Research Method :

Empirical Research on the factors that

influence the development of E-commerce
in United States
Name Student ID No.

Tang Kin Fei 1505953

Wong Jia Yi 1502407
Ong Shin Yi 1503095
Ng Zhi Jun 1505494
Chong Wan Teng 1501976
Chapter 1
 Background of study
E-commerce:
 Buying and selling of products and services through
electronic network
 Transmitting data and funds without using any paper
documents
 B2B, B2C, C2C, C2B
 Bring safety and convenience
 1960s, Electronic Data Interchange (EDI) – data can be
exchanged electronically (information/transaction)
 1970s, able to send commercial document
electronically
 2000s, introduction of PC’s and World Wide Web
Advantages
O reduced cost
O helps to facilitates comparison shopping
O able to run all time
Disadvantages
O customer could not experience the goods
O may harvest the information
O fraudulent website
 Problem Statement
O The importance of E-commerce in United States economy has
gradually been obvious with the global electronic tendency.
O In year 2017, United States takes 20.4% of the world E-
commerce retail sales share.
O The research findings indicate the most crucial factors affecting
E-commerce retail sales in United States are Real GDP per
Capita, Research and Development GDP, Real Disposable
Personal Income, and Mobile E-Commerce Spending
(Wang & Liu, 2015).
O Researchers of this journal want to further investigate and verify
the factors that affect the E-commerce retail sales of
United States.
 Research Question
General Research Question
 What are the determinants contribute to the
quarterly development of e-commerce in United
States from year 2010-2017?

Specific Research Questions

 How the number of mobile user of United States
affects the quarterly development of e-
commerce in United States from year 2010-
2017?
 Research Objectives
General Objective
 To determine the impact of determinants
towards the development of e-commerce
in United States.

Specific Objectives
 To determine the relationship between
number of mobile user and development
of e-commerce in United States.
 Significant of study
• New direction for retailer
• Advance development of internet technology enables e-
commerce successfully transform into new business world
• Better understanding and development of future prospects
of e-commerce in economy.
• New business opportunity for companies and individual.
• Enhance economic knowledge to develop new marketing
and pricing strategy.
• Perform professional to generate a new economic fact by
deploying the outcome
• Use for academic study
Chapter 2
 E-satisfaction Model
O Developed by Akshay
Convenie
nce
Merchandi
Serviceabi
sing
lity
E–
satisfactio
n Model

Site
Security
design
Theoretical Support: Growth Theory
• Continuous exogenous technology growth
• Technology-led economic growth aligns with the context of digital
economy growth.
• Advance Internet technology provide platform for ecommerce

Endogenous Growth Theory

 Internal factor of an economic systems instead of external factors.
 Two-way communication in between technology and economic life.
 Predicts positive externalities and spillover effects within a country
from the expansion of knowledgeable economy.
 Empirical review
 Emerging of E-commerce
• Wilson et al. (2001) : adaption of Internet to promote
sales
 Advancement of technology
• Malkawi (2001) : Roles of E-commerce
• E-commerce Foundation (2016) : Increased number
of E-shoppers in US
• Shahriari el at. (2015) : Growth of sales
 Shift of spending habit
 Economy Development
 Economic development of a country
• Kurni (2007) & Wang and Liu, (2015)
Economic condition E-commerce development
• Rahman (2013): Human infrastructure & literacy rate
• Alhusban (2014) :Government intervention
 Poor economic condition
• Dedrick et al. (1995) : Barriers for developing
countries
• Zhao et al. (2008) : Lack of technology infrastructure
and government policy
 Living standard
Positive relationship:
O demand for high quality increase while living
standards are improving
O (report) proved that living standard of U.S. in
increasing when their personal income is increasing
and this will lead to the e-commerce sales increase at
the same time
O the living standards increasing at 4.0%, not only do
people have more income but they are also
purchasing more also that affected consumption
expenditures increased at a 5.3% annual rate
O there is no evidence to prove that there is a negative
relationship or no relationship
 Number of mobile user
Positive relationship:
O (report) mobile has overtaken desktop as a browsing channel
but it does not convert as much into actual purchases as the
bigger screens
O described as business transaction conducted through mobile
internet and network
O Safe proved by using IBPCE scheme and mobile e-
commerce (AMEC) scheme
Negative relationship:
O smaller screen size, less secure
O consumers are still developing an understanding of how the
technology works
 Level of investment in
science and technology
Positive relationship:
O Advancement of wireless technology will give pace to the E-
commerce rapid development which stated by Siau and Lim (2001).
O Veerse (2000) estimated that as more R&D spending in technology, the
new features in E-commerce will only be modernized in future.
O Fui and Davis (n.d.) stated that the preferences of E-commerce
market will encourage the firm to spend more on research and
development in order to gain more users.
O According to Chen and Zhang (2015), the development of Internet
technology has improve the performance of E-commerce
applications significantly.
There is no evidence to prove that there is a negative relationship or no
relationship between development of E-commerce and level of investment
in science and technology
Chapter 3
 Research Design
O Quantitative method
 Statistical analysis of data
 Rational approach scientifically
 Generalization of theory
 Able to build upon existing theories
 To further explore the knowledge that
contributes to the existing economic theory
 Source of Data
No. Variables Proxy Unit Measurement Source
1. Development of E- E-commerce Retail Sales Millions of US dollars Statista
commerce (DV)
2. Living standard of Real Disposable Personal Income Billions of US dollars
citizen in United FRED
States(IV)

3. Economy development Real GDP per capita US dollars

of United States(IV) FRED
.
4. Level of investment in Gross Domestic Product: Research Billions of US dollars
science and technology and development (billions of US FRED
activities(IV) dollars)

5. Number of mobile user M-commerce share of total digital Percentage

of United States(IV) commerce spending in the United Statista
States
 Research Framework
Living standard of Economy
citizen in United development of
States United States

Development of E-
commerce

Level of investment Mobile commerce

in science and spending in United
technology activities States
 Research Framework
 Living standard of citizen
O Expected sign: positive
O Sanwal: High living standard – high disposable income – increase e-
commerce sales
O Hubona & Kennick: High income – lower implicit risk – increase the
demand
 Level of investment in science and technology activities
O Expected sign: positive
O Choi: level of investment - development of e-commerce
O Subramani and Walden: investment – reduce cost – increase sales
revenue
O Dos Santos: innovative investment – firm value increased
 Research Framework
 Economy development
O Expected sign: positive
O Odedra: Low level economic development – barrier for adoption of
e-commerce
O Lawrence & Tar: unfavourable economic – not able to support –
growth of e-commerce
 Mobile commerce spending
O Expected sign: negative
O Chae & Kim: mobile device – smaller screen size – computer –
payment transaction – shorter time
O Varshney: m-commerce – convenience – e-commerce sales
decreased
Chapter 4
 Hypothesis Testing
First Model:
ECSi = ˗ 28313.5 ˗ 2.0241DPICi + 3.3188RGDPi +
476.8862RDGDPi + 462.6191MCSi
O T-test:
H0: βi = 0
H1: βi ≠ 0
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05. Otherwise, do not
reject H0. DPIC RGDP RDGDP MCS
P-value 0.4527 0.0120 0.0000 0.0801
Decision making Do not reject Reject H0 Reject H0 Do not reject
H0 H0
Conclusion Not Significant Significant Not significant
significant
 Hypothesis Testing
O F-test:
H0: The model is not significant.
H1: The model is significant.
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05. Otherwise,
do not reject H0.
P-value: 0.0000
Decision making: Reject H0 since the p-value (0.0000) is smaller than
α = 0.05
Conclusion: We can conclude that the model is significant at
significance level of 0.05.
 Diagnostic Testing
1.) Multicollinearity – IV highly correlated with each other
(i) High R2 but few t-significant ratios
 Have multi problem – high R 2 (0.9645), only two t-ratios significant
(ii)High pair wise correlation among regressors

  DPIC RGDP RDGDP MCS

DPIC 1.00000 0.35112 0.12031 -
0 2 3 0.01239
9
RGDP 0.35112 1.00000 - -
2 0 0.28424 0.15615
2 6
RDGDP 0.12031 - 1.00000 0.22667
3 0.28424 0 0
2
MCS - - 0.22667 1.00000
0.01239 0.15615 0 0
 No multi, coefficient correlation
9 < 0.8 6
(iii)Variance Inflation Factor
Variance Inflation Factors  
Date: 03/05/18 Time: 13:20  
Sample: 2009Q1 2017Q4  
Included observations: 30  
       
       
  Coefficient Uncentered Centered
Variable Variance VIF VIF  Serious
       
        multicollinearity
C  1.08E+09  12815.12  NA
DPIC  7.040521  11928.28  26.42985
REAL_GDP  1.501769  44577.78  41.68392
RDGDP  3882.073  8856.874  43.75752
MCOMMERCE_SPEN
DING  64334.38  146.1360  26.26710
       
       
 
 
       
 Transform the data into percentage
O ECSi = 2.9995 ˗ 0.0558DPICi + 0.2491RGDPi +
0.0231RDGDPi + 0.2315MCSi
 Variance Inflation Factor:
Variance Inflation Factors
Date: 03/16/18 Time: 00:27
Sample: 2010Q1 2017Q4
Included observations: 30

Coefficient Uncentered Centered

VIF < 10
Variable Variance VIF VIF Multicolline
C 0.050045 18.32984 NA arity
DPIC
RGDP
0.000939
0.007235
2.658176
13.71263
1.213590
1.311613
problem
RDGDP 0.000186 1.421353 1.199494 solved
MCS 8.47E-05 5.921943 1.064435
 Hypothesis Testing(new model)
O T-test:
H0: βi = 0
H1: βi ≠ 0
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05. Otherwise, do not
reject H0. DPIC RGDP RDGDP MCS
P-value 0.0807 0.0072 0.1018 0.0000
Decision making Do not reject Reject H0 Do not reject Reject H0
H0 H0
Conclusion Not Significant Not significant Significant
significant
 Model Specification

H0: Model specification is correct.

H1: Model specification is incorrect.
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05. Otherwise,
do not reject H0.
P-value: 0.0344
Decision making: Reject H0 since p-value (0.0344) is smaller than α
= Inclusive
 0.05. of irrelevant independent variable – two variables are not significant
(DPIC&RDGDP)The model specification is incorrect.
Conclusion:
 Heteroscedasticity
Heteroskedasticity Test: ARCH  Hypothesis Testing (ARCH Test):
H0: There is no heteroscedasticity problem in
F-statistic 0.296245 Prob. F(1,27) 0.5907
Obs*R-squared 0.314736 Prob. Chi-Square(1) 0.5748 the model.
H1: There is heteroscedasticity problem in the
Test Equation: model.
Dependent Variable: RESID^2
Method: Least Squares α = 0.05
Date: 03/16/18 Time: 00:28
Sample (adjusted): 2010Q2 2017Q2
Included observations: 29 after adjustments Decision Rule: Reject H0 if the p-value is less
Variable Coefficient Std. Error t-Statistic Prob. than significant level, =0.05. Otherwise, do
not reject.
C 0.059406 0.019637 3.025130 0.0054
RESID^2(-1) 0.103388 0.189953 0.544284 0.5907
P-value: 0.5748
R-squared 0.010853 Mean dependent var 0.066494
Adjusted R-squared -0.025782 S.D. dependent var 0.078151 Decision Making: Do not reject H0 since the
S.E. of regression 0.079153 Akaike info criterion -2.168408
Sum squared resid 0.169158 Schwarz criterion -2.074112 p-value which is 0.5748 is greater than α
Log likelihood 33.44191 Hannan-Quinn criter. -2.138875 equal to 0.05.
F-statistic 0.296245 Durbin-Watson stat 2.037763
Prob(F-statistic) 0.590713
Conclusion: There is enough evidence to
conclude that there is no
heteroscedasticity problem in our model
Breusch-Godfrey Serial Correlation LM Test:
Autocorrelation
Null hypothesis: No serial correlation at up to 2 lags
 
Hypothesis Testing (Breusch-Godfrey
F-statistic 1.139614 Prob. F(2,23) 0.3374 LM Test):
Obs*R-squared 2.704863 Prob. Chi-Square(2) 0.2586
H0: There is no autocorrelation problem in
Test Equation: the model.
Dependent Variable: RESID
Method: Least Squares
H1: There is autocorrelation problem in the
Date: 03/16/18 Time: 00:28
Sample: 2010Q1 2017Q2
model.
Included observations: 30
Presample missing value lagged residuals set to zero.
α = 0.05
Variable Coefficient Std. Error t-Statistic Prob.

C 0.063546 0.227743 0.279023 0.7827 Decision Rule: Reject H0 if the p-value is

DPIC 0.005431 0.030718 0.176805 0.8612
RGDP -0.028238 0.086869 -0.325060 0.7481 less than significant level, =0.05.
RDGDP -0.003096 0.013702 -0.225940 0.8232
MCS -0.000467 0.009160 -0.051007 0.9598
Otherwise, do not reject H0.
RESID(-1) 0.319064 0.214668 1.486316 0.1508
RESID(-2) -0.024908 0.215796 -0.115423 0.9091
P-value: 0.2586
R-squared 0.090162 Mean dependent var 2.37E-16
Adjusted R-squared -0.147187 S.D. dependent var 0.265725
S.E. of regression
Sum squared resid
0.284609
1.863055
Akaike info criterion
Schwarz criterion
0.525564
0.852510
Decision Making: Do not reject H0 since
Log likelihood
F-statistic
-0.883456
0.379871
Hannan-Quinn criter.
Durbin-Watson stat
0.630157
1.834851
the p-value which is 0.2586 is greater than
Prob(F-statistic) 0.884257 α equal to 0.05.

Conclusion: There is enough evidence to

 Normality Test
 
Hypothesis Testing (Jarque-Bera
7 test):
Series: Residuals H0: Error terms are normally distributed.
6 Sample 2010Q1 2017Q2
H1: Error terms are not normally
Observations 30
5
distributed.
Mean 2.37e-16
4 Median -0.006639 α = 0.05
Maximum 0.515496
3 Minimum -0.577223 Decision Rule: Reject H0 if the p-value is
Std. Dev. 0.265725
Skewness -0.271269 less than significant level, = 0.05.
2
Kurtosis 2.242899 Otherwise, do not reject H0.
1
Jarque-Bera 1.084435 P-value: 0.5815
Probability 0.581457
0
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 Decision Making: Do not reject H0 since
the p-value which is 0.5815 is greater than
α equal to 0.05.

Conclusion: There is enough evidence to

conclude that the error terms are
normally distributed at 0.05 significant
 Final Output
Dependent Variable: ECS
Method: Leas t Squares
Date: 03/16/18 Tim e: 00:27
Sam ple (adjus ted): 2010Q1 2017Q2
Included obs ervations : 30 after adjus tm ents

Variable Coefficient Std. Error t-Statis tic Prob.

C 2.999491 0.223707 13.40813 0.0000

DPIC -0.055757 0.030635 -1.820031 0.0807
RGDP 0.249132 0.085056 2.929038 0.0072
RDGDP 0.023139 0.013623 1.698537 0.1018
MCS 0.231482 0.009201 25.15933 0.0000

R-s quared 0.964505 Mean dependent var 6.363333

Adjus ted R-s quared 0.958826 S.D. dependent var 1.410425
S.E. of regres s ion 0.286194 Akaike info criterion 0.486719
Sum s quared res id 2.047678 Schwarz criterion 0.720252
Log likelihood -2.300789 Hannan-Quinn criter. 0.561428
F-s tatis tic 169.8326 Durbin-Wats on s tat 1.339664
Prob(F-s tatis tic) 0.000000
ECSi = 2.9995 ˗ 0.0558DPICi + 0.2491RGDPi +
0.0231RDGDPi + 0.2315MCSi

β0 = 2.999291
O When foreign direct investment, DPIC, RGDP, RDGDP and
MCS are equal to zero, on average, the ECS in USA will be
2.999291. 2.999291 indicates the ECS that is not explained
by DPIC, RGDP, RDGDP and MCS.
O β1= ˗ 0.0558: When Real Disposable Personal Income(DPIC)
increases by 1%, on average, E-commerce sales (ECS)
decreases by ˗ 0.0558%, ceteris paribus
O β2 = 0.2491: When Real Gross Domestic Product (RGDP)
increases by 1%, on average, E-commerce sales (ECS)
increases by 0.2491%, ceteris paribus.
O β3= 0.0231: When Research and Development Gross
Domestic Product (RDGDP) increases by 1%, on average, E-
commerce sales (ECS) increases by 0.0231%, ceteris paribus.
O β4 = 0.2315: When M-commerce share of total digital
commerce spending (MCS) increases by 1%, on average, E-
commerce sales (ECS) increases by 0.2315%, ceteris paribus.
R squared
1. R-squared = 0.9645
 Interpretation: 96.45% of the variation of E-commerce sales can
be explained by the independent variables which are real
disposable income, research and development gross domestic
product and M-commerce share of total digital commerce
spending.
 
2. Adjusted R-squared = 0.9588
 Interpretation: 95.88% of the variation of E-commerce sales can
be explained by the independent variables which are real
disposable income, research and development gross domestic
product and M-commerce share of total digital commerce
spending after taking into account of degree of freedom.
 Hypothesis Testing
Final Model
O T-test:
H0: βi = 0
H1: βi ≠ 0
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05.
Otherwise, do not reject H0.
 Hypothesis Testing
O F-test:
H0: The model is not significant.
H1: The model is significant.
α = 0.05
Decision Rule: Reject H0 if p-value smaller than α = 0.05.
Otherwise, do not reject H0.
P-value: 0.0000
Decision making: Reject H0 since the p-value (0.0000) is
smaller than α = 0.05
Conclusion: We can conclude that the model is significant
at significance level of 0.05.
 Consistency of the result
Variables Expected Actual Result
DPIC + - Inconsistent
RGDP + + Consistent
RDGDP + + Consistent
MCS - + Inconsistent
Chapter 5
 Policy Implication
Improve the informatization infrastructure construction (m-
commerce sector.)
 American Recovery and Reinvestment Act (ARRA) of 2009 are unlikely
to be renewed due to budget reduction
 Enhance the urbanization level and increased usages of mobile phone
Invest in network infrastructure for ecommerce online
transaction.
 Payment technology innovation encouragement policies is vital to
maintain the effectiveness of payment system.
 Supportive payment system( QR code)
 Biometric m-payment system
Establish legalized policy to protect trustworthy online payment
system
 Provide innovation encouragement and increase governmental
support for high profile third-party payment platforms
 Promote the local programs and global initiatives to
invest in those entrepreneurs
 most cost-effective method by investing in small and
medium enterprise (SME).
 SMEs are targeting lower business capital cost.
 Overseas Private Investment Corporation (OPIC), U.S.
Agency for International Aid (USAID), the Millennium
Challenge Corporation, and the State Department
 Mismatch resources and needs
Providing SMEs with human, financial and
technologies sources in order to facilitate the
adoption of ecommerce technologies.
 Provide technology education (Training on usage of
electronic media)
 Set up a suitable ICT mechanisms
Collaborate with industry partners
 Better understanding of current ecommerce trend,
enhance guidelines for SMEs
 Provide appropriate supportive resources (Financial
loan)
 Policy implication
Legislation and law enforcement
 improve the privacy protection on a large scale
 to regulate, to authorize, to outlaw, to provide funds, to
sanction, to grant, to declare or to restrict
 dealing with issues brought about by information
technology was developed
 efforts culminating in the draft for an electronic
commerce guideline
 digital signature and telemarketing guidelines are
representative
Credit guarantees policy
 guarantor promises to pay to the lender within a
specific time period
 a promise by the guarantor to pay all or part of the
loan if the borrower defaults
 the guarantor is an independent entity that acts as a
third party between the lending bank and a borrower
 to reduce the credit risk or default risk and increase
the confidence of consumer or seller towards e-
commerce
 Limitation of the study
i. Limited data available that can be accessed.
O Use time series data instead of panel data.
ii. Constrained to a small sample size.
O Have to settle for less conclusive results.
iii. Insufficient review of relevant theoretical models
O Less relevant theories can be found
iv. Difficulties in selecting the independent variables.
O Different analysis implemented and different results
obtained for
different selected groups of variables.
Recommendation for future research
 More research on statistical improvement
• Enhance measurement of economic activity
 Detailed empirical analyses
• Study wider range of factors
 Expand the scope of research
• External : cultural and environmental factor across
countries
 Enlarge the sample size
• Increase the validity of the result
END