Despite the increasing significance of IT innovations and corporate ethics, we lack research that has investigated whether and how the extent to which firms in a country behave in an ethical manner relates to the rate at which B2C e-commerce diffuses among them. Drawing on the ethical climate theory, the stakeholder theory, and the resource-based view of the firm, we posit that firms’ ethical behavior positively relates to B2C e-commerce diffusion and that their customer orientation and innovation capacity will mediate the relationship. We validated our research model using publicly available archival data from 128 countries. Our findings suggest that 1) ethical conduct leads to higher B2C e-commerce diffusion among a country’s firms, and 2) customer orientation and innovation capacity serve as the underlying mechanisms that explain this relationship. We discuss crucial implications for research and practice
