E-commerce usage and business performance in
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E-commerce usage and business performance in
The current issue and full text archive of this journal is available at www.emeraldinsight.com/0968-5227.htm IMCS 17,2 E-commerce usage and business performance in the Malaysian tourism sector: empirical analysis 166 Mohamed Intan Salwani Received 24 November 2008 Revised 28 December 2008 Accepted 14 January 2009 Faculty of Accountancy, Universiti Teknologi MARA Malaysia, Shah Alam, Malaysia Govindan Marthandan Faculty of Management, Multimedia University, Cyberjaya, Malaysia Mohd Daud Norzaidi Faculty of Business Management, Universiti Teknologi MARA Malaysia, Shah Alam, Malaysia, and Siong Choy Chong Principal and Chairman’s Office, Putra International College, Ayer Keroh, Malaysia Abstract Purpose – Based upon the E-VALUE model developed, this paper aims to investigate the impact of e-commerce usage on business performance in the tourism sector. Design/methodology/approach – A cross-sectional survey is carried out on 165 Malaysian firms involved in the tourism sector (hotels, resorts, and hospitals engaged in health tourism) through the use of a structured questionnaire. Findings – The structural equation modeling results indicate that technology competency, firm size, firm scope, web-technology investment, pressure intensity, and back-end usage have significant influence on e-commerce usage. Among these variables, back-end integration is found to function as a mediator. E-commerce experience (in years) is found to moderate the relationship between e-commerce usage and business performance. Research limitations/implications – The paper focuses on the tourism sector in Malaysia and concentrates only on the management perspective of e-commerce adoption. Practical implications – The results provide insights to the Malaysian tourism sector and other organizations of similar structures of how they could improve upon their e-commerce adoption and/or usage for improved business performance. Originality/value – This paper is perhaps one of the first to investigate e-commerce usage in the tourism sector using a comprehensive set of variables through an interactive, comprehensive and multi-dimensional theoretical model (the E-VALUE model) in investigating their influences on business performance. Keywords Electronic commerce, Business performance, Tourism, Malaysia Paper type Research paper Information Management & Computer Security Vol. 17 No. 2, 2009 pp. 166-185 q Emerald Group Publishing Limited 0968-5227 DOI 10.1108/09685220910964027 Introduction It is widely acknowledged that the emergence of information and communications technology (ICT) have contributed to the rapid growth of electronic marketplace (Norzaidi et al., 2007). With the strong waves of globalization and liberalization across the world, ICT, particularly the internet, is believed to be the most cost-efficient tool to help brick and mortar companies gain bigger markets and the ability to compete with other rival organizations in attracting customers to their products, services and information (Tan et al., 2009). The favourable characteristics inherent in the internet such as speed, user-friendliness, low cost and wide accessibility have allowed electronic commerce (e-commerce) to be increasingly diffused globally, bringing countries together into a global networked economy (Gibbs and Kraemer, 2004). It is for these reasons that e-commerce has been widely regarded as a new frontier for business environment and that businesses all over the globe are attempting to shift to e-commerce to achieve their business objectives (Chandran et al., 2001) in terms of pursuing efficiency and quality (Mougayar, 1998). There is, however, consensus that many organizations in general, irrespective of size, have not been able to realize the full potential of the values brought about by e-commerce. In a developing country such as Malaysia, for instance, enterprise attitude has been identified as a major hindrance to e-commerce involvement. It has been found that Malaysian companies tend to be followers rather than pioneers in e-commerce investment because many of them fear failure to invest in such an unknown space (Ng, 2000). Further, lack of success stories by click and mortar companies have been identified as a reason why traditional businesses are reluctant to embark in e-commerce investments. In a study on e-commerce stimuli and practices among the small and medium enterprises (SMEs) in Malaysia, Ainin and Noor Ismawati (2003) provide empirical support where 79 percent of the respondents cited “not many success stories of e-commerce” as the main barrier to e-commerce adoption, followed by “not having knowledge in e-commerce” (72.6 percent), “low internet access among buyers” (72.2 percent), and “lack of knowledge on the potential of e-commerce” (69.6 percent). This problem is also prevalent among larger organizations in different parts of the world where most of them are still at the infancy stage of positioning themselves to exploit business opportunities enabled by the internet (Zhu, 2004). Notwithstanding, it is believed that e-commerce has the potential to create value for different types of firms across different sectors, including the tourism industry. Being a sector that is largely service-based, e-commerce can serve as a unique tool for the tourism industry to enhance their services, which could well determine their value creation and business performance. This in turn could ensure the success of e-commerce implementation. However, the involvement of the firms in e-commerce in Malaysia is still in its formative years. Chow (2000) found that only 20.5 percent of the firms involved in hospitality services are involved in e-commerce due to the lack of success stories and information on the potential impact of e-commerce implementation on firms’ performance. It is therefore imperative to further conduct research to understand the issues and potential of e-commerce implementation on the performance of the firms in the tourism industry. The literature indicates that relevant studies conducted on this industry are scarce (Intan Salwani et al., 2008). Further, while many efforts have been devoted to studying e-commerce at the pre-adoption stage (initiation) and its formal adoption (Norhayati, 2000), very little attention has been paid to the post-adoption issues (Zhu and Kraemer, 2005), especially in the developing countries. While similar reasons have been advanced of why organizations in general still struggle with e-commerce implementation, the theories developed particularly in the context of mature markets The Malaysian tourism sector 167 IMCS 17,2 168 may not be suitable to the developing economies (Austin, 1990). As such, in order to fully realize the value of e-commerce investment and usage in the tourism sector, a full-scale deployment at the post-adoption stage and its impact on business performance especially in a developing economy such as Malaysia stand out as an important research topic. Specifically, this paper aims to fulfill the following objectives: . to advance our understanding on the extent to which technological, organizational and environmental factors influence the level of e-commerce usage and business performance by considering the direct and indirect effects; . to provide input on how e-commerce capabilities (front-end functionalities and back-end integration), through usage, will influence business performance; and . to provide information on the relationship between level of e-commerce usage and business performance by considering the effects of moderating variables (i.e. e-commerce experience). To accomplish the above research objectives, this research uses an interactive, comprehensive and multi-dimensional theoretical model (E-VALUE model) to fill the gaps of knowledge in the literature. The findings of this paper serve to not only inform decisions on the value of e-commerce but also to furnish useful guides to the organizations in the tourism sector as well as firms of similar structure on how e-commerce can be best deployed for improved business performance. The findings also provide useful information to related bodies such as the regulatory bodies and industrial and/or business associations. The rest of the paper is organized as follows. The next section reviews the technological, organizational, and environmental (TOE) model and the resource-based view (RBV) theory. The resulting model, i.e. the E-VALUE model, acts as the theoretical foundations of this paper. The research framework and a series of testable hypotheses are presented next before the methodology is provided. The data collected were then analyzed and interpreted. The implications are discussed and recommendations are provided before concluding the paper. Literature review E-commerce is an unfolding phenomenon in view of technological advancement. From the research perspective, technological innovations have led to the development of various theories related to the diffusion of information technology (IT) and information systems (IS). A review of literature indicates that there is a rich stream of research focusing on technology diffusion on individuals and organizations (Cooper and Zmud, 1990; Rogers, 1962; Tornatzky and Fleischer, 1990). Some of the popular areas studied were on adoption and/or usage of different types of technologies such as electronic fund transfer (EFT), electronic data interchange (EDI), enterprise resource planning, adoption drivers, adoption barriers or hindrance, and many others. In the late 1990s, however, the focus seems to shift to e-commerce adoption. In line with the objectives of this research, the following sub-sections discuss one of the more popular models, i.e. the TOE model and the corresponding RBV theory in brief. Technological, organizational and environmental (TOE) model Realizing the importance of technology adoption, Tornatzky and Fleischer (1990) developed the TOE model to evaluate technology adoption. The TOE model is consistent with the theory of innovation diffusion in organizations by Rogers (1983). The model identifies three aspects of firm’s characteristics that influence the process of adopting, implementing and using technological innovations (DiPietro et al., 1990; Robertson, 2005; Tornatzky and Fleischer, 1990) which is explained below: (1) Technological context. Technological context describes both existing and new technologies relevant to the firm such as prior technology usage, and number of computers in the firm which determines the ability of the firm to move to e-commerce and other technology initiatives. (2) Organizational context. Organizational context refers to descriptive measures related to organizations such as firm scope, firm size and managerial beliefs. (3) Environmental context. Environmental context focuses on areas which the firm conducts its business operations, with the priority given to external factors influencing the industry that have significant impacts on the firm such as government incentives and regulations. According to DePietro et al. (1990), the three suggested elements interact with each other in influencing technology adoption decisions. One can safely conclude by drawing upon prior theoretical and empirical evidences that the TOE model has been a popular foundational model used for studying the drivers contributing to successful e-commerce initiatives from the interactions of the three characteristics, particularly in examining issues such as adoption, implementation and usage. Table I summarizes some of the more popular studies in chronological order. Dedrick and West (2003), however, believe that the TOE framework is just a taxonomy for categorizing variables and does not represent an integrated conceptual framework or a well developed theory. However, they agree that the model is a useful analytical tool to distinguish between inherent qualities of an innovation itself and the motivations, capabilities, and broader environmental context of adopting organizations. As e-commerce has been viewed as a global technological innovation (Kraemer et al., 2006), more meaningful insights on the whole process of e-commerce diffusion can be generated if the TOE model is used to study e-commerce adoption and value creation in conjunction with other theories or model. To achieve this, Zhu and Kraemer (2005) combined the TOE model with the RBV theory to study the post-adoption variations in usage and value of e-business. As the drivers of e-commerce are categorized into three characteristics; technology, organization, and environment, the value creation of e-commerce is analyzed from a resource-based perspective that stems from the unique characteristics of the internet, i.e. the front-end functionalities and back-end integration (Zhu, 2004). The next sub-section discusses the RBV theory and relates it to the current research. Resource-based view (RBV) theory The RBV theory has been developed to facilitate the understanding of how organizations achieve sustainable competitive advantages (Caldeira and Ward, 2003). Rooted in the strategic management literature, the RBV theory focuses on the idea of costly-to-copy attributes of the firm as sources of business returns and as a means to achieve superior performance and competitive advantage (Conner, 1991). The theory argues that sustained competitive advantage is generated by the unique bundle of resources at the core of the firm (Conner and Prahalad, 1996) where business owners build their businesses from the resources and capabilities that they currently possess or acquired (Dollinger, 1999). In general, the RBV theory addresses the central issue of The Malaysian tourism sector 169 Table I. Summary of previous studies that intersect with TOE model Technological context: (technology readiness, technology integration) Organizational context: (size, global scope, managerial obstacles) Environmental context: (competition intensity, regulatory environment) Robertson (2005) Technological context: (discontinuity of services, compatibility integration, Critical drivers in B2B benefits of new technology, EDI, asset specificity) e-commerce Organizational context: (readiness, decision makers IT knowledge, managerial structure) Environmental context: (competitive environment, relationship with business partners, industry dynamics, external resources, industry support, institutional factors) Zhu and Kraemer (2005) Technological context: (technology competence) Usage and value of Organizational context: (size, international scope, financial commitment) e-business Environmental context: (competitive pressure, regulatory support) Zhu et al. (2004) Technological context: (technology readiness) IT payoff in e-business Organizational context: (firm size, firm scope) environments Environmental context: (competition, government regulation) Kuan and Chau (2001) Technological context: (perceived direct benefits) EDI adoption Organizational context: (perceived financial cost, perceived technical competence) Environmental context: (perceived industry pressure, perceived government pressure) Thong (1999) CEO characteristics: (CEOs’ innovativeness and IS knowledge) IS adoption IS characteristics: (relative advantage/compatibility, complexity) Organizational characteristics: (business size, employees’ IS knowledge) Environmental characteristics Zhu et al. (2006) Innovation assimilation Constructs p p p p p p p p p p p p p p p Theoretical framework Technology Organization Environment p p p p 170 Study IMCS 17,2 how superior performance can be attained relative to other firms in the same market and posits that superior performance results from acquiring and exploiting unique resources of the firm (Saffu, 2004). Prior IS literature indicates that the RBV theory has been used to analyze IT capabilities (Mata et al., 1995) and to explain how the business value of IT resides more in the organization’s skills to leverage on IT as compared to the technology itself (Soh and Markus, 1995). It shows that the business value of IT depends on the extent to which IT is used in the key activities in the firm’s value chain (Zhu and Kraemer, 2005). In relation to e-commerce innovation, the RBV theory is used to demonstrate how firms leverage their investments in e-commerce to create unique internet-enabled capabilities that determines a firm’s overall e-commerce effectiveness (Zhu, 2004). Although some people might argue that e-commerce technologies are already available in the software and hardware market (e.g. EDI and EFT) for which the investment in e-commerce will not create value, there is a counterargument that regardless of how commodity-like the technology is, the architecture that removes the barriers of system incompatibility and makes it possible to build a corporate platform for launching e-business applications is never a commodity (Keen, 1991). The costly-to-copy attributes of e-commerce capabilities are tightly connected to the resource base and embedded in the business process of the firms but the degree varies as the firms themselves are unique with respect to their resource endowments (Smith et al., 2001). As such, the value creation through information sharing and the availability of online communities will lead to performance advantages in e-commerce (Lederer et al., 2001). Looking at the application of the RBV theory in discussing e-commerce usage and value creation, Zhu and Kraemer (2005) attempt to integrate the TOE model and the RBV theory as their conceptual model to assess the use and value of e-business in organizations. By investigating the e-business functionalities that make use of the unique characteristics of the internet, which consequently enable value creation, they posit that e-business leverages the unique characteristics of the internet to improve business performance. In this case, e-business capabilities are classified as front-end functionalities and back-end integration. The front-end functionalities refer to the medium in which customers interact with the marketspace. It refers to the seller’s portal, electronic catalogs, a shopping cart, a search engine and a payment gateway. On the other hand, activities related to order aggregation and fulfillment, inventory management, purchases from supplier, payment processing, packaging, and delivery are known as back-end integration of the business (Turban et al., 2006). By applying the RBV theory in looking at the post-adoption variations in usage and value of e-business, Zhu and Kraemer (2005) found that both front-end functionalities and back-end integration contribute to value creation of e-business, but back-end integration has a much stronger impact. The following sub-section discusses the E-VALUE model which is a result of combination of the TOE model and the RBV theory. E-VALUE model – the theoretical foundation of the study As the e-commerce technology is increasingly attracting the attention of researchers and managers, the literature on e-commerce remains fragmented and ambiguous especially from organizational perspectives, particularly on e-commerce usage and value creation (Govindarajulu et al., 2004). The absence of an integrated theoretical framework has led to a fractured research stream with many simultaneous but The Malaysian tourism sector 171 IMCS 17,2 172 Table II. Proposed improvements to Zhu and Kraemer’s (2005) model non-overlapping conversations (Chan, 2000). There is thus a need to develop a conceptual model that is not based only on theory, but rooted in one that is inherently suitable for analyzing the complexity of IT and firm performance (Melville et al., 2004). This issue is merely solved by Zhu and Kraemer (2005) who developed an integrated, multi-dimensional model of e-business use and value which combined the TOE model and RBV theory. Although the efforts by Zhu and Kraemer (2005) solved some missing link in the literature, there are at least four improvements that can be made on the integrated model as shown in Table II. The combination of Zhu and Kraemer’s (2005) model with the improvements shown in Table II lead to the development of an interactive, comprehensive, and multi-dimensional theoretical model known as E-VALUE model (Figure 1) which is used in this paper, to further examine the impact of e-commerce usage on business performance. In short, in proposing the specific constructs within the E-VALUE model, this paper considers all significant factors found in prior studies such as the pre- and post-adoption of e-commerce usage, direct and indirect effects, and effect of the moderator variable. Besides, combining the TOE model with the RBV theory, this paper also includes an e-business scorecard which contains elements from IT and accounting perspectives in order to provide a comprehensive and multi-dimensional research model. Based on Figure 1 and the research objectives above, the following section presents the hypotheses constructed for this paper. Gaps existed in Zhu and Kraemer’s (2005) model Suggested improvements to the proposed model 1. The absence of important variables such as managerial beliefs and pressure intensity (as suggested in the literature) that could have significant influence on e-commerce usage 2. In the RBV theory, front-end functionalities and back-end integration were regressed directly to e-business value. Both variables should be regressed towards e-commerce usage because front-end functionalities and back-end integration are the predictors of e-business usage 3. The absence of a moderator variable which could have a strong contingent effect on the relationship between e-commerce usage and business performance 4. The measurement of business performance is not comprehensive enough from the accounting point of view. The model only focused on three factors; the impact of sales, impact on internal operations, and impact on procurement. Other important dimensions and attributes were ignored 1. The inclusion of two new variables: managerial beliefs and pressure intensity 2. Front-end functionalities and back-end integration were regressed towards business performance 3. EC experience is included as a moderator variable to test whether its inclusion could modify the original relationship between the independent and the dependent variables 4. Business performance is measured based on the four perspectives of balanced scorecard as suggested by Kaplan and Norton (1992). However, with some modifications in the measurement attributes to suit the needs of performance measurement from technological and accounting points of view, this study introduces “e-commerce scorecard” as a comprehensive and multi-dimensional performance measurement tool The Malaysian tourism sector Technological context Technology competence H1 Front-end functionalities H10 Organizational context Firm size H2 Firm scope H3 Back-end integration 173 H8 H9 H4 Web-technology investment H5 Managerial beliefs E-commerce usage Business performance H11 H12 H6 Environmental context Regulatory support Pressure intensity H7 EC experience Mediator Moderator Hypotheses development Technological competence and e-commerce usage Many researchers found technological resources an important factor for successful IS adoption (Crook and Kumar, 1998; Kuan and Chau, 2001), specifically as an enabling backbone of e-business service (Robertson, 2005). The resources consist of infrastructure, human resources and knowledge (Bharadwaj, 2000; Mata et al., 1995) which could well determine the technological competency of the firm. In this paper, technological competency refers to the technological infrastructure and IT personnel that enable the development and implementation of e-commerce. The infrastructure establishes a platform on which e-business can be developed. With the availability of infrastructure, the IT personnel function by using their knowledge and skills to develop e-commerce applications (Zhu and Kraemer, 2005). Realizing the importance of technology competence towards e-commerce usage, H1 is developed to test the relationship of technology competence and e-commerce usage: H1. Technology competence significantly explains the variance in e-commerce usage. Firm size and e-commerce usage Firm size is one of the most commonly studied factors in the diffusion of innovation literature (Damanpour, 1991; Zhu et al., 2004). While increasing the efficiency of business processes such as reducing processing costs related to commercial transactions, it is also a major objective that drives companies to implement e-commerce irregardless of the size-bands (The European E-Business Report, 2004). Large companies are more likely to benefit from the smaller ones in view of the higher fixed costs for technology implementation and maintenance. This is not difficult to understand as firm size represents several important aspects of the organization such as resource availability, decision agility and prior technology experience (Zhu and Kraemer, 2005). It is therefore Figure 1. E-VALUE model IMCS 17,2 posited in this paper that size (as proxied by the number of employees) has a significant effect on firm’s e-commerce usage: H2. Firm size significantly explains the variance in e-commerce usage. 174 Firm scope and e-commerce usage Firm scope is another commonly studied factor in the diffusion of technology literature. It refers to the geographical extent of the firm’s operation and its trading globalization. Dewan and Kraemer (2000) and Hitt (1999) propose that greater scope leads to greater demand of IT. This is because e-commerce eliminates the geographical boundaries of doing businesses (Khan and Motiwalla, 2002). With e-commerce, firms are now connected to the global market which provides opportunities to widen their market size and reach. Based on these arguments, H3 is constructed to test the relationship between firm scope and e-commerce usage: H3. Firm scope significantly explains the variance in e-commerce usage. Web technology investment cost and e-commerce usage The findings on the extent to which web technology investment influences e-commerce usage have been mixed and inconclusive. Caldeira and Ward (2003) argue that despite high IT investments, not all firms are successful in innovating an effective IT capability. Zhu and Kraemer (2005) however, believe that higher investment on e-business development lead to greater extent of usage. The degree of investment normally relates to what extent the top management believes that e-commerce leads to firm’s value creation. It relates to the financial commitment of the firms in terms of their willingness to invest in hardware, software, system integration, and employee training. As such, H4 is proposed to identify the nature of relationship between costs of web technology investment and e-commerce usage: H4. Web technology investment costs significantly explain the variance in e-commerce usage. Managerial beliefs and e-commerce usage Many studies have singled out top management support and leadership as the most critical factor for successful implementation of technology innovation and e-commerce usage (Gould, 2001; Igbaria et al., 1998; Quinn et al., 1997). In this paper, managerial beliefs refer to how top management perceives and acts on e-commerce technology innovation. This relates to their beliefs on the ease of use and usefulness of e-commerce investment in creating values for the firms. To test whether managerial beliefs have significant effect on e-commerce usage, H5 is developed: H5. Managerial beliefs significantly explain the variance in e-commerce usage. Regulatory support and e-commerce usage The development of digital technology and the emergence of new products and services require formulation of a new policy and regulatory framework. This is because without parallel development of laws, policies and strategic directions by government can result in abuses and discourages the adoption and use of e-commerce (Dasgupta et al., 1999; Zhu and Kraemer, 2005). For e-commerce to flourish, the legal framework needs to facilitate the use and access to basic infrastructure and technology (Country Progress Report, 2005). Besides, regulatory framework, government support in terms of providing incentives would facilitate e-commerce usage. To test whether regulatory support provided by the Malaysian government affects e-commerce usage, H6 is proposed: The Malaysian tourism sector H6. Regulatory support significantly explains the variance in e-commerce usage. 175 Adoption intention and e-commerce usage Sociological research on threshold models suggest that decisions to engage in a particular behaviour depends on perceived number of similar others in an environment that have already done likewise (Krassa, 1988). According to Windrum and Berranger (2003), factors that influence firms’ decisions to invest in e-commerce can be classified into two, internal drivers and external drivers. Improved knowledge-sharing, costs reduction, and increased efficiency are some of the internal drivers to e-commerce adoption intention (Daniel and Wilson, 2002; Martin, 2001) while customer pressures, competitive pressures and key suppliers make up the external drivers (Martin, 2001; Quayle, 2002). To identify whether adoption intention has significant effect on e-commerce usage, H7 is formulated: H7. Adoption intention significantly explains the variance in e-commerce usage. E-commerce usage, front-end functionalities, and business performance Customers interact in the digital market via a front-end, defined as the portion of an e-seller’s business process through which customers interact (Turban and King, 2003). In simple words, front-end refers to the seller’s web site, an interface that helps business organizations to interact directly with customers and to outperform their competitors. Front-end functionalities have been identified as a critical success factor of e-commerce (Wen et al., 2003). Interactive technology such as live chat, interactive catalogs and three dimensional modeling gives online buyers more control over their shopping experience and draws them deeper into the buying process. Front-end functionalities help firms to deliver real-time product information, offer customization and facilitate customers via online account management which lead to improving transactional efficiencies and expanding the existing channel (Zhu and Kraemer, 2002). This would help firms to improve their business performance. To test whether front-end functionalities create values in e-commerce, H8 is developed: H8. Through e-commerce usage, front-end functionalities significantly explain the variance in business performance. E-commerce usage, back-end integration, and business performance Turban and King (2003) define back-end as the activities that support online order taking and fulfillment, inventory management, purchases from suppliers, payment processing, packaging, and delivery. Zhu and Kraemer (2005) discover that the process of back-end integration which is more difficult to imitate, have stronger impact on e-business performance compared to front-end functionalities. Since not much focus was given on how back-end integration affects business performance in prior literature, H9 is constructed to test the relationship between back-end integration and business performance: IMCS 17,2 176 H9. Through e-commerce usage, back-end integration significantly explains the variance in business performance. As back-end integration helps to fit the transactions offered by front-end systems by linking disparate systems and fragmented resources which help to facilitate order fulfillment and logistics management with suppliers and distributors (Zhu, 2004), thus, H10 is formulated to test the relationship between front-end functionalities and backend integration: H10. Front-end functionality has significant influence on the level of back-end integration. E-commerce usage and business performance The ultimate goal of using e-commerce is to improve business performance (Zhu and Kraemer, 2005). Clayton and Criscuolo (2002) demonstrate firms that use e-commerce are more likely to assess their innovations as having high positive impacts on firm performance than those without e-commerce. Similarly, Khan and Motiwalla (2002) in their paper on the influence of e-commerce on corporate performance in the USA found that from 44 companies under study, 64 percent of them found favourable e-commerce impact on return on investments. There is so far no evidence on the extent of how e-commerce usage influences business performance in the Malaysian tourism industry. To answer this question, H11 is formulated: H11. E-commerce usage significantly explains the variance in business performance. In this paper, a moderating variable is proposed. It is posited that experience of implementing e-commerce will have a strong contingent effect on the relationship between e-commerce usage and business performance. This makes up H12: H12. The relationship between e-commerce usage and business performance is significantly moderated by e-commerce experience (years). The next section explains the methodology used in this paper. Methodology Sampling procedures Firms involved in online tourism services such as hotels, resorts, and hospitals engaging in health tourism constitute the population of interest. These firms were chosen because of their high degree of usage of technological equipments such as computers and more importantly, their involvement in e-commerce initiatives. As of June 2006, there are about 456 members registered with the Malaysian Virtual Tourism Portal, which largely consists of hotels and resorts. The Directory of the Association of Private Hospitals of Malaysia reveals that there are 35 hospitals involved in health tourism as of September 2006. The population is thus made up of 491 companies. Based on the population of interest, a sample was selected using the stratified random sampling method. Sekaran (2003) considers this the most efficient sampling design when differentiated information is needed from the various strata within the population, with the aim to avoid members of population being significantly under or over represented (Hussey and Hussey, 1997). The optimum sample size was determined based on the sampling table provided by Sekaran (1992) where 217 samples are deemed adequate for a population of 491. Data collection and analysis procedures A set of structured questionnaires is used for primary data collection. Only one questionnaire is distributed to each organization through the respective human resource or public relations managers to be given to the appropriate higher-level personnel who is identified to be involved in policy setting and is well aware of the overall aspects and performance of his or her firm. It is observed that among the positions of the respondents involved in this paper include the president, managing director, chief executive officer, chief information officer, chief technology officer, chief operating officer, chief financial officer, vice president of information systems, information systems director/manager, business operations manager, administration manager and/or finance manager. The constructs and number of questions (Table III) are based upon the research objectives and the H12 formulated earlier in this paper in which the sources are largely based on literature reviews, reports, and documents gathered. Based on the 217 questionnaires sent through mail to the companies, 165 responses were received. According to Hussey and Hussey (1997), in order to avoid sample bias, the response rate using the mail distribution method should be more than 10 percent. In this research, the response rate of 33.6 percent (165 out of 491 companies) indicates that sample bias was avoided and the responses received represent the population adequately. The data were coded and run using the Statistical Package for Social Sciences version 12.0.1 and Analysis Moment of Structure Graphics version 5.0. The main data analysis involved the use of the structural equation modeling (SEM) technique. SEM is noted as a more powerful data analyzing technique that takes into account the modeling of interactions, non-linearity, correlated independents, measurement errors, correlated error terms, multiple latent independents each measured by multiple indicators, and one or more latent dependents also each with multiple indicators (Garson, 1999). The use of SEM is believed to be able to allow more meaningful and accurate results to be generated. Constructs Technology competence Firm scope Managerial beliefs Web technology costs Regulatory support Pressure intensity E-commerce usage Front-end functionalities Back-end integration Business performance No. of indicators Cronbach’s a 3 2 6 2 4 3 4 5 4 19 0.704a 0.761 0.911 0.780 0.909 0.761 0.958 0.973 0.980 0.987 Note: aStandardized item a (due to multiple-item scales to quantify the construct) The Malaysian tourism sector 177 Table III. Cronbach’s a for each construct IMCS 17,2 Construct reliability In this paper, Cronbach’s a was performed on each construct to measure internal consistency reliability for the individual scales and the overall measures. As shown in Table III, all the constructs scored above 0.70 and therefore are considered reliable in all aspects. 178 Evaluation of model fit Table IV shows the results of evaluation of the model’s fitness. The x 2/DF value is 1.268 which is less than the desired cut-off value of 3.0 suggested by Segars and Grover (1993). Moreover, the incremental fit index (IFI) (0.983), comparative fit index (CFI) (0.983), and Tucker-Lewis index (TLI) (0.976) values are considered close to the recommended values. Further, the root mean square error of approximation (RMSEA) score of 0.045 shows that the model meets a reasonable error of approximation with a cut-off of 0.08 (Browne and Cudek, 1993). It can therefore be concluded that the model used in this paper is valid in all aspects. The results confirmed that the responses of the managers generally support the theoretical and conceptual distinctions of all the variables proposed in this paper. As such, the data can be applied for further analyses. The next section presents the results of the H12 tested in this paper. Results Table V presents the results of the H12. Technology competence, firm scope, costs of web technology investment, and adoption intention were found to have significant Table IV. Evaluation of model fit Table V. Summary of hypothesis testing Goodness-of-fit-measure Recommended value Approximate boundary as a good fit Relative x 2 IFI TLI CFI RMSEA ,3.00 Close to 1.0 is better Close to 1.0 is better Close to 1.0 is better ,0.08 1.268 0.983 0.976 0.983 0.045 Proposition Causal relationship H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 TC ! ECU SZ ! ECU FS ! ECU WTI ! ECU MB ! ECU RS ! ECU AI ! ECU FE ! BP BE ! BP FE ! BE ECU ! BP EC experience on ECU ! BP ba pb 0.146 0.007 0.164 0.240 0.043 20.031 0.415 0.192 0.279 0.912 0.438 0.749 0.003 NS * 0.046 NS NS * NS 0.004 * * * Notes: aRegression coefficient; bstatistical significant of the test (a ¼ 0.05, *, 0.001) Result Supported Not supported Supported Supported Not supported Not supported Supported Not supported Supported Supported Supported Supported influence on the extent of e-commerce usage. As such, H1, H3, H4, and H7 are supported. Back-end integration and e-commerce usage were found to significantly explain the variance in business performance and therefore, H9 and H11 are supported. H10 is also supported where front-end functionality has significant influence on the level of back-end integration. Finally, the relationship between e-commerce usage and business performance is significantly moderated by number of years of experience in e-commerce and therefore, H12 is supported. No support was found for H4, in that, firm size (H2), managerial beliefs (H5), regulatory support (H6) do not significantly explain the variance in e-commerce usage, while front-end functionalities do not significantly explain the variance in business performance (H8). Discussion and implications This research has fulfilled all the three objectives set forth in the paper. It offers significant contributions to the tourism sector not only in terms of the potential of e-commerce usage but also advances knowledge as far as the use of the E-VALUE model is concerned. Grounded in the diffusion of innovation literature which covers the TOE model and the RBV theory, this paper has empirically evaluated the proposed E-VALUE model and proven its applicability in assessing the various issues related to e-commerce. By examining firms with experience in e-commerce, it provides a holistic picture of the post-adoption diffusion and the consequences of e-commerce adoption and usage. The results suggest that usage appears to be determined by adoption intention (H7), followed by costs of investment (H4), firm scope (H3), and technology competence (H1) of the firm in chronological order. The findings are consistent with the results of prior studies (Crook and Kumar, 1998; Dewan and Kraemer, 2000; Hitt, 1999; Khan and Motiwalla, 2002; Kuan and Chau, 2001; Robertson, 2005; Windrum and Berranger, 2003; Zhu and Kraemer, 2005). This is not difficult to comprehend as many of the firms involved in tourism in Malaysia have engaged in e-commerce due to their nature of businesses and stakeholders which transcends their geographical boundary. Further, their key suppliers such as hotels, airlines, and pharmaceutical companies have gone online and they require the firms to synchronize their operations through the use of computerized and e-commerce systems. These become the external drivers for the other firms which wish to have businesses with the suppliers and distributors to follow (Martin, 2001; Quayle, 2002). However, e-commerce implementation requires a certain amount of investment on web technology in order to fulfill the needs of suppliers. For the firms, their ultimate aim is profit through working with the key suppliers and distributors in offering their services to customers. Their investment is important in order to get business support from the suppliers. The substantial investments made on e-commerce development for the sake of suppliers and distributors explained the adoption intention and utilization by the firms (Zhu and Kraemer, 2005). It is therefore not difficult to understand the relationship between firm scope and e-commerce usage. The wider the scope of the tourism firms’ activities, the more likely it is for the firms to use e-commerce (Dewan and Kraemer, 2000; Hitt, 1999). These, however, depend very much on the technological competency of the firms as the availability of necessary technological infrastructure and knowledgeable IT personnel can determine the success of the firms’ e-commerce initiatives and usage (Crook and Kumar, 1998; Kuan and Chau, 2001; Zhu and Kraemer, 2005). The findings suggest that the tourism firms must consistently create value through their willingness to invest in hardware, software, system integration, and employee training. The Malaysian tourism sector 179 IMCS 17,2 180 On the other hand, firm size (H2), managerial beliefs (H5), and regulatory support (H6 ) do not determine e-commerce usage. This is in contrast with prior studies (Dasgupta et al., 1999; Gould, 2001; Igbaria et al., 1998; Quinn et al., 1997; Zhu and Kraemer, 2005). The finding on firm size reaffirms the earlier argument on the priority given to the key suppliers across geographical boundaries. The firms are required to have e-commerce presence in order to meet the requirements of their suppliers, be they small or large in size. This also explains why managerial beliefs are not a significant criterion for e-commerce usage. It seems to indicate that e-commerce use is not a priority to key managers of the firms, but rather meeting the needs and requirements of key suppliers that dictate their e-commerce initiatives. The significance of back-end integration to e-commerce usage and business performance (H9) substantiates this claim. This may also be the reason why the firms perceive regulatory support provided by the Malaysian government does not induce e-commerce usage due to the many such laws enacted for the benefits of protecting customers. The non-significance between front-end functionalities and business performance (H8) imply that the firms perceive usage of e-commerce as an important means of meeting the requirements of their key suppliers rather than their customers. This is in contrast with prior studies which insist that front-end functionalities are critical success factors that create values for firms (Wen et al., 2003; Zhu and Kraemer, 2005). The results of which front-end functionalities significantly influence back-end integration suggest that Zhu’s (2004) argument is supported where integration is needed to facilitate the activities of key suppliers and distributors rather than towards meeting the requirements and needs of customers. It appears clearly that although front-end functionalities are not seen as important as back-end integration, an integration of both is necessary to facilitate e-commerce usage. Consistent with prior studies, the findings also demonstrate that e-commerce experience significantly moderates the relationship between e-commerce usage and business performance (H11 (Clayton and Criscuolo, 2002; Khan and Motiwalla, 2002; Zhu and Kraemer, 2005)). This is proven by the increase of 6.9 percent in the R 2 value. This implies that experience in e-commerce is an important factor which determines usage and business performance (H12). Firms with e-commerce experience, such as the ones surveyed in this paper, are able to determine what works better and what does not by exploring, experimenting, examining market and performance feedback, and learning from the experiences of others throughout a period of time (Kauffman et al., 2002). Their feedback reinforces the importance of the variables under study and more importantly, the confirmation on the value creation of e-commerce usage in terms of improved business performance. In short, the results suggest that e-commerce usage, back-end integration and experience in e-commerce, and business performance are closely linked. These will have implications on the firms planning to use or enhance utilization of their e-commerce technology. The results imply that the potential of e-commerce technology and usage towards improved business performance should not be overlooked. The firms should realize that the focus is no longer on whether to deploy e-commerce but how to deploy it profitably. As e-commerce experience plays a significant role towards improved firm performance, younger firms cannot afford to delay their e-commerce development and utilization due to the reason of size. In this respect, the government and industry associations can play a more pivotal role by creating awareness and rendering assistance to the firms. For SMEs, some associations such as the Malaysian Association of Hotels provide services on developing online businesses and providing training to its members. By participating in these activities, the investment cost can be minimized for greater benefits. For firms that are at the advanced stage of e-commerce implementation, it is of paramount importance that they continuously assess the suitability of their e-commerce initiatives. The firms must be willing to invest in technological infrastructure, particularly in hardware, software, and integration of the systems as well as human competencies by hiring IT personnel with appropriate knowledge and skills to develop e-commerce applications. These personnel ought to be sent for frequent technical trainings in order to ensure that their knowledge and skills are kept up-to-date. Both key suppliers and customers require significant attention from the firms. Many customers are tech-savvy today and they are increasingly relying on transactions made on the internet. As such, equal emphasis must be given to both the front-end functionalities and back-end integration by keeping in mind the needs of the key suppliers, distributors, and customers. This will undoubtedly help to boost the performance of the firms. Conclusion and suggestions for future research This paper has advanced knowledge by addressing the potential of e-commerce usage and its relation to business performance from multi-dimensional perspectives through the use of an integrative model. In many instances, the paper found support from prior research conducted across different industries in different countries and therefore, generalizability is not so much of an issue. As such, it is not only useful to the tourism industry but also other service-based industries which intend to venture into e-commerce initiatives. It provides useful guides to the click and mortar companies to evaluate their current e-commerce initiatives and to determine the areas that need to be re-engineered in the process of profiting from their e-commerce investments. In addition, it also encourages brick and mortar companies to embark into e-commerce. In this hypercompetitive world, firms should react fast to the changing business environment. 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