SPECIAL SECTION: GLOBALIZATION AND ELECTRONIC COMMERCE AbstractDiffusion and Impacts of the Internet and E-commerce diffusion has apparently taken different paths in different nations partially E-commerce in China because of the implications of national technology and the political and economic environments. This paper examines both the ZIXIANG (ALEX) TAN AND WU OUYANG diffusion and the impacts of e-commerce in China, based on results of a large-scale survey conducted in 10 countries including China. Findings lead to the conclusion that Chinese firms have started to build up e-commerce technology infrastructure and to create a Web presence. However, they fall behind in conducting actual e-commerce transactions, mostly because barriers in business, legal and cultural perspectives fail to accommodate the technology progress. In addition, three surveyed sectors, manufac- turing, wholesale/retail and banking/ insurance, have appeared to follow quite INTRODUCTION Many Chinese firms have followed different paths in adopting e-commerce. the leap-frogging approach to sig- There are also differences between large China has been rapidly building up nificantly upgrade their technology firms and SMEs regarding e-commerce dif- its IT and telecommunications infra- infrastructure for e-commerce dif- fusion strategies and impacts. Finally, our structure for e-commerce applica- fusion and to establish their web findings support the argument that a healthy tions since the late 1980s (Mueller presence while bypassing traditional e-commerce infrastructure should be sup- and Tan 1997; Tan and Ouyang technologies such as EDI. However, ported both by advanced technologies and 2003; Wang 2001; Zheng et al the lack of the solid historic founda- by a friendly business, legal and cultural 1999). In general, China’s infrastruc- tion of deploying and utilizing inter- environment. ture for e-commerce diffusion is nal information systems and the poor Keywords: e-commerce diffusion, Internet, characterized by ‘disparities’ among integration of business process with China geographic areas, demographics, information systems may slow down industrial fields, and firm size. Large technology progress. There are many 10.1080/1019678042000175270 cities and economically advanced other non-technical barriers to e- coastal provinces enjoy much better commerce diffusion in China. The infrastructure and many more most significant barriers include the Internet users than remote and lack of security, lack of a system to Downloaded By: [Schmelich, Volker] At: 19:56 23 March 2010 Authorseconomically poorer provinces. monitor and guarantee buyer and Internet users are dominated by the seller credibility, and an inefficient Zixiang (Alex) Tan educated young generation. Certain delivery system. In addition, there is ([email protected]) is an Associate Professor industries including banking and not a sophisticated legal framework in the School of Information Studies insurance are information intensive to facilitate e-commerce activities at Syracuse University. His research and better positioned to adopt any and to protect the interests of both and teaching interests include information-related activities. Large vendors and consumers. www.electronicmarkets.org DOI: telecommunications policy and regulation, new technology enterprises have bigger IT budgets The above-mentioned factors, to development and applications, industry and better-trained staffs than small- a large extent, have determined a restructure and competition. and medium-sized enterprises. Inter- unique feature to characterize 2004 Electronic Markets Wu Ouyang net and e-commerce are better China’s Internet applications in © ([email protected]) is the Director of the adopted among younger generations general and e-commerce activities in Center for Information Infrastructure with higher education. The particular. Many firms have recog- and Economic Development at the infrastructure disparity leads to nized the potential of the Internet Copyright Volume 14 (1): 25–35. Chinese Academy of Social Science and e-commerce diffusion disparity in and e-commerce. They have started an Associate Professor of the Graduate China. Current e-commerce activities the first step by connecting to the School at the Chinese Academy of Social Sciences. His study focuses on in China are concentrated in large Internet and setting up websites to the area related to informatization cities, coastal provinces, certain introduce and advertise their pro- including networks economics, industries, large enterprises, and ducts and services. However, only telecommunications and e-commerce. among well-educated young people. a very small number of firms have 26 Zixiang (Alex) Tan and Wu Ouyang { Diffusion and Impacts of the Internet and E-commerce in China actually moved further to the next step to conduct sectors — manufacturing, wholesale/retail distribution e-commerce activities via their websites. The Network and banking/insurance. Half of the sample firms are Economy Research Center in Beijing University (2001), small—medium establishments (SMEs) with 25 to 250 supported by State Economic and Trade Commission, employees and the other half are large firms with over surveyed 638 large and medium-sized enterprises in 250 employees. All the global means in this paper refer to 2001. Of them, 87% were reported to have connected to the average results from these ten surveyed nations. the Internet and 69% of them had created their websites. The Chinese sample comprises 204 establishments However, only 4% of them reportedly had conducted with 69 in manufacturing, 68 in wholesale/retail distri- online purchases and 4% of them had offered online sales bution, and 67 in banking/insurance. Among the 204 for their products (see Table 1). establishments, 102 are SMEs and the other 102 are This paper intends to expand research on e-commerce large ones. However, these establishments are drawn diffusion in China by examining empirical data result from four major cities: Beijing, Shanghai, Guangzhou from the ‘Globalization and E-commerce’ project and Chengdu, which are among the most economically funded by the National Science Foundation (NSF) and advanced regions. The survey result is not a typical repre- organized by the Center for Research on Information sentation of China’s firms as a whole, which could create Technology and Organization (CRITO) at the Univer- some limitations on any conclusion drawn from the sity of California at Irvine. It addresses issues including survey data. After obtaining the raw data, weights are technology readiness for e-commerce diffusion, key applied based on the actual distribution of establishments drivers and barriers, and the impacts of e-commerce in each sample sector. Both the global results and the diffusion. Findings of this study serve the purpose of Chinese results in this paper are based on the weighted understanding how e-commerce has been diffused in the calculation. particular Chinese environment. In addition, these Chinese characteristics are compared with those in other studied nations in order to provide a cross-nation E-COMMERCE TECHNOLOGY READINESS understanding of e-commerce diffusion. Use of e-commerce related technologies METHODOLOGY AND SAMPLE DESCRIPTION China is close to the average of sample nations in using e-commerce technologies. There is not a significant gap Data for this paper is primarily based on the results of the for newly deployed e-commerce technologies including CRITO/IDC Global E-Commerce Survey conducted email, websites, intranets, and extranets. However, in 10 countries including China. Secondary data from China falls far behind in using ‘traditional’ e-commerce government statistics, survey results by other organiza- technologies such as EDI, EFT, and call centres. This tions and research institutions, and some websites have result further confirms our expectation that the IT been cited in the paper. In addition, intensive interviews infrastructure has only been largely deployed recently in have been conducted. Chinese firms, which tends to bypass the ‘traditional’ The CRITO/IDC Global E-Commerce Survey technologies. Downloaded By: [Schmelich, Volker] At: 19:56 23 March 2010 sampled 2,139 establishments in the following 10 coun- More large Chinese enterprises use newly developed tries — Brazil, China, Denmark, France, Germany, e-commerce than small and medium-sized (SME) ones. Japan, Mexico, Singapore, Taiwan and the United States. However, more small and medium-sized firms have This is a well-balanced mixture of developed, newly adopted EDI and EFT. It could be explained by the industrialized and developing countries. All sample more intensive involvement of SME firms in interna- establishments are evenly split among three industry tional trade than large firms. China’s banking and insurance sector is clearly leading the use of the ‘traditional’ and newly developed e- Table 1. E-commerce activity among 638 large and medium firms commerce technologies, compare with manufacturing in 2001 and wholesale/retail sectors. This is consitent with the argument that information intensive sectors including Yes (%) No (%) banking/insurance tend to deploy a more advanced IT infrastructure (see Table 2). Has the firm connected to the Internet? 87 13 Has the firm created its own website? 69 31 Has the firm conducted on-line purchase? 4.1 95.9 Enterprise integration strategy Has the firm offered on-line sales of its products? 3.4 96.6 China falls behind the surveyed nations regarding the Source: Survey results