On network externalities, e‐business adoption and information asymmetry
| DOI | https://doi.org/10.1108/02635570710750453 |
| Published date | 29 May 2007 |
| Date | 29 May 2007 |
| Pages | 728-746 |
| Author | Fujun Lai,Jian Wang,Chang‐Tseh Hsieh,Jeng‐Chung (Victor) Chen |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
On network externalities,
e-business adoption and
information asymmetry
Fujun Lai
College of Business, University of Southern Mississippi – Gulf Coast,
Long Beach, Mississippi, USA
Jian Wang
School of International Trade and Economics, University of International
Business and Economics, Beijing, People’s Republic of China
Chang-Tseh Hsieh
College of Business, University of Southern Mississippi,
Hattiesburg, Mississippi, USA, and
Jeng-Chung (Victor) Chen
Institute of Telecommunications Management,
National Cheng Kung University, Tainan, Taiwan
Abstract
Purpose – This paper seeks to investigate and provide empirical evidence of the interrelationships
among network externalities, e-business adoption and information asymmetry.
Design/methodology/approach – A conceptual model was proposed and tested using 307
completed interview cases selected from a database of 2,075 Chinese international trading companies
published by the Beijing Municipal Bureau of Commerce for this study.
Findings – The results indicated that network externalities significantly influenced e-business
adoption and information asymmetry, and e-business adoption influenced information asymmetry
through information sharing and collection. A split sample analysis showed that cultural contexts
significantly moderated the interrelationships among network externalities, e-business adoption, and
information asymmetry.
Research limitations/implications – Data for this study were collected only from mainland
China, therefore, non-Chinese companies (foreign-owned) operating in China may have been influenced
by Chinese cultures and some of them have been localizing their operations in China. The influences of
network externalities on business performance and decision making remain unclear. In addition, data
were collected from self-reported questionnaires, and thus may be subject to self-reporting bias. Future
studies should use more objective measurements to reduce the potential for self-reporting bias.
Practical implications – This study contributes significantly to the literature by providing
empirical evidence on interrelationships among network externalities, e-business adoption, and
information asymmetry. The findings in this study also provide valuable insights for managers to
better understand the influence of network externalities on e-business adoption.
Originality/value – This study contributes significantly to the literature by providing empirical
evidence of the interrelationships among network externalities, e-business adoption, and information
asymmetry. The findings also provide managers with valuable insight into better understanding of
the nature of these interrelationships.
Keywords Computer networks,Electronic commerce, Information management, China
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm
IMDS
107,5
728
Industrial Management & Data
Systems
Vol. 107 No. 5, 2007
pp. 728-746
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570710750453
Introduction
Described as a demand-side economy of scale (Besen and Farrell, 1994), network
externalities refer to the value of a network created as a by-product of an existing
installed base (Kauffman and Wang, 2002) from which the user benefits are associated
with the size of the network (Katz and Shapiro, 1985, 1986). Network externalities
pervasively exist in telephones/faxes, ATM’s, hardware, software, computers, and the
internet (Liebowitz and Margolis, 1994; Church and Gandal, 1993).
Technological, organizational, managerial, and environmental factors all have
important influences on e-business adoption (Tornatzky and Fleischer, 1990; Wang
and Cheung, 2004). However, there remains a limited understanding of the influence of
network externalities on e-business adoption (Zhu et al., 2006). The concept of network
externalities has been used in a number of analytical models to improve the
understanding of e-business adoption (Riggins et al., 1994; Wang and Seidmann, 1995;
Bhargava and Choudhary, 2004; Asvanund et al., 2004; Ahsan and Herath, 2006).
However, so far, only limited empirical testing of these models has ever been attempted
(Kauffman et al., 2000; Zhu et al., 2006).
Information related to exchanges or transactions is not evenly distributed among
participants (Anthony and Gales, 2002). When one participant in these exchanges or
transactions has an information advantage over the other participants, this represents
“Information Asymmetry” a topic widely studied in the economics literature (Stigler,
1961; Akerlof, 1970). A company’s decision making and operations may be significantly
influenced by information asymmetry (Daft and Lengel, 1986). Although factors such as
information sharing and price discounting have been suggested to reduce information
asymmetry (Filia, 2005; Lee et al., 2004; Klastorin et al., 2002), very little empirical
evidences on the influence of network externalities on information asymmetry has ever
been provided.
The purpose of this study is to investigate the interrelationships between network
externalities and information asymmetry as well as between e-business adoption and
information asymmetry. It is proposed that network externalities would significantly
influence e-business adoption, and that e-business adoption and network externalities
would reduce information asymmetry. It is also proposed that cultural contexts would
have a significant influence on the interrelationships among network externalities,
e-business adoption, and information asymmetry.
Theoretical background and relevant studies will be presented in the following
section followed by the development of the proposed conceptual model an d hypotheses.
Methodologies developed to empirically test the above-mentioned proposals will be
described in the section followed. The conceptual model will then be tested using
survey data from 307 international trading companies in China. Data analyses will be
conducted and the results interpreted. A brief summary of major findings in this study
and a discussion on directions for future studies will conclude this report.
Theoretical background
Network externalities
Network externalities may be classified as positive or negative. Positive externalities
exist when a user’s utility for a product or service increases with an increase in users of
identical or compatible products or services (Srinivasan et al., 2004). Conversely,
negative network externalities exist when a user’s utility decreases with an increase in
On network
externalities
729
To continue reading
Request your trial