Diffusion of Electronic Stores: A Comparison Between Taiwan and the United States

ABSTRACT Electronic commerce that allows transactions to be conducted over the Internet has gained much attention. The number of electronic stores has experienced an unprecedented growth in recent years. In this paper, we examine the growth model of electronic stores offering different products in the United States and Taiwan. Empirical data were analyzed. The result indicates that information content of the product and information intensity of the value chain have significant effects on the growth potential of an industry. Bookstores and banks that have higher information intensity in their value chains are more likely to take advantage of the power of electronic commerce. The internal diffusion model can better describe their growth. Beverage and investment consulting, on the other hand, have a lower percentage of electronic stores. Their growth follows the external diffusion model. We also observed that the same industry might have different growth patterns in different countries. JEL: L86, 031 Keywords: Technology diffusion; Electronic commerce; Comparative studies I. INTRODUCTION The rapid growth of Internet users has resulted in an unprecedented increase of electronic stores on the web. The Amazon.com and CDNow.com are well-known examples. Although some web-based stores have been successful in generating sales, followers in other countries may not be as successful as in the United States. Different industries also seem to have different growth speeds and patterns. Therefore, it is interesting to study how electronic stores expand and diffuse in different industries and countries, and what are the factors that may affect the diffusion of electronic stores. Technology diffusion is a phenomenon that more and more individuals or organizations adopt a certain technology over time. Research in the area focuses on investigating the process and affective factors of adopting a certain technology. In recent years, studies on the diffusion of computer networks have increased (e.g., Sibley, 1990; Goodman, 1994). However, no research has systematically studied the diffusion of electronic stores in a country or across the national border. Given the importance of electronic commerce in the coming century, it is time to have a better understanding of what has been the growing patterns and what are affecting the growth of these stores, which should help us predict their future. This is the objective of the research More specifically, the objective of the study is three-fold: (1) Investigate the growth and diffusion of online transaction functions in Internet stores, (2) Analyze whether industrial specificity may affect the adoption of electronic transaction functions, and (3) Compare whether the diffusion patterns may differ in different countries. The remainder of the paper is organized as follows. In the next section, nature of on-line transactions and literature in technology diffusion are introduced. Based on the literature, a framework composed of product and market characteristics are proposed in Section 3 for empirical evaluation. The empirical results are discussed in Section 4. Section 5 is the conclusion. II. LITERATURE REVIEW Electronic commerce is generally defined as using Internet to share information, maintain business relationships, or perform commercial activities (Zwass, 1996; Kalakota and Whinston, 1996). This section reviews literature related to factors that affects the adoption of electronic transactions and models of technology diffusion. A. Factors Affecting on-line Transactions Since electronic commerce involves business activities conducted over the Internet, the nature of electronic markets is different from that of traditional markets. Since Internet transmits digital signals, products or services that can be easily digitized seems to have an advantage to fit into the electronic market. …