Critical Success Factors for EC Korea vs U

Critical Success Factors for EC: Korea vs. U. S. A. Tae Kyung Sung, Ph. D. CFE Kyonggi University IC 2 Institute, The Univ. of Texas at Austin © Tae Kyung Sung

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

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

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

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

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

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

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

Measures (1) CSF’s CUSTOMER PRIVACY LOWCOST ease STRATEGY EXPERTISE STABLE SECURITY PLENTY VARIETY SPEED PAYMENT SERVICES DELIVERY LOWPRICE EVALUATION Tobin’s q ROA Mean KOR USA 3. 5459 3. 1046 3. 1565 3. 5595 2. 8699 3. 1837 2. 9311 2. 7577 2. 9473 3. 2449 3. 6173 3. 1888 2. 4362 4. 0663 3. 3810 2. 8087 1. 1277 20. 0125 3. 6326 3. 6423 3. 1004 3. 2044 2. 9343 2. 9871 2. 5000 3. 4988 4. 0620 3. 2409 2. 8358 3. 1655 2. 9854 3. 3577 3. 1727 2. 7536 1. 3228 15. 0213 Std. Dev KOR USA Cronbach’s KOR USA 1. 0874 0. 7346 0. 5256 0. 8299 0. 7677 0. 8394 0. 9096 0. 7783 0. 7867 0. 8667 0. 8132 0. 7746 0. 7389 0. 7076 0. 6572 0. 7564 0. 2546 4. 2467 0. 8543 0. 7872 0. 8320 0. 8122 0. 7145 0. 7630 0. 8088 0. 7753 0. 8289 0. 8091 0. 8345 0. 7360 0. 7874 0. 7582 0. 8481 0. 7230 0. 7934 0. 9605 0. 7015 0. 8237 0. 7446 0. 7851 0. 7351 0. 8344 0. 7304 0. 7744 0. 5334 0. 9234 0. 6309 0. 8246 0. 8067 0. 2573 4. 2880 N= 196 (Korea) © Tae Kyung Sung 0. 8081 0. 8123 0. 8456 0. 7754 0. 7453 0. 7878 0. 7322 0. 7255 0. 8188 0. 7760 0. 8005 0. 7872 0. 7431 0. 7289 0. 7984 0. 7663 N= 137 (USA)

Measures (2) CSF’s KOREA Correlation with Tobin’s q ROA CUSTOMER PRIVACY LOWCOST EASE STRATEGY EXPERTISE STABLE SECURITY PLENTY VARIETY SPEED PAYMENT SERVICES DELIVERY LOWPRICE EVALUATION © Tae Kyung Sung 0. 1741** 0. 3261*** 0. 2861*** 0. 3142*** 0. 3218*** 0. 4785*** 0. 4719*** 0. 3826*** 0. 5010*** 0. 3998*** 0. 4192*** 0. 4223*** 0. 1800*** 0. 1549** 0. 2182*** 0. 4035*** 0. 2511*** 0. 3034*** 0. 3372*** 0. 3265*** 0. 3986*** 0. 4569*** 0. 4889*** 0. 4340*** 0. 5231*** 0. 3979*** 0. 4156*** 0. 3922*** 0. 2009*** 0. 1361* 0. 1842*** 0. 3640*** Tobin’s q USA 0. 3802*** 0. 1554* 0. 3019*** 0. 4992*** 0. 3049*** 0. 4997*** 0. 1756** 0. 3420*** 0. 0923 0. 3988*** 0. 4113*** 0. 2740*** 0. 5138*** 0. 1566* 0. 4296*** 0. 3507*** ROA 0. 3592*** 0. 2344*** 0. 2863*** 0. 5014*** 0. 3626*** 0. 5255*** 0. 1517* 0. 3236*** 0. 0661 0. 3620*** 0. 3499*** 0. 3192*** 0. 5134*** 0. 0958 0. 3604*** 0. 3859***

Measures (3) Factor 1 Factor 2 Factor 3 Factor 4 PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY 0. 6857 0. 7058 0. 7005 0. 5543 0. 6178 0. 5066 0. 3798 0. 2626 0. 2498 0. 1791 0. 1779 0. 0687 0. 1872 0. 0467 0. 1982 0. 2529 0. 3045 0. 3061 0. 0646 0. 1747 0. 3077 0. 3154 0. 0273 0. 1837 SECURITY STABLE EVALUATION EXPERTISE SPEED 0. 0211 0. 3710 0. 3799 0. 1595 0. 1029 0. 5545 0. 6911 0. 5281 0. 6491 0. 6628 0. 0170 0. 1271 0. 3873 0. 1617 0. 0978 0. 2278 0. 0056 0. 0195 0. 0301 0. 1614 CUSTOMER STRATEGY 0. 1756 0. 3679 0. 0364 0. 2450 0. 7062 0. 6336 0. 1190 0. 0802 PRIVACY LOWCOST EASE 0. 0162 0. 0306 0. 2254 0. 1733 0. 2237 0. 2686 0. 1345 0. 3863 0. 0023 0. 8091 0. 6904 0. 6523 Variance Explained 2. 9009 2. 3109 1. 8274 1. 7618 © Tae Kyung Sung

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

Results – CSF’s (2) T Test CSF’s CUSTOMER PRIVACY LOWCOST EASE STRATEGY EXPERTISE STABLE SECURITY PLENTY VARIETY SPEED PAYMENT SERVICES DELIVERY LOWPRICE EVALUATION Tobin’s q ROA © Tae Kyung Sung N= 196 (Korea) KOR USA t stat 3. 5459 3. 1046 3. 1565 3. 5595 2. 8699 3. 1837 2. 9311 2. 7577 2. 9473 3. 2449 3. 6173 3. 1888 2. 4362 4. 0663 3. 3810 2. 8087 1. 1277 20. 0125 3. 6326 3. 6423 3. 1004 3. 2044 2. 9343 2. 9871 2. 5000 3. 4988 4. 0620 3. 2409 2. 8358 3. 1655 2. 9854 3. 3577 3. 1727 2. 7536 1. 3228 15. 0213 -0. 84 -5. 52 0. 79 3. 85 -0. 76 2. 26 4. 60 -8. 30 -13. 86 0. 05 8. 88 0. 33 -5. 79 9. 40 2. 56 0. 64 -7. 03 10. 49 KOREA N= 137 (USA) USA PRIVACY*** EASE*** EXPERTISE** STABLE SECURITY*** PLENTY*** SPEED*** SERVICES*** DELIVERY*** LOWPRICE** Tobin’s q *** ROA***

Results – Regression Analysis KOREA (N = 196) Tobin’s q ROA PLENTY PAYMENT VARIETY LOWPRICE SERVICES DELIVERY SECURITY STABLE EVALUATION EXPERTISE SPEED PRIVACY LOWCOST EASE CUSTOMER STRATEGY R-square F-stat © Tae Kyung Sung USA (N = 137) Tobin’s q ROA 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 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** 51. 0102 11. 65*** 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. 7487 12. 49*** 54. 8898 9. 13*** 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. 0263 0. 6711 55. 7238 9. 44***

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

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

Future Research Directions • Replicate the research with a larger population both locally and internationally • Unit of analysis • Validate CSF’s – Level of Analysis – B 2 C vs B 2 B • Detailed investigation of CSF’s on firm performance • More valid organizational level performance measures • Longitudinal Study © Tae Kyung Sung