B2B e-commerce and small business exporters.

ABSTRACT

This paper focuses on B2B e-commerce use by small business exporters. When a firm purchases products from or sells its products to other businesses over the Internet, it engages in B2B e-commerce. The purpose of this empirical study is to examine the following small business Internet B2B topics: factors motivating Internet use, strategies, and performance. To obtain information for the study, a sample of Idaho small business exporters was selected. Two key study results were observed. First, it appears that high levels of both collaborative pressure from business partners as well as perceived benefits of B2B e-commerce can be linked with high satisfaction of B2B performance. Second, it appears that high degrees of importance in B2B partnering with other domestic (but not foreign) businesses can also be linked with high satisfaction of B2B performance.

INTRODUCTION

E-commerce is a topic of high interest today. Businesses, both large and small, began exploring the Internet's potential in the early 1990s after the first commercial provider of Internet dial-up access was launched. Prior to this date, advances in information technology (IT) focused mainly on improving the efficiency of individuals and operating departments "inside" a firm. Since the 1990s, IT has centered on building bridges between an enterprise and key "outside" elements--i.e., between a business and other businesses with which it conducts activities (B2B), and between a business and its end users or consumers (B2C).

At the present time, much of what is written about e-commerce or commercial activity over the Internet is in the popular press--e.g., Wall Street Journal, Business Week, Computerworld, Ecommerce Times, etc. However, more and more texts are being written. In addition, research studies are increasingly being conducted and published to help guide businesses as they explore Internet options. In the B2B e-commerce area, research has sharpened the focus on strategies (Cunningham, 2001; Haig, 2001; Iyer, G.R., 2002) and, in some cases, has tied strategies to performance (Connell, 2000; Subramaniam & Shaw, 2002). Other B2B studies have examined technical complexities that may affect both strategies and performance (Easton & Araujo, 2003; Hubbard, 2001; Kauffman, 2002).

The aim of this study is to help fill the gap in B2B scholarly studies. More specifically, the paper focuses on small businesses exporters that recently began B2B e-commerce activities. The study's purpose is to examine for these firms the following B2B topics: motivation or trigger factors, strategies, and performance. Hopefully, what is learned from these firms' experiences will be useful for other small exporters who are contemplating what B2B e-commerce actions they can/should take.

Background information on e-commerce and B2B e-commerce, including a discussion of the motivation and strategy topics, is covered next. Sections on methodology, results and discussion, and the conclusion follow.

BACKGROUND

Some people associate e-commerce with Amazon.com. As such, their definition of e-commerce is the exchange of retail goods and services for payment over the Internet. But this view overlooks businesses working with other businesses. In its broadest sense, electronic commerce encompasses any commercial activity that takes place directly between a business, its partners (e.g., suppliers, distributors), or its customers through a combination of computing and communications technologies (Trepper, 2000).

According to Focazio (2001), there are four core e-commerce interactive communications channels for a company:

Business to Business (B2B). The working relationship a company has with suppliers, vendors, business partners, and others. This is a trusted relationship and frequently involves the transfer of products between businesses. Often, these channels are closed and protected. In the interactive space, the channels are typically enabled through extranet projects.

Business to Consumer (B2C). The public interface a company has with the consumer or end user. It includes marketing, advertising, service before and after the sale, and the sales channel. In the interactive space, these channels are typically public Web sites and e-mail.

Consumer to Business (C2B). A relationship made practical by large-scale interactive technologies. In this situation consumers become potential customers through proactive means or as a result of a compensated relationship facilitated by a third party. An example of this channel would be the request from a consumer to a business facilitated by Priceline.com.

Consumer to Consumer (C2C). As with the C2B communications channel, C2C is made practical by large-scale interactive technologies. One such approach is where consumers directly influence other consumers' decisions via one-to-one communications such as e-mail and instant messaging. Another C2C approach is where a third-party organization leverages interactive communications technologies that enable a large number of people with similar likes or needs to communicate. An example of a C2C e-commerce business is eBay.

Of the four communication channels, those involving consumers-i.e., B2C, C2B and C2C--are the most visible and familiar. This does not mean, however, that B2B e-commerce is less important. Consider the following evidence. Gartner research group forecasts that global B2B e-commerce sales will grow from USD 1.93 trillion in 2002 to USD 8.53 trillion in 2005. Further, a Gartner spokesman stated: "B2B has already outperformed initial expectations and will continue to far surpass B2C e-commerce transactions" (Clark, 2002).

Included under B2B e-commerce is a broad spectrum of activities. Two sub-groups of the spectrum are operating resource activities and supply chain activities. Operating resources are the goods and services required to operate a company. Included here are procuring computers, office supplies and travel as well as maintaining and repairing buildings and equipment. These activities are all part of running a business. Managing these operating resources is both costly and time consuming.

A supply chain is the business process used to produce and deliver goods and services. A product supply chain could include: raw material providers, part providers, manufacturers (assemblers), distributors, retailers, and consumers. These entities must work together in a coordinated fashion in order to deliver a product. Each product that is delivered must pass through its supply chain entities and be acted on in some fashion. Managing these activities can be a challenge for a business. Firms with international partners may find the B2B communication channel helpful in reducing communication problems with its operating resource partners and its supply chain partners.

What motivates a firm's leaders to engage in B2B e-commerce activities? Iacovou, Benbasat and Dexter (1995) suggest there are two factors that can motivate/impact Internet use: external pressures and perceived benefits. Examples of external pressures are use of the Internet by competitors and customer demands; examples of perceived benefits are increased productivity and reduced costs.

Competitive pressures can be a strong motivator. In a competitive market, a firm's leaders will often be incited to imitate its rivals because staying current with industry best practices can be associated with successful performance. One example of imitating (or copying) is benchmarking, a technique associated with the total quality management movement. Benchmarking means identifying a rival who is best at something and then duplicating the activity (Daft, 1998).

The perceived benefits associated with using a new idea/innovation can also be a strong motivator for a firm's leaders. Adopting an innovation that has the potential to increase productivity and reduce costs can help a firm create a competitive advantage over its rivals.

Motivation is an important topic because it has been linked to a firm's performance. More specifically, previous studies have suggested a positive relationship exists between the motivation of a small firm's leaders and the firm's performance (Olson, 1986; Olson & Bosserman, 1984). Based on these arguments, one proposition in this study is: B2B e-commerce exporting firms with leaders who have a high motivation to use this technology (i.e., those with either high levels of external pressures or perceived benefits or both), versus those with leaders who have a low motivation, will generally report higher levels of satisfaction with their B2B performance.

Turn next to B2B e-commerce strategies an exporting firm can pursue with its domestic and international partners. Some firms may develop B2B Internet connections with their "domestic" operating resource or supply chain partners. Other companies could generate B2B connections with their "foreign" operating resource or supply chain partners. Even other firms could develop B2B connections with both their domestic and foreign partners. It would appear that an Internet communication channel would be particularly attractive between an exporting firm and its international partners because it can help overcome some of the distance barriers separating the companies.

Given these strategies, a second proposition in this study is: B2B e-commerce exporting firms which attach high degrees of strategic importance to B2B links with their business partners, versus those which attach low degrees of importance, will generally report higher levels of satisfaction with their B2B performance. This proposition is based on Covey, Merrill and Merrill's (1994) research. Their position is that a firm's important activities are those linked to the firm's goals; hence, important activities are those that receive the highest levels of attention and resources. One goal of a firm, in turn, is to achieve high performance. Hence, the link between importance and performance, and the argument that firms which attach more important to their B2B strategies will generally report higher satisfaction levels with their B2B performance.

METHODOLOGY

To obtain information for this study, firms were selected from the Idaho International Trade Directory, 1999-2000. The directory lists Idaho manufacturers, distributors, retailers and service firms which sell both domestically and internationally. Further, to meet study requirements only firms with less than 100 employees and those with at least one year B2B e-commerce experience were chosen.

Information about each business was gathered through a phone interview with the CEO or other knowledgeable person. Forty firms were surveyed of which 22 were mainly manufacturers and 18 were mainly other businesses (e.g., distributors, retailers and service firms).

The 40 interviewees were asked the following questions:

1. What motivated your firm's leader to implement B2B e-commerce activities? (Please respond to the following three reasons using 1 for strongly agree, 2 for agree, 3 for neutral, 4 for disagree, and 5 for strongly disagree).

1 (a). Your rivals were using B2B e-commerce activities?

1 (b). Your business partners (e.g., suppliers, distributors, retailers) requested that you use the B2B electronic communication channel?

1 (c). You perceived B2B e-commerce benefits to outweigh the costs?

2. How important for your firm are the following B2B e-commerce strategies (or ways your firm uses this technology)? (Please respond to the following two strategies using 1 for important, 2 for somewhat important, 3 for neutral, 4 for somewhat not important, and 5 for not important).

2 (a). Partnering with other "domestic" businesses with whom you work (either operating resource or supply chain partners)?

2 (b). Partnering with other "foreign" businesses with whom you work (either operating resource or supply chain partners)?

3. What is your attitude towards, or degree of satisfaction with, your firm's B2B e-commerce performance? (Use the following scale: 1 for exceedingly above expectations, 2 for somewhat above expectations, 3 for meeting expectations, 4 for somewhat below expectations, and 5 for exceedingly below expectations.)

RESULTS AND DISCUSSION

Results concerning the first motivation-performance relationship are presented in Table 1. More specifically, it focuses on the degree to which rivals incited or "pushed" firms into B2B e-commerce. Using a clustering procedure, the 40 observations of the index were grouped into two categories, those with lower versus higher values. A non-parametric procedure, the Mann-Whitney U test, was utilized to test the relationship. The statistics in Table 1 reveal that there is no significant (.238) difference in satisfaction with B2B performance between the group of exporting firms most motivated to compete with, and imitate, their rivals in B2B e-commerce, versus those firms with lower motivation. This result can be interpreted to mean that pressure from rivals to engage in B2B e-commerce does not appear to impact an exporting firm's satisfaction with its B2B performance.

Table 2 contains information on another motivation-performance relationship. The specific motivation issue is the degree to which a firm's business partners requested that it use B2B e-commerce. Using the same clustering procedure and statistical test, results in Table 2 indicate that the group of firms most motivated to respond to their business partners requests were also significantly (.034) more satisfied with their performance. A high degree of pressure (or push) from an exporting firm's business partners, then, appears to impact the firm's satisfaction with its B2B performance. Note that pressure from a business partner when compared to a rival is a different type of force for a firm. The former is "collaborative" while the latter is "competitive."

Table 3 contains information on the third motivation-performance relationship. The motivation question covered here concerns the degree to which a firm perceived B2B e-commerce benefits to outweigh the costs. Again, using the prior clustering procedure and statistical test, results in Table 3 indicate a significant (.038) relationship. In this case, exporting firms that perceived, to a high degree, B2B benefits to outweigh the costs also were more satisfied with their B2B performance. To summarize motivation issues, it appears that high levels of both collaborative pressure from business partners as well as perceived benefits of B2B e-commerce can be linked with high satisfaction of B2B performance.

Table 4 displays the first strategy-performance relationship. The particular strategy covered here is the importance of B2B partnering with other "domestic" businesses with whom a firm works. After the clustering procedure, the Mann-Whitney U test reveals an significant (.003) difference. In other words, firms that perceived high degrees of importance in B2B partnering with other domestic businesses, versus those holding lower degrees of importance in B2B partnering, also were more satisfied with their B2B performance.

The second strategy-performance relationship, that of the importance of B2B partnering with other "foreign" businesses and its linkage to performance satisfaction, is examined in Table 5. The test result was not significant (.064). Hence, no difference in satisfaction with B2B performance was found between firms that perceived high degrees of importance in B2B partnering with other foreign businesses versus and those that perceived low degrees of importance in B2B partnering.

Originally it was thought that firms reporting high importance or interest in B2B partnering with foreign businesses would be those reporting high B2B performance satisfaction, because B2B transactions can help reduce communication costs. Different reasons can be used to argue why this result did not occur. First, some firms had limited experiences with B2B e-commerce, only one year. Hence, they might not have been able to observe positive B2B performance outcomes yet. In addition, to further analyze the foreign partner and performance relationship (in a post hoc sense), it was thought that manufacturing firms using B2B e-commerce might have responded differently than other firms (e.g., retail and service firms). To examine this position, the sample was split into two sets, manufacturing versus other firms. Interestingly, a significant relationship was found for manufacturing firms. Hence, future research should be directed in this area.

CONCLUSION

The current study has several limitations. First, the exporting firms sampled in the survey were all from Idaho. Second, questions about, and descriptions of, B2B e-commerce are open to misinterpretation. Further, in this study both types of B2B partners for a firm (operating resource and supply chain partners) were not treated separately in the survey motivation, strategy, and performance questions. In future studies, researchers could develop separate questions about these partner types to ask interviewees. Although these limitations exist, the results of this study should stimulate future B2B e-commerce research.

In terms of information from this study for small business exporters, two general conclusions can be drawn concerning the B2B motivation, strategy, and performance topics. First, it appears that high levels of both collaborative pressure from business partners as well as perceived benefits of B2B e-commerce can be linked with high satisfaction of B2B performance. Second, it appears that high degrees of importance in B2B partnering with other domestic (but not foreign) businesses can also be linked with high satisfaction of B2B performance.

REFERENCES

Covey, S.R., A.R. Merrill & R.R. Merrill (1994). First things first. New York: Simon & Schuster.

Clark, M. (2002). B2B e-commerce sales to skyrocket. Retrieved May 8, 2002 from http://www.electricnews.net/news.html

Cunningham, M.J. (2001). B2B: How to build a profitable e-commerce strategy. Cambridge, MA: Perseus Publishing.

Daft, R.L. (2001). Organization theory (Seventh Edition). Cincinnati, OH: South- Western Publishing.

Easton, G. & L. Araujo (2003). Evaluating the impact of B2B e-commerce: A contingent approach. Industrial Marketing Management, 32(5), 431- 440.

Focazio, M.T. (2001). The e-factor: Building a 24/7, customer centric, electronic business for the internet age. New York: AMACOM.

Haig, M. (2001). The B2B e-commerce handbook. London: Kogan Page, Limited.

Hubbard, K. (2001). B2B e-commerce (working paper series, report no. 01- 104). Marketing Science Institute.

Iacovou, C.L., I.W. Benbasat & A.S. Dexter (1995). Electronic data interchange and small organizations: Adoption and impact of technology. MIS Quarterly, 19(4), 465-485.

Iyer, G.R. (2002). B2B e-commerce: Economy and strategies. Journal of Business-to-Business Marketing, 9(1), 77-93.

Kauffman, R.J. (2002). B2B e-commerce revisited: Leading perspectives on the key issues and research directions. Electronic Markets, 12(2), 67-84.

O'Connell, B. (2000). B2B com: Cashing in on the business-to-business e - commerce bonanza. Holbrook, MA: Adams Media.

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Olson, P.D. & D.A. Bosserman (1984). Attributes of the entrepreneurial type. Business Horizons 27(3), 53-56.

Subramaniam, C. & M.J. Shaw (2002). A study of the value and impact of B2B e-commerce: The case of web-based procurement. International Journal of Electronic Commerce, 6(4), 19-41.

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Philip D. Olson, University of Idaho 

Newell Gough, Boise State University

Table 1: B2B E-Commerce Motivation (Measured by Degree to
Which Rivals Pushed a Firm) and Performance Satisfaction Results

                                      Performance
Motivation                            Mean Rank *      n

Stronger levels                          18.11         27
  (indicated by lower scores)
Weaker levels                            22.91         11
  (indicated by higher scores)

U = 111.00
significance = .238

* Lower values indicate higher performance satisfaction

Table 2: B2B E-Commerce Motivation (Measured by Degree to
Which Business Partners Requested Firm to Participate) and Performance
Satisfaction Results
                                      Performance
Motivation                            Mean Rank *       n

Stronger levels                          14.65         23
  (indicated by lower scores)
Weaker levels                            22.40         10
  (indicated by higher scores)

U = 61.00
significance = .034

* Lower values indicate higher performance satisfaction

Table 3: B2B E-Commerce Motivation (Measured by Degree to
Which a Firm perceived B2B Benefits to Outweigh the Cost) and
Performance Satisfaction Results

                                      Performance
Motivation                            Mean Rank *       n

Stronger levels
  (indicated by lower scores)            16.80         25
Weaker levels
  (indicated by higher scores)           24.69         13

U = 95.00
significance = .038

* Lower values indicate higher performance satisfaction

Table 4: B2B E-Commerce Strategy (Partnering With Othe
Domestic Businesses With Whom You Work) and Performance
Satisfaction Results

                                      Performance
Strategy Importance                   Mean Rank *       n

Higher levels                            12.58         18
  (indicated by lower scores)
Lower levels                             22.30         15
  (indicated by higher scores)

U = 55.50
significance = .003

* Lower values indicate higher performance satisfaction

Table 5: B2B E-Commerce Strategy (Partnering With Other Foreign
Businesses With Whom You Work) and Performance Satisfaction Results
Strategy Importance

                                      Performance
                                      Mean Rank *       n

Higher levels                            16.48         21
  (indicated by lower scores)
Lower levels                             23.24         17
  (indicated by higher scores)

U = 115.00
significance = .064

* Lower values indicate higher performance satisfaction