, 2004). numerous high ratings would likely elicit more
Detailed descriptions of products are signifi- trust from potential bidders than a seller with a
cant predictors of a successful sale (Gilkeson & new ID. Trust has been linked to the ability to
Reynolds, 2003). It has been argued that pictures generate price premiums (Ba & Pavlou, 2002).
of an item may affect information processing and
thereby influence success of the sale, but perhaps Auctioneer-C ontrolled Factors
not for commodity-like items (Ottaway, Bruneau
& Evans, 2003). Numerous other researchers After examining recent literature, we conclude
have included product description as a control that characteristics of the auction under the
variable in their studies, measuring this variable control of the auctioneer include (1) the auction
as the number of pictures, the number of lines mechanism, (2) the availability of an option to
of text describing a product, or some similar end an auction early and purchase the item im-
measure (Bruce, Haruvy & Rao, 2004; Dhola- mediately (“BuyNow” on eBay), (3) the number
kia & Soltysinski, 2001; Standifird, Roelofs & of payment options, (4) the perceived ease of use
Durham, 2004). of the Internet auction Web site, (5) the perceived
Delivery options refers to the shipping options usefulness of the Internet auction Web site, (6)
available and their costs. One study argues that the presence of a feedback mechanism through
high seller reputation and delivery efficiency may which bidders and/or sellers can leave comments
be correlated (McDonald & Slawson, 2002), while about parties to auction transactions, and (7) the
another includes shipping cost as a control variable availability of an escrow service that helps mediate
(Gilkeson & Reynolds, 2003). Simple economic the transaction between bidder and seller. As with
explanations of rational behavior explain that the foregoing list of seller-controlled factors, we
shipping price will take on greater significance provide a table with a general definition of each
to the bidder as shipping price becomes a greater of these variables as well as the studies that have
proportion of the total transaction price. included these variables (see Table 3).
132
A Review of Single-Item Internet Auction Literature and a Model for Future Research
(1) Auction The choice of first-price sealed-bid, Dutch, second-price sealed bid, and (Lucking-Reiley, 1999; Rafaeli
Mechanism English auction format & Noy, 2005)
(2) Buy-Now The presence or absence of the option for a bidder to end an auction (Standifird, Roelofs & Dur-
Option early by purchasing at a seller-determined fixed price (eBay’s Buy-it- ham, 2004)
Now option)
(3) Payment The number of various payment methods available to bidders (check, (Gilkeson & Reynolds, 2003;
Options credit card, PayPal, etc.) McDonald & Slawson, 2002)
(4) Perceived The degree to that an Internet auction site is easy to use (Pavlou, 2002b; Stafford &
Ease of Use Stern, 2002)
(5) Perceived The degree to that use of an Internet auction site is free of effort (Pavlou, 2002b; Stafford &
Usefulness Stern, 2002)
(6) Feedback The presence or absence of a mechanism that allows bidders and/or sell- (Pavlou, 2002a)
Mechanism ers to leave comments about other parties to auction transactions
(7) Escrow The availability of an escrow service to mediate the transaction between (Hu, Lin, Whinston & Zhang,
Service the bidder and seller 2004)
The reader will recall from the previous section der-controlled factors, if bidders value the ease
describing seller-controlled factors that auction with which a transaction can be completed, it is
format has been linked in one study to variation plausible that they will utilize an auctioneer that
in seller revenue (Lucking-Reiley, 1999). Specifi- has a large number of payment options (Gilkeson
cally, the use of a Dutch auction may produce & Reynolds, 2003).
higher revenues than will a first-price sealed-bid The remaining auctioneer-controlled factors
auction (a type of auction very similar to the are generally understood to be under the exclusive
popular eBay and yahoo.com auctions). Also, direction of the auctioneer. First, the Technology
revenues are essentially equivalent in English Acceptance Model (TAM) (Davis, 1989) has been
and second-price sealed bid (Vickrey) auctions. found to have explanatory power when predict-
Another factor that may, in many auctions, be ing participation in Internet auctions. Bidders
under the control of both seller and auctioneer is who find a Web site useful and easy to use are
the availability of a buy-now option. To restate an more likely to participate in an Internet auction
earlier point, offering a buy price may increase (Pavlou, 2002b; Stafford & Stern, 2002). Several
revenue for sellers, as has been argued by Budish researchers have examined the development of
and Takeyama (2001), but this proposed relation- trust through feedback mechanisms as a predic-
ship has not yet been borne out by empirical tor of success in Internet auctions (Ba & Pavlou,
findings (Standifird, Roelofs & Durham, 2004). 2002; Ba, Whinston & Zhang, 2003; Pavlou,
Still another factor under the control of both seller 2002a). The use of escrow services has also been
and auctioneer is the number of payment methods shown to have a key role in developing trust in
accepted. This variable has been investigated Internet bidders (Hu, Lin, Whinston & Zhang,
with regard to both auction success and final 2004). The use of an escrow service has been
bid price (Gilkeson & Reynolds, 2003). Similar linked to Internet auction outcome as well. Col-
to the argument advanced in the section on bid- lectively, these studies indicate that auctioneers
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
(or sellers) who are able to induce trust through “evaluators,” that is, early one-time high bidders
a variety of mechanisms may be more successful with a clear idea of their valuation of the item,
than competitors in Internet auctions. while other bidders are “opportunists,” who are
bargain hunters and generally place minimum
B idder-C ontrolled Factors required bids just before an auction closes, and still
others to be “participators,” who enjoy participat-
Auction outcome can also be influenced by bid- ing in the process of the auction itself and often
ders. These factors include (1) bidder experience, make a low initial bid then monitor the auction
(2) bidder type, (3) intention to use an Internet progress and make successive bids (Bapna, Goes
auction Web site, (4) affinity with the computer, & Gupta, 2000). Still another study examined the
(5) involvement in the Internet auction bidding risk propensity of bidders, using the framework
process, and (6) the number of bidders placing of Prospect Theory (Kahneman & Tversky, 1979)
bids on a given item or using a given auction to classify them as risk-averse or risk-seeking
Web site. These bidder-controlled factors and (Ward & Clark, 2002). Finally, bidders with
their histories in Internet auction literature are hedonic motivations for participating in Internet
detailed in Table 4. auctions have been contrasted with those who
Experienced bidders have been found to make have purely utilitarian motivations (Standifird,
bids that are consistent with the optimal strate- Roelofs & Durham, 2004).
gies prescribed in auction theory (Wilcox, 2000). Following from the earlier mention of the TAM
Bidder type has been classified in different ways model as an explanatory model of Internet auc-
by different researchers. One study finds some tion outcome, behavioral intention to use, a TAM
bidders have a relational orientation, preferring to construct, has also been linked to the number of
interact with one seller multiple times (Dholakia, bidders participating in an Internet auction (Staf-
2005b). Another study finds some bidders to be ford & Stern, 2002). The same study notes that
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A Review of Single-Item Internet Auction Literature and a Model for Future Research
an individual’s preference for computer mediated theory development to help understand Internet
shopping and a user’s emotional state in response auctions (Dholakia, 2005a). We concur and call
to the stimulus of the Internet auction environ- researchers to bring synthesis to studies of Internet
ment increase the likelihood of a potential bidder auctions by moving into process explanation and
to participate in an auction. Thus, both affinity ultimately towards theory development.
with the computer and a bidder’s involvement in It has been argued that a complete theory
the Internet auction bidding process may influ- must contain four elements, including a list of
ence auction outcome. what factors are relevant to the explanation of
Finally, the circular effect of high seller volume the phenomenon of interest, a description of
eliciting high bidder interest, that in turn motivates how the factors are related, an explanation of the
psychological, economic, or other dynamics that
sellers to continue to utilize a highly-trafficked
justify the selection of factors and their relation-
Internet auction Web site has been noted (Wing-
ships, and finally a description of the limitations
field, 2001). It is therefore not surprising that as of the theory to pertinent places, times, and
an independent variable, the number of bids and people (Whetten, 1989). We have endeavored to
bidders leads to auction success and increased develop the first element by noting the factors
revenues for sellers (Dholakia & Soltysinski, that have been shown to be significant predic-
2001; Gilkeson & Reynolds, 2003). tors of Internet auction outcome. These factors
have been enumerated in previous sections of
this article. This section provides the second
Towar ds a Theo r et ic al and third of Whetten’s (1989) four elements for a
Underst anding of Int er net complete theory: descriptions of how factors are
Auct ions related and explanations of their relationships.
We will reserve our discussion of limitations to
Based upon our review of literature, this research the conclusion section of the article.
stream has matured to the point that pure concept At this point, we would like to add informa-
discovery is becoming less necessary. As men- tion to the conceptual model of Internet auctions
tioned earlier, scholars have called for additional (presented earlier in this article as Figure 1) and
Figure 2. Parties to the auction transaction and factors under their control
135
A Review of Single-Item Internet Auction Literature and a Model for Future Research
advance a possible explanation of how these in SPSS software. A three-cluster solution was
factors may be related. We enrich Figure 1 to il- found to be the most parsimonious grouping of
lustrate the factors that each party to the auction the studies and the solution that best reflected the
transaction may manipulate to determine auction meaningful patterns of the relationships among
outcome. In Figure 2, we place the list of seller- the control factors. Table 5 shows the means
controlled factors into the left-most rectangle of the clustering variables for each of the three
entitled “Seller-Controlled Factors.” Similarly, groups; the values for cluster centers in Table 5
we populate the remaining rectangles with the represent the distance among the clusters. Thus,
“Auctioneer-Controlled Factors,” “Bidder-Con- our categorization of independent variables as
trolled Factors,” and “Dependent Variables” either seller-controlled, auctioneer-controlled,
that have been described in the previous section or bidder-controlled is validated. Table 6 shows
of this article. We place the dependent variables the classification results of a one-way ANOVA
within the “Internet Marketplace,” which is it- analysis. ANOVA indicates that the three groups
self within the “Auctioneer-Controlled Factors” are significantly different and thereby affirms the
rectangle. We locate the dependent variables here stability of the three-cluster solution.
to illustrate first, that transactions are brokered We now turn our attention to theories utilized
by the auctioneer, and second, that auctions are in extant Internet auction research (summarized
conducted in the virtual marketplace maintained in Table 7) and note how they may collectively
by the auctioneer. point towards a comprehensive, systematic un-
To validate our three-way categorization derstanding of Internet auctions. The reader will
of independent variables, we employed cluster recall that Image Theory (Beach, 1993) and the
analysis, a statistical technique that identifies TAM model (Davis, 1989) have been applied in
homogeneous subgroups of cases within a dataset the context of Internet auctions. These psycho-
(Hair, Anderson, Tatham, & Black). We identi- logical theories have been provided valuable
fied 25 empirical studies of single-item Internet insight into bidder behavior. Investigation of
auctions and noted the independent variables auctions has, however, long been dominated by
recorded in each study [see Appendix A, where economic rather than primarily psychological
Table A.1 lists the research studies used in this explanations. Within Internet auction literature,
dataset, and where Table A.2 lists the independent the theory of Information Cascades (Banerjee,
variables recorded in each study]. We adopted 1992; Bikhchandani, Hirshleifer & Welch, 1992),
the k-means method that will product exactly k Signaling Theory (Spence, 1973), and Prospect
different clusters based on the greatest possible Theory (Kahneman & Tversky, 1979) have been
distinction using Euclidean distance (Johnson applied to explain bidder behavior. Based upon
& Wichern, 1992). The membership of each the review of literature in the previous section
cluster was fixed using k-mean cluster analysis of this article, none of these theories seem to be
136
A Review of Single-Item Internet Auction Literature and a Model for Future Research
Cluster Error
Variable+ Mean Square d.f. Mean Square d.f. F-value p-value
+
here, variable S1 denotes the first variable under the control of the seller—namely reputation rating. Simi-
larly, S2 denotes initial bid price, S3 denotes reserve price, etc. This numbering of variables appears in
the body of the paper, in Table 2, and in Figures 2-4.
* significant at .1 level; ** significant at .01 level; *** significant at .001 level
ª Buy-now option is duplicated. As noted in the body of the text, this factor is under the control of both the
seller (S4) and the auctioneer (A2). An insignificant p-value on these two measures should not, therefore
be construed as a lack of statistical support for the clustering solution.
b
Auction mechanism is duplicated. As noted in the body of the text, this factor is under the control of both the
seller (S11) and the auctioneer (A1). An insignificant p-value on these two measures should not, therefore
be construed as a lack of statistical support for the clustering solution.
137
A Review of Single-Item Internet Auction Literature and a Model for Future Research
comprehensive enough to explain the influence of imagined example, Signaling Theory appears to
all independent variables upon auction outcome. explain that a high reputation rating, a high initial
Each, however, seems to play a significant role bid price, a high reserve price, and a buy-now op-
in explaining how some subset of independent tion set at a relatively high level will allow bidders
variables determines auction outcome. to infer that an item is of high quality. Signals of
We argue that the role of these theories is to high quality encourage bidders to submit higher
explain how bidders evaluate the utility of a given and greater numbers of bids and will likely result
item up for auction. For instance, TAM explains in a higher final closing price.
that if a Web site is perceived to be useful and We argue that existing psychological theories
easy to use, the bidder experiences a lower cost provide insights into how bidders construct their
(in terms of time and effort) to bid on an item than individual utility functions for a given item being
if the site were neither useful nor easy to use. An auctioned. Thus, an explanation of how the factors
item auctioned on a Web site that is perceived to we have identified here are related is:
be easy to use and useful will have greater utility
than an item auctioned on a Web site that does ui (scf1, scf2, …scf12, acf1, acf2,…acf7, bcf1, bcf2,…bcf6) (1)
not have these characteristics. In another easily
138
A Review of Single-Item Internet Auction Literature and a Model for Future Research
Here, ui denotes the utility of a given item i, the economic, psychological, and/or sociological
and explains that utility is a function of the value forces that give shape to the behavior of each of
of seller-controlled factors (denoted by scfn), auc- the parties to the auction transaction.
tioneer-controlled factors (denoted by acfn), and A number of perspectives can be adopted in
bidder-controlled factors (denoted by bcfn). Items these future studies. Many possible studies may
with greater utility will have a higher likelihood of choose to hold constant one set of factors (either
successful sale, have a higher final closing price, bidder-, auctioneer-, or seller-controlled) to isolate
product greater revenue for the seller, be more the contribution of each set of factors to auction
likely to generate price premiums, and be more outcome. For instance, if bidders in an Internet
likely to generate a higher number of bids. Thus, auction are treated as a “black box,” having un-
we argue that the relationships between the fac- known, unknowable, or unspecified motivations,
tors we have listed can be partially explained by then the list of seller- and auctioneer-controlled
existing psychological and economic theories. An factors listed in the conceptual model presented
application of utility theory, however, may provide here is a comprehensive basis from which to
a comprehensive and parsimonious explanation of understand Internet auctions. Both field studies
Internet auction outcome. Such an application of using real-world data as well as experiments using
utility theory subsumes the explanations of how laboratory data can be conducted to find the impact
individual independent variables influence the of seller-controlled factors as well as auctioneer-
dependent variable(s) of interest. controlled factors on auction outcome.
Bidder motivation need not be treated as a black
box, however. The conceptual model presented
Implic at ions for here is an attempt to provide an inclusive list of
Re s earc h and Pr act ic e the factors pertinent to a study of bidder behavior.
The list of bidder-controlled factors presented here
A comprehensive list of the factors under the gives guidance to researchers who may wish to
control of sellers, auctioneers, and bidders helps design more carefully controlled research studies.
bring synthesis to the exploratory phase of Internet Field studies may provide copious data about the
auction research. We argue that by cataloguing impact of seller- and auctioneer-controlled fac-
and categorizing the variables investigated in tors, but they provide relatively little information
previous studies, the major determinants of auc- about bidders. Bidders’ experience and the number
tion outcome have been identified. This represents of bidders can usually be observed from a field
the first contribution of this article to scholarship. study, but bidders’ type (motivation), intention
With a comprehensive review of Internet auction to use a Web site, affinity with the computer, or
literature completed, and with the relevant vari- involvement generally cannot. Our list of bidder-
ables identified, research can now be undertaken controlled factors allows researchers to observe
to ascertain the relative importance of various that experiments and field studies have been
factors and the rationale for their effect on auc- used in the past to investigate bidder behavior.
tion outcome. By placing these factors into three Other research, however, has paired a survey (as
categories, an additional, related contribution is was used by Pavlou (2002b) and by Stafford and
made to the literature as well. Researchers may Stern (2002)) with a field study or experiment to
now choose to focus their inquiry more tightly investigate bidder-controlled factors. We note that
on one set of factors or another. Decomposition surveys, a methodology frequently employed in
of a single list of factors into categories of fac- behavioral research, may be underutilized for
tors may reduce the complexity of elucidating investigating bidder behavior in Internet auctions.
139
A Review of Single-Item Internet Auction Literature and a Model for Future Research
Similarly, the pairing of a mathematical model making an initial decision to utilize Internet auc-
to explain Internet auction outcome (such as the tions as a sales channel might choose to purchase
simple utility function developed in this article) a firm with an excellent reputation rating rather
with an empirical examination using real-world than invest in the time to build a reputation.
data to validate the model seems to be an appropri- Thus, practical insights for firms are given by
ate way in which to investigate Internet auctions. this model as well.
Many studies either develop mathematical models
of auctions or collect real-world data to investigate
variables, but few combine the two methods in Con c lus ion
a way that can bring the rigor of a pure science
such as mathematics to bear on a social science We wish to briefly address the limitations of
phenomenon like Internet auctions. the theoretical development presented here. The
The goal of Internet auction research is not vast majority of the studies considered have
only to provide insights for scholars, but also to been conducted at Internet auction Web sites.
give practical guidance to practitioners whose We acknowledge that some auctions take place
firms utilize Internet auctions as a sales channel. through newsgroups or e-mail (Lucking-Reiley,
While Internet auctions were once dominated 1999; Lucking-Reiley, 2000a), and different fac-
by consumer-to-consumer (C2C) transactions, tors may come into play in such situations. For
researchers have noted the increasing number instance, trust is often developed through feedback
of business-to-business (B2B) and business-to- mechanisms on Internet auction Web sites, and
consumer (B2C) auctions (Bapna, Goes & Gupta, may be developed differently among members
2001; Lucking-Reiley, 2000a). eBay alone boasts of a newsgroup who have established relation-
383,000 eBay stores (eBay, 2006). Furthermore, ships before the commencement of the auction.
eBay has begun to court companies such as Dell, Obviously, this review has been constrained to
Disney, Home Depot, IBM, Motorola, Sears, Sun include only single-item consumer-oriented auc-
Microsystems, and Sharper Image to sell outdated, tions. Future work may address multiple-item
returned, or refurbished merchandise on the Inter- auctions, reverse auctions, or business-oriented
net (Dholakia, 2005b; Gentry, 2003; Grow, 2002; auctions. Additionally, the ideas advanced here
Vogelstein, Boyle, Lewis & Kirkpatrick, 2004) may be specific to individuals in Western coun-
where they can earn greater profit than by using tries where the majority of data for the empirical
a liquidator (Gentry, 2003; Grow, 2002). Clearly, studies discussed here was gathered.
in light of the burgeoning use of Internet auctions While we do not claim to have developed
by businesses, the model presented here has value a comprehensive theory explaining Internet
to organizations that use Internet auctions as a auctions, this study contributes to literature by
sales channel. bringing a measure of cohesion and synthesis to
An understanding of the factors a firm can existing findings regarding Internet auctions. As
control will aid the development of successful Weick (1995) has argued, findings in datasets are
sales strategies for firms. For instance, when a closer to theory than mere lists of references, lists
firm auctioning items on the Internet notes the 12 of variables are closer to theory than are data, dia-
factors under their control (previously described grams are closer than variables, and hypotheses are
in Table 2 and depicted in Figure 2), they may closer still. All are necessary intermediate stages
choose to price an item in such a way that the in theory development, and perhaps the model
price communicates a signal about quality and here may guide future investigations. Specifi-
thus stimulates bidding interest. Similarly, a firm cally, we believe this review makes three primary
140
A Review of Single-Item Internet Auction Literature and a Model for Future Research
contributions. First, we believe the compendium Bapna, R., Goes, P., & Gupta, A. (2003a). Analysis
of variables presented here will assist researchers and design of business-to-consumer online auc-
attempting to ascertain what variables have been tions. Management Science, 49(1), 85-102.
previously investigated. Second, the conceptual
Bapna, R., Goes, P., & Gupta, A. (2003b).
model presented earlier may represent a step
Replicating online Yankee auctions to analyze
closer to theory. Third, we have highlighted the
auctioneers’ and bidders’ strategies. Information
existing theoretical explanations of bidder, seller,
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http://www.treasuryandrisk.com/issues/2004_01/ Letters, 11(4), 363-374.
supply_chain_management/256-1.html
Wilson, R. B. (1969). Communications to the edi-
van Heck, E., & van Damme, E. (1997). New tor: Competitive bidding with disparate informa-
entrants and the role of IT: The tele flower auc- tion. Management Science, 15(7), 446-449.
tions in the Netherlands. Paper presented at the
Wingfield, N. (2001). Ebay watch: Corporate sell-
30th HICSS, Hawaii.
ers put the online auctioneer on even faster track:
Vickrey, W. (1961). Counterspeculation, auc- Goods from IBM, Disney help dot-com pioneer
tions, and competitive sealed tenders. Journal of post a surge in profits: Why mom and pop are
Finance, 16(1), 8-37. mad. Wall Street Journal, p. A.1.
Vogelstein, F., Boyle, M., Lewis, P., & Kirkpat-
rick, D. (2004). 10 tech trends to bet on. Fortune,
149(4), 75-81. Endnot e
Ward, S. G., & Clark, J. M. (2002). Bidding be- 1
Online auctions, Internet auctions, and elec-
havior in on-line auctions: An examination of the
tronic auctions are terms that are often used
eBay Pokemon card market. International Journal
interchangeably in e-commerce research
of Electronic Commerce, 6(4), 139-155.
(Lucking-Reiley, 2000a). We acknowledge
Weick, K. (1995). What theory is not, theoriz- both that there are technical distinctions
ing is. Administrative Science Quarterly, 40(3), that might be highlighted to differentiate
385-390 between the terms and that some scholars
have made such distinctions in the past
Webster, J., & Watson, R. (2002). Analyzing the
(e.g., Klein, 1997). Contrasting such dif-
past to prepare for the future: Writing a literature
ferences, however, is not the focus of this
review. MIS Quarterly, 26(2), xiii-xxiii.
article. Additionally, this article focuses on
Whetten, D. (1989). What constitutes a theoretical auctioneer-mediated Internet transactions
contribution. Academy of Management Review, (such as those that occur on eBay), therefore,
14(4), 490-495. we will adopt the term “Internet Auctions”
throughout the remainder of this chapter.
This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 5, Issue 1, edited by M. Khosrow-
Pour, pp. 43-68, copyright 2007 by IGI Publishing, formerly known as Idea Group Publishing (an imprint of IGI Global).
144
A Review of Single-Item Internet Auction Literature and a Model for Future Research
All studies selected were of single-item Internet auctions This choice is consistent with the scope of
this article, which does not examine multiple-item auctions. The studies included peer-reviewed journal
articles, Ph.D. dissertations, and conference proceedings. We chose to research from all three of these
sources to make our sample more representative of the total population of research studies than a group
of only journal articles would be (King & He, 2005) We chose to use 25 studies because our cluster and
discriminant analyses require at least as many observations as variables.
In Table A.2, the first two columns identify the research studies used in the cluster analysis (presented
above in Table A.1). The columns ranging from S1 to B6 denote the variables measured in each of the
research studies. For example, S1 denotes the first variable under the control of the seller—namely
reputation rating. S2 denotes initial bid price, S3 denotes reserve price, etc. In a similar way, A1 denotes
the first variable under the control of the auctioneer—the auction mechanism and B1 denotes the first
variable under the control of the bidder—bidder experience. This numbering of variables appears in
the body of the chapter, in Table 2, and in Figures 2-4.
Within each column, we have indicated whether a given study measured a particular variable. When a
study did measure a variable, we have coded that fact with a 1. When a study did not measure a variable,
we have coded that fact with a 0. For instance, research study 21, Standifird’s 2001 Journal of Manage-
ment paper measured S1, S2, S6, S7, and S12 (but not any of the other variables listed on this table).
The final column, C, denotes the group to which the research study was assigned by the cluster
analysis.
145
A Review of Single-Item Internet Auction Literature and a Model for Future Research
Academy of Management
17 Pavlou - Trustworthiness 2002 Proceedings
Academy of Management
18 Pavlou - TPB 2002 Proceedings
146
No. Author S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 S11 S12 A1 A2 A3 A4 A5 A6 A7 B1 B2 B3 B4 B5 B6 C
1 Ba and Palvou 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2
4 Brint 1 1 1 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
6 Dholakia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 2
10 Lucking-Reiley 0 0 0 0 0 1 1 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 1 2
12 Mehta 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 2
14 Mollenberg 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 2
17 Pavlou - Trustworthiness 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2
18 Pavlou - TPB 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 1 0 0 0 3
Table A.2. Independent variables examined in Internet auction studies
21 Standifird 1 1 0 0 0 1 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 3
25 Wilcox 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 2
147
148
Chapter IX
Changing IT Skills:
The Impact of Sourcing Strategies on
In-House Capability Requirements
Christine V. Bullen
Stevens Institute of Technology, USA
Thomas Abraham
Kean University, USA
Kevin Gallagher
Northern Kentucky University, USA
Kate M. Kaiser
Marquette University, USA
Judith C. Simon
University of Memphis, USA
Abstr act
The increasingly global sourcing of IT work and other socio-economic trends are prompting fundamen-
tal changes in the availability of IT skills needed in both client and vendor organizations. This article
analyzes the results of a survey conducted in 2005, in which IT executives were asked to describe the
skills they felt were critical to keep in house now and in 2008. The top ten current skills included three
in project management, five in business domain and three in technical. In 2008, the top five emerging
skills are almost all business domain while the top five exiting skills are all technical. Our findings
indicate that the critical skills to keep in-house are primarily client-facing skills, even when they are
technical. Respondents are moving away from traditional IT skills except when their business model
continues to value them. However, traditional technical skills are still important for all new hires while
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Changing IT Skills
project management skills are the most often cited for mid level hires. The projected number of full
time employees is expected to remain approximately the same by 2008 but there will be an increase in
sourcing to third party providers (3PP) and a shift from domestic to offshore 3PP staff. The patterns in
the data indicate that technical skills that are not client facing and can be done anywhere are the most
likely to be sourced. Findings indicate that IT professionals need to have a balance that demonstrates a
foundation in the traditional “hard skills” and experience with “softer” business-oriented skills.
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Changing IT Skills
and marketing can be moved outside. In a report discussed the Internal Labor Market theory where
published by the Cutter Consortium, Rottman and they propose two approaches an organization
Lacity describe the positive effect that sourcing can take to develop career paths: Industrial and
has had in the U.S. on IT jobs, IT productivity, Craft. Under the Industrial strategy, employees
IT costs and IT quality (Rottman and Lacity, enter the organization and progress along clearly
2004). UBS, in a report for their investors, pre- marked job ladders. They are selected based
dicts a labor drought in the U.S. that will require on high education requirements, they receive
some jobs to move offshore (Ryan, Farrell and training in skills and knowledge specific to the
Doerflinger, 2005). organization, and they advance due to merit and
Tapscott (2004), in a rebuttal of Carr, responded personality. Under the Craft strategy, employees
that companies with bad business models tend to often are viewed as having more loyalty to the
fail, regardless of whether they use IT or not. In profession than to the organization and that their
a recent Deloitte Consulting report, the authors skills are less organization specific and more
conclude that outsourcing is complex and that mobile. Their work suggests that contractors are
results have been mixed (Deloitte, 2005). Their typically given tasks with low task identity and
evidence suggests that most (70%) of the par- low autonomy, often coding narrowly specified
ticipants in the study had significant negative programs. Contractors have little business and
experiences with outsourcing and will be more industry knowledge. Understanding the quality
selective in using it. A McKinsey report (Farrell of the skills at 3PPs may be a key to understand-
et al., 2005) finds that a single global labor market ing the workforce decisions that client companies
exists but that it is small. Offshoring accounts will make.
now for only about 1% of the service jobs in de- An assessment of workforce globalization
veloped countries. Even though the report projects found that businesses want to retain certain kinds
that this proportion will gradually increase as the of IT services and software work in the United
global market becomes more efficient, it does not States (Anonymous, 2004). The report states
forecast a sudden discontinuity in employment for that the characteristics of such IT work includes
developed countries. The report cites a US Bureau products or processes in which there is uncertainty
of Labor statistic that the growth rates for wages about customer needs or specifications, projects
and jobs in computer and data-processing services requiring highly iterative development processes,
are higher than those in the economy as a whole. work that involves a high degree of personal inter-
The extent to which organizations subscribe to action with end-users or clients, work that crosses
one or another viewpoint on the importance of many disciplines, applications with complex pro-
IT and sourcing to a business strategy will affect cedures, applications that involve a high degree
the changes in the IT skill set. of integration with other systems developed and
A literature review looking at IT workforce, maintained on-shore, work involving nuances or
skills, employment and outsourcing uncovers deep cultural understanding, work in which much
many articles that were written which focus of the knowledge exists only in the minds of the
on the movement of “non-core” IT skills out of on-shore IT staff, analytical tasks, leading-edge
the corporate organization and into the realm research, non-rule-based decision-making, high
of 3PPs, both foreign and domestic (Slaughter levels of creativity, high management interaction
and Ang, 1996). In addition Ang and Slaughter requirements, process design, business analysis,
(2001) have applied social exchange theory to technology and systems integration, and fusion
the study of workplace attitudes and behaviors of industry knowledge, high level IT skills, and
of contract and permanent professionals. They business process expertise. A key aspect of our
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Changing IT Skills
research is to better understand the skills that or- in more than one-fifth of the job openings. .Net
ganizations deem critical to maintain in house as has grown in importance and now represents 13%
opposed to those that can be sourced to 3PPs. of skills required by employers.
Several articles have applied theories from The demand for network skills was growing in
diverse fields to study IT skills and the approach 1995 as increasing numbers of companies entered
to outsourcing. Gomes and Joglekar (2005) have the world of the Web (Litecky, Prabhakar and
applied the theory of transaction cost economics Arnett, 1996). Koong, et al, noted in 2002 that
to explore the nature of software development expertise in Java, XML, TCP/IP and other Inter-
tasks that remain in-house. Their analyses show net-related skills demanded higher compensation
that process asset specificity indicated by task in- than other IT professional positions (Koong, Liu,
terdependence and task size predicts outsourcing Liu, 2002). Research based on systematic reviews
the task. Ang and Slaughter (2004) apply Internal of want ads showed that older IT skills tended to
Labor Market strategies to classify the human disappear from the advertisements, indicating
resource rules used to govern IT workers. - Chief less interest in hiring those skills on the parts of
Information Officer (CIO), Applications Manager IT managers (Arnett and Litecky, 1994).
(AM), Project Leader/Analyst (PLA), Programmer The research based on advertised positions
(PGM), Infrastructure Manager (IM), Database may be biased by a tendency to list required
Administrator (DBA), Network Specialist (NWS), technical skills but omit additional skills that
Systems Programmer (SP). They found that the are determined in the interview process. Below
more managerial jobs – CIO, AM and IM – are we discuss a two stage hiring model that is not
usually governed by the Industrial strategy, lead- reflected in the want ads.
ing to lower turnover and higher tenure. The other, Previous studies have shown that managers
more technical, jobs were governed by the Craft rate non-technical skills higher than technical
strategy, leading to higher turnover and shorter skills even for entry-level employees. In addition,
tenure. There are factors affecting the individual managers’ expectations with regard to the non-
career decision which must also be considered in technical abilities of new hires are usually higher
trying to understand the trajectory of workforce than the actual ability the new hires exhibit (Cap-
skill trends. pel, 2001/2002, Van Slyke, Kittner and Cheney,
1998). An earlier paper looked at the “expectation
IT S kills and C apabilities gap” between what skills and experience industry
expects from college graduates in IT versus what
Reviewing the literature on the skills and capabili- they find (Trauth, Farwell and Lee, 1993). A survey
ties themselves reveals a number of interesting of ACM SIGCPR proceedings resulted in the same
research projects that are related to ours. In a general conclusion that non-technical skills were
very recent paper, Prabhakar, Litecky and Arnett equally or more important than technical skills for
(2005) reviewed the current IT job market and IT professionals (Nakayama and Sutcliffe 2001).
conclude that the need for development work in In addition, managers have less of a preference
web-related applications has changed the demand for a specific programming language, but rather
for these programming skills. They report that value the learning of programming concepts in
these skills are mentioned in 42.6% of job ads. any language (Cappel, 2001/2002).
Specifically, Java has remained important and is ITAA (2004) found that interpersonal skill
required in more than one-fifth of all jobs. How- was the highest rated non-technology skill in the
ever, it has not replaced the need for C++ and C survey. Fifty-two percent of respondents cited this
programmers. SQL programming is also required attribute, far more than any other. This preference
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Changing IT Skills
proved true for IT and non-IT companies as well Inconsistencies between What Is
as companies big, small and in-between. A few S aid and What Is Done
variations also appeared when comparing IT and
non-IT hiring manager responses in this area. IT A study of classified advertising for IT positions
companies placed substantially higher importance from 1988 to 2003 found a recruiting gap exists
on project management than non-IT firms. The whereby organizations say they want well-rounded
report suggests that project management may individuals with business knowledge and soft
be more of a core competence for IT firms—a skills, however, they advertise for individuals
critical component of what these companies offer with hard technical skills (Gallivan, Truex and
their clients. Kvasny, 2004). The paradox is further explored
An evolution of the relationship between clients in a study proposing a new model for IS recruit-
and 3PPs proposes that under certain conditions ing called Image Theory (Litecky, Arnett and
“cosourcing” is an appropriate model that requires Prabhakar, 2004). This research posits a two-stage
the parties to work in a close partnership, which hiring process: Selection/Filtration Stage and
results in an exchange of skills and capabilities Choice/Hiring Stage. The Selection/Filtration
(Kaiser and Hawk, 2004). Stage is what is represented in job postings. It
Ross, Beath and Goodhue (1996) identify three is the necessary technical background required
IT assets for competitiveness. One of these is the for a position. The Choice/Hiring Stage is where
human asset which they describe as an IT staff that additional skills and experience on the softer side
solves business problems and takes advantage of come into play in the hiring decision
business opportunities through the application of
information technology. They conclude that the Implications for Academic Programs
IT professional needs a blend of current technical
skills, a deep understanding of the business and George et al (2005) examine the recent and rapid
a talent for problem solving. Foote describes the rise and fall of university student enrollments in
“hybrid” IT job that requires multidimensional information systems programs and describe how
skill sets blending technology skills and customer these enrollment fluctuations are tied to the job
focus (Foote, 2005). opportunities of graduates. Drawing on the work
A variety of studies have been done to as- of Ives et al (2002), they recommend that programs
sess the quality of IT professionals’ skills and can influence the number of majors they attract
knowledge. Two of these have established sets of by focusing more on why information technol-
skills/knowledge that should be measured: Techni- ogy is valuable to an organization rather than on
cal Specialties, Technical Management, Business what the technology is or how it works. Foote
Functional, and Interpersonal and Management reported a 10.3% decline in computer science
(Lee, Trauth and Farwell, 1995 and Byrd and undergraduate enrollment from 2000 to 2004 and
Turner, 2001). Generally the results of these studies noted that UCLA had calculated a 60% decline
have indicated that a blend of all of the skills is in undergraduates declaring computer science
required for success as an IT professional. as their major from 2000 to 2004 (Foote, 2005).
All of these research areas underline the Other universities have indicated similar drops
importance of a balance of skills that are both (Trewyn, 2005)
technical and non-technical. This supports our In the Gallivan, Truex and Kvasny paper they
findings. also determine a need for life-long learning for
IT professionals and the academics who teach
them (Gallivan, Truex and Kvasny, 2004). Cap-
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Changing IT Skills
pel also addresses the issue of how students can in house now and in 2008. It also analyzes some
better prepare for the marketplace requirements of the data on employment trends for IT.a This
(Cappel, 2001/2002). article excludes data from 3PPs. There is a fol-
The decreasing enrollments in all IT-related low-up study underway specifically looking at the
programs, i.e. MIS and Computer Science, is workforce needs of these service providers.
a concern for the industry and is an important The interview script was developed by a subset
factor motivating our research. Most recently the of the research team, all of whom have extensive
decline appears to be leveling off, and there is an experience with interview-based research. The
indication of a new growth in enrollments about research objectives along with appropriate demo-
to begin. However mixed messages persist about graphic information were the focus of the design.
the value of a career in IT. Pre-test interviews were conducted to verify the
practical use of the interview script.
The data was collected using the interview
Met hod script, through structured, one-hour interviews
between a researcher and a respondent. All re-
The Society for Information Management (SIM) searchers used the same interview script thus
sponsored a study to explore the impact of so- providing the same data for the collective data
cio-economic trends on the IT Workforce. Data base of interviews. Some of the interviews were
was gathered from senior IT managers by 20 conducted face-to-face and others via the tele-
researchers in the US and Ireland using a struc- phone.
tured interview script. The sample was initially chosen from orga-
The objectives of the study were to: nizations that are members of SIM. There was a
goal to include companies of all sizes. In much
• Explore the current and future needs for IT management research there is a focus on the
skills and capabilities in U.S. and European largest, Fortune 500 companies. In fact, the ma-
organizations, including private and public jority of employers are firms in the SME (Small
sector organizations and client and vendor to Medium Size Enterprises) category and these
organizations. are often overlooked. While we would have
• Determine how organizations do/will re- liked to have even more firms in this category,
cruit, develop, and retain in-house IT skills we were pleased to have 37% of the sample fall
and capabilities to meet current and future into the SME group. The sample was increased
needs. through references from respondents and through
• Understand how organizations do/will ac- personal contacts. A structured interview script
cess IT skills and capabilities through third with multiple choice answers wherever possible
party global sourcing. was used by all researchers which mitigated any
• Assess what skills and capabilities univer- individual researcher bias. Respondents were
sities should be providing in their gradu- asked to discuss what they were actually doing and
ates. their formal strategy for the next 3 years. There
• Identify patterns of skills and how capabili- were checks built into the script. For example,
ties will change over the next three years. if a respondent said they were not hiring in the
current year, then we did not use their answers
This article analyzes the results of parts of about what skills they were looking for in new
the survey in which IT executives were asked to hires. This was to avoid “blue skying” and stay
describe the skills they felt were critical to keep with actual activities.
153
Changing IT Skills
different organizations.
Table I illustrates that the majority of respon-
dents, approximately 82%, were executives in the
IT organization. Since we were asking respondents
about the hiring strategies of their organizations, The sample included a range of organizational
we decided that the highest level managers would sizes based on revenue. For analysis purposes,
be able to give us the most accurate picture of the size categories were created as follows:
current and future (three years out) plans. While
lower level managers, if interviewed, may have • Fortune 500 – greater than USD 3 billion
focused more on specific technical skills, we were • Large – between USD 3 billion and USD
looking at the career paths for IT professionals 500 million
and were therefore interested in what top IT • SME – less than USD 500 million
management judged were the critical skills for
someone to have a productive career path within Table 4 lists the 5 categories and their related
the organization. skills drawn from previous research (Lee, Trauth
The industries represented in the sample are and Farwell, 1995; Byrd and Turner, 2001) and
shown in Table 2. adding skills related to sourcing and to IT ad-
ministration. We reorganized the categories to
reflect where we felt they fit in terms of the type
of work being done. For example, we did not have
a separate category of “interpersonal skills” but
Table I. Respondents by title rather included such skills in the category where
it would be employed. Thus skills and capabili-
Respondent Title Percent
ties related to planning, organizing and leading
CIO 38%
projects appear under Project Management.
Vice President 24%
We asked subjects the following:
Executive Director/Director 16%
CTO 4%
• What skills and capabilities they believed
CIO Report 3%
were critical to keep in house in 2005
HR Related 7% • Which skills and capabilities they thought
Top Management 7% would be critical to keep in house by 2008
154
Changing IT Skills
Figure 1 shows the top ten skills (with a tie for continued on following page
155
Changing IT Skills
Table 4. continued are client facing and want to keep them in house
SOURCING rather than source them. While this is consistent
Sourcing strategy with previous research, we have been able to
Third party provider selection
demonstrate that this is an explicit choice of IT
Contracting and legal
executives.
We asked our respondents what skills and ca-
Managing 3rd party providers
pabilities they thought would become less critical
Other
to keep in house in 2008 - because they would
IT ADMINISTRATION
become irrelevant, be automated or be outsourced,
Financial Management
for example. Figure 2 shows the top five that are
Internal HR management not critical to keep in house. In general, there
IT Governance were very few skills that more than 10% of our
Other respondents thought would disappear by 2008. The
top ranked ones in this question were program-
ming, desktop/help and mainframe/legacy items.
Note that only technical skills were mentioned by
others are in project management (indicated by the more than 10% of the respondents. No business
darkest shading), five are in the business domain domain, project management, sourcing or IT ad-
category (the lightest shading) and three are in ministration items were identified as potentially
technical (the medium shading). It is interesting disappearing. In fact the skills that are leaving in
to note that two of the technical items, Systems house appear to be migrating to 3PPs. This will
Analysis and Systems Design, are technical be discussed further in the section below on the
skills that are client facing. Therefore the top changes in Full Time Equivalent (FTE) data.
ten shows a strong bias toward skills that require We asked our respondents what skills and
this type of interaction between clients and IT capabilities they thought would emerge as newly
professionals. critical to keep in house in 2008. Figure 3 shows
Thus our research supports the strategy that the top five in this category. Five emerging items
IT executives value the skills and capabilities that are in the business domain. This reinforces the
156
Changing IT Skills
interpretation that client-facing skills are and with the pattern that previous researchers have
remain important to keep in house. One techni- found that the items listed in classified advertis-
cal and one project management skill are tied for ing change depending on the technologies that
fifth place. are becoming of interest.
Respondents also mentioned items that might Some respondents pointed out that their main-
be considered “new” programming or operations frame operations were not going away any time
skills and capabilities, e.g., Java, .Net, Linux, soon. While this would, on the surface, appear to
wireless, etc. While these were mentioned by be contradictory, we believe that this represents a
10% of the respondents, they were specifically business-specific need related to an organization’s
named during the interviews. This is consistent culture and values. That is, when an organization
with the interpretation that skills related to newer is in a stage in which it is still highly dependent
technologies need to be in house while they are on a technology, e.g., mainframe technology,
being learned and understood. It is also consistent it will want to maintain some of those skills in
157
Changing IT Skills
house, and therefore the skills and capabilities the one technical item whose criticality increased
would not disappear. the most was continuity/disaster recovery.
Managing third party providers and IT gov- We asked what skills and capabilities are
ernance were also becoming more important critical for new hires. Figure 4 shows the top ten
capabilities to have in house. There were a few entry level items. It is interesting to note that 8
items in the technical category that were seen to of the top 10 are technical and that programming
be increasingly critical to have in house in 2008 is at the top. As discussed previously, we used
– notably security and IT architecture. In addition skill categories to describe broad capabilities,
158
Changing IT Skills
therefore “programming” here includes any form This data supports the concept of the two stage
of programming regardless of platform such as model in hiring IT professionals (Litecky, Arnett
traditional computing, desktop computing or and Prabhakar, 2004). The technical skill set is
Web development.c Organizations still value necessary to be considered for a position; however,
the traditional IT skill set for entry level hires. it is not sufficient. The softer skills represented
We investigated the degrees that organizations by communication skills and industry knowledge
sought and found that entry-level applicants with must be present to create the balance that makes
undergraduate degrees in Computer Science are a candidate desirable.
desirable.d Communication skills and industry We asked respondents what skills and ca-
knowledge are now also highly valued. pabilities are critical for hiring employees into
It is important to note that programming mid-level positions. Figure 5 shows the top ten
represent the generalized capability of program- items shown for mid-level positions. At the mid
ming and not a specific programming language level the set shifts away from the technical skills
skill. By combining the fact that programming of the entry level and towards project manage-
is the highest entry level skill or capability with ment skills and capabilities. Gomes & Joglekar
the generally accepted evolution toward newer (2005) found increased project management
technical areas, one can interpret this to mean expertise is positively correlated with increased
that organizations are looking for programming outsourcing. Therefore as sourcing has increased
skills in the newer technologies, e.g. Java, .Net, in recent years, organizational need for project
Linux along with more traditional programming management skills is also increasing. Most of
language skills. This is supported by the respon- these mid-level skills can be described as client
dents who specifically named newer technology facing, even the technical ones such as systems
skills and capabilities that are critical to have in analysis and systems design.
house in 2008.
159
Changing IT Skills
Specific Skill Categories Figure 7 illustrates the top five Project Man-
agement skills and capabilities kept in house in
In order to better understand the specific skill 2005. The five items shown here are unsurprising
categories, we looked at the top five skills reported as they are core skills in project management. The
in each of the five categories of skills. high percentage of respondents choosing these
Figure 6 shows the top five in-house items in the as critical skills to keep in house indicates the
Technical category. Numbers one, two and four, increasingly important role of project manage-
Systems Analysis, Systems Design and Database ment in organizations. Comments made by the
Design/Management are client-facing technical respondents indicate that project management
skills that require a lot of interaction between IT is important both for improving the manage-
professionals and clients in the course of their ment of in-house projects and for management
accomplishment. IT Architecture/Standards of projects that have been sourced to 3PPs. The
and Security, numbers three and five, represent IT organizations appear to be responding to past
technical areas that are critical today in most or- criticism of IT projects being traditionally late
ganizations. One would expect a standard-setting and over budget.
capability such as IT Architecture to be one that is The data in Figure 8 emphasize the impor-
needed in house where the specific nature of the tance of specific business knowledge for today’s
business and the IT required to enable it are well IT professional, with Functional Knowledge,
understood. The Security skill encompassed both Company Knowledge and Industry Knowledge
the management of security and the day-to-day as the top three in this category. Business Process
operations of security. Many firms indicated that Design/Reengineering is fourth, indicating the
they are sourcing the day-to-day operations (e.g., degree to which organizations today are engrossed
issuing security cards and passwords, maintaining in implementing ERP systems. Change Manage-
a security force); however, it became clear in our ment/Organizational Readiness is the last item in
interviews that the management-level functions of this category and represents a clear understand-
security strategy and standards are seen as skills ing on the parts of IT executives of their roles as
best maintained in house at the present time.e change agents for the organization.
Figure 7. Top five project management skills and capabilities in house in 2005
160
Changing IT Skills
Figure 8. Top five business domain skills and capabilities in house in 2005
Skills
161
Changing IT Skills
Past research efforts have not focused on sourc- Full-T ime Equivalent IT Employment
ing skills for IT professionals. Our investigation of Data
these skills covers new ground in understanding
the nature of work within the IT organization Although this study looked primarily at predic-
and demonstrates that this is becoming part of tions of IT skills and capabilities that would remain
the job of an IT professional. As sourcing to 3PPs in-house versus those that would disappear or be
has increased, so has the need to manage these sourced elsewhere, we also asked participants
relationships. Thus we find items represented in about their expectations for changes in overall
Figure 9 for the various phases of the sourcing full-time equivalent (FTE) IT employment. Us-
activity. The “Other” category included resource ing total FTEs provided by the participants, we
management and PMO (project management of- found a very small decrease (0.2%) expected
fice) experience. in overall FTEs. Although the total FTEs will
Finally, in the skill category of IT Administra- continue to be largest in-house (over 70%), the
tion, Figure 10 indicates that IT Governance skills largest increase in FTEs is expected in the use of
are the most critical to maintain in house, along third-party providers.
with Financial Management and Human Resource The distribution of FTEs going to third-party
Management skills. In the “Other” category, the providers is currently greatest for domestic third-
most frequent answer was Program Management. party providers using domestic staff and will
This answer most likely represents the increasing continue to be the largest group in 2008. Projec-
complexity that the typical CIO faces in today’s tions for 2008 indicate increases in FTEs for all
organization, necessitating a strong ability to four categories (domestic 3PP with domestic staff,
manage multiple high-pressure projects. domestic 3PP with offshore staff, foreign 3PP with
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Changing IT Skills
Figure 13. Projected changes in distribution of third party provider (3PP) staff
domestic staff, and foreign 3PP with offshore could significantly influence the trend picture.
staff), although the increase is negligible for those A comparison of the expected change in FTEs
with a foreign headquarters using domestic staff. by size of organization showed that the largest
The greatest increase will occur in the category organizations (i.e., Fortune 500 and Large catego-
of providers with domestic headquarters using ries) expected a decrease in total FTEs by 2008,
offshore staff. while the small and medium enterprises (SMEs)
Further analysis (Figure 13) of IT employment expected an increase in FTEs.
was done by counts of individual organization The McKinsey study (Farrell et al. 2005)
responses rather than by total FTEs, since a predicted a gradual increase in overall off-shore
change in FTEs of one very large organization FTEs. Figure 11 shows a 5% increase by 2008 in
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Changing IT Skills
the FTEs based in 3PPs in all locations. In Figure FTEs by 2008. Less than one-third of the Fortune
13, however, we separate the domestic and off- organizations expect a decrease in FTEs by 2008,
shore FTEs of 3PPs indicating an increase of off- with over half expecting an increase. Over half
shore staff of 13%. This is the increase reported of the Large and SME organizations also expect
by client firms, that is, client firms are planning an increase in FTEs.
to increase their use of off-shore 3PPs by 2008 The data shown in the FTE figures indicates a
in the amount of 13%. In the next figure, Figure rearrangement of IT FTEs. The overall number of
14, it is clear that the largest organizations are FTEs from 2005 to 2008 remains basically stable.
those decreasing their in-house FTEs in favor of However there is a shift away from in-house FTEs
increasing their use of 3PPs. and towards 3PPs. This illustrates the migration
Further analysis (Figure 14) by numbers of or- of skills from in house to service providers. Given
ganizations rather than by total FTEs determined the previous data presented on what is happening
that a majority of firms expect an increase in to specific skills, the migration is very clearly one
of traditional technical skills (e.g., programming)
to service providers. It is important to understand
that what is specifically included in the technical
Table 5. Expected changes in FTEs by number category may be dependent on the culture of the
of firms organization. Thus for some, the skills that are
Size Decrease No Change Increase migrating are those related to “old” technology
Fortune 29.4% 14.7% 55.9%
(e.g. mainframe, COBOL) while for others they are
Large 38.9% 5.5% 55.6%
“newer” technologies (e.g., HTML, web design).
SME 15.6% 21.9% 62.5%
However, the client-facing technical skills along
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Changing IT Skills
with the many in project management, business in the next three years are client-facing technical
domain, sourcing and IT administration are not skills – Systems Analysis and Systems Design.
migrating at this time. The message here is that whatever technical ex-
pertise individuals develop, e.g., programming in
Java, designing in .Net, wireless networking, they
disc uss ion should also be developing project management
and general business/industry knowledge.
Our research has implications in a variety of The specific technical skills and capabilities
areas: that are critical are dependent on the organization’s
business model, culture and values. Organizations’
• Understanding how organizations value needs vary depending on what technologies they
skills and capabilities in IT. are working with and whether the culture believes
• Considerations for career development in maintaining in-house talent that might other-
within organizations. wise be sourced, e.g., mainframe technologies.
• Guidelines for universities educating gradu- Therefore, while the majority of our respondents
ates in computer science and information were tending to source traditional technical work
technology. like programming, mainframe, operations, there
were some who did not.
Understanding How Organizations Skills specific to Internet applications inhabit
Value IT S kills and C apabilities a complex space in the IT skill world. They are
not limited to the skills required to create Web
There has been much discussion and concern about pages such as Java, PHP, and HTML, but rather
the impact of IT outsourcing on IT jobs here in become a critical element of the problems that
the U.S. People have predicted a serious loss of many organizations face in integrating their
positions. Vocal detractors such as Lou Dobbs on many platforms. The focus of this integration
CNN have been declaring the crisis. This concern task is allowing Web-based applications to draw
added to the depressed state of employment in IT from and interact with the existing legacy foun-
stemming from the dot com bust has filtered to dation. For example, a legacy customer database
the university community and had the effect of developed from the 1970s may be the base of a
decreasing enrollments in computer science and Web-based customer relationship management
IT programs. Nicholas Carr’s article declaring that (CRM) application. Therefore when we discuss
IT doesn’t matter gained notoriety and added to Internet skills we include their interaction with
the confusion (Carr, 2003). Unfortunately much legacy applications as well as the stand-alone Web
of this discussion has been based on emotions languages and tools.
and not on facts. Previous research has shown that the specific
Our data confirms that some IT jobs are mov- technical skills appearing in want ads change
ing to 3PPs in off shore locations; however, more depending on the technology du jour. With the mi-
importantly it also confirms the continuing need gration pattern that we are seeing in this research,
and value for people trained in technical skills. It is there will be a similar change in technical talent
also clear from the data that the technical capabili- considered critical to have in house that relates
ties should be coupled with soft skills in project to the ability to source this work adequately. IT
management and the business domain. This is sourcing decision research indicates that the deci-
evident in that the technical items that top the list sion making is dependent on a variety of factors:
of most critical now and continue to be important demand and supply, transaction cost economics
165
Changing IT Skills
and IT executive choice. Each of these will influ- them to create the needed balance. The increase
ence the migration of technical skills to 3PPs. in sourcing as an IT strategy underlines the need
Respondents tended to focus on the need for for strength in both hard and soft skill areas. As
basic technical skills in hiring at the entry level. sourcing increases, the criticality of IT profession-
They also named the undergraduate degree in als who can manage sourcing effectively will also
computer science as the one they would look increase. IT professionals will need their technical
for the most. At the same time, they chose skills skill foundation in a variety of areas plus skills in
in business knowledge and communication as project management, business knowledge, team
important in an entry-level candidate for this leadership and managing 3PPs.
person to have a successful career within the Ang and Slaughter’s (2001) discussion of the
organization. two approaches an organization can take to de-
This apparent inconsistency can be explained velop career paths: Industrial and Craft, can be
by understanding that for most IT organizations in used to describe the heyday of the dot com boom,
client firms (i.e. not in service providers) technical in which most IT professionals appeared to be
skills are necessary but not sufficient for career using the Craft approach – they were like “hired
success. The majority of our interviews took place guns” who came into an organization, performed
in client firms, therefore this finding relates to the and then moved on to a higher level at the next
clients and not to the service providers. This is organization. To a certain extent there is an anal-
supported by the Image Theory, a two stage model ogy here with sourcing: the client organizations
of IS recruiting where the first stage is a filtration that are sourcing certain skills are using the Craft
stage as an employer screens potential hires for a approach for those skills. However, for the skills
minimum requirement of technical skills. This is respondents reported as critical to maintain in
followed by the second stage where the final choice house, firms need to use the Industrial strategy in
is made and influenced by softer skills and other order to develop the strength and depth in those
factors (Litecky, Arnett and Prabhakar, 2004). particular areas. Thus the technical skills that we
Such a finding raises the question of whether see migrating to 3PPs are in the Craft mode, while
individuals who have chosen a technical track for the project management and business domain
their careers will be able to succeed. Our research skills are in the Industrial mode.
does not address this directly. Interestingly the above strategy is only from
Hiring at the mid-level exhibited a similar the point of view of the client organization. Ser-
inconsistency: while the critical skills were in the vice providers, on the other hand, will need to
project management and business domain catego- follow the Industrial strategy for technical skills
ries, the IT executives still wanted their mid-level that they are called upon to provide. The dual
candidates to have a strong basic technical foun- project management hierarchy model provides a
dation. The end result is that IT professionals at mechanism for clients and vendors to share career
all levels need to be concerned about developing development and learn from each other (Kaiser
a balance between the hard technical skills and and Hawk, 2004).
the soft client-facing skills.
Guidelines for C omputer S cience
C areer Development Programs and Information T echnology
Programs
The need for a balance in hard and soft skills calls
for organizations to create career development Our research also has implications for universities
programs for their IT professionals that enable in developing programs that support the need for
166
Changing IT Skills
a balance of skills in their graduates. This balance We have also looked at how the total number
has been called for in the past (Lee, Trauth and of IT FTEs will change from 2005 to 2008. Our
Farwell, 1995) specifically noting that computer research shows that while the mixture of in-house
science programs should be restructured to include FTEs versus sourced FTEs is changing, the overall
more breadth and business education. Cappel number of IT FTEs will remain stable over the
made the specific recommendation that under- next three years. The changing mix indicates an
graduate programs include more opportunities increase in IT FTEs at 3PPs with off shore loca-
for internships to help students gain the necessary tions. Looking at the migration of certain technical
business education (Cappel, 2001). We echo this skills out of organizations along with the FTE
call for diversifying the traditional undergraduate patterns implies that the most likely skills to be
program through internships and relationships sourced to 3PPs are the non-client facing techni-
with the business community. cal skills. Our study is consistent with previous
We understand that traditional computer findings that indicated the migration of traditional
science curriculum is fundamental to training technical skills (e.g., programming) to 3PP. How-
the highly-skilled CS graduates that are needed ever many of those were based on the availability
for future generations of hardware and software of technical talent in 3PPs and on the definition
development. We are not calling for a merger of of technical skills as being “non-core.” In our
CS and IT programs. What we are recommending research the IT executives explicitly chose which
is that even within the traditional CS curriculum skills they wanted to hire and maintain in house
it is becoming critical to expose students to real as opposed to those they were willing to source to
organizations, solving real problems. One ap- a 3PP. As a result, some technical skills migrated
proach is through internships and work-study to 3PPs while others remained in house.
programs. The findings are consistent with the paradox
observed by others of a “recruiting gap” where
organizations purport to seek well-rounded
Summa r y individuals although they advertise for those
with “hard skills” and technical backgrounds.
We have investigated the impact of sourcing Findings indicate that IT professionals need to
strategies on what skills IT executives prefer to have a balance that demonstrates a foundation in
maintain in house versus source to third party the traditional “hard skills” and experience with
providers. IT executives indicate that the critical “softer” business-oriented skills.
skills to keep in house today are primarily client
facing, including technical items with client fac-
ing elements. Looking to 2008, the only skills Fut ur e Re s earc h
that are seen as no longer critical to maintain in
house are technical skills which do not contain This chapter is focused on the changing skills
any client-facing activities. There are exceptions from the viewpoint of the client organizations.
to this pattern based on organizational-specific We are currently conducting further research into
characteristics of business model and culture. the skills and capabilities desired by the service
This result is also moderated by the position level provider organizations. The client organization
in the organization. Entry level positions tend choices will cause a migration of some skills to
to require more technical skills while mid level 3PPs. This migration needs further investigation
positions tend to require more project manage- in order to provide a comprehensive picture of
ment skills. how skills and capabilities are evolving in the
167
Changing IT Skills
168
Changing IT Skills
169
Changing IT Skills
170
171
Chapter X
Understanding Outsourcing of
Web-Based Applications in
Organizations:
The Case of E-Insurance
Teuta Cata
Northern Kentucky University, USA
Abstr act
This article has investigated the insurance industry and provided insights into the relationships of or-
ganizational size and age with outsourcing and organizational structure. Also, this study investigated
the relationship between Web site age, outsourcing, and organizational structure. The main findings
are that firm size and maturity is related to the decision of Web-based development approach and the
best organizational structure to support online activity. The insights obtained by a new variable: Web
site age suggests that insurance companies are trying to develop their Web-based activities within their
existing organizational structures, rather than creating new e-commerce divisions.
Intr oduct ion convey to its online audience (D’Angelo & Little,
1998). An interesting and successful approach to
Electronic commerce (e-commerce) is now con- creating and maintaining the smooth operation
sidered to be a very important component of a of Web-based applications is outsourcing them
business strategy for sales and customer service. to firms that are able to provide professional and
An online presence increases a firm’s credibility reliable Web services. The financial industry is
if the Web site is able to communicate and deliver perceived the one which can reap significant ben-
the message and services that the firm wants to efits from offshore outsourcing of their IT services
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Understanding Outsourcing of Web-Based Applications in Organizations
(Schaaf, 2004). By outsourcing their IT-based The research problem of our study has fo-
services, banks can save 8-12% of their overall cused on two main areas aspects: first, how firm
cost and insurance companies 10-15%. Financial size and age influence the decision to outsource
companies have begun to consider outsourcing the development of Web-based applications and
as an alternative, and they are considering Web second, what organizational structures are suit-
site maintenance as the most efficient approach able for supporting Web sites for e-commerce.
to a successful Web-based activity (Minkoff, Reasons to investigate the impact of organization
2000). Practitioners in the insurance industry variables in sourcing e-commerce activities come
consider outsourcing of Web-based applications from the need to identify how organizational
as a potential to reduce costs and risks in the context influences important decisions related
industry (Ahmed, 2002). Applications such as to participate or not in Web-based applications.
collaborative claims litigation; niche product Organization variables such as organization
development, deployment, and administration; maturity and size has been under investigated in
and bringing agents and insured services closer e-commerce context.
to policy holders are only the start of insurance This study has aimed to answering the fol-
applications that can be outsourced to application lowing questions:
service providers (ASPs).
Outsourcing makes it possible for companies • What approach to Web development do
to have an instant Web environment without insurance companies tend to apply? Do
increasing traffic on the firm’s LAN/WAN or put- they develop it in-house? Do they outsource
ting more pressure on its Information Technology it? Do they use a combination of these two
(IT) staff to support the 24x7 Web environment. approaches?
At the same time, outsourcing allows companies • What organizational structure do insurance
to focus on their core competencies, provide bet- companies choose to support e-commerce
ter Web service, and reduce the cost of online initiative? Do they develop it as part of ex-
activity (Sibley, 2001). While all of this is true, isting structure or as a separate division?
companies may very well have different strategies • How do the insurance company’s size and
for outsourcing. age relate to decisions on how to develop
This research will address the issue of de- the Web site?
veloping Web-based applications as one of the • How do the company’s size and age relate
most important decisions in e-commerce initia- to different organizational structures for
tives. Investigating Web-based applications in e-commerce?
the financial industry has a specific importance
because this industry is an information-intensive The remainder of this chapter is presented
industry, where the adoption of technology has a in four sections. First, we discuss outsourcing,
significant impact not only on the products and organizational structure for e-commerce, and
services offered, but also on business strategies organizational variables. Then, we describe the
and the process of business core redesign (Dos sample and the methodology used to capture data.
Santos & Peffers, 1995). At the same time, the The third section presents the findings from this
insurance sector is lagging the banking sector in study and relates them to the hypotheses of this
e-commerce (Burger, 2005). As online banking research. In the final section, we draw conclu-
has been growing dramatically in the last 10 years, sions from these data and identify the limitations
online sales have just gotten started. of the study.
172
Understanding Outsourcing of Web-Based Applications in Organizations
173
Understanding Outsourcing of Web-Based Applications in Organizations
The retail industry is a good example of this that leads companies to the decision of whether
sourcing strategy. Retailers such as Marks & they need a separate division to support their
Spencer (M&S) (Brooks, 2006) are delegating e-commerce applications. Results of the study
the e-commerce operation to other companies suggest that a company will create a spin-off IS
(Amazon) to operate it more efficiently, after they division if its IS activities are highly asset-specific,
setup the operation by themselves. The hybrid ap- its IS departments are large and perform as profit
proach will allow M&S to control the management centers, and if a high degree of interconnected-
of the site by itself and reduce cost by allowing a ness exists between financial companies and
third party to operate it more efficiently. manufacturer firms.
Another interesting perspective in this research
Organizational S tructure for stream is the investigation of what happens with
E-commerce organizational structure once a company has
made its outsourcing decision. Chu and Smithson
E-Commerce initiatives have raised organiza- (2003) conducted a case study of changes that
tional-structure issues because companies are two organizations undertook in order to create
aware that the online channel is not only a tech- an e-commerce solution. The authors observed
nology solution, but it is a business strategy, or that neither company under study was satisfied
a “moving target.” The best solution is to have a with having new organizational structures created
flexible integrated platform (Sauer & Willcocks, for the e-commerce initiative, and so, these were
2002) and a business model which will address changed back to the traditional in-house approach,
the organization goals, strategies, and objectives in which the e-commerce was better understood
for the e-commerce project (Wang, 2000). by manufacturing, sales, marketing, and other
Some organizational structures are considered divisions. A reason for the reversal could be a gap
to better support such Web initiatives. Solutions that IT creates between business units if it takes
vary from supporting Web activities totally in- the leading role (Gordon & Gordon, 2000). The
house by the organization’s IS department, to e-commerce initiatives are established in order
creating a separate division which will totally to get more information about the company’s
integrate all functions related to an online busi- customers. If this information is located within a
ness in a single division, and to the separation of separate division or a new company branch, then
the online business as a totally new independent companies are not reaping the entire benefit from
business (or a spin-off) created by an existing their online channel.
company.
Several attempts have been made to understand Organizational Variables
what the best approach is to managing e-commerce
activity and how companies can best make such This study investigates the relationship between
decisions. Grant (2003) conducted an exploratory the decision of outsourcing Web-based applica-
study that tried to investigate how Canadian tions and e-commerce organizational structures
companies designed the organizational structure with two of the most important organizational
of their e-commerce initiative. The results of the variables: organizational size and age. Research in
study suggest that companies prefer to trust their IS has examined the impact of organizational vari-
business applications to their existing IT structures ables on issues related to technology assimilation,
rather than to a specific e-business division. technology adoption, and technology innovation
Barthelemy and Geyer (2005) tried to identify in general. Unfortunately, there is little evidence
the relationship of internal and external factors of investigating how these two organizational
174
Understanding Outsourcing of Web-Based Applications in Organizations
variables influence adoption of Web-based tech- the organization grows larger it becomes more
nologies in particular. The following discussion structured, hierarchical, bureaucratic, and less
of organizational variables is based on findings flexible and able to adapt to changes.
of technology innovation in general. Hopefully
the findings of this research will help to fill the Organizational Age
gap in literature and help understanding of the
relationship between organizational variables How does a firm’s activity change with maturity?
and e-commerce technologies. This question has been investigated many times
and is important to understanding the changes that
Organizational S ize firms adopt over the course of time. Henderson
(1999) advocates that there is a strong relationship
The literature offers contradictory findings about between a firm’s maturity and the IT strategy it
the relationship and direction between organi- adopts. Mature firms, through in-house R&D,
zational size and innovation (Camison-Zornoza, are more likely to develop proprietary solutions,
Lapiedra-Alcami, Segarra-Cipres, & Boronat-Na- while younger firms show a tendency towards
varro, 2004; Lee & Xia, 2006). An organization’s purchasing off-the-shelf solutions. Following this
size affects not only business structure and pro- discussion stream, Thornhill and Amit (2003) sug-
cesses, but also managerial decisions to apply gest that young firms possess different resources
technology innovation in organizations. There is a and suffer different managerial issues than older
stream of research that argues that large organiza- firms. Less mature firms are at risk due to a lack
tions are more innovative and better equipped to of valuable resources, while mature firms are at
apply new technology developments. This argu- risk because they are not able to adapt themselves
ment is based on the fact that large organizations to a changing competitive environment.
have a greater potential for the application of new The relationship between a firm’s maturity
technology because they have more technical, and the adoption of new technological innova-
human, and financial resources to support the tions is very intriguing and interesting. Sorensen
adoption of new technologies (Yap, 1990). Small and Stuart (2000) meticulously investigate this
firms lack the managerial resources and technical relationship. They present two scenarios related
expertise required to implement and use network to the relationship between a firm’s age and
technologies (Min & Galle, 2001). Two recent technological innovation. On the one hand, older
meta-analysis research of 54 and 53 empirical firms are more stable and focus on innovation
studies focus on the relationship between orga- more frequently. Their innovations are more
nization size and IT innovation adoption (Lee & incremental and comply with the firm’s existing
Xia, 2006; Camison-Zornoza et al., 2004) suggest technologies. Furthermore, technology adoption
that a positive effect exists between the indicated tends to be self-reinforcing, which puts older
variables. This positive relationship exists for firms in a positive situation because they have
profit organizations and is stronger if the adoption already perfected their routines, structures, and
is considered as IT process innovation, IT mixed incentives (Cohen & Levinthal, 1990). Support for
innovation, adoption stages, and so forth (Lee & this theory lies in the large number of patents held
Xia, 2006). On the other hand organization size or pursued by older, Fortune 500, firms. On the
affects the decision for organizational structures. other hand, young firms are more willing to adopt
Harris and Katz (1991) contend that small orga- new technologies, especially if these technologies
nizations have simple and flexible structures, provide radical technical changes.
which makes them more adoptable to change. As
175
Understanding Outsourcing of Web-Based Applications in Organizations
Research on IS has not yet addressed the im- 1999) are the ones who prefer to buy off-the-shelf
pact of the Web site age on the different strategic or outsource their applications. Large and mature
decisions that organizations make. Companies companies are more stable and can better support
have consistently changed their strategies for their in-house development of applications. Organi-
Web-based activities as online sales volume in- zational structure variable is basically discussed
creased and as the companies were more confident from the business perspective, how a new business
in applying the latest Web technologies. The Web division is related to organizational goals and
site age is a new organizational variable which strategies (Wang, 2000), and only few attempts
has to be involved as a way to collect information are made to investigate this variable in light of
on how business strategies have changed as Web organizational variables (size and maturity). A
technology matures. Web site age is considered European study (Barthelemy & Geyer, 2005) sug-
as a positive factor to increase the legitimacy of gests that companies with large IT departments
the business and increase ranking in some search are more willing to create spin-off IT divisions.
engines, such as Google (Melbourne, 2005) and Mature organizations possess more managerial
shows firm’s commitment to e-commerce ac- resources and are not able to adopt themselves
tivities (Kowtha & Choon, 2001). Another study to environmental changes (Thornhill & Amit,
(Vaughan & Wu, 2004) made the first effort to 2003), which was very evident in the first wave
explore the relationship between the Web site of e-commerce.
age and the links that a Web site has. Both those
variables were used to test if the Web site age
impacts the business performance measures such MET HODOLOGY
as profit, R&D, revenue, and so forth. Results of
the study show the older Web sites have more In order to address our research problem and ques-
links to them, but Web site age is not a confound tions discussed previously, given the evidence and
variable between number of links and the business gaps identified in the literature, we have tested
performance measures. several hypotheses as follows. Figure 1 shows the
In summary, literature suggests that IS out- hypothesis tested in this study.
sourcing is related to organizational variables
(Ang & Cummings, 1997). Small organizations • H1: Organizational size is positively related
with limited or mismanaged IT departments (Lee to the decision to develop the Web-based
et al., 2003) and young companies (Henderson, applications in-house.
H3
Organization Age Organizational
H4
Structure
176
Understanding Outsourcing of Web-Based Applications in Organizations
• H2: Organizational size is negatively related This study used quantitative methodology.
to the decision of creating new organizational The first step was to identify which insurance
structures for e-commerce activity. services would be the target of this study. The
• H3: There is a positive relationship between various types of insurance coverage were care-
organizational age and the decision to de- fully analyzed and two types—automobile and
velop Web-based applications in-house. life—were selected for inclusion in this study.
• H4: There is a positive relationship between These two types of insurance are considered as
organizational age and the decision to de- the most appropriate products for e-commerce
velop Web-based applications in the existing (“Web News,” 2003).
structures. Participants in this study were identified from
two sources—the Internet (Yahoo.com, Google.
Our study used a survey of insurance com- com, and Hoover.com) and Best Key Rating Guide
panies that have Web sites. A preliminary pilot (2002) published by AM Best. Companies iden-
study with four insurance experts helped us better tified on the Internet were invited to participate
understand the insurance process and ensured that in the study by e-mail. Each received an invita-
items in the questionnaire were easily understood. tion letter with a survey questionnaire attached.
The unit of analysis is organization. We did not The invitation letter stated IT managers or other
attempt to perform an in-depth analysis of either managers related to Web-based activity should
the technical implementation of Web-based activi- complete the questionnaire. A total of 522 e-mails
ties or other technical details and problems. were sent to companies that provided e-mail ad-
177
Understanding Outsourcing of Web-Based Applications in Organizations
dresses on their Web sites, and 97 online forms insurance, 63 in life insurance, and 29 provided
were completed for companies that did not pro- both types of insurance (see Table 1).
vide e-mail addresses. Thirty-seven e-mails were Survey respondents hold a variety of posi-
returned as undelivered. Those companies were tions in their respective organizations. As shown
invited to participate in the study by traditional in Table 2, 72% of participants were associated
mail in the second round of data collection. with the IT function in their organization or with
Due to the low response rate obtained by the the firm’s e-commerce/Web site activity. The
e-mail survey, the data collection phase of the remaining questionnaires (25%) were completed
study continued by sending traditional mail to by managers with other responsibilities for their
life insurance companies identified in Best’s Key organizations, mainly marketing managers. Three
Rating Guide (2002). A total of 385 companies questionnaires did not provide information about
were invited to participate in the study by sending the job title of the respondents.
a letter of invitation and a printed questionnaire. A survey questionnaire was created in order
In this phase, careful consideration was taken to obtain information about each company’s age;
to invite companies that were not contacted via size; insurance types served; Web site charac-
e-mail survey, companies whose e-mails were teristics age; the percentage of sales which come
returned, and companies whose service rate was from Web-based activity; Web development
above an F rating (in liquidation). The identified approaches; and the organizational structure
companies operate in almost every state in the supporting e-commerce operations.
United States. Data analysis has involved several measure-
Twenty-three postal questionnaires were ment-related issues. The dependent variable
returned as undelivered due to either dissolu- outsourcing is measured by three ordinal values:
tion or simple changes of address. A total of 109 (1) in-house, (2) partly outsourced, and (3) partly
questionnaires were completed and returned, in-house, and totally outsourced. The dependent
53 via e-mail, and 56 via traditional mail. Two variable related to a new organizational structure
questionnaires were partially completed and could related to Web-based activity, named in statisti-
not be used for statistical analysis and hypothesis cal analysis as “eDepartment,” is measured as an
testing. Fifteen respondents were engaged in auto ordinal variable with three levels: (1) part-of-or-
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Understanding Outsourcing of Web-Based Applications in Organizations
ganization, mixed-approach, and new-division. In employees. This study uses crosstab analysis as
the survey questionnaire this variable was broken the best method for analyzing the relationship
in two categories: part of organization and new- between two ordinal variables and a third as a
department. Several respondents reported a mixed control variable (Agresti, 1996).
approach as well. Therefore, in statistical analysis
this variable is included as an ordinal variable with
three levels. Moreover, firm age and Web site age FINDINGS
are measured in years. Based on the suggestions
given by insurance experts who participated in Table 3 summarizes the mean values and standard
the pilot study, companies are grouped as new deviation of the company’s age, Web site age,
companies if they are younger than 20 years old, organizational size, and online sales investigated
moderate-age if they are between 21 and 100 years in this study. As Table 3 shows, the companies
old, and mature if they are more than 100 years participating in this study vary according to the
old. The Web site age has two groups based on time they have been operating in the insurance
the very limited time insurance companies have industry (from 7 to 293 years old) and the length
been operating online. Companies are considered of time they have been conducting business online
to have a new Web site if they have been operating (one to 10 years).
online for fewer than 4 years and mature if their Crosstabs analysis is used to identify any rela-
activity is 4 or more years. Insurance experts tionship between the decision to outsource Web-
suggested the following classification based on based functions and create new organizational
the experience with operating the Web site and structure and independent variables related to
other problems related with the adoption of Web- organizational size, organizational maturity, and
based applications. Web site age. The three levels of the outsourcing
It was intended that organizational size be decision (in-house, mixed, and outsourced) and
measured by the number of employees and sales. new organizational structures (part-organization,
Unfortunately, few companies agreed to share sale both, new-division) are considered as ordinal
figures with us. Therefore, organizational size variables. The independent variable firm size is
is operationalized as the number of employees controlled by measuring the time-varying vari-
reported. Insurance firms are considered small ables (firm age and Web site age) and online-sales
if they have fewer than 50 employees, medium variable because of a strong positive correlation
if they have more than 51, and less than 500 that exists between the variables (Barron, West,
employees, and large if the firm has 500 or more & Hannan, 1994). The strong correlation between
Table 3. Descriptive statistics for firm age, Web site age, firm size
Variables N Minimum Maximum Mean
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Understanding Outsourcing of Web-Based Applications in Organizations
Table 4. Results of crosstab analysis for firm size by controlling firm age
Variables Chi-Square Hypotheses
Firm size * Outsourcing decision * (Control: Firm age) Small Medium Large
H1 Supported
(Small, Medium, Large) 14.693** 8.839 5.871
Firm size * Org. structure * (Control: Firm age) Small Medium Large
H2 Supported
(Small, Medium, Large) 6.256* 2.726 .244
Table 5. Count table of the relationship between organizational size and decision of outsourcing Web-
based activities (Hypothesis H1)
Firm Age
Firm size Young Med Mature Total
Smal l in-house 30
both 18
outsource 14
Total 18 32 12 62
Medium in-house 7
0 4
both
0 9
outsource
Total 3 9 8 20
Large in-house 11
both 13
outsource 0 1
Total 11 14 25
Table 6. Count table of the relationship between organizational size and decision of creating new orga-
nizational structures (Hypothesis H2)
Company Age
Firm Size Young Med Mature Total
Small part-organization 51
spin-off 0 11
Total 18 32 12 62
Medium part-organization 16
spin-off 0 4
Total 3 9 8 20
Large part-organization 15
mixed 6
spin-off 4
Total 11 14 25
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Understanding Outsourcing of Web-Based Applications in Organizations
variables can be avoided by using one of them or keep it within the existing organizational
as the control variable in order to identify if any structure, shows a positive trend to create spin-
relationship exists between the second variable off (p<.05) for small insurance companies. The
and the dependent variable. reason that this group, in particular, wants to cre-
Crosstab analysis for the firm-size variable has ate spin-off structure may be related to the fact
been tested to explore firm size in its relation to that small size companies are more flexible and
both dependent variables: Web site development less bureaucratic and they were able to follow the
and organization structure (Table 4, 5, and 6). Firm hype of e-commerce developments late in 20th
age is used as the controlling variable in order to century. The counts table (Table 6) clarify the
get a clear relationship between the independent Pearson chi-square results and clearly shows a
and the dependent variables. trend to keep Web-based applications as part of
Results of chi-square value show different the organization in the two groups of firm size
approaches of Web development based on the (medium = 16 counts, and large 15= counts).
company size. Small size insurance companies The variable firm age is tested toward the
develop the Web site applications not only in- dependent variables on the three levels of con-
house or partly in-house but also outsource them trolling variable (firm size). Chi-square test
at third parties. Those companies have considered shows significant trends toward using different
seriously the three approaches, where outsourc- approaches for Web-based development (p<.001
ing is not determinant but still is considered as a and p<.05) for two groups of firm age (medium
trend by chi-square test (p<.01). The count table and mature) (Table 7). To better clarify chi-square
shows that in-house development for small size results, this study will use the counts tables to
firms has the majority by 30 counts, followed by pertain detailed information as to which Web-
mixed approach with 18 counts, and outsourcing developing alternatives the insurance companies
by 14 counts (Table 5). Medium-size firms overall had chosen (Table 8). Counts table shows young
do not show any trend towards which approach firms prefer to develop their application in-house
is more favorable. Within this group of firms, the or partly in-house (8+11 counts). Some subgroups
medium size and medium age subgroup shows a hesitate on trusting only one approach of Web-
clear trend towards outsourcing the Web-based based application development (young-small
functions (6 counts). Large insurance companies group and medium-large group). Therefore, those
show a clear trend towards in-house or partly in- groups have preferred the mixed approach of de-
house development of Web-based applications veloping their Web-based applications in-house
(11+13 counts). and outsourcing some functions to third parties.
The other organizational decision tested in Interestingly, only mid-age mid-size companies
this study: to create a new e-commerce division have chosen outsourcing as the main approach
Table 7. Results of crosstab analysis for firm age by controlling firm size
Variables Chi-Square Hypotheses
Young Medium Mature
Comp. age * Outsourcing decision *(Control: Firm size) H3 Rejected
5.688 20.670*** 9.518*
Comp. age * Org. structure * ( Control: Firm size) Young Medium Mature
H4 Rejected
(Young, Medium, Mature) - 12.500* 5.666
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Understanding Outsourcing of Web-Based Applications in Organizations
Table 8. Count table testing the relationship between firm age and decision of outsourcing Web-based
activities (Hypothesis H3)
Firm Size
Firm Age Small Medium Large Total
Young in-house 8
both 0 11
outsource 0 2
Total 18 3 21
Med in-house 23
both 15
outsource 14
Total 32 9 11 52
Mature in-house 17
both 9
outsource 0 8
Total 12 8 14 34
Table 9. Testing the relationship between organizational age and decision of creating new organizational
structures (Hypothesis H4)
Firm Size
Firm Age Small Medium Large Total
Young part-organization 21
Total 18 3 21
Med part-organization 39
both 0 0 3
new division 10
Total 32 9 11 52
Mature part-organization 22
both 0 0 3
new division 9
Total 12 8 14 34
to Web site development (6 counts). The reason tion toward trying new organizational forms for
of applying a mixed development approach (in- managing Web-based activities (Table 9, counts =
house and outsourcing) may be related to the fact 10). This trend is evident for mature group as well
that medium and mature companies have legacy (count = 9), but chi-square test does not confirm
systems which are hard to integrate to new tech- this trend. The reason may be the small sample
nology developments. For this reason they may size for the mature group.
need specialized help from vendors. The analysis of this study will continue with
As far as the decision to develop the Web another variable: Web site age, which is not pre-
activities within the company or create new Web viously investigated in IS research. The gap in
division, young and mature insurance companies literature does not allow us to build hypotheses
show a clear trend toward keeping them as part of for this new IS variable, but the analysis in this
the organization. Chi-square test shows a trend of section will allow us to shed some light on how
medium-age companies to create new divisions this variable is related to organizational variables:
(p<.05) (Table 7), which indicates an inclina- firm size and firm age.
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Understanding Outsourcing of Web-Based Applications in Organizations
Table 10. Results of crosstab analysis for Web site age by controlling firm size
Variables Chi-Square
Web site age * Outsourcing decision * (Control: Firm
Young Mature
size)
19.460 *** 10. 068*
(Young, Mature)
Web site age * Org. structure * (Control: Firm size) Young Mature
(Young, Mature) 3.644 17,731**
Table 11. Testing the relationship between Web site age and decision of outsourcing Web-based activi-
ties
Firm Size
Website Age Small Medium Large Total
Young in-house 18
both 0 0 0 10
outsource 0 13
Total 27 10 4 41
Mature in-house 30
both 25
outsource 11
Total 35 10 21 66
Table 12. Testing the relationship between Web site age and decision of creating new organizational
structures
Firm Size
Website Age Small Medium Large Total
Young part-organization 0 35
new division 0 0 6
Total 27 10 4 41
Mature part-organization 0 47
both 0 0 6
new division 13
Total 35 10 21 66
The analysis of the variable Web site age is cations and do not prefer outsourcing approach
interesting because it tries to investigate the trend (large-young = 0, large-medium= 1). The other
of how Web sites are created and managed as the two groups (small and medium size) prefer both
Web-based technology matures. Chi-square test in-house and outsourcing approach.
(young p<.001 and mature p<.05) shows that insur- Interesting insights are obtained at observing
ance firms have developed and continue to develop the different organizational structure approach
their Web sites based in different approaches as Web-technology matures. Crosstab analysis
(in-house, outsourced, and both). The crosstab shows that the mature Web site shows a clear trend
table (Table 11) shows that large companies trend (p<.01) toward new e-business organizational
more towards in-house or partly in-house appli- structures. With the development and maturity
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Understanding Outsourcing of Web-Based Applications in Organizations
of e-commerce activity, firms are considering their Web-based functions might be related with
bringing or creating the Web-based activities the scarcity of IT resources. Insurance companies
within their existing organizational structures are transaction-oriented firms where their IT staff
(Table 12). In particular medium and large size is mainly oriented on supporting and maintain-
firms are integrating their Web-based applica- ing their legacy systems, and the knowledge and
tions with their existing structures (new-division expertise to support the Web environment might
young-medium counts = 0, new-division young- be missing.
large counts = 0). Interesting findings are to be found even in
the trends of organization structures that support
Discussion of Findings e-commerce initiatives. Small size firms were
more willing to create new organizational struc-
This study reveals many interesting findings ture for their Web-based activities. The reason is
related to the decisions of Web site development related to the flexibility that small size brings to
and organizational structure. The size of firms companies in case they need to rearrange their
is related to the decision of what approach will structure. As Harris and Katz (1991) suggest, large
be used when they develop their Web-based ac- size firms are unable to be flexible and adaptable
tivity. Findings in this study suggest that small to structural changes. Interestingly, the findings
companies and mid-size mid-age companies are suggest that as organization matures, it tries new
the ones experimenting with external sources for ways to manage its functions. Organizations that
Web development. These groups are not totally have been in business for a considerable time
depending on their IT department, but they are (medium and mature firms) are more willing to
using the external expertise that outsourcing com- create new business divisions, which will manage
panies provide. Large and medium size companies the Web-based activity. The reason might be that
depend more on internal resources to develop their they want to bring the new technology develop-
Web-based applications. These findings support ment in the most incremental and visible way to
previous studies (Min & Galle, 2001; Yap, 1990) their business partners and customers.
that suggest that large companies, which have Web site age is an underdeveloped variable in
more technical and managerial support, are in IS research. Therefore, understanding the trends
advantage to apply technology innovation. of Web site development as the technology and
Results of the analysis indicate that as an business approach mature requires a notable con-
organization matures it attempts to trust third sideration. Web site development shows that insur-
parties to develop their Web sites totally or par- ance firms do not have any specific preference for
tially. Interestingly, this study found that financial Web-based developments. The three development
companies are considering outsourcing of the approaches (in-house, mixed, and outsourced) are
front-office applications, where the leaders are me- applicable. A close-up investigation by crosstabs
dium-age and mid-size companies. The findings suggests that large companies have tried to develop
support the suggestions by Kishore et al. (2004) all or part of their Web-based functions in-house.
who suggest that both companies and outsourcers Small and medium size insurance companies
are maturing and that companies are delegating are still considering IT departments as a major
more responsibilities to the outsourcing compa- developer for their Web-based application in
nies and reaping more benefits of their expertise cooperation with outsourcing companies.
developed in the last few years. Other reasons Results of this study suggest that in the first
that might have pushed the medium and mature steps of e-commerce activities, companies came
segment of the insurance industry to outsource up with new organizational structures which
184
Understanding Outsourcing of Web-Based Applications in Organizations
divided those operations from existing organiza- This study did not identify the reasons that
tional departments. As the online activity matures, push insurance companies to outsource their
insurance firms understand that online sales are Web-based functions. Do insurance firms feel
part of the firm and therefore they have to be in- comfortable on sharing sensitive data about their
tegrated with the “brick and mortar” operations customers to the third parties and if so, how do
of the company. they make sure that those data are not sold to
their competitors by the outsourcer? A follow-up
research will focus in-depth on these issues and
C ONC LUS ION AND LIMIT AT IONS will try to explore the relationship between the
nature of information collected and saved via
In summary, this research indicates that the Web-based activities and the decision to outsource
insurance industry still hesitates to rely on third those activities.
parties to develop their Web-based applications Certain limitations should be noted when
and prefers to consider online sales as an en- considering these findings. The major limitation
hancement of the current activity rather than to of this study is the sample size. As mentioned
adopt a totally new and different sales approach. previously, the population of auto and life insur-
Part of the reason is that the insurance sector ance firms is limited, and it is difficult to secure a
has, already, a well-developed IS infrastructure large sample size. Insurance firms were contacted
and a skilled IT staff, which are able to support via e-mails and the postal mail to increase the
Web-based activities. sample size. The number of insurance firms that
Data collected on Web site age clarify this issue are conducting a major portion of their businesses
further. The results suggest that companies that online is still quite limited.
were the pioneers of online sales were more will- Another limitation is generalizability of the
ing to come up with new organizational divisions, results of this study. The data collected for this
which were going to take care of their e-com- study are entirely from American insurance firms;
merce part of the activity. The recent trend shows thus the findings identified in this study may not
that insurance companies feel more comfortable apply to other service industries or other regions
with developing the Web-based applications and of the world. Also, this study is snap-shot research
are trying to keep this expertise in-house. This rather than a longitudinal study. These results do
study identified a very specific group within the not indicate the current trends of the e-insurance
insurance industry: mid-size mid-age companies, adoption process, and therefore they do not provide
which are exhibiting new approaches related to any insights into what their strategies might be
Web site development and management. in the future.
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187
188
Chapter XI
Business Process Outsourcing
Modeling
Lai Xu
SAP Research, Switzerland
Paul de Vrieze
SAP Research, Switzerland
Abstr act
Organizations in the new millennium face relentless pressure to perform better, faster and cheaper,
while maintaining high level of guaranteed results. To remain competitive, enterprises have to integrate
their business processes with those of their customers, suppliers and business partners. Increasing
collaboration is not only relevant within a global multi-national enterprise, but also considering the
organization and its relationship to and business processes with its business partners. While standards
and technologies make it possible for business partners to exchange information, collaborate and carry
out business transaction in a pervasive Web environment, there is however very limited research activity
on modeling business process outsourcing underlying semantics. In this chapter, we demonstrate that
an in-house business process that has been gradually outsourced to third-parties and analyze how task
delegations cause commitments between multiple business parties. Finally we provide process semantics
for modeling multi-party business process outsourcing.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Business Process Outsourcing Modeling
increase significant. It enables the organization of multi-party business collaboration has been
to focus on its core competencies. recognized as a major problem for a long time,
In addition, large organization sizes are no but relatively little fundamental research has
longer necessarily an advantage in production been devoted it. From the semantic perspective,
of products or services, and neither are small we model the way organizations co-operate in
sizes. Quality, flexibility, agility and the ability a multi-party involved situation. A high-level
to meet diverse consumer demands count for view of the collaboration is provided, in terms
more (Drucker, 1992). Firms now respond to of the parties involved, the roles they perform
change by outsourcing when they face heightened and the way they’re related, also in terms of busi-
competition pushes. Traditionally, after the part ness functions they fulfill and the interactions
of business services is assigned, the initial orga- between those.
nization can hardly monitor or get to control of
the outsourced services. Even a minor change of The Benefits of Multi-Party Business
service is not easy. C ollaboration Modeling
The advent of global digital networks, the
Internet, the World Wide Web, and more recently Outsourcing business processes is highly complex.
Web services has drastically lowered the cost of They consist of several organizations intercon-
coordination between firms and improved the nected through networks and working together
possibilities for organizations and individuals to using sophisticated computer applications. When
communicate in an effective and standard man- trying to understand, reorganize or develop sys-
ner. New environments, newer technology and tems to support multi-party business collabora-
rapid technological change provide an avenue for tions one is confronted with that complexity. As
reducing human and equipment resources that do in any modeling activity, modeling multi-party
not fit with a company’s strategic direction, for business collaboration can help to deal with this
meeting latest needs with up-to-date resources at (Rechtin & Maier, 1997; Wolstenholme, 1990).
competitive rates by outsourcing those business There are many possible reasons to create
processes. Furthermore, the current technologies a model of multi-party business collaboration.
are also allow to get control of outsourced busi- The goal of multi-party business collaboration
ness processes. modeling may be:
Rather than outsourcing an entire business
process to a single supplier, multi-souring using • To understand the functioning of an existing
more than one supplier is used. A classic example multi-party business collaboration.
is Alcatel. Alcatel has outsourced supply chain • To provide a starting point for analysis of
management and R&D functions to Wipro, and requirements of design and for the redesign
its SAP and ERP environment work to Infosys of an outsourced business process.
(Pinto & Harms, 2005). • To offer a starting point for the implemen-
Business process multi-outsourcing causes tation of computer applications to support
business collaboration. As business collabora- multi-party business collaboration.
tion increases between different enterprises, the • To serve as a basis for analysis, for example,
need for semantics also increases as a mediator answer ``what-if" question, to evaluate the
between the structure and content of the different responsibilities between involved parties,
knowledge based. There will be a need, not just or simulate an inter-organizational business
for semantics to mediate the structure and content, process before implementing it.
but also for the services themselves. Semantics
189
Business Process Outsourcing Modeling
The benefits of using models to support these We furthermore define all concepts needed for
objectives, rather than a textual description, are modeling multi-party business collaborations.
as follows (Biemans et al., 2001; Booch et al., We first introduce our meta-model of multi-party
1999): business collaboration language, which defines
the attributes and relationships of the modeling
• Models help us to visualize a system as it concepts. Then, multi-party collaboration lan-
is or as we want it to be. it create a com- guage is given with a concrete graphical syntax.
mon frame of reference for those who have We also evaluate relate work in this area. The
to understand a design, and facilitate the chapter concludes with a summary and directions
communication between clients, business for further research.
analysts, designers and engineers.
• Models permit us to specify the structure or
behavior of multi-party business collabora- T ER MINOLOGY
tion by representing only their essentials
and abstracting from what we consider In this section, we will discuss terms like outsourc-
irrelevant. Abstraction can be done in two ing, transaction, transaction properties, business
ways: by abstracting from details or by transaction and business collaboration. Finally,
abstracting from aspects. we provide our definition of multi-party business
• Models give us a template that guides us in collaborations.
constructing a system. Properties of models Outsourcing is a generic term of farming out
can be thus analyzed. This can be used to certain company activities or processes, often
assess the expected performance of business previously performed by company employees, to
collaboration, or check conformance to a set external contractors specializing in such activi-
of business rules. ties or processes. It is used in most branches of
• Models document the decisions we have industry and services worldwide.
made, motivate changes or point alterna- Transactions are a fundamental concept
tives. in building reliable distributed applications.
A transaction is a mechanism to insure all the
In modeling it is definitely true that the larger participants in an application achieve a mutually
and more complex the system, the more impor- agreed outcome. Traditionally, transactions have
tant modeling becomes. A business involving held the following properties collectively referred
multi-party business collaboration is a complex to as ACID (Haerder & Reuter, 1983):
system. To be able to model this system, we have
to understand concepts and issues in multi-party • Atomicity: if successful, then all the opera-
business collaboration which will be discussed in tions happen, and if unsuccessful, then none
the following sections. of the operations happen.
In the rest of this chapter, we provide the • Consistency: the application performs valid
definitions of outsourcing, business transactions state transitions at completion.
and business collaborations in Section 2. The • Isolation: the effects of the operations are
following section starts by elaborating how an not shared outside the transaction until it
in-house business process has been gradually completes successfully.
outsourced by using a multi-party business col- • Durability: once a transaction successfully
laboration case. Moreover, we explain the issues completes, the changes survive failure.
in multi-party business collaboration modeling.
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Business Process Outsourcing Modeling
According to the International Organization car insurance scenario involving AGF Irish Life
for Standardization (ISO), a business transaction Holdings Plc. It was taken from the CrossFlow
is “a predefined set of activities or processes of project (Browne & Kellett, 1999).
organization to accomplish an explicitly shared Initially, a car insurance company probably
business goal” (ISO/IEC, 1997). A business trans- only involves a group of garages to assess car
action may involve any number of participants, it damages and to repair damaged cars for an in-
may be instant or last for years, and it can have surant who has bought car insurance from the
various degrees of complexity. car insurance company. The insurance company
Following the ebXML Business Process Speci- deals with the rest of the issues. More precisely,
fication Schema (ebXML, 2001), the concepts of after the occurrence of car damage, a process
business transaction and business collaboration starts, including many interactions among the
are defined as follows, insurant, a garage and the insurance company
(see Figure 1(a)).
• A business transaction involves two parties, After some time, the insurance company
and is an atomic unit of work that can result decides to outsource its phone service to a call
in either a success or a failure. center. The business process is consequently
• A business collaboration can involve any changed (along the line of Figure 1(b)). The call
number of parties and is a combination of center is responsible for registering the insurant
choreographed business transaction, defin- information, suggesting an appropriate garage
ing the ordering and transition between (most time a close by garage is assigned) and
them. notifying the insurance company about the
insurant’s claim. Except the phone service, the
According above ebXML definitions of busi- insurance company still needs to handle the rest
ness transaction and collaboration. It implicates of services for the insurant.
that collaboration is a number of two-party Continuing it could be an alternative to out-
transactions. This assumption is not reasonable. source the inspection of damaged vehicles to an
For example, if there is a broadcast message or association of assessors. In this business model
an activity benefits to multiple parties, this as- (see Figure 1(c)), the assessors conduct the physical
sumption cannot hold anymore. inspections of damaged vehicles and agree upon
In the next section we will analyze multi-party repair figures with the garages. After the call
business collaborations that involve more than two center, the garages and the assessors finish their
autonomous parties that are coordinated and lead obligations, the insurance company performs the
to the accomplishment of some result. Looking rest services.
at such collaboration one cannot just see it as a Due to the increasing amount of different in-
number of two-party transactions. surance businesses, the insurance company might
finally decide to outsource the daily service to a
day to day handling company. The day to day
OUTS OURC ING AND MULT I-PART Y handling company coordinates and manages the
B US INESS C OLLAB OR AT IONS operation on a day-to-day level on behalf of the
insurance company (see Figure 1(d)). The detailed
We provide a car insurance case for explaining obligations of the day to day handling company are
how a car insurance business is gradually out- provided in Figure 2. After receiving the forward
sourced and in which collaborations are involved claim from the insurance company, the day to day
afterward. This case is an abstract version of a handling company will agree upon repair costs
191
Business Process Outsourcing Modeling
Call
C t
Insurance Insurance
Insurant* Insurant*
Company Company
Garage* Garage*
Call Center
Call Insurance
Day to Day
C t Company Handling
Company Insurance
Insurant* Insurant *
Company
Assessor *
Garage* Assessor* Garage*
Garage
Receive Estimate Repair Issue
car repair car Invoice
cost
Insurant
Claim Receive Send Assessor
damage information car Inspect car
Receive Return
claim form claim form
Insurant
if an assessor is not required for small damages; invoices to the insurance company monthly. As
otherwise, an assessor will be assigned. After a result the workload of the insurance company
finishing repairs, the garage will issue an invoice is significantly reduced.
to the day to day handling company, which in turn Changes of the business models do not neces-
will check the invoice against the original estimate. sarily go through from Figure 1 (a) to (b), then
The day to day handling company returns all from (b) to (c) and finally from (c) to (d). Changes
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Business Process Outsourcing Modeling
can happen, for example, directly from (a) to (d). In addition, because different parties can
Figure 1 demonstrates that how a business process operate different activities at the same time, it is
is collaborated by more business parties in differ- difficult to find all violators responsible for even
ent circumstances. It also shows some essential an unsatisfied performance or a mis-performance.
characters of multi-party collaborations. One of Therefore, modeling multi-party business col-
them is that it is critical to understand when and laborations is different from modeling bilateral
who did, is doing or will do what in a multiple collaborations. Because there are in total only two
parties involved business process. parties involved in a collaboration, in modeling a
bilateral collaboration it is not an important issue
to identify who does not do what. In a multi-
ISS UES IN MULT I-PART Y B US INESS party collaboration, it is however an important
C OLLAB OR AT ION MODELING concern.
There are many potential violations in the
A distinction between a bilateral business process case as outlined in (Xu & Jeusfeld, 2004; Xu et
and multi-party business collaboration is the way al., 2005). For example, after sending invoices to
of interactions. In a multi-party collaboration, the day to day handling company; the garage does
many business activities which involve different not get money back from the insurance company.
parties can be performed in parallel. The order It could be caused by
of interactions is no longer sequential. Therefore
to use a full ordering to specify the collaboration • The day to day handling company, because
(many bilateral collaborations are specified in this the day to day handling company did not
way) is not suitable for specifying multi-party forward the invoices to the insurance com-
collaborations. pany (see Figure 3 mark 1).
Garage
Receive Estimate Repair Issue
car repair car Invoice
cost
Insurant
Claim Receive Send Assessor
damage information car Inspect car
Insurant
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Business Process Outsourcing Modeling
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Business Process Outsourcing Modeling
which properties are satisfied according to explains an attempt to achieve mutual belief with
per-defined rules and which output can be the addressee that the sender wants the addressee
expected, etc. to perform an act relative to the sender’s wanting
it done, or an assert, which expresses an attempt
Parties and C hannels to achieve mutual belief with the addressee that
the asserted statement is true.
In order to survive, companies are forced to The model of speech acts and repartee de-
constantly revise their business processes. Due veloped by Longacre recognizes two kinds of
to decision of multi-supplier business process relations among successive utterances: replay and
outsourcing, involved parties and their intercon- resolution in (Longacre, 1976) and another two
nections are modeled as parties and channels. kinds of relations: resolves and completes by Van
Depending on the chosen scope of the model, Dyke Parunakin in (Van Dyke Parunak, 1996).
parties may represent individual people, organi- In the model of speech acts and repartee, every
zational units, such as departments, or an entire utterance in a conversation except for the first
organization. Furthermore, A party represents must “respond”, “reply”, “resolve” or “complete”
an active organizational entity. Parties can be to another, otherwise there would be no conversa-
assigned a name to distinguish them. tion. Analyzing relations between utterances some
Parties may be connected by channels through characters can be split (Dooley, 1976).
which they interact. For example, parties may In the business process domain physical actions
be linked by Internet, by telephone or by truck. and messages convey information between par-
Usually channels can connect two parties, but ticipants. An initial proposal can be triggered by a
multi-access channels can also be envisioned, certain action and later on be finished by another
for example a broadcast channel. Channels can action. During multi-party business collabora-
further specified as bi-directional, uni-directional tion, several proposals are initiated by different
channels. A channel thus represents an intercon- business parties. Each of them is followed and
nection between parties for the exchange of objects eventually finished by some actions. Actions are
or information. Channels may be named by the thus sorted into different commitments.
medium (e.g. Internet, Post, EDI, etc.) A commitment is a guarantee by one party
towards another party that some action sequences
C ommitments and R oles provided that some “trigger”, “involve”, or “finish”
action happens and all involved parties fulfill their
To model responsibilities between multi-parties, side of the transactions (Xu & Jeusfeld, 2003; Xu,
we use speech act theory and make an extension. 2004; Xu & Jeusfeld, 2004). To finish a commit-
Applying those theories we will provide our ment, more than one party must finish the relevant
definition of commitments and roles. To do that actions. A commitment is associated with one
we first explain speech act theory and the used particular party. This means that the fulfillment
extension. of a single commitment (from the point of view
Part of Austin’s work on speech act theory of the receiver) may involve multiple parties.
(Austin, 1975), is the observation that utterances From this point of view, the concept of our
are not implied propositions that are true or false, commitment is different from the definition of
but attempts on the part of the speaker that suc- a commitment in papers (Verdicchio & Colom-
ceed or fail. Perfomatives, acts, or actions are betti, 2002; Ervin, 2002), where a commitment
organized as speech acts and non-speech acts. only refers to two parties, a debtor and a creditor
An individual speech act is either a solicit, which (Verdicchio & Colombetti, 2002), or a vendor
195
Business Process Outsourcing Modeling
and customer (Ervin, 2002). The notion of com- Met amodel Of Mult i-part y
mitment in this chapter is not related to beliefs, Bu s iness Colla b or at ion
desires, or intentions. In the research of Cohen Modeling Language (Mbc ml)
and Levesque (1995), commitments are related
to establishing common beliefs about a certain In this section, we define the metamodel for
state of the world. MBCML. A concrete syntax is proposed in the
All parties involving multi-party business next section. MBCML is used to define multi-
collaboration fulfill different roles in different party business collaboration models (MBCMs).
commitments. One role cannot be part of another An MBCM defines the cooperation of a number
role. However, it is possible for an actor to fulfill of organizations to involve a common business
multiple roles in business collaboration. Each role process. In order to capture all relevant aspects
is specified by a unique name. We will provide of collaboration. A variety of diagrams can be
some examples, such as how to identify commit- used, each offering a different view on the model.
ments, or which party plays which role. We distinguish three different diagram types,
one for each conceptual domain which has been
Interaction and Properties of Actions defined. The notation used for representing the
metamodel of MBCM is the Unified Modeling
Multi-party interaction models are composed Language (UML) (Booch et al., 1999).
of actions, commitments, properties of party An overview of the basic modeling concepts
and connectors. An action is the atomic unit of and their relationships is given as a metamodel in
behavior. The orders between actions are causal, Figure 4. A multi-party collaboration consists of
conjunctive “splits”, disjunctive “splits”, conjunc- role, party, channel, commitment and actions. Par-
tive “joins” and disjunctive “joins”. ties perform different roles in a commitment and
Each party has a set of predetermined proper- fulfill different commitments. The roles perform
ties. The party’s properties consist of three parts actions. A channel connects two or more parties.
which are inputs, outputs and rules. The inputs A commitment aggregates many actions.
and outputs of properties are domain related. The
input property specifies a list of the domain ele- Multi-Party C ollaboration S tructure
ments, which will be formulated as preconditions. Metamodel
The rules property is specified as the set of rules
using predicate logic. The rules property provides The parties involved and channels connected of
logic formulas to specify the preconditions of all parties of a business collaboration are inter-
fulfilling actions and also some domain elements related in Figure 5. How the parties are linked
as a consequence of performing the actions. The
output property specifies those domain objects
which are the results of the executing action.
Figure 5. Metamodel for multi-party collabora-
When the party attempts to execute an action, it
tion structure
first checks whether the input of the property is
satisfied, and subsequently generates the output
of the property according the rules.
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Business Process Outsourcing Modeling
by the channels is presented in a collaboration mitment is a set of actions and is made up of one or
structure model. A party may contain other par- more commitment segments. An action contains
ties. A channel connects two or more parties, and zero or more connectors that interconnect these
as an option, attributes like medium and direction commitment segments to make up the commit-
can be indicated. ment. A role (roles) performs (perform) an action
within a commitment.
Multi-Party C ollaboration The connectors are used to introduce rela-
C ommitment Metamodel tionships between commitments or commitment
segments. There are four notations for specifying
Commitments and roles construct a commitment the connectors. The connectors can be special-
model. All concepts involved in the commitment ized to “and-join” connector, “or-join” connector,
model are roles, actions, commitments, commit- “and-split” connector and “or-split” connector.
ment segments and connectors. The relationship Commitments can be linked by causality, or-split,
between those concepts are provided in Figure and-split, or-join, and and-join as Figure 7. Besides,
6. the connectors may contain other connectors to
A party guarantees another party to perform specify more complex relationships. The causal-
a commitment to another party. A party performs ity relation is represented by an arrow from one
different roles in different commitments. A com- node to another node. The “or-split” relation is
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Business Process Outsourcing Modeling
represented by an empty-diamond, which means Each party has a set of per-determined prop-
that a commitment from a role triggers exactly erties, namely: inputs, outputs and rules. After
one of multiple commitments from other roles the input property of a party is satisfied, the role
(see Figure 7(a)). The ``and-split’’ relation is ex- of the party performs the action(s) and the result
pressed by a solid-diamond, which means that a of actions will provide some output. Besides,
commitment from a role triggers other multiple the actions can be also linked by the connectors
commitments (see Figure 7 (b)). The “or-join” which are provided in Figure 7. Those connec-
relation is denoted by an empty-box, which means tors represent the occurrence relationship of the
that one of multiple commitments triggers another actions.
commitment (see Figure 7(c)). The “and-join”
relation is shown by a solid-box, which means
that multiple commitments together trigger a MULT I-PART Y C OLLAB OR AT ION
commitment (see Figure 7(d)). MODELING LANGUAGE
A multi-party business collaboration consists
of a set of commitments. A collaborating party In the business domain, we need to provide
can thus be involved in different commitments detailed and precise descriptions of multi-party
playing different roles and an action may be in- business collaborations. In order to represent
volved in more than one commitment. construct in the business domain, a language for
modeling multi-party collaborations should be
Multi-Party C ollaboration Interaction sufficiently expressive to represent a multi-party
Metamodel collaboration in terms of its structure, commit-
ments and interactions. We separate views to
The part of the metamodel concerning interactions represent a structural model, a commitment model
is refined in Figure 8. Interaction model consists and a interaction model in the following sections
of actions, connectors, parties, properties of par- respectively.
ties. The property of a party includes inputs and
rules and outputs.
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Business Process Outsourcing Modeling
Collaborated parties involved and channels in a To model commitments between multiple parties,
business process are modeled in collaboration we use concepts of commitments. The approach
structure model. Figure 9 shows collaboration of how to determine the commitments in business
structure model for the six parties involved care collaboration which have introduced in Section
insurance case. It depicts how the insurance Commitments and Roles.
company and its co-operators are interconnected. We use the six parties involved in the car
It is an important model for future mapping to a insurance case (see Figure 2) to explain how to
specific implementation suits/toolkit. determine the commitments. For example an
For example, the insurance company and its insurant phones a call center for a claim. Action
insurant can be connected by internet such as, A_phoneClaim triggered a conversation between
web and email; by post office so they can send the insurant and the call center to deal with the
letters to each other; by telephone network like claim. Actions A_sendInfo and A_assignGarage follow,
they can use fax or phone calls to contact each and action A_notifyClaim finishes the conversation.
other, or by a bank system which means they Actions A_phoneClaim, A_sendInfo, A_assignGarage
can transfer money. It is not always necessary and A_notifyClaim are sorted within a commitment
to have all communication channels. It is up to which records obligations of the call center to deal
the customer requirements. However, for each with the insurant claim. Action A_phoneClaim is a
communication channel, it does require different trigger of a conversation; actions A_sendInfo and
implementation. A_assignGarage are the actions as “involved”; and
Modeling collaboration structure is useful to action A_notifyClaim is an action to “finish” the
identify the parties involved in business collabora- conversation.
tion. It also provides a further step to clarify the Furthermore, six commitments of the care
responsibilities of parties. insurance case are identified according to the
199
Business Process Outsourcing Modeling
200
Business Process Outsourcing Modeling
theory introduced in Section Commitments and solid-box is also in party “insurance company”, it
Roles. connects commitments C_dailyService, C_claimForm
According to Table 1. There are six commit- and C_payRepairCost. It means that commitment
ments. They are simplified in Box 1. C_payRepairCost will be performed after commit-
In commitment C_dailyService, actions A_ ments C_dailyService and C_claimForm.
agreeRepairCar and A_forwardInvoice are both marked In the commitment model, we present the
as “finished”. Action A_agreeRepairCar finishes a position of each commitment in terms of which
proposal by action A_notifyClaim and action A_for- parties and roles are involved, and which com-
wardInvoice finishes a proposal by action A_send-
Invoice.
It is difficult to represent commitments
graphically. In our commitment model, a party
Figure 11. Examples of actions and their pa-
is represented as a rectangle with a name. A node
rameters
denotes a role which should stay in a rectangle.
A commitment is indicated by a set of nodes (or
commitment connectors) and a set of arrows.
Figure 10 depicts the six parties and six com-
mitments of the case in Figure 9. For example, in
party “insurance company”, the solid-diamond
connects commitments C_phoneService, C_claimForm
and C_dailyService. It means that after commitment
C_phoneService is fulfilled, both commitments
C_claimForm and C_dailyService are triggered. A
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Business Process Outsourcing Modeling
mitments are triggered, chose and paralleled by between actions is modeled by conjunctive and
other commitments. In the commitment model, we disconjunctive “splits” and “joins”.
provide an overview of each party’s responsibili- Each party’s behavior is determined by three
ties. This is very important for both the business parameters as found from the business collabora-
side and the IT side as it helps creating a common tion. The inputs and outputs of a party are domain
understanding. In the next section, the behavior related. The rules of a party in our model are
of the parties is modeled. specified using predicate logic. The input param-
eter specifies the actions that this party expects
Modeling B ehaviors of the Parties to be involved in as object, while the output
parameter specifies results of the action. When a
In collaboration interaction modeling, behavior party attempts to execute an action, it first checks
is modeled as inter- or intra-organizational busi- whether the current input can trigger this action
ness processes. The vertical dimension is the time and subsequently generates the output which may
axis; time proceeds down the page. Each party be checked against the possible output.
is represented by a vertical column. An action is In Figure 12, an action is noted as a table-box
the atomic unit of behavior. The causal ordering (see Figure 11), where the first column shows the
202
Business Process Outsourcing Modeling
203
Business Process Outsourcing Modeling
UML, primarily designed as a language for relations. A principle cause behind this is that
software design, has been used in enterprise and current e-commerce environments only support
business process modeling (Eriksson & Penker, bilateral executions. In some simple cases, the
2000; Jacobson et al., 1995; Marshall, 1999). Ac- approach to support multi-party collaboration
cording to (Steen et al., 2002), however, the UML is execution in current e-commerce environments
not suitable for modeling business. The UML does is to assume the whole business process runs cor-
not well support all the concepts needed for busi- rectly according to a number of bilateral relations.
ness collaborations. Modeling business collabora- However, in complicated multi-party collabora-
tions is mainly concerned with what happens at tions this conversion results in information of
the business level and how it is organized. First, relations being lost or hidden. Consequently this
the UML does not support expressing responsi- option to split the multi-party collaborations up
bilities. In the business world, parties permit the into several two-party relations will not work for
commitments to each other to execute a business these complex multi-party collaborations (Dubray,
activity. In our approach, the commitment model 2002; Haugen, 2002).
represents collaborations between business parties SAP’s collaborative business scenarios de-
and provides the relations of the commitments. scribe inter-enterprise business processes from
Second, for business party behavior, business three different perspectives (SAP, 2000), namely
processes are normally not confined to single business view, interaction view and component
actions. Therefore, state diagrams (also for Petri view. The purpose of the business view is show-
Net) are not really useful here. Most business ing the business advantages of implementing a
collaborators do not reason about processes in collaborative business scenario. Business relations
terms of states but rather in terms of the activities per se are out of the scope of our research through.
performed and results produced. Although UML The interaction view describes the process design
can be extended with stereotypes and profiles, the and detailed dependency relationship between
stereotyping mechanism just makes it possible the different activities and responsibilities of
to introduce new subtypes of existing concepts the participants. It is too simple to describe the
and profiles cannot introduce new concepts either relationship like the action relations with conjunc-
(Henderson-Sellers, 2001). tive and disconjunctive “splits” and “joins”. The
Using the Petri Nets to specify a multi-party component view describes the logical applica-
business collaboration process, the amount of tion components needed to support the business
states of the Petri Net can be significantly in- process. Different channels in a collaboration
creased. Especially, because the multi-party structure model can determine different ways to
business collaboration process focuses on when implement a multi-party collaboration. Commit-
and who did, is doing or will do what. A Petri Net ment model and interaction model provide enough
representation can be too trivial, even by using details of interactions between multi-parties.
state-based workflow patterns (van der Aalst et Those three collaboration models can easily map
al., 2003) because of a big amount of possible into a component level model by using specifically
combinations of multi-party’s behavior. software implementation packages.
Two models for ebXML BPSS multi-party
collaboration and web services choreography
are presented in (Dubray, 2002; Webber, 2004) C ONC LUS ION
respectively. Other research (Haugen, 2002) on
multi-party collaboration tries to break down a We have looked at a multiple supplier business
multi-party collaboration into a number of bilateral process outsourcing case. In a business process
204
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205
Business Process Outsourcing Modeling
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207
Chapter XII
Innovative Technological
Paradigms for Corporate
Offshoring
Tapasya Patki
GGSIP University, India
A. B. Patki
Department of Information Technology, India
Abstr act
Internet technology has impelled us to develop faith in the modern practices of business, commerce,
and trade. Offshoring has been viewed as a global phenomenon on the economic frontier. While new
technologies need to be framed, stopgap arrangements in the form of transient solutions to upgrade
the current systems are also desired. Newer regulations and multi-jurisdictional compliance have pro-
found impacts on the growth of outsourcing projects. The development of new technological solutions
must challenge the myth that legislation and statutory practices are the only possible mechanisms to
counter the unscrupulous activities in the context of outsourcing. A change in the outlook toward such
methodologies is essential to shed away the technological inertia and latency. This article opens up
discussion issues in the perspective of hardware and software requirements for efficient offshoring. The
aim is to achieve higher precision, protection, and throughput by applying core-computing techniques
to the existing practices of outsourcing.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Innovative Technological Paradigms for Corporate Offshoring
Intr oduct ion that is, not adhering to a fixed definition. Such
an approach is necessary for a global outlook,
The information and communications technology wherein the participation of developed and de-
(ICT) revolution has triggered the economic de- veloping nations is at equal stake levels (Farrell,
velopment at collaborative and cooperative levels. Kaka, & Sturze, 2005). Both subcontracting and
Internet-based infrastructure provided impetus offshoring/outsourcing have impact on work force
for outsourcing projects to hubs such as India, realignment. The fears, however, are disjoint.
China, and the Philippines. Bednarzik (2005) Subcontracting may result in a partial relocation
indicates that due to its emerging nature, there is of the workforce with ensured job security. Such a
no universally accepted definition of offshoring. possibility is absent in offshoring/outsourcing. In
While the industry professionals use outsourcing this context, the theory of comparative advantage,
and offshoring terms interchangeably, IEEE and propagated by the economics of offshoring cannot
ACM believe that when a U.S. company gives be applied to subcontracting.
work to companies in other nations like India, With the introduction of business models in
it is outsourcing (and not offshoring). A general the developing nations for managing the avail-
business expansion trend, including an outreach able workforce and the infrastructure, the ICT
program, is to explore potentials of other na- industry paved the way for the foundation of
tions for widening an organization’s horizons first generation outsourcing oriented corporate
(Friedman, 2005). Considering this general view, models (FG-OOCM) for expanding commerce.
offshoring, outsourcing, and subcontracting The FG-OOCM has opened up various issues
need to be distinguished. A report of the ACM for outsourcing-based research, and a need for
Job Migration Taskforce (Aspray, Mayadas, & deploying technological solutions to offshoring
Vardim, 2005) looked at the issue from a global activities is being felt. For example, consider a
perspective, as compared to a country-centric one situation where Mexican, Indian, Chinese, and
in the context of rapid globalization of IT and the American people work together in an outsourc-
migration of jobs resulting from outsourcing and ing-based system. In such cases, knowledge man-
offshoring. The report clearly defines the follow- agement is a challenge and a need for introducing
ing two terms: technological solutions is felt. Although distinct
units, rules, and documents of each participat-
• Outsourcing refers to having work for a ing organization can be considered as explicit
company done by another organization. knowledge, these do not make knowledge for
• Offshoring refers to having this work done the entire outsourcing system. Information and
in another country, whether or not it is done knowledge are interdependent, but information
by part of the same company. per-se contains no knowledge. Some of the issues
of knowledge management in software engineer-
This leads to a partially overlapping definition ing (Desouza, 2003) are applicable to outsourcing.
of outsourcing and offshoring. Transferring a part In general, outsourcing system operations are
of the workload from a host location to another performed by outside contractors, and the terms
adjunct destination can broadly represent the of understanding between the client and the con-
meaning of these two terms. Predominantly, the tractor for outsourced services are defined based
host and the destination locations are in different on distribution of responsibility, liability sharing,
countries. The authors explore the possibility of and performance monitoring. These issues require
such situations from the previous perspective, managing of electronic records and evidence,
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Innovative Technological Paradigms for Corporate Offshoring
impose legal compliance requirements, and need cess pattern using transformational outsourcing
to be viewed from the perspective of technology (Linder, 2004). Conventional outsourcing ap-
as opposed to that of mere administration. proaches that focus on incremental cost savings
have outlived and business process offshoring
Internet T echnology Framework (BPO) as well as emerging knowledge process
offshoring (KPO) are the likely next generation
Outsourcing is a multistage phenomenon involv- outsourcing activities. At present, the Internet
ing individual (usually management/technical technology-based computing deployed for Web
positions), functional (knowledge and responsi- services and outsourcing comprises of a broad
bility orientated), and process (flow of product range of processors, communication networks,
or services) level activities (Greaver, 1998). De- and information reservoirs. The trustworthy
pending on the process requirements, outsourc- computer systems encompassing a spectrum of
ing can be classified as tactical, strategic, and information processing technologies will play a
transformational (Brown & Wilson, 2005). The major role in the impressive growth of the BPO
mindset of considering tactical outsourcing for sector. The technology to support next genera-
reducing financial costs is assuming new dimen- tion outsourcing is likely to witness large scope
sions to make business capabilities portable on computing instead of large scale computing to
a global basis. Detailed analysis of case studies withstand attacks and to ensure greater security,
in a research-based manner establishes the suc- dependability, and reliability. Multimedia, mul-
Data Poor
Health Economic
Theft, Increasing
Job Due to Disparity
Breach Crime
Loss Odd in the
of Rate
Working Society
Privacy
Hours
Solutions Framework
Technology Domain Governace
GovernanceDomain
Domain
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Innovative Technological Paradigms for Corporate Offshoring
tilingual network operating software (MISNOS) ing issues from motivation, performance angle,
supports large scope computing permitting ap- to management control has been the focus of first
plication semantics (Bandyopadhyay, 1996). It phase. The second phase describes partnership-
has potential for context-sensitive and secure based outsourcing trend. A management checklist
OS architectures to facilitate e-services needs of (Kobayashi-Hillary, 2004) focuses on preparation
conventional and emerging ubiquitous embedded as a critical part of transition and redundancy
systems deployed in BPO sectors. Outsourcing, in process for managerial commitments. However,
the past, has evoked a response, which is a com- the preference of the “touch-and-feel” factor over
bination of excitement for corporate management the impersonal virtual environment and the lack
and fear/worries like loss of jobs for employees of adequate security systems to safeguard stra-
in the host country. In addition to these social tegic information may limit the extent and pace
issues, the technological issues like data thefts, of outsourcing.
privacy protection, and timely deliveries have A need to structure and equip the outsourc-
been concerns in the past few years. Figure 1 ing business community for content sharing and
depicts problems triggered by outsourcing. The control has arisen in the Internet technology
Internet must also provide substantive benefits framework. With the continued globalization and
to the various stakeholders of outsourcing busi- technology push, outsourcing is seen as the growth
ness community as opposed to merely offering engine of the global economy (Roger, Smith,
traditional subcontracting disguised with technol- & Kidd, 1999). The IT infrastructure currently
ogy. The early management-oriented outsourcing available to small- and medium-sized enterprises
studies focused on employment issues instead (SMEs) does not provide sufficient integration
of productivity aspects. The job losses due to amongst different application components of busi-
direct impact of offshoring and indirectly due ness to support trustworthy inter-organizational
to productivity enhancements are concerns of outsourcing process. As a stopgap arrangement
transient nature (Bednarzik, 2005). Lo (2005) has to improve trustworthiness, we suggest an e-
demonstrated using a mathematical approach that service-oriented methodology for outsourcing
the international outsourcing trade and technol- for addressing trustworthiness concerns. The
ogy improvements have potentials to make the approach suggested in the section on establishing
world better off with higher real wage and more concurrency control and security is on the lines
product variety. of TIOBE programming community index that is
Outsourcing failure is termed as a situation updated once a month (TIOBE, n.d.). Flexibility
when a deal is either terminated or re-negotiated in arranging trans-organizational BPO is a key
(Brudenall, 2005). High rate of outsourcing failure requirement for a common middleware. Shifting
is attributed to factors like poor planning, choice of of skill set up the value chain is useful (Fowler,
partner, or lack of proper strategy. The importance 2005). As a long-term goal, underutilized skill sets
of identifying short-term and long-term goals to arising out of job losses due to outsourcing must
prevent outsourcing failures is discussed in the be deployed for assessing global methodologies
context of vendor selection and cultural match for benchmarking BPO/KPO infrastructure on the
(Chandrasekar, 2005). Lee, Huynh, Chi-Wai, and lines of supercomputer ranking initiatives (Top
Pi (2000) identify key research areas for deeper 500 supercomputer Sites, n.d.) that are updated
understanding on outsourcing as a two-phase half yearly. Technological approaches suggested
exercise. Evolution of several identified outsourc- in this article are useful from this perspective.
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Innovative Technological Paradigms for Corporate Offshoring
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Innovative Technological Paradigms for Corporate Offshoring
pression algorithms grew more popular. Such load of the end user leading to the simplification
patchwork approach was acceptable for in-house, and ease of use of the data processing framework.
networked IT installations. However, the lack of We provide a brief review of the basic concepts
built-in cognitive supports at computational/op- of fuzzy logic (FL) next.
erational levels adversely influenced outsourcing.
It has led to situations of outcry toward outsourc- Fuzzy Logic
ing ranging from labour dissatisfaction to data
thefts, forcing countries to resort to legislation. The theory of binary logic is based on the assump-
The authors identify the limitations of the current tion of crisp membership of an element to a certain
outsourcing technologies and focus on using soft set. An element x thus either belongs to (i.e., has
computing based solutions. a membership value of 1) or does not belong to
(i.e., has a membership value of 0) a particular set
C ognitive S upport for Data X. Conventional logic systems can be extended to
Processing encompass normalized values in the range of [0,1];
thus introducing the notion of partial membership
With the availability of Internet, EDP-oriented of an element to a particular set. The variable in
methodology has been directly extended to a fuzzy system is generally described linguisti-
the BPO sector for establishing dedicated ap- cally prior to its mathematical description, as it is
plication-oriented servers (e.g., ftp, mail, and more important to visualize a problem in totality
dbms) to preclude the intermixing of data and to devise a practical solution.
information. However, concept modeling as per A fuzzy set F, on a collection of objects, X,
the user specifications and requirements is not is a mapping
incorporated in these dedicated servers. Unlike
the EDP applications of the bygone century, the µF (x): X → [0,a]
future information systems will require com-
puters with capabilities to handle imprecise and Here, µF (x) indicates the extent to which x ∈
partial information, approximate reasoning, and X has the attribute F, thus it is the membership
learning, both for scientific and commercial ap- function. In general, we use a normalized fuzzy
plications. Capturing and representing knowledge domain set, for which
and inferencing are major challenges in classical
computing techniques due to the imprecise or a = sup µF (x) = 1
gray nature of real-life decisions. Since com-
puter programming is the ultimate vehicle for The membership function can be generated
the practical realization of outsourcing plans, it with the help of mathematical equations. Typi-
is necessary to cater to imprecision and context cally, it can be in trapezoidal, triangular or in the
through software construction approach (Hunt & form of S or π - curve.
Thomas, 2003; Patki, 2004). Fuzzy logic (Zadeh, The support of a fuzzy set, F, S(F) is the crisp
1965, 1976) techniques allow system modeling set of all x ∈ X such that µ (x) >0.
using linguistic hedges for handling imprecision, The three basic logical operations of inter-
partial truth, uncertainty, and approximations. section, union, and complementation can be
The focus should be on reducing the cognitive performed on fuzzy sets.
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Innovative Technological Paradigms for Corporate Offshoring
213
Innovative Technological Paradigms for Corporate Offshoring
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Innovative Technological Paradigms for Corporate Offshoring
to such an e-service must be standardized so that as it determines the usability and accessi-
processing of requests for proposals (RFPs) is bility of a service unit for offshoring, and
more effective. needs to be consulted before investing in a
particular location prior to the finalizing of
• Cyber crime index (CCI): It is the cumu- the outsourcing project.
lative measure of the various cyber crimes
that occur at a particular service unit in a In the context of the previous discussions, when
city where the outsourcing infrastructure we talk of outsourcing at the most fundamental
has been installed and involves inter-nation level, we refer to a collection of operations that
as well as intra-nation successful illegal form a single logical unit that need to be executed
attempts that have taken place in the time to perform a specified task to fulfill a particular
period of observation. The term illegal at- request. This collection of operations is referred to
tempt is based on a cognitive factor and as a transaction. Transaction management (TM)
cannot be determined directly. and concurrency control (CC) are thus evolving
• Customer satisfaction rate (CSR): It de- issues in outsourcing. To support such schemes,
termines the percentage-based value of the technological solutions have to be provided in
number of satisfied customers per unit time the form of cognition-based protocols for TM
(this time is the time-period of observation). and CC. Some important considerations with
The CSR value determines the reliability regard to TM include atomicity, consistency,
and the serviceability of the infrastructure isolation, and durability, popularly referred to as
unit. Weekly project progress of the targets ACID properties. When several transactions take
as per the PERT chart serves as an important place simultaneously, the isolation property may
parameter. This value is fuzzy in nature as not necessarily be preserved and to ensure that it
it is used to plot a membership function of holds, a separate CC algorithm must be designed
CSR with the help of parameters like satis- to control the interaction between simultaneous
fied and dissatisfied. Furthermore, hedges transactions. Serialization of transactions is one
like moreorless and very can be applied to such method to establish CC. We can do this by
these values. This membership curve can the use of protocol-oriented techniques. Tech-
be used to determine the efficiency and the niques such as lock-based, timestamp-based,
effectiveness of a service center unit. graph-based, and validation-based protocols have
• Civil infrastructure status (CIS): This is been previously employed for database systems
a value that is computed from the join of (Elmasri & Navathe, 2004; Silberschatz, Korth,
various other factors like the present popu- & Sudarshan, 2002). However, these techniques
lation of the city, the administrative status fail to deliver a good output, as they are not based
of the city, the present need and urgency of on the real-life problems. A major limitation of
a request, and several such related factors. these protocol-oriented solutions is that they
This factor uses type-II fuzzy sets repre- have been founded on the grounds of example
sentation. This is a highly variant quantity situations, and they do not by any means address
and it generally fluctuates with parameters the grass-root reality of outsourcing/offshoring
like the current climate/season, the socio- setup, as they cannot take intelligent decisions.
economic condition of the city, the language In order to develop more practically efficient
and culture of the people, the percentage of solutions, we have to move to the soft-computing
academicians in the city, the business base based options (Kapoor, Patki, & Khurana, 2005).
of the city etc. This is a very important value Proposed TM could be implemented using rough
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Innovative Technological Paradigms for Corporate Offshoring
set theory (RST) approach, which also supports an ordered pair, A = (U, R) where U refers to the
the powerful concept of information systems (IS). universe of discourse, and R refers to a binary
We provide a brief introduction to RST (Pawlak, relation over U, also called the indiscernibility
1982, 1984) as well as IS in this article and then relation of the IS (Marek et al., 1976; Pawlak,
discuss how these can be applied for security and 1984).
concurrency control. We assume R to be an equivalence relation,
thus broadly classifying R as reflexive, symmetric,
Information Systems and transitive. Thus, if an ordered pair (x, y) ∈ R,
we say that x and y are indiscernible or indistin-
A system that is capable of storing information for guishable in A. Equivalence classes of relation R
archival and reference purposes can be thought of are often called elementary sets or atoms in rough
as an IS. It is quite similar to a relational database set theory. An empty set (i.e., φ) is assumed to be
(Silberschatz et al., 2002) in terms of its physical the elementary set for every A. When the union
structuring. The difference lies in the powerful of elementary sets for a set X is finite, we say that
concepts of reduction and abstraction that it uses. the set X is definable or composed. Essentially,
It can also perform the task of a decision making for a quantifiable set X, we can talk of two ap-
system, allowing us to select a few attributes as proximations in general, a lower approximation
decision parameters. The attributes can also be (LA or A), which refers to the greatest definable
classified as relevant and irrelevant. set in A of which X is a superset, and an upper
Mathematically, an IS is defined as a 4-tuple approximation (UA orA), which refers to the
system (Marek & Pawlak, 1976; Pawlak, 1984) least definable set in A of which X is a subset.
The positive region is the union of the lower ap-
S = {U, D, V, ρ} proximations (Pawlak, 1982). The boundary of X
in A is mathematically the set difference of the
where upper approximation and the lower approximation.
Thus, BND (X) = A – A. Figure 2 illustrates these
• U is a non-empty finite set of objects known operations. The negative region (or NEG (X)) is
as the Universe of Discourse; the difference between the universe of discourse
• D is a non-empty finite set of attributes or and the positive region. A set can also be referred
descriptors used to represent the objects; to as definable when its LA and UA represent the
• V is the set of values, such that for every a∈D, same set, i.e., when A = A. In all other cases, the
we associate a set Va, called the domain of set X is said to be undefinable.
attribute a; and Undefinable sets in a given approximation
• ρ is the mapping function such that space A are of the following four types:
ρ : U x D → Va
• Roughly Definable: When for a given set X,
Rough Set Theory A ≠ φ and A ≠ U
• Externally Undefinable: When for a given
Rough set theory, as the name suggests, is based set X, A ≠ φ and A = U
on the concept of roughness or approximation of • Internally Undefinable: When for a given
the crisp sets. It extends the conventional set theory set X, A = φ and A ≠ U
to include a concept known as an approximation • Totally Undefinable: When for a given set
space, which can be defined mathematically as X, A = φ and A = U
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Innovative Technological Paradigms for Corporate Offshoring
BND(X)
POS(X) or A
Set (X)
Universe of Discourse, U
Example: RST can be effectively applied for an alarm once a suspected intrusion happens. It
determining and analyzing the CCI. To find CCI, also watches for attacks that originate from within
we need to follow up a given service unit and the setup. The basic process extracts predictive
approximate its illegal activities/attempts. This features from the raw data stream being monitored
approximation can be done in a suitable time to produce formatted data that can be used for
frame, which depends on the traffic load of that detection. Following this, a detection model de-
particular unit. In case of a heavy traffic, we can termines whether the data is intrusive. RST based
approximate the attempts every half-an-hour; and methods for the development of IDS is promis-
in case of low traffic, the procedure can be car- ing in terms of detection accuracy, requirement
ried out every 12 hours. The approximated results of training data set and efficiency. In a classical
would give us a rough idea of the illegal attempts RST based approach, the new attack records are
that are taking place. We can thus formulate two combined with the original training data, and a
extreme limits, given by the upper and the lower process of rule generation is employed. The rules
approximations. These limits can be overlapped in generated are used for detection and analysis of
a cumulative fashion to gather information about further similar attacks. However, this process is
that particular service unit. The number of suc- not very practical as the entire existing knowledge
cessful illegal attempts can also be determined. base has to be re-examined. To solve this problem,
This value however, will not be an approximated an incremental learning procedure is required
value, as the number of crimes that have actually to approximate the attacks in a more efficient
taken place, i.e. the number of successful illegal manner in a real-time environment (and not in a
attempts can be determined finitely. The CCI post-mortem style of cyber forensics’ analysis). A
can then be computed by considering the ratio rough set based incremental knowledge acquisi-
of these two values. tion algorithm requires that whenever a new attack
RST can also be applied in case of the security type or a new variation of attack appears, the
of transactions that are taking place in a service rule generation process with the entire training
unit on an outsourced enterprise. This is done data need not be repeated. The only computation
through the development of an intrusion detection required is that new rules should be generated
system (IDS) for protection of a networked link from the new attack records and these should
(Peng, Yun, Douglas, & Dingbang, 2004). An be used in conjunction with the existing rules.
IDS evaluates suspected intrusions and signals This algorithm has higher speed and recognition
217
Innovative Technological Paradigms for Corporate Offshoring
rate and can be appropriate for processing huge port and strengthen outsourcing. In the strictest
amounts of data/transactions. Handheld portable sense, there is no accepted universal practice for
gadgets for cyber police patrolling have already measuring the performance of an OS in an out-
been proposed based on the previous ideas (Patki, sourcing environment. On the lines of reduced
Patki, Khurana, & Sivasubramanian, 2005). instruction set computing (RISC) philosophy of
microprocessors, OS will have to shed off some
of its existing burden onto hardware. Some of
Limit at ions of Ex ist ing the salient points in the context of outsourcing
s oft war e Pr act ic es are presented below.
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Innovative Technological Paradigms for Corporate Offshoring
219
Innovative Technological Paradigms for Corporate Offshoring
Root Directory
Public
Public Private
Insurance Medical_data_
papers
sion must be dynamically updated in accordance Unlike the text-oriented databases of the cur-
to the logging in and logging out of any user. rent decade, future information systems would
Matrices to map the relationships between primarily use multimedia and non-multimedia
(a) directory/subdirectory, (b) directory/user, databases. The current efforts in the multimedia
and (c) group/user are created in the system to databases have been restricted to audio, video, and
analyze the attribute-value domains. Then, with textual stimuli. In order to give them true power
the help of fuzzy equations and recursive matrix of expression, a concept mapping system needs to
operations, the influence of different users on each be viewed as a core, instead of considering these
other as well as influence of different directories objects merely as collection of symbols, bitmaps,
on the users and system is computed. The time or audio signals. With provision for open ended
and date of creation in fuzzy format will enable queries comprising of textual and an ordered
processes to make inferences by considering group/ring/field-based composition of audio/im-
hedges regarding the file being new, very new, old, age/video clippings as language symbols dis-
moreorless old, etc. This is useful for detecting played on the small screen of an optical keyboard
tampering of files and assessing the damage due (Bandyopadhyay, 1997), multimedia database
to unauthorized access using fuzzy role theory systems can play a significant role in providing
(Kandel et al., 1979). information for the masses (Bandyopadhyay,
220
Innovative Technological Paradigms for Corporate Offshoring
1996). It is envisaged that for building large-scope ules to improve trustworthiness of outsourcing
information systems using outsourcing method- projects, object-oriented programming systems
ology, the data entry, query, and retrieval nodes (OOPS) need to include synthesis support. The
would naturally be distributed. The data in the existing programming languages are more in
form of textual reports, audio/video clippings, the form of large suite of tools (with associated
and images arriving in all these information integrated development environment IDE), which
reservoir nodes would be un-modeled raw data. support algorithmic methodology constructs like
The existing password-protected schema view iterative loops, multiple branch (switch-case),
methods of SQL/DBMS environments can be and conditional controls (if-then-else). These
modified to incorporate encryption and decryp- languages emphasize algorithmic programming
tion methodologies operative through ASPA for using an iterative philosophy instead of design
sensitive data. Software tools would be required using synthesis approach. At present, the exist-
to analyze and aid modeling using raw data for ing programming languages used in information
concept generation. systems design do not support synthesis constructs
prevailing in the hardware engineering design
Programming Language practice like VHDL for digital VLSI circuit de-
C onsiderations sign. This calls for introducing basic primitive
modifications at object-oriented programming
The conventional programming languages from languages. Ruby programming language has
the era of FORTRAN/LISP to the present day attempted to bring programming closer to the
C/C++/Java are based on the following building application space of the user (Thomas, Fowler,
blocks: & Hunt, 2004). Ruby’s object-oriented features
are designed to add an instance during runtime,
• Iterative statements ( for loop, do loop). allowing this instance of a class to behave dif-
• Conditional and non-conditional executions ferently from the other instances of the same
(If-then-else, Goto). class. This feature is useful in combination with
• Recursion oriented structures (Stack ori- ASPA loaded partial instruction set to monitor
ented). security concerns and prohibit data thefts in real
• Assignments with associated enhancements time environment at outsourcing infrastructure.
(i= i +1, c+= 5). However, Ruby does not address features required
for outsourcing. In order to address issues ranging
A need for an effective programming medium from sharing code development across the globe
in place of a programming language was sensed to asynchronous interactions amongst develop-
while examining various issues of information ers and/or supervisors, it is essential to deploy
banking related activities in the development cognition-based algorithms. We illustrate a case
phases for SIIIS (Sivasubramanian & Patki, of document support in programming language
1996) and FUZOS© (Patki et al, 1997). We dis- for outsourcing environment.
cuss the programming medium approach, which The debugger and documentation capabilities
encompasses programming languages as one of of object-oriented programming languages (e.g.,
the building blocks around which other modules Java) are not much useful after the software-
for monitoring information disposal, fraudulent testing phase is over. Program understanding
attempts, resource aware, and context-based data and documentation, which is useful for software
collections are dynamically configured. In order designers, code developers, and testing person-
to facilitate ASPA to load instruction set mod- nel keeps the end-user out of loop. This bottle-
221
Innovative Technological Paradigms for Corporate Offshoring
neck leads to conflict creation, which should be Conventional documentation retrieval tech-
avoided (Reifer, 2004). The information retrieval niques do not address mid-operation support and
and documentation approaches in the past had the scope of fuzzy logic and rough set techniques
been traditionally configured for isolated activ- is promising (Bandyopadhyay, 1996; Goguen, &
ity and had never been considered for a group Lin Kai, 2000). A fuzzy logic-oriented documen-
activity like outsourcing. The scope for utilizing tation support system for programming language
document features is very limited in the software that will permit offshoring community to develop
maintenance and practically no scope exists for a dynamic view of the same output from multiple
its usage by the end users who use such software perspectives like software code obfuscation, trust-
at their computer installations. We should con- worthy computing, and forensic examinations to
centrate on group performance in the outsourcing improve the overall group performance has been
environment (Damian & Eberlein, 2000). Since proposed (Patki & Khurana, 2006). By using the
existing documentation is not tailored for multiple lower and upper approximation techniques of
perspectives, there is no provision to configure rough set theory, along with fuzzy relational data
the documentation application module on a user view, different projections of the same information
selection basis. are feasible for different information consumers
An end user in an outsourcing scenario rarely (Kapoor et al., 2005). This capability is a must
uses the software documentation supplied with the for efficient outsourcing to restrict and partially
systems since it does not provide any cognitive overcome the data thefts and similar problems.
assistance. Thus, OOPS should provide applica-
tion semantic support on documentation so that
cognitive assistance is provided individually to Mult iplex ing of B PO
every category of user community consisting of Infr astr uct ur e
management controllers, cyber forensic analysts,
security supervisors, and client managers. Thus, At present, BPO infrastructure is being used
existing broadcasting modes of documentation in absolute terms with respect to the consumer
should be replaced by an interactive category-spe- community. There is a need to think on the lines
cific mode for users. Intelligent software agents of relative BPO houses where scheduling of
can help to simulate such studies. Support docu- jobs is carried out in a manner corresponding
mentation for outsourcing infrastructure should to the demands as well as the feedback of the
answer cognitive queries and not function as help user. Multiplexing of infrastructure on the basis
menus or FAQs. The text analysis orientation in of geographical locations to provide and serve a
traditional documentation retrieval leads to the larger user community to the fullest extent is a
situation that two words with same underlying novel idea. Such a scheme may use a three-schema
meaning/stem refer to the same concept for index- architecture at the grass root level, comprising
ing, e.g. neutron and neutralize. The index terms of a physical (internal) schema, a conceptual
that are derived from the text of the document use (logical) schema, and an application (external)
pre-coordinate or post-coordinate principles. The schema. This architecture will aid the development
controversy about index language for document of secure systems and will thus revolutionalize
retrieving (Farradane, Russell, & Yates-Mercer, the concept of data protection and safe transfer.
1973) is primarily due to text analysis approaches The OSI reference model for the TCP/IP network
adopted and can be overcome using synthesis protocol can be extended to accommodate such
principle. multiplexed BPOs. Resource allocation should be
222
Innovative Technological Paradigms for Corporate Offshoring
carried out using platform independent integrated routing information to various customers. It is also
development environment (IDE). This will also responsible for finding the CSR with the help of
cater to the increasing traffic through the network user feedback. Such an arrangement is depicted
at the peak hours due to the availability of efficient in Figure 4. The arrangement shown here is very
resources, resulting into the optimal utilization fundamental in nature and is not necessarily a
of the BPO infrastructure. final solution to the multiplexing concept. It can
In order to provide a makeshift arrangement however be used as a makeshift pattern in this
to incorporate concept modeling as per the cli- transient phase of offshoring. Since some special
ent requirements, we introduce the concept of an customized hardware needed for such a system is
inter-dialoguing processor (IDP). not yet available, this section of the article may
The IDP infrastructure could be based on a be considered as a precursor. Refinements of this
simple microcomputer, which takes in machine design are expected. We discuss fuzzy logic-based
level inputs (instructions as well as data packets). algorithm for BPO multiplexing in the following
The IDP acts as a transfer-establishing a resource subsection.
link between the service center and the customer
interface array dynamically. The main task of Algorithmic S teps for B PO
the IDP is to merge and route the traffic of the N Multiplexing
service centers via a single transfer path to the
customer interface array, which is responsible for 1. Create a global FMAP of service centers
interactions with the actual customer. The CCI available to the customers, mapping custom-
value is computed for each service center. This ers to the multiplexed infrastructure based
value is used for handling the security issues. At on the membership function value. FMAP
the IDP level, the CIS value is calculated. The is a resource relation that allows customers
customer interface array uses the CIS value for to determine which service center stores or
Customer
Interface Array
Legend:
223
Innovative Technological Paradigms for Corporate Offshoring
caches which files. The structure of a typical congestion. As and when a new machine joins
FMAP is given in Table 2 where customer the multiplexing infrastructure, the FMAP of
interface array (CIA) index of figure 4 is the closest link is read, and the system-updating
used. module of IDP modifies its own map accordingly.
2. Manage metadata through proxy servers that Updating of FMAPs takes place synchronously.
reference the locations where data blocks The system can also be expanded using multiple
of different files are placed in an encrypted fuzzy variables like distance between client and
format. BPO, cyber trustworthiness, and cost factor to
3. Maintain a cache block so that some per- provide other advantages. Such an approach helps
mitted, registered requests can be handled in reducing the cognitive load. It is important
without accessing the machine disks and to observe that the conventional von Neumann
resources directly. architecture is not efficient for handling fuzzy
4. Maintain cache consistency metadata (i.e., logic processing and IDP can be only simulated
version information so that no writes can in software environment for demonstrating the
be done on obsolete data) however, read effectiveness. ASPA based instruction sets can be
requests for this data are permitted. introduced for modeling such a system. Instead
of general-purpose processors, digital fuzzy
The control-system-managing module of hardware is required for acceptable real-time
inter-dialoguing processor (IDP) of BPO multi- performance. In the absence of such dedicated
plexer acts as a load balancer and changes the fuzzy hardware, either the limited scaled down
FMAP by increasing the membership value of software solutions will be used or the approach
lesser-used BPO infrastructure machines and may be abandoned altogether, as it requires very
reducing those of heavily loaded machines. This high fuzzy inference speeds (Alag et al., 1996;
representation and replication (FMAP is globally Hung, 1995; Patki 1996; Watanabe, 1991).
replicated and present in different machines with
different entries) of FMAP enables the customers
to be serviced with minimum number of network Con c lus ion
hops using BPO multiplexing, by taking into ac-
count parameters like link speed, bandwidth, and In the past, computing technologies were framed
load status when assigning membership values by developed nations and were deployed do-
in the FMAP. This helps in preventing network mestically as well as internationally. This view
224
Innovative Technological Paradigms for Corporate Offshoring
of technology producers and consumers must Mahesh Kulkarni, Group Coordinator, Center for
be understood in the context of offshoring by Development of Advanced Computing (CDAC),
integrating consumer experiences rigorously. Pune and Mr. S. Sivasubramanian, Scientist-E,
Data collected at the outsourced infrastructure Department of Information Technology, New
destinations will be a useful technology driving Delhi, have been enlightening. Suggestions from
parameter. This is now feasible as many MNCs editors have been useful in shaping the article
have set up their own infrastructure units in vari- effectively.
ous countries, which are routinely undertaking
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This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 5, Issue 2, edited by M. Khosrow-
Pour, pp. 57-76, copyright 2007 by IGI Publishing, formerly known as Idea Group Publishing (an imprint of IGI Global).
228
229
Chapter XIII
Factors In.uencing the Ex tent
of Deployment of Electronic
Commerce for Small- and
Medium-Sized Enterprises
Sandy Chong
Curtin University of Technology, Australia
Graham Pervan
Curtin University of Technology, Australia
Abstr act
This study surveys the perceptions and experiences of Australian small- and medium-sized enterprises
(SMEs) in the implementation of Internet-based Electronic Commerce (EC) as seen from the perspec-
tive of the extent of deployment. With a sample of 115 small businesses in Australia, this article uses
regression modelling to explore and establish the factors that are related to the extent of deployment in
EC. A multiple regression analysis shows that seven factors: perceived relative advantage, trialability,
observability, variety of information sources, communication amount, competitive pressure, and non-
trading institutional influences, significantly influence the extent of EC deployment by SMEs in Australia.
The managerial implications are discussed.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Factors In.uencing the Extent of Deployment of Electronic Commerce
ganizations to improve business processes and 2003a; Purao & Campbell, 1998; Stockdale &
communication, both within the organization Standing, 2004; Whiteley, 2000).
and with trading partners. In the U.S. alone, the The need to adopt EC for survival in the inter-
second decade of EC would boost online sales national marketplace, especially due to physical
from $172 billion in 2005 to $329 billion in 2010 and economic distance faced by Australian SMEs
(Forrester Research, 2005), while Asia Pacific’s is imperative. An awareness of the critical suc-
B2B EC is forecasted to grow rapidly at a Com- cess factors of EC implementation also becomes
pound Annual Growth Rate (CAGR) of 59% essential for SMEs to appropriately address the
percent (IDC, 2004). Specifically in Australia, relevant issues and move forward, since failed
EC is estimated to be worth $11.3 billion dollars implementation may have severe repercussions
annually (Australian Government Information on small businesses with their limited resources.
Management Office, 2005). Despite the salience of these issues, there is little
empirical research that examines the success of
EC deployment after the technology has been
Re s earc h Pr ob lem implemented. In addition to that, there is little of
the prior information systems (IS) and informa-
According to the report of the Information Econ- tion technology (IT) literature, and none from
omy (NOIE, 2002), Australia is well positioned to EC literature, that has investigated the relative
benefit from the emerging information economy. importance of the identified factors of extent of
On a number of metrics, Australia is among the deployment. Without knowing the relative impor-
leading nations in terms of measures of Internet tance of these factors, SMEs may be expending
infrastructure, penetration and activity. In fact, their limited resources and energy on less impor-
Australia is ranked the top second country in Asia tant factors which have limited contribution to
Pacific region by EC infrastructure (eMarketer, EC implementation success. Hence, the principal
2005). However, in comparison with other coun- contribution of the current report can be asserted
tries and larger Australian businesses, small- and to be its provision of a model for EC adoption
medium-sized enterprises (SMEs) have been that takes into account the relative importance
relatively slow in adopting EC (The Age, 2002; of various factors that encourage or inhibit the
NOIE, 2002; Sensis, 2005). Even if SMEs were extent to which it is deployed. It may also provide
able to overcome the barriers of initial adoption, a theoretical tangent that authors and facilitators
they still face challenges when trying to imple- of future research may wish to follow.
ment the new system into their business. Most
SMEs perceive the challenge of integrating EC
into their business operations as risky, complex, S c ope of S t udy
time-consuming, and an expensive initiative
(NOIE, 2002). Yet it should be noted that if EC In this study, the term Electronic Commerce
implementations are successful, the potential principally includes, but is not limited to, Inter-
benefits to small businesses can include increased net-based EC. The scope of EC applications is
sales, improved profitability, increased produc- limited to the utilization of the Internet as the
tivity, reduced costs associated with inventories, technological infrastructure to communicate,
procurement and distribution, improved quality distribute, and conduct information exchange
of service, and secured competitive positions (see and transactions with business partners. The
Dholakia & Kshetri, 2004; Grandson & Pearson, overwhelming growth rate of the Internet since
.
230
Factors Influencing the Extent of Deployment of Electronic Commerce
• What factors influence of the extent of EC As defined in Roger’s diffusion theory (1995),
deployment for SMEs? adoption is a decision to define the full use of
• To what degree do these individual factors an innovation as the best course of action, and
influence the success of EC implementa- implementation is taking the necessary steps to
tion? facilitate and execute that innovation into busi-
ness practice or process. For several reasons, there
is rarely any clear separation between adoption
231
Factors Influencing the Extent of Deployment of Electronic Commerce
and implementation in EC. In other words, EC Raymond & Bergeron, 1996). Although it is an
is not “one simple or single innovation” that a adaptation of concepts from previous research,
firm either does or does not adopt, but should be the current report has tailored these for an EC
considered as consisting of a number of combina- context. Thus, the variable Extent of Deployment
tions of innovations of varying complexity and combines the notions of volume, diversity, and
sophistication on a continuum requiring lesser to breadth. As for the aspect of depth, this is cap-
greater levels of commitment. While conceptu- tured in the other dependent variable not covered
ally distinct, there is no temporal dividing line in this article—the Level of Usage.
between all the dependent variables in this study
for they merge into one another (i.e., State of • Volume—the proportion of business that
Adoption, Extent of Deployment, Level of Usage, the firm derives from Internet-based EC is
and Overall Satisfaction). Rather, their hierarchy defined as the “Percent of Business Con-
is logical in that each is a necessary condition ducted Online” in this study.
for the next: while one feature is becoming more • Diversity—the variety of documents ex-
utilized, another is being explored and a third is changed via Internet-based EC with their
being considered or enabled. Thus, in any firm external partners. It is defined as “Applica-
EC is never “adopted” or “not adopted,” but al- tion Diversity” in this study.
ways in one of a large number of possible ”states • Breadth—the extent to which a firm has
of adoption”. The following section focuses on developed EC connections with its trading
discussing the significance of Extent of Deploy- partners. It is defined as “Number of Link-
ment as a measure of implementation success. ages” in this study.
The other three dependent variables are beyond
the scope of this article. Unlike traditional information systems, EC is
an IOS, and therefore requires the organization
Extent of Deployment to expand its external electronic links to gain
economies of scale and be cost effective. Previous
While most IS adoption studies are inwardly ori- studies have demonstrated that there is a need for
ented (due to the internal deployment of systems “inter-exploitation” between partners through
architectures or software within a specific firm), expansion of IOS in order to sustain strategic
the current study utilizes Extent of Deployment as advantage (Computerworld, 1992; Vitale, 1985).
an externally-oriented measure. Hence, the defini- Firms could utilize the electronic links to a greater
tion of Extent of Deployment can be designated extent by including more transactions or docu-
as the degree to which a firm is successful in ments. Such an expansion of electronic exchange
linking with external partners and converting its would enable firms to experience the full benefits
transaction documents into electronic form. The of EC and an improvement in organizational ef-
construct borrows three concepts and definitions fectiveness in the long run.
from diffusion and integration studies by Massetti
and Zmud (1996). A weighted index was developed
to measure Extent of Deployment by multiplying Re s earc h Model
all the three components of deployment (or the
“extent of integration” or “diffusion” as defined In this study, it is proposed that several factors
by previous studies—see Massetti & Zmud, influence different levels of EC adoption for the
1996; Premkumar, Ramamurthy & Nilkantan, organization. To assist in the selection of the
1994; Ramamurthy, Premkumar & Crum, 1999; most significant variables for EC adoption and
232
Factors Influencing the Extent of Deployment of Electronic Commerce
Organisation Industry
Firm Size Pressures from Trading
Firm Age Partners
Management Support Competitive Pressures
Perceived Readiness Relevant Environmental
International Orientation Participation
Non-Trading
Institutional Influence
Innovation
Perceived Relative Adv.
Complexity
Implementatn s uccess
Extent of Deployment
Compatibility
Trialability
Observability
communication National
Information Sources Perc’d Govt. Support
Communication Channels
Communication Amount
implementation, a number of possible relevant & Thomson, 2002; Wagner, Fillis & Johansson,
factors have been identified and grouped into broad 2003). Several organizational factors that inhibit
categories of internal and external environmental IT and EC adoption were identified after con-
factors. The principal reason for separating in- ducting preliminary interviews and an extensive
ternal from external influences is to distinguish literature search. Among these were the cost of
between organization-derived factors and other technology, a lack of managerial and technological
motivations that may arise from the overall busi- skills, a lack of system integration and a lack of
ness environment (or outside the organization). financial resources (Cragg & King, 1993; Iacovou,
Figure 1 presents the research model in which the Benbasat & Dexter, 1995; McCole & Ramsey,
relationship between the influencing factors and 2005; Nilankanta & Scamell, 1990; Stockdale &
the Extent of Deployment was examined. Standing, 2004). These inhibitors are expected to
play a major role in the context of small organiza-
Influenc ing Fact ors of EC tions, where resources and the level of computer
Adopt ion and Implement at ion sophistication are limited (Dholakia & Kshetri,
2004; Grandon & Pearson, 2003b; Lertwongsatien
Internal Environmental Factors & Wongpinunwatana, 2003; Riemenschneider
& McKinney, 2001-2002; Stockdale & Stand-
Despite the advantages of EC, SMEs around the ing, 2004; Van Beveren & Thomson, 2002; Zhu,
world are not adopting it as rapidly as originally Kraemer & Xu, 2003), thus firm size and perceived
anticipated (The Age, 2002; Dholakia & Kshetri, readiness are included in the category of internal
2004; Grandon & Pearson, 2003b; McCole & environmental factors. Another recurrent obser-
Ramsey, 2005; Mirchandani & Motwani, 2001; vation is that EC adoption seems to be more of
Poon & Swatman, 1998; Purao & Campbell, a management issue than a technical one (Cor-
1998; Rao, Metts & Monge, 2003; Van Beveren bitt, Behrendorf & Brown-Parker, 1997). Many
233
Factors Influencing the Extent of Deployment of Electronic Commerce
researchers have found that if there is a lack of start-up costs), complexity (ease of use or the ease
support amongst top executives, technology can- with which EC can be learned), and observability
not be successfully adopted (Cooper & Zmud, (the extent to which EC advantages or gains are
1990; Gagnon & Toulouse, 1996; Grandon & visible to firms).
Pearson, 2003a; Igbaria, Zinatelli & Cavaye, 1998; During the early stage of the study, preliminary
Lertwongsatien & Wongpinunwantana, 2003; interviews and extensive literature search con-
Premkumar & Ramamurthy, 1995). It is therefore ducted indicated limited sources of information
reasonable to assume that management support that SMEs can exploit in order to gain knowledge
is a critical factor to the successful adoption of of EC. This may serve to hinder the smooth adop-
EC. Previous scholars also anticipated that the age tion of EC in many cases. Moreover, following
of the firm could either foster or impede technol- the work of Rogers (1995), other scholars argue
ogy adoption in terms of resistance to change, a that the adoption of a new technology is influ-
track record of successfully overcoming hurdles, enced by communication channel types (mass
and experience in adopting prior technological media vs. interpersonal channels), information
advances (Germain, Droge & Daugherty, 1994). source (external source vs. internal source), and
The international orientation of the company is communication amount (Brancheau & Wetherbe,
also examined in this study, as previous research 1990; Nilankantan & Scamell, 1990). Hence
within the area of Internet adoption demonstrates communication factors were added to the EC
that firms that are operating in the international adoption model.
markets are more likely to conduct EC through
portals than those that do not have foreign col- External Environmental Factors
laborations (see Daniel & Grimshaw, 2002; Lal,
2002; Wagner, Fillis & Johansson, 2003). SMEs are usually characterized by a high level of
Several factors that influence the adoption environmental uncertainty that includes fluctua-
of innovation are deduced since EC is treated tions in interest rates, reliability of supply, and
as the innovative business practice in this study. competition. Related to this factor, the use of IT
Of most commonly investigated characteristics and EC is often imposed on SMEs by major cus-
that promote the adoption of innovation, the best tomers or suppliers. Such pressure from trading
known may be those developed by Rogers (1995). partners plays a critical role in encouraging small
These innovation factors have also been the key firms to adopt IT and EC, as evidenced in previ-
feature of several other IT adoption studies (Iaco- ous studies (Daniel & Grimshaw, 2002; Grandon
vou et al., 1995; Kwon & Zmud, 1987; Moore & & Pearson, 2003b; Iacovou et al., 1995; McCole
Benbasat, 1991; Sharif, 1994; Tornatzky & Klein, & Ramsey, 2005; Stockdale & Standing, 2004;
1982) and EC studies (Kendall, Tung, Chua, Ng & Thong, 1999; Wagner et al., 2003; Zhu et al., 2003).
Tan, 2001; Lertwongsatien & Wongpinunwatana, In addition, the competitive pressure that firms
2003; McCole & Ramsey, 2005; Van Slyke, Be- face within the industry also has an influence on
langer & Comunale, 2004; Wagner et. al., 2003). In the company’s decision to adopt IT or EC (Crum,
this study, they are adapted for the current report Premkumar & Ramamurthy, 1996; Grandon &
as follows: perceived relative advantage (i.e., the Pearson, 2003a, b; Iacovou et al., 1995; McCole
perceived EC benefits and impact relative to its & Ramsey, 2005; Wagner et al., 2003; Zhu et
existing practice or system), compatibility (how al., 2003). As more competitors adopt EC, small
well EC fits in both technical and organizational firms are more inclined to follow suit in order to
processes), trialability (the degree to which EC maintain their own competitive positions. Even
can be pilot tested or experimented without high though it should also be noted that the influence
234
Factors Influencing the Extent of Deployment of Electronic Commerce
235
Factors Influencing the Extent of Deployment of Electronic Commerce
AUSTRALIA
1st Round
Percent % 23.7
lia to develop a database of such companies and on the follow-up rounds. New e-mail addresses,
contact details of target respondents. A systematic mailing addresses, and fax numbers were identi-
random sampling method was conducted and a fied for some of the undeliverable responses. Of the
total of 485 records were derived from a database 314 remaining surveys sent the second and third
of 3,232 companies. As the survey was intended rounds, 47 were returned in a usable format, and
to apply to a wide geographical area, the chosen 7 were identified as unusable. Overall, the total
method of delivery was a combination of e-mail, number of usable questionnaires elicited from
Web, and mail survey, and 485 questionnaires the Australian SMEs was 115, amounting to an
were disseminated. A cover letter stating the acceptable rate of 23.7% of responses.
objective of the study and the web address of the
online version of the survey was included. The Nonresponses B ias Assessment
questionnaires were personally addressed to the
director or owner of the firms. In order to improve In order to encourage SMEs’ participation in the
response rate, reminders were sent out to target study, more than two mailings of the questionnaire
respondents two weeks after the commencement were conducted. To further increase the response
of first and second-wave of mail-outs. A total of rate, each of the cover letters accompanying the
115 usable responses were collected. questionnaire was personally addressed to the
In the first round of distribution, 68 responses Director or Chief Executive Officer (where such
were returned in a usable format, 18 were unusable, information was available). For those businesses
and 85 were marked as undeliverable. Three weeks for which no details were supplied, the covering
after the first round, a second round was sent out. letter was addressed to the position title of Di-
For those surveys delivered electronically, the re- rector or Chief Executive Officer. A reply paid
turned responses contained the e-mail addresses of envelope was also issued and this was an effort to
respondents, and reminders were not sent to them encourage responses even further. A copy of sum-
236
Factors Influencing the Extent of Deployment of Electronic Commerce
mary findings was yet another incentive offered retested and then included in the final survey.
to ensure a high response rate. To arrive at the Individual survey items that are presented in
estimate of total nonresponse error, a comparison Appendix A represent a comprehensive list of the
of the data obtained from the two mailing rounds variables used in the current study. These variables
was conducted. The basic assumption behind this are presented with the corresponding indicators,
approach is that subjects that respond only after the types of scales used, and an indication of
further prompting were potential nonrespondents. whether they were researcher-defined or, if not, the
Analyses from the first round of respondents are sources from which they were adopted or adapted.
compared with results from later rounds. If no Researcher-defined variables are developed ac-
statistically significant difference between the two cording to Neuman’s (1999) suggestions for con-
groups is found, then it is reasonable to assume structing new measure. In the current report, all
that nonresponse error is not present and that the variables were measured as attitudinal perception
remaining nonrespondents exhibit similar charac- items on five-point Likert scales (e.g., 1 to 5 = very
teristics to the respondents (Churchill, 1991). unimportant to very important; strongly agree to
In summary, the two-step response assess- strongly disagree). The research instrument was
ment process that was utilized, together with based on many multiple-item scales, as incorpo-
the personally addressed covering letters, reply rating several items results in a more realistic
paid facility, and an offer of summary findings, and comprehensive indicator (Neuman, 1999).
were put into practice in order to counteract the To ensure the validity of the dependent measure,
disadvantages normally associated with a mail this study also incorporates a single rating scale
survey: namely, low response rates and the prob- so as to provide a comparison of results.
lem of non-response error. It was therefore safe to
make the assumption that the data obtained from
the respondents was representative of the sample Dependent Var iab le: Ext ent
and that, as a consequence, any findings derived of Deployment
from this data were generalizable to the sample
frame in its entirety. It was stated in the previous section that Extent
of Deployment measures the degree to which the
firm is successful in linking with external partners
Instr ument Development and converting its transaction documents into
electronic form. Thus, Extent of Deployment is
The questionnaire used in this study was designed measured by multiplying all the three components
to measure variables in the theoretical model il- of deployment—volume, diversity and breadth of
lustrated previously. Some of the indicators were EC application as implemented within the busi-
developed by the researcher, while some were ad- ness practice.
opted or modified from previous scholars. In some Owing to the exploratory nature of the research
cases in which a previous measure is adequate, at the time the current study was conducted, the
sources and proper credit were cited. In other relationships that emerged as significant at the
cases, new indicators were added and compared 10% level may or may not eventually prove to
with the previous measures to help improve the be valid in a more intensively formed undertak-
explanatory power of the research model. Slight ings. However, they were deemed to be worthy of
modifications of the wordings were made to reflect serious consideration in this report as a basis for
the business-to-business EC nature of the study further exploration. In addition, due to the sample
and any further changes to the instrument were size limitation of this study, a rigid imposition of
237
Factors Influencing the Extent of Deployment of Electronic Commerce
the traditional 5% level of significance level (p It should be noted that methods of testing the
< 0.05) entailed an unwarranted risk of rejecting stability of any measurement becomes relatively
possible valid relationships (i.e., type II error). meaningless and unnecessary when a concept or
As indicated by Hair, Anderson, Tatham, and construct has defined the essential components,
Black (1998), the recommended minimum ratio each of which is measured using an appropriate
of cases to variables in regression is five to one. item (Jacob, 2000). Here, the items are not ex-
The criterion of sample size adequacy was met pected to be homogenous, nor are they selected
in this study. at random.
A test of internal consistency amongst each set
Instrument Validation of items representing the Internal and External
Environmental Factors was conducted. These tests
As recommended by Nunnally (1978), the reli- reveal that the Innovation Factors—Perceived
ability and validity of the measures for this study Relative Advantage (0.73), Compatibility (0.77)
were tested to ascertain the suitability and rigour and Complexity (0.72), and Observability (0.79),
of the study instrument. The Cronbach’s (1951) all had Cronbach Alpha values greater than the
coefficient alpha has been used in the present re- 0.7 benchmark suggested by Nunnally (1978).
search to examine the internal consistency of the The value for Trialability (0.56) was margin-
scales relating to all the independent variables of ally below the cut off value of 0.6, acceptable in
this study. This reliability measure of two or more the early stages of research (Tan & Teo, 2000).
construct indicators produces values between 0 The reliability coefficient for the new variables,
and 1. Higher values indicate greater reliability Management Support (0.94), and Nontrading In-
among the indicators (Hair et al., 1998, p. 618). stitutional Influence (0.98) all exceeded 0.7. Thus,
The amount of scale reliability could have been overall the results appeared robust enough to carry
improved by repeating or requesting the same es- out further analysis. It must be acknowledged
sential question in a disguised or reoriented form however, that since the items comprising some of
in another part of the questionnaire. However, this these scales were not heterogeneous collections
would have substantially lengthened the question- drawn from a large number of possible candi-
naire and very likely decreased the response rate. dates but specifically designed to cover distinct
The following are the practical considerations components, the appropriateness of equivalence
and principles (Neuman, 1999) that were taken to reliability measures such as Cronbach Alpha may
ensure the reliability of the current study: be debated. The lists of items for the variables
concerned are not created by a large sample of
• Clarity of most constructs was carefully possible phenomena. They are almost an exhaus-
examined. Most of which have already been tive list but not a complete one. The applicability
established in previous literature. of the standard reliability score (0.70) by Cronbach
• Pretests and pilot studies were used. Alpha is limited for the following reasons:
• The most precise level of measurement was
used in each question within the constraints • The list does not consist of a small hetero-
of meaningful discernibility of values. A geneous collection of items drawn from a
5-point scale is used in the questionnaire. large number of potential candidates.
• Multiple indicators were used where any • However, for those who insist on Cronbach
possibility of ambiguity existed on the part Alpha, the results are presented above. The
of the respondents. Cronbach Alpha indicates that the list of
items is internally homogeneous.
238
Factors Influencing the Extent of Deployment of Electronic Commerce
239
Factors Influencing the Extent of Deployment of Electronic Commerce
and no serial correlation of errors in this study, had tertiary education or above. This suggests
with the exception of the partial regression plot that the level of language used in the survey is
that examined the relationship between Extent unlikely to have been any hindrance to its proper
of Deployment and Communication Amount. In interpretation by the respondents.
this case there was evidence of a slight upward Multiple linear regression was used to generate
curvature and attempts were made to compensate the results illustrated in Table 3. It represents the
for this by introducing the square of this variable. results of the stepwise-backward elimination,
This resulted in the latter becoming significant whereby those factors that are statistically signifi-
at the expense of the former, but no change in cant in the model for the Extent of Deployment,
the inclusion or the exclusion of other variables. are retained.
In other words, no additional advantage was An adjusted R-squared value of 47% of the varia-
gained and thus, for the purposes of identifying tion in Extent of Deployment by Australian SMEs
Communication Amount as a factor related to the is explained by the variation of Communication
Extent of Deployment and confirming the direc- Amount, Variety of Information Sources, Perceived
tion of its relationship, the original formulation Relative Advantage, Observability, Trialability,
was retained. Competitive Pressure, and Non-Trading Insti-
tutional Influences (F-significance < 0.000). All
variables are significant at the 0.10 level or better.
Re s ults The figure below shows factors that are supported
by significant evidence.
Of the 485 survey questionnaires distributed to
target respondents within Australia, a total of
115 usable responses were collected. More than Disc uss ion
50% of the responding firms employ less than
50 workers. The distribution of respondents was C ommunication Amount
consistent with the overall community distribu-
tion. The majority of those who responded in this Communication Amount is the most significant
study held Managing Director positions in their factor related to the Extent of Deployment thus
respective companies and three quarters of them
240
Factors Influencing the Extent of Deployment of Electronic Commerce
Table 3. Final model estimation (stepwise-backward method) for the Extent of Deployment
Standardized Coefficient
Influencing Factors t-value Significance
(beta)
suggesting that the more a firm increases its inten- positively related to the Extent of Deployment.
sity of communication with other organizations, This suggests that the larger the variety of sources
the higher its extent of deployment is likely to a firm used in acquiring information about EC,
be. It can also be rationalized that the greater the the higher the Extent of Deployment. This can
amount of information a small firm shares with be explained in the following way: as firms are
its trading partners, the greater the diversity and getting ready to implement EC, they are likely to
depth of integration of EC will be between firms. seek advice and information from a large variety
Since EC can be regarded as another interorgani- of sources in order to familiarize themselves with
zational system, more frequent communication the different functions, applications, or benefits
between trading partners will help them coordi- of EC. The larger the variety of the sources the
nate policies, provide technical information, and firm consults, the higher possibility will be that
answer questions. Such collaborative approaches the firm would seek diversification of applica-
may assist, in a fairly unobtrusive manner, in tions and external participants for higher levels
bringing the trading partners “on-board” to the of deployment. It may also be suggested that the
EC network. This would in turn help them in the diligence on the part of the firm that seeks in-
uptake of new systems, which would eventually formation from a greater variety of sources will
motivate the adopting firms to improve the extent result in them being better informed than those
of their EC deployment. relying on a smaller sample of sources. Since
those companies that have consulted widely are
Variety of Information S ources likely to have more knowledge in the requisite
areas of EC, they are more likely to apply their
The Variety of Information Sources used to at- knowledge to practical functions and applications.
tain information pertaining to EC, is found to be This would conceivably lead to a higher ability to
241
Factors Influencing the Extent of Deployment of Electronic Commerce
trade with a variety of participants in the market, hand, it could be suggested that if companies do
thus encouraging them to attain a higher propor- not believe that EC can provide them with rela-
tion of business online. tive advantage after they have already adopted
it, it is likely that the implementation would be
Perceived Relative Advantage discontinued.
Although one cannot forcibly increase ones’
Perceived Relative Advantage appears to be perception of relative advantage where it does
significantly related to the Extent of Deploy- not genuinely exist it is nevertheless possible to
ment. This contradicts the results of a study by be more proactive in investigating and exploring
Premkumar, Ramamurthy and Nilkantan (1994) possible advantages that could lead to increased
in which they found that perceived relative ad- success (Chong & Pervan, 2001). SMEs should
vantage only influences the adoption decision evaluate their implementation of EC on a regular
and not the implementation success of EDI. The basis in order to integrate and expand its applica-
high relative importance of this variable indicates tion to other business functions effectively. After
that the benefits of EC perceived by SMEs have making the decision to adopt EC, it also needs to
led to a high extent of deployment. This can be be perceived by SMEs as a better alternative to
logically explained in so far as it is akin to as- existing practices in the business. However, very
sessing the benefits and costs of adopting any often the lack of knowledge of the advantages
type of innovation. In this case it can be seen that EC offers can cause impatient firms to give
that SMEs are most motivated by the prospects up and discontinue the adoption and implemen-
of gaining a relative advantage over competitors, tation. Therefore, the use of promotional efforts
or by the likelihood that EC can put them ahead and noncoercive influence tactics is suggested
of the “status quo” or existing business practice for increasing the levels of awareness for EC
in as much as it might open up new markets for benefits. Perhaps both government and industry
them or lower their business costs. On the other associations can also play a more active role raising
Innovation c ommunication
Perc’d Rel.Adv.(+) Information Sources (+)
Trialability (-) Comm. Amount (+)
Observability (+)
ExtENt OF
DEPLOYMENt
Industry
Competitive Pressure (+)
Non-Trading Instit.Influence (-)
242
Factors Influencing the Extent of Deployment of Electronic Commerce
participation, pointing SMEs to the opportunities approach in which SMEs will need to be coura-
and benefits of EC, providing them with support, geous enough to implement an EC system, even
and working with them to overcome their doubts if its tangible benefits are not readily observable
regarding the implementation of EC. from the outset.
Another possible explanation for the significant
Observability relationship between observability and extent
of deployment could lie in reversing the chain
For Australian SMEs, Observability appears to of causality as follows: the higher the extent of
be significantly related to the Extent of EC De- EC deployment, the greater the likelihood that
ployment. A two-way causation is likely to be the regimen’s advantages will be observable. It
operating in this instance. First, there is a logi- is logical to expect that the more extensive the
cal relationship between confidence and Extent deployment of EC is in terms of its application to
of Deployment. When a firm can observe the a given firm’s business practices, the more benefits
benefits that EC has brought to the business, it is the firm is going to reap. These benefits will in turn
very likely that the firm will increase the depth become more observable to the adopting firms and
and breadth of EC implementation. In the case confidence in EC will thus be self-perpetuating.
of doing business online, effects such as quicker To improve the extent of EC deployment, firms
access to and dissemination of information and should not only increase the variety of documents
savings in costs (e.g., printing, advertizing, com- exchanged via the Internet, but also seek to in-
munication, and overheads) are more immediate crease external links with trading partners. This
and easier to acknowledge. The implication for can be done by providing incentives and assistance
SMEs is therefore to highlight the easily and to encourage these partners to get involved in the
quickly demonstrable benefits and usage in the first electronic network. Such incentives may include,
instance, such that the short term visible effects for instance, bulk discounts or special rates for
of EC can help promote its continued adoption trading online.
and hence facilitate the long-term goals of the
initiative. It is sometimes not enough to assume Trialability
that people will automatically realize the impact
of an innovation. Indeed, it may be necessary to It was interesting to note that Trialability appears
insist that firms reflect on their EC implementation to be inversely related the Extent of Deployment.
in order to increase their awareness and observa- It is possible to suggest that when adopting firms
tion of the regimen’s impact. This could include perceived EC to be less trialable, they are more
the requirement of a formal review procedure likely to push for higher levels of commitment.
involving both owner/managers and employees Such firms would thus apply more urgency to
of a given company, in order to elicit the end user learning and experimenting with the new system,
observations of how well the application of the which normally leads to greater preparedness as
EC systems is progressing. During the course of most companies want to ensure that their invest-
implementing EC a degree of pessimism may be ment will not be wasted. This also indicates that
exhibited amongst key personnel, and this may be a such firms would have a higher ability to deploy
justifiable reaction to a certain extent. Nonetheless, extensively. Another possible explanation, how-
every effort must be made to counter unjustified ever, is that the perception of trialability may be
and groundless pessimism because this could a sign of lack of commitment. Because deploy-
serve as a needless inhibitor in the deployment ment requires some degree of commitment, it
of EC. This may well require a more proactive can only truly begin when the trialing mentality
243
Factors Influencing the Extent of Deployment of Electronic Commerce
stops. This serves as a reminder to would-be or be influenced by the publicity and persuasion of
hesitant adopters that even though preparation and certain institutions (such as governments, banks,
keen attitude in experimenting may be essential, telecommunication corporations, media, consult-
SMEs should not take too long to deploy EC. For ing firms or universities), may tend to explore the
a start, rather than purchasing more expensive, possibilities more widely and with greater initia-
custom-developed EC software or applications, tive. Alternatively, those that tend to follow what
well-tested dedicated packages may well suit the others prescribe (e.g., laggards or non-initiators)
needs of the company. tend to lack the characteristics or incentives to
explore, take risks, adapt to new change, and to
Competitive Pressure venture into different avenues for maximizing the
potential of new business practices (in this case,
Competitive Pressure was positively related to the adopting EC). It may also be true that when firms
Extent of Deployment, suggesting that the higher react to pressure from the external environment, it
the level of pressure experienced to the firm from is more likely that they are limiting their deploy-
its competitors, the greater the extent of its EC ment in the direction from which the pressure is
deployment is likely to be. This means that the arising instead of exploring the fuller extent of
competitiveness of the environment has been possibilities that the innovation (EC) offers. This
found to provide the “push” for SMEs to deploy can impede wider deployment as some firms may
their existing capabilities. Firms that fear losing see it as a chore to keep following others, while
customers or market share may expedite their some may be discouraged to further the adoption
learning process or expand the use of new systems due to unreadiness or unclear objectives. Thus,
in order to keep up with what their competitors SMEs are strongly encouraged not to restrict
are doing. The emergence of competitive pressure their exploration of possibilities as a result of
as a key variable also underscores the need to the dominance of narrow influencing sources.
electronically integrate business operations both Nonetheless, it should be noted that despite the
internally and externally with trading partners. relationship between Nontrading Institutional
Formalization of these functions and trading Influence and Extent of Deployment being sta-
processes is essentially a matter of deployment. tistically significant, it is a comparatively weak
SMEs are advized that early formalization of a relationship.
system between the firm and its trading partners
may decrease the likelihood of the trading partners Managerial Implications
finding a competitive relationship more attractive.
By being more efficient in business transactions To achieve a greater extent of EC deployment, it
with their partners through faster and more ac- is imperative for SMEs to possess an enduring
curate processing, the competitiveness of a given perception of EC as being advantageous over pre-
firm would naturally be strengthened, and better ceding legacy systems and that its implementation
links with its customers would be formed. can give them an advantage over their competitors.
In fact, Grandon and Pearson (2003a) even as-
Nontrading Institutional Influence serted that late adopters may not gain competitive
advantage as much as they may gain competitive
Nontrading Institutional Influence was found parity because most of the surplus value of EC
to have an inverse relationship with the Extent implementation would be ceded to the earlier
of Deployment. This suggests that those au- adopters. Thus, apart from encouraging hesitant
tonomous early adopters that are less likely to firms to stop procrastinating and begin making
244
Factors Influencing the Extent of Deployment of Electronic Commerce
a commitment, it is also essential for SMEs to any influence on implementation success may be
possess a sufficient degree of optimism and due to the fact that once most SMEs got a clear
confidence such that a habit of continued deploy- push from its management to adopt this initiative,
ment becomes the norm for future adoptions of readiness, age of the firm or even its international
innovation. When obtaining information about orientation become less of an issue when striving
EC, SMEs should consult more than one source to achieve implementation success. The same is
of information to better its knowledge about its also true for governmental support—for most
applications and benefits, as well as its potential SMEs, incentives and assistance would be most
pitfalls. However, while external information appreciated and needed in the initial stage when
sources are valuable, a thorough assessment of a firms are new to the idea of conducting business
firm’s own business needs may still be required electronically. Once the inertia has been overcome,
to prevent the type of unfounded influence which the issue of governmental support becomes less
commonly leads to limited deployment or discon- of an importance for the adopters.
tinuity of implementation. It was also found to be The study found that it is important for SMEs
beneficial for SMEs to increase the frequency of to seek information from a greater variety of
communication with their trading partners. This sources to be better informed in the area of EC.
often enhances collaboration between the firms, During the implementation of highly advanced or
establishes trust, and integrates future online sophisticated applications, SMEs are advised to
business more extensively. The current study also evaluate its integration with other business func-
suggests that SMEs should take more initiative tions on a regular basis. The study also revealed
in their deployment strategies, as an impulsive that SMEs need to take a more proactive approach
reaction to pressures coming directly from com- in disseminating success cases of implementation
petitors and non-trading institutions tend to limit to encourage continued and further deployment.
the fuller potential of what EC has to offer. This also requires the firm to take a more com-
mittal approach rather than an experimental one
towards such initiatives as it ensures likelihood
Con c lus ion, Limit at ions, and of implementation success.
Furt her Re s earc h Apart from conceptualizing the theoretical
framework of EC implementation success for
It is clear that in the implementation of EC, most SMEs, the current study has also helped to clarify
SMEs in Australia face a range of challenges the definition of the concept “adoption” and
including a lack of perceived relative advantage most importantly, the measurement of Extent of
over current systems, lack of visible improvement Deployment. Moreover, it encapsulates a multi-
or benefits, competitive pressure, and insufficient dimensional measure of implementation success
sources of information for further deployment. combining the notions of volume, diversity, and
This study offers a comprehensive framework and breadth, while encompassing both an external
knowledge of the relative importance of factors and internal orientation.
that influence EC deployment which would as- Despite the above contribution, it should be
sist SMEs to better plan their continuous IT and noted that this study focuses on theory develop-
resource investments. It is found in this study ment rather than theory confirmation. This, with
that communication factors are more vital than the cross sectional nature of data, also limits the
other influencing factors in order to achieve suc- ability of this study to draw causal implications
cessful implementation of EC. The reasons why in the findings. Owing to the inherent time con-
organizational factors were not found to have straints in a study of this kind, the adoption deci-
245
Factors Influencing the Extent of Deployment of Electronic Commerce
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Rogers, E. M. (1995). Diffusion of innovations Van Slyke, C., Belanger, F., & Comunale, C.
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The online experience of small and medium
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Sharif, N. (1994). Technology change manage-
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ment: Imperatives for developing economies.
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Soh, C., Mah, Q. Y., Gan, F. Y., Chew, D. & Reid,
medium sized businesses (SMEs). Supply Chain
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The experience of early adopters in Singapore.
Internet Research, 7(3), 217-228. Whiteley, D. (2000). E-commerce: Strategy,
technologies and applications. Berkshire, UK:
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Information Management, 17(4), 301–311. adoption by European firms: A cross-country
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Thong, J. Y. L. (1999). An integrated model of
information systems adoption in small businesses. Endnot e
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15(4), 187-214.
1
Definition of Small- and Medium-sized En-
terprises (SMEs) in Australia is any business
Tornatzky, L., & Klein, K. (1982). Innovation employing less than 20 people; and 20 or
characteristics and innovation adoption-imple- more but less than 200 people for medium
business. For further definitions of SMEs,
please refer to http://sbdc.gov.au
This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 5, Issue 1, edited by M. Khos-
row-Pour, pp. 1-29, copyright 2007 by IGI Publishing, formerly known as Idea Group Publishing (an imprint of IGI Global).
249
Factors Influencing the Extent of Deployment of Electronic Commerce
Introduction
Please complete this questionnaire with reference to your company’s experience in the adoption of In-
ternet-based Electronic Commerce (EC). The study is designed to investigate users’ perceptions of the
utilization of Internet as the medium to communicate, distribute and conduct information exchange and
business transaction with other organizations or businesses. You could expect to complete this question-
naire in about ten to fifteen minutes. There are no right or wrong answers—all we are interested in is
a number that truly reflects your thoughts. Thank you again for your time.
1. What is the nature of your business? Please choose from the industry sectors provided.
2. Please indicate the size of your firm based on the number of employees in the company?
3. What is your position in the company?
4. What types of documents or information do you exchange via Internet-based EC? (You may tick
more than one box).
5. With whom do you currently participate in EC (external partners)? (You may tick more than one
box).
Suppliers
Buyers
Online recruitment & personnel agencies
Telecommunication Companies
Financial Institutions (banks, finance co.)
Other, please specify: ____________________________________________________
250
Factors Influencing the Extent of Deployment of Electronic Commerce
6. What percentage of the total business that your company exchanges with its trading partners are
transacted via the Internet?
7. Please indicate your level of agreement on a scale of 1 to 5 (Strongly Disagree to Strongly Agree)
with the following statements about the support for EC implementation by the top management
in your company (where top management includes yourself and other directors).
a. Educational support (e.g., training, seminars)
b. Advisory support
c. Financial support
d. Human Resources support
e. Technical support
8. How prepared was your company for the implementation of EC? Please indicate your opinion on
the scale of 1 to 5 (Not Prepared to Fully Prepared).
Age of Firm
9. What proportion or percentage of your company’s turnover is derived from international trade?
Innovation Factors (R ogers, 1995; S oh, Mah, Gan, C hew & R eid, 1997)
10. Please state your opinions to the following statements on a scale of 1 to 5 (Strongy Disagree to
Strongly Agree)
251
Factors Influencing the Extent of Deployment of Electronic Commerce
h. The adoption of EC is consistent with the values, beliefs, and business needs of your com-
pany.
i. There is sufficient support for the adoption of EC from your top management.
j. There is no or only minimal resistance to change from your staff.
k. Your company has encountered problems with locating desired information in relation to
EC
l. There are rapid changes and technological advances in EC
m. There are technical constraints about adopting EC
n. There are problems relating to the complexity of the application of EC, the skills and training
required
o. Your company has no fear of time slippage when experimenting with Internet-based EC
p. Your company faces no financial constraints in experimenting with Internet-based EC
q. Your company perceived Internet-based EC to be trialable before committing more resources
to it
r. Your company believes that the use of Internet-based EC will be highly valued
s. Your company thinks that most firms will adopt the use of EC
t. Your company does not face limitations to the use of the Internet-based EC for business
u. Your company observes the success of similar initiatives by other companies
v. Your company finds that the use of Internet-based EC will become essential
252
Factors Influencing the Extent of Deployment of Electronic Commerce
11. a. Where does your firm get its information about EC from? (you may tick more than one box):
b. Which outside sources of advices would your company use for identification or supply of information
about EC? (you may tick more than one box):
12. What forms of communication channel does your company employ to disseminate EC-related
information to your business partners:
253
Factors Influencing the Extent of Deployment of Electronic Commerce
C ommunication Amount (C annon & Homburg, 2001; Mohr, Fisher & Nevin,
1996)
13. What is the average number of documents communicated Internet-based between your company
and other organizations? Types of Relationship—Inter-organizational: Business-related commu-
nication with other organizations (e.g., suppliers, customers). Please choose the most appropriate
answer from the following choices on the scale of 1 to 7 (1 = Once every year, 2 = Twice a year,
3 = Once every month, 4 = Once every two weeks, 5 = Once a week, 6 = Once every two days, 7
= More than once a day).
Trading Partners’ Pressure (Iacouvou et al., 1995; Premkumar & Roberts, 1999)
14. Was your company under any pressure from your trading partners to implement EC? Please indicate
your opinion from the scale of 1 to 5 (Under Very Little Pressure to Under Very High Pressure, 0
= Not affected at all).
a. Customers
b. Suppliers
254
Factors Influencing the Extent of Deployment of Electronic Commerce
18. What kinds of governmental support have you found available to your company to implement EC?
How helpful has the support been? Please indicate your opinion from the scale of 1 to 5 (Least
Helpful to Most Helpful, 0 = Not aware at all).
Foot not e
1
Total number of responses was calculated out of 485 target respondents.
255
256
Chapter XIV
Barriers to E-Commerce
Adoption in SMEs:
A Comparison of the Perception of
Barriers in a Developed and a
Developing Country
Robert C. MacGregor
University of Wollongong, Australia
Mira Kartiwi
University of Wollongong, Australia
Abstr act
It has long been known that small businesses have realised enhanced profits through the adoption of e-
commerce. However, a number of recent studies have suggested that it is the larger businesses that are
reaping the rewards of e-commerce rather than the smaller businesses. This slow growth of e-commerce
adoption in SMEs has been attributed to various adoption barriers that are faced by small business
owners/managers. These barriers have been well documented in numerous research studies. However,
the relationship between these barriers has not been fully examined, particularly in developing coun-
tries. Of particular concern is the fact that the conclusions concerning the nature and role of barriers
to e-commerce adoption have simply been transferred from studies in developed economies to those in
developing ones. 96 non-adopting SMEs in Indonesia are compared to 129 in Sweden to determine whether
the perception of importance of barriers differs between the two locations. The data is also analysed to
determine whether the underlying factors of these barriers differs across the two locations.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Barriers to E-Commerce Adoption in SMEs
Intr oduct ion than the smaller businesses. This slow growth of
e-commerce adoption in SMEs has been attributed
The importance of the small to medium enterprise to various adoption barriers that are faced by
(SME) sector as the cornerstone of most economies small business owners/managers. These barriers
is widely recognised (Abdullah and Bakar, 2000; have been well documented in numerous research
Hall, 2002; NOIE, 2002). This is not only borne studies. However, the relationship between these
out by the number of SMEs (almost 90% of the barriers has not been fully examined, particularly
total number of businesses across the world), but in developing countries. A number of studies
also by their significant role in creating employ- (Kaynak et al., 2005; Stockdale and Standing,
ment opportunities (Hall, 2002). This is no less 2004; Taylor and Murphy, 2004) have suggested
the case in developing countries. A number of that much of literature concerned with e-com-
studies (Abdullah & Bakar 2000, Urata 2000, merce use (or lack of use) in SMEs have been
Kartiwi & MacGregor 2007) suggest that SMEs undertaken in developed countries (particularly,
are vital to the emergence of healthy private sec- but not exclusively US, Europe and Scandinavia).
tors in developing countries. However, research They argue that the wholesale application of these
has indicated that the SME contribution to the findings to developing economies is not justifiable
GDP of many nations has fallen over the past few because the driving forces for SMEs to adopt
years (Abernethy, 2002). While the reasons for E-commerce, as well as the barriers preventing
this decrease are diverse, SMEs, both in devel- adoption differ widely from location to location
oping and developed countries are attempting to (UNCTAD 2004, Molla & Heeks 2007, Molla &
reverse the trend by turning to global markets. This Licker 2005).
development has been enabled by the advent of In line with these criticisms, the aim of this
electronic commerce (E-commerce) technology. chapter is threefold: to analyse the correlation
E-commerce, defined as “the buying and selling between various e-commerce adoption barriers
of information, products, and services via com- in order to identify any underlying factors; to
puter networks” (Kalakota and Whinston, 1997) examine whether there are any significant dif-
is radically changing the dynamics of the business ferences in the rating of importance of barriers
environment and the way in which people and to E-commerce between SMEs that are located
organizations are conducting business with one in a developing country (Indonesia) and those
another. There are numerous studies suggesting located in a developed country (Sweden); and to
that, for SMEs, e-commerce has the potential to determine whether the underlying factors them-
provide competitive advantage. However, Molla & selves differ between SMEs in a developed and
Heeks (2007) suggest that many of these studies, a developing economy.
particularly those focused on developing econo- This chapter begins by examining the nature of
mies, often lack an empirical basis and simply SMEs and identifying features that are unique to
assume that the adoption and use of internet SMEs. This is followed by a discussion of factors
technologies is the same for all users. pertaining specifically to developing countries.
While clearly many small businesses have As the study compares the perception of barriers
realised enhanced profits through the adoption of to e-commerce adoption in a developing country
e-commerce (Scupola 2003, Khiang & Chye 2002, (Indonesia) and a developed country (Sweden),
MacGregor & Vrazalic 2007), studies (Macgregor a brief synopsis of the role of SMEs in each
& Vrazalic 2005, 2007, IEI 2003, Magnusson location is provided. A discussion of barriers to
2001) suggest that it is the larger businesses that e-commerce adoption based on previous research
are reaping the rewards of e-commerce rather is then presented and the barriers are mapped to
257
Barriers to E-Commerce Adoption in SMEs
the unique SME features. This is followed by a (Walker,1975, Delone,1988). Cochran (1981) found
correlation and factor analysis of the combined that SMEs tended to be subject to higher failure
Swedish and Indonesian data. A series of two- rates, while Rotch (1987) suggested that SMEs
tailed t-tests is then applied to determine whether had inadequate records of transactions. Welsh &
there are any significant differences between the White (1981), in a comparison of SMEs with their
ratings of importance of the barriers to E-com- larger counterparts found that SMEs suffered
merce adoption (Indonesia – Sweden). Finally a from a lack of trained staff and had a short-range
factor analysis of the data is undertaken for each management perspective. They termed these traits
location. A discussion of similarities and differ- ‘resource poverty’ and suggested that their net
ences is then presented. The limitations of the effect was to magnify the effect of environmental
study are presented and conclusions drawn. impact, particularly where information systems
were involved.
These early suggestions have been supported
The Nat ur e of S MEs by more recent studies that have found most
SMEs lack technical expertise (Barry & Milner
There are a number of definitions of what consti- 2002), most lack adequate capital to undertake
tutes an SME. Some of these definitions are based technical enhancements (Gaskill et al (1993, Ray-
on quantitative measures such as staffing levels, mond 2001), most SMEs suffer from inadequate
turnover or assets, while others employ a qualita- organisational planning (Tetteh & Burn 2001,
tive approach. Meredith (1994) suggests that any Miller & Besser 2000) and many SMEs differ
description or definition must include a quantita- from their larger counterparts in the extent of
tive component that takes into account staff levels, the product/service range available to customer
turnover, assets together with financial and non- (Reynolds et al, 1994).
financial measurements, but that the description A number of studies (see Reynolds et al (1994),
must also include a qualitative component that Murphy (1996), Bunker & MacGregor 2000),
reflects how the business is organised and how MacGregor & Vrazalic (2005, 2007)) have exam-
it operates. In terms of employee numbers, the ined the differences in management style between
definition of an SME in Sweden is 50 employees large businesses and SMEs. These studies have
or less (EIRO 2006), while for Indonesia the shown that, among other characteristics, SMEs
figure is 20 employees or less (DEPKOP 2005). tend to have a small management team (often one
In an effort to maintain uniformity, the study has or two individuals), they are strongly influenced by
adopted the wider, Swedish model (50 employees the owner and the owner’s personal idiosyncrasies,
or less) as the quantitative component. they have little control over their environment
Qualitatively, any description of a small busi- (this is supported by the studies of Westhead &
ness must be premised on the notion that they are Storey (1996) and Hill & Stewart (2000) and they
not simply scaled down large businesses and al- have a strong desire to remain independent (this
though size is a major distinguishing factor, small is supported by the findings of Dennis 2000 and
businesses have a number of unique features that Drakopolou-Dodd et al 2002).
set them apart from larger businesses. Based on an extensive review of the litera-
There have been numerous studies carried out ture, a summary of the features unique to SMEs
in order to isolate the features unique to SMEs. is shown in Table 1. An analysis of the features
Brigham & Smith (1967) found that SMEs tended revealed that they could be classified as being
to be more prone to risk than their larger coun- internal or external to the business. Internal
terparts. This view is supported in later studies features include management, decision-making
258
Barriers to E-Commerce Adoption in SMEs
Table 1. Features unique to small to medium enterprises (SMEs) (Adapted from MacGregor & Vrazalic
2004)
INTERNAL FEATURES
INT 8 SMEs have informal and inadequate planning and record keeping Reynolds et al (1994)
processes Tetteh & Burn (2001)
Miller & Besser (2000)
Markland (1974)
Rotch (1967)
Features Related to Resource Acquisition
INT 9 SMEs face difficulties obtaining finance and other resources, and as a Cragg & King (1993)
result have fewer resources Welsh & White (1981)
Gaskill & Gibbs (1994)
Reynolds et al (1994)
Blili & Raymond (1993)
INT 10 SMEs are more reluctant to spend on information technology and Walczuch et al (2000)
therefore have limited use of technology Dennis (2000)
MacGregor & Bunker (1996)
Poon & Swatman (1997)
Abell & Limm (1996)
INT 11 SMEs have a lack of technical knowledge and specialist staff and Martin & Matlay (2001)
provide little IT training for staff Cragg & King (1993)
Bunker & MacGregor (2000)
Reynolds et al (1994)
Welsh & White (1981)
Blili & Raymond (1993)
259
Barriers to E-Commerce Adoption in SMEs
Table 1. continued
Features Related to Products/Services and Markets
EXT 1 SMEs have a narrow product/service range Bunker & MacGregor (2000)
Reynolds et al (1994)
EXT 2 SMEs have a limited share of the market (often confined towards a Hadjimonolis (1999)
niche market) and therefore heavily rely on few customers Lawrence (1997)
Quayle (2002)
Reynolds et al (1994)
EXTERNAL FEATURES
EXT 3 SMEs are product oriented, while large businesses are more customer Reynolds et al (1994)
oriented Bunker & MacGregor (2000)
MacGregor et al (1998)
EXT 4 SMEs are not interested in large shares of the market Reynolds et al (1994)
MacGregor et al (1998)
EXT 5 SMEs are unable to compete with their larger counterparts Lawrence (1997)
Features Related to Risk Taking and Dealing with Uncertainty
EXT 6 SMEs have lower control over their external environment than larger Westhead & Storey (1996)
businesses, and therefore face more uncertainty Hill & Stewart (2000)
EXT 7 SMEs face more risks than large businesses because the failure rates of Brigham & Smith (1967)
SMEs are higher DeLone (1988)
Cochran (1981)
EXT 8 SMEs are more reluctant to take risks Walczuch et al (2000)
Dennis (2000)
and planning processes, and the acquisition of fusion of technology and awareness, noting that
resources, while external features are related to where these are taken for granted in developed
the market (products/services and customers) economies, this is not necessarily the case in
and the external environment (risk taking and developing environments. Oxley & Yeung (2001)
uncertainty). take this a step further suggesting that not only
does technology and awareness need to reach a
critical mass before network externalities and e-
E-c ommerc e in Developing commerce can take effect, but that there needs to
Coun tr ies be a willingness by participants to regulate and
govern its use.
Any examination or comparison of e-commerce Aside from the availability of infrastructure,
adoption in developed and developing countries studies by Goode & Stevens (2000) and Hempel
must be premised on the understanding that many & Kwong (2001) suggest that there is a far lower
developing countries face many challenges that level of IS and business sophistication in many
are not found in developed countries (Kartiwi & SMEs in developing economies. They add that
MacGregor 2007, Molla & Licker 2005, Molla & where the adoption of e-commerce requires
Heeks 2007). These include the notion of acces- modification to organisational structure, product
sible and affordable infrastructure (Humphrey et characteristics or business culture, this is often a
al 2005). Molla & Heeks (2007) suggest that the far larger ‘stumbling block’ for SMEs in develop-
notion of infrastructure includes the level of dif- ing countries.
260
Barriers to E-Commerce Adoption in SMEs
261
Barriers to E-Commerce Adoption in SMEs
ment bodies The Central Bureau of Statistics could be further categorised into supply barri-
(CBS, 2004) and the Ministry of Cooperatives ers (difficulties obtaining finance and technical
and Small Medium Enterprises (DEPKOP, 2005a) information), demand barriers (e-commerce not
will be adopted. fitting with the products/services or not fitting with
There are currently more than 40 million the way clients did business) and environmental
SME establishments in Indonesia. They ac- barriers (security concerns). Internal barriers were
count for 99.99% of the total number of business further divided into resource barriers (lack of
enterprises. Based on the latest data (DEPKOP, management and technical expertise) and system
2005b), the largest percentage is in the agricul- barriers (e-commerce not fitting with the current
ture sector (58.9%), followed by trade (22%) and business practices). A summary of e-commerce
manufacturing (6.3%) sectors with transportation adoption barriers in SMEs is presented in Table
and services also significant. The significance 3. An analysis was undertaken to examine the
of SMEs to the Indonesia economy is further relationship between these barriers and unique
highlighted by their contribution to national de- features of SMEs listed in Table 1. Table 3 shows
velopment and by the fact that, as a sector, they this relationship by indicating which unique
provide and create jobs especially during times features can be mapped to which barriers. For
of recession (Asian Development Bank., 2003; example, one of the most commonly cited barriers
DEPKOP, 2005a). Table 2 provides a comparison to e-commerce adoption is that it is too expensive
of SMEs in Sweden and Indonesia. to implement, a barrier that arises from the fact
that SMEs face difficulties obtaining finance, un-
like their larger counterparts. If the finance was
Ba rr iers t o E-c ommerc e readily available to SMEs, high cost may not be
Adopt ion in S MEs a barrier to e-commerce adoption. Table 3 is an
initial, exploratory attempt at determining the
It has been demonstrated previously that the rate relationship between unique features and barri-
of e-commerce adoption in SMEs has been low. ers. Further research is required to establish the
This slow paced uptake of e-commerce technolo- nature of this relationship.
gies has been documented and researched widely,
with results indicating that SMEs face inhibitors
or barriers that prevent them from implementing Met hodology
and fully reaping the benefits of e-commerce. In
their study of 27 SME manufacturing firms, Cragg An empirical study was designed to collect data
and King (1993) identified the lack of financial from two countries representing develop and
and managerial resources, and inadequate levels developing economies. Sweden was selected as
of technical expertise as the major inhibitors of an example of a developed country, and Indonesia
IT grown in small businesses. These three factors as an example of a developing country (World
were also identified by Welsh and White (1981) Bank Group, 2006).
as being symptomatic to SMEs. However, other Ten barriers to E-commerce adoption were
barriers have also been identified. gathered from the literature. For the Swedish
Like the unique features of SMEs, the barri- study, 6 in-depth interviews were undertaken with
ers to e-commerce adoption can be classified as SME owner/managers to determine whether the
external or internal to the business. Hadjimonolis barriers were applicable and complete. In order
(1999), in a study of e-commerce adoption by to validate the barriers to the Indonesian setting,
SMEs in Cyprus, found that external barriers a series of 8 in-depth interviews with SMEs
262
Barriers to E-Commerce Adoption in SMEs
Table 3. Summary of e-commerce adoption barriers and their relationship to the features unique to
SMEs
RELATED
BARRIERS TO E-COMMERCE ADOPTION REPORTED BY TO UNIQUE
FEATURE ID
High cost of e-commerce implementation; Internet Iacovou et al (1995); Quayle (2002); Purao & INT 9
technologies too expensive to implement Campbell (1998); Lawrence (1997); Riquelme
(2002); Van Akkeren & Cavaye (1999)
E-commerce too complex to implement Quayle (2002) INT 11
Low level of existing hardware technology incorporated Lawrence (1997) INT 10
into the business
SMEs need to see immediate ROI and e-commerce is a Lawrence (1997) INT 1
long-term investment
Organisational resistance to change because of the fear of Lawrence (1997); Van Akkeren & Cavaye (1999) INT 2; INT 11
new technology amongst employees
Preference for and satisfaction with traditional manual Lawrence (1997); Venkatesan & Fink (2002); INT 10; EXT 3
methods, such as phone, fax and face-to-face Poon & Swatman (1998)
Lack of technical skills and IT knowledge amongst Quayle (2002); Lawrence (1997); Riquelme INT 11
employees; Lack of computer literate/specialised staff (2002); Van Akkeren & Cavaye (1999); Iacovou
(1995); Damsgaard & Lyytinen (1998); Chau &
Turner (2002)
Lack of time to implement e-commerce Walczuch et al (2000); Lawrence (1997); Van INT 5; INT 2; INT 1
Akkeren & Cavaye (1999)
E-commerce is not deemed to be suited to the way the SME Abell & Limm (1996); Hadjimanolis (1999); INT 5; INT 8; EXT
does business Iacovou et al (1995); Poon & Swatman (1997) 3;
E-commerce is not deemed to be suited to the products/ Walczuch et al (2000); Kendall & Kendall (2001); EXT 1; EXT 5
services offered by the SME Hadjimanolis (1999)
E-commerce is perceived as a technology lacking direction Lawrence (1997) INT 1; INT 10;
EXT 8
Lack of awareness about business opportunities/ benefits Iacovou et al (1995); Quayle (2002) INT 1; INT 2; INT
that e-commerce can provide 5; INT 8; EXT 3;
EXT 4
Lack of available information about e-commerce Lawrence (1997) EXT 8
Concern about security of e-commerce Quayle (2002); Purao & Campbell (1998); Abell EXT 6; EXT 7;
and Limm (1996); Riquelme (2002); Van Akkeren EXT 8
& Cavaye (1999); Poon & Swatman (1999);
Hadjimanolis (1999)
Lack of critical mass among customers, suppliers and Abell and Limm (1996); Hadjimanolis (1999) EXT 2
business partners to implement e-commerce
Heavy reliance on external consultants (who are considered Lawrence (1997);Van Akkeren & Cavaye (1999); INT 11
by SMEs to be inadequate) to provide necessary expertise Chau & Turner (2002)
Lack of e-commerce standards Tuunainen (1998); Robertson & Gatignon (1986) INT 11
263
Barriers to E-Commerce Adoption in SMEs
owner/manager and consultants was undertaken and it contained personnel who could assist with
to determine whether the barriers were applicable the distribution and re-gathering of the survey
and complete. The interviews in both Sweden and materials.
Indonesia showed that all of the barriers were ap- A total of 1170 surveys were distributed by
plicable and no extra barriers were forthcoming. post in four regional areas of Sweden: Karlstad,
Based on the interviews a survey instrument was Filipstad, Saffle and Arvika.
developed for SME managers. The survey was The same procedure with data collection
used to collect data about the barriers to e-com- in Sweden was undertaken in Indonesia. The
merce adoption in SMEs. The respondents who respondents who had not adopted e-commerce
had not adopted e-commerce were asked to rate were asked to rate the importance of each of the
the importance of each barrier to their decision barriers to their decision not to adopt e-commerce.
not to adopt e-commerce. A standard 5 point A standard 5 point Likert scale was used to rate
Likert scale was used to rate the importance with the importance with 1 meaning very important
1 meaning very unimportant and 5 meaning very and 5 meaning very unimportant.
important. Figure 1 shows the English equivalent Seven locations were chosen across the three
of the question. provinces in Indonesia, as they were deemed to
Karlstad was the chosen location in Sweden. have sufficient numbers of adopters as well as
Karlstad is described as a regional ‘developed’ non-adopters. These were:
city, both by the OECD and the World Bank,
1 = the reason was very unimportant to your decision not to use e-commerce
2 = the reason was unimportant to your decision not to use e-commerce
3 = the reason was neither unimportant nor important to your decision not to use e-commerce
4 = the reason was important to your decision not to use e-commerce
5 = the reason was very important to your decision not to use e-commerce
264
Barriers to E-Commerce Adoption in SMEs
• West Java: Bandung, Sukabumi, Tasikma- Table 4 shows the 5 highest rated barriers for
laya both Sweden and Indonesia.
• Bali: Denpasar, Kuta, Gianyar The first aim of the study was to determine
• DKI Jakarta whether there were any underlying factors for
the barriers to E-commerce adoption in SMEs.
These locations are also chosen as they were The rating of the barriers was combined. The
determined to represent a ‘developing’ economy, results of the Kaiser-Meyer-Olkin MSA (.887) and
and again, they contained personnel who could Bartlett’s Test for Sphericity (χ² = 1347, p=.000)
assist with the distribution and re-gathering of indicated that the data set satisfied the assumptions
the survey materials. A total 330 surveys were for factorability. Principle Components Analysis
distributed by post. was chosen as the method of extraction in order to
account for maximum variance in the data using a
minimum number of factors. A two-factor solution
Re s ults was extracted with Eigenvalues of 5.145 and 1.856
and was supported by an inspection of the Scree
Responses were obtained from 313 SME organisa- Plot. The two factors accounted for 70.012% of
tions in Sweden giving a response rate of 26.8%. the total variance as shown in Table 5.
129 of these responses were from non-adopter The two resulting components were rotated us-
SMEs. 179 responses were obtained from Indo- ing the Varimax procedure and a simple structure
nesia, giving a response rate of 54.2%. 96 of these was achieved as shown in the Rotated Component
responses were from non-adopter SMEs. A test Matrix in Table 6. Six barriers loaded highly on
for reliability was applied to both sets of data. The the first component. These barriers are related
Cronbach’s Alpha for the Swedish responses was to the complexity of implementation techniques,
.910, while for the Indonesian data it was .780. range of e-commerce options, high investments
265
Barriers to E-Commerce Adoption in SMEs
and the lack of technical knowledge and time. This organisation’s way of doing business, their client’s
component has been termed the “Too Difficult” way of doing business and the lack of advantages
factor. Four barriers highly loaded on the second offered by e-commerce implementation. These
component are termed the “Unsuitable” factor and two factors are independent and uncorrelated, as
are related to the suitability of e-commerce to the an orthogonal rotation procedure was used.
respondent’s business, including the extent e-com- The second aim of the study was to determine
merce matched the SME’s products/services, the whether there were any significant differences
266
Barriers to E-Commerce Adoption in SMEs
in the rating of importance of any of the barriers adoption generally show moderately strong posi-
(Sweden vs. Indonesia). A series of two-tailed tive correlations with each other. However, the
t-tests was applied to the data (see Table 7). barriers within these two groupings appear to be
Six of the ten barriers showed a statistically unrelated to the barriers in the alternate group,
significant difference (Sweden – Indonesia). With with the exception of very weak correlations for
the exception of the barrier “We do not have the the barrier relating to security and time.
technical knowledge in the organisation to imple- Table 9 also shows an interesting pattern of
ment e-commerce”, all the significant barriers results. Again, the first four barriers seem to all
were rated higher by the Indonesian respondents. correlate with each other, but show weak or no
Four barriers showed a significant difference at the correlations with the last set of barriers. Similarly,
.001 level. These were E-commerce is not suited to it appears that correlations exist between the last
our products/ services, E-commerce is not suited five barriers in the Correlation Matrix. Therefore,
to our way of doing business, E-commerce is not two distinct groupings of results can be identified
suited to the ways our clients (customers and/or in the Correlation Matrix. In the first grouping,
suppliers) do business and E-commerce does not there is a positive correlation between the barri-
offer any advantages to our organisation. ers “E-commerce is not suited to our products/
The final aim of the study was to determine services” and “E-commerce is not suited to our
whether the factors underlying the barriers to way of doing business” (Pearson’s r = .715, p<
e-commerce differed between developing and .05). These two barriers also show moderately
developed economies. Prior to any factor analysis strong positive correlations with the barriers “E-
being undertaken, a series of correlations was commerce is not suited to the ways our clients
carried out (see Tables 8 and 9). The Correlations (customers and/or suppliers) do business” and
which were significant at the .001 level are shown “E-commerce does not offer any advantages to
in bold lettering. our organisation”. In the second grouping, the
Table 8 shows an interesting pattern of results. barriers relating to the investment, time, number
The first four barriers seem to all correlate with of options, complexity and security aspects of e-
each other, but show weak or no correlations commerce adoption generally show moderately
with the last set of barriers. Similarly, it appears strong positive correlations with each other. The
that correlations exist between the last five bar- correlation matrices suggested the use of factor
riers in the Correlation Matrix. Therefore, two analysis for both sets of data. The Kaiser-Meyer-
distinct groupings of results can be identified in Olkin MSA (.895 Sweden, .720 Indonesia) and
the Correlation Matrix. In the first grouping, there Bartlett’s Test for Sphericity (χ² = 845 p = .000
is a strong positive correlation between the bar- Sweden, χ² = 448 p=.000 Indonesia) indicated
riers “E-commerce is not suited to our products/ that the data set satisfied the assumptions for
services” and “E-commerce is not suited to our factorability. Principle Components Analysis
way of doing business” (Pearson’s r = .746, p< was chosen as the method of extraction in order
.000). These two barriers also show moderately to account for maximum variance in the data us-
strong positive correlations with the barriers “E- ing a minimum number of factors. A two-factor
commerce is not suited to the ways our clients solution was extracted with Eigenvalues of 5.615
(customers and/or suppliers) do business” and and 1.556 for Sweden. This was supported by an
“E-commerce does not offer any advantages to our inspection of the Scree Plot. These two factors
organisation”. In the second grouping, the barriers accounted for 71.717% of the variance. A three-
relating to the investment, time, number of options, factor solution was extracted with Eigenvalues of
complexity and security aspects of e-commerce 3.439, 2.586 and 1.014 for Indonesia. Again, this
267
Barriers to E-Commerce Adoption in SMEs
268
Barriers to E-Commerce Adoption in SMEs
was supported by an inspection of the Scree Plot. implementation techniques, the difficulty in de-
These three factors accounted for 70.400% of the ciding which standard to implement because of
variance. Table 10 provides the details. the large range of e-commerce options, the dif-
In both cases the resulting components were ficulty obtaining funds to implement e-commerce,
rotated using a Varimax procedure and a simple the lack of technical knowledge and difficulty
structure was achieved as shown in Table 11. in finding time to implement e-commerce. The
“Unsuitable” factor, on the other hand, is related
to the perceived unsuitability of e-commerce to
Disc uss ion SMEs. These barriers include the unsuitability of
e-commerce to the SME’s products/services, way
The first aim of the study was to analyse the of doing business, and client’s way of doing busi-
correlation between various e-commerce adop- ness, as well as the lack of perceived advantages
tion barriers in order to identify any underlying of e-commerce implementation.
factors. An examination of Tables 5 and 6 shows The second aim of the study was to examine
that, as a composite group, adoption barriers whether there are any significant differences in the
can be grouped according to 2 factors termed rating of importance of barriers to E-commerce
unsuitable and too difficult. The “Too Difficult” between SMEs that are located in a developing
factor is related to the barriers which make e- country (Indonesia) and those located in a de-
commerce complicated to implement, including veloped country (Sweden). An examination of
barriers such as the complexity of e-commerce Table 7 shows that 6 of the 10 barriers showed
269
Barriers to E-Commerce Adoption in SMEs
a statistically significant difference between the The results of this study are significant in
two locations. However, the results of Table 6 several ways. The analysis has shown that ten of
are different to expectation. Where conventional the most common barriers to e-commerce adop-
wisdom would suggest that the greater difference tion can be grouped in relation to two or three
would be seen in the technical barriers (with the main factors. This gives researchers a powerful
developing economy respondents placing a greater explanatory tool because it reduces the “noise”
level of importance on these than the developed in the data. Instead of accounting for ten dif-
economy respondents), it is the organisational ferent barriers, the inhibitors to e-commerce
barriers that show the greatest difference, with adoption can be explained as a result of one of
the developing economy placing a greater level of three factors: e-commerce is either too difficult,
importance on these barriers. A number of authors unsuitable to the business or we have a problem
(Hawk, 2004; Lim, 2002; Paul, 2002; Sheth and with time and choice. The Rotated Component
Sharma, 2005; Wood, 2004) have indicated that Matrix also enables the prediction of the scores
there are ‘organisational difficulties’ in many of each individual barrier based on the score of
developing countries, including low income, the two or three factors and vice versa, for an
low credit card penetration, cultural differences. SME. This has implications for research into e-
The data from Table 7 seems to support these as commerce barriers. Whereas before researchers
being more important to developing economies. have identified various barriers (such as the ones
Indeed, it is interesting to note that the only barrier listed in Table 3), this is the first time a study has
that showed any significant difference between shown that certain barriers are correlated and
the two sets of respondents, we do not have the can be logically grouped according to two or
technical knowledge to implement E-commerce, three factors. This makes it simpler not only to
was actually rated more important by the Swed- explain, but also predict barriers to e-commerce
ish respondents. adoption in SMEs.
The final aim of the study was to determine
whether the underlying factors themselves differ
between SMEs in a developed and a developing Limit at ions of t he st udy
economy. An examination of tables 10 and 11 show
a number of interesting, and again unexpected It should be noted that this study has several
results. Firstly, and most obviously, is that while limitations. The data used for this study was
the Swedish respondents loaded the barriers onto drawn from 4 areas in Sweden and 3 provinces in
2 factors, the Indonesian respondents loaded theirs Indonesia. As is apparent, while conclusions can
onto 3. Perhaps even more interesting, however, is be drawn, they are not generalisable to SMEs in
the fact that again the Swedish respondents were other locations. Also, the data for the study was
more concerned with technical barriers while collected from various industry sectors and it is
the Indonesian respondents were concerned with not possible to make sector specific conclusions.
organisational barriers. An examination of Table Finally, this is a quantitative study, and further
9 shows that 2 barriers, We do not have time to qualitative research is required to gain a better
implement e-commerce and It is difficult to choose understanding of the key issues.
the most suitable e-commerce standard with so
many different options available were loaded onto
a separate and uncorrelated factor by the Indone- Con c lus ion
sians, while the Swedish respondents considered
them to be part of the organisational factor. The aim of this study was threefold: to analyse the
correlation between various e-commerce adoption
270
Barriers to E-Commerce Adoption in SMEs
barriers in order to identify any underlying factors; business than organisational concerns. Indeed,
to examine whether there are any significant dif- Taylor & Murphy (2004) suggest that governments
ferences in the rating of importance of barriers to are ‘besotted with technology’, often to the detri-
E-commerce between SMEs that are located in a ment of organisational concerns. The data clearly
developing country (Indonesia) and those located shows that, particularly for developing economies,
in a developed country (Sweden); and to determine organisational impacts of E-commerce appear
whether the underlying factors themselves differ far stronger than technical concerns. For the
between SMEs in a developed and a developing owner/manager, the data clearly shows that it is
economy. To this end, the unique features of SMEs essential to consider the organisational impacts
were presented and mapped to e-commerce adop- of E-commerce adoption, including customers,
tion barriers indicating a potential relationship suppliers, products/services and the methods
between the two. Further investigation is required employed within the small business.
to identify the exact nature of this relationship. A The study presented in this paper is only one
factor analysis was performed on the composite part of a larger long-term project investigating
data to determine whether there were underlying the drivers and barriers to e-commerce adoption
factors for the barriers to E-commerce adoption in SMEs. Further research is currently being
and use. A two-tailed t-test was applied to the undertaken in order to overcome some of the
data to determine whether there were differences limitations outlined above.
in the perception of barriers to E-commerce be-
tween the two locations. The results showed that
it was the organisational barriers that provided the Refe r enc es
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276
277
Chapter XV
A Parallel Methodology for
Reduction of Coupling
in Distributed
Business-to-Business
E-Commerce Transactions
Anthony Mark Orme
Athens State University, USA
Letha H. Etzkorn
University of Alabama, USA
Abstr act
Recently, new standards for business-to-business (B2B) e-commerce transactions, to reduce extended
record locking, relaxed standard database transaction properties. In this chapter, we provide a paral-
lel methodology employing a mobile/intelligent agent framework to alleviate extended record locking,
while adhering to standard database transaction properties. Our methodology provides a minimum 30%
reduction of record locking compared to new B2B standards.
INTR ODUCT ION (EDI) was the industry standard for business
automation across organizational boundaries.
The Internet boom of the last decade has led to the EDI provided a standard set of messages that
realization that business automation is possible on business partners used to pass data between their
a wider scale than ever before. Prior to the B2B respective applications. The EDI solution suffered
push of the 1990s, electronic data interchange from limited reusability due to the high degree
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
A Parallel Methodology for Reduction of Coupling
of coupling required between applications and a factory before it has new widgetCs available for
high cost of implementation (Weigand, Heuvel, purchase. A transaction goes out from company
& Dignum, 1998), which translates to a higher A to both companies B and C. This transaction
cost per transaction. These factors prohibited asks to purchase a widgetB from company B
smaller businesses from implementing EDI-based and a widget C from company C. The database
solutions (Weigand et al., 1998). A key benefit in company B locks the record corresponding to
of the research in business automation is a lower one of its five widgetBs. This widget will be held
transaction cost; the lowered transaction cost until the overall transaction is complete. Mean-
has been the impetus that has driven the latest while, company C is unable to complete its part
B2B e-commerce research. The result of early of the transaction, because it has not received its
B2B automation was the development of several shipment of widgetCs. The record in company B
proprietary B2B frameworks1 that defined a set could be locked for hours or days, until the overall
of services to provide pairwise interoperability transaction completes. In the meantime, several
between two companies for integration of their hours or a day later, another transaction request
enterprise applications (Ariba Inc., 2006). How- from a different customer arrives at company B.
ever, the pairwise interoperability was limited by This request is for five widgetBs. Company B is
the development of many competing frameworks unable to satisfy this request, due to the locked
and a lack of interoperability between the compet- record for one of its widgetBs.
ing frameworks. Much of the current research on distributed,
There are many examples of B2B e-commerce Internet–based, B2B e-commerce transactions
transactions that parallel logistics management focuses on the possibility of having transactions
problems that require coordination of multiple in- characterized by their long-running nature; a
teractions between many trading partners. These consequence of this is the possibility of extended
logistic management problems require distributed record locks being held by an integrated applica-
transaction support on relational database man- tion from an outside organization. Therefore, the
agement systems (Riccardi, 2001) not provided autonomy of individual trading partners may be
in these B2B frameworks. Therefore, front-end compromised (Dan et al., 2001), which may lead to
applications provide the distributed transaction a potential loss of sales under certain circumstanc-
support required for many B2B and logistics man- es. Some have suggested easing the restrictions
agement problems. If these front-end applications of the properties of standard transaction-based
use traditional distributed transaction techniques, systems, “Atomic,” “Consistent,” “Isolated,” and
the possibility of extended record locking across “Durable,” known as the ACID properties (Ric-
organizational boundaries exists. In long-running cardi, 2001), as a solution to the potential problem
transactions, these extended record locks may not of extended record locking (Dan et al., 2001).
be desirable and must be considered as a compo- However, easing the restrictions associated with
nent in the cost of a B2B e-commerce transaction. the ACID properties is unsatisfactory in many
Extended record locking can be illustrated with ways. First, data anomalies may be introduced
the following example: Suppose company A is into transaction-based systems when relaxing
building widgetA. In order to build widgetA, the ACID properties (Attaluri & Salem, 2002).
company A needs widgetB from company B and Second, all databases implement ACID (Riccardi,
widgetC from company C. Suppose company B 2001); ignoring this feature limits reuse of invest-
possesses exactly five widgetBs at the current ments, which results in achieving correctness via
time. Also, suppose company C has just sold its another method, which is therefore an additional
last widgetC and must receive a shipment from the cost. The only problem with retaining the ACID
278
A Parallel Methodology for Reduction of Coupling
properties is the extended record locking and the use of a parallel approach versus a linear se-
potential rollback of work that has been accom- quential approach to B2B transactions. We use
plished in a transaction when one system fails, mobile/intelligent agents to implement the paral-
when in some cases preserving the work would lelism of ourapproach. A parallel methodology
be preferable (Organization for the Advancement such as the one described in this chapter breaks
of Structured Information Standards, 2002a) a task into multiple subtasks, each of which can
(Organization for the Advancement of Structured be executed simultaneously.
Information Standards, 2002b). Our framework exploits the use of mobile
For example, suppose the “Isolated” ACID agents (MA) working in parallel as one mechanism
property is not being supported. This means that, to achieve the reduction in record locking time.
for example, one transaction could read temporary Trading partner agreements (TPA) are used to
data occurring during another transaction; that enable MAs to negotiate and finalize interactions
data might not be valid later. In a similar example with individual vendors. For the purpose of this
to the one given earlier, suppose company C buys chapter we use the term transaction to define a
more widgetCs to replenish its stock. It requests data manipulation in which a state change of one
these widgetCs from company D and at the same or more tuples (rows) in one or more relations
time requests some widgetDs from company D (tables) occurs in a database. An autonomous
because there is a discount if you buy both wid- transaction is a transaction that occurs on a single
getCs and widgetDs at the same time. It initially system. A distributed transaction refers to a
receives some widgetCs, and those enter its da- transaction that effects a change on more than one
tabase, but the entire transaction with company system, meaning data changes on more than one
D has not yet completed. During this time, the database. Finally, we introduce the term trading
transaction from company B comes through. partner interaction to encompass all of the mes-
Company B’s request (running at company C) saging capabilities required in order to achieve a
can see that there are widgetCs available, so it transaction between trading partners; therefore, a
provides these widgetCs to company B. Unfor- distributed transaction is a set consisting of one
tunately, the transaction with company D fails, or more trading partner interactions.
since no widgetDs are available, and company C The remainder of this chapter is organized
is unwilling to pay a higher price for widgetCs. as follows: first, the background necessary to
Then company C has no widget Cs after all, and understand the relationship between transactions
has erroneously sold a widgetC that it does not and distributed transactions and a standard two-
possess to company B. phase commit protocol3 (Riccardi, 2001) with
We examine the possibility that B2B distrib- respect to the ACID properties (Riccardi, 2001)
uted transactions should adhere to the ACID is provided. Then the ACID properties are also
properties for transaction-based systems. Also, described. This includes a brief description of
we propose a mobile/intelligent agent2 frame- B2B transactions and ebXML (a new standard for
work that supports B2B, e-commerce, distributed B2B distributed transactions). The Methodology
transactions with a reduced record locking time section outlines our architecture to support a B2B
compared to traditional distributed ACID-based distributed transaction that adheres to the ACID
transactions. As we mentioned earlier, a software properties and reduces record locking. Also in
framework provides a partial software solution. the Methodology section are the results of our
It defines the architecture for software systems research when applied to a specific transaction
that are further defined by the user to apply to scenario. In the Discussion section we discuss
a particular problem. Our methodology exploits the results. Finally, a conclusion to our research
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is presented and topics for further investigation ing one legal (consistent) state of data into
are outlined. another legal (consistent) state of data.
• Isolated: A transaction must be a unit of
isolation, which means that concurrent trans-
B ACK GR OUND actions should behave as if each were the
only transaction running in the system.
The background section is divided into the fol- • Durable: If a transaction commits, the sys-
lowing subsections: the first explores the ACID tem guarantees that its updates can persist
properties and the two-phase commit protocol, and and will not be undone.
their relationship to autonomous transactions and
distributed transactions. The next section provides These ACID properties have formed a basis
a look at B2B transactions as they relate to our for transactions in both autonomous transactions
architecture. After that, the last section provides and distributed transactions. These properties
an overview of a few core components of ebXML guarantee transaction system developers that
and their relation to business. transaction-related data adhered to well-defined
. semantics, and that the image of the data before,
T ransaction Properties during, and after the transaction meets the defined
criteria for each of the ACID properties. The
Although the concept of a transaction is not unique Consistent and Isolation properties define a set
to a database system, the ACID properties and of rules on both the data state and the visibility
two-phase commit protocol provide the basis for of data in the scope of a transaction. Both the
database systems transactions. The ACID proper- Consistent and Isolation properties are similar
ties that follow provide a level of certainty and in an autonomous and a distributed transaction.
assurance on the outcome of a transaction and The Consistent property assures that, during a
define a set of restrictions placed on the data. transaction, tuples modified by an insert, update,
or delete statement in the scope of a transaction
• Atomic: A transaction must execute exactly must be in agreement with the constraints that
once and must be atomic—either all of the govern the validity of the relationships among the
work is done or none of it is. data defined by the assumptions of the designers
• Consistent: A transaction must preserve of this system. The Isolation property makes as-
the integrity constraints of data, transform- surances on the visibility of the changes made to
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a tuple with respect to other transactions. In other DBMS must allow a transaction to view all tuples
words, the Isolation property governs the read- in the database, as they were when the transaction
ability of tuples by other transactions, when one started. A serializable isolation level guarantees
transaction has modified that tuple in its scope that none of the data anomalies can occur in the
previously. In most modern database manage- scope of a transaction, at the cost of high overhead
ment systems (DBMS), the implementation of to make concurrent transactions appear to execute
the Isolation property provides different levels one at a time. At the other end of the spectrum,
of granularity with respect to the visibility of a read uncommitted transaction requires less
modified data between transactions. overhead than a serializable transaction; however,
Table 1 Summarizes the ANSI isolation levels this reduction in overhead allows all anomalies to
(American National Standard Institute, 1992) with occur in the scope of a transaction. Most DBMS
respect to known data anomalies. systems opt for a commonly accepted default
Table 1 shows three data anomalies, Dirty isolation level of read committed, which allows
Read, Non-Repeatable Read, and Phantom Read, the possibility of both a non-repeatable read and
that are used to differentiate the four isolation phantom read, but does not allow a transaction to
levels of Read Uncommitted, Read Committed, read or modify uncommitted data from another
Repeatable Read, and Serializable. Each data transaction. It is important to note that the length
anomaly represents a potential problem for trans- of the record locking does not define the isolation
actions in terms of data changing in the scope of levels of a transaction; they are defined in terms
a transaction. A dirty read allows a transaction to of the possible data anomalies that may occur in
read uncommitted data from another transaction. the scope of a transaction. Therefore, a DBMS
A non-repeatable read occurs when a transaction is free to implement these isolation levels as it
rereads data committed by another transaction sees fit, using record locking as a mechanism to
and sees the changes. A phantom reads occurs achieve these different isolation levels.
when a transaction executes a query again and The durable and atomic properties define
sees data inserted by another transaction. Both rules for implementation that guarantee the state
the non-repeatable read and phantom read are of the data with regard to the transaction as a
point-in-time correct, meaning any read sees only single unit. The durable property assures that
committed data from other transactions. However, once change to any tuple in an autonomous or
on the other hand, a dirty read allows data to be distributed transaction is made permanent, the
viewed, which may eventually be rolled back by implementation guarantees these changes even in
the modifying transaction. Each of these data the event of a system failure. The guarantee of the
anomalies may affect transaction logic by poten- Atomic property assures that all changes made
tially supplying seemingly inconsistent views of to any tuple can be made permanent (committed)
data as the transaction progresses. or undone (rolled back) in an all-or-nothing man-
The strictest isolation level, serializable, must ner. A transaction with regard to the state of the
execute in such a way that transactions appear to data is defined as a logical unit or work in which
be executing one at a time (serially) rather than tuples are modified, and these modifications are
concurrently. Concurrent transactions executing either all committed or rolled back. In an autono-
in serialized mode can only make database chang- mous transaction the Atomic property defines a
es that they could have made if the transactions relationship between individual insert, update,
ran one after the other. Concurrent transactions and delete statements; therefore all statements
executing in serializable mode require record must be able to be made permanent or undone as
locking in each concurrent transaction and the a unit. Distributed transactions have additional
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requirements to ensure the atomicity property; B2B frameworks. These B2B frameworks took
all participants need to be assured as to the final a services-oriented approach to providing in-
outcome of the transaction. teroperability between trading partners that have
The two-phase commit protocol is a standard implemented the same B2B framework. Several
that provides distributed transaction coordination. competing frameworks have been developed such
The coordination is achieved by defining one as eCo, commerce XML (cXML), and RosettaNet;
system as the distributed transaction coordina- each provides a solution that allows businesses
tor (DTC), and the other participants become to take advantage of e-commerce transactions.
resource managers (RM). Attaluri and Salem Business partners wishing to benefit from a B2B
(2003) provide a detailed account of the two-phase framework would integrate their enterprise appli-
commit protocol; in general, there are a series of cations as shown in Figure 1. Several advantages
messages that are passed between the DTC and have been realized in these B2B frameworks, such
the RMs that demarcate a transaction, and allow as real-time access products and services. How-
a transaction to progress towards a finalized state, ever, as a whole, B2B frameworks do not address
either committed or aborted. The distributed interoperability between competing frameworks.
two-phase commit provides the mechanism for The lack of interoperability between frameworks
each RM to assure that its data state is consistent requires that front-end logistics management ap-
with respect to the finalized state of the distributed plications provide distributed transaction support
transaction. The DTC and RMs work together to achieve an atomic transaction. The application
via the two-phase commit protocol to assure the acts as the DTC performing the synchroniza-
atomicity and consistency properties; however, the tion task for a distributed transaction. A linear
Consistent, Isolation, and Durability properties sequential approach to transaction management
are generally considered the responsibility of the is used to accomplish the individual interactions
RMs to assure within their local context. with each trading partner participating in the
The two-phase commit has two distinct distributed transaction. As with its predecessor,
phases: EDI, B2B framework messaging facilities are
large and loaded exclusively for an individual
• Prepare Phase: Prepare phase is where the trading partner interaction. Trading partner in-
DTC requests that all RMs will promise teractions are handled on an individual basis: one
to commit or rollback the transaction. All after another all requirements for the distributed
participants respond to the DTC that they transaction are fulfilled. This linear progression
are prepared or not prepared. coupled with the ACID properties form a basis
• Commit Phase: Commit phase is where the for the problem of extended record locking. The
DTC asks all RMs to commit the transac- isolation property guarantees that no transaction
tion. can see the effect of another’s transaction before
If all participants cannot prepare or there is a the distributed transaction comes to a final state.
system component failure, the coordinator asks Therefore, the isolation property requires each
all databases to roll back the transaction. trading partner to hold locks on records being
updated until the distributed transaction is com-
plete. These locks are held indefinitely on a trad-
B 2B TR ANS ACT IONS ing partner’s system as the application moves on
to the next trading partner while the distributed
One B2B transaction approach popularized dur- transaction progresses. The Atomic property,
ing the Internet expansion was the concept of the when applied to a distributed transaction, requires
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A Parallel Methodology for Reduction of Coupling
B2B framework
Enterprise Enterprise
Application Interoperability Application
Purchasing Inventory
Buyer Seller
Enterprise
Application
Inventory
Purchasing
Buyer/Seller
that all trading partners that participate come to ebX ML C ore C omponents
an agreement on the final state of the distributed
transaction. The distributed transaction is either The Organization for the Advancement of
committed or aborted based upon the two-phase Structured Information Standards (OASIS) is a
commit protocol. global consortium that drives the development,
If all trading partners acknowledge that they convergence, and adoption of e-business standards
are in a prepared state, the logistics management (OASIS, 2002a). OASIS and the United Nations
application acting as the DTC signals each trading jointly sponsor ebXML, a global framework for
partner to commit; otherwise, it sends the signal e-business data exchange. In the past (for up to
to abort. When the trading partner commits or 20 years), most large companies have used EDI.
aborts its respective transaction; the record locks As discussed earlier in the introduction, EDI is
are released and the effects of the distributed management intensive and also requires expensive
transaction become visible to other applications. software. This puts EDI out of reach for many
This linear progression approach follows from a smaller companies (Weigand et al., 1998). More
mindset based on modular sequential program- recently, the advance of the Internet has made
ming techniques. It is this linear progression lower cost, Internet-based, e-business solutions
that is the potential cause of extended record popular. Many early Internet e-business solutions
locking. Therefore, further research based on a were proprietary solutions expressed in a format
nonsequential and nonlinear paradigm is needed called Extensible Markup Language (XML). XML
to provide real-time collaboration in the e-com- is a simple information exchange format and does
merce market. not have, in itself, any e-business capabilities,
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A Parallel Methodology for Reduction of Coupling
so each new e-business solution based on XML provider, responsiveness, failure handling,
alone was a unique solution, unstandardized. and other attributes.).
Thus, ebXML is intended to solve two problems. • Sequencing rules to describe valid action
It replaces the high cost of EDI with a relatively invocation sequences in each party.
inexpensive Internet-based solution. It also ad- • Global properties to describe default proper-
dresses the spread of incompatible XML-based ties of various fields in the TPA.
B2B frameworks. One way ebXML addresses • Comments to describe handling of disputes,
these incompatibilities is by defining a set of core termination of the TPA as a whole, and other
components that are reusable across all industries. exceptional conditions.
OASIS (2002b) contains a complete reference for
all core components of ebXML. One core component of ebXML, the Collabo-
A TPA, developed by IBM, defines how trading ration Protocol Agreement (CPA), automates the
partners interact by defining the general contract technical aspects of a TPA. In ebXML, all trading
terms and conditions; participant roles (buyers, partners publish a Collaboration Protocol Profile
sellers); communication and security protocols; (CPP) that states a basic description of the ebXML
and business processes (Dan et al., 2001). There- business processes, as defined by an industry that
fore, the XML-based TPA documents capture the it supports, together with the industry’s e-busi-
essential information upon which trading partners ness systems points of access and technologies.
must agree in order for their applications and Companies developing a CPA will match the busi-
business processes to communicate. ness process they support to prospective trading
The specification for a TPA (Dan et al., 2001) partners. The CPA allows trading partners to agree
includes: on a set of common processes and the messages
that need to be exchanged to accommodate these
• Identification to uniquely identify the TPA business processes. Therefore, the CPA provides
document, and the parties. for the automatic generation of the TPA.
• Communication to specify the transport Another initiative of ebXML was to address
protocol(s), electronic addresses of the par- distributed B2B transactions in a heterogeneous
ties. environment, focusing on the extended record
• Security, to define the certificates used for locking across organizational boundaries in
authentication, including no repudiation, long–running, distributed transactions. The long-
and a digital envelope. running transaction is defined by (Dan et al., 2001)
• Invocation-independent properties, for ex- as a long-running conversation in which trading
ample, the valid duration of the TPA. partners negotiate and create an electronic contract
• Data definition for describing formats of the that stipulates the terms of the transaction. The
data being passed around. scope of the transaction state has been broadened
• Role definition that describes each of the to encompass requirements and semantics of the
roles specified in the TPA filled by specific state of a business transaction as a measure of the
parties. transaction’s progress and outcome. A key benefit
• Action list to describe the requests each of this approach is that it provides an extensible
party can issue to the other. These actions model of a transaction that is well suited for the
are the independent units of work (The action advance transaction models, such as Flexible
definitions define the associated message transactions, Interoperable transactions, and
flows between the invoker and the service Mobile transactions. Here, “model” refers to a
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A Parallel Methodology for Reduction of Coupling
IA
HEE
MA MA MA
TPA TPA TPA
RM RM RM
counterpart to a paper trail. The fulfillment stage This architecture assumes that each trading
actually provides the business transaction with partner provides an interface to its enterprise ap-
the ability to exchange documents that state the plications and that the trading partners’ systems
transaction is completed and that resources have are capable of ACID transactions. The focus of
been allocated on each side to provide physical this research is to show that a reduction in record
services. The satisfaction stage is a feedback locking is possible for long-running distributed
mechanism design for process improvement. transactions without relaxing the ACID properties.
The TPA aids the MA to conduct the interactions This reduction in record locking is accomplished
necessary to accomplish the first three stages in by allowing a set of MAs to work in a parallel
the business transaction. How this interaction manner to achieve each trading partner interac-
model is implemented in our mobile/intelligent tion required for the B2B distributed transaction.
agent framework is discussed further. Our mobile/intelligent agent architecture, shown
Our mobile/intelligent agent framework de- in Figure 2, has the following components: IA,
sign addresses the need to reduce record locking MA, TPA(s), and a host execution environment
without relaxing the ACID properties of transac- (HEE).
tion-based systems. Although (Dan et al., 2001) In the business transaction the IA acts on behalf
points out that we should not make assumptions of the purchaser to fulfill all of the requirements
on behalf of a trading partner’s abilities, for of the distributed transaction. The purchaser
many areas such as e-banking, the need for a describes, through a front-end application, the
trading partner to ensure that a transaction has requirements for all interactions with each trad-
truly completed as required leads to a desire for ing partner that are contained in the transaction.
more insight into a trading partner’s capabilities. The IA uses ebXML
Traditionally, having a trading partner implement CPAs ) to match the services needed by poten-
the ACID properties was how such assurance tial trading partners. When all requirements have
was achieved. been matched with potential trading partners, the
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A Parallel Methodology for Reduction of Coupling
IA spawns a set of MAs, one for each interaction ing the requirements of the ACID properties in
with a potential trading partner. These MAs are a distributed transaction. The Oracle XA library
spawned to a shared distributed memory where conforms to the X/Open Distributed Transaction
each MA proceeds autonomously with its task. Processing (DTP) software architecture’s XA in-
Each MA uses the TPA to carry out the interaction terface specification. The Oracle XA library is an
with this trading partner. The use of MAs allows external interface that allows distributed transac-
us to remove the linear sequential aspect of most tions to be coordinated by a transaction manager.
distributed B2B interactions. The parallel execu- In this section we describe the specific details of
tion of MAs provides a significant improvement the test performed to quantify our hypothesis that
over sequential transactions. on average the mobile/intelligent agent framework
will significantly reduce record locking when
Mobile/Intelligent Agent Framework compared with a linear progressive implemen-
B usiness T ransaction Flow tation. A description of the mobile/intelligent
agent framework implementation used to test our
This section details the transaction messaging hypothesis is provided for completeness.
required to allow an MA, working autonomously,
to successfully complete a trading partner in-
teraction. The IA creates the MA to conduct an
individual trading partner interaction. The MA Figure 3. Trading partner interaction model
interacts with the enterprise application interface
of the specified trading partner. The MA acting Inquiry/Negotiations Stage
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A Parallel Methodology for Reduction of Coupling
Testing the hypothesis requires a test scenario each database by performing an update to a set
that simulates each method of record locking, of records. The SQL script required to achieve
while capturing the amount of time records are record locking is propagated in a linear fashion
locked on each trading partners’ system. The focus to each participant using Oracle 9i’s Database
of each test scenario is to simulate all aspects of Link mechanism. When the last participant in
the specific approach that have an impact on the the transaction achieves its record lock, the script
length of time records are locked in the distributed issues a commit and the DTC performs the two-
transaction without relaxing the ACID properties. phase commit. Figure 4 depicts the test scenario
Therefore, for the purpose of this analysis, the for the linear progressive simulation.
implementation of the linear progressive method This test implementation of the mobile/in-
and the mobile/intelligent agent framework need telligent agent framework simulates the same
only address the record locking: other higher level distributed transaction previously accomplished
B2B interactions are irrelevant for the purpose of by the linear progressive method. In the test
this experiment. The implementation that follows implementation, the IA communicates with the
is intended to simulate all the message-passing enterprise application using Sun Microsystem’s Ja-
requirements between the IA, MA, and a trad- vaspace technology, a core component of Jini 2.0.
ing partners’ enterprise application necessary to The Javaspace is a Linda-like4 (Freeman, Hupfer,
implement an XOPEN two-phase commit. & Arnold, 1999) shared distributed memory that
The simulation of the linear progressive provides a synchronized message facility for this
method for distributed B2B transactions uses the framework implementation. The Javaspace also
native ability of the Oracle 9i database to perform provides an implementation of the Jini distributed
distributed transactions, as it captures the true events model that aids with synchronization of
essence of the linear progressive approach. The the message passing. The Javaspace can be used
simulation uses the Oracle database’s ability to implement a mobile-agent-based messaging
to perform a two-phase commit, in which one requirement.
database acts as the DTC while the remaining A typical distributed transaction in this imple-
databases act as RMs in the transaction. To simu- mentation of the framework would flow as follows
late the linear progressive approach, a Structural (a more business level algorithmic description is
Query Language (SQL) script is invoked on one provided in Appendix A):
database server. The SQL script locks records on
Figure 4. Simulation of the linear progressive methods for distributed B2B transactions
SQL Script
1 5
2 3 4
DB 1 DB 2 DB 3 DB 4 DB 5
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A Parallel Methodology for Reduction of Coupling
1. The Javaspace MA signals that the IA is Oracle 9i database that provided storage for the
ready to fulfill. enterprise applications. Using Oracle’s LogMiner
2. Upon receiving a fulfill message from all Utility, we were able to recover the amount of
MAs the IA writes one entry into the Javas- time in seconds each record was locked on the
pace for each trading partner interaction. five Oracle 9i databases from the active redo log
These entries represent the fulfill/acknowl- files. The total lock time for the distributed transac-
edge message. tion was the sum of the five partner interactions.
3. The Javaspace MA signals each enterprise The 50 distributed transactions were averaged to
application via Jini’s distributed event compute a mean for each method.
mechanism. To simulate both methods there were a total of
4. After completion of the record locking and six test machines, with one machine used to initi-
the prepare phase of the XOPEN two-phase ate the transaction, while the other five machines
commit, each enterprise application writes were running Oracle 9i. Each machine was run-
its entry into the Javaspace. This entry ning Windows 2000 Professional edition. Each
represents the acknowledge message of the of the test machines was a Pentium 4, with 512
two-phase commit protocol. megabytes of random access memory (RAM),
5. The Javaspace MA signals the IA via Jini’s running at 2.0 gigahertz. Table 2 shows a typical
distributed event mechanism. The Javaspace measurement for the distributed transaction using
signals once for each business interaction the linear progressive (Linear P) method and the
6. The IA waits to receive an acknowledge mobile/intelligent agent framework (Mobile A).
signal from each business partner partici- A two-sample t-test was used to compare the
pating in the distributed transaction. If the rating of the two sample means (the linear pro-
IA receives all acknowledgments within a gressive transaction and the parallel MA). This
specified time limit, the IA writes the com- tested the following hypothesis.
mit entry to the Javaspace.
7. The Javaspace MA signals each enterprise
application via Jini’s distributed event
mechanism.
8. Each enterprise application commits and Table 2. Record lock time measurements
releases its respective record locks.
Method DB1 DB2 DB3 DB4 DB5
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A Parallel Methodology for Reduction of Coupling
IA
Javaspace
RM RM RM RM RM
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A Parallel Methodology for Reduction of Coupling
between the means will be between 7.261 and distributed B2B scenario by employing a method
9.219. The CI agrees with our rejection of the null that greatly reduces record lock time. The record-
hypothesis that there is no significant difference lock test conducted with our framework proved to
between the sample means, therefore we accept the be a significant improvement over the traditional
alternative that there is a significant difference in linear approach to distributed transactions. In the
the population means. To note that the difference worst case, a 30% improvement was shown; in
between means is significantly different from 0, the best case, the improvement could be as much
µ1-µ2≠0, the 95% CI of (7.261, 9.219) does not as 60%. The noted improvement is a result of the
contain 0, therefore the difference of the means framework’s use of MAs working in parallel to
is significantly different from 0. accommodate individual trading partner interac-
tions. Our mobile/intelligent agent framework
makes use of ebXML’s CPA in order to allow MAs
DISC USS ION to autonomously negotiate individual business
interactions. As agents complete the negotiation,
These results show that there is a significant dif- each agent signals the IA, which is standing by,
ference between the linear progressive method and ready to fulfill the intended transaction with its
the mobile/intelligent agent framework method. trading partner. When all MAs have signaled they
Estimating the time saved to be 7.261, the lower are ready to fulfill the transaction, the IA starts
end of the CI, suggests that in the worse case an a standard two-phase commit.
average savings of 30% on the record locking One benefit of our framework is that it reuses
time was achieved by our framework, compared existing infrastructure such as databases that are
to the linear progressive method The best case capable of the two-phase commit. Therefore,
average saving shown by this test using the up- companies would not need to implement a new
per end of the CI, 9.219, suggests that a saving of distributed transaction protocol such as provided
60% is possible under the tested scenario. How- in the ebXML standard. In our implementation of
ever, one assumption of the test scenario for the the framework, this reuse is seen in the XOPEN
linear progressive method was that all individual distributed two-phase commit feature in the
business interactions are fully specified by the Oracle database. A secondary benefit attributed
front-end logistics application before any business to the use of MAs and IAs in our framework is
interaction takes place. However, if the front-end the ability to have a late binding to the atomicity
application approaches each interaction one at a property of the transaction. This is similar to
time, meaning the user specifies interaction 1, ebXML’s ability to do a partial transaction with
and the records are locked on vendor 1’s system, respect to the originating request. Therefore, the
then interaction 2 is specified by the user and framework is capable of saving partial work that
records are locked on vendor 2’s system and so has been accomplished towards the goals of the
on, the worse case and best case average saving transaction.
would increase in proportion to the time it takes Our current experiment was chosen so that
to specify all interactions other than the first. the improvement would be the least possible
improvement in record locking from using our
methodology—our expectation would be that
C ONC LUS ION a typical operation in practice, as well as any
other experiments using our methodology, would
In summary, our research shows that retaining actually achieve better results than was possible
ACID properties in transactions is possible in a in our chosen experiment. However, we would
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A Parallel Methodology for Reduction of Coupling
be interested to see further experiments by other Dan, A., Dias, D., Kearny, R., Lau, T., Nguyen,
researchers validating our results. R., Parr, F., et al. (2001). Business-to-business
Although the mobile/intelligent agent frame- intergration with tpaML and a business-to-busi-
work has shown significant results in these test ness protocol framework. IBM Systems Journal,
scenarios, future research will concentrate on 40(1), 68-90.
the advanced transaction models. Our research
Freeman, E., Hupfer, S., & Arnold, K. (1999).
suggests that it is possible to reduce record lock-
Javaspaces principles: Patterns and practice.
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actions as a possible alternative. Isolation levels are ness transaction protocol primer [Version 1.0].
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Organization for the Advancement of Structured
currently locked. In order to accommodate the use
Information Standards (OASIS). (2002b). Business
of isolation levels in these transactions there are
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two options: first, we should consider the static
MA: Author.
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APPENDIX A.
The following algorithm describes a typical B2B distributed transaction using our framework for a
vendor/purchaser interaction. See Figure 5 for a diagram illustrating this algorithm.
1. A software framework provides a partial software solution. It defines the architecture for software
systems that are further defined by the user to apply to a particular problem.
2. A mobile agent is software that moves itself from place to place in a network. An intelligent agent
is software that has a particular goal and can act autonomously in certain situations (Wooldridge
& Jennings, 1995).
3. The two-phase commit protocol is used to guarantee the Atomic ACID property in distributed
transactions.
4. Linda is a well known coordination language (plus tools) that provides a virtual space where
processes can communicate without regard to location (Freeman et al., 1999).
This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 5, Issue 3, edited by M. Khosrow-
Pour, pp. 52-67, copyright 2007 by IGI Publishing, formerly known as Idea Group Publishing (an imprint of IGI Global).
293
294
Chapter XVI
E-Business Triggers:
Further Insights into Barriers and
Facilitators amongst Ghanaian
Non-Traditional Exporters (NTEs)
Olav Sorensen
Aalborg University, Denmark
Robert Hinson
Aalborg University, Denmark
Abstr act
E-business is key to export development for developing economy firms. There are however key barriers
and facilitators to e-business adoption for small and large internationalizing firms the world over. This
chapter sets to find out, by means of the testing of key hypothesis, the main barriers and facilitators
of e-business adoption by Ghanaian export firms. We adopt a quantitative approach to this study and
draw our study sample from a directory of active non-traditional exporters (NTEs) in Ghana. We find
that an export firm’s international orientation, owner/management idiosyncrasies, e-sophistication of
partners, export firm’s characteristics (age, number of employees and location) and weak government
regulation have no significant influence on e-business adoption by Ghanaian NTE firms. On the other
hand, competitive pressure (as measured by competition from Ghanaian export firms and growth in
size of export operations) significantly facilitates e-business adoption. Internal resource constraints
(measured by technological and financial resources for e-business adoption and business culture) and
environmental bottlenecks (measured by lack of support from export sector regulators and export associa-
tions and high internet access fees carged by ISPs) also reduce the likelihood of e-business adoption by
Ghanaian NTE firms. We find interestingly that Export facilitation (measured by pressures from GEPC
and FAGE) and digitalization (measured by perceived importance of e-business in digitalizing export
operations and improving export competitiveness) perceived to facilitate e-business adoption however
exhibit significant negative relationships with adoption. We proffer some explanations for this unusual
finding and provide general management implications for improving e-business practices amongst the
various players in Ghana’s non-traditional export sector.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
E-Business Triggers
INTR ODUCT ION & ST UDY also found that Internet use was advantageous to
OBJ ECT IVES the extent that it assisted in sales leads generation,
ability to sell in remote countries, penetration of
Issues surrounding the adoption of e-business unfamiliar markets and creation of international
for firm development have received extensive awareness of the enterprise. Other proponents
coverage in the e-commerce, international of the benefits of e-business to small firms have
marketing, business development, strategy and noted inter alia that some of the benefits include
entrepreneurship literature. Several other disci- on-line sales and transactions (Poon and Swat-
plines like supply chain management; marketing man, 1997), acquisition of know-how through
communication, finance etc. have all applied discussion with others on the Internet (Poon and
various theoretical and empirical treatments to Swatman, 1997), speedy and timely access to
the phenomenon of e-business/Internet adoption. information from websites (Poon and Swatman,
The Internet itself has been heralded for over 1997), lower cost of obtaining supplies (Abell and
two decades as some sort of panacea to the vari- Limm 1996), availability of expertise regardless
ous problems encountered by small businesses of location (Abell and Limm, 1996), improved
(Kalakota and Whinston, 1996). In the context communication between customers and suppliers
of firms engaged in international business, it has (Leadbeater, 2000). In addition, the small firm has
been positioned by scholars like Levitt (1983) the potential for gaining competitive advantage by
that embracing technology can result in gaining being much quicker and flexible in connecting to
competitive advantage and capitalization of the the Internet (Durkin and McGowan, 2001).
opportunities resulting from the globalization of Despite all the proposed benefits for small
business. Fillis et al (2003), arguing from the work export firms outlined above, there is recorded in
of earlier scholars (Keogh et al, 1998; Coviello the literature, several constraints to e-business
and McAuley, 1999) posit that technology offers adoption by small export firms. Some of these
vast opportunities for instant international market constraints discussed from a more conceptual
access for SMEs. standpoint have included conservatism; fear of
The internet has been described as a global change/technology; inertia in decision making,
network of interlinked computers offering several security concerns, financial constraints and other
commercial applications for most firms around the resource constraints like the challenge of learn-
world (Hamill, 1997). The Internet acts as a major ing new skills and performing new tasks (Fillis
platform for the conduct of e-business and the et al, 2003). More empirical contributions to our
astute deployment of Internet technologies holds understanding of the barriers to e-business adop-
promise for improvement in the management and tion have included contributions by Eid (2005),
organization of small export firms. Hornby et al Stockdale and Standing (2004) and Kaynak et al
(2002) argue that theoretically, exporting SMEs (2005). Eid (2005) found significant barriers to
engaged in exporting should have a higher pro- e-business adoption among 123 UK companies
pensity for Internet uptake. Khoo et al (1998) have but posited that “powerful drivers of internet-
advanced arguments that small exporters are able based marketing in business-to-business firms
to compete in foreign markets as a result of their will generally outweigh significant barriers to
technological capabilities. Bennet (1997) in a study its adoption in the future”. Chau and Pederson
on experiences of website use and perceptions of (2000) also noted some barriers to e-commerce
export barriers among UK businesses found that adoption such as lack of resources, complications
exporters held favourable views of the Internet’s in implementing change, lack of cost-effective
contribution to the facilitation of export. The study e-commerce enabled software, lack of technical
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E-Business Triggers
skills and training, computer apprehension, inter- …the World Bank in 2007 rated Ghana as the
organisational motivation and prioritization of e- most attractive place to do business in emerging
commerce initiatives. Our interest in this chapter markets in 2007…
is to develop a more comprehensive understanding
of the range of perceived facilitators and barriers to …government is endeavouring to make informa-
e-business adoption in Ghana’s export sector. The tion and communication technology available to
export sector is crucial to Ghana’s development available to large sections of society. The National
agenda and the uptake of ICT and Internet usage Communicators Backbone Infrastructure Network
has been a matter of critical concern for policy- is being pursued vigorously to provide open access
makers and researchers (Sorensen and Buatsi, broadband connectivity…
2002) and this study builds on earlier studies in
this sector (Hinson and Sorensen, 2006; Hinson …all sectors of our society including commerce,
and Sorensen, 2007). The rest of the chapter is health and government will access information
set out as follows: section two will give a general speedily for decision-making…
overview of Ghana’s export sector; section three
will address a literature review and the attendant …a number of world class companies are vying
hypothesis generated for the study whilst section to partner the country to invest in the bauxite
four to six will address the study methodology, industry for both upstream and downstream pro-
presentation and discussion of findings; as well cession locally…
as conclusions and recommendations for future
research. …farmers in twenty three districts in five regions
of the country are being assisted to undertake
commercial agriculture, mainly in the cultivation
AN OVER VIEW OF GHANA’S NON- of horticultural produce.
TR ADIT IONAL EX PORT S ECT OR
It has been the clarion call of the president
In 2005, the Ghana Export Promotion Council and several policy makers that increased non-
(GEPC) set up a web portal (www.gepcghana. traditional export and the increasing dynamism
com) to begin improving the e-readiness of of the same sector is key to improving the foreign
Ghanaian non-traditional exporters. The head of exchange fortunes of Ghana. Export values ac-
GEPC notes that “international trade was increas- cording to an article on www.myjoyonline.com
ingly becoming global and highly competitive entitled “Non-traditional exports to cross billion
as a result of technological advancements…and dollar mark” rise from 705.4 million dollars in
information and communications technology” 2004 to 893 million in 2006. On a country –by-
(www.myjoyonline.com) and that the Export country basis the United Kingdom is the lead-
Promotion Council had endeavoured to set up ing market for Ghana’s non-traditional exports,
a trade information centre to assist in school- followed by France, Burkina Faso and Nigeria.
ing exporters on e-business, which meant the The article notes that those officials of the Ghana
importance of Information and Communication Export Promotion Council were optimistic that
Technology (ICT)/e-business in dynamizing the the value of non-traditional exports will traverse
sector is also not in doubt. the 1 billion dollar mark in 2007; and this is pre-
In reporting on the performance of his govern- cisely what happened. Currently, there are over
ment, the President of Ghana in February 2008; 383 different Non-Traditional Export products
noted inter alia that:
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E-Business Triggers
categorized into Agricultural, Processed / Semi like the level of infrastructural networks and the
Processed and Handicrafts. work of various business associations including
GEPC has a clientele base of over 3000 FAGE (Federation of Association of Ghanaian
registered private sector exporting companies Exporters) and export promotion agencies like the
organized into 15 Product Associations, which Ghana Export Promotion Council in creating a
she relates to both on individual corporate basis favourable climate for small exporter e-business
and as groups/associations. To create an enabling adoption. Some elements of a favourable climate
environment for e-business adoption among their might include, for instance, helping to procure
clientele, the Ghana Export Promotion Council affordable PCs for the exporters, or setting up a
(GEPC), in January 2008, launched the Ghana trade information system that the small exporters
Export Trade Information System to provide the can connect to.
business community in Ghana with resources to Micro triggers for e-business adoption are
access and use trade information. Exporters reg- hypothesized to include the business culture
istered with the Ghana Export Promotion Council (measured by organization resistance/acceptance
and other members of the exporter community to technological change) and the type of export
can now access Trade Map, Product Map, Market organization. It is hypothesized that a handicraft
Access Map and Investment Map through a Com- exporting firm might find the web strategy com-
mon Management User System. We set out in this ponent of e-business more exciting than a tomato
chapter to ascertain the adoption and facilitation exporter and might therefore be incentivized to
triggers of e-business amongst a cross-section of adopt e-business faster). Other e-business adop-
Ghanaian NTEs. tion triggers might include resource (financial and
The objectives of this study are: skill) constraints, and the age of the exporting
firm. Owners/top management of small firms
a. An ascertainment of key facilitators of e- wield a lot of power in organizational direction,
business for Ghanaian export firms. so in instances where such owner/managers tend
b. An ascertainment of key barriers to e-busi- to be technology averse, then e-business might be
ness adoption amongst Ghanaian non-tra- delayed or might even remain a perpetual mirage
ditional export firms. for the small firm in question.
E-business adoption in the conceptual frame-
work is also expected to deliver certain benefits
C ONC EPT UAL FR AMEWORK & to export firms that adopt it. The focus of this
ST UDY HYPOT HES ES chapter is however on the facilitators and inhibitors
to e-business adoption in Ghanaian export firms
We draw on the small exporter e-business develop- and builds on the work on Hinson and Sorensen
ment conceptual framework (Figure 1) developed (2006 & 2007). We develop hypothesis to test
by Hinson and Sorensen (2006). The framework what key facilitators and barriers exist in the e-
posits that there are some internal and external business adoption bid of Ghanaian non-traditional
forces/triggers that act on export firms at the disad- export firms.
vantaged end of the global digital divide to adopt One of the greatest benefits of having an
the Internet in the conduct of their export busi- Internet presence could be said to be the instant
nesses. Triggers like an international orientation access a small exporting business has to a global
and/or the level of international competition the market. Evans and King (1999) note that the
firm faces, might constitute triggers for e-business key deliverable benefits of the internet is global
adoption. Additionally, there are a set of triggers, reach firm. It would stand to reason then that a
297
E-Business Triggers
developing country that is internationally oriented country context. According to an article entitled
in its outlook will tend to adopt e-business. We “e-challenges: Countries in Action”, it was noted
therefore hypothesize that: that Ghana’s national strategy is to aggressively
facilitate export development; primarily in the
H1: The more internationally oriented the export non-traditional export sector and in this vein,
firms, the more likely they are to adopt e-busi- the Ghana Export Promotion Council coordi-
ness. nates the implementation of this strategy. It was
further noted that one of the strategic objectives
Export facilitation institutions are meant to of the council was that all registered Ghanaian
be key to improving the electronic competen- exporters should become e-competent by 2003.
cies of export firms especially in developing We therefore hypothesize that:
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E-Business Triggers
H2: The higher the level of export facilitation, the the decision to adopt/not adopt new technologies.
more likely a developing economy export firm is, Small business owners do not usually have sophis-
to adopt e-business. ticated governance structures and therefore any
decision that requires substantial capital outlay;
Digitalization can be understood to be the usually have to be decided by the owner/manager.
increasing application of electronic practices in In certain cases owner/managers fall on the advice
the conduct of an export firm’s business. Digita- of a management team. Orlikowski (1993), Rai
lization could therefore mean that the higher the and Patnayakuni (1996) have all identified top
compatibility of the export operation (task) with management support as crucial to the adoption
electronic processes (technology), the higher the of new innovation like e-business technologies.
likelihood of the adoption of e-business innova- We therefore hypothesize that:
tions (Cooper and Zmud, 1990). We therefore
hypothesize: H5: Top management support and commitment
will be positively related to e-business adop-
H3: That the higher the level of digitalization, the tion.
higher the likelihood of e-business adoption.
Developing economy firms usually face re-
Competitive pressure usually leads export source constraints and this could have a direct
firms along the path of unearthing strategies to bearing on their capacity to adopt e-business. The
outmanoeuvre their competition and maintain ability to purchase computers and put in simple
a competitive edge. The adoption of e-business technology applications like local area and wide
practices represents one of the tools to the at- area networks could be a major determinant of
tainment of sustainable competitive advantage. the adoption of e-business. Newcomer and Candle
The perceived benefits of e-commerce in fight- (1991) note that access to adequate equipment
ing competitive pressure and facilitating export could hamper or facilitate the adoption of new
firm growth (Iacovou et al, 1995) could be an technologies like e-business. The business culture
important factor in the adoption of e-business within an export firm as well as the presence of
technologies. Khoo et al (1998) have also noted staff with ICT exposure and related business strat-
that small exporters are able to better compete egy skills to harness and use e-business (Molla
in foreign markets because of their technological and Licker, 2005); also have a significant effect
capabilities. Abell and Limm (1996) also posit that on the adoption or otherwise of e-business. Thus,
e-commerce adoption delivers and Epstein (2004) we hypothesize that:
has also argued that e-commerce can potentially
influence an organization’s advantages of increase H6: The less resourced an export firm is, the less
in market share of products/ services competitive likely they are to adopt e-business.
position. We hypothesize that:
Environmental bottlenecks in respect of
H4: The higher the level of competitive pres- e-business adoption for a developing country
sure, the higher the likelihood of e-business export are real and these could range from lack
adoption. of support from export industry associations
and regulations and the high cost of Internet ac-
In a developing economy (including African) cess. In an international trade centre article on
context, owners/managers of small (including e-challenges: Countries in Action, it was noted
export) firms tend to be extremely powerful in that the Ghana Export Promotion Council had
299
E-Business Triggers
developed an e-competency strategy which sought on “The internet and exporting in Ghana” found
to amongst others: that lack of means to finance equipment was one
of the hindrances to internet adoption amongst
i. arrange soft loans...for the purchase of com- Ghanaian non-traditional exporters. Since it takes
puter systems quite a while for export firms from developing
ii. encourage computer companies and Inter- economies to become profitable, we posit that
net Service Providers (ISPs) to participate younger export firms may be not be as endowed
directly in the e-competency programme (finance) as older exporters. Following on, we
iii. encourage exporters to “connect” to the also believe that larger exporter firms and firms
Internet, develop enterprise websites and located into larger internet-ready cities may pos-
devise e-trade strategies sess a higher level of I.T. resources and personnel
I.T. knowledge (Akbulut 2002) as well as financial
Molla and Licker (2005) have argued that resources required to adopt e-business. We thus
for electronic practices to be better assimilated hypothesize that:
there should be the presence of support-giving
institutions; which we argue in this case could H9: The younger and more remotely located
comprise export industry associates and ISPs. the export firm, the less likely they are to adopt
We hypothesize that: e-business.
H7: The higher the level of environmental bottle- Molla and Licker (2005), Sorensen and Buatsi
necks/ lack of industry support, the less likely (2002), Pucihar (2006) and Kamel (2006) all agree
they are to adopt e-business. that governments and their various ICT regula-
tory agencies are extremely crucial in facilitating
Technological sophistication of the business the uptake of e-business in developing economy
networks in which an export firm operates in, has contexts. Sorensen and Buatsi posit for instance
a bearing on their decision to adopt/ not adopt that the government of Ghana must increase in-
e-business. Chan et al (2000) have noted that frastructural investments in order to improve the
the internet has now been adopted to facilitate uptake of e-business whilst Pucihar (2006) notes
greater supplier involvement in the activities of that government activities played an important role
the firms. Turban et al (2004) have also noted that in accelerating e-commerce adoption in Slovenia.
for e-commerce to thrive, sellers and buyers have We thus hypothesize that;
to be willing to exchange goods and services for
money online. We thus hypothesize that: H10: The weaker ICT and export-related govern-
ment regulation is, the less likely an export firm
H8: The less technologically sophisticated the is to adopt e-business.
parties in the export/ international network of
the export firm, the less likely they are to adopt
e-business. MET HODOLOGY
Exporting is a herculean challenge for develop- The data for this study was collected from a sample
ing economy export firms because of the financial of NTEs drawn from the agricultural processed &
and technical investments that need to be made semi-processed and handicraft sectors. These are
into the export operation before it becomes a the broad categories of the NTEs usually delin-
success. Sorensen and Buatsi, in a 2002 article eated by the Ghana Export Promotion Council, the
300
E-Business Triggers
apex body for NTE export development in Ghana. agriculture, 32.6% are in the processed & semi-
We employed a convenience sampling technique processed sector and 20.9% are into export of
and contacted 120 NTEs located/headquartered handicrafts. Table 1 below presents descriptive
in Accra (the capital of Ghana). A six section statistics on the sample.
questionnaire predominantly constructed using
a five-point Likert scale with the responses for a
majority of the questions ranging from “strongly R ES ULTS
disagree to strongly agree’. The sample was made
up of 94 NTE firms located in Accra, the capital E-B usiness Adoption
of Ghana. Majority (67%) of them are private and
locally owned. The firms mostly employ less than The level of e-business adoption in this study has
100 people and 81% have annual sales less than been measured in three levels – possession and
$500,000. Nearly half (46.5%) are involved in use of computer, internet and website. Two items,
0-19% 39.7
20-39% 12.1
40-59% 6.9
60-79% 22.4
80-99% 19.0
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E-Business Triggers
summing the scores for the nine items. Scores Yes (1) 70.7
thus range between 0 where none of the items is Percentage of PCs with internet access %
adopted to 37 where all are adopted. This scale <20% (1) 59.5
has a Cronbach’s Alpha of 0.605 which indicates 20-39% (2) 8.3
a satisfactory level of construct reliability. The 40-59% (3) 6.0
Friedman ANOVA test indicates that scores are 60-79% (4) 4.8
significantly different (p < 0.001) and Tukey’s Test
80-99% (5) 21.4
of Additivity is significant (p < 0.001).
Employees with corporate e-mail address %
Descriptive statistics on the various items
<20% (1) 51.8
comprising the e-business adoption index are
20-39% (2) 16.5
shown in Table 2 below. Majority (93.3%) of firms
40-59% (3) 11.8
have between 1 to 49 computers with about 1 to 4
60-79% (4) 7.1
full-time IT staff (70.1%). The average score for
80-99% (5) 12.9
computer is 2.234 with a maximum of 6 out of
the possible 10. About 70% of firms have internet Description of website %
Static (0) 35.4
connection with 59.5% having connections on less
than 20% of computers in their firms. In 52% of Dynamic (1) 64.6
302
E-Business Triggers
Your firm has the competencies to use Internet/e-business technologies 2 5.95 1.353
The level of infrastructural development in Ghana’s ICT sector has a direct influence in our
6 5.25 1.882
level of e-business adoption
Your company adopted e-business as a strategic option to enhancing its export competitiveness 7 5.05 1.972
Your export firm has embraced e-business as a value delivery tool 10 4.94 1.949
The Ghana Export Promotion Council (GEPC) has been pressurizing your firm to adopt e-
12 3.63 1.886
business practices in your export promotion
The Federation of Association of Ghanaian Exporters (FAGE) has been pressurizing your firm
13 3.08 2.139
to adopt e-business
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E-Business Triggers
labeled as international orientation, export facili- while eight items had mean scores between the
tation, digitalization and competitive pressure. indifference score and the median score. Table 5
The results are shown in Table 4 below. below presents the ranks of the barriers.
Again, because of inter-item correlations
Adoption B arriers among the over 25 internal and external barrier
items measured by the instrument, factor analy-
Similar to the approach adopted for assessing sis was used to extract distinct non-overlapping
adoption facilitators, the level of agreement of underlying factors. Principal axis factoring with
respondents were sought on a set of 19 items per- varimax rotation produced six factors from 19
ceived to be e-business adoption barriers (internal items after items with inappropriate loadings were
and external to the firm). The scores on levels of dropped. This explained 72.9% of the observed
agreement observed for the barriers were gener- variance. Satisfactory construct reliability and
ally lower than those observed for the facilitators. internal consistency is exhibited with Cronbach’s
Mean scores across the 19 items ranged between Alpha values ranging from 0.60 to 0.93. KMO-
3.33 and 4.81. Eleven items had scores above the MSA is 0.633 and Bartlett’s test of sphericity is
median scale value of 4, indicating low agreement significant. The extracted factors were labeled
Notes: Principal axis factoring with varimax rotation, KMO-MSA = 0.566, Bartlett’s test of sphericity = 163.723 (p < .00001)
304
E-Business Triggers
305
E-Business Triggers
306
E-Business Triggers
• H5. The more favourable owner/manage- plots suggest there are no serious violations of
ment idiosyncrasies are to e-business the error term assumptions. The coefficients of five
more likely the firm is to adopt e-busi- factors (3 perceived facilitators and 2 perceived
ness. barriers) are significant. These are export facilita-
• H6. The more under-resourced the export tion, digitalization, competitive pressure, internal
firm is, the less likely it is to adopt e-busi- resource pressure and environmental bottlenecks.
ness. However, of the 3 significant perceived facilitators,
• H7. The higher the level of environmental only one (competitive pressure) has a positive sign.
bottlenecks, the less likely the export firm The implication of the two perceived facilitators
is to adopt e-business. with negative coefficients (export facilitation and
• H8. The less technologically sophisticated digitalization) is that the higher the level of those
the partners in the export/international net- factors, the less likely it is for the firms to adopt
work of the export firm, the less likely they e-business. Both significant perceived barriers
are to adopt e-business. (internal resource constraints and environmental
• H9. The younger the export firm with fewer bottlenecks) have negative signs. Thus, the higher
employees and rural location, the less likely the levels of those perceived barriers, the less
it is to adopt e-business. likely it is for firms to adopt e-business. From the
• H10. The weaker ICT and export related results it can be concluded that an export firm’s
government regulation is, the less likely an international orientation, owner/management id-
export firm is to adopt e-business. iosyncrasies, e-sophistication of partners, export
firm’s characteristics (age, number of employees
The regression model is significant at the 0.01 and location) and weak government regulation
level (F = 6.72, Adjusted R 2 = .397). Residual have no significant influence on e-business adop-
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E-Business Triggers
tion by Ghanaian NTE firms. On the other hand, 2007 had wrong email addresses. From an insti-
competitive pressure (as measured by competition tutional perspective therefore the policy maker
from Ghanaian export firms and growth in size (GEPC) must itself seek to become an e-business
of export operations) significantly facilitates e- champion in order to begin to create norms that
business adoption. Export facilitation (measured export firms can aspire to.
by pressures from GEPC and FAGE) and digita- On the issue of digitalization, we found that it
lization (measured by perceived importance of was closely related to the issue of export facilita-
e-business in digitalizing export operations and tion since most of the crusade about e-business
improving export competitiveness) perceived to adoption has come again from the facilitating
facilitate e-business adoption however exhibit institutions and therefore the more of the crusade
significant negative relationships with adoption. they hear, the less likely they are adopt e-business.
Internal resource constraints (measured by tech- Competitive pressure (as measured by competi-
nological and financial resources for e-business tion from Ghanaian export firms and growth in
adoption and business culture) and environmental size of export operations) significantly facilitates
bottlenecks (measured by lack of support from e-business adoption and this was significant to the
export sector regulators and export associations extent that it would seem that peer pressure is a
and high internet access fees charged by ISPs) more predictable adoption factor than pressure
also reduce the likelihood of e-business adoption from facilitating institutions. The facilitating
by Ghanaian NTE firms. Thus, while H4, H6 and institutions might want to create training fora
H7 are accepted, H1, H2, H3, H5, H8, H9 and to get the best adopters to come and explain
H10 are rejected. e-business adoption benchmarks to laggards so
that the whole export sector e-business adoption
propensities can be enhanced.
DISC USS ION
We found the two perceived facilitators with nega- C ONC LUS ION
tive coefficients (export facilitation and digitaliza-
tion) to be rather fascinating so we did a follow This chapter has attempted to delineate the main
up with ten export firms to ascertain from them barriers and facilitators to e-business adoption by
what the likely reasons for this finding might be. Ghanaian export firms. A quantitative approach
We discovered that non-traditional export firms was adopted, which involved selecting 120 Non-
perceive a lack of clarity on terms of e-business traditional exporters (NTEs) from a directory of
policy direction from the major export policy active NTEs in Ghana. The results revealed that
makers and therefore the more e-commerce or e-business adoption by small exporting firms was
e-business advocacy noises they make, the less facilitated by pressure from other local firms, in-
likely NTEs are to adopt e-business. This find- ternet resourcefulness of the firm and a conducive
ing is consistent with Reid (1984) who found in business environment. It is recommended that
a study on export assistance that institutional facilitation institutions like the GEPC and FAGE
sources (for export assistance) tend to be the least get their e-business act together first; and then
used information source because exporters tend enhance these facilitators for export firms to move
to perceive this as not being specific enough or towards more internet-based operations. From an
not having accurate data. In separate research institutional theory perspective, it is posited that
being conducted by us, we discovered 99 of the structures, rules, norms and routines become
438 exporters listed on the GEPC web portal in established as authoritative guidelines for social
308
E-Business Triggers
behaviour (Scott, 2004). For an e-business culture Durkin, M. and McGowan, P. (2001). Net effect
to become more diffuse in Ghana’s NTE sector – views from the periphery: exploring the role and
therefore, facilitation institutions themselves must importance of the internet on marketing activity
aspire to higher levels of e-business excellence so in entrepreneurial firms. Irish Marketing Review,
they can take the appropriate lead in creating and special issue, 14(1), 15-25.
diffusing this culture. Adoption and adaptation
Eid, R. (2005). International Internet Marketing:
will eventually better take place over space and
A Triangulation study of drivers and barriers in
time (Scott, 2004).
the business-to-business context in the United
Kingdom. Marketing Intelligence and Planning,
23(3), 266-280.
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311
Chapter XVII
Organizational Motivation and
Interorganizational Systems
Adoption Process:
Empirical Evaluation in the Australian
Automotive Industry
Md. Mahbubur Rahim
Monash University, Australia
Graeme Shanks
Monash University, Australia
Robert Johnston
The University of Melbourne, Australia
Pradip Sarker
RMIT University, Australia
Abstr act
Interorganizational systems (IOS) play a critical role in today’s e-commerce environment. These systems
are introduced by different organizations following different adoption processes. Existing literature on
IOS adoption, however, does not explain the variations in the IOS adoption processes initiated by differ-
ent organizations. A theory of IOS adoption known as IOS Motivation Model (IMM) has recently been
developed by the authors that explains the differences in IOS adoption processes in terms of differences
in organizations’ adoption motivations for any given IOS project. This chapter reports an application
of the model in the Australian automotive industry. The findings provide support for the model and are
useful for IT managers.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Organizational Motivation and Interorganizational Systems Adoption Process
INTR ODUCT ION system. Similarly, in the first stage the supplier
company introduced a stand-alone EDI system
IOS are important applications that support key to communicate with the automotive assembly
boundary-spanning activities of many organiza- company; and at a latter stage the company ad-
tions (Saeed, Malhorta, & Grover, 2005). These opted a fully integrated EDI system with its own
systems play a critical role in today’s e-commerce suppliers (i.e., tier two suppliers) and as well as
environment (Han, Kauffman, & Nault, 2004; the automotive assembly company. Interestingly,
Subramaniam & Shaw, 2004) because they pro- the motivation for EDI adoption did not change
vide significant business benefits to supply chain between the two implementation episodes for
partners (Garfield, Kamis, & LeRouge, 2004). the automotive assembler company, but did so
However, IOS benefits are likely to be experienced for the automotive parts supplier. Thus the IMM
when these systems are carefully introduced by predicts that the IOS adoption processes initi-
following appropriate adoption processes (Ra- ated by the manufacturing assembler company
him, 2004; Rahim, Shanks, & Johnston, 2002). should be similar in nature at both stages; and by
Regrettably, little is reported in the existing IOS contrast, the IOS adoption processes undertaken
adoption literature about how organizations deter- by the automotive parts supplier should differ in
mine IOS adoption processes. An exception is the specific ways between adoption episodes. Em-
work of Rahim, Shanks, & Johnston (2001a) that pirical evidence from the two cases suggests that
has recently developed IMM. The IMM relates the similarities/differences in the IOS adoption
IOS adoption processes to the organizational processes between the two stages of each company
motivations for IOS adoption, classifies organi- can be explained in terms of the corresponding
zations into four generic motivation scenarios, similarities/differences in its motivations for EDI
and predicts different adoption processes to be adoption. This finding provides support for the
initiated by organizations representing different proposition that an organization that demonstrates
motivation scenarios. The model was tested in different motivation for adopting an IOS solution
the Australian pharmaceutical industry where it at two different time periods will initiate dis-
received considerable support (Rahim, Shanks, & similar adoption processes and that the particular
Johnston, 2001b; Rahim et al., 2002); the model circumstances within which the motivation is
thus requires further validation in other industry formed do not affect significantly the adoption
contexts in order to evaluate its usefulness across processes initiated. Thus, this study contributes to
industry segments. To address this, the IMM is the literature by confirming the explanatory power
applied in this article to examine electronic data of IMM and also demonstrating the applicability
interchange (EDI) adoption processes in the con- of IMM to an industry setting other than the one
text of the Australian automotive industry. for which it was initially developed.
Two organizations that are members (i.e., This article is organized as follows. First, past
automotive assembler company and a first-tier approaches to IOS adoption are critically reviewed
automotive parts supplier) of an automotive as- and their limitations are pinpointed. Second,
sembling supply chain were thus chosen for case the IMM is briefly described and its relation to
study in this research project. They have both ex- past research is explained. Third, the research
perienced two distinct stages of EDI adoption. For approach is narrated. Empirical evidence is then
the automotive assembler company, the first stage produced to classify the motivations observed in
of IOS adoption was initiated with the introduction each EDI stage and actions initiated by the case
of a traditional EDI system, and the second stage companies to introduce EDI in each stage. Next,
focused on the adoption of an Internet-based EDI the case study findings are discussed. Finally, the
312
Organizational Motivation and Interorganizational Systems Adoption Process
research contributions are highlighted and areas represent this stream of research. Process-oriented
of further investigations are indicated. studies generally provide a better understanding
of IOS adoption benefits by explaining the role
of adoption processes. However, although the
EX IST ING IOS ADOPT ION connection between process and benefits is often
LIT ER AT UR E: quite convincingly demonstrated, these studies
A CR IT IC AL EX AMINAT ION do not discuss how the processes are determined
in organizations.
Existing IOS adoption literature can be divided In recent years, Rahim et al. (2001b) and Rahim
into two broad streams: (1) factor-based IOS (2004) have proposed the IMM, which explains
research and (2) process-oriented IOS research. the role of organizational motives in determining
Factor-based studies posit that the presence or the particular IOS adoption processes followed by
absence, or perhaps the level, of certain condi- organizations. While recognizing the role of tra-
tions (commonly known as factors) at some point ditional factors for the decision to adopt, the IMM
in time predict IOS adoption. In general, three rejects factors as predictors of benefits because
broad categories of factors are identified: (1) IOS benefits can be predicted from knowledge of
the properties of the IOS being adopted, (2) the the processes followed by organizations to intro-
characteristics of the adopting organization, and duce an IOS. According to the model, traditional
(3) the conditions prevailing in the environment factors do not directly affect the attainment of
of the organization. The works of Premkumar, IOS benefits; their influence is mediated through
Ramamurthy, and Nilakanta (1997) and Lee, the selection of appropriate processes chosen
Clark, and Tam (1999) represent the influence by the organizations based on their motivations
of the first factor group. On the other hand, Lee for a given IOS project. In their previous works
et al. (1999) and Chwelos, Benbasat, and Dexter (Rahim, 2004; Rahim et al., 2001a) the predictive
(2001) have examined the influence of the second ability of IMM was successfully demonstrated
factor group. Finally, Kuan and Chau (2001); Chau in explaining single EDI adoption initiatives in
and Hui (2001); and Soliman and Janz (2004) selected companies chosen from the Australian
have looked at the influence of the third factor pharmaceutical industry. However, as the model
group. Reasonably strong empirical evidence has is new it needs to be applied in other industry
emerged that suggests such factors are predic- segments in order to evaluate its usefulness.
tive of the decision to adopt IOS. These studies
are useful as they offer important guidelines
facilitating successful IOS adoption decisions. T HE IOS MOT IVAT ION MODEL &
They, however, do not discuss the conditions R ES EARC H PR OPOS IT IONS
relating to initiating IOS adoption processes.
Process-oriented IOS adoption studies, on the The IMM (shown in Figure 1) is based on the
other hand, posit that outcomes of IOS adoption fundamental premise that organizational moti-
cannot be predicted from the level of factors, but vations determine IOS adoption processes. The
can be partially predicted from knowledge of IOS model classifies organizational motivation along
adoption processes. These studies describe the two dimensions: (1) locus of motivation and (2)
processes used in adopting an IOS solution by type of motivation, and identifies four distinct
organizations and explain the benefits achieved as motivation scenarios (shown in the left hand side
a result of IOS adoption. The works of Kurnia and of Figure 1). These scenarios are proposed in
Johnston (2000) and Kautz and Henriksen (2002) recognition of the existence of various types of
313
Organizational Motivation and Interorganizational Systems Adoption Process
Locus of Motivation
Internal External IOS Adoption Activities
Initiated by Cell I
c ell II c ell IV
Socio- Socio- IOS Adoption Activities
Socio- Initiated by Cell II
political political
political Leads to
Leader Follower
t ype of
P1 P8 IOS Adoption Activities
Motivation Initiated by Cell III
c ell I c ell III
Techno- Techno-
Techno- IOS Adoption Activities
economic economic
economic Initiated by Cell IV
Leader Follower
organizational motives (e.g., coercion, normative mediate efficiency gains, but nevertheless with
relations, economic gains, gaining status) and the a clear intention of perhaps portraying either a
source (e.g., internal or external) from which such “progressive” or “customer caring” image in the
motives may originate. IMM predicts different industry, or with the realization that there is no
adoption processes to be initiated by organizations other way forward, given its trading partner’s IOS
representing different motivation scenarios. The adoption strategies. However, the motivation to
model also identifies eight key activities (shown adopt IOS is conceived internally. Cell III refers
in the rightmost column of Table 1) that constitute to the “Techno-economic Follower” scenario
IOS adoption processes. Detailed discussion of that occurs when an organization is approached
these activities is reported in Rahim (2004). Ac- either by its business partners or by any other
cording to the model, the subset of these activi- influential organization about IOS adoption and,
ties that will be initiated by an organization for having evaluated the potential economic benefits
introducing an IOS application is driven by its of the IOS, invests in it voluntarily. Although
motivation scenario for a given IOS project. the motivation to adopt IOS is generated from
According to the IMM, cell I defines the external sources, the decision is made based on
“Techno-economic Leader” scenario that occurs an economic motive. These followers generally do
when organizations develop a direct economic not build an IOS and simply embrace a standard
motive internally and invest in an IOS project IOS but remain proactive users of IOS. Cell IV
voluntarily, believing that the investment will represents the “Sociopolitical Follower” scenario
improve organizational performance with regard that occurs when an organization is approached
to internal efficiency and competitiveness in the by its trading partner or a third-party organization
marketplace. Cell II defines the “Sociopolitical to adopt an IOS, and a decision is made based on
Leader” scenario that occurs when organiza- a sociopolitical motive. These followers do not
tions invest in IOS voluntarily to realize their develop an IOS, but embrace an existing IOS
own sociopolitical motives. These organizations solution, and generally remain as passive users
initiate an IOS project for reasons other than im- of IOS. IMM also includes a set of propositions
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Organizational Motivation and Interorganizational Systems Adoption Process
(shown in Table 1) relating to the IOS adoption (Damsgaard & Lyytinen, 2000). Hence, it is criti-
processes initiated by organizations belonging cal to capture the experiences of the relevant people
to each motivational scenario. Detail deductions and the context of their actions to understand IOS
of these propositions are not included here due adoption. Case studies are suitable for understand-
to page constraints. They are reported in Rahim ing phenomena within their organizational context
(2004). (Yin, 2003). The automotive industry was selected
because the contextual details within which IOS
adoption takes place differ significantly from
R ES EARC H DES IGN the pharmaceutical industry within which the
IMM was previously tested. These two industry
A scientific case study approach was selected to segments differ significantly in terms of type
empirically evaluate the IMM. This is because of products produced and distribution of power
IOS adoption generally takes place in a complex among supply chain members.
environment since these systems have dependency The case study was conducted using the rigor-
on infrastructure, which may not be within the ous principles of Yin (2003) and Sarker and Lee
control of a single organization (Premkumar et (2000), which are grounded in the positivist tradi-
al., 1997). Moreover, the complex interplay of tion. The positivist tradition is used because the
resource dependencies and distribution of power aim is to test a preexisting theoretical model (i.e.,
along supply chain members also add complexity IMM) to explain the behavior of organizations for
to the IOS adoption, decision-making process IOS adoption. Drawing upon the model, it was also
315
Organizational Motivation and Interorganizational Systems Adoption Process
possible to deductively test concepts pertaining to analyzed using the pattern matching logic (Yin,
organizational motives and adoption processes for 2003) which enabled the researchers to compare
adopting IOS. Data were collected using in-depth the pattern of outcomes of the dependent variable
interviews from several senior executives from (i.e., IOS adoption processes) predicted from the
each case site. Each interview lasted for an hour, theoretical model with the pattern of outcomes
was tape-recorded, and subsequently transcribed deduced from the case data collected through ver-
in full. A coding scheme was developed based on bal interviews and other documentary sources of
the interview protocol suggested by Rahim (2004). the company. However, consistent with the notion
Using this coding scheme, each interview script of analytical generalization (Yin, 2003), attempts
was examined by two members of the research were also made to check that the expected pro-
team. Any differences were resolved through cesses were initiated for the same reasons as those
mutual discussion. used in the logical deduction of the propositions
Established methodological guidelines were reported in Rahim (2004). Additionally, in order
applied to generate reliable findings. Reliability to facilitate data analysis process, the following
was addressed by clearly conceptualizing research three strategies were applied: (1) a number of key
variables, using previously pilot-tested protocol themes and subthemes were identified, (2) each
and using multiple coders. The variables involved subtheme was captured using a number of ques-
in the research propositions were clearly defined, tions that appeared in the interview protocol, and
and a summary of these definitions was provided (3) a coding scheme was used to label a chunk of
to the interviewees prior to commencing the a “descriptive paragraph or part of” to categorize
interviews. This was done in order to ensure empirical data into subthemes.
that all the interviewees were able to interpret
the research variables in a consistent manner.
Additionally, following Yin’s (2003) guidelines, DESCR IPT ION OF C AS ES
a case-study protocol was developed, which to-
gether with a copy of the summary of definition Case A is a well-known automotive assembly
of research variables, was sent to the interviewees company located in a large capital city, Australia.
one week prior to the actual date of the inter- It wholly designs, develops, and builds a range
view. The protocol included questions asking of vehicles, many of which are exported to Asian
about the nature of the motives that persuaded countries. The company has several thousand staff
the case organization to invest in IOS solutions, and has introduced a wide range of IT-enabled
the activities undertaken during adoption, and applications in support of all the major busi-
explanations for initiating those activities. The ness processes. The company uses an enterprise
protocol was developed based on the concepts resource planning (ERP) system which is well
involved in IMM and the propositions shown in integrated with its materials planning system. On
Table 1 and was evaluated by academics who are the other hand, Case B is a an established first-
actively engaged in e-commerce research. The tier supplier that produces various types of filters
interviewees on many occasions granted access and delivers them to both the production division
to relevant company documents that helped the and parts accessories division of all four automo-
researchers to corroborate the information pro- tive assembly companies located in Australia. It
vided during interviews. The interview transcripts also supplies filters direct to hundreds of small
as well as a draft report on EDI adoption were spare parts retailers. The supplier is a medium-
prepared and were sent to the interviewees for sized enterprise and has only two IT managers.
review. Data collected from the company were It currently uses the MFGPRO ERP system that
316
Organizational Motivation and Interorganizational Systems Adoption Process
runs on a UNIX platform in support of all its key order-document preparation time. The department
business processes. wanted to send Material Requirements Schedules
(MRS) to the suppliers who would then return
Advanced Shipping Notices (ASN). The electronic
C AS E ST UDY FINDINGS exchange of these documents was believed to
result in substantial time and cost savings. EDI
C ase A: EDI Adoption in was also expected to take some costs out of the
Automotive Assembly C ompany ordering process by reducing mismatched ASNs.
In addition, the department looked at EDI as a
The automotive assembly company has under- means of gaining competitive advantages over its
taken two distinct initiatives in adopting EDI rivals by locking in major suppliers. Hence, the
systems which are discussed next. type of motivation is techno-economic in nature.
Considering the locus and type of motivation,
• Stage 1: Adoption of traditional EDI sys- the automotive company can be regarded as an
tems. instance of a techno-economic leader.
Prior to introducing the EDI system, the
In the late 1980s, the automotive industry company framed a carefully crafted implemen-
underwent considerable changes. The Australian tation plan to seek an approval from the senior
government decided to withdraw tariff protection management (P1). The plan included a detailed
as outlined in the Button Car Plan (Mackay, 1993) justification for introducing the EDI technology, a
in order to make the industry more internationally time table for implementing EDI, and an overview
competitive. As part of an industry-wide response of the critical issues relating to communication
to this situation, the automotive company then took and EDI standards. The company also conducted
an initiative to adopt a traditional EDI system to a cost-benefit analysis (P2) and clearly specified
transact electronically with its large suppliers in benefits in terms of immediate efficiency gains
order to improve its efficiency and develop the and long-term advantages over its competitors.
ability to compete effectively in the global market. Furthermore, it reviewed the situation in its in-
The idea of conducting electronic transactions ternal operations as well as in the supply chain
through EDI was initially conceived by the IT after having undertaken the implementation of
department. The materials planning department the EDI system (P3). The company integrated
of the company then expressed a strong interest in EDI systems with its back-end, materials plan-
the idea of EDI-enabled electronic transactions as ning system in order to avoid manual data entry
EDI was considered as a means to become more about MRS and ASN (P4). In the words of the
competitive. The materials planning department materials planning manager:
prepared a project proposal with the assistance In the pre-EDI days, our staff in the materials
of the IT department to streamline the materials control division printed out the schedules and
ordering process, which later received full sup- faxed them out to our suppliers. At the other end,
port from the senior management of the company. when parts arrived at the gate, if the ASN had
Hence, the locus of motivation for EDI adoption already reached the materials handling system
can be classified as internal. via EDI when our staff can see the particular
The materials planning department was at- conveyance coming in, they can say - yes, I’ve
tracted to the novelty of EDI technology and got this conveyance…the screen’s already popu-
considered EDI technology to have the potential lated…we’ve received all those parts.
for bringing a reduction in data entry errors and
317
Organizational Motivation and Interorganizational Systems Adoption Process
The company streamlined its ordering process standardize and streamline internal operations
prior to introducing the traditional EDI system across its chapters worldwide. The migration to
(P5) as indicated by the senior analyst: the global MRP, however, instigated changes to
coding patterns and mailboxes in the company’s
…EDI implementation was preceded by the ex- EDI transactions with its suppliers. Thus, an
amination and enhancement of relevant business EDI upgrade was undertaken that called for a
processes. revision of coding schemes and mailboxes with
suppliers. At that time, the automotive company
The company organized training for its IT conducted a survey of its local suppliers to find
staff, which enabled them to build an electronic out more about their EDI capability. It identified
interface between the EDI system and the back-end that somewhere down the line its purchasing
materials planning systems and greatly facilitated department had “signed in” with suppliers with
the seamless exchange of MRS and ASN data no EDI capability whatsoever, as these suppliers
with its suppliers (P6). The company also took were delivering parts at a low cost. However,
a strong stance in support of forcing its suppli- the noncompliance of EDI by these small sup-
ers into joining the EDI network (P7). Suppliers pliers had an ill effect on the company that was
risked losing their business relationship with the not identified before. Therefore, bringing these
car manufacturer if they failed to adopt EDI, non-EDI enabled suppliers onto an EDI network
while potential non-EDI partners lost out in their presented an opportunity to obtain further ef-
competitiveness to the EDI-willing counterparts ficiency improvement.
in their bid to join the supply chain network. Sup- The automotive company further recognized
pliers had no choice but to join the network, which that many of the non-EDI-enabled suppliers were
eventually proved to be an expensive venture small companies with limited financial resources
for them, both in terms of their own investment and IT expertise. The company thus decided to
in EDI as well as technical proficiency required invest in Web-enabled EDI application but out-
to send and receive documents through the EDI sourced its development to a third-party service
network. Even though EDI had the potential to provider. Using the Web-based EDI systems, the
provide benefits to suppliers by bringing a reduc- company could then send MRS to the third-party
tion in transaction errors, no serious attempt was provider via a proprietary network. Suppliers
made by the company to promote EDI based on could then log in and view the list of MRS using
its technological novelty (P8). Rather, the com- a standard Web interface. The Web application
pany indicated that the failure of the suppliers to also allowed the suppliers to view a particular
comply with the company’s requirement of doing MRS, automatically convert it into an ASN, and
business via EDI would unfavorably affect their send it off to the service provider. Upon receiving
performance ratings. an ASN from the suppliers, the service provider
would then translate it into a traditional EDI format
• Stage 2: Adoption of a Web-based EDI and forward the EDI message to the automotive
system. company via the proprietary network. Thus, the
intent of the automotive company to invest in the
In the year 2002, the company decided to mi- Web-based EDI system was to realize further
grate to the global manufacturing resource plan- efficiency gains by encouraging the small suppli-
ning (MRP) system that had already been running ers to adopt an electronic medium. However, the
for about 20 years in its headquarters. This decision Web-based EDI was not considered as a source
was made due to its parent company’s desire to of competitive advantage nor was the system
318
Organizational Motivation and Interorganizational Systems Adoption Process
intended to enhance the company’s bargaining user friendly, Internet based, and required lower
power over the small suppliers. Hence, the com- subscription fees from suppliers. The Web-based
pany was still being driven by its techno-economic EDI eliminated the need for small suppliers to
leadership motivation although the circumstances possess a high degree of technical proficiency and
under which this motive was formed were differ- thus encouraged them to carry out transactions
ent from those in stage 1. with the automotive company electronically.
The automotive company framed an in-depth The introduction of the Web EDI system was
implementation plan in close collaboration with accompanied by a much more cooperative ap-
the third-party service provider (P1). It also proach from the automotive company. Apart from
conducted a cost-benefit analysis and decided investing in the development of the Web-based
to outsource the development of the system in solution, the automotive company did not issue any
order to minimize the development costs (P2). explicit threats to non-EDI suppliers. Moreover,
Furthermore, the company reviewed its internal technical assistance and guidance were offered to
operations after having undertaken the imple- the suppliers by the third-party service provider.
mentation of the Web EDI system (P3). It found In particular, as the translation of documents from
out that further manual work was reduced as the proprietary EDI network into a Web-based
non-EDI suppliers were now able to transmit docu- format and vice versa was being looked after by
ments electronically via the Web. The company the Web EDI provider, small suppliers subscribing
also integrated Web-based EDI systems with its to the Web services did not have to worry about
back-end systems to avoid manual intervention EDI codes and formats.
for triggering the exchange of MRS and ASN at
the company’s side (P4). C ase B : EDI Adoption in
The company did not streamline its order- Automotive Parts S upplier
ing process while introducing the Web-based
EDI system (P5) because the task of translating The automotive parts supplier has also under-
documents from EDI to Web formats and vice taken two distinct initiatives in adopting EDI
versa was now to be performed by the service systems. The first initiative was concerned with
provider. Therefore, the introduction of Web EDI introducing a DOS-based EDI system and the
services did not bring about any major changes second initiative focused on introducing a fully
in the internal business processes of the automo- integrated EDI system.
tive company as it continued to send and receive
documents in the usual EDI format. As the Web • Stage 1: Adoption of a DOS-based EDI
solution was actually developed by the third-party system.
service provider, the automotive company did not
conduct any training programs for its own person- In the early 1990s, the supplier was approached
nel. However, the company instructed the third- by a large automotive assembly company (i.e.,
party service provider to organize demonstration case A), which expressed its strong desire to be
programs and online training programs for the able to communicate with all its first-tier sup-
small suppliers to train their staff in operating pliers through EDI. The automotive assembly
the application (P6). company also asked the supplier to conduct EDI
The automotive company did not exert any transactions through its preferred third-party,
pressure on the small suppliers (P7). Instead, value-added network (VAN) provider, which it
it provided financial assistance to the Web EDI appointed to provide EDI communication support
provider to develop a Web-based solution that was for all its first-tier suppliers. The manufacturing
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Organizational Motivation and Interorganizational Systems Adoption Process
company further suggested that the supplier use no intention of investing more resources in an
its proprietary EDI format to exchange documents EDI project for further improvement.
with them through the preferred VAN provider. The supplier had a very low volume of EDI
Hence, the locus of motivation for EDI adoption transactions. It received only one weekly produc-
is external. The primary desire of the supplier tion schedule from its customer and in response
in adopting EDI was to comply with the strong sent back several ASNs to the customer. Therefore,
demand from its major customer (i.e., automotive senior management did not see any visible benefits
assembler company) that it receives documents that EDI integration could provide to the company.
in EDI format for the customer’s convenience. Hence, no electronic integration was established
The supplier expected that its compliance with between EDI and the back-end ERP system (P4).
the customer’s request would make them satis- The supplier also did not introduce any major
fied, and thus the supplier would be able to avoid changes to its existing supply chain management
any disadvantage caused by not adopting an EDI practices (P5) as a result of EDI adoption. Senior
system. Additionally, the supplier also wanted management did not perceive a need for process
to be seen as more responsive to its customer changes because EDI was not seen as a strategic
needs. Hence, developing an EDI capability was application nor did EDI help them to determine
considered to be the right option for building a how many of their filters were used in the produc-
“customer-oriented image” in the eye of the pow- tion line of the customer. The customer became
erful customers. Also, the EDI capability was not satisfied when they learned about the compliance
introduced to address supply chain inefficiency of the supplier in introducing the EDI system. In
problems from the supplier perspective. Hence, other words, EDI was basically regarded as a tool
the type of motivation for EDI adoption can be that helped the supplier to maintain good busi-
classified as sociopolitical in nature. Based on ness relations with the customer that requested
the aforementioned arguments, the EDI adoption EDI connectivity.
of the supplier at this stage can be considered to The supplier trained its IT personnel (P6)
represent an instance of the sociopolitical fol- which facilitated them in implementing EDI with
lower scenario. few difficulties. The training was provided by the
The supplier did not prepare an EDI imple- EDI vendor. Interestingly, neither the influential
mentation plan (P1) because it simply wanted to customer that requested EDI connectivity nor
comply with the customer’s request to adopt EDI the EDI VAN provided any training. Training
and hence considered it unnecessary to spend time was also given to the customer service staff; they
and effort in rigorous EDI project planning. The learned how to operate the EDI system in order
supplier also did not initiate a cost-benefit analy- to receive and print weekly production schedules
sis prior when introducing the EDI system (P2). and send ASNs.
Two reasons were identified: first, a DOS-based, The supplier did not put any pressure (P7) on
stand-alone EDI system was introduced—the the customer to expand the use of EDI in other
cost of which was less than $5,000, and this cost functional areas. Basically, the supplier adopted
was absorbed as a necessary IT operating ex- a conservative approach; it did not look at EDI
pense; second, the supplier had no expectations as a source of gaining economic advantage, and
of economic returns from its investment in EDI. consequently, did not take any initiative to use
Likewise, a post-implementation review of EDI EDI to share other important information with
was not initiated (P3) because such a review was the customer. This view is expressed by senior
considered as a waste of time as the supplier had business manager as follows:
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Organizational Motivation and Interorganizational Systems Adoption Process
Our management did not consider EDI to be these arguments, a decision was made to replace
a strategic application. Hence, we did not exert the aging DOS-based EDI system. A new EDI
any influence on the customer to use the system application was chosen from a vendor in the year
for sharing additional information with us. 2001 taking into consideration its integration
Proposition P8, which is about the promotion capabilities with the back-end ERP system and
of the IOS solution, was not examined because, as its user-friendliness. These observations show
argued in the previous section, it is not applicable that the locus of motivation for the new EDI
for sociopolitical followers. system is internal and the type of motivation
was techno-economic in nature. Hence, the EDI
• Stage 2: Adoption of a fully integrated EDI adoption at the second stage can be considered
system. to represent an instance of the techno-economic
leader scenario.
In the late 1990s, when the Y2K problem re- Prior to making a decision to adopt the new
ceived huge attention from the media and popular EDI system, the IT department conducted a for-
trade magazines, the senior management of the mal implementation plan (P1). The plan included
supplier took a fresh look at their existing portfolio preparing a detailed justification for the new EDI
of IT applications. In doing so, they became aware system, specifying a time frame for EDI imple-
of the difficulties encountered by the customer mentation, organizing a series of presentations by
service staff in dealing with the DOS-based, stand- four leading EDI vendors, and establishing criteria
alone EDI system. The EDI system was not user for evaluating rival EDI products. A cost-benefit
friendly and because it was not integrated with analysis was also conducted (P2), which took into
the back-end ERP system, duplicate data entry account potential immediate cost savings due to
was required, thus causing data inconsistency the elimination of data entry errors and reduction
problems. The management realized that the EDI in paper-based transactions. Upon deployment, a
system did not bring any economic benefits to the post-implementation review also took place (P3)
company other than complying with its customers’ involving discussing implementation problems
request. Around that time, a new, young, highly and identifying corrective actions. Following
educated and dynamic IT manager joined the the acquisition of the new EDI system, the IT
company and was soon appointed as the head of department spent the next 2 months integrating the
the IT department. The IT manager was familiar new EDI system with the back-end ERP system
with the notion of interorganizational systems. (P4). The integration began to yield benefits as
Thus, he brought in fresh ideas and explained to data entry errors and paperwork were reduced.
the senior management about how a fully inte- In addition, cost savings were also achieved by
grated EDI system could address their chronic being able to limit the number of administrative
data inconsistency problems. He suggested that personnel processing EDI documents.
the company needed to exploit the full potential The establishment of integration between the
of new generation EDI systems in trading with new EDI system and the back-end ERP system
their customers. The suppliers had about 500 small eliminated the need for the customer service staff
customers (which are basically retailers of spare to manually process EDI documents. However,
parts) located throughout the country. Electronic the new EDI system did not bring about additional
transactions, through the new generation of EDI changes to the supplier’s business processes (P5).
systems, with those customers had the potential The supplier faced difficulties in persuading the
to bring significant reduction in transaction costs automotive assembly companies to agree on a
and improve data accuracy. Being convinced of uniform standard for exchanging EDI messages.
321
Organizational Motivation and Interorganizational Systems Adoption Process
Consequently, considerable effort had to be de- those retailers are likely to achieve if they embrace
voted to the development of EDI templates and EDI. The supplier was also actively involved in
maps for each automotive assembly company. promoting the notion of doing business through
Furthermore, senior management did not per- EDI to the retailers (P8). It identified that one of the
ceive a need to improve their existing ordering barriers that was discouraging the small retailers
process. was the absence of a standard EDI format. The
The IT team attended a training program supplier then led an initiative to standardize EDI
organized by the EDI vendor that helped them formats for electronic transactions with retailers
to develop an electronic interface between the in the aftermarket. The managing director of
EDI system and the back-end ERP system (P6). the supplier was also involved at the executive
The cost of the training was absorbed as a part of committee level of the Australian Automotive
the EDI implementation project. No training was Aftermarket Association (AAAA).
offered, however, to the customer service people
because they did not need to view the EDI-based
documents. DISC USS ION
The supplier did not coerce the small retailers
into trading with them through EDI (P7). The sup- The motivations that led the automotive manu-
plier rather explained the possible improvement in facturing company to adopt EDI systems did not
data accuracy and savings in transaction costs that change during the course of the two stages. Its
Table 2. Outcomes of the propositions relating to IOS adoption processes initiated in case A
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Organizational Motivation and Interorganizational Systems Adoption Process
motivation in both stages remained techno-eco- be safely suggested that the logical arguments
nomic in nature. Thus, the automotive company used in developing these propositions were not
is classified as a techno-economic leader in both challenged in a broad sense.
episodes. By contrast, the motivations that in- Likewise, the outcomes of propositions of EDI
fluenced the automotive parts supplier to adopt adoption for the automotive parts supplier are
EDI systems changed over the course of time. In summarized in Table 3. All the research propo-
the first stage, the initiative to introduce a DOS- sitions appropriate to the sociopolitical follower
based EDI system originated from an influential scenario received full support in the first stage
customer and the supplier adopted EDI to make of EDI adoption. In the second stage, all but one
that customer happy. In the second stage, the op- proposition appropriate to the new techno-eco-
portunity of achieving efficiency gains using new nomic motivation scenario was supported.
generation EDI technologies inspired the supplier P5 did not receive support because the sup-
to embrace a fully integrated, window-based EDI plier failed to receive any cooperation from its
system. In the light of these observations, the sup- large customer, which pursued its own agenda
plier company was found to have migrated from of using proprietary EDI formats for competitive
the sociopolitical follower motivation scenario to reasons. This situational factor, however, needs
the techno-economic leader scenario. to be examined in other organizational contexts
The outcomes of propositions with regard to to find out whether it is unique to the automotive
EDI adoption at the automotive manufacturing industry segment.
company are summarized in Table 2, which shows An interesting finding is that the approach fol-
that a total of six research propositions out of lowed by the automotive company in diffusing the
eight have received full support at the first stage EDI innovation to its suppliers has shown some
of EDI adoption. Propositions P7 and P8 which differences between the two stages. In the early
did not receive empirical support however could stage, the company forced its suppliers to join the
be interpreted in terms of situational factors. For proprietary EDI network. However, during the
instance, the lack of EDI maturity and inadequate course of EDI implementation, the automotive
understanding of the assembling company about company became aware of the difficulties for the
suppliers’ difficulties in using EDI significantly smaller suppliers with data mapping and docu-
contributed to the assembly company’s strong ment standards, which caused great inconvenience
coercive stance for promoting EDI to its suppli- to the suppliers and acted in a cooperative way
ers. In the second stage, all but one proposition that is consistent with the predictions made by
were supported. Proposition P5, which is about the propositions for the techno-economic leader
introducing changes in existing business pro- motivation scenario. Its maturity in using EDI
cesses, was not supported because the company and the lessons learned from the initial stage
had already streamlined its ordering process helped the company in changing its attitude to-
when it introduced the traditional EDI system wards diffusing a new innovation with its supply
at the first stage. Hence, there was no need to chain members. The company thus paid greater
further alter the existing process. Interview data attention to providing a system that not only
concerning those propositions that did not receive improved its efficiency but also added value and
empirical support were revisited, and the devia- improved convenience to its suppliers. As such,
tions between the predictions of the propositions the company promoted the Web-enabled EDI
and actual experiences of the company could be through a cooperative approach and did not exert
satisfactorily interpreted in terms of situational any pressure on its suppliers so that the system
factors unique to this company. Therefore, it can made it easy for the small suppliers to establish
323
324
adoption in case B
electronic exchanges. This realization provided The implication is that it is possible to observe
support for the propositions 7 and 8 at the second variations in IOS adoption processes even within
stage of EDI adoption. one organization and such variations can be sat-
Finally, most of the activities undertaken by isfactorily explained in terms of the differences
the automotive company during the two stages in the organization’s motives for IOS adoption.
of EDI adoption were found to be consistent with In summary, the empirical findings of the case
the predictions shown in Table 1; thus providing companies together indicate that the predictions of
empirical support for the research proposition the IMM are independent of the nature of industry
that organizations tend to follow similar adoption from which case companies were selected, the
processes when they establish similar motiva- nature of company, and the position of company
tions for IOS adoption, despite differences in the within its supply chain. The findings reported in
circumstances within which the motivation was this article thus provide indicative evidence that
formed. Similarly, most of the activities performed the model of IOS motivation that was initially
by the automotive supplier during each of the two tested in the pharmaceutical industry applies
stages of EDI adoption are consistent with the to the automotive industry as well. The article
predictions shown in Table 1. This supports the thus contributes to the e-commerce and IOS
theory that organizations tend to characteristically literature by highlighting the role of motivation
follow different adoption processes when they as a determinant of IOS adoption processes. The
establish different motivations for IOS adoption, practical implication is that, by understanding
even when other aspects of the adoption situation their own motivations for IOS adoption, potential
are the same. These empirical findings thus offer IOS adopter organizations can obtain insights
broad support for the IMM model in the automo- about how to initiate adoption processes, which
tive industry context. in turn can bring a reduction in the uncertainty
associated with IOS adoption in organizations.
It is planned to extend this work in three ways.
C ONC LUS ION First, the IMM was applied to examine only two
cases. Thus, the findings reported in this article
This article has reported the experiences of two cannot be generalized for the entire automo-
members of a single supply chain selected from the tive industry. As such, these findings should be
Australian automotive industry and analyzed their treated with caution. Additional case studies are
EDI adoption initiatives in terms of the IMM. The required to find out whether automotive compa-
findings support the prediction that similarities in nies representing the techno-economic leader
IOS adoption processes observed in organizations and sociopolitical follower scenarios demonstrate
could be successfully explained in terms of their predicted differences in IOS adoption processes
corresponding similarities in motives for IOS as found in the participating two cases. Second,
adoption (i.e., the automotive assembler company the EDI adoption experiences of the participating
case), and different organizational motivations two companies represent instances of techno-
for IOS adoption projects lead to different IOS economic leader and sociopolitical follower mo-
adoption processes. These findings further dem- tivation scenarios. Hence, only part of the IMM
onstrate that even if an organization introduces framework has been evaluated in this article.
an IOS for a particular motive it is not necessary Therefore, the findings are still preliminary in
for it to cling to that motive for the adoption of nature. Further work is thus necessary to include
subsequent IOS projects. more cases from the automotive industry that
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Organizational Motivation and Interorganizational Systems Adoption Process
will serve as the instances of the remaining two Kaefer, F., & Bendoly, E. (2000). The adoption of
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Chapter XVIII
Inter-Organizational
E-Commerce in Healthcare
Services:
The Case of Global Teleradiology
Arjun Kalyanpur
Teleradiology Solutions, India
Firoz Latif
Teleradiology Solutions, India
Sanjay Saini
Harvard Medical School, USA
Surendra Sarnikar
University of Arizona, USA
Abstr act
Advances in healthcare information technology have enabled new models for electronic delivery of
healthcare services. In this article, we present the case of electronic delivery of radiological services
and describe the market-based and technological factors that have led to the development of Internet-
based service models for flexible delivery of radiological services. Specifically, we describe the techni-
cal, regulatory, and security issues that affect teleradiology and propose a service delivery model for
providing cost-effective and flexible radiological services.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Inter-Organizational E-Commerce in Healthcare Services
The continued wide-scale adoption of information In the past decade, several new businesses have
technology in the healthcare industry is facilitat- developed that deliver healthcare related services
ing the electronic delivery of healthcare related over the Internet. They can be broadly classified
services. Following the integration of medical into four different forms of e-health business (Par-
infrastructure with information and communi- ente, 2000). These include portal, connectivity,
cation technologies (ICT), patient-facing, and B2B, and B2C applications. Portal, connectiv-
inter-organizational healthcare services can now ity, and B2C commerce in healthcare typically
be delivered using Internet-based applications and involves either the provisioning of information to
e-commerce platforms. In order to understand the consumers via advertising supported Web sites, or
factors influencing the evolution of e-commerce the Web-based ordering services for prescription
models in healthcare services, we present the case drugs (Zehnder, Bruppacher, Ruppanner, & Hers-
of global teleradiology. berger, 2004). In B2B e-commerce, the healthcare
Teleradiology refers to the electronic transmis- industry is mostly focused on the procurement
sion of radiological images such as x-rays, com- and supply of medical devices and equipment
puted tomograms (CTs), and magnetic resonance (Arbietman, Lirov, Lirov, & Lirov, 2001; Smith
images (MRIs) across geographical locations for & Correa, 2005). The exchange of services has
the purposes of interpretation and consultation. been mostly limited to non-medical services such
The digital radiological images are typically as billing and claims processing.
transmitted using standard telephone lines, satel- The exchange of medical services over the
lite connections, or wide area networks (WANs). Internet has received little attention both in the
Teleradiology is an empowering technology and industry and in academic literature. However, re-
a facilitator for enhanced medical care. It enables cent advances and developments in the healthcare
a single radiologist to simultaneously provide industry and medical information technology are
services to several hospitals independent of their now enabling several new models for delivery of
location and allows the exploitation of global time medical services over the Internet (Siau, 2003),
differences to provide emergency night coverage primary examples of which include telemedicine
by personnel in a different time zone working a and teleradiology. In addition, initiatives on data
day shift. Additionally, the quality of care deliv- standardization and standardization of quality
ered by an alert physician working a day shift are also driving the development of outsourc-
is far superior to that provided by a radiologist ing-based models in the healthcare industry
who is up all night. In addition, teleradiology (Segouin, Hodges, Brechat, 2005). Following
also enables the delivery of subspecialty opinions the development of enabling technologies and
to remote locations, where otherwise expertise the emergence of favorable market factors for
is not available. In this article, we describe the medical service outsourcing, the outsourcing of
current state-of-art in teleradiology, the benefits medical services is now a major topic for discus-
of the clinical practice of teleradiology, and the sion and research (Wachter, 2006). Among the first
technical, regulatory, and security issues related applications of medical service outsourcing and
to teleradiology. We begin by discussing relevant offshoring is the teleradiology service, and is now
work in healthcare e-commerce and subsequently practiced by firms like NightHawk (http://www.
the evolution of global teleradiology. nighthawkrad.net/), virtual radiologic (www.
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Inter-Organizational E-Commerce in Healthcare Services
virtualrad.com), teleradiology solutions (www. & Sunshine, 2002), new technology, and insurance
teleradsol.com), etc. and regulatory changes have also contributed to
Although the concept of teleradiology was the growth and development of teleradiology. We
first tested and clinically utilized in the late briefly describe these factors next.
1950’s (Gershon-Cohen & Cooley, 1950), the
high cost of transmission and the variability in • Radiologist Staffing Shortage: A sig-
digital imaging protocols limited the widespread nificant shortage of radiologists became
adoption and application of teleradiology appli- apparent in the U.S. toward the turn of the
cations. However, the rapid progress in digital millennium, with a large cohort of senior
communication technologies and the development radiologists retiring from practice and train-
of efficient Internet-based software for image ing programs not having grown adequately
transmission, storage, and display in the 1990s to keep pace with the increased needs (Sun-
has significantly reduced the technical barriers to shine et al., 2004). In many other parts of the
teleradiology adoption. In addition to the previ- world, a similar shortage of trained/skilled
ous developments, the universal adoption of the radiologists exists. As might be expected in a
DICOM standard, as required by the ACR-NEMA time of staffing shortages, it is the night shift
(American College of Radiology and the National in the community hospital that is typically
Electronic Manufacturers Association), has en- hit the hardest, although academic depart-
abled the wide spread adoption of teleradiology ments also stand to benefit from having their
applications. off-hours/overflow work done remotely by
faculty based offshore (Kalyanpur et al.,
GLOB AL T eleradiology 2004).
• Increase in Imaging Volumes: The rapid
Today, teleradiology has become both global evolution of faster imaging technologies
and online. The precedent for globalization of such as multi-slice CT, faster MRI scan-
teleradiology was set by the information tech- ners, and sequences, coupled with an ageing
nology services industry, which has pioneered population in the U.S. has led to a consistent
the concept of the global office where the work per year increase in imaging volumes in
“follows the sun” (i.e., divisions in different time recent years. A recent survey of radiology
zones are connected over a WAN to provide a utilization in Medicare population indicates
24-hour workforce without the need for having a 13% increase in the utilization of radiologi-
individuals to work a night shift at any location). cal imaging (Martin et al., 2003).
Extended to teleradiology, this means that the • Increase in Trauma Imaging Utilization:
interpreting radiologist for a given hospital can The development of newer applications of CT
potentially be located anywhere on the globe and in the emergency setting has necessitated a
day-night time differences can be exploited to staff large increase in 24-hour radiologist cover-
the emergency room (ER) night shift. A paper age at hospital emergency rooms (Spigos,
published by Kalyanpur, Weinberg, Neklesa, Freedy, and Mueller, 1996). In addition,
Brink, and Forman (2003) from Yale University the Health Care Financing Administration
showed that this was both technically and clini- (HCFA) requires that in order for the services
cally feasible (Kalyanpur et al., 2003). to be billable, overnight coverage for radio-
Several market-based factors such as staffing logical services has to be provided by a fully
shortages (Sunshine, Maynard, Paros, & Forman, trained and certified radiologists, rather than
2004), increases in imaging volumes (Bhargavan residents/trainees (Federal Regulation 60:
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Inter-Organizational E-Commerce in Healthcare Services
63124). This has resulted in a large increase like a locum relationship. The radiology group
for overnight radiologist services. then reimburses the teleradiology provider at a
predetermined rate for the preliminary emergency
A S ervice Delivery Model for report provided by the latter and then bills the
T eleradiology insurer for the final read that the former performs.
By integrating a workflow system with the remote
Recent advances in information and communi- teleradiology service, all the previous payment,
cation technologies such as Web services and billing, and routing services can be automated.
workflow technologies enable new extensions In addition to automating the billing, payment,
to teleradiology that facilitate the delivery of ra- and routing services, an Internet-based service
diological services across various time zones and delivery model enables the delivery of radiological
geographical regions. The foremost application services to emergency departments, large hospi-
of teleradiology is in the emergency setting. In tals, and remote rural clinics. We further describe
emergencies, teleradiology facilitates a prompt these application areas next.
response by bringing the emergently performed
images to the off-site radiologist that allows for • Emergency teleradiology services: Telera-
timely diagnosis and the timely administration diology within the U.S. led to the develop-
of appropriate treatment. ment of the “nighthawk” concept wherein a
However, using secure Internet-based commu- radiologist is able to simultaneously provide
nication mechanisms and workflow technologies, services to multiple hospitals via teleradiol-
several new applications of teleradiology can be ogy links to a central reading facility (often
developed. An overview of the service delivery the radiologist’s home). This enables a single
model is presented in Figure 1. A key feature of radiologist to simultaneously staff the night
the model is an e-commerce platform consisting of shift at multiple hospitals. The process is
payment, communication, and workflow services. cost-effective to hospitals, as the need to
Under typical current arrangements for emergency recruit night shift personnel is minimized.
teleradiology, the radiology group outsources its • Radiology to remote locations: Teleradiol-
night calls to a teleradiology provider, somewhat ogy also enables the provision of radiologi-
Payment, Communication
& Workflow Services
331
Inter-Organizational E-Commerce in Healthcare Services
cal services to remote locations where the together with standards for imaging and systems/
technical infrastructure for radiological procedures for security and contingency practices
scanning exists, but a radiologist is not complete the technical aspects of teleradiology.
available on site. Field studies indicate that These are further discussed in the following
teleradiology implementations at rural hos- sections.
pitals have been highly successful and cost-
effective in providing radiological services Picture Archiving and
even in real-time situations and have lead to C ommunications S ystem
improved patient care (Franken et al., 1995;
Lee et al., 1998). An efficient Web-based PACS is the cornerstone
• Optimization of workflow: Teleradiology of a clinical teleradiology practice. PACS is the
also increases the efficiency of a radiologist information system used for the acquisition,
by ensuring that he or she spends the most storage, communication, archival, viewing, and
part of his or her time delivering quality manipulation of radiological images and related
care to the maximum number of patients. data. We provide a brief discussion on each of
This is achieved by bringing the images these components next.
to the radiologist rather than vice versa,
thereby saving physician commuting time • Acquisition devices: Acquisition devices
and increasing the range and reach of the are modalities with digital output capabili-
radiologists’ expertise. Within large radiolo- ties or devices such as frame grabber and
gist groups servicing multiple hospitals and digitizers that convert the analog output from
imaging centers, teleradiology also permits imaging modalities to a digital format.
the optimal distribution of work based on • Storage: The storage components in a PACS
need and the availability of radiologists. system include both short-term as well as
• Subspecialty consultations: Teleradiology long-term archival solutions. This allows
enables the wider availability of subspe- radiologists to have easy access to relevant
cialty consultations wherein images of a prior studies for comparison. Typical ra-
specific body region/modality need to be diological images range from 0.5MB to 4
referred to the radiologist with expertise in MB or higher in size and depending on the
the interpretation of that type of study. Past number of images storage requirements can
studies indicate that opinions of subspecialty run to several gigabytes of storage per month.
radiologists obtained through teleradiology Since long-term archives do not require
have resulted in significant improvements instant accessibility, optical disks or tape
in the quality of patient care (Franken et al., drives could be used for this purpose. The
1997; Kangarloo et al., 2000). duration for which images need to be stored
is dependent on the image type and varies
T echnical R equirements for from organization to organization. In the
T eleradiology emergency setting, images are not usually
stored for longer than 30 days. However, if
The key components of a teleradiology system outpatient imaging is being performed where
include a picture archiving and communications comparisons are required, longer periods of
system (PACS), a radiology information system storage may be necessary.
(RIS), and a reliable and secure high-speed con- • Communication: PACS requires high-
nectivity between the remote sites. These put speed connectivity to enable rapid transfer
332
Inter-Organizational E-Commerce in Healthcare Services
of images to viewing workstations over LAN invoicing, etc. At teleradiology solutions, a RIS
and WAN (the latter is what constitutes tele- has been developed by an in-house software de-
radiology). Transmission of images is based velopment team to meet the requirements of an
on protocols of imaging standards called offshore teleradiology practice.
DICOM. Transmission of non-image data
like text uses HL7 standards. We further C onnectivity R equirements
discuss DICOM and HL7 in later sections.
• Software: Image viewing and manipulation An ideal connectivity solution for teleradiology
software are most often an integral part of providers includes dedicated commercial broad-
PACS. Image viewers can be on a diagnostic band connection. The high-speed connections
workstation, review workstation, or could allow teleradiology service providers to serve
be done utilizing a Web-based module. Di- clients half way around the globe, with report turn-
agnostic workstations are high-end systems around times comparable or even superior to the
with high-resolution flat panel displays while ones from local radiologists. A single radiologist
standard desktop PCs can be used as review working from home may use DSL connectivity,
workstations or as Web viewers. provided adequate throughput is confirmed prior
• Image Compression: Given the large file to clinical use. For example, a single ultrasound
size of typical radiological images, an impor- image would take about 2 seconds to transfer over
tant feature required facilitating rapid image a typical DSL connection; however, larger plain
transfer and throughput in teleradiology is film images can take between 1 and 4 minutes to
compression. Compression algorithms used transfer. Apart from bandwidth, one would also
may be industry standard like JPEG 2000 require other networking components such as
or could be proprietary to the vendor. It has routers, firewalls, VPN concentrators, and intru-
been noted that compression settings of up sion detection and prevention systems.
to 10:1 can be tolerated in clinical telera- As the service being provided is a clinical
diology without the compromise or loss of service, typically in the emergency setting, a
clinically relevant data, for review of CT high level of communication between the site of
images (Kalyanpur, Neklesa, Taylor, & Daft- origin and interpretation of the images is manda-
ary, 2000). In the case of plain radiographs, tory. This involves the utilization of fax systems
even higher settings may be tolerated. capable of handling high volume data, direct
telephonic contact and video and teleconferenc-
R adiological Information S ystems ing facilities.
333
Inter-Organizational E-Commerce in Healthcare Services
and administrative data. Using HL7 compatible the HIPAA covered entities to choose solutions
software streamlines the workflow considerably. based on their specific requirements. Technical
For example, if PACS and RIS of a teleradiol- safeguard standards include access control, audit
ogy practice are HL7 enabled, as soon as a new controls, data integrity, person or entity authen-
study is received by the PACS, a new order can tication, and transmission security. Our in-house
be created on the RIS using patient demography developed RIS solution (Tele-RIS) is used as a
and study details from the DICOM file, thereby case in point here to illustrate/demonstrate how
eliminating duplication of work. it complies with the above standards.
Access control mechanisms are used to en-
S ecuring Patient Data sure that a person or software can only access
and modify resources for which the person is
Teleradiology providers are covered under the granted authorization. Access controls standard
Health Insurance Portability & Accountability require the implementation of several features
Act (HIPAA) and therefore need to implement ad- such as unique user identification, automatic
equate privacy and security practices as protected logoff, and data encryption procedures. In ad-
health information (PHI) and electronic protected dition, the following functionality also needs to
health information (EPHI) are transmitted over be implemented:
public networks on a regular basis. While offshore
teleradiology providers are not required to comply • Emergency access procedure: This imple-
with HIPAA laws, the HIPAA act requires that mentation specification requires a covered
“covered entities execute contracts that consist entity to establish procedures to retrieve
specific provisions for protection, use, and dis- EPHI during emergencies. Tele-RIS has a
closure of health information” (Hilger, 2004). provision for adequate backup for power
The privacy rule deals with all forms of patients’ or network outages, but in case of a total
protected health information, whether electronic, outage, a backup procedure for the entire
written, or oral, while, the security rule covers only workflow from order entry to report dis-
protected health information that is in electronic tribution is well defined. Operating from
form, including EPHI that is created, received, different geographical locations also helps
maintained, or transmitted. in dealing with contingencies.
With the availability of a large number of • Audit controls: Are useful for recording
commercial off the shelf network security so- and examining information system activity,
lutions and technical safeguards, building and especially when determining if a security
managing a secured network are relatively easy violation occurred. Any addition, deletion,
to implement. However, unauthorized access to or remarkable modification on Tele-RIS is
patient data due to administrative breaches are logged for audit purposes.
difficult to monitor and implement, and hence the • Data integrity: Data could be altered
bulk of the HIPAA privacy rules have to do with during transit or in storage. “EPHI that is
administrative and physical safeguards. These improperly altered or destroyed can result in
breaches can only be prevented by educating clinical quality problems for a covered en-
employees about privacy and security practices tity, including patient safety issues” (Health
followed by the organization and ensuring that Insurance Portability & Accountability Act).
these practices are implemented. This could happen by both technical and
The security rule does not prescribe any specif- non-technical sources. A user can change
ic technologies--being technology neutral allows the data, accidentally or maliciously. Tele-
334
Inter-Organizational E-Commerce in Healthcare Services
RIS addresses this problem using audit logs state-wise licensing requirements and board
and techniques like versioning and digital certifications, a hospital appointment for
signing. the consulting radiologist with the client
• Person or entity authentication: Authen- hospital is necessary for providing radio-
tication involves confirming that users are logical services. The current regulatory
who they claim to be. Tele-RIS uses a user- and credentialing structure is designed for
name/password combination for authentica- a physical presence-based delivery model
tion. Many applications now incorporate the of radiological services, and needs to be
use of biometrics for authentication. redesigned for remote radiological or medi-
• Transmission security: This standard cal service delivery to develop.
requires a covered entity to “Implement • Malpractice liability: The medical mal-
technical security measures to guard against practice liability laws differ from state to
unauthorized access to electronic protected state and its implications to the practice
health information that is being transmitted of telemedicine are not clear. In addition,
over an electronic communications network” malpractice claims could also arise from
(Health Insurance Portability & Account- improper use of equipment and errors in
ability Act). data transmission. For a detailed discussion
on the legal issues related to the practice of
B arriers to Adoption telemedicine and teleradiology, the reader
is referred to Gantt (1999).
Although teleradiology provides several benefits • Billing and reimbursement: Although tele-
and can result in improved patient care and the radiology consultations are now eligible for
technology exists for the large scale implemen- reimbursement under Medicare, HFCA rules
tation of Internet-based radiological services, limit the eligibility to patients who reside in
several barriers exist in the healthcare services a designated health professional shortage
industry that prevent the wide adoption of Internet- area (HPSA). In addition, regulations exist
based radiological and medical service delivery. that prevent the billing of Medicare claims
We briefly discuss these factors next. outside of United States, thus preventing
the offshore reading services for Medicare
• Technology: Although the technological related cases.
capability to enable the delivery of medical • Health Insurance Portability & Account-
services exists, the availability of the technol- ability Act: The confidentiality and security
ogy and trained technicians to operate them of patient information when transmitted
is a major barrier to wide-scale adoption. For across public networks is of major concern
example, the availability of reliable Internet during the implementation of teleradiology
connections in remote locations is a major solutions. Adequate safeguards need to be
barrier to the successful implementation of implemented in order to prevent unauthor-
teleradiology and telemedicine projects. For ized access to patient information at both
a detailed discussion on the technological local and remote locations. In addition to
barriers to telemedicine, please refer to Paul, textual data, new encryption mechanisms
Pearlson, and McDaniel (1999). need to be implemented to secure image
• Credentialing: A major impediment to the data while maintaining their reliability (Cao,
rapid adoption of teleradiology services is Huang, & Zhou, 2003).
the credentialing process. In addition to
335
Inter-Organizational E-Commerce in Healthcare Services
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375
Mehdi Khosrow-Pour, DBA, received his Doctorate in Business Administration (DBA) from the
Nova Southeastern University (FL, USA). Dr. Khosrow-Pour taught undergraduate and graduate infor-
mation system courses at the Pennsylvania State University – Harrisburg for 20 years where he was the
chair of the Information Systems Department for 14 years. He is currently president and publisher of IGI
Global, an international academic publishing house with headquarters in Hershey, PA and an editorial
office in New York City (www.igi-global.com). He also serves as executive director of the Information
Resources Management Association (IRMA) (www.irma-international.org), and executive director of
the World Forgotten Children’s Foundation (www.world-forgotten-children.org). He is the author/editor
of over twenty books in information technology management. He is also the editor-in-chief of the Infor-
mation Resources Management Journal, the Journal of Cases on Information Technology, the Journal
of Electronic Commerce in Organizations, and the Journal of Information Technology Research, and
has authored more than 50 articles published in various conference proceedings and journals.
***
Thomas Abraham is a professor and chair of the management department at Kean University. He
received his PGDM (MBA) from the Indian Institute of Management, Bangalore and his PhD from the
University of Massachusetts. He is a member of the New Jersey chapter of the Society for Information
Management (SIM) and the association for information systems (AIS). His research interests include
global supply chains and MIS education. He has been a consultant at various companies including Sony
and BMG and his research has appeared in several journals.
Andreas Aresti is a graduate from the computer engineering and informatics department of the
University of Patras. His research interests focus on algorithms and techniques for personalized recom-
mendations in e-commerce systems and his diploma thesis dealt with the application of web mining
techniques on a pilot e-shop’s usage data for the production of recommendations.
Jeff Baker is a doctoral student in information systems and quantitative sciences at the Rawls Col-
lege of Business Administration at Texas Tech University. His research interests include electronic
commerce, visualization of multidimensional datasets, information systems strategy, and information
technology tasks during corporate acquisitions.
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
About the Contributors
Glenn J. Browne is an associate professor and the Wetherbe Professor of Information Technology at
the Rawls College of Business Administration at Texas Tech University, where he is also director of the
Institute for Internet Buyer Behavior. His research focuses on cognitive and behavioral issues in infor-
mation requirements determination, systems development, e-business, and managerial decision making.
His articles have appeared in Management Science, the Journal of Management Information Systems,
MIS Quarterly, Organizational Behavior and Human Decision Processes, and other journals.
Christine V. Bullen joined Stevens Institute of Technology in August 2002, where she is coordinator
for strategic issues in IT and director of the IT outsourcing concentration. Her current research focuses
on IT workforce trends and the impacts of sourcing practices. Bullen was a distinguished lecturer at
Fordham University and for 17 years she was the assistant director of the MIT Center for Information
Systems Research where her research focused on strategic planning for the IT function, the organizational
impact of IT, and the launching of the concepts of critical success factors and IT strategic alignment.
She received her MS in Management from the MIT Sloan School and will shortly be awarded the PhD
degree from Stevens Institute of Technology.
Teuta Cata is an assistant professor of MIS at Northern Kentucky University. She completed her
PhD in MIS at the University of Nebraska-Lincoln. Her teaching and research interests include e-com-
merce in the financial industry, global IT, outsourcing, and enterprise solutions. Her papers have been
published in several journals, and many research papers have been presented at national conferences.
Qimei Chen is an associate professor of marketing in the Shidler College of Business at the University
of Hawaii at Manoa and an advisory professor at Fudan University, Shanghai, China. She received a
BS in literature from Nanjing Normal University (JiangSu, China) and a MA and a PhD in mass com-
munication from the University of Minnesota, Twin Cities. Her research interests include advertising
effectiveness, online/offline consumer behavior, and innovation/knowledge. She has published in journals
such as Journal of Advertising, Journal of Advertising Research, and Journal of Retailing.
Sandy Chong, PhD in information systems, is a lecturer in the School of Marketing at the Curtin
University of Technology. She conducts research in the area of innovative business and technology adop-
tion strategies, Web-based social marketing, business process management, collaborative organisational
structures, costing model for IT procurement, as well as sustainability in supply chain management. She
376
About the Contributors
has presented papers at major conferences, and her research appears in information systems, market-
ing, and global business management journals. Her industry experience includes strategic marketing
management in the credit card sector, advertising, consultancy and quantitative market research.
Letha H. Etzkorn is an associate professor in the computer science department at the University of
Alabama in Huntsville. Her primary research interests are in software engineering (including program
understanding, object-oriented software metrics, and artificial intelligence applications to software
engineering) and mobile agents. She has a bachelors and masters degree in electrical engineering from
the Georgia Institute of Technology, and a PhD in computer science from the University of Alabama
in Huntsville.
Kevin Gallagher is an assistant professor in the business informatics department in the College
of Informatics at Northern Kentucky University. He holds a PhD in management information systems
from the Weatherhead School of Management at Case Western Reserve University in Cleveland, Ohio.
Before his career in academia, he worked as an IT manager and consultant. His teaching, research and
consulting interests include IT strategic planning, business agility, organization design, and workforce
development.
Edward J. Garrity is professor of information systems in the Richard J. Wehle School of Busi-
ness at Canisius College in Buffalo, New York. He holds a PhD in MIS and an MBA from the State
University of New York at Buffalo. He has published research in a number of IS journals and also has
co-authored a book of readings entitled Information Systems Success Measurement, published by Idea
Group Publishing. His current research interests are system dynamics and systems thinking, informa-
tion systems development issues, information systems success measurement, and the design of business
and management systems.
Robert Hinson is a senior lecturer at the University of Ghana Business School. He is also studying
for a doctoral degree at the Centre for International Studies in Aalborg University in Denmark under the
supervision of Professor Olav Jull Sorensen. He has had papers accepted for publication in journals like
the Journal of Business and Industrial Marketing, Journal of African Business, Management Decision
and the Place Branding Journal.
Robert Johnston, BSc(Hons), MSc, PhD is an associate professor in the department of information
systems. His research areas are electronic commerce, supply chain management and theoretical foundations
of information systems. He has over 100 refereed publications, many in leading international journals
377
About the Contributors
including Management Science, Journal of the Operational Research Society, OMEGA, International
Journal of Production Economics, European Journal of Information Systems, International Journal
of Electronic Commerce, Journal of Strategic Information Systems, and Supply Chain Management.
Before becoming an academic he was an IT consultant, designing and implementing about 25 large
computer systems in a number of leading Australian manufacturing companies.
Kiku Jones is an assistant professor of management information systems at The University of Tulsa.
Jones received her PhD from the University of Kentucky and is a member of the Association for In-
formation Systems, Decision Sciences Institute, and Information Resources Management Association.
Her research interests include knowledge management, electronic commerce, C2C commerce, trust,
and human computer interaction. Her publications have appeared in Knowledge and Process Manage-
ment, International Journal of Knowledge Management, Journal of Computer Information Systems,
International Journal of Information Management as well as in various conference proceedings.
Kate M. Kaiser, associate professor of IT at Marquette University, researches future IT skill needs
and the impact of offshore outsourcing from Ireland, Russia and India through research grants from the
Sloan and 3M Foundations. Kaiser received her MBA from Kent State University and her PhD from
the University of Pittsburgh.
Arjun Kalyanpur is CEO of Teleradiology Solutions, Bangalore. He obtained his medical educa-
tion and initial radiology training from the All India Institute of Medical Sciences, New Delhi. He then
obtained training in radiology at the Cornell University Medical Center in New York and at the Yale
University School of Medicine, New Haven, Connecticut, leading to certification by the American Board
of Radiology. In 1999, Dr. Kalyanpur founded Teleradiology Solutions, which currently provides online
diagnostic teleradiology reporting services to over 50 hospitals and clinics in the U.S., Singapore and
India. Dr Kalyanpur continues to be on the faculty at Yale University and has published several research
papers in the field of teleradiology.
Mira Kartiwi is a PhD student in information systems at University of Wollongong. Her research
interests include e-commerce, SMEs, women in IT, and IT in developing country. She has published
several articles on proceedings and journals. She currently teaches at department of information systems,
International Islamic University, Malaysia.
Rick Kazman is a professor in the Shidler College of Business at the University of Hawaii at Manoa
and a visiting scientist at the software engineering Institute of Carnegie Mellon University. Kazman
received a BA (English/music) and M.Math (computer science) from the University of Waterloo, an MA
(English) from York University, and a PhD (computational linguistics) from Carnegie Mellon University.
His research interests are software architecture, human-computer interaction and information retrieval.
Kazman is the author of over 100 papers, and co-author of several books, including “Software Archi-
tecture in Practice,” and “Evaluating Software Architectures: Methods and Case Studies.”
378
About the Contributors
Yong Jin Kim is associate professor of management information systems at Sogang Business School
and the School of Management at the State University of New York at Binghamton. He holds a PhD
in MIS from the State University of New York at Buffalo. He participated in large IT consulting and
development projects. His research interests are in knowledge management and innovation, IS success,
e-commerce, and information technology valuation. He has published papers in outlets such as MIS
Quarterly, Communications of the ACM, Decision Support Systems, International Journal of Informa-
tion Management, Information Systems Frontiers, and Knowledge and Process Management. He also
has published book chapters on IS Success and e-learning.
Firoz Latif is the senior manager for IT at Teleradiology Solutions. He has been working in the
healthcare domain for over 3 years, mainly focusing on areas related to radiology like DICOM, PACS and
RIS. He has also been involved in infrastructure management and security compliance at Teleradiology
Solutions. He holds a bachelor’s degree in instrumentation and electronics engineering.
Dahui Li is an assistant professor of MIS at University of Minnesota Duluth. His current research
areas are business-to-consumer relationships, IT innovation and diffusion, and online communities.
His articles have appeared in International Journal of Electronic Commerce, Journal of the Associa-
tion for Information Systems, Decision Support Systems, Journal of Computer Information Systems,
and other journals.
Robert MacGregor is an associate professor in the School of Information Systems and Technology
at the University of Wollongong in Australia. He is also the former head of discipline in information
systems. His research expertise lies in the areas of information technology (IT) and electronic com-
merce (e-commerce) in small to medium enterprises (SMEs). He has authored a number of journal and
conference publications examining the use and adoption of IT in SMEs. Along with Lejla, MacGregor
was the recipient of the 2004 Australian Prime Minister’s Award for Excellence in Business Community
Partnerships (NSW). MacGregor is also the founding editor of the Australasian Journal of Information
Systems and was conference chair of the Australian Conference of Information Systems in 1992. In his
spare time, MacGregor writes music. His most recent work is the symphony Alba.
379
About the Contributors
Ross A. Malaga received his PhD in 1998 from George Mason University. He is currently an as-
sociate professor of management and information systems in the School of Business at Montclair State
University. His research focuses on search engine optimization, online auctions and electronic commerce.
He has published articles in Communications of the ACM, Decision Support Systems, Journal of Orga-
nizational Computing and Electronic Commerce, Electronic Commerce Research, and the Journal of
Electronic Commerce in Organizations. Malaga serves on the editorial review board of the Information
Resources Management Journal and the Journal of Electronic Commerce in Organizations.
Penelope Markellou is a computer engineer and researcher in the computer engineering and in-
formatics department at the University of Patras. She obtained her PhD in techniques and systems for
knowledge management in the Web (2005) and her MSc in usability models for e-commerce systems and
applications (2000) from the above University. Her research interests focus on algorithms, techniques
and approaches for the design and development of usable e-applications including e-commerce, e-learn-
ing, e-government and business intelligence. She has published several research papers in national and
international journals and conferences and is co-author of two books and eight book chapters.
Ioanna Mousourouli is a graduate computer engineer from the computer engineering and informat-
ics department of the University of Patras. Currently is a postgraduate student at computer science. Her
research areas are personalization and recommendation techniques in e-business and e-learning systems,
information retrieval techniques and Web usage mining techniques in adapting content and structure.
Joseph B. O’Donnell, PhD, CPA, is currently an associate professor of accounting information sys-
tems at Canisius College. He holds a PhD and MBA from the State University of New York at Buffalo
and an undergraduate degree from the University of Notre Dame. He formerly worked as a systems
consultant and auditor for an international accounting firm. He has published articles in the Journal of
Marketing for Higher Education, Review of Business Information Systems, The CPA Journal, Journal
of College Teaching and Learning, along with other journals. His research interests include diffusion
of innovation, continuous auditing, e-commerce, and accounting information systems education.
Anthony M. Orme is an assistant professor at Athens State University in Athens, Alabama. His
primary research interests are in software engineering (software metrics), distributed systems, and
knowledge engineering. He received his PhD in computer science from the University of Alabama in
Huntsville.
A.B. Patki obtained his MTech from Indian Institute of Technology (IIT), Kharagpur in 1975. Pres-
ently, he is working as Scientist —G with the department of information technology (DIT), Government
of India. He has been a referee for IEEE Transactions on Reliability for over twenty years. His research
areas include soft computing, software engineering and cyber forensics & security. He has been trained
in VLSI Design at Lund University, Sweden and Mentor Graphics, USA. He holds a copyright for FU-
ZOS©- Fuzzy Logic Based Operating Software. His hobbies include Hindustani music, homoeopathy
and vedic studies.
Tapasya Patki is a final semester student of BTech (computer science and engineering), in Maharaja
Surajmal Institute of Technology, affiliated to Guru Gobind Singh Indraprastha University, New Delhi.
380
About the Contributors
She has an internship experience of over four months at the department of information technology,
Government of India, where she specialized in applications of fuzzy logic and rough set techniques.
Her areas of interest include software engineering, artificial intelligence and bio-informatics. Presently,
she is exploring potentials of soft computing to knowledge management practices and software code
obfuscation. She is also a violin soloist and an amateur poet.
Graham Pervan is a professor at Curtin University of Technology in Perth, Western Australia, has
over 30 years experience in education, research, and practice in Information Systems and Information
Technology (IS/IT). He has published on various issues related to IS/IT management, electronic com-
merce and decision support systems in journals such as Journal of Information Technology, Decision
Support Systems, Information and Management, Journal of Computer Information Systems, Journal of
Group Decision and Negotiation, Journal of Research and Practice in IT, and Communications of the
AIS as well as most major conferences. He is the Asia-Pacific regional editor for the Journal of Informa-
tion Technology, the IT management editor for the Australian Journal of Management, and president
of the Australian Council of Professors and Heads of Information Systems.
Md. Mahbubur Rahim, BSc (civil engineering, BUET), MS (computer science, UPM), PhD (Mel-
bourne) is currently a lecturer at the Clayton School of Information Technology, Monash University,
Australia. Rahim has considerable international teaching experience and has published over 20 research
articles in leading IS/IT journals including IT & People, Behaviour & Information Technology, Infor-
mation & Software Technology, Information & Management, and International Journal of Information
Management. His research interests include e-business and IT adoption in organizations. He serves on
the review panel for Journal of IT Cases & Applications Research.
Cheul Rhee is currently a PhD candidate in the department of management science and systems at
University at Buffalo. He holds his bachelor’s and master’s degrees in agriculture and education from
Seoul National University. He has research interests in e-learning, knowledge management, virtual
communities, and e-business strategy.
Sanjay Saini is a professor of radiology at Harvard Medical School and serves as the vice chair for
finance in the Department of Radiology at the Massachusetts General Hospital. He is a specialist in
gastrointestinal radiology. He has degrees from Duke (AB), Tufts (MD) and MIT (MSc) and did his
post graduate training in radiology at the Massachusetts General Hospital in Boston.
G. Lawrence Sanders, PhD, is a professor of management science and systems in the School of
Management at the State University of New York at Buffalo. He has taught MBA courses in the Peoples
Republic of China and Singapore. His current research interests are in the ethics and economics of
software piracy, systems success measurement, and systems development. He has published papers in
outlets such as The Journal of Management Information Systems, MIS Quarterly, Information Systems
Research, the Journal of Strategic Information Systems, the Journal of Management Systems, Decision
Support Systems, Database Programming and Design, and Decision Sciences. He has also published a
book on database design and co-edited two other books.
381
About the Contributors
Pradipta Sarker is currently a research associate in the department of business information tech-
nology, RMIT University. He has received his PhD from Deakin University, Australia. His has also
published in e-commerce related journals.
Surendra Sarnikar is a doctoral student in MIS at the University of Arizona. He has an undergradu-
ate degree in engineering and a master’s in management information systems. His research interests are
in the area of healthcare data and communication standards, medical information filtering, and medical
event reporting systems. He has also presented papers on medical information filtering and information
distribution mechanisms at the Americas Conference on Information Systems.
Graeme Shanks is a professor and associate dean of research in the faculty of information technol-
ogy at Monash University, Australia. His teaching and research interests include information quality,
conceptual modelling, identity management, implementation and impact of enterprise systems, and
decision support systems. Graeme has published the results of his research in over 100 refereed journal
and conference papers. He is a member of several journal editorial boards, a member of IFIP WG8.3
Decision Support Systems, a fellow of the Australian Computer Society and was recently a member of
the College of Experts of the Australian Research Council.
Judith C. Simon is a professor of management information systems, director of the Center for In-
novative Technology Management, and co-director of the Center for Information Assurance at the Uni-
versity of Memphis. Her bachelors and doctoral degrees were received from Oklahoma State University,
and her MBA was earned at West Texas State University. Her research interests include information
security management and IT quality. She has written nine textbooks and published numerous articles
in academic journals. She also serves as membership chair for the Memphis Chapter of the Society for
Information Management.
Jaeki Song is an assistant professor of information systems and quantitative sciences at the Rawls
College of Business Administration at Texas Tech University. His research interests include electronic
commerce, web design, information systems strategy, and technology adoption. His research appears
in Management Science, Information and Management, IEEE Transactions on Professional Com-
munication, International Journal of Information Management, Information Systems Frontier, and
International Conference on Information Systems.
Olav Sorensen is a professor of international business at the Centre for International Studies in
Aalborg University in Denmark. He is widely published in prestigious journals like the Journal of Busi-
ness and Industrial Marketing and Electronic Markets. Sorensen is also the author and editor of several
382
About the Contributors
seminal texts on internationalization, marketing and international business. Sorensen’s current research
interests encompass small firm internationalization, foreign direct investment, and e-business.
Athanasios Tsakalidis obtained his diploma in mathematics from the University of Thessaloniki,
Greece (1973), his diploma in computer science (1981) and his PhD (1983) from the University of Saarland,
Saarbuecken, Germany. His is currently a full professor in the computer engineering and informatics
department at the University of Patras and the r&d coordinator of the Research Academic Computer
Technology Institute (RACTI). His research interests include data structures, graph algorithms, com-
putational geometry, expert systems, medical informatics, databases, multimedia, information retrieval,
and bioinformatics. He has published several research papers in national and international journals
and conferences and is co-author of the Handbook of Theoretical Computer Science and other book
chapters.
James C. Wetherbe is the Stevenson Chair of Information Technology at the Rawls College of
Business Administration at Texas Tech University. He is the author of 21 books and over 200 articles
on systems analysis and design, strategic use and management of information systems, information
requirements determination, and cycle time reduction. He is quoted often in leading business and in-
formation systems journals, and was ranked by Information Week as one of the top dozen information
technology consultants.
Lai Xu is a senior researcher at SAP research, Switzerland. Previously, she worked as a senior re-
search scientist at CSIRO ICT Centre, Australia. She was a post-doctoral researcher at Organisation and
Information Group of the Institute of Information and Computing Sciences of the Utrecht University
(2004-2007), the Netherlands and Artificial Intelligence group of the department of computer science
of the Free University Amsterdam (2003-2004), the Netherlands respectively. She received her PhD in
computerized information systems from Tilburg University, the Netherlands in 2004. Her main research
areas are in process integration, multi-party process monitoring, web services and service-oriented ap-
plications, development method for product software. Her research has appeared in publications including
The European Journal of Information Systems, ACM SIGecom Exchanges, numerous IS conferences’
proceedings and book chapters.
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Index
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Index
E in-house IT 148–170
independent contractors (ICs) 155
e-business adoption 301–302 indexing
e-business triggers 294–310 Google 77–78
e-commerce 18, 19, 20, 22, 51, 52, 53, 66, 67, 171, MSN 75–77
172, 173, 174, 175, 176, 177, 178, 181, 184, Yahoo 75–77
185, 186, 187, 229–255, 256–276, 343, 350, Indonesia 256, 257, 258, 261, 262, 264, 265, 266,
355, 358 267, 268, 269, 270, 271, 275, 370
e-commerce in developing countries 260–262 information and communication Technology (ICT)
e-insurance 171–187 296, 299, 300, 303, 307
e-shop 51–68 information system outsourcing 173–174
ebXML 283–285 innovation diffusion theory (IDT) 4
electronic commerce (e-commerce) 1–17 instrument validation 238–239
electronic customer relationship management Integrated Web Information System Success Model
(ECRM) 30–38, 41–46 (IWISSM) 90, 91, 98, 100, 101
electronic data interchange (EDI) 277, 278, 282, Internet auctions 124–147
283, 284, 312, 313, 316, 317, 318, 319, 320, Internet technology framework 209–210
321, 322, 323, 325 interorganizational systems 311–327
Expedia.com 115 IOS motivation model (IMM) 311, 312, 313, 314,
extent of deployment 237–240 315, 316, 325, 326
isolated 278, 279, 280
F
isolation 190
facilitators 294–310 IS success 86–106
Fastparts.com 115 IT employment data 162–165
flow theory 86–106 IT skill categories 160–162
FORTRAN/LISP 221 IT skills 151–152, 165–166
fuzzy logic 212, 213, 219, 222, 223, 224, 225, 226,
227, 352, 362 K
knowledge process offshoring (KPO) 209, 210
G
Garrity and Sanders model 89 M
general-direct-sales (GDS) 107, 111, 112, 116, 117, machine intelligence quotient 213–214
118, 119, 120, 121 magnetic resonance images (MRIs) 329
general-intermediary-sales (GIS) 107, 111, 113, 116, managerial implications 245
117, 118, 119, 120, 121, 123 mobile/intelligent agent framework
Ghana 294–310 285–287
Ghana Export Promotion Council (GEPC) 294, 296, motivation 311–327
297, 303, 304, 306, 308 movie recommendation model 51–68
global sourcing of IT work 148, 149 MSN 71, 74, 75, 77, 78, 79, 80, 82
Google 71, 72, 74, 77, 78, 79, 80, 81, 82 MSN indexing 75–77
Google indexing 77–78 multi-party business collaboration 189, 190, 191,
193, 194, 195, 196, 198, 203, 204, 205
H
multi-party business collaboration modeling lan-
healthcare e-commerce 328–337 guage (MBCML) 196–198, 198–203
hospital information system (HIS) 333 multi-party collaboration interaction metamodel 198
multi-party collaboration
I commitment metamodel 197–198
multiplexing of BPO infrastructure 222–224
improving rankings 78–79
MyBestiPodStuff.com 70, 74, 77, 78, 79, 81
in-house 172, 173, 174, 175, 176, 177, 178, 179,
181, 182, 183, 184, 185
385
Index
386
Index
Y
Yahoo 71, 74, 75, 77, 78, 79, 80, 81, 82, 84, 371
Yahoo! Shopping 113–114
Yahoo indexing 75–77
387