E-Commerce Is a Way of Conducting Business over the Internet

Alev M. Efendioglu, University of San Francisco Vincent F. Yip, University of San Francisco William L. Murray, University of San Francisco Abstract Differing characteristics of local environments, both infrastructural and socio-economic, have created a significant level of variation in the acceptance and growth of e-commerce in different regions of the world. Our findings show that, in development and diffusion of ecommerce in China, cultural issues such as “socializing effect of commerce”, “transactional and institutional trust”, and “attitudes toward debt” play a very major role. In this paper, we present and discuss these findings, and identify changes that will be required for broader acceptance and diffusion of e-commerce in China and propose approaches that businesses can use to enhance this development.

Introduction The number of Internet users around the world has been steadily growing and this growth has provided the impetus and the opportunities for global and regional e-commerce. However with Internet, different characteristics of the local environment, both infrastructural and socioeconomic, have created a significant level of variation in the acceptance and growth of ecommerce in different regions of the world. Over time, various studies have been conducted and models have been developed to identify diffusion of e-commerce in different environments. (Zwass, 1999; Wolcott, et. al. 2001; Travica, 2002) These models have looked at “infrastructure” (e.g. connectivity hardware and software, telecommunications, product delivery and transportations systems) and “services” (e.g. e-payment systems, secure messaging, electronic markets, etc.) as the primary diffusion factors. In addition to infrastructural issues, trust (in our paper, we call this “transactional trust”) has been identified as one of the critical issues that confront businesses that are new businesses or utilize new business models like e-commerce.

Numerous studies have tried to find correlations between trust and experience with a new system, concept, or relationships, including a correlation to frequency of e-commerce activity and other researchers have noted that trust may be significantly influenced by culture of a given society. (McKnight et. al., 1998; McKnight and Chervany, 2001; Lee and Turban, 2001) Grabner-Kraeuter observes and states that trust is “the most significant long-term barrier for realizing the potential of e-commerce to consumers”, (Grabner-Kraeuter, 2002) and others state that trust will be a “key differentiator that will determine the success of failure of many Web companies.” (Urban et. al., 2000) This paper and the associated research focus on the impact of these infrastructural and socioeconomic factors on e-commerce development in China, and our findings identify changes that will be required for broader acceptance and diffusion of e-commerce in this country.

Objectives Our objective was to explore e-commerce associated concepts, infrastructure and socioeconomic, as they relate to China as a developing country with a government that has taken a special interest in technological capabilities of its population. We FIGURE 0: knew from first hand experience that, in spite of recently increased Influences on Diffusion of E-Commerce governmental efforts and investments, INFRASTRUCTURE: the telecommunication and ecommerce infrastructure was not as developed in China as they were in U.S., Europe, or as would be in any developing country, and we expected POLITICAL / LEGAL: COUNTRY-WIDE ACCEPTANCE & DIFFUSION to find technical and infrastructural of E-COMMERCE limitations to be significant impediments. Therefore, we focused on the societal issues and specifically SOCIO-ECONOMIC: wanted to identify and explore the influence of culture on acceptance and use e-commerce in this developing country. Access to Technology & Connectivity, Telecommunication Infrastructure, & Supporting E-Services Governmental Policies and Support, & Legal Environment and Practices Business Environment, Consumer and Business Practices, & Social and Cultural Characteristics

Methodology To address our research objectives, we developed a 20-question questionnaire, developed in English and translated to and administered in Chinese. It contained questions designed to collect information on demographics, Internet usage, and e-commerce activities (frequency of commerce and type of purchase, means used for purchase, transaction experience, and perceptions of e-commerce in China). We selected 252 individuals that would be considered to be a close match to e-commerce users in developed countries and we considered to be “early adopters”. Since our primary focus was “impact of culture”, we wanted to get the opinions of actual participants/users of e-commerce and wanted to eliminate the infrastructure problems as much as possible. The study participants resided and worked in different regions and for different types of organizations, and had different educational levels, professions, and gender. TABLE 1: Study Demographics GENDER EDUCATION AGE ORGANIZATION Male Female BS Degree Graduate 25-40 years Over 40 years MNC DE* JV 59.92% 40.08% 75.40% 13.49% 75.40% 7.54% 21.03% 63.49% 15.48% * DOMESTIC ENTERPRISES including Private Enterprises, State Owned Enterprises (SOE), and University ; MNC = Multi-National Corporation; JV = Joint Venture

We asked our study participants about their Internet usage to identify their familiarity with

technology and their access to Internet, and their e-commerce participation to determine their ability (access to type of medium used for payment) to pay (possession of credit cards) for ecommerce and whether they purchased any goods/services, using e-commerce, within the previous 12-month period. The respondents (166 out of 252 study participants) that indicated that they had purchased goods/services were further asked about the frequency of their transactions during the previous 12- and 6-month periods, the products/services they purchased, highest total value of their single purchase, and their payment method (credit cards and other commonly used methods of payment in China) for these purchases. They were also asked to list their primary reasons for utilizing e-commerce and rate their overall satisfaction with the activity and to provide unstructured comments on what they consider to be impediments to the development of e-commerce in China and Chinese attitudes towards use technology as a means for commerce. The unstructured section of the questionnaire and the follow-up unstructured interviews were used to further explore and to identify perceptions on positive and negative aspects of ecommerce in China as it currently exits, future of e-commerce in China, and any other issues that we might have neglected to categorize and include in our questionnaire.

These comments, in some cases, provided additional information, and in others, reinforced the previous responses and strengthened the data we collected through other questions. Results Our 252 study participants had complete and fairly easy access to Internet enabling technology (e.g. access to a PC and telecommunication connection to an ISP) and used Internet regularly for multiple purposes/activities (e.g. email, search, etc.), with 65.88% of the study group participating in e-commerce activities. As we expected, for our research participants, ability to pay (access to credit cards) was not an impediment to e-commerce (86.51% had credit cards, with 69.84% having 2 or more credit cards). However, our findings showed that having increased number of credit cards did not necessarily translate into increased frequency of purchases. Respondents with 4 or more credit cards constituted 21.03% of total respondents and 21.69% of e-commerce participants. Other credit card ownership ranges also had similar distributions between the study participants vs. ecommerce participants.