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

Abstract

I n this study, we developed a set of constructs to measure e-commerce capability in Internetenhanced 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.

The Association between Information Technology Investments and Audit Risk

“…Hitt and Brynjolfsson (1996) find that IT reduces production costs and increases customer satisfaction. Other studies find that investments in IT increase financial and market performance (e.g., Bharadwaj 2000; Zhu and Kraemer 2002) and improves organizational innovativeness (Kleis et al 2012;Xue et al 2012) across different contexts. Dorantes et al (2013) report that Enterprise Systems improve companies' internal information environment and increases both quantity and quality of management forecasts.…”

IT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variation

“…For example, Zhu and Kraemer (2002) identify four metrics that assess the e-commerce capability of firms and demonstrate that firms with greater e-commerce capabilities perform better on some dimensions of performance (e.g., supply chain optimization) but perform worse along other dimensions (e.g., the cost of goods sold). These results provide convincing evidence of complementarities between an aggregate measure of IT intensity and organizational capabilities in e-commerce.…”

“…• Coordination theory (e.g., Malone et al 1987) • Customer intimacy (e.g., Mithas et al 2005) Internet architecture • e-commerce capability theory (e.g., Zhu and Kraemer 2002) • The Internet shopping site (www.7dream.com, a strategic IT asset) is integrated with physical stores to offer payment acceptance and pick-up and/or delivery services for products purchased on line.…”

E-commerce applications in the tourism industry: A Tanzania case study

“…Many studies have quantified effects of e-commerce using either financial measures such as profitability, cost reductions, and inventory efficiency (Zhu & Kraemer, 2002) or nonfinancial ones , (Mola & Heeks, 2007), (Zhu & Kraemer, 2005). Some have considered various combinations of these two types of measures (see Zhuang & Lederer, 2006), (Salwani et al, 2009).…”