Leveraging Offshore IT Outsourcing by SMEs through Online Marketplaces

Following their larger counterparts, an increasing number of small firms outsource their IT tasks to lower cost offshore destinations. For small firms, however, offshore outsourcing is a difficult undertaking as it involves high transaction costs. Online marketplaces for IT services, which have recently become available to small firms, make offshore IT outsourcing more accessible and manageable, although differences in the marketplace design result in varying outcomes across the marketplaces. This has consequences for SME’s decision as to which online marketplace to use, because different markets may have different types of benefits and costs. This paper sets to analyze some of the similarities and differences between online marketplaces for IT services and their effects for small firms. First, we analyze if and how online marketplaces reduce small firms’ transaction costs in offshore IT outsourcing. Second, we examine the effects of market entry barriers on outcomes of online marketplaces and their implications for small firms. The results indicate that online marketplaces for IT services do reduce transaction costs for small firms in offshore outsourcing across ten specific market processes. More surprising, however, is the finding that the lower market entry barriers for suppliers result in lower prices for buyers without compromising other aspects of market performance.Offshore IT Outsourcing;Online Market;Process-Stakeholder Analysis;Reverse Auction

THE MODERATING EFFECTS OF CONTEXTUAL FACTORS ON A BUYER’S TRUST IN E-COMMERCE PLATFORMS AND SELLERS

Drawing on trust transfer theory and signal theory, we investigate how perceived effectiveness of e-commerce institutional mechanisms (PEEIM) and perceived website quality of the seller (PWQS) moderate the relationships between trust in platform, trust in seller and purchase intention in the context of Consumer to Consumer (C2C) platforms. To test our proposed model, we surveyed 224 buyers of TaoBao, a major Chinese C2C portal. The results indicate that PEEIM has no effect on the relationship between trust in platform and trust in seller, yet it positively moderates the relationship between trust in seller and purchase intention. In addition, PWQS positively moderates the relationship between trust in platform and trust in seller, but negatively moderates the relationship between trust in seller and purchase intention. The theoretical and practical implications are discussed

Strategic Challenges for Exchanges and Securities Settlement

A common feature of major trends in securities and derivative markets is that they facilitate cross-border competition between financial institutions and markets. These trends include financial deregulation, technological developments that increase network externalities and the introduction of the single currency in Europe. This paper discusses future prospects for stock and derivative exchanges and securities settlement systems globally in the light of this analytical framework. The increased contestability of the financial markets opens the way for a completely new situation where economies of scale and network effects enable new systems to challenge existing exchanges and settlement systems. This has already led towards more integrated trading and settlement infrastructure via mergers, alliances, links, agreements and other forms of cooperation between existing infrastructure companies. At the same time new electronic communication networks and electronic exchanges operated by members of exchanges or off-exchange companies and Internet brokers have emerged. We expect that economies of scale and scope and network effects will foster global competition. The business conducted by brokers and exchanges will tend to converge, thus posing a major challenge for the management of these businesses. Trading and settlement services for the most liquid global trading products will, we believe, be provided by limited liability companies that employ efficient governance practices. We anticipate that US stock and derivative exchanges will have to adopt fully electronic trading systems. This might lead to intense competition between exchanges in the US and globally. We also anticipate that European alliances will be based on a more efficient operational model than the models proposed so far. An increase in Internet-routed equity and derivative trades will lead to partial fragmentation of liquidity. As technology advances, we expect pooling of liquidity in one of the networks.exchanges; settlement systems; technology; network externalities; economies of scale

A model to enhance the perceived trustworthiness of Eastern Cape essential oil producers selling through electronic marketplaces

Eastern Cape Province farmers in the natural essential oils industry are yet to fully realise the use of electronic commerce (e-commerce) platforms, such as electronic marketplaces (e-marketplaces) for business purposes. This is due to the issues that include lack of awareness, poor product quality, untrusted payment gateways and unsuccessful delivery that are associated with e-marketplaces. As a result, farmers do not trust e-marketplaces and therefore hesitate to engage in e-marketplaces for business purposes. This is further complicated by natural essential oils buyers‟ tendency of preferring face-to-face interaction with a supplier rather than online interaction as they need quality assurance. As such, this research proposes a model to enhance the perceived trustworthiness of natural essential oil producers in the Eastern Cape Province selling through e-marketplaces. The model constitutes the factors that could be considered in assisting essential oil producers to create a perception of trustworthiness to buyers in e-marketplaces. These factors were evaluated amongst five organisations involved in the production, retail or processing of essential oils using a multiple-case study methodology. The study‟s use of multiple-case study was applied within the interpretivist paradigm and five cases were considered. Interviews, document analysis and observations were used for data collection. Data analysis was done using within-case analysis followed by cross-case analysis to establish factors of trust. The essential oil producers based in the Gauteng, Kwazulu-Natal and Western Cape provinces were cases that had been successfully using e-marketplaces for a notable period of time. Accordingly, factors that contributed to the successful use of e-marketplaces informed the proposed model of this research. The model proposes that perceived trustworthiness of enterprises in e-marketplaces can be achieved through following the uncertainty reduction stages (Entry, Personal and Exit) and applying uncertainty reduction strategies (passive, active and interactive)

Building Effective Online Marketplaces with Institution-Based Trust

Despite the inherent risk arising from separating buyers and sellers, networked online marketplaces are proliferating. We describe how online auction marketplaces take advantage of institutional structures to build buyer trust in auction sellers, mitigate risk, increase satisfaction, and promote transaction intentions. It is hypothesized, based on institutional trust (Zucker 1986), that buyer trust in auction sellers can be increased, beyond past experience with sellers, through structural assurances, such as buyer-driven certification, auction house escrows, and credit card guarantees. We examined buyer transaction intentions, mediated by trusting beliefs, risk reduction, and satisfaction. The model is tested with 274 buyers in Amazonís online auction marketplace. The results support the hypotheses, highlighting the importance of institution-based trust in online networks. Implications are discussed

The Development of an Augmented Contrained Efficiency Framework for the Adoption of Electrionic Interorganizational Governance

Business-to-business electronic commerce provides new mechanisms for interorganizational exchange governance. This study contributes to the research of the adoption of interorganizational exchange governance by developing an augmented constrained-efficiency framework that summarizes the salient factors influencing organizational selection and adoption of electronic exchange governance. Drawing upon the literature on organizational and interorganizational governance design and adoption, the augmented constrained-efficiency framework posits that organizational selection and adoption of electronic interorganizational exchange governance are an efficiency pursuing process and also constrained by some critical forces. Internally, the constraints include organizational decision makers’ bounded rationality and organizational resources and capabilities. Externally, an organization’s institutional environments, its dependency relationship, contractual arrangements and relational norms developed with its business partners through physical transactions are important constraining forces. To demonstrate the usefulness of the augmented constrained-efficiency framework, the paper applies it to the analysis of two important modes of electronic interorganizational exchange governance, namely electronic hierarchy and electronic marketplace. By doing so, the paper sets foundations for future theory development and empirical study

Leveraging Rich Communication Tools: Evidence of Online Trust and Guanxi in China

Driven by the evolution of consumer-to-consumer (C2C) online marketplaces, we examine the role of communication tools (i.e., an instant messenger, internal message box and a feedback system), in facilitating dyadic online transactions in the Chinese C2C marketplace. Integrating the Chinese concept of guanxi with theories of social translucence and social presence, we introduce a structural model that explains how rich communication tools influence a website’s interactivity and presence, subsequently building trust and guanxi among buyers and sellers, and ultimately predicting buyers’ repurchase intentions. The data collected from 185 buyers in TaoBao, China’s leading C2C online marketplace, strongly support the proposed model. We believe that this research is the first formal study to show evidence of guanxi in online C2C marketplaces, and it is attributed to the role of communication tools to enhance a website’s interactivity and presence

Perceived Risk and Trust Associated with Purchasing at Electronic Marketplaces

Understanding consumer behavior is of vital importance to consumer oriented e-business models today. In this paper we report on a study into the relationships between consumer perceptions of risk and trust and the intention to purchase at a C2C electronic marketplace. Distinguishing for electronic marketplace settings is that consumer behavior is subject to perceptions of both selling party and the institutional structures of the intermediary operating the system. Building upon the well-established literature of trust we consider the concepts of institutional trust and party trust. We extend this categorization by introducing the concepts of institutional risk and party risk. Next, we adopt the process of measurement instrument development as put forward by Churchill (1979). We develop measurement instruments for institutional trust (4 items), institutional risk (5 items) and party risk (4 items). All measurement scales contain acceptable alpha’s and are unidimensional. An empirical study is applied to explore the relationships between the risk and trust types and consumer purchase intention. The results reveal significant, direct effects of party trust and party risk. Second order effects of institutional trust and institutional risk are investigated and reported. The paper concludes with general observations and recommendations for further research

Transaction Streams: Definition and Implications for Trust in Internet-Based Electronic Commerce.

In this paper we analyze how transactions related to the exchange of goods and services are being performed on the Internet. The adoption of electronic markets in an industry has a disintermediation potential because it can create a direct link between the producer and the consumer (without the need for the intermediation role of distributors). Electronic markets lower the search cost, allowing customers to choose among more providers (which ultimately reduces both the costs for the customer and the profits for the producer). In this paper we contend that electronic markets on the Internet have the opposite effect, resulting in our increase in the number of intermediators. We introduce transaction streams, which model how transactions are being conducted and help explain the types of new intermediators that are appearing on the Internet. We also describe mechanisms by which companies are exploring ways of extending transaction streams. To illustrate the model and validate our findings, we analyze transaction streams in the insurance industry and review associated concepts such as trust and brands.transactions; electronic markets;