SPECIAL SECTION: GLOBAL VS.
LOCAL ISSUES IN E-COMMERCE
A b s t r a c t
Development, Determinants of Diffusion, Appropriation of e-commerce.
The web is being heralded as a global
Keywords: Electronic Commerce, Globalization, Regions, Regional
marketplace, and globalization is seen
as one of the key drivers for the
diffusion of electronic commerce (EC).
In stark contrast to the enthusiasm for
a global electronic marketspace we
have collected empirical support for the
premise that much web-based commer-
cial activity is regionally focused. Based
on a brief introduction of the notion of
regions, we will use a reference model
for e-commerce in order to gain a rich,
multifaceted view of the regional di-
mensions of e-commerce.
Volume 9 (1/2): 1±6. www.electronicmarkets.org
A u t h o r
Copyright & 1999 Electronic Markets
Charles Steinfield (steinfie@pilot.msu.
edu) is a Professor in the Department of
Telecommunication at Michigan State
University. His research interests focus
on organizational impacts of electronic
commerce.
Stefan Klein (klein@wi.uni-
muenster.de) is a Professor at the
Department of Information Systems at
the University of Muenster, Germany.
His research interests focus on
electronic commerce and
interorganizational systems.
Article number = k010
Introduction
Local vs. Global Issues in Electronic Commerce
CHARLES STEINFIELD AND STEFAN KLEIN
INTRODUCTION
The web is being heralded as a global
marketplace causing the `death of dis-
tance' (The Economist). Globalization
is seen as one of the key drivers for
the diffusion of e-commerce: the glo-
bal hyper-media, computer mediated
environment enables companies to
address a global audience of (poten-
tial) customers. Transaction, search
and coordination costs are decreasing,
facilitating an extension of the regio-
nal scope of business activities. Even
highly specialized niche markets can
find a sufficiently large audience on
the web and companies expect to gain
economies of scale once their pro-
ducts and services are made available
globally.
The rhetoric suggesting that elec-
tronic commerce fosters global mar-
kets is convincing, and exerts a
powerful influence on the business
strategies of companies going online.
s Indeed, a recent article in The Econo-
mist proclaimed:
The Internet is affecting all businesses in
similar ways. Every industry, for example,
has suddenly become part of a global net-
work where all companies are equally easy
to reach. As a result of these changes,
many businesses that survived mainly be-
cause they were conveniently placed, or
because they provided information that
was hard to find, will soon have to find
some other raison d'eÃtre. (The Economist,
1997: [http://www.economist.com/
editorial/freeforall/14-9-97/ec4.html]
In stark contrast to this unbridled
enthusiasm for frictionless global mar-
kets is an alternative view that geogra-
phy and physical space are not
rendered irrelevant in electronic com-
merce. Indeed, several of the papers
in this theme section provide empiri-
cal support for the premise that much
web-based commercial activity is re-
gionally focused. Even The Economist
argues that `Geography has wormed
its way into cyberspace, using tools
such as sales tax, credit-card restric-
tions and shipping. Indeed, the main
justification for online malls today is
to group stores within a country to
spare locals such irritations' (The
Economist 1997: [http://www.
economist.com/editorial/freeforall/
14-9-97/ec1.html]. These are per-
haps the most obvious reasons why
geography still matters.
There are many reasons for the
continued vitality of regionally fo-
cused businesses on the web, includ-
ing:
· businesses within a region have a
greater ability to capitalize on
local expertise;
· within a region, businesses are
embedded in social networks facil-
itating trust;
· logistics costs for physical pro-
ducts are lower.
Based on a brief introduction of the notion of regions, we
will use a reference model for electronic commerce (e-
commerce) in order to gain a rich, multifaceted view of
the regional dimensions of e-commerce. The reference
model covers a market perspective (determinants of diffu-
sion and market structure impact) as well as an actor
perspective (technology trends and strategic potentials).
WHAT ARE REGIONS AND HOW DO THEY MATTER IN
E-COMMERCE?
While we forgo the attempt to define `regions' (the latin
origin of the word means rule or regime) we would like to
point to a few features or dimensions of regions: they have
a physical extension and (political) boundaries, a common
cultural heritage, and significant intra-regional commerce.
Although regions are sometimes referred to as supra-
national entities, e.g. the European Union or the Asian
region, we imply smaller units within states or in some
cases even cross-border areas, e.g. the so-called Euregios
in Europe. Moreover, we would like to include local issues
and locally operating companies.
Just as small and medium-sized businesses have been
recognized as important drivers for the development of
national economies, so have regions been identified as
important economic, political, cultural and social dwelling
grounds for individual companies and in particular inter-
organizational networks as well as partnerships between
public institutions, universities and research institutions
and private companies. Silicon Valley, Silicon Alley in New
York City, or the Italian Modena region are examples of
thriving conglomerates of different sizes, in some cases
only a part of a city or community, built upon positive
network effects and the collaboration of different stake-
holders and a sense of community Ð albeit loose Ð within
a geographical area.
In contrast to the dominating globalization perspective
of e-commerce, we want to emphasize a regional perspec-
tive:
· Can e-commerce succeed in a regional environment
with a regional focus?
· Moreover, does e-commerce facilitate regional eco-
nomic development and lead to a renaissance of
regional structures?
REGIONAL IMPACT THROUGH THE LENS OF AN
E-COMMERCE REFERENCE MODEL
The web is becoming the infrastructure for the informa-
tion society and has led to the creation of a global
marketspace for e-commerce. It has become the nucleus of
the promises and perils of the information society. It is the
link between technology developments and innovation on
one side and emerging business models on the other.
Figure 1 depicts a framework of core questions about e-
commerce (cf. Klein & Szyperski 1997) which we will
discuss in the context of our analysis of regional impacts
and/or regional dimensions of e-commerce:
1) Which are the technological drivers and to what
degree does e-commerce built on previous technolo-
gies?
2) What are the constituting elements of e-commerce?
3) What are the strategic implications for individual
companies?
4) What are the determinants of speed of diffusion and
proliferation of e-commerce?
5) What is the overall impact on market structures?
We address these questions below, pointing out how
local and regional factors are often intertwined with e-
commerce developments, shaping technological trends and
subsequent applications, and influencing its diffusion and
the resulting market structures.
TECHNOLOGY TRENDS, PERCEPTIONS AND
APPROPRIATION
The web has been conceptualized, designed and perceived
as a global network for information and knowledge
exchange. However, its meaning is still very much 'under
construction' (Falk 1998). Like other innovations and
technologies, the web has proven to be exceptionally
versatile and has been adapted and appropriated for many
purposes which have not been envisioned or intended.
The commercialization even runs contrary to the inten-
tions of some of the inventors; however, it was driven by
the fascination of a global reach, high hopes for profits
and the overall debate about globalization. Similar pro-
cesses of appropriation have taken place in numerous other
dimensions, such as:
· demography: while initially a medium for younger,
primarily male academics, the web has been appro-
tiv
e
rspec
l pe Strategic
Steinfeld and Klein Local vs. Global
a
ion potentials
Reg
Governance
Market
Determinants
EC applications
of diffusion
structure
impact
Infrastructure
Market perspective
Actor perspective
Technology
trends
Figure 1. Electronic Commerce Reference Model 2
 priated by many other demographic groups including
women, older people, less-educated groups, lower-
income groups, and so forth;
· communities: many different types of interest groups,
such as economic, political, religious, ideological, etc.,
have learned to use the web for their purposes;
· regions: in contrast to the global reach, regional
players have realized the opportunities of using the
web to facilitate or foster regional development and
coherence.
While the strength of global e-commerce is its decontex-
tualization, i.e. it does not matter who or where you are
or what equipment you use, as long as you take part in
business transactions, regionally focused of e-commerce is
embedded in and attempts to contribute to a dense
network of political, social, cultural, technical and eco-
nomic considerations. Figure 2 illustrates Ð from a
technical perspective Ð the breadth of emerging applica-
tions of information and communication infrastructures
which constitute the environment for e-commerce applica-
tions. Communication infrastructure development and
adequate access mechanisms, e.g. telecenters, have become
a precondition for regional economic development (see
Fesenmaier and van Es, and Damsgaard and Farhoomand,
in this issue).
Some of the broader information society initiatives
already have a regional scope, e.g. the Bangemann chal-
lenge is focusing on cities [http://www.challenge.
stockholm.se/] and the German Forum Info 2000 has a
working group on multi-media in regions and for local
communities [http://www.forum-info2000.de]. These in-
itiatives reflect a general political trend of shifting power
from the nation states in two directions: to supra-national
institutions, e.g. the European Union, and to the regions.
E-COMMERCE APPLICATIONS
Numerous examples show how e-commerce applications
can been successfully designed with and for a local or
Electronic Markets Vol. 9 No 1/2
Tele
Medicine
Telecommunication
Digital Home
Electronic Commerce
TeleWork
bus.-b. b- b-pub.
cons. sect.
Tele
Learning
Media, Digital Libraries
Entertainment
3 Figure 2. The Emerging Environment of Electronic Commerce
regional focus. A few examples as anecdotal evidence
follow:
The Electronic Mall Bodensee (EMB) is an electronic
mall with a regional focus, attempting to achieve a broad
coverage of regional, and cross-border, activities in the
Euregio Bodensee (Zimmermann 1997 [http://www.
emb.org]). Another metaphor to describe EMB is an
interactive daily newspaper with a regional focus which
includes everything from political and economic informa-
tion, (classified) advertisements, news about all types of
regional activities, etc.
Numerous cities or metropolitan areas have developed
extensive websites in order to facilitate economic develop-
ment and promotion (see, for example: [http://www.
region-frankfurt-rheinmain.de]). The many city websites
found in Lycos' City Guide [http://cityguide.lycos.com]
or Boulevards.com [http://www.boulevards.com] illus-
trate public and private attempts to exploit interest in a
specific geographical area for a variety of purposes.
TIScover is an example if a destination-oriented tourism
websites, attempting to market a tourist destination in a
comprehensive way and to facilitate cooperation among
the regional tourism suppliers [http://www.tiscover.org].
Many privately sponsored, regional entities use the web
to promote local or regional business, and foster the
growth of business-to-business networks. For example,
Schweizerischer Bauernverband (a Swiss farmers' associa-
tion [http://www.bauernverband.ch/] has created a re-
gional information platform to foster consumption of
regional products for ecological and quality reasons and
therefore establish an information link among customers
and suppliers in order to make existing preferences more
transparent. Other examples from the US include the
many state-oriented, but privately sponsored websites,
such as Vermont.com or Virginia.com, which serve to
showcase businesses in state-oriented malls, promote tour-
ism, provide news of interest to state residents, and
facilitate relocation through real-estate links and access to
relevant government services.
Some web-based businesses only make sense when
linked to a particular geographical context. For example,
grocery delivery services on the web generally require
connection to local grocery shops (HeikillaÈ, Kallio, Saar-
inen and Tuunainen 1998).
Tele Online newspapers usually direct large amounts of their
Politics content to local audiences or to those with some connec-
tion to the locality of the print version of the newspaper.
Hence, many of the services focus on businesses within the
Information region.
Society
Innumerable smaller businesses with a physical presence
Virtual in a town, city or region clearly cater to local consumers.
Communities They use maps to direct people to their stores or offices,
offer services (e.g. coupons, delivery, notices of local
events, reservations for in-store services) that are only
meaningful to those from the area, make general reference
to the local community on their website, show photos of
their physical structure to enhance recognition, and embed
their site with language and content that is more mean-
ingful to patrons from the area.
Collectively, these examples illustrate that websites can
be designed:
· with a focus on regional customers;
· for efficiency in a regional environment, e.g. logistics
issues for physical products may affect locational deci-
sions;
· to benefit from regional (social/economic/private-pub-
lic partnership, university-company partnerships) infra-
structures; and
· to facilitate regional collaboration (SchroÈter 1998).
STRATEGIES FOR DIFFERENT STAKEHOLDERS
As electronic commerce takes root, the underlying strate-
gic rationale varies depending on who the relevant stake-
holders are. Regional governments, vendors and
intermediaries, and customers may all infuse their strategic
behavior with geographical elements.
Strategies for Regions
One of the clearest manifestations of the role of geography
in electronic commerce is the way it is used to play out
economic competition among regions. Electronic com-
merce, built upon a robust telecommunications infrastruc-
ture, is seen as a critical means of establishing a
comparative advantage across many levels. Fesenmaier and
Es (this issue) emphasize the role that adequate Internet
access in general, and e-commerce in particular, can play in
helping rural regions compete with their urban counter-
parts. Damsgaard and Farhoomand (this issue) show the
extent to which Hong Kong views its electronic commerce
capability as central to its ability to compete with other
cities vying to be the gateway to Asia.
Regional economists have developed measures for the
attractiveness of regions, referring to a wide set of people's
preferences for jobs, housing, schooling, security, traffic
infrastructure, etc. Regions are starting to explore how
they can use the web to leverage existing strengths and
built new communities. Schuler (1996) discusses way to
develop sustainable communities and lists characteristics of
the new communities. Following this line of reasoning, we
suggest that:
Hypothesis 1. The use of regional positioning and the
comprehensive regional coverage of offerings can become
a key means of achieving competitive advantage in a global
economy (Porter 1990).
Hypothesis 2. There will be increasing efforts by policy-
makers within a locality to help organize their electronic
commerce capability, and offer an interface (e.g. business
directory, mall, etc.) that makes the regional aspect of
goods and services apparent to web consumers.
Strategies for Vendors or Intermediaries: Regional
Dimensions of E-Commerce Application Strategy
and Design
From the perspective of goods and services vendors, either
the producers or intermediaries such as resellers, a regional
orientation to electronic commerce is often mandated.
This is relevant not only for large national or multinational
businesses using the web to enter local markets without
the expense of a physical presence, but also for small, local
businesses attempting to reach beyond their own commu-
nity. As shown in the Bouwman case studies (this issue),
businesses and infrastructure providers have often found it
necessary to target consumers based upon geographically
defined customer segmentations. Language differences are
but one example of the need to adapt web offerings to
regional audiences. Businesses ignore local tastes and other
culturally defined preferences at their peril.
Hybrid physical and electronic structures represent
another strategy for electronic commerce vendors. The
Steinfield et al., paper (this issue) highlights numerous
ways that such hybrid approaches can compete effectively
with virtual web-based businesses lacking a physical pre-
sence in a market. The potential synergies to be gained
from virtual and physical hybrid structures should not be
surprising. The experience of `The Well', the famous
online-community in California, indicates that electronic
communication benefits a lot from face-to-face meetings
of the participants at some point (Hafner 1997). More-
over, recent social psychological research on Internet users
highlights the dangers of assuming that the Internet can
substitute for physical relationships (Kraut, Steinfield,
Chan, Butler and Hoag 1998a). Given the importance of
social relationships in economic exchange, we should
anticipate that physically based interactions could supple-
ment virtual ones (Granovetter, 1985; Kraut, Patterson,
Lundmark, Kiesler, Mukophadhyay and Scherlis 1998b).
These observations would suggest:
Steinfeld and Klein Local vs. Global
Hypothesis 3. Taking a local or regional focus can be a
success factor of e-commerce.
Hypothesis 4. Regional content in e-commerce helps to
foster regional cohesion. Regional content can include
such factors as: Local news, or links to local online news-
papers; and content related to regional or local cultural
heritage: language, history, legends, famous people or
places, etc.
Hypothesis 5. Hybrid strategies can help local physical
businesses maintain their strength in the region as they
compete with global e-commerce sources. 4
 Strategies for Customers
Customers' strategies are foremost reflected in their buy-
ing behavior. There is growing evidence that customers
are developing differentiated buying patterns: as far as only
price matters they are looking for best offers in a global
marketspace. For most purchases, however, more criteria
will be considered, such as quality assurance, reputation,
trust, a physical service infrastructure, etc. These criteria
can obviously be met in different ways, most people have
acquired ways to judge them in a regional setting. Indeed,
the global web may provide consumers with the product
information that then is fulfilled locally, as evidenced in
one Internet survey that found that the majority of web
shoppers preferred visiting the websites of stores that they
visit physically (GVU 1997).
To the extent that regional consumers realize that a
healthy range of economic activities contributes to the
sustainability and liveliness of the region infrastructure,
inter-regional competition and regional diversity, they may
pay specific attention to the web presence of local business.
These observations suggest that:
Hypothesis 6. Many customers will prefer hybrid strate-
gies for e-commerce, and will benefit from synergies
between physical and web presence.
Hypothesis 7. Price alone will not determine the purchas-
ing preferences of web consumers.
DIFFUSION OF E-COMMERCE
Regional specificities may explain the speed of diffusion of
e-commerce. Preissl, Haas and Rickert (in this issue) have
conducted a comparison of success factors for e-commerce
in the US and in Germany. While they mainly looked for
such tangible factors as the proliferation and usage fees of
communication infrastructures, they found a recurrent
pattern of cultural resistance or slow take-up of technical
innovations. Another cultural issue are different traditions
and habits of trading, such as preferences for mail order or
Electronic Markets Vol. 9 No 1/2
negotiating prices on a bazaar. These different traditions
will not only affect the speed of diffusion but also the
emergence and success of different business models of e-
commerce, such as electronic auctions.
Figure 2 illustrates that electronic commerce relates to a
wide set of application domains. Regional differences can
be described in terms of the selection, mix and weight of
these applications. Different profiles characterize different
ways of appropriating and embedding of e-commerce in a
regional environment. These observations suggest that:
Hypothesis 8. Regional differences can explain the vary-
5 ing success of e-commerce.
Hypothesis 9. Regional differences can explain different
rates of diffusion and different business models of e-
commerce or of IT appropriation.
IMPACT ON MARKET STRUCTURE AND REGIONAL
PARAMETERS
Electronic commerce has now become an important issue
on the agenda of regional policy-makers. Increasingly,
regional policy makers have become aware of the potential
impact of IT, and in particular e-commerce, on regional
(economic) development and revival. Lack of attention to
e-commerce by local or regional policy-makers can perhaps
have harmful effects on the regional economy. e-com-
merce might result in a net loss to the local economy if
people use the web to purchase from distant or entirely
virtual merchants, and local businesses fail to capture new
business on their websites. Facilitating local or regional e-
commerce growth therefore is no longer the domain of
national governments or supranational bodies (European
Commission 1996). We propose that:
Hypothesis 10. e-commerce is an innovation motor for
regional development and collaboration (reviving and
mobilizing in particular less-favored regions).
Hypothesis 11. e-commerce can become a formative
element for regional conscience and identity.
Hypothesis 12. e-commerce can foster regional trade and
welfare.
(IS and regional cohesion in: Building the European
Information Society for Us All Ð First Reflections of the
High Level Group of Experts)
CONCLUSIONS
We have suggested a conceptualization of local or regional
e-commerce as a form of commerce which is embedded in
the social, political, cultural, technical and economic
structures. It benefits from the regional fabric and will
affect local and regional structures for better or for worse.
We would like to highlight three core issues of the
regional perspective on e-commerce which need further
understanding and hence research:
`Regions Matter'
Technology has a profound impact on our perceptions of
time, distance and economics as well as personal values.
We would like to argue that while the web has led many
to appreciate the richness of a global dimension of
information, communication and commerce, it has also Ð
and perhaps in the course of personal encounters with the
opportunities and threats of globalization Ð reinforced
the understanding of the values and contributions of
regions and local infrastructures as an important nucleus of
personal identity, economic development and cultural
heritage.
`Globalization'
Although we have built a part of our argument on the
stylized contrast between local and global, we are well aware
that both dimensions can be developed concurrently and in
a way that one complements the other and both can benefit
from each other. However, there are a number of position-
ing and design issues to be solved before potential comple-
mentarities are actually deployed. Is it possible for e-
commerce businesses to have meaningful local intent, but
global reach? What factors are necessary for a local e-
commerce business to success globally, and vice versa?
The Regional and Local Fabric of Electronic
Commerce
The transformation of societies into information societies
yields high expectations and hopes for a better future. While
this future will gradually emerge, we are constantly design-
ing and redesigning the way business is conducted. Times of
change provide a unique opportunity to develop a deeper
understanding of underlying structures, implicit knowledge
and latent needs that are built into socially constructed
routines. The quest for global and local e-commerce might
help us to develop a better understanding of the regional
embedding of commerce, which of it we want to maintain,
develop and moreover, what we really value.
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