Kevin Zhu

The Process of Innovation Assimilation by Firms in Different Countries: A Technology Diffusion Perspective on E-Business

This paper extends our previous studies on the assimilation of Internet-based e-business innovations by firms in an international setting. Drawing upon theories on the process and contexts of technology diffusion, we develop an integrative model to examine three assimilation stages: initiation → adoption → routinization. The model features technological, organizational, and environmental contexts as prominent antecedents of this three-stage assimilation process. Based on this model, we hypothesize how technology readiness, technology integration, firm size, global scope, managerial obstacles, competition intensity, and regulatory environment influence e-business assimilation at the firm level. A unique data set of 1,857 firms from 10 countries is used to test the conceptual model and hypotheses. To probe deeper into the influence of the environmental context, we compare two subsamples from developed and developing countries. Our empirical analysis leads to several key findings: (1) Competition positively affects initiation and adoption, but negatively impacts routinization, suggesting that too much competition is not necessarily good for technology assimilation because it drives firms to chase the latest technologies without learning how to use existing ones effectively. (2) Large firms tend to enjoy resource advantages at the initiation stage, but have to overcome structural inertia in later stages. (3) We also find that economic environments shape innovation assimilation: Regulatory environment plays a more important role in developing countries than in developed countries. Moreover, while technology readiness is the strongest factor facilitating assimilation in developing countries, technology integration turns out to be the strongest in developed countries, implying that as e-business evolves, the key determinant of its assimilation shifts from accumulation to integration of technologies. Together, these findings offer insights into how innovation assimilation is influenced by contextual factors, and how the effects may vary across different stages and in different environments.

e-Commerce Metrics for Net-Enhanced Organizations: Assessing the Value of e-Commerce to Firm Performance in the Manufacturing Sector

In this study, we developed a set of constructs to measure e-commerce capability in Internet-enhanced organizations. The e-commerce capability metrics consist of four dimensions: information, transaction, customization, and supplier connection. These measures were empirically validated for reliability, content, and construct validity. Then we examined the nomological validity of these e-commerce metrics in terms of their relationships to firm performance, with data from 260 manufacturing companies divided into high IT-intensity and low IT-intensity sectors. Grounded in the dynamic capabilities perspective and the resource-based theory of the firm, a series of hypotheses were developed. After controlling for variations of industry effects and firm size, our empirical analysis found a significant relationship between e-commerce capability and some measures of firm performance (e.g., inventory turnover), indicating that the proposed metrics have demonstrated value for capturing e-commerce effects. However, our analysis showed that e-commerce tends to be associated with the increased cost of goods sold for traditional manufacturing companies, but there is an opposite relationship for technology companies. This result seems to highlight the role of resource complementarity for the business value of e-commerce--traditional companies need enhanced alignment between e-commerce capability and their existing IT infrastructure to reap the benefits of e-commerce.

Electronic business adoption by European firms: a cross-country assessment of the facilitators and inhibitors

In this study, we developed a conceptual model for studying the adoption of electronic business (e-business or EB) at the firm level, incorporating six adoption facilitators and inhibitors, based on the technology–organization–environment theoretical framework. Survey data from 3100 businesses and 7500 consumers in eight European countries were used to test the proposed adoption model. We conducted confirmatory factor analysis to assess the reliability and validity of constructs. To examine whether adoption patterns differ across different e-business environments, we divided the full sample into high EB-intensity and low EB-intensity countries. After controlling for variations of industry and country effects, the fitted logit models demonstrated four findings: (1) Technology competence, firm scope and size, consumer readiness, and competitive pressure are significant adoption drivers, while lack of trading partner readiness is a significant adoption inhibitor. (2) As EB-intensity increases, two environmental factors – consumer readiness and lack of trading partner readiness – become less important, while competitive pressure remains significant. (3) In high EB-intensity countries, e-business is no longer a phenomenon dominated by large firms; as more and more firms engage in e-business, network effect works to the advantage of small firms. (4) Firms are more cautious in adopting e-business in high EB-intensity countries – it seems to suggest that the more informed firms are less aggressive in adopting e-business, a somehow surprising result. Explanations and implications are offered.

Information Technology Payoff in E-Business Environments: An International Perspective on Value Creation of E-Business in the Financial Services Industry

Grounded in the technology-organization-environment (TOE) framework, we develop a research model for assessing the value of e-business at the firm level. Based on this framework, we formulate six hypotheses and identify six factors (technology readiness, firm size, global scope, financial resources, competition intensity, and regulatory environment) that may affect value creation of e-business. Survey data from 612 firms across 10 countries in the financial services industry were collected and used to test the theoretical model. To examine how e-business value is influenced by economic environments, we compare two subsamples from developed and developing countries. Based on structural equation modeling, our empirical analysis demonstrates several key findings: (1) Within the TOE framework, technology readiness emerges as the strongest factor for e-business value, while financial resources, global scope, and regulatory environment also significantly contribute to e-business value. (2) Firm size is negatively related to e-business value, suggesting that structural inertia associated with large firms tends to retard e-business value. (3) Competitive pressure often drives firms to adopt e-business, but e-business value is associated more with internal organizational resources (e.g., technological readiness) than with external pressure to adopt. (4) While financial resources are an important factor in developing countries, technological capabilities become far more important in developed countries. This suggests that as firms move into deeper stages of e-business transformation, the key determinant of e-business value shifts from monetary spending to higher dimensions of organizational capabilities. (5) Government regulation plays a much more important role in developing countries than in developed countries. These findings indicate the usefulness of the proposed research model and theoretical framework for studying e-business value. They also provide insights for both business managers and policy-makers.

Migration to open-standard interorganizational systems: network effects, switching costs, and path dependency

Migration to Open-Standard Interorganizational Systems: Network Effects, Switching Costs and Path Dependency RESEARCH PROJECT REPORT June 2005 KEVIN ZHU The Paul Merage School of Business, and CRITO University of California, Irvine 949.824.2619 Tel. kzhu@uci.edu KENNETH L. KRAEMER The Center for Research on Information Technology and Organizations (CRITO) The Paul Merage School of Business University of California, Irvine 949.824.5246 Tel. kkraemer@uci.edu VIJAY GURBAXANI The CRITO Consortium The Paul Merage School of Business University of California, Irvine 949.824.5215 Tel. vgurbaxa@uci.edu SEAN XU The Paul Merage School of Business, and CRITO University of California, Irvine sxu00@uci.edu This research has been supported by grants from the CISE/IIS/CSS Division of the U.S. National Science Foundation and the NSF Industry/University Cooperative Research Center (CISE/EEC) to the Center for Research on Information Technology and Organizations (CRITO) at the University of California, Irvine. Industry sponsors include: The Boeing Company, IBM, IDC, Intel, Microsoft, and the U.S. Department of Defense. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Science Foundation.

Innovation Diffusion in Global Contexts: Determinants of Post-adoption Digital Transformation of European Companies

Grounded in the diffusion of innovation theory and the technology–organization–environment framework, we develop an integrative model to study the determinants of post-adoption stages of innovation diffusion, using enterprise digital transformation as an example of technology-enabled innovations. We specify four innovation characteristics (relative advantage, compatibility, costs and security concern) and four contextual factors (technology competence, organization size, competitive pressure and partner readiness) as determinants of post-adoption usage, and postulate usage as an intermediate link to impact on firm performance. We test the proposed model using a dataset of 1415 companies from six European countries. We find that the innovation needs to be used extensively in value-chain activities before its impact can be realized. Among the innovation characteristics, we find that compatibility is the strongest driver, and security concern outweighs cost as a usage inhibitor. Among the contextual variables, technology competence, partner readiness and competitive pressure significantly drive e-business usage, and the structural inertia of large firms tends to slow down its penetration. Collectively, these results indicate that innovation diffusion can be better understood by including both innovation characteristics and contextual factors, whereas earlier literature has traditionally treated the two separately. Finally, we evaluate an international dimension among European countries and tease out important boundary conditions that would not have been evident in a single-country dataset. Our results show that careful attention must be paid to the economic and regulatory factors that may result in uneven innovation diffusion even among developed European countries.

Research Note---Information Technology in Supply Chains: The Value of IT-Enabled Resources Under Competition

In this study, we seek to better understand the value of information technology (IT) in supply chain contexts. Grounded in the resource-based theory in conjunction with transaction cost economics, we develop a conceptual model that links three IT-related resources (backend integration, managerial skills, and partner support) to firm performance improvement. The model differs from previous studies by proposing a moderating effect of competition on the resource-performance relationships. Using data of 743 manufacturing firms, our analysis indicates significant contribution of IT to supply chains, which is generated through development of the digitally enabled integration capability and manifested at the process level along the supply chain. The technological resource alone, however, does not hold the answer to IT value creation. In fact, managerial skills, which enable adaptations on supply chain processes and corporate strategy to accommodate the use of IT, are shown to play the strongest role in IT value creation. Furthermore, backend integration and managerial skills are found to be more valuable in more competitive environments. While commodity-like resources have diminishing value under competition, integrational and managerial resources become even stronger. Overall, our results shed light on the key drivers of IT-enabled supply chains, and provide insights into how competition shapes IT value.

Global Technology, Local Adoption: A Cross-Country Investigation of Internet Adoption by Companies in the United States and China

To gain a better understanding of the global diffusion of e-business among organizations in developed and developing countries and to investigate the relationships among e-business contexts, economic environment, and organizational adoption, we conducted a firm-level survey in two countries — the United States and China — and tested a research framework built upon the technology-organization-environment framework. Empirical data from 262 US firms and 175 Chinese firms provided evidence about the extent of organizational adoption of ebusiness. Major findings include: 1) Chinese firms lag in using e-business-related technologies, especially interorganizational technologies; 2) US firms make more extensive use of the Internet; and 3) government regulation plays a more important role in China than in the US. Moreover, using structural equation modelling, we further teased out four adoption facilitators in general — technology competence, enterprise integration, competition intensity, and regulatory environment. These factors played different roles in different economic environments. The paper concludes with a discussion of the major results and implications. Keyword: Internet, electronic business, adoption, innovation diffusion, global environment, cross-country study, technologyorganization-environment framework A u t h o r s Sean Xu (xxu00@gsm.uci.edu) is a doctoral student of Information Systems in the Graduate School of Management at the University of California, Irvine. His research focuses on e-business adoption/diffusion in a global environment and the business value of IT and e-business. Kevin Zhu (kzhu@uci.edu) received his PhD from Stanford University and is currently an Assistant Professor of Information Systems in the Graduate School of Management at the University of California, Irvine. His research focuses on e-business, global electronic markets, strategic IT investments, and economic/organizational impacts of IT. Jennifer L. Gibbs (jlgibbs@uci.edu) is Senior Research Fellow at the Center for Research on Information Technology and Organizations (CRITO), at the University of California, Irvine. Her research focuses on social impacts of information technology in global teams and organizations. She is currently researching global e-commerce diffusion across numerous countries. Global Technology, Local Adoption: A Cross-Country Investigation of Internet Adoption by Companies in the United States and China SEAN XU, KEVIN ZHU, AND JENNIFER GIBBS

Information Transparency in Electronic Marketplaces: Why Data Transparency May Hinder the Adoption of B2B Exchanges

The online B2B environment makes a vast amount of data about prices and costs available on the Internet, which tends to make information more transparent in electronic marketplaces. In this study, ...

Internet-Based Distribution of Digital Videos: The Economic Impacts of Digitization on the Motion Picture Industry

Digital technologies and, especially, the Internet are profoundly reshaping the motion picture industry. Video-on-demand heightens the trend toward digitization and disintermediation. In the short term, the increasing use of digital technologies may result in significant cost reductions throughout the value chain. In the long term, the digitization of film production and distribution may induce a significant restructuring of the motion picture industry. Digital film delivery may displace physical films, videos and DVDs, thus threatening the long-term survival of video rental stores and other middle layers in the value chain. Taking an economic and strategic perspective, this paper examines the impacts of digitization on the motion picture industry with a focus on disruption and disintermediation of the value chain.