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e-Commerce Metrics for Net-Enhanced Organizations: Assessing the Value of e-Commerce to Firm Performance in the Manufacturing Sector

Graduate School of Management, University of California, Irvine, California 92697-3125
Graduate School of Management, University of California, Irvine, California 92697-3125
kzhu{at}gsm.uci.edu
kkraemer{at}gsm.uci.edu

In this study, we developed a set of constructs to measure e-commerce capability in Internet-enhanced organizations. The e-commerce capability metrics consist of four dimensions: information, transaction, customization, and supplier connection. These measures were empirically validated for reliability, content, and construct validity. Then we examined the nomological validity of these e-commerce metrics in terms of their relationships to firm performance, with data from 260 manufacturing companies divided into high IT-intensity and low IT-intensity sectors. Grounded in the dynamic capabilities perspective and the resource-based theory of the firm, a series of hypotheses were developed. After controlling for variations of industry effects and firm size, our empirical analysis found a significant relationship between e-commerce capability and some measures of firm performance (e.g., inventory turnover), indicating that the proposed metrics have demonstrated value for capturing e-commerce effects. However, our analysis showed that e-commerce tends to be associated with the increased cost of goods sold for traditional manufacturing companies, but there is an opposite relationship for technology companies. This result seems to highlight the role of resource complementarity for the business value of e-commerce—traditional companies need enhanced alignment between e-commerce capability and their existing IT infrastructure to reap the benefits of e-commerce.

Key Words: Electronic commerce; IT intensity; E-commerce metrics; Measurement; validation; Firm performance; Net-enhanced organizations
History: This paper was received on January 14, 2001.

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