Technological Forecasting & Social Change 73 (2006) 1161 1177

E-commerce critical success factors: East vs. West

Tae Kyung Sung*
College of Business, Kyonggi University, #94-6 Yiui-Dong, Youngtong-Gu, Suwon 443-760, South Korea Received 15 February 2003; received in revised form 18 January 2004; accepted 1 September 2004

Abstract The three main purposes of this paper are to (1) identify critical success factors (CSFs) for electronic commerce (EC), (2) investigate the explanatory power of these CSFs on firm performance, and (3) compare differences in evaluating CSFs and explaining impact of CSFs on performance among in Korea, Japan, and USA. Through a literature review and interviews with managers in EC firms, a list of 16 CSFs consisting of 111 items was compiled. Questionnaires were administered to managers of EC companies in Seoul, Korea, Tokyo, Japan, and Texas, USA. Survey results show that CSFs have very significant explanatory power for firm performance in all three countries. While security, privacy, and technical expertise are the most explanatory CSFs in Korea, evaluation of EC operations, technical expertise, and ease of use show most explanatory power in USA. D 2004 Elsevier Inc. All rights reserved.
Keywords: Electronic commerce; Critical success factors; Firm performance

1. Introduction Organization for Economic Co-Operation and Development (OECD) officially acknowledges electronic commerce (EC) as a new way of conducting business [1]. In this report, OECD recognizes that EC has the potential to radically alter economic activities and the social environment. Particularly, the enormous growth of EC along with the rapid development of information technology (IT) is having a

* Tel.: +82 31 249 9457; fax: +82 31 249 9401. E-mail address: tksung@kcfe.or.kr. 0040-1625/$ - see front matter D 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2004.09.002

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profound impact on the world economy. EC allows regional businesses and economies to be less local and more global in keeping with long-term trends toward market liberalization and reduced trade barriers [2]. Accordingly, EC is considered to be an unavoidable alternative for companies of the 21st century [3,4]. When the term bECQ was first introduced, it was understood as simple as transactions over the Internet [5]. However, as EC evolves, the horizon of EC expands as the conduct of selling, buying, logistics, or other organization-management activities via the Web [6]. A step further, Weill and Vitale [7] define EC as doing business electronically by completing business processes over open (nonproprietary) networks. According to U.S. Department of Commerce, almost half of the U.S. workforce will be employed by industries that are either major producers or intensive users of information technology products and services by 2006. Internet-related jobs grew 29% between the first quarter of 1999 and the first quarter of 2000 compared to 6.9% growth of non-Internet related jobs during the same period. The Internet economy generated an estimated US$830 billion in revenue in 2000, a 58% increase over 1999 [8]. The number of U.S. firms engaging in EC has increased from just under 8% in 1999 to over 35% by the end of 2000 [9]. There is a critical question emerging under this explosive EC growth. What is management bbest practicesQ of successful EC firms? In this respect, the primary purpose of this paper is to explore what are the critical success factors (CSFs) for EC companies. Another related question is the validity of these CSFs. Do CSFs actually impact firm performance? Thus, the secondary purpose is to investigate explanatory power of selective CSFs on firm performance. OECD [2] report indicates that there is a great difference on the growth of EC and impact of EC over economy and society across the nations in the world. This leads to another academically and practically insightful question. Are there any differences in evaluating CSFs and explaining impact of CSFs on performance across the nations? In this paper, Korea, Japan, and USA are selected to perform comparative analyses on theses issues. The structure of the remainder of the paper is as follows. The following section reviews the literature on CSFs and performance measures. Then the research design section describes operational measures and data collection processes. Next, survey results are presented and important research findings and implications are discussed. Finally, Section 5 summarizes findings, draws the conclusions, and provides future research directions.

2. Literature review 2.1. Critical success factors for electronic commerce There have been few studies explicitly examining CSFs for EC. Rather, most studies implicitly suggest a range of important factors or issues, which may be considered to be CSFs. Huff et al. [10] emphasize nine CSFs for EC firms: First, add value in terms of convenience, information value, disintermediation, reintermediation, price, and choice; Second, to focus on a niche market and then expand; Third, maintain flexibility; Fourth, segment geographically; Fifth, get the technology right; Sixth, manage critical perceptions; Seventh, provide exceptional customer services; Eighth, create effective connectedness; and ninth, understand the Internet culture. Through case studies, Tabor [11] suggests that a synergistic relationship between business strategy and strategic fit is the

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critical factor for EC success. Plant [12] studies the success factors associated with over 40 organizations in the US and Europe and identifies the following seven CSFs: financial impact, competitive leadership, brand, service, market, technology, and site metrics. Hahn and Noh [13] use critical failure factors (CFFs) to explore the factors that inhibit the growth of EC. They listed 44 variables and through empirical study, they categorized them into the following six CFFs: lower level of data security, inconvenient use, unstable systems, lack of information mind, dissatisfied purchasing, and social disturbance. Regression analysis on performance variables further indicates that unstable system, unsatisfied purchasing, and lower level of data security affect satisfaction while unstable systems and lower level of data security affect usage. CFFs that affect users expectation of EC usefulness are unsatisfied purchasing, social disturbance, and inconvenient use. Hagel and Rayport [14,15] discuss the implications of consumers taking control of their own information as a result of EC strategy. Their work suggests the importance of information security and privacy as key EC success factors. E (electronic)-Loyalty is targeted by Reichheld and Schefter [16] to emphasize the trust of customers to a specific EC company. Manchala [17] also confirms the importance of trust as a critical factor. To explore web-based electronic commerce opportunities, Riggins [18] presents a framework that identifies 15 key ways to add value to an organizations e-commerce strategy. The extent to which each of these is utilized represents critical success factors. Similarly, Barua et al. [19] suggest eight key drivers for EC operational success: system integration, customer orientation of IT, supply orientation of IT, international operation of IT, customer-related processes, supplier-related processes, customer e-business readiness, and supplier e-business readiness. A number of studies emphasize the importance of EC strategy [2027]. Athey [18] stresses that EC requires leadership as challenges for the future. Customer orientation is another critical factor discussed by Elofson and Robinson [29], Fulkerson [30], and Gonsalves et al. [31]. Hoffman and Novak [32] suggest a new marketing paradigm for EC and a number of researches explore the importance of marketing including pricing mechanisms [17,3336]. Another stream of research is on the issue of evaluation and assessment of EC operations and web sites [22,33,3739]. These researches suggest that effectiveness of EC operations and web sites should be evaluated as EC is considered a strategic necessity. In summary, the literature review on CSFs for EC indicates a broad range of issues including security of information and systems, privacy of customer information, stability of systems, cost of operations, metrics for EC operations and web sites, ease of use, proper presentation of information about goods and services, customer orientation, EC strategy, EC expertise in both technical and managerial perspectives, payment, delivery, competitive price, speed, services, variety of goods and services, web design, marketing, trust and loyalty of customers. From extensive literature review, 16 CSFs are identified. The results are summarized in Table 1. The CSFs in the upper part of Table 1 are factors mentioned by at least three studies and there are total of 16 CSFs surpassing this standard. Even though the categorization of 16 CSFs is somewhat arbitrary, derivation of CSFs based on literature review is the only feasible methodology since there have been no comprehensive and empirical studies on CSFs of EC. To develop the operationalization of each CFS, careful examination of literature has been done to identify specific items to measure CSFs. A total of 125 items were compiled for 16 CSFs and there are five to nine items for each CSF.

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Table 1 Summary of literature review on CSFs CUSTOMER PRIVACY LOWCOST EASE STRATEGY EXPERTISE STABILITY SECURITY PLENTY VARIETY SPEED PAYMENT SERVICES DELIVERY LOWPRICE EVALUATION Huff et al. [10] Tabor [11] Plant [12] Han and Noh [13] Hagel and Rayport [14] Hagel and Rayport [15] Reichheld and Schefter [16] Manchala [17] Riggins [18] Barua et al. [19] Aldridge et al. [20] Bennett and Eustis [21] Gebauer and Scharl [22] Jarvenpaa and Tiller [23] Klose and Lechner [24] Lincke [25] Porra [26] Timmers [27] Athey [28] Elofson and Robinson [29] Fulkerson [30] Gonsalves et al. [31] Hoffman and Novak [32] Burn and Barnett [33] Jahng et al. [34] Lee et al. [35] Roberts [36] Day [37] Selz and Scuert [38] Strader and Hendrikson [39] o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o

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2.2. Performance of EC firms How to measure the success of EC firms? For example, the most successful online seller, Amazon.com, which had less than US$1 billion in revenue in 2000, was worth more than long established corporations including Delta Airlines, Kmart, Apple Computer, and Barnes and Noble [40]. Also, as of 2001, Amazon.com had not produced a profit. Even Andy Grove, Chairman of Intel, once mentioned bWhats my ROI on e commerce? Are you crazy? This is Columbus in the New World. What was his ROI?Q But in view of such a broad range of often conflicting views and orientations regarding EC success, it is time for researchers to develop valid and reliable measures to evaluate success of EC firms. Most studies on EC success have been centered on levels of national economy, industry, and web sites [4146]. There have been few studies that measure the organizational performance of EC companies as does this research. Organizational performance is a multi-faced construct that defies measurement by a single item and is also an area where much research work is needed [47]. IS researchers have utilized a variety of dependent variables to represent firm performance, including perceptual measures such as IT assimilation [48], and objective measures such as ROA, and Tobins q [49,50]. Tobins q ratio (or simply, the q ratio), which is defined as the capital market value of the firm divided by the replacement value of its assets, represents a market-based measure of firm value that is forward looking, risk adjusted, and less susceptible to changes in accounting practices [51]. The q ratio has been widely used in business, economics, and finance literature as a measure of business performance [5255]. More recently, the q ratio has also been used in the IS literature to examine the association between IT and firm performance [49,50]. Thus, the use of Tobins q as a performance measure is applicable in this study. In addition to using a market-based measure, EC CSFs and firm performance will also be assessed through return on assets (ROA), a widely used accounting measure in the IT business value literature [56,57]. Using both marketing and accounting measures of firm performance, we can expect more valid research findings and the comparability of measures. In this study, objective measures of firm performance will be used. Since measures of CSFs will be gathered through questionnaires from managers perceptions, an objective measure of firm performance eliminates potential concerns about methods bias and provides the basis for a robust test of CSFs on firm performance. Also two widely used measures of firm performance are Tobins q ratio, and ROA [58]. 3. Research methodology 3.1. Two-staged data collection A two-staged data collection methodology was adopted. In the first stage, in depth interviews were conducted to verify CSFs extracted from literature review. Twenty high level EC managers from 20 Korean EC companies participated in this stage. Using a 7-point Likert scale (Very Strongly Agree Strongly AgreeAgreeNeutralDisagree, Strong DisagreeVery Strongly Disagree), the list of 16 CSFs along with 125 items was presented to interviewees to evaluate the importance of each item to EC success. The list was written in English and each participant has a good command of written English. Items that scored lower than 4 were removed from the list. After the evaluation, interviewees were asked

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to eliminate duplicate or similar items and to integrate them if possible. This process removed 14 items from the original list. Then each of 20 participants was asked to recategorize 111 items into 16 CSFs in terms of their commonality. After this grouping, all 20 participants discussed the recategorization for further refinement and generalizations. There was only slight deviation from the original categorization of CSFs. These recategoized CSFs were used for the second stage empirical assessment. In the second stage, uniform questionnaires were administered to EC companies in Korea. Japan, and USA. A preliminary version of the questionnaire was pilot-tested for accuracy and reliability. The same 20 study participants in the first stage were asked for the review. Respondents reviewed the questionnaire in the presence of one of the authors and provided feedback regarding wording, understandability, and applicability of the instrument. The original questionnaire used a 7-point Likert scale. However, respondents at the pilot-test indicated that a 5-point scale was more comfortable to answer since they tended to avoid the extreme points. Also there is a number of studies supporting this argument that Korean culture prohibits people to express extreme opinions [5962]. Thus, the 5-point Likert scale (Strongly AgreeAgreeNeutralDisagree, Strong Disagree) was adopted for the study. Questionnaire was written in English to maintain the compatibility among three countries. There were no noticeable problems due to English in Korea and Japan. Special assistance was provided by researchers in case participants encounter problems in understanding English. 3.2. Sample About 400 EC companies were listed at Chamber of Commerce in Korea at the end of December 2000. There are different types of EC firms, from pure-play like Amazon to bricks-and-clicks like Barnes and Noble. This study included all types of EC firms since it was almost impossible to exactly classify all EC firms into different types. Also most of pure-players are small- and medium-sized firms and could not provide accurate information regarding Tobins q and ROA. For the sake of convenience, only EC firms in the metropolitan area of Seoul were targeted. This pre-screen process resulted in a sample of 320 firms. To avoid contaminating the sample, recently established companies (that could not provide Tobins q and ROA) were eliminated. Two hundred and thirty five EC firms were left and were designated as the target sample. The questionnaire was administered to top EC managers at 235 EC companies from January 15, 2001 to January 19, 2001 by one nationwide Korean newspaper agency. To secure high response rate, newspaper agency reporters visited each EC firm and solicited participation. Out of 203 questionnaires returned, 7 were unusable. Therefore, the final response rate was 83.40% (196 questionnaires). Demographic analysis (comparison of size and sales between respondent and nonrespondent companies) did not reveal any significance to suspect sample bias. In Japan, a faculty member at University of Tokyo administered questionnaires. The same above procedure was adopted and EC firms in the metropolitan area of Tokyo were targeted. The questionnaires were administered from August 5August 25, 2001. The final response rate was 47.4% (312 questionnaires were distributed and 148 were returned). In the USA, the State of Texas was selected as the sample frame. This is because one of the authors was participating state-wide EC surveys conducted by the University of Texas at Austin and Great Austin Chamber of Commerce. The University of Texas at Austin and Great Austin Chamber of Commerce designated 358 companies as target sample after careful pre-screening process. The questionnaire was distributed to EC managers at 358 EC companies from October 1 to October 31, 2001. A total of 152 questionnaires were returned and 15 were unusable. Therefore, the final response rate was

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38.27% (137 questionnaires). Even though this response rate is not quite high compared to Korean sample, it surpasses Browns [64] suggested level of 20% in social studies. Again demographic analysis was performed and analysis did not reveal any significance to suspect sample biases in Japan or USA. 3.3. Measures From the first stage of data collection, 16 factors that consist of 111 items were identified. Table 2 shows the 16 CSFs as well as a number of items and sample items for each CSF. There were between 4 and 8 items for each factor. As discussed in Literature review, two performance measures of firm performance are employed: Tobins q as a market-based measures and ROA as an accounting measure. Each participating EC firm was asked to provide raw financial data and these data were checked with the official data from Korea
Table 2 CSFs and sample items CSFs Customer relationship CUSTOMER Privacy of information PRIVACY Low-cost operation LOWCOST Ease of use EASE EC strategy STRATEGY Technical EC expertise EXPERTISE Stability of systems STABILITY Security of systems SECURITY Plenty of information PLENTY Variety of goods/services VARIETY Speed of systems SPEED Payment process PAYMENT Services SERVICES Delivery of goods/services DELIVERY Low price of goods/services LOWPRICE Evaluation of EC operations EVALUATION No. of items 6 7 7 8 6 6 8 8 8 7 8 6 8 8 4 6 Sample items Is Web page customized for each customer? How much sensitive to needs of customers? Is there any illegal use of customer information? Do you honor privacy rights? What is cost/revenue ratio? What is overhead cost ratio? How EASE to recognize menu? Is web page sequence logical? Is there EC strategy? Is strategy integrated with IT strategy? Do you have EC expert(s) in company? Do you have necessary EC technology? How often system is disconnected? How constant system is working? Do you have enough protection from hacking? How secure customer information? Is there enough Information about goods/services? Is information relevant? Is there variety of goods/services? Do you carry top-brand goods/services? How fast is retrieval time? Is speed fluctuates at peak and off times? Is customer payment safe? Do you accept variety of payment? Do you provide A/S? Do you have technical service hot lines? How accurate your delivery to customers? Are Goods delivered are the same as on the screen? Are your prices of goods/services are competitive? Are Shipping and handling charges are reasonable? Do you have metrics for EC? Do you have metrics for web sites?

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Stock Exchange (KSE) and Korea Chamber of Commerce. If there were discrepancies between two sources of data, the authors contacted EC firms to provide explanations or correct data. Tobins q and ROA are derived from these verified data. The same procedure was applied in Japan and USA. The means of Tobins q and ROA of all three countries are in comparable to the average ratios reported in other studies [49]. Summary statistics for all research variables are displayed in Table 3. The second column of the Table 3 represents the mean score for each CSF, which was derived by averaging the scores of corresponding items for the particular CSF. Averaging the scores of the items to represent the score of CSF was well justified since all measures pass the reliability and validity test (described in the next section). 3.4. Reliability and validity Reliability refers to the stability of measures over a variety of conditions [63]. The amount of error made by any measure is determined by Cronbachs alpha test applied to inter-item scores and to the overall measures. The results of reliability test on CSFs measures are shown in Table 2. There is no absolute standard for interpreting Cronbachs alpha. Brown [64] recommends the minimum value of 0.80 for tests measuring attitudes or values. More generally, Nunally [63] argues that the satisfactory level of exploratory study is 0.7 or above. Cronbachs alphas (a ) are on the far right column of Table 2 and all variables suffice the Nunallys standard and close to Browns recommendation. Therefore, reliability of measures is concluded to be satisfactory. To verify the content validity of measures, factor analysis was performed. As Table 4 shows, all 16 CSFs has high loadings (above 0.5000) on one of four components. Thus, the content validity of CSFs
Table 3 Descriptive statistics of research variables CSFs No. of items 6 7 7 8 6 6 8 8 8 7 8 6 8 8 4 6 N/A Korea (n =196) Mean 3.546 3.105 3.157 3.560 2.870 3.184 2.931 2.758 2.947 3.245 3.617 3.189 2.436 4.066 3.381 2.809 1.123 20.013 S.D. 1.087 0.735 0.526 0.830 0.768 0.839 0.910 0.778 0.787 0.867 0.813 0.775 0.739 0.708 0.657 0.756 0.255 4.247 Cronbachs a 0.854 0.787 0.832 0.812 0.715 0.763 0.809 0.775 0.829 0.809 0.835 0.736 0.787 0.758 0.848 0.723 N/A Japan (n =148) Mean 4.080 3.083 3.132 3.448 3.195 3.203 2.975 2.730 3.493 3.218 3.619 2.959 2.451 2.891 3.357 2.813 1.021 13.912 S.D. 0.708 0.740 0.534 1.031 0.740 0.844 0.923 0.796 0.839 0.838 0.824 0.768 0.754 0.746 0.637 0.771 0.254 4.256 Cronbachs a 0.813 0.788 0.822 0.753 0.864 0.822 0.781 0.776 0.738 0.820 0.799 0.803 0.755 0.717 0.802 0.793 N/A USA (n =137) Mean 3.633 3.642 3.100 3.204 2.934 2.978 2.500 3.499 4.062 3.241 2.836 3.166 2.985 3.358 3.173 2.754 1.323 15.021 S.D. 0.793 0.961 0.702 0.824 0.745 0.785 0.735 0.834 0.674 0.730 0.774 0.533 0.923 0.631 0.825 0.807 0.257 4.288 Cronbachs a 0.789 0.819 0.835 0.774 0.758 0.823 0.846 0.831 0.798 0.725 0.775 0.819 0.843 0.789 0.742 0.767 N/A

CUSTOMER PRIVACY LOWCOST EASE STRATEGY EXPERTISE STABILITY SECURITY PLENTY VARIETY SPEED PAYMENT SERVICES DELIVERY LOWPRICE EVALUATION Tobins q ROA

T.K. Sung / Technological Forecasting & Social Change 73 (2006) 11611177 Table 4 Factor analysis on research variables CSFs PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY SECURITY STABILITY EVALUATION EXPERTISE SPEED CUSTOMER STRATEGY PRIVACY LOWCOST EASE Variance Explained Components 1 0.6857 0.7058 0.7005 0.5543 0.6178 0.5066 0.0211 0.3710 0.3799 0.1595 0.1029 0.1756 0.3679 0.0162 0.0306 0.2254 2.9009 2 0.3798 0.2626 0.2498 0.1791 0.1779 0.0687 0.5545 0.6911 0.5281 0.6491 0.6628 0.0364 0.2450 0.1733 0.2237 0.2686 2.3109 3 0.1872 0.0467 0.1982 0.2529 0.3045 0.3061 0.0170 0.1271 0.3873 0.1617 0.0978 0.7062 0.6336 0.1345 0.3863 0.0023 1.8274 4

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0.0646 0.1747 0.3077 0.3154 0.0273 0.1837 0.2278 0.0056 0.0195 0.0301 0.1614 0.1190 0.0802 0.8091 0.6904 0.6523 1.7618

measures is generally supported. The factor analysis was performed for the validity purpose only. So the meaning of each component is not discussed. Subsequent analyses were performed on individual CSF, not component since major concern is how each individual CSF affects the success of EC. To further examine the predicative validity of CSFs measures, correlation analysis of CSFs on two performance measures was performed (Table 5). In the case of Tobins q , correlation coefficients of all 16 CSFs in Korea, 15 in Japan, and 13 in USA are statistically significant at the alpha level of 0.05. In terms of ROA, correlation coefficients of 15 CSFs in Korea, 13 in Japan, and 13 in USA are statistically significant at the alpha level of 0.01. This correlation analysis indicates that CSFs have considerable association with performance measures. Therefore, the CSFs measures are considered to be predicatively valid. 4. Results and discussions Korean respondents rate DELIVERY (of goods/services)1 as the most critical success factor, followed by SPEED (of systems), EASE (of use), CUSTOMER (orientation), and LOWCOST (operation). On the other hand, SERVICES is evaluated as the least critical factor, followed by SECURITY (of systems), EVALUATION (of EC operations), (EC) STRATEGY, and STABILITY (of systems) (refer to Table 6). Japanese respondents perceive CUSTOMER (orientation) as the most critical success factor, followed by SPEED (of systems), PLENTY (of information), EASE (of use), and LOWPRICE (of Goods/ Services). SERVICES is rated as the least critical factor, followed by SECURITY (of systems), EVALUATION (of EC operations), DELIVERY (of goods/services), and PAYMENT (Process).
1

For the detailed discussion of each CSF, please refer to Table 2.

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Table 5 Correlation analysis on critical success factors CSFs PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY SECURITY STABILITY EVALUATION EXPERTISE SPEED PRIVACY LOWCOST EASE CUSTOMER STRATEGY Tobins q Korea 0.5010*** 0.4223*** 0.3998*** 0.2182*** 0.1800*** 0.1549** 0.3826*** 0.4719*** 0.4035*** 0.4785*** 0.4192*** 0.3261*** 0.2861*** 0.3142*** 0.1741** 0.3218*** Japan 0.2951*** 0.4971*** 0.3733*** 0.1639** 0.1474** 0.2597*** 0.3217*** 0.4744*** 0.4236*** 0.4333*** 0.3162*** 0.2914*** 0.2494*** 0.1827** 0.1048 0.3835*** USA 0.0920 0.2740*** 0.3988*** 0.4296*** 0.5138*** 0.1566* 0.3420*** 0.1756** 0.3507*** 0.4997*** 0.4113*** 0.1554* 0.3019*** 0.4992*** 0.3802*** 0.3049*** ROA Korea 0.5231*** 0.3922*** 0.3979*** 0.1842*** 0.2009*** 0.1361* 0.4340*** 0.4889*** 0.3640*** 0.4569*** 0.4156*** 0.3034*** 0.3372*** 0.3265*** 0.2511*** 0.3986*** Japan 0.2746*** 0.5245*** 0.3317*** 0.1136 0.1421* 0.3466*** 0.3660*** 0.4767*** 0.3592*** 0.4337*** 0.3162*** 0.2821*** 0.2986*** 0.2321*** 0.0667 0.3757*** USA 0.0661 0.3192*** 0.3620*** 0.3604*** 0.5134*** 0.0958 0.3236*** 0.1517* 0.3859*** 0.5255*** 0.3499*** 0.2344*** 0.2863*** 0.5014*** 0.3592*** 0.3626***

*, **, and *** denote coefficients are statistically significant at a level of 0.10, 0.05, and 0.01, respectively.

In contrast to Korean and Japanese respondents, USA respondents evaluate PLENTY (of information) as the most critical success factor, followed by PRIVACY (of information), CUSTOMER (orientation), SECURITY (of systems), and DELIVERY (of goods/services). STABILITY (of systems) is rated as the least critical factor, followed by EVALUATION (of EC operations), SPEED (of systems), (EC) STRATEGY, and (technical EC) EXPERTISE. Korean, Japanese, and USA respondents all rate CUSTOMER (orientation) as very important and EASE (of Use) and VARIETY (of Goods/Services) as well. Interestingly, Korean and Japanese respondents evaluate SPEED (of systems) as very critical while USA respondents rate otherwise. SECURITY (of systems) is rated very highly by USA respondents, but very low by Korean and Japanese respondents. To further investigate whether there are statistically significant differences in recognizing CSFs among Korean, Japanese, and USA respondents, ANOVA (ANalysis Of VAriance) was performed (refer to Table 7). ANOVA analysis indicates that respondents rate CSFs quite differently among three countries except PLENTY (of information), VARIETY (of Goods/Services), EVALUATION (of EC operations), LOWCOST (operation), (EC) STRATEGY, and CUSTOMER (Orientation). Korean and Japanese respondents evaluate STABILITY (of systems) and SPEED (of systems) significantly higher than USA respondents. On the other hand, USA respondents rate PRIVACY (of information), SECURITY (of systems), PLENTY (of information), and SERVICES significantly higher than Korean and Japanese respondents. The above analysis shows that Korean and Japanese EC managers are more concerned about smooth and efficient operations while USA EC managers are more interested in ethical and legal issues of EC. This may be contributing to the fact that Korean and Japanese EC market is in the beginning stage and will face these ethical and legal issues in the near future. Also these gaps in evaluating CSFs may stem from differences in cultural background of the two nations. Koreans and Japanese are well known for

T.K. Sung / Technological Forecasting & Social Change 73 (2006) 11611177 Table 6 Rank order of CSFs among Korea, Japan, and USA Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Korea DELIVERY SPEED EASE CUSTOMER LOWPRICE VARIETY PAYMENT EXPERTISE LOWCOST PRIVACY PLENTY STABILITY STRATEGY EVALUATION SECURITY SERVICES 4.0663 3.6173 3.5595 3.5459 3.3810 3.2449 3.1888 3.1837 3.1565 3.1046 2.9473 2.9311 2.8699 2.8087 2.7577 2.4362 Japan CUSTOMER SPEED PLENTY EASE LOWPRICE VARIETY EXPERTISE STRATEGY LOWCOST PRIVACY STABILITY PAYMENT DELIVERY EVALUATION SECURITY SERVICES 4.0800 3.6188 3.4925 3.4482 3.3572 3.2179 3.2026 3.1948 3.1320 3.0832 2.9754 2.9589 2.8909 2.8131 2.7302 2.4513 USA PLENTY PRIVACY CUSTOMER SECURITY DELIVERY VARIETY EASE LOWPRICE PAYMENT LOWCOST SERVICES EXPERTISE STRATEGY SPEED EVALUATION STABILITY

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4.0620 3.6423 3.6326 3.4988 3.3577 3.2409 3.2044 3.1727 3.1655 3.1004 2.9854 2.9781 2.9343 2.8358 2.7536 2.5000

their collectivism, which dictates standardized products with uniform services. Also Koreans and Japanese would like to have fast services. These may be the reason why Korean and Japanese EC managers feel that SPEED (of systems) and DELIVERY (of goods and services) are more important than others. On the other hand, Americans emphasize individualism. They respect individual ability and personal taste. In this sense, it is not surprising to see that PRIVACY (of information) and SECURITY (of systems) are more important. To investigate the importance of each individual CSFs on firm performance, regression analysis was performed (Table 8). The CSFs in total have very significant explanatory power for firm performance in Korea, Japan, and USA sample (over 50% for all six analyses and statistically significant at the alpha level of 0.05). There seems to be no differences in explanatory powers among three countries and due to firm performance measures. In the analysis of Korean sample, SECURITY (of systems), PRIVACY (of information), (technical EC) (technical EC) EXPERTISE, PLENTY (of information on goods/services), VARIETY (of goods/services), EVALUATION (of EC operations) are statistically significant in explaining firm performance measured by Tobins q . In terms of ROA, PLENTY (of information and goods/ services), SECURITY (of systems), VARIETY (of goods/services), PRIVACY (of information), (technical EC) EXPERTISE, and STABILITY (of the systems) are CSFs that contribute to firm performance. Whether Tobins q or ROA is used, SECURITY (of systems), PRIVACY (of information), (technical EC) EXPERTISE, PLENTY (of information about goods/services), and VARIETY (of goods/services) are the most explanatory CSFs on firm performance. This analysis can be interpreted to mean that customers would use EC if they felt comfortable about navigating EC for plenty of information about and a variety of goods/services without technical difficulty in a secure and private way (Table 8). In Japan, PAYMENT (process), SECURITY (of systems), DELIVERY (of goods/services), STABILITY (of the systems), EVALUATION, (technical EC) EXPERTISE, and PRIVACY (of information), and PRIVACY (of information) are statistically significant in explaining firm

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Table 7 Analysis of variance on CSFs among Korea, Japan, and USA CSFs PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY SECURITY STABILITY EVALUATION EXPERTISE SPEED PRIVACY LOWCOST EASE CUSTOMER STRATEGY Tobins q ROA Korea 2.9473 3.1888 3.2449 3.3810 2.4362 4.0663 2.7577 2.9311 2.8087 3.1837 3.6173 3.1046 3.1565 3.5595 3.5459 2.8699 1.1227 20.0125 Japan 3.4925 2.9589 3.2179 3.3572 2.4513 2.8909 2.7302 2.9754 2.8131 3.2026 3.6188 3.0832 3.1320 3.4482 4.0800 3.1949 1.0212 13.9118 USA 4.0620 3.1655 3.2409 3.1727 2.9854 3.3577 3.4988 2.5000 2.7536 2.9781 2.8358 3.6423 3.1004 3.2044 3.6326 2.9343 1.3228 15.0213 F -statistics 116.97 1.09 0.01 7.78 45.17 5.52 86.94 26.41 0.53 6.57 92.52 45.12 0.60 11.54 2.32 0.95 87.16 22.24 Probability 0.0001 0.2979 0.9270 0.0055 0.0001 0.0192 0.0001 0.0001 0.4674 0.0107 0.0001 0.0001 0.4395 0.0007 0.1282 0.3293 0.0001 0.0001

Table 8 Regression analysis of CSFs on performance CSFs PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY SECURITY STABILITY EVALUATION EXPERTISE SPEED PRIVACY LOWCOST EASE CUSTOMER STRATEGY R -Square F -Statistics Pr bF Tobins q Korea 0.0574** 0.0249 0.0427* 0.0044 0.0016 0.0083 0.0725*** 0.0240 0.0389* 0.0712*** 0.0285 0.0522** 0.0161 0.0355 0.0061 0.0258 51.01% 11.65 0.0001 Japan 0.0424 0.1055*** 0.0323 0.0119 0.0044 0.0666** 0.0772*** 0.0423* 0.0547** 0.0838*** 0.0112 0.0450* 0.0015 0.0072 0.0198 0.0092 50.36% 8.31 0.0001 USA 0.0237 0.0047 0.0035 0.0382 0.0317 0.0114 0.0228 0.0179 0.0827*** 0.0989*** 0.0423 0.0055 0.0430 0.1096*** 0.0001 0.0643** 54.89% 9.13 0.0001 ROA Korea 1.0640** 0.1750 0.6769* 0.2123 0.1164 0.0864 1.4129*** 0.5448* 0.1486 0.9979*** 0.4279 0.7042* 0.6594 0.5141 0.3495 0.0062 52.75% 12.49 0.0001 Japan 0.7498 1.9612*** 0.1409 0.0422 0.0163 0.4207 1.4793*** 0.6830* 0.2859 1.2911*** 0.1809 0.6983 0.5139 0.2272 0.0459 0.3686 50.96% 8.51 0.0001 USA 0.1638 0.2096 0.0816 0.1117 0.6533 0.1198 0.2029 0.2259 1.5205*** 2.1312*** 0.2298 0.3950 0.5867 1.8081*** 0.2063 0.6711 55.72% 9.44 0.0001

*, **, and *** denote coefficients are statistically significant at a level of 0.10, 0.05, and 0.01, respectively.

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performance measured by Tobins q . In terms of ROA, PAYMENT (process), SECURITY (of systems), DELIVERY (of goods/services), STABILITY (of the systems), EVALUATION, and (technical EC) EXPERTISE are CSFs that contribute to firm performance. Whether Tobins q or ROA is used, PAYMENT (process), SECURITY (of systems), DELIVERY (of goods/services), STABILITY (of the systems), EVALUATION, and (technical EC) EXPERTISE are the most explanatory CSFs on firm performance. In USA sample, EVALUATION (of EC operations), (technical EC) EXPERTISE, EASE (of use), and (EC) STRATEGY are statistically significant in explaining firm performance measured by Tobins q . In terms of ROA, EVALUATION (of EC operations), (technical EC) EXPERTISE, and EASE (of use) are CSFs that contribute to firm performance. Whether Tobins q or ROA is used, EVALUATION (of EC operations), (technical EC) EXPERTISE, and EASE (of use) are the most explanatory CSFs on firm performance. USA sample shows quite consistency in explaining contribution of CSFs on firm performance either measured by Tobins q or ROA. Unlike simple rank comparison of CSFs, regression analysis shows that each country has different sets of CSFs that have strong explanatory power on firm performance. (Technical EC) EXPERTISE shows statistically significant explanatory power on firm performance in all three countries. PRIVACY (of information), PLENTY (of information on goods/services), and VARIETY (of goods/services) have strong explanatory power in Korea while PAYMENT (process), SECURITY (of systems), DELIVERY (of goods/services), and STABILITY (of the systems) in Japan and EVALUATION (of EC operations) and EASE (of use) in USA show statistically significant explanatory power, respectively. It is very surprising to see that most explanatory CSFs on firm performance in all countries are not included in the top 5 CSF list which was rated by EC managers. These ratings of CSFs are perceptional and relative since EC managers evaluate each CSF based on their prior experience. Thus, these individual judgments may not accurately reflect the objective contribution of CSF on firm performance. Also, this irony may contribute to the fact that firm performance is measured by ROA and Tobins q EC managers rate CSFs in terms of overall operation, not particularly paying attention to ROA or Tobins q . To EC managers, ROA or Tobins q may just be one aspect of firm performance. Thus, ROA or Tobins q may be a good surrogate measure for firm performance, but is not a perfect measure and this is reason why many academicians point out that more refined organizational performance measured is expected [47]. The strong correlation coefficients between CSFs and performance but low t -ratios of CSFs in the regression analysis may suggest that too many CSFs are being included in the study. In short, some CSFs are overlapped with other CSFs and may be eliminated. There are number of negative correlation coefficients of some CSFs (e.g., LOWPRICE, PAYMENT) in the regression analysis and it may be the results of multi-collinearity among some CSFs. Multicollinearity appears when there exist strong relationships among independent variables in the regression analysis. This observation also supports the above argument that a number of CSFs may be reduced.

5. Summary and conclusions The three main purposes of this paper are to (1) identify critical success factors (CSFs) for EC companies, (2) investigate explanatory power of these CSFs on firm performance, and (3) compare differences in CSFs and impact of CSFs on performance among Korea, Japan, and USA.

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Through the literature review and interviews, a list of 16 CSFs that consist of 111 items was complied. Questionnaires were administered to EC managers at 235 Korean EC companies, 312 Japanese companies, and 358 USA EC companies in Texas. The final response rate was 83.40% (196 questionnaires) for Korean sample, 43.7% (148 returns) for Japanese sample, and 38.27% (137 questionnaires) for USA sample. Korean, Japanese, and USA respondents all rate CUSTOMER (orientation) as very important and EASE (of Use) and VARIETY (of Goods/Services) as well, and DELIVERY (of goods/services) in the top five of CSFs. Interestingly, Korean and Japanese respondents evaluate SPEED (of systems) as very critical while USA respondents rate otherwise. SECURITY (of systems) is rated very highly by USA respondents, but very low by Korean and Japanese respondents. Regression analysis shows that CSFs in total have very significant explanatory power for firm performance in Korea, Japan, and USA sample. There seems to be no differences in explanatory powers among three countries and due to firm performance measures. Each country has different sets of CSFs that have strong explanatory power on firm performance. (Technical EC) EXPERTISE shows statistically significant explanatory power on firm performance in all three countries. PRIVACY (of information), PLENTY (of information on goods/ services), and VARIETY (of goods/services) have strong explanatory power in Korea while PAYMENT (process), SECURITY (of systems), DELIVERY (of goods/services), and STABILITY (of the systems) in Japan and EVALUATION (of EC operations) and EASE (of use) in USA show statistically significant explanatory power, respectively. This research has several limitations. First, the research setting is limited to metropolitan area of Seoul in Korea, Tokyo in Japan, and state of Texas in the USA. Also the sample sizes (N =196, 148, and 137) may not be large enough to carefully examine all CSFs and their relationships with firm performance. Second, there may be more important CSFs that this study does not accommodate. Third, two firm performance measures (objective, marketing measure and traditional, accounting measure) may not adequately represent corporate performance. As Delone and McLean [47] point out, organizational level performance measures need to be refined. Fourth, this study does not consider different types of EC firms such as pureplay like Amazon or bricks-and-clicks like Barnes and Noble. This may have some serious impact on the revenue measures. Fifth, as described in Results and discussion, the strong correlation coefficients between CSFs and performance but low t -ratios as well as number of negative correlation coefficients of some CSFs in the regression analysis may suggest that there are some overlapped CSFs in the study. There are several directions in which this research can be extended. One is to replicate this research with a larger population setting including EC companies in other countries. The second is to comprehensively include more CSFs for further investigation and empirically and carefully validate CSFs. The third research direction concerns the dependent variable. More reliable and valid organizational level performance measures should be devised and empirically tested. Fourth is to attempt a comparative study of CFSs between EC firms and traditional off-line firms. This attempt may produce different sets of CSFs for on-line and off-line firms.

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Tae Kyung Sung is a Professor of MIS at Kyonggi University, Korea. He received his PhD in MIS from the University of Texas at Austin in 1988 and his BBA from SungKyunKwan University. Currently Dr. Sung serves as Research Fellow of IC2 Institute, Director of e-Business Institute, and Editor-in-Chief for the Journal of MIS Research. Dr. Sungs research interests include information systems strategy, planning, and management, fraud detection and prevention, data mining and applications, business innovation, and knowledge/technology/information sharing and transfer.