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Critical Success Factors for EC: Korea vs. U.S.A.

Critical Success Factors for EC: Korea vs. U.S.A. Tae Kyung Sung, Ph.D. CFE Kyonggi University IC 2 Institute, The Univ. of Texas at Austin. About the Author. Ph.D., Department of MSIS, The University of Texas at Austin Professor, Department of MIS, Kyonggi University

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Critical Success Factors for EC: Korea vs. U.S.A.

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  1. Critical Success Factors for EC:Korea vs. U.S.A. Tae Kyung Sung, Ph.D. CFE Kyonggi University IC2 Institute, The Univ. of Texas at Austin

  2. About the Author • Ph.D., Department of MSIS, The University of Texas at Austin • Professor, Department of MIS, Kyonggi University • Research Fellow, IC2 Institute, The University of Texas at Austin • Consultant, ISTC(International Science & Technology Center), Russia • President, Korea Chapter, Association of Certified Fraud Examiners • Research Interests • Information Systems Strategy and Management • Fraud Prevention and Detection • Business Innovation • Technology/Knowledge Transfer • Global Sustainability and Entrepreneurship

  3. Introduction The newest innovations, which we label information technologies, have begun to alter the manner in which we do business and create value, often in ways not readily foreseeable even five years ago. Alan Greespan Chairman, Federal Reserve Board May 6, 1999 • What are CSF’s for EC companies? • Are there any differences between Korea and USA? • Do CSF’s actually impact firm performance?

  4. Literature Review (1) • Critical Success Factors • Not many studies explicitly examining CSF’s for EC • Rather suggest a number of factors or issues • Huff et al. (2000): Nine CSF’s • Tabor (1998): Strategic Fit • Plant (1999): Seven Issues • Hahn and Noh (2000): Critical Failure Factors • Hagel and Rayport (1997a & 1997b): Customer-orientation • Barua et al. (2000): Eight key drivers • EC strategy • Evaluation and Assessment of EC operations • Marketing Paradigm

  5. Literature Review (2) • Performance of EC Firms • How to measure the success of EC firm? • Amazon.com has never produced a profit, but considered to be very successful • What’s my ROI on EC? Are you crazy? This is Columbus in the New World. What was his ROI? (Andy Grove, Chairman of Intel) • Not many studies on organizational level of performance • In this study, two kinds of measures • Tobin’s q: marketing measure • ROA: accounting measure

  6. Performance Measurement • Tobin’s q • Introduced in 1969 by James Tobin as a predictor of firm’s future investments • Has been recognized as very useful • Tobin’s q = (MVE + PS + DEBT) / TA Where MVE: (Closing price share at the end of fiscal year) * (number of common shares outstanding) PS: Liquidating value of firm’s outstanding preferred stock DEBT: (Current liabilities – Current asset) + (Book value of inventories) + (Long-term debt) TA: Book value of total assets • ROA • Standard accounting measure

  7. Research Methodology • Stage 1 • From literature review, 125 items compiled • 10 academicians and EC managers evaluate each item on a 7-point Likert Scale • Items scored lower than 4 were removed • Eliminate duplicates & integrate similar items (14 items) • Categorize 111 items into groups (16 groups) • Stage 2 • Standard questionnaires were administered • With help of Chamber of Commerce (USA) and newspaper agency (Korea) • Korea: 203 returned from 235 companies (7 unusable) • USA: 152 returned from 358 companies (15 unusable) • N: 196 (Korea) and 137 (USA)

  8. Research Variables VARIABLE DESCRIPTION No of ITEMS SAMPLE ITEM CUSTOMER Customer Relationship 6 How much web page is customized for each customer? PRIVACY Privacy of Information 7 Do you honor privacy rights? LOWCOST Low Cost Operation 7 What is cost/revenue ratio? EASE Ease of Use 8 How easy to recognize menu? STRATEGY EC Strategy 6 Is there EC strategy? EXPERTISE Technical EC Expertise 6 Do you have necessary EC technology? STABLE Systems Stability 8 How often system is disconnected? SECURITY Security of Systems 8 Do you have enough protection from hacking? PLENTY Plenty of Information 8 Is there enough information about goods/svcs? VARIETY Variety of Goods/Svcs 7 Do you carry top-brand goods/svcs? SPEED Speed of Systems 8 How fast is retrieval time? PAYMENT Payment Process 6 Is customer payment safe? SERVICES Services 8 Do you have technical services hot line? DELIVERY Delivery of Goods/Svcs 8 How accurate your delivery to customers? LOWPRICE Low Prices of Goods/Svcs 4 Are you prices of goods/svcs are competitive? EVALUATION Evaluation of EC Operation 6 Do you have metrics for Web sites?

  9. Measures (1) Mean Std. Dev Cronbach’s  CSF’s KOR USA KOR USA KOR USA CUSTOMER 3.5459 3.6326 1.0874 0.7934 0.8543 0.8081 PRIVACY 3.1046 3.6423 0.7346 0.9605 0.7872 0.8123 LOWCOST 3.1565 3.1004 0.5256 0.7015 0.8320 0.8456 ease 3.5595 3.2044 0.8299 0.8237 0.8122 0.7754 STRATEGY 2.8699 2.9343 0.7677 0.7446 0.7145 0.7453 EXPERTISE 3.1837 2.9871 0.8394 0.7851 0.7630 0.7878 STABLE 2.9311 2.5000 0.9096 0.7351 0.8088 0.7322 SECURITY 2.7577 3.4988 0.7783 0.8344 0.7753 0.7255 PLENTY 2.9473 4.0620 0.7867 0.7304 0.8289 0.8188 VARIETY 3.2449 3.2409 0.8667 0.7304 0.8091 0.7760 SPEED 3.6173 2.8358 0.8132 0.7744 0.8345 0.8005 PAYMENT 3.1888 3.1655 0.7746 0.5334 0.7360 0.7872 SERVICES 2.4362 2.9854 0.7389 0.9234 0.7874 0.7431 DELIVERY 4.0663 3.3577 0.7076 0.6309 0.7582 0.7289 LOWPRICE 3.3810 3.1727 0.6572 0.8246 0.8481 0.7984 EVALUATION 2.8087 2.7536 0.7564 0.8067 0.7230 0.7663 Tobin’s q 1.1277 1.3228 0.2546 0.2573 ROA 20.0125 15.0213 4.2467 4.2880 N= 196 (Korea) N= 137 (USA)

  10. Measures (2) CSF’s KOREA USA Correlation with Tobin’s q ROA Tobin’s q ROA CUSTOMER 0.1741** 0.2511*** 0.3802*** 0.3592*** PRIVACY 0.3261*** 0.3034*** 0.1554* 0.2344*** LOWCOST 0.2861*** 0.3372*** 0.3019*** 0.2863*** EASE 0.3142*** 0.3265*** 0.4992*** 0.5014*** STRATEGY 0.3218*** 0.3986*** 0.3049*** 0.3626*** EXPERTISE 0.4785*** 0.4569*** 0.4997*** 0.5255*** STABLE 0.4719*** 0.4889*** 0.1756** 0.1517* SECURITY 0.3826*** 0.4340*** 0.3420*** 0.3236*** PLENTY 0.5010*** 0.5231*** 0.0923 0.0661 VARIETY 0.3998*** 0.3979*** 0.3988*** 0.3620*** SPEED 0.4192*** 0.4156*** 0.4113*** 0.3499*** PAYMENT 0.4223*** 0.3922*** 0.2740*** 0.3192*** SERVICES 0.1800*** 0.2009*** 0.5138*** 0.5134*** DELIVERY 0.1549** 0.1361* 0.1566* 0.0958 LOWPRICE 0.2182*** 0.1842*** 0.4296*** 0.3604*** EVALUATION 0.4035*** 0.3640*** 0.3507*** 0.3859***

  11. Measures (3) Factor1 Factor2 Factor3 Factor4 PLENTY 0.6857 0.3798 0.1872 0.0646 PAYMENT 0.7058 0.2626 0.0467 0.1747 VARIETY 0.7005 0.2498 0.1982 0.3077 LOWPRICE 0.55430.1791 0.2529 0.3154 SERVICES 0.61780.1779 0.3045 0.0273 DELIVERY 0.5066 0.0687 0.3061 0.1837 SECURITY 0.02110.5545 0.0170 0.2278 STABLE 0.3710 0.6911 0.1271 0.0056 EVALUATION 0.3799 0.5281 0.3873 0.0195 EXPERTISE 0.1595 0.6491 0.1617 0.0301 SPEED 0.1029 0.6628 0.0978 0.1614 CUSTOMER 0.1756 0.0364 0.70620.1190 STRATEGY 0.3679 0.2450 0.6336 0.0802 PRIVACY 0.0162 0.1733 0.1345 0.8091 LOWCOST 0.0306 0.2237 0.3863 0.6904 EASE 0.2254 0.2686 0.0023 0.6523 Variance Explained 2.9009 2.3109 1.8274 1.7618

  12. Results – CSF’s (1) Top 5 Bottom 5 KOREA USA KOREA USA 1 DELIVERY PLENTY 16 SERVICES STABLE 2 SPEED PRIVACY 15 SECURITY EVALUATION 3 EASE CUSTOMER 14 EVALUATION SPEED 4 CUSTOMER SECURITY 13 STRATEGY STRATEGY 5 LOWPRICE DELIVER 12 STABLE EXPERTISE

  13. Results – CSF’s (2) T Test N= 196 (Korea) N= 137 (USA) CSF’s KOR USA t stat KOREA USA CUSTOMER 3.5459 3.6326 -0.84 PRIVACY 3.1046 3.6423 -5.52 PRIVACY*** LOWCOST 3.1565 3.1004 0.79 EASE 3.5595 3.2044 3.85 EASE*** STRATEGY 2.8699 2.9343 -0.76 EXPERTISE 3.1837 2.9871 2.26 EXPERTISE** STABLE 2.9311 2.5000 4.60 STABLE SECURITY 2.7577 3.4988 -8.30 SECURITY*** PLENTY 2.9473 4.0620 -13.86 PLENTY*** VARIETY 3.2449 3.2409 0.05 SPEED 3.6173 2.8358 8.88 SPEED*** PAYMENT 3.1888 3.1655 0.33 SERVICES 2.4362 2.9854 -5.79 SERVICES*** DELIVERY 4.0663 3.3577 9.40 DELIVERY*** LOWPRICE 3.3810 3.1727 2.56 LOWPRICE** EVALUATION 2.8087 2.7536 0.64 Tobin’s q 1.1277 1.3228 -7.03 Tobin’s q *** ROA 20.0125 15.0213 10.49 ROA***

  14. Results – Regression Analysis KOREA (N = 196) USA (N = 137) Tobin’s q ROA Tobin’s q ROA PLENTY 0.0574** 1.0640** 0.0237 0.1638 PAYMENT 0.02490.17500.0047 0.2096 VARIETY 0.0427* 0.6769* 0.00350.0816 LOWPRICE 0.0044 0.2123 0.0382 0.1117 SERVICES 0.0016 0.1164 0.0317 0.6533 DELIVERY 0.0083 0.0864 0.0114 0.1198 SECURITY 0.0725*** 1.4129*** 0.02280.2029 STABLE 0.0240 0.5448* 0.0179 0.2259 EVALUATION 0.0389* 0.1486 0.0827*** 1.5205*** EXPERTISE 0.0712*** 0.9979*** 0.0989*** 2.1312*** SPEED 0.0285 0.4279 0.0423 0.2298 PRIVACY 0.0522** 0.7042* 0.0055 0.3950 LOWCOST 0.0161 0.6594 0.0430 0.5867 EASE 0.0355 0.5141 0.1096*** 1.8081*** CUSTOMER 0.0061 0.3495 0.00010.0263 STRATEGY 0.02580.00620.0643** 0.6711 R-square 51.0102 52.7487 54.8898 55.7238 F-stat 11.65*** 12.49*** 9.13*** 9.44***

  15. Findings (1) • Respondents rate the following five factors the most critical KOREA USA DELIVERY (of goods/services) PLENTY (of information) SPEED (of systems) PRIVACY (of information) EASE (of use) CUSTOMER (orientation) CUSTOMER (orientation) SECURITY (of systems) LOWCOST (operation) DELIVERY (of goods/services) • Korean respondents consider SPEED as critical while US respondents consider otherwise while US respondents consider SECURITY as critical while Korean respondents consider otherwise • Korean respondents evaluate EASE, EXPERTISE, STABLE, SPEED, DELIVERY, and LOWPRICE higher than US respondents while US respondents evaluate PRIVACY, SECURITY, PLENTY, and SERVICES higher than Korean respondents

  16. Findings (2) • CSF’s have very significant explanatory power for firm performance • 51% and 53% for Tobin’s q and ROA for Korean Sample • 55% and 56% for Tobin’s q and ROA for US Sample • In case of Tobin’s q, • SECURITY, PRIVACY, EXTERTISE, PLENTY, VARIETY, and EVALUATIONare most contributable for Korean Sample • EXTERTISE, EVALUATION, EASE, and STRATEGY are most contributable for US Sample • In terms of ROA, • PLENTY, SECURITY, VARIETY, PRIVACY, EXPERTISE, and STABLEare most contributable for Korean Sample • EXTERTISE, EVALUATION, and EASE are most contributable for US Sample • Whether Tobin’s q or ROA is used, • PLENTY, SECURITY, VARIETY, PRIVACY, and EXPERTISE are the most explanatory for Korean Sample • EXTERTISE, EVALUATION, and EASE are the most explanatory for US Sample

  17. Future Research Directions • Replicate the research with a larger population both locally and internationally • Unit of analysis • Validate CSF’s • Level of Analysis • B2C vs B2B • Detailed investigation of CSF’s on firm performance • More valid organizational level performance measures • Longitudinal Study

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