Level Of E Commerce Sophistication Business Essay

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This chapter gives and introduction to the research area and what the thesis will offer. It commence with the passion resulting in taking on the research and proceeds with an introduction to the research area and work leading to the research problem and the research model guiding the research. Then, a discussion of the importance of the research in terms of contributions to the literature and to practitioners is provided. The chapter concludes with an outline of the thesis.

The passion

Before taking on this research , I spent considerable time doing exploratory research in terms of case studies focused on Sri Lankan garment firms utilizing the internet and e commerce technologies towards customers and suppliers. One of the outcome of this research was an academic text book in Internet marketing published in Norway. More important , however was my growing academic interest for e commerce research issues based on observations made during this exploratory work and the many calls for more rigorous academic research on these issues in the research literature. Most of my thoughts , energies and emotions were at this point tied to understanding e commerce initiatives in retailing firms and the drivers of performance in retailing firms involved in e commerce activities. It led to a passionate commitment to the e commerce field , which again resulted in taking on the challenging and demanding doctoral research work on the subject.

Two issues in particular stimulated my curiosity and caught my sincere interest during the exploratory work prior to the doctorate. First, the work indicated that Norwegian retailing firms were quite different with respect to their utilization of e commerce technologies (in this research named as level of e commerce sophistication) . In fact ,while some firms were utilizing such technologies in a very sophisticated way, others were utilizing it to only a minor degree. This observation was consistent with many of the findings reported in e commerce research literature "(e.g. Volsky et al ., 2002 ; Daniel et al; 2002 ; Teo and pian ,2004). Second ,during the exploratory work, I became interested in knowing more about the key factors driving the performance of retailing firms involved in e commerce activities ,and whether or not the level of e commerce sophistication could be one of the explanatory variables for performance differences. These two issues have to a very large extent influenced the shape and direction of this doctoral thesis, and they led in the first phases of the research to several important questions guiding the research process ,most notably;

Firms make huge investment in e commerce systems and applications ,but do these investments contribute positively to the performance of these organizations?

Is degree of utilization of e commerce technologies (level of e commerce sophistication) towards customers and suppliers positively associated with the performance of small and medium sized retailing firms?

Which factors than the level of e commerce sophistication may have a profound impact on the performance of retailers involved in e comers activities?

Not only did the observation from the explorative work and the resulting research questions form a platform for formulating the research problem , thereby giving some direction to the investigation ,it also gave a foundation for a more determined and systematical effort aimed at identifying an appropriate and theoretical justifiable research model for the doctoral thesis work.

1.2 The work resulting in the research model

As mentioned , observational data collected prior to this research were important as they led to a research idea and hence provided some directions to the investigation. As chohen (1956: 148 ) has well pointed out , "without some guiding idea we do not what facts to gather". However , since observations in practical settings only give some guiding ideas for the research ,relevant literature had to be reviewed in order to shed more light on the research theme , as well as to provide a justification for including variables in the research model. Variable chosen for inclusion were as such from several sources , including prior theory in different research fields, findings in empirical surveys ,and own observations from case studies.

Relevant literature was reviewed in a systematical and determined manner as outlined in figure 1.1 .Since the utilization of e commerce technologies in retailing firms was the passion that led to the doctoral work, e commerce , information systems (IS) and electronic data interchange research was first reviewed. This review had two main objectives. First , it sought to identify theoretical and empirical contributions bringing more clarity to the level of e commerce sophistication phenomenon and performance effects resulting from various levels of e commerce sophistication. The second aim was to review empirical studies conducted in these research areas having performance (outcome ,productivity ,effectiveness and /or financial performance )as the dependent variable .Explanatory (independent) variables used in the existing research could then be identified and for their potential inclusion in the current research . Appendix 5 provides an overview of a examined selection of scholarly contributions within e commerce , is an research , that have been reviewed as part of this process.

The reviewed process - relevant literature

A review of relevant e commerce literature (e.g. , Volsky et al ., 2002: Daniel et al ., 2002, saeed et al ., 2005 ; chaffy et al: 2006 ) gave conceptual and empirical support for distinguishing between different levels of e commerce sophistication .Although researchers use other notions for the ' level of e commerce sophistication phenomenon ,such as levels of e commerce adoption advanced e commerce and scope of e commerce ,the constructs they described undoubtedly share a common core. A review of e commerce literature also provided justification for the inclusion of e commerce sophistication asand independent variable for a research model aimed at examining performance drivers in retailing involving e commerce activities. Conceptual support was found in the contribution by JEffcoate et al . (2002) ,Egan et al ., (2003) ,Teo Pian (2004) among others, who point to the necessity of firms to move to an advanced stage of e commerce in order to gain a competitive advantage. This is also consistent with Poter(2001) who claims that the question is not whether to deploy internet technology but how to deploy it.

Some empirical support for including the level of e commerce sophistication as an independent variable in the research model was found in both IS and e commerce research contribution. For instance, while Brynjolfsson and Hitt (1998, 1998 b )and Rai et al . (1997) present evidence that IS spending have made a substantial and statistically significant improvement to the out put of firms , Bharadwaj (2000)and Santhanam and Haranto (2003) report evidence suggesting that IT capability have a positive impact on firm performance .Similarly, empirical research within the e commerce area, although scarce, gives an indication that the level of e commerce sophistication has a positive impact on organizational performance . Relevant contributions include Zue and Kraemer (2002), Teo and Pian (2003)Kraemer et al.(2005) ,Saini and Johnson (2005)Saeed et al .(2005)and Teo (2007).

Since researches tend to apply slightly different construct in their model as well as different instruments for measurement purposes (e.g. EC capability , e commerce scope ,IT capability , level of internet adoption ) ,the empirical evidence is far from conclusive. The development of better means for measuring new aspects of the internet in terms of construct and instrumentation development ,as well as more systematic study of performance drivers in e commerce ,has there for been called for (see Straub et al ., 2002; Khan and Motiwalla,200; Souitaries and cohen ,2003 ; Karagozoglu and Lindell , 2004 ;saini and Jhonson ,2005;Bunker and Yin,2005) The current study is a response to this call for new contributions.

As figure 1.1 indicates, the review of e commerce EDI and Is research gave compelling reasons for continuing the search for relevant literature in the marketing research field. Two statements particular were strongly influential . While Bharadwajv(2000:186) concludes, 'the firm's IT combined with a strong customer orientation , creates set of complementary resources that are not easily matched by rival firms', Saini and Johnson (2005;370) state, "marked oriented firms are more likely to leverage IT skills for the collection storage and analysis of customer data in order to predict future behaviors" . Furthermore ,Saeed et al .(2005) comment that customer value generated through website functionality enhance performance. The contribution by Saini and Johnson (2005) and Saeed et al .(2005) are most relevant since their emphasis is on performance drivers in e commerce. They report findings findings showing that IT capabilities in conjunction with market orientation is critical for superior performance in the internet Saini and Johnson (2005)and the employment of e comers technology to deliver higher customer value affects firm performance in the short and long term (saeed et al 2005) .Since the exploratory work conducted prior to the doctoral work also pointed to the importance of being dedicated towards customers, scholarly contributions on the market orientation performance relationship became very interesting. As Kara et al .(2005) explain , several research findings indicating an influence of market orientation on organizational performance highlighting the significance of including market orientation in an integrated model of determinants of performance. Scholarly contributions on the market orientation performance relationship that have been reviewed as part of the current research are listed in Appendix 5.

The inclusion of market orientation as an independent variable to explain performance differences among e commerce firms coheres with statements made by numerous e commerce scholars that the internet and related digital technologies are tools to achieve marketing objectives and to support the modern marketing concept (see for instance Chaffy et al 2006).As Chaffy et al .(2006) note, Internet technology can be used to achieve market orientation by identifying customer requirements , anticipating' customer requirements and satisfying customer requirements profitably . They specifically argue that the need for market orientation is a critical aspects of web site design and internet marketing strategy . This is in line with Awad (2004:20)Who states that " the first step to become an e commerce business is adopting a sustainable business strategy based on unique opportunities to provide value.."An enhance ability to identify , anticipate and satisfy customer requirements through e commerce is also explicated by Turban and King (200).

Through the review of scholarly on the market orientation -performance relationship ,it was discovered that the innovation and entrepreneurship research fields could provide valuable input to the research model for the current research. In fact , researchers examining the influence of market orientation on business performance have increasingly added innovation , innovativeness and entrepreneurial orientation as constructs to their research models (e.g.Slater and Narver ,2000; Agarwal et al ., 2003; Maydeu -Olivares and Lado ,2003; Berthon et al ., 2004),and research findings indicate that such constructs provide new insight to the market orientation performance relationship. Complementing market orientation by orientation by entrepreneurship and innovation was in fact the basic idea presented by Peter Ducker as early as in1954. He defined a business purpose to create a customer ,and stated that "because it is its purpose to create a customer ,any business enterprise has two and only this two - basic functions : marketing and innovation " .since e commerce development in existing business by its nature is corporate entrepreneurial activity and the exploratory work conducted prior to the doctoral work also pointed to the importance of being entrepreneurial as to the functionalities implemented on a firms firm's website ,it was decided to review innovation and entrepreneurship research. An emphasis was put on empirical studies reported in the corporate entrepreneurship research field (as categorized by e.g. Antoncic and Hisrich ,2003), and in particular studies aimed at clarifying the entrepreneurial orientation construct and those examining the relationship between entrepreneurial orientation and organizational performance. The link between the review of market orientation performance articles and the innovation and entrepreneurship research fields is indicated in figure 1.1 furthermore, some of the scholarly contributions within the entrepreneurship and innovation fields that have been reviewed as part of the current research are listed in Appendix 5.

Much theoretical and conceptual support for including entrepreneurial orientation in a research model involving organizational performance as the dependent variable exists. As Peters (1984:121)says "We view the constantly innovating constantly customer -serving organization as one that continually discovers new markets and new opportunities" .This is consistent with Webster (1994b :14)who states that "management must develop a broader concept of organizational culture that focuses on the firm outward- on its customers and competitors and create and overwhelming predisposition toward entrepreneurial and innovative responses to a changing market". The challenge is to create climate in which market oriented entrepreneurship can flourish (Salter and Nawer ,1995 ) In fact , a growing body of evidence suggests that more successful firms over time are the ones that engage in higher level of entrepreneurial activity and are entrepreneurial oriented. The findings reported in the corporate entrepreneurship literature provide strong empirical support for a positive relationship between entrepreneurial orientation and firm performance (e.g.Zahraand Covin, 1995; Knight ,1997b; Wikland, 1999; Zahra and Garvis, 2000; Hult et al., 2004; Madsen, 2005)

The contribution by Amit and Zott (2001)also influenced the decision to include the entrepreneurship field as the theoretical framework for this study. Their analysis of value creation in e business suggested that no signal theoretical framework should be given priority over the others when examining the value creation potential of e businesses. Instead they urged for and integration of various frameworks ,including entrepreneurship theories . As they note "the advent of e business presents a strong case for the confluence of the entrepreneurship theories are applicable in the context of the emergence of virtual markets and that e business firms often innovate through novelty , for instance by providing new (combinations) of products ,services, information and incentives (e.g. customers can generate content),

Hence the inclusion of entrepreneurial orientation in the research model aimed at investigating performance differences among retailers engaged in e comers can be theoretically defended.

Figure 1-2 Research model guiding the research

Market Orientation



Entrepreneurial orientation

Four control variables that can potentially influence the performance of retailers involved in e commerce activities were included in the research model. The selection based on previous empirical studies within the research areas specified in the figure 1.1 that have focused on firm performance. The variables were firm size, cost position , environmental hostility and market turbulence . Firm size is added to the model to control for the performance arising from differences in firm resources. Substantial evidence exists in the research literature that organizational resources affects performance (e.g. Scher,1980;Bharadwaj et al., 1999; Capon et al ., 1990) In particular ,this variable implies the advantages associated with the relatively large market share (Buzzell and Gale , 1987; Slater and Narver ,1994)Environmental hostility was selected as control variable since unfavorable business environments generally lead to difficulties of varying types for many firms, thus affecting performance (see e.g.Potor 1985; Covin and Slevin ,1989; Hunt and Morgan ,1995; Lumpkin and Dess ,2001.Murphy and Callaway , 2004). Furthermore ,cost position was selected as a control variable since the theory suggests that low cost is a potential source of sustainable competitive advantage (see Scherer, 1980; Aaker, 1989; Poter, 1985). Finally , market turbulence was added as a control variable since the rate of change in the composition of customers and their performance has proved to influence performance (e.g.Jaworski and Kohli ,1993; Harris,2001)

To conclude ,observational data collected prior to this doctoral work ,along with prior theory in different research field and findings in empirical survey ,justified the inclusion of the following independent variables and control variables in the research model (figure 1-2)

Level of e commerce sophistication

Market orientation

Entrepreneurial orientation

Firm size (control variable)

Cost position (control variable)

Environmental hostility (control variable)

Market turbulence (control variable)

1.3 Research question

This study had two main objectives. First, the aim was to identify relevant key performance drivers in retiling firms engaged in e commerce activities. Relevant performance drivers although not exhaustive , were identified based on the review process of relevant literature as outlined in the previous paragraph. Second, it aimed to empirically examine the relationships between the identified performance drivers and organizational performance, using a sample of Norwegian retailing firms. The research question lending direction to the empirical investigation in this thesis was as such defined as:

Does adopting a market orientation philosophy , entrepreneurial orientation philosophy ,and a high level of e commerce sophistication lead to better performance for retailers engaged in e commerce activities?

The specific objectives of the proposed empirical work were as follows : i) to examine the relationship between market orientation and organizational performance , ii) to examine the relationship between entrepreneurial orientation and organizational performance, iii) to examine relationship between the level of e commerce sophistication and organizational performance and iv) to compare the effect of market orientation , entrepreneurial orientation and the level of e commerce sophistication on organizational performance.

In order to Address the research objectives , it was necessary to identify measure that would adequately describe an organization's level of market orientation ,entrepreneurial orientation ,and level of e commerce sophistication . Furthermore , it was necessary to decide upon the organizational performance measurement approach and the organizational measurement instrument to be used for this research. The instruments selected for measuring the constructs included in the research model, and the measurement development effort s found necessary to undertake , are explained and discussed in detail in chapter three.

1.4 The importance of the research

The review of literature conducted as part of this research confirms the existence of relatively few empirical studies focused on the performance consequences of e commerce ( e.g. Souitaris and Cohen, 2003; Saini et al ., 2002; Teo and Pian ,2004 , 2002 ; Bunker and Yin ,2005). In fact ,researches have commented upon the large extent of exploratory and qualitative research that now exists on business use of internet and e commerce technologies , and that this research is mixed in quality and academic rigour ( see for instance Drew,2002: Scupola, 2003 ) The current research is a such a response to the urge for more empirical studies within this novel research area in in terms of surveys. Since firms adopt innovations such as the Internet and e commerce practices to gain a competitive advantage, more research should therefore be initiated to examine the key performance drivers in e commerce. The research reported in this thesis provides such empirical data. It there by adds to the existing body of literature , and provides several insights for managers in retailing firms.

This research also contributes to the ongoing effort within e commerce research to develop valid and reliable scales. E commerce is still a novel research area where researches face measurement challenge due to the lack of sophisticated measures. Researches have there for urged for the development of better means for measuring new aspects of the internet in terms of construct and instrumentation development ( e.g., Staub et al ., 2002 ; Souitaries and cohen ,2003; Saini and Johnson ,20o5 ), The EC-SOPH scale developed in the current research provides such a means , and gives researches a rigorous research procedure that may relieve them from repeat efforts at construct and instrumentation development when it comes to the level of e commerce sophistication construct. This construct and the EC-SOPH scale take into account the complementary nature of technology and business process and business processes and build on the scale developed by Zhu and Kraemer (2002) as well as other measurement attempts reported in the literature relating to a firm's degree of utilization of e commerce technologies towards customers and suppliers (e.g. Barua et al .,2001; Teo and Pian ,2004; Gibbs and Kreamer , 2004) The fact that the development of the new measurements for evaluating phenomena such as e commerce and firm's utilization of network and the internet for commercial purposes has just begun (Straub et al ., 2002),and the fact that researchers have asked for construct and instrument development e commerce research area , make the construct and scale development effort in the current research very relevant . the development of the level of e commerce sophistication construct and EC-SOPH instrument also represent a certain level of originality. Finally, while the valid and reliable EC-SOPH instrument and the sub scale themselves make no particular contribution to theory, they provide researches with a new instrument and scales that may open new avenues for further research. Hence the construct and scale achieved in the current research give researches in different research areas the option of adding new construct to their research model as well as an instrument for measuring this construct and its two sub dimensions .

Personally, dedicating my doctoral work to the relationship between market orientation ,entrepreneurial orientation , level of e commerce sophistication and organizational performance has been worthwhile journey. Since this field of inquiry is fairly new it also offers numerous alternatives for further studies. Hence , it is a research field in which much academic research needs to be carried out in years to come, ensuring plenty of research opportunities also after the completion of this thesis.

1.5 The structure of the thesis

As illustrated in figure 1-3 , this doctoral thesis is organized in to six chapters. In the present chapter an introduction to the research area has been given. Furthermore ,it has provide a discussion of the passion resulting in taking on the doctoral thesis work, the work leading to the research problem , the research model guiding the research , the importance of the research , as well as contributions to literature and to practitioners. In chapter two a review of relevant literature is presented. The literature review consists of four parts. In the first part , the literature on market orientation is reviewed and empirical findings related to the market orientation - performance relationship are presented. The second part includes a review of relevant contributions within the entrepreneurship and innovation literature and presents prior empirical findings on the entrepreneurial orientation performance relationship. The third part aims to give a thorough discussion of criteria used in the literature to determine the level of e commerce sophistication on organizational performance. The fourth part of the literature review discuss different frameworks used to conceptualize organizational performance models. Chapter 2 ends with a discussion of the research model and a presentation of the hypotheses that he research sought to find support for.

In chapter 3 ,the approach taken to conduct the research is described. It commence with a discussion supporting the decision to adopt a positive approach , which led to the research design used. A major section of the chapter relates to the design of the data collection instrument given the decision in this study to take on the challenging task of developing a sophisticated multiple item instrument for measuring the level of e commerce sophistication.

Chapter 1


Figure 1-3 The structure of this thesis

Chapter 3

Methodology-Data collection

Chapter 6

Conclusion, implications and limitations

Chapter 5

Examining the construct validity of the performance scales included in the study

Chapter 4


Chapter 2

Literature review

The other scales included in the instrument were borrowed from other researchers. Following the questionnaire design is a review of the literature on inducement techniques and an in depth discussion of the techniques employed in this research to minimize the general challenge that non responses pose on the validity of the data. Chapter 3 ends with a description of the sampling approach , a discussion of the data collection approach and results, assessments of non response bias, and a presentation of the data analysis plan.

Chapter 4 reports the results of the study and shows how the results bear on the operational hypothesis deduced from the research questions. It follows six stages. First, the research model , key research question and the operational hypothesis are revisited. In the second part the data are examined thoroughly in terms of errors in the data set , missing values, and outliers. In the third part The scales use for measuring the constructs involved are examined and analyzed in terms their appropriateness in the current research setting. This involves purification and testing for reliability and validity. The assumption underlying multivariate analysis ,such as normality, linearity and homoscedasticity , are examined and tested in the fourth part of this chapter. Then the hypothesis are tested an result reported. Finally , the results are analyzed and discussed with prior theoretical contributions.

During the research it was decided to add a chapter between the analysis chapter and the final chapter. This requires some explanation as the findings reported in chapter 5 had major implications for the selection of the performance instruments to be used in the analysis chapter. The decision on what performance measurement approach to be used for testing the hypothesis in this research was not an easy one. After reviewing the literature on organizational performance ,the excellence perspective seemed at first glance most appropriate. This led to the selection of the Excel -scale by Sharma et al. (1990)as the instrument to measure organizational performance. However a more thorough review of the literature on the independent variables involved in the research ( market orientation and entrepreneurial orientation in particular) and the scales measuring this constructs gave clear indications that the Excel - scale reflects these behavioral orientations to a very large extent. In fact , an overlap between the Excel measure and the market orientation and entrepreneurial orientation measures suggested conceptual redundancy. Consequently ,a concern about the suitability of the Excel scale as a measure of organizational performance in this study was raised. A second concern was related to the construct validity of the Excel scale in the Norwegian context in general and the retail context in particular. To reduce the risk a second organizational performance instrument was included in the final questionnaire. This second instrument was based mainly on an economic return perspective but had also some items rooted in a business excellence perspective. To determine which of the two performance instruments to be used as a measure of organizational performance in this study, it was decided to assess the convergent validity of both instrument s using objective performance data (such as ROI ROE, and ROA) collected from the official firm register of Norway. The results from these assessments are reported in chapter 5.

In the final chapter ,the main conclusions and the limitations of the research are addressed. It commences with a brief summery of the research model , the methodological choices made in this research , the data collection results , and discusses the main conclusion from the hypothesis testing. The originality of the work conducted , the relevance , and the contribution to the theory are then addressed before turning to the importance for practitioners. Chapter 6 ends with limitations , the implications of the research and suggestions for further research.