Global e-business: firm size, credibility and desirable modes of payment

This paper explores the impact of company size on an important financial consideration affecting the decision to adopt e-business in international trade. We assert that firm size will influence the choice of payment method in global e-commerce. When a Letter of Credit (L/C) is used among global supply chain partners in the e-business setting, payment flows will move faster than the physical flow of products. This asymmetric speed is not preferable for importers, particularly small importers. In this case, the diffusion of e-business adoption will likely be upstream rather than down. We predict that the usance Letter of Credit and usance L/C payable at sight will become more popular as payment modes in global e-business, particularly for Small- to Medium-size Enterprises (SMEs). New ICC regulations for e-business, if actually implemented, will likely popularise a payment mode similar to the current usance Letter of Credit.

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