Synthesizing e-commerce start-up and small business
literature: uncovering the contextual antecedents
A systematic literature review
MSc BA Strategic Innovation Management
Master Thesis
20/01/2015
Boudino Lambertus de Jong
S1686429
Abstract
Even though increasing interest exists towards e-commerce start-ups and small businesses’ potential to create value, little research has been carried out attempting to identify the e-commerce value creating drivers. Our analysis moves past the saturated research on small business e-commerce adoption, while still turning to this extensive body of literature to identify relevant antecedents of e-commerce start-ups and small businesses and their interrelations in the value creation process deriving from e-commerce utilization at the firm level. This research adopts a systematic literature review of e-commerce startup and small business conducting an exhaustive search of literature focusing on the link between e-commerce start-up and small business providing a synthesized overview the contextual antecedents relevant to business conducted over the Internet. Firm-level antecedents identified as being significant are absorptive capacity, e-vision, e-service, size, business type, and lifecycle stage online and were linked to five organizational drivers of e-commerce value creation, namely differentiation strategy, innovative products/services, perceived benefits, online-offline complementarities, and transaction efficiency. Ultimately, our assessment of the interrelationship of these antecedents and the value creation drivers enabled us to derive important managerial and theoretical implications and observations relating to the e-commerce small business and start-up value creation process amidst the most important firm-level antecedents.
Word count: 10683
Keywords: e-commerce, small business, start-ups, antecedents, value creation Supervisor: dr. Pedro de Faria
2 TABLE OF CONTENTS
INTRODUCTION ... 3
‘Open Sesame’ ... 3
E-commerce Start-up and Small Business ... 3
Research Relevance ... 4
METHODOLOGY ... 6 Choice of methodology ... 6 Data Collection ... 6 Keyword Search ... 6 Theoretical Perspectives ... 8 Contextual Antecedents ... 9
FIRM LEVEL ANALYSIS AND SYNTHESIS ... 12
Theoretical perspectives ... 12
Firm Level Antecedents ... 14
E-commerce Start-up and Small Business Value Creation ... 16
DISCUSSION & CONCLUSION ... 17
Findings & Implications ... 17
Limitations ... 18
Future Research ... 18
INTRODUCTION ‘Open Sesame’
September 19, 2014 marked the historical day the Chinese e-commerce firm Alibaba, debuted on the New York Stock Exchange; valued at $168 billion and reaping over $20 billion it was the largest initial public offering (IPO) to this day.1 Founder and entrepreneur Jack Ma, previously an English teacher, literally and figuratively earned the title of wealthiest man of China almost overnight fifteen years after the inception of the e-commerce startup Alibaba, securing a spot amongst Silicon Valley’s established billionaires, including tech giant founders Bill Gates (Microsoft), Larry Page and Sergey Brin (Google), and Mark Zuckerberg (Facebook).2 The case of Alibaba hints that a lot has changed since the inception of the Internet and the dot-com crash and NASDAQ plunge that followed in April 2000. It presents a compelling case in which a previous e-commerce startup based in a developing country and operating globally through the Internet, now ranks amongst the biggest and most valued tech companies in the world.
E-commerce Start-up and Small Business
Research in the fields of e-commerce and entrepreneurship shows that both phenomena have a big impact on economic development and wealth creation (Acs et al., 2004). It is thus not a surprise, that start-ups have the potential to create enormous wealth through the successful exploitation of e-commerce, as is illustrated in the Alibaba case. Even though a unified definition of start-up appears to be lacking in existing literature, several researchers provide similar definitions, defining a start-up as a new venture (Clarysse et al., 2011), new establishment (Andersson and Noseleit, 2011), and firms or firm divisions initiating operations in a location for the first time (Sargent and Matthews, 2008).
This new endeavor can be linked to entrepreneurship which Shane and Venkataraman (2000) define as “the process of discovery, evaluation, and exploitation of opportunities” (p.218), in which the individual initiating and leading this process is coined the entrepreneur. However when referring to the organizational context in which the entrepreneurial activities take places, no direct derivation from “entrepreneurship” exists. Derivatives used in the literature include new ventures, entrepreneurial firms, and start-ups, with a predominant focus towards small businesses. Start-ups are often of limited size relative to the older more established firms (Talaulicar et al., 2015) and can often be classified as small firms. The opposite does not hold however, in that small firms are not necessarily start-ups since it is ultimately the firm age that determines whether a firm is considered a start-up. The most used and accepted definition of small firms is a firm employing between 10-49 workers (Higón, 2012;Fathian et al., 2008). Weber and Zulehner (2010) found a mean start-up employee-base size of 10.82, substantiating our decision to treat start-ups and small businesses as one focal construct in our research. Similar to our approach of treating start-ups and small businesses as one focal construct, Huber et al. (2014) considered young firms and small firms as one group in their research on the impact of firm size on job creation.
4 Extant research shows that e-commerce startups and small businesses specifically differ from their traditional counterparts in that most of their business transactions are conducted online, through the Internet (Chulikavit and Rose, 2003; Matlay, 2004). Additionally, Amit and Zott (2001) found that the value creation process of e-businesses occurs through innovative transaction and exchange mechanisms not present in more traditional businesses. Many different designations have been attributed to e-commerce, including but not limited to: electronic commerce, Internet commerce, Internet business, e-business, and network economy (Eikebrokk and Olsen, 2007; Fillis and Wagner, 2005). Definitions of e-commerce are also plentiful and are now discussed more closely. Kalakota and Whinston (1997) define e-commerce as the act of buying and selling products, services, and information through computer networks that are mainly enabled by the Internet. Recognizing that the Internet is central to commerce, Poon and Swatman (1999) adopted and slightly modified the e-commerce definition coined by Zwass (1994) as the interchange of business information, business relationship management, and business transactions processing via the Internet. Santarelli and D’Altri (2002) suggest that the most common definition of e-commerce involves different actors in a marketing channel conducting Internet-based transactions of physical goods delivered offline or digitized services delivered online. Rao et al. (2003) define e-commerce as a business model through which businesses and customers interact and transact data and information via electronic technology, enhancing efficiency and effectiveness of business transactions. Yet others researched the success factors of so-called ‘DotComs’; virtual businesses that exist only on the Internet (Razi et al., 2004). Assessing the different previously presented definitions of e-commerce it becomes evident that Internet plays a central and enabling role in e-business. For this reason, this research adopts the all-encompassing definition of e-commerce in the context of the Internet used by Amit and Zott (2001) as “business conducted over the Internet” (p. 493). We defined start-ups as being entrepreneurial new ventures that mainly comprise small businesses, and therefore treat start-ups and small businesses as one construct in our study. Combined with our adopted definition of e-commerce, we define e-commerce entrepreneurship as the act of discovering, evaluating, and exploiting business opportunities using Internet technology.
Higón (2012) found that e-commerce is not significant to the firm’s level of innovativeness and speculate that this is due to the different nature of buying versus selling over the Internet that underlies e-commerce. Whilst e-selling enables the distribution of new products and services, e-buying might have no link with product innovation. Similarly, e-buying may influence a firm’s production processes and not necessarily its products. Conversely, e-commerce, specifically e-commerce technology, is an important firm-level enabler of both process and product innovation (Koellinger, 2008).
Research Relevance
5 gain a lot from latent opportunities arising from e-commerce advancement and that research in this area is still lacking (Weintraub, 2001; Drew, 2003). Parker and Castleman (2007) identified that extant research on small business e-commerce adoption has repeatedly focused on the barriers and drivers of adoption decisions up to the point of saturation. They emphasize the need for more novel research looking beyond e-commerce adoption factors and directed towards the successful exploitation of small business e-commerce opportunities. Yet other researchers (Kleindl, 2000; Steinfield and Whitten, 1999) note that not much attention has been paid to arising small business disadvantages and threats deriving from the Internet, leading to intensified competition from larger firms that can now mimic previously unattainable small firm strengths such as targeting niche markets, acquiring local knowledge, and building intimate customer relationships more effectively. The use of Internet technology by entrepreneurial start-ups has received relatively little attention from researchers and is not consistent with the social and economical importance deriving from the Internet’s growing utilization by entrepreneurs (Reuber and Fischer, 2011). The exponential growth of e-commerce and change of technology is not showing any signs of leveling out in the future and leads to lower prices, enabling more entrepreneurs to acquire the necessary technology in order to partake in e-commerce (Mueller, 2001). The most prevailing criticism surrounding existing research of Internet utilization by small businesses is its fragmented nature, which hampers further development of theoretical implications (Fillis et al., 2003; Fillis and Wagner, 2005). Previously conducted research also turned to different theories in their analysis of e-business, including the resource-based view (Amit and Zott, 2001) and innovation diffusion theory, however not much effort has been made to synthesize findings from extant literature in order to articulate central and unique issues relating to e-commerce small businesses and start-ups. Extant literature suggests that small businesses have struggled to create and capture value from e-commerce utilization (Brown and Locket, 2004; Daniel and Wilson, 2002).
This research is directed towards synthesizing extant literature regarding e-commerce start-ups and small business uncovering the contextual antecedents and their interrelations in the value creation process occurring at the firm level. By means of a qualitative research that follows the process of a systemic literature review as described by Crossan and Apaydin (2010), different literature streams were analyzed, including strategic management, entrepreneurship and e-commerce. This analysis moves past the saturated research on small business e-commerce adoption, while still turning to this extensive body of literature to identify relevant antecedents of e-commerce start-ups and small businesses and their interrelations in the value creation process deriving from e-commerce utilization at the firm level. Adoption drivers and barriers can technically be classified as facilitators and anti-facilitators of the e-commerce value creation process, and because of their duality cannot be treated singularly (Rao et al., 2003). Considering the often-vast amounts of capital invested in Internet startups, and the high bankruptcy levels among these ventures, it is of the essence to researchers and practitioners that they identify the driving forces that influence the overall performance of Internet startups (Chang, 2004).
e-6 commerce and their interrelations in the firm-level value creation process, thus contributing not only to the further development of theory by providing a synthesized research agenda, but also by providing new insights to managers and practitioners on how to foster and effectively manage the value creation process stemming from their e-commerce operations. We continue with a detailed description of the chosen research methodology, followed by a synthesized overview of the contextual antecedents of e-commerce start-up and small business. This synthesized overview is extended with an in-depth analysis and synthesis of the firm-level antecedents specifically, and their interrelations in the value creation process, ultimately deriving theoretical and managerial implications from our findings and observations. This research concludes with the identification of relevant future research areas.
METHODOLOGY Choice of methodology
This research adopts a systemic literature review approach following the methodological process proposed by Crossan and Apaydin (2010), which removes personal-bias and subjectivity from the data gathering process by using a predetermined search algorithm.
This method is essentially different from traditional narrative reviews in that it allows for a comprehensive and unbiased search by making use of explicit values underpinning the review method (Transfield et al., 2003). Systematic reviews adopt an efficient and high-quality process for the identification and evaluation of extensive literature (Mulrow, 1994). This paper follows a consecutive and systemic three-stage approach, used by Crossan and Apaydin (2010), starting with a description of the data collection process, followed by a comprehensive analysis of the data, and finally synthesizing the main findings and results into a conceptual model and presenting our main research findings and observations.
Data Collection
The data collection process involving the conducted keyword search and narrowing of the sample data is now discussed.
Keyword Search
7 sample manageable. Simply conducting a full text search centered on the co-presence of the two main keywords would result in a unmanageable amount of non-relevant papers and would lead to a very inefficient sample filtering process. Since our search focused on the co-presence of two main concepts, the ‘Find all my search terms’ search mode was used in EBSCOhost versus the ‘Boolean/Phrase’ search more, since the first explicitly focuses on the co-presence of our main keyword and their derivatives. This first search led to an initial sample of 423 papers (see Appendix, Table 1).
Converging the data sample
Paper citation counts are widely used to measure the quality of papers serving as a “vote” for knowledge creation and accumulation (Saha et al., 2003). Impact factors are based on the frequency of journal articles’ citation in scientific literature, and serve as an accepted indicator of journal quality (Saha et al., 2003). The ISI Web of Knowledge Journal Citation Reports was used to identify the corresponding impact factor of each journal. The Web of Science electronic database was used as the default checking tool for paper citation frequency. In the case the paper was absent, Google Scholar was used to check citation counts. Papers containing zero citations, or deriving from journals that did not have an impact factor, or with an impact factor lower than 0.50 were excluded. Additionally, papers containing errors such as non-existing links, (e)books, non-English, were removed, resulting in a corrected sample of 126 papers.
In order to ensure that relevant and recently published high-quality papers were not overlooked, a subsequent search was conducted in top-tier journals, using related keywords: micro business, small business, SME, e-entrepreneurship, virtual commerce, online commerce, online shopping and Internet business. This second search yielded 41 papers.
This was extended with a backward citation search in which missing papers were added that showed a link between e-commerce and entrepreneurship, and their derivatives, in the abstract. This lead to an additional 22 papers that were added to this sample, resulting in a sample of 63 top-tier journal papers. Top entrepreneurship journals include the Journal of Business Venturing, Entrepreneurship Theory and Practice, Journal of Small Business Management, Small Business Economics, and International Small Business Journal (Gamboa and Brouthers, 2008; Brush et al., 2008).
Among top e-commerce journals are MIS Quarterly, Information Systems Research, International Journal of Electronic Commerce, Electronic Commerce Research and Applications, Electronic Markets, Journal of Management Information Systems, and Journal of Electronic Commerce Research (Chua et al., 2005). Finally, duplicate papers were removed and in order to ensure relevancy of the sample papers, abstracts were carefully analyzed to determine that there is a link between the main two phenomena being researched, namely e-commerce and entrepreneurship. This resulted in a final sample of 77 papers.
DATA ANALYSIS
8 conceptual model of the contextual antecedents that surround e-commerce start-up and small business (see Appendices: Table 1). Since our main research focus is directed towards start-ups and small businesses specifically, we afterwards provide an in-depth analysis of the firm-level antecedents and finally link these organizational antecedents to small business and startup e-commerce value creation process. After conducting an extensive review of the literature on e-commerce startups and small businesses, it becomes evident that the extant literature adopts different analysis approaches and perspectives. Razi et al. (2004) looked at the causes of e-business success by distinguishing between controllable versus uncontrollable factors. Chau and Tam (2000) note that research of SME e-commerce adoption factors can be explained using the technology-push versus demand-pull model of technology innovation adoption. Yet others such as Simmons et al. (2008, 2011) approach e-commerce small business adoption and utilization by distinguishing between instigators (enablers), influencers and industry. They define instigators as the enabling factors of e-commerce with the key enabler being the owner/manager and influencers as the influencing determinants of e-commerce being mainly the company and network. In our effort to synthesize extant e-commerce start-up and small business literature in order to provide a simple overview of the identified contextual antecedents, we adopt a similar classification as the one used by Simmons et al. (2011), but instead we define enablers as the enabling antecedents of e-commerce comprising the individual, company and partially network context, whilst influencers are considered influencing antecedents present under the network, industry and country context. Lockett and David (2006) note that literature relating to SME e-commerce activities can be classified under three strands, specifically strategic, organizational, and technological. This research turned to the main theoretical perspectives used in extant literature surrounding start-up and small business e-commerce, which will be discussed now in more detail.
Theoretical Perspectives
Amit and Zott (2001) researched the value creation factors in e-business by adopting different theoretical perspectives, namely value chain analysis (Porter, 1985), the theory of economic development, resource-based view, strategic networks, and transaction cost theory. They found that a large number of insights deriving from collective research on strategic management and entrepreneurship also hold in the context of e-commerce, and identify the following firm-specific value creation areas: organizational activities, innovation, unique combination resources and capabilities, and novel ways of structuring transactions leading to enhanced efficiency. McDougall and Oviatt (2000) applied the resource-based view and transaction cost theory to examine the internationalization theory concerning new ventures, and concluded that so-called “born global” firms do not fit into this established model. Additionally, Kotha et al. (2001) researched US Internet firms’ specific factors that apply in the case of internationalization by also applying the resource-based view. Nohria (1998) suggests that the success of Silicon Valley entrepreneurial firms led to an increased interest amongst researchers into the dynamics of inter-firm networks. Some researches (Dyer and Singh, 1998) identified sources of competitive advantage at the inter-firm network level.
9 the contextual e-commerce start-up and small business antecedents, but more importantly, the specific firm-level related theoretical perspectives that have been adopted in previous research.
Table 2: Small business e-commerce entrepreneurship research theory
Theory Authors Context Main Insights
Value chain analysis Amit and Zott (2001) Firm Identifies a set of organizational activities that encompass the value creation process. Theory of economic
development
Amit and Zott (2001) Individual, firm, network industry
Innovation as the source of value creation.
Emphasizes the importance of new technology as the main value-creating innovation.
Innovation diffusion theory
Rogers (1995), Vadapalli and Ramamurthy (1997), Poon and Swatman (1999), Admiraal and Lockhorst (2009)
Individual, firm In order for e-business technology applications to be perceived as beneficial, they must match the firm-specific needs and context. Important factors include compatibility, complexity, observability, relative advantage, and trialability.
Theory of complex innovation adoption
Attewell (1992) Network Mediating institutions play a central role in the
transfer and implementation of innovation-related complex knowledge (e.g. e-business technology) Resource-based view Amit and Zott (2001),
Kotha et al. (2001) McDougall and Oviatt (2000)
Firm Uniquely combining firm resources and capabilities leads to value creation. Internet enables relational capabilities and complementarities between offline and online firm resources.
Strategic networks Amit and Zott (2001) Network Value creation from novel transaction structures. Social network theory Dyer and Singh (1998),
Nohria (1998)
Network Sources of competitive advantage embedded in inter-firm networks.
Transaction cost theory
Amit and Zott (2001), McDougall and Oviatt (2000)
Individual, firm Internet facilitates commerce on a global scale, low-cost information processing, and novel
reconfigurations of transactions leading to enhanced efficiency.
Technology Acceptance Model
Grandon and Pearson (2004), Riemenschneider et al. (2003)
Individual Perceiving the benefits of e-business applications as to addressing firm-specific needs is crucial for its adoption.
Theory of planned behaviour
Harrison et al. (1997) Individual The positive attitude towards behaviour is linked to individual belief of a positive outcome.
Unified Theory of Acceptance and Use of Technology
Venkatesh et al. (2003), Riemenschneider et al. (2003)
Individual Decisions by firm owners to website adoption are related to perceived benefits and social approval
Contextual Antecedents
Before we proceed with the in-depth analysis of e-commerce start-up and small business antecedents specific to the firm level context, this section synthesized the extant literature to provide a holistic overview of the different e-commerce start-up and small business contextual antecedents (See Appendices: Figure 1).
10 acquiring essential know-how regarding the effective adoption and utilization of e-commerce innovation (Jones et al, 2003). The successful website adoption was especially apparent in cases where owners/managers recognized its potential value as a viable tool in their marketing endeavors (Martin and Matlay, 2003). Following the previously described marketing ability, some researchers found that an interdependent link exists between the concepts of marketing and e-commerce entrepreneurship (Slater and Narver, 1995). The interaction of entrepreneurial and marketing activities in the context of small firm innovation adoption has the potential to yield significant earnings (Jonas et al., 2003), in which the entrepreneur ultimately forms the decisive factor as to the adoption of e-commerce (Simmons et al., 2008). Indeed, it is the entrepreneur that possesses the required skillset to identify opportunities from and creatively allocate scare resources in order to effectively exploit e-commerce (Atuahene-Gima and Ko, 2001). Other researchers (Elloitt and Boshoff, 2005; Matlay and Westhead, 2005) corroborate this finding by adding that entrepreneurial characteristics are essential to the success of small firms operating in conditions of high uncertainty, typifying the challenges surrounding creating and sustaining competitive advantages from e-commerce in a global space. Sebora et al. (2009) found the entrepreneurial characteristics achievement orientation and locus of control to be significant determinants of e-commerce entrepreneur success. Part of the aforementioned challenges have been identified as the need for specialized information technology knowledge, issues concerning the integration of e-commerce, and proper configuration of business systems and models to optimally facilitate electronic commerce practices (Simmons et al., 2008). Indeed, several researchers (Van Akkeren and Cavaye, 1999; Strader and Shaw, 2000; Lewis and Cockrill, 2002) found that lacking IT knowledge and experience constitute barriers to the exploitation of e-commerce. Poon and Swatman (1999) offer a relaxation of these findings suggesting that the mere interest of small firm owners/managers as opposed to extensive knowledge and expertise in information technology is sufficient to successfully appropriate rents from e-commerce. Theoretically a negative relation between the entrepreneur’s age and utilization of innovative technologies such as e-commerce would be expected, since older entrepreneurs are expected to be more apprehensive towards taking risks in comparison to their younger peers (Higón, 2012). Hadjimanolis (2000) found empirical evidence supporting this stand, while Damanpour and Schneider (2006) found no empirical significance in support of this relationship.
11 2004). Organizational learning by small firms operating within a network can be regarded as a dynamic capability strengthening the collective competitive advantage of the concerning network and its constituent member firms (Raymond and Blili, 2000). In order to effectively foster this dynamic network capability, intra- and interorganizational learning should be facilitated by the integration of proper network-wide information technology systems (Raymond et al., 1998). Additionally, barriers to small firm personnel training can be effectively mitigated through cost sharing on a network level in order to overcome previously existing resource constraints (Fariselli et al., 1999). Competition within small business networks has been found to play a significant role in the overall network utilization level of new technologies, including commerce (Dasgupta et al., 1999). As the extent to which e-commerce is utilized by competitors grows, increased adoption and utilization pressures are exerted on small business firms to follow, without necessarily having the appropriate and required IT competencies (Poon, 2000). It is therefore, that we regard the network context as both an enabler and influencer of commerce in start-up and small business, since the network can dictate enabling e-commerce practices to be followed, whilst it can also exert an influencing role on small business and start-ups to modify current e-commerce practices or to adopt different e-commerce utilization strategies. Shared beliefs, norms, culture and similar training within well-established groups are conducive to the establishment of trust among participants (Fariselli et al., 1999).
12 during the startup process of a new venture, as illustrated by the case of Alibaba, which enables importers and exporters to find each other online and discover potential new venture opportunities.
Firm level antecedents of e-commerce start-ups and small business will now be discussed more rigorously in the next chapter. The antecedents that we synthesized from extant literature include absorptive capacity, e-vision, e-service, size, business type, and lifecycle stage online (Figure 1).
FIRM LEVEL ANALYSIS AND SYNTHESIS
The different theoretical approaches adopted in extant startup and small business e-commerce research provide us with fractional and scattered insights into this phenomenon. We continue by putting “these pieces of the puzzle” together, synthesizing the different identified theoretical concepts and antecedents of the firm level in the context of e-commerce.
Theoretical perspectives
As will become clear in this section, the value creating potential of e-commerce start-up and small business cannot be fully explained using just one theoretical perspective (Amit and Zott, 2001). Therefore we assessed the different theoretical approaches adopted in existing e-business research (Table 2) in order to identify which of these theories focus specifically on the firm context, namely value chain analysis, theory of economic development, innovation diffusion theory, resource-based view, and transaction-cost theory. From these theoretical perspectives we formulate basic insights as to the value creation sources that underlie each theory. The main insights that were derived from these different theoretical perspectives respective to e-commerce value creation are now elaborated in more detail.
Value chain analysis The value chain analysis as conceptualized by Porter (1985) concerns firm activities that create value, which are regarded drivers of product differentiation. According to Amit and Zott (2001) the value chain analysis follows a two-pronged approach, encompassing:
1. The identification of the main firm activities to be pursued;
2. Determining their optimal configuration in support of creating value and enabling competition.
13 synthesizing, and distributing information in order to create value. Thus, from the value chain analysis perspective this research adopts the following stance towards start-up and small business e-commerce: principal e-business activities encompass gathering, organizing, selecting, synthesizing, and distributing information in support of applying a differentiation strategy.
Theory of economic development Schumpeter’s (1934) theory of economic development regards innovation as the value-creating source of a firm. He identified several innovation sources including the introduction of new products, production processes, markets, and supply sources, emphasizing the supporting role of technology in enabling innovative ways of combining firm resources to facilitate the introduction of new products and production processes. Therefore, we suggest that e-commerce technology enables novel ways of combining firm resources, leading to new and innovative products/services and production processes.
Innovation diffusion theory In order for e-business technology applications to be perceived as beneficial, they must match the firm-specific needs and context, which include the important factors: compatibility, complexity, observability, relative advantage, and trialability (Rogers, 1995). Accordingly, researchers (Rogers, 1995; Vadapalli and Ramamurthy, 1997; Poon and Swatman, 1999; Admiraal and Lockhorst, 2009) have found that the extent to which innovative e-commerce solutions are adopted and utilized by firms is dependent upon the perceived benefits to its users.
Resource-based view The resource-based view considers the firm as a whole consisting of resources and capabilities that have the potential to create firm-specific competitive advantages (Barney, 1991; Amit and Schoemaker, 1993). In order for these competitive advantages to arise and remain sustainable, these resources and capabilities need to be valuable, rare, inimitable, and non-substitutable (Barney, 1991). The Internet adds the online dimension to this perspective, enabling relational capabilities and complementarities between offline and online firm resources that create value.
Transaction-cost theory Williamson (1975) defined a transaction as the process of a transactional good or service being transferred from one separable technological unit to another. Within transaction cost theory, the efficiency enhancement of a transaction is regarded as the main source of value creation, with costs deriving from planning, adaptation, execution, and monitoring activities. Internet facilitates commerce on a global scale, low-cost information processing, and novel reconfigurations of transactions leading to increased efficiency.
14 continue with an in-depth analysis of the previously identified firm level antecedents, and make observations as to their interrelations in the underlying e-commerce start-ups and small businesses value creation process.
Firm Level Antecedents
Absorptive Capacity Zahra and George (2002) provide a reconceptualization of absorptive capacity defining it as “a set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability” (p. 186). The absorptive capacity process shows a strong resemblance with the underlying value chain analysis process required to adopting a differentiation strategy, namely “processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability” and “main e-business activities directed towards the implementation of a differentiation strategy, supported by the gathering, organizing, selecting, synthesizing, and distributing of information”. Both processes involve the reconfiguration of knowledge/information resulting in the main firm source of competitive advantage. Therefore, we categorize the firm antecedent absorptive capacity under the value creation driver ‘differentiation strategy’ (Figure 2).
Figure 2: E-commerce start-up and small business’ value creation strategy
15 firms considering their limited availability of resources (Van Smith and Webster, 2000; Lewis and Cockrill, 2002).
E-Service E-service involves customer service offered by the firm via the Internet that is organized in an interactive and content-focused manner, with the purpose of fostering customer-provider relationships (De Ruyter et al., 2001). Researchers (Rust and Kannan, 2002) suggest that enhanced comprehension of the e-service impact on customers enables firms to optimize the design of their organizational processes directed towards customer service. Specifically, the reliability and ease of use of e-service have been found to be significant determinants of e-commerce success (Zeithaml, 2002; Voss, 2003).
Since ‘E-service’ constitutes a service offered by a provider to a customer, we are inclined to categorize this antecedent under the ‘Innovative products/services’ value creation driver. Additionally, the existence of an e-service suggests that an online portal is connected the firm’s supporting back-end and offline systems, which facilitate the provided services and connect the inner-firm business processes.
Size Researchers found different and even contradicting outcomes regarding the relational effects of firm size on e-commerce adoption and utilization (Chappell and Feindt, 1999). Differences in organizational size and size classifications were identified in relation to the sort and rate of e-business utilization (Dandridge and Levenburg, 2000; Bengtsson et al., 2007). Part of the extant research found a positive correlation between firm size and e-commerce adoption (Del Aguila-Obra and Padilla-Melendez, 2006; Cohen and Klepper, 1996), suggesting that small firms are more sensitive and reluctant to adoption because of their resource constraints (Moussi and Davey, 2000). It has also been posited that the related effect between firm size and website use diminishes as the adoption stages progress and websites become more developed (Sadowski et al., 2002).
On the other hand, the relative size of small businesses in comparison to their larger counterparts increases their flexibility and speed through the utilization of e-commerce, enabling to respond faster and be more adaptive to changing market conditions (Arbore and Ordanini, 2006; Stockdale and Standing, 2004). Even though the small firm size is presented here as mainly an adoption barrier to e-commerce, we propose that for e-commerce start-ups and small businesses this identified adoption barrier is also present as a constraining factor to creating value from existing e-commerce activities.
16 senses. Phau and Poon (2000) found the level of product and service differentiation to be a key determinant as to the suitability and effectiveness of being transacted via the Internet. They find that the Internet enhances price transparency for consumers, thus creating downward price pressures. Businesses unable to offer significant product and service differentiation face significant challenges when wanting to conduct business through the Internet.
Lifecycle Stage Online The extent to which small firms have had an online presence has been found to be a determining factor of their degree of e-commerce adoption (Sadowski et al., 2002). Barry (2000) found that small firms tend to start with a simple website to establish an initial presence online, and because of resource constraints will implement more advanced e-commerce solutions on their website as they become more IT competent over time (Chen et al., 2003). This finding is corroborated by other researchers (Venkatraman, 2000; Sultan and Rohm, 2004) who found that e-commerce adoption by small firms occurs in sequential stages.
E-commerce Start-up and Small Business Value Creation
Daniel and Wilson (2003) emphasize the pivotal role of integration and innovation in order to create value through the utilization of e-commerce. According to Amit and Zott (2001) the value creation process deriving from e-commerce utilization by e-businesses is dependent upon the combination of firm-specific resources and capabilities. They identified four interdependent sources of value creation through e-commerce, namely efficiency, complementarities, lock-in and novelty. Perhaps not surprisingly, these value creation dimensions appear to be highly related to the main value creation drivers present in our conceptual model of e-commerce start-up and small business (figure 2). Consider the following relationships:
Efficiency à Transaction efficiency;
Complementarities à Online-Offline complementarities; Lock-in/noveltyà Innovative products/services.
17 DISCUSSION & CONCLUSION
Findings & Implications
Overall, we find that the extant literature of e-commerce utilization by start-ups and small firms to be very extensive, fragmented, and even ambiguous, due to the many related keyword derivatives used in a inconsistent manner. This research conducts a systematic literature review in an attempt to simplify the wide range of identified contextual antecedents in the field of e-commerce by identifying the antecedents that have specifically been found to be significant in extant literature. The most important e-commerce start-up and small business antecedents are synthesized and briefly discussed, this way providing a holistic overview of the antecedents contained in extant literature.
Furthermore, an in-depth analysis of the firm-level antecedents is conducted, assessing their interrelationship in the value creation process underlying a firm’s e-commerce activities. The identified firm-level antecedents include: absorptive capacity, e-vision, e-service, size, business type, and lifecycle stage online. By further analysis of the different theoretical perspectives adopted in existing research, we identify the following theoretical approaches to being relevant to e-commerce, namely value chain analysis, innovation diffusion theory, theory of economic development, resource-based view, and transaction cost theory. Our analysis of these different theoretical perspectives provided relevant insights. Main e-business activities have been found to encompass gathering, organizing, selecting, synthesizing, and distributing information in support of applying a differentiation strategy. E-commerce technology and specifically the Internet enable novel ways of combining firm resources, leading to new and innovative products/services and production processes. The resulting extent to which advancements in e-commerce solutions are ultimately adopted and utilized by firms is dependent upon the perceived benefits to its users. Ultimately, e-commerce and its underlying technologies facilitate the linking between relational capabilities and complementarities existing both offline and online firm resources that create value. Internet facilitates commerce on a global scale, low-cost information processing, and novel reconfigurations of transactions leading to increased efficiency.
18 (limited resources) to the firm’s value creation capability. Businesses offering search goods will be more effective in creating value from e-commerce, in comparison to businesses offering physical goods. The extent to which a firm is able to differentiate its product offering will have a positive effect on the value creation process. The maturity and degree to which a firm’s online lifecycle stage is developed has a positive effect on increasing transaction efficiency through e-commerce and the resulting increase in value created. Finally, we found that e-commerce itself, can be regarded as a readily-embedded value creation driver in e-commerce firms, exerting a reinforcing effect on the value creation drivers ‘transaction efficiency’, ‘online-offline complementarities’, and lock-in of ‘innovative products and services’.
Limitations
Several limitations of this research should be addressed, including those that are directly related to the qualitative nature this study. All presented propositions need to tested in order to confirm their validity. In narrowing the data sample used in our research, personal-bias is evident in the selection of papers deemed relevant when assessing the corresponding abstracts.
Another limitation of this research, lies in the fact that e-commerce assessed from a homogeneous perspective, considering all e-commerce firms and their products and services equal. In reality, the opposite is through. Many different forms, applications, configurations of e-commerce exist, each with their own specific heterogeneous characteristics that can have essentially different theoretical and practical implications. Even though our research synthesizes e-commerce start-up and small business antecedents that were found to be significant in extant literature, we only provide an in-depth analysis of the firm-level antecedents. The individual, network, industry, country, and global contextual antecedents are merely identified in order to provide a wide overview of the contextual antecedents surrounding e-business.
Given the speed at which e-commerce continues to evolve, we believe a specific focus on more novel research conducted in this field can yield relevant new insights that are not, or not fully captured in our data sample, which also included research conducted in the initial years following the advent of the Internet.
Future Research
Our observations and implications deriving from our qualitative research approach need to be empirically tested. Thus they provide a future research agenda and guide focusing specifically on the e-commerce start-up and small business firm-level antecedents’ interrelationship with value creation process deriving from e-commerce utilization. Empirically testing these observations is important and highly relevant, since this allows for new insights that directly provide new theoretical and managerial implications, broadening our theoretical understanding of the studied phenomenon, and providing e-business managers and entrepreneurs with valuable insights on how to effectively manage the utilization of e-commerce in an organizational context.
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25 APPENDICES
Table 1: Data sample Electronic Database Keywords Initial sample No citation, impact factor <0.50, errors
Duplicates Abstract not
relevant Final Sample EBSCOHost Business Source Premier e-commerce, entrepreneurship (and derivatives) 76 61 - - 15 Web of Science Core Collection e-commerce, entrepreneurship (and derivatives) 83 49 9 12 13 Top-tier Journals
Main keywords (and
derivatives) and micro -, small business, SME, online commerce, online shopping, Internet business 63 - 6 13 44
Google Scholar e-commerce, entrepreneurship
201 187 7 2 5
Total 423 297 22 27 77
* Each column shows total frequency per defined category
