Journal of Manufacturing Technology Management

E-business capabilities model: Validation and comparison between adopter and nonadopter of e-business companies in UK
Khalid Hafeez Kay Hooi Keoy Robert Hanneman

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Khalid Hafeez Kay Hooi Keoy Robert Hanneman, (2006),"E-business capabilities model", Journal of
Manufacturing Technology Management, Vol. 17 Iss 6 pp. 806 - 828
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JMTM
17,6

806

E-business capabilities model

Validation and comparison between
adopter and non-adopter of e-business
companies in UK
Khalid Hafeez and Kay Hooi Keoy

Downloaded by SAINT PETERSBURG STATE UNIVERSITY At 08:16 16 October 2016 (PT)

Bradford School of Management, Bradford University, Bradford, UK, and

Robert Hanneman
Department of Sociology in the College of Humanities, Arts and Social Sciences,
University of California, Riverside, California, USA
Abstract
Purpose The purpose of this paper is to present a conceptual framework to evaluate e-business
strategic capabilities using structural equation modelling (SEM) approach.
Design/methodology/approach The paper identifies three e-business capabilities, namely
business strategy, supply chain strategy and e-business readiness. These capabilities are further
decomposed under technology, organization and people dimensions to assess their contribution for
business effectiveness. A questionnaire is designed and implemented using SEM technique. Survey
data from 143 firms from the UK are collected to test our theoretical model. In particular, we have
tested a positive, mediating/reciprocal relationships among multidimensional measures of business
strategy, supply chain strategy and e-business adoption. Further hypotheses are developed to evaluate
a direct positive impact of e-business on companys performance.
Findings This empirical analyses demonstrate several key findings: success of e-business in UK
firms is attributed to the strong positive co-relationship of supply chain strategy to business strategy
and to e-business adoption; within the technology-organization-people dimensions, e-business
adoption and business strategy emerges as the strongest factors for the companys performances for
the adopter of e-business group, whereas supply chain capabilities and business strategies is relatively
a stronger contributory factor towards business success for non-adopter of e-business.
Originality/value It is expected that the results from this study will provide useful guidelines for
companies to assess their strengths and weaknesses towards adopting an effective e-business
implementation strategy.
Keywords Corporate strategy, Supply chain management, Electronic commerce, Modelling,
United Kingdom
Paper type Research paper

Journal of Manufacturing Technology

Management
Vol. 17 No. 6, 2006
pp. 806-828
q Emerald Group Publishing Limited
1741-038X
DOI 10.1108/17410380610678819

Introduction
It is understood now that e-business is more than just another way to sustain or
improve existing business practices. Where a few researchers suggest that e-business
is a disruptive innovation that is radically changing the traditional way of doing
business (Lee and Kalakota, 2001), on the contrary many other highlight the
evolutionary aspects of e-business adoption (Ross et al., 2001). There are examples
where companies have used business tools such as total quality management (TQM)
and business process reengineering (BPR) while introducing e-business in the
organisation. These tools allow companies to automate processes, integrate systems,
and work towards customer intimacy. As Ross et al. (2001) suggest that migrating to

Downloaded by SAINT PETERSBURG STATE UNIVERSITY At 08:16 16 October 2016 (PT)

e-business involves exploiting existing processes through information rich channels,

expanding core processes to include adjacent businesses, and extracting management
attention from these processes.
A recent survey suggest that two third of the UK businesses are online, while
further growth is forecasted (UK Online, 2002). There are indications that the larger
companies adopt twice as many e-commerce activities compared with small and
medium-sized enterprises (SMEs) (Haig, 2002; Simpson and Docherty, 2004). In
addition, the UK government has recently acknowledged that there is a slow take-up of
e-commerce amongst SMEs, particularly amongst micro-businesses (UK Online, 2002).
The main reason cited for this slow adoption is ignorance about e-commerce benefits
and a shortage of relevant skills (DTI, 2002).
The work reported in this paper was set out to develop an in depth understanding
how UK companies have prepared for e-business adoption. A number of key factors
contributing towards e-business success are identified. A comparative hypothesis
testing methodology is proposed to investigate the problems and barriers in
implementing e-business strategies across multiple organizations. This research also
aims to develop a measurement tool that academic and practitioner can use to identify
existing gaps between the firms current business practice and its desired e-business
implementation strategy. The paper is organised as follows: some relevant literature is
reviewed in first section. Conceptual e-business capabilities framework with
underlying technology-organisation-people (TOP) dimensions is discussed in the
following section. Research method using multiple group comparison between adopter
and non-adopter of e-business groups and the outcome of the structured equation
modelling (SEM) analysis are given, respectively. Lastly, discussions on the theoretical
and practical implications of these results, as well as limitations of this study are given.
Literature review
A few authors view e-business as one of the most controversial research area (Zhu et al.,
2003, 2004). Despite the burst of the dot-com bubble few years ago, many companies
are still continuing to deploy e-business extensively in their business operations. There
is overwhelming evidence that firms such as Dell, Wal-Mart and Capital One have
achieved improvements in their operational efficiency and supply chain partners
intimacy by integrating e-business into their business models. Many large and SME
companies have developed internet-enabled initiatives to strengthen online connection
with customers, disseminate product information, facilitate transactions, improve
customer services, and manage inventory via electronic links with suppliers. The
dominant strategy among retailers is to achieve direct access to customers via
interactive web technologies. There are reports indicating that due to the fear of
lagging behind the technology curve, many firms have anxiously engaged in
e-business initiatives without deriving any benefits (Martinsons and Martinsons, 2002;
Barua and Mukhopadhyay, 2000).
There is evidence that embracing technology can result in competitive advantage in
the marketplace (Levitt, 1983). Internet technologies offer opportunities for instant
international market access, as well as improve domestic market performance for
companies (Keogh et al., 1998; Caviello and McAuley, 1999; Ian et al., 2004). By using
internet, customer relationships can be re-engineered resulting in a more cost efficient
one-to-one relationship (Webb and Sayer, 1998). Therefore, there is a view that

E-business
capabilities
model
807

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808

widespread business adoption of the internet is needed in order to reach critical mass
for internet commerce (Poon and Swatman, 1999; Ian et al., 2004). Also there are
guidelines that it is the longer-term benefits that should drive e-business development,
rather than any short-term gains. (Ian et al., 2004).
In the UK industrial climate, SMEs are increasingly making use of e-commerce with
almost 92 percent of medium seized firms and 62 percent of small firms connected to
internet access (Oftel, 2002). However, the SME sector is traditionally characterized by
high failure rates, where failure rate noted to be six times higher for small companies
compared to large counterparts (Storey, 1994). With the significant impact that
e-commerce can have, such failure rate may increase if the UK SMEs do not develop
efficient e-business implementation (Daniel, 2003). Therefore, many authors have
suggested that the integration of internet with existing system is to be treated as an
essential factor for e-commence effectiveness (Keeling et al., 2000; Melymuka, 2000;
Haapaniemi et al., 2000; Von Hoffman, 2001).
At present, much of the existing e-commerce literature relies exclusively on case
studies, anecdotes and conceptual frameworks. Only a few studies use empirical data to
characterize the internet-based initiatives, or gauge the scale of their impact on firm
performance (Zhu et al., 2003, 2004; Brynjolfsson and Kahin, 2000). There is also a lack of
theory to guide the empirical work (Wheeler, 2002). Many authors argue that the literature
is weak in making the linkage between theory and measures apart from subjecting
proposed measures for empirical validation for reliability and validity (Straub, 1989).
E-business capability framework
In this section, we proposed salient features of our conceptual framework. First we
discuss TOP model in the context of e-business. Then we develop an appropriate
e-business capability (EBC) model by discussing business strategy, supply chain
strategy and e-business adoption flexibility for a company. Subsequently six
hypotheses are proposed to be tested to show the relationships of TOP model with
business performance employing structural equation modelling (SEM) technique.
Results of the survey analyses are then discussed.
Technology organization people (TOP) dimensions
Many studies suggests that even in a traditional supply chain environment, many
companies have yet not realised the full technological integration of the available office
technologies and software tools such as material resource planning (MRP), distribution
resource planning (DRP), and enterprise resource planning (ERP), etc. Steven as early as
1989 had advocated that in order to achieve full integration (from a baseline to external
integration as illustrated in Table I); companies need to focus on technological,
organizational, and people dimensions within and outside a company. Today many
firms are still at the early stages to fully utilize the business opportunity and
improvements offered by the internet technology. Therefore, we would argue that
Stevens (1989) supply chain integration framework is still fully applicable where
companies want to move from a traditional business to e-business. We would argue that
the three identified dimensions, namely; technology, organisation and people (TOP) are
also well suited for studying e-business evaluation and implementation.
Das et al. (1991) commented that technology has emerged as a flexible and
versatile information attainment and processing capability which is essential to reduce

Stage of supply chain integration

Supply chain characteristics

Technology integration

Baseline

Organisation integration

Functional integration

Reactive short-term planning. Fire

fight. Large pools of inventory.
Vulnerability to market changes
Emphasis still on cost, not
performance. Focus inward and on
goods. Reactive towards customer.
Some internal trade-offs
All work processes integrated.
Planning reaches from customers
back to supplier. EDI wide used.
Still reacting to customer
Integration of all suppliers. Focus
on customer. Synchronized
material flow. SC covers extended
enterprise

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People integration

Internal integration

External integration

Source: Stevens (1989)

the response time required by a company. In the context of e-business application

the technology provide the essential capabilities and process applications. This may be
reflected in terms of value management with regards to processing; provision of
electronic exchange capabilities, and management of database (Croteau et al., 2001).
There are studies showing that many organizations have pursued external
integration leading to detrimental consequences by ignoring the organization dimension
(Barratt and Green, 2001; Fawcett and Magnan, 2001).Organizational dimension can be
defined as the choice pertaining to a particular configuration and internal arrangement
intended to support the organizations chosen position in the market (Morton, 1991).
According to Stevens (1989), organisation flexibility is necessary to move towards
internal integration of disparate operation functions. Also this enables an organisation
to move towards an integrated MRP, DRP or a fully integrated ERP system.
There are many studies suggesting an over emphasis on the technology, while the
people issues have been completely ignore (Sabath and Fontanella, 2002; Barratt, 2002;
Ireland and Bruce, 2000). Along with technology and organisational issues, senior
management commitment towards e-business strategy and underlying performance
measures are regarded having a strong impact on e-business success (Ontario, 2001).
Kaplan and Norton (2004) describe people as organisation capital and companys
culture as its leadership, how aligned its people are with its strategy goals and
knowledge sharing abilities of its employees. Achieving internal integration is not
sufficient and could lead to create larger organization silos (Barratt and Green, 2001).
According to Stevens (1989), attitudinal changes are necessary for a company to
integrate with its customers and suppliers. For us, a fully integrated ERP solution,
such as CRM, in only possible if companies mindset (or people) is willing to adapt to
new organization and technological changes. Earl (2000) provides four e-business
evaluation stages where organization, technology and people issues can be addressed
appropriately. By utilizing Stevens (1989) and Earls (2000) model, we believe that

E-business
capabilities
model
809

Table I.
Stevens integration
model

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810

these three dimensions make up the essential fabric for our e-business capabilities
framework to study e-business value (Figure 1).
E-business capability model
As mention earlier, EBC model would include business strategy, e-business adoption
and supply chain management (SEM) elements as shown in Figure 1. We define
e-business adoption as the readiness of the organisation by having appropriate
attitudes, skills, knowledge and technology to facilitate e-business operations. Again
we would emphasize e-business adoption through technology, organization and people
dimensions. As shown in Figure 1, all these components are inter-related, i.e. changes
to one of these components will have ramifications on others.
Porter (1985) developed a value chain model that highlights interdependent
activities in the business where competitive strategies can be best applied and where
information systems are most likely to have strategic impact. As information
technologies developed, novel ways of business process redesign emerged. However,
Porter (2001) argued that the key question is not whether to deploy e-business to take
advantage of the internet technology, but how to deploy it. Gaining competitive
advantage requires building on the proven principles of effective strategy either by
operational effectiveness or strategic positioning. As Porter (2001) quoted:
. . . the next stage of the internets evolution will involve a shift in thinking from e-business to
business, from e-strategy to strategy. Only by integrating the internet into overall strategy will
this powerful new technology become an equally powerful force for competitive advantage.

Technology
Dimension

Organization
Dimension

People
Dimension

Business Strategy
Business strategy ensures that organization, people
and technological dimensions are a ligned to create a
successful business.
Companys Business
Performance
E-Business Adoption
The readiness of a company to introduce e-business
processes taking into consideration or ganization, people
and technological dimensions.

Figure 1.
Proposed e-business
capability framework

Supply Chain Management

Supply chain strategies are aligned with the business
strategy and e-business adoption taking into
consideration organization, people and technological
dimensions.

E-Commerce
enhance companys
ability to create value
position,
increase
revenue
and
performance
improvement

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SCM is defined as activities to be involved in the flows of materials (physical product

flows from suppliers to customers through the chain and reverse flows via product
returns, servicing, recycling and disposal), information (order transmission and
delivery status) and finance (credit terms, payment schedules, and consignments and
title ownership arrangements) in a network consisting of customers, supplier,
manufacturers and distributors (Stevens, 1989; Hau, 2000). Clearly these flows cut
across multiple functions and areas both within and outside a company; therefore, the
internet and SCM are inextricably linked. The internet is a key enabler, providing
radical improvement to the performance of many supply chain activities. Therefore, in
our view an effective supply chain strategy must be part of overall business strategy
(Keoy et al., 2002).

E-business
capabilities
model
811

Hypotheses formulation
Many authors agree that, SCM should be given a higher level of strategic importance at
the board room level (Maede, 1998; Philip and Pedersen; 1997; Damien, 2005). In
addition, research has frequently identified that strategy development and business
performance are to be inextricably link to reap the actual value proposition from the
e-businesses (Rosenzweig et al., 2003; Vickery et al., 2003; Damien, 2005). Under the
impression of our conceptual framework (Figure 1) and aforementioned discussions we
postulated the following six hypotheses to test the effectiveness of e-business adoption
and related business outcomes.
Methods
Figure 2 details of our EBC framework along with associated TOP dimensions which
are suited to the three determinants (business strategy, supply chain strategy and
e-business adoption) of e-business performance. As illustrated the e-business
FM

EM

CM

Business Performance
H1

Business
Strategy

TI

OI

Supply Chain
Strategy

H4

PS

H3

H2

H6

TIn

OIn

E-Business
Adoption

H5

SCR

TA

OC

AC

Legend
TI
OI
PS

Technological
Infrastructure (IT)
Organization
Infrastructure
Partnership
Strategy

TIn
OIn
SCR

Technological
Integration (ERP, EDI)
Organisation
Integration
Supply Chain
Relationship

TA
OC
AC

Technological
Adoption
Organizational
Capability
Attitudinal
Capability

FM
EM
CM

Financial
Measures
Efficiency
Measures
Coordination
Measures

Figure 2.
Hypothesized
arrangement for the
e-business capability
framework

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812

performance is assesses under financial measures, efficiency measures (or operational

measures) and coordination measure related to, respectively, technology, organization
and people dimensions. The figure also graphically represents the six hypotheses
constructs as outlined in Table II together with dependent variables suited for
Structure Equation Modeling procedures.
To test the conceptual model in Figure 2 and the associated hypotheses proposed,
we conducted a questionnaire survey. To have a broad representation and
understanding of the proposed framework, the survey was a stratified sample by
industry group (manufacturing; services; IT; finance, insurance and real estate;
wholesale and retails trade; others (agriculture, communication, utility services,
non-classified). The sites were randomly selected. A predetermined number of targets
completes were fifty per industry group. Survey was directed to qualified and
experienced individual having a good understanding their businesses.
Participants were asked to complete a paper version of the questionnaire comprised
of an introductory to outline the purpose and aims of the study. Confidentiality and
anonymity were explained on the front page. The set up of the e-mail version (Word
document) questionnaires mirrored the paper versions of the survey so that only the
mode of completing the survey differed. In a pilot study questionnaires were sent in
Microsoft Word format and participants were able to click the value of their choice by
using a pull-down menu for each item in each questionnaire.
The response rate was 47.7 percent, where 44 percent belong to adopter of
e-business group, while 54 percent represent the non-adopter of e-business group.
A breakdown of the sample characteristics is illustrated in Table III.
Rational of selecting structural equation modelling
The structural equation is recognized as a more comprehensive and flexible approach
to research design and data analysis than any other single statistical model in standard
(Hoyle, 1995). Rather than an exploratory approach SEM takes a confirmatory
approach that specifies inter-variable relations a priori, and estimates measurement
errors explicitly (Suhr, 1999). However, SEM, require to base the tested model exactly

Hypothesis

Description

H1

Appropriate implementation of business strategy in consideration with TOP

dimensions is a significant determinant of perceived business performance
The content of supply chain strategy in consideration with TOP dimensions is a
significant determinant of perceived business performance
Strategic e-business adoption in consideration with TOP dimensions is a significant
determinant of perceived business performance
Successful e-business implementation is the result of a positive reciprocal effect of
business strategy and supply chain strategy in consideration with TOP dimensions
Successful of e-business adoption is the result of a positive reciprocal effect of supply
chain strategy and e-business adoption strategy in consideration with TOP
dimensions
Successful e-business implementation is the result of a positive reciprocal effect of
business strategy and e-business adoption strategy in consideration with TOP
dimensions

H2
H3
H4
H5
Table II.
Hypotheses formulation
for testing e-business
capability model

H6

Country: The United Kingdom

Respondents
(out of 50)

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Industries
Manufacturing
Services
IT
Finance, insurance and real estate
Wholesale and retails trade
Others (agriculture, communication, utility
services, non-classified)
Total respondent
Response rate (percent)
Adopter of e-business group
Non-adopter of e-business group
Job title

25
20
30
20
23
25

E-business
capabilities
model
813

143 out of
300
47.7 percent
63
80
IS
70
CIO, CTO, VP of IS
IS manager, director, planner
Other manger in IS department
Non IS
73
CEO, president, managing director
COO, business operations manager
CFO, administration/finance manager
Others (IS analyst, marketing VP, other
manager)

Keyword
CIO
VP
COO
CTO
IS

Chief information officer

Vice president
Chief operating officer
Chief technology officer
Information system

on theory. Therefore, the use of SEM in a confirmatory way is recommended especially

if the purpose is to confirm or reject the proposed hypotheses.
The most obvious difference between SEM and other multivariate technique is the
use of separate relationships for each of a set of dependent variables (Hair et al., 1998).
The SEM becomes a very useful tool when one dependent variable needs to be treated
as independent variable in a subsequent analysis. For instance, business strategy,
supply chain strategy and e-business adoption factors are treated as initial dependent
variables, which in turn become independent variables in terms of their influence on
the surveyed companies business performance.
Other multivariate approaches such as regression analyses are too simplistic and
does not allow analysing between independent variables. In comparison of other
multivariate method, the SEM applies only the variance/covariance or correlation
matrix as its input data. Therefore, focus of SEM is not to understand an individual
observation, but on the pattern of relationships across the samples (Hair et al., 1995).
In addition, SEM is a comprehensive statistical approach to test hypotheses about
relations among observed and latent variables (Hoyle, 1995). The unobserved (latent)

Table III.
Demographic
characteristics of the
survey participants
(n 143)

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814

variables is linked to one (variable) that is measurable, thus making its measurement
feasible (Bryrne, 2001).
Data analysis
As mentioned earlier, SEM was used to assess the propositions of the research model
using Arbuckle (1997) approach implemented in the SPSS AMOS 4.0 program using
maximum likelihood estimation (Bollen, 1989; Byrne, 1998a; Joreskog and Sorbom,
1993). Following Marsh et al. (1996, 1988), goodness of fit of the proposed model was
computed using comparative fit index (CFI), Tucker-Lewis index (TLI) and root mean
square error approximation (RMSEA). In order to further confirm the validation of the
model, x 2 test statistic and an evaluation of parameter estimates were calculated.
Where various tests of statistical significance and indices of fit aid in the evaluation of
a model, we understand that there is always a degree of subjectivity and professional
judgment in the selection of a best model in multiple group comparison using Marsh
et al. (1988).
According to Byrne (1998b) and Marsh (1994) there is a well-developed
methodology in which the goodness of fit of alternative models are compared. They
proposed the least restrictive model that does not require any of the parameter
estimates to be the same in different groups, and the most restrictive model that
requires all parameter estimates to be the same in the different groups. As part of this
study we compared two parallel groups, i.e. of e-business adopters and non-adopters,
and tested the invariance of the solution by considering one, any set, or all parameter
estimates to be same in two or more groups.
Generalizability over groups with tests of invariance
The overarching question is whether the EBC model is generalised enough to be
replicable in the two groups for two sample groups being examined. One particular
interest we have with the analysis is that how the results generalize across the two
groups (adopter of e-business and non-adopter of e-business groups) within the sample.
We conducted multi-group confirmatory factor analysis (CFAs) and SEMs in which we
constrained different parameters (factor loadings, path coefficients, and factor
correlations) to be invariant across the 2 groups for the sample (Tables IV and V and
Figure 3). We constrained with a set of CFA models to evaluate the invariance of the
measurement component of the model (MG2-MG11). Subsequently we had focused
specifically on structural equation models (MG12-MG19) to evaluate the appropriate
EBC model (Table IV).
Multi-group CFAs were conducted from model MG1 to model MG11 considering the
factor loadings (First- and second-order) and relevant factor correlations. With the
baseline multiple-group model (MG1), no invariance constraints were imposed and
parameters for the a-priori model were fit separately to data set for each group. The fit
indices were subsequently calculated. With the first (model MG2), only first-order
factor loadings are constrained to be equal across the two groups. This model was
subsequently used to evaluate the multiple group comparison between adopter and
non-adopter of e-business on second-order factor loadings (technological, organisation
and people dimensions), correlations among second-order constructs (H1, H2 and H3)
and path coefficients (H4, H5 and H6). Results obtained from this model were
compared against those based on exclusively non-invariant solution (MG1), provided

DF
761
1,522
1,554
1,559
1,557
1562
1,555
1,555
1,555
1,560
1,560
1,560

871.10
1832.20
1871.21
1869.14
1882.93
1880.17
1876.33
1872.39
1876.62
1872.60
1870.95
1873.28

Total group sample

TG1
Multiple group CFA
MG1

MG2

MG3

MG4

MG5

MG6
MG7
MG8
MG9
MG10
MG11

1.21
1.20
1.21
1.20
1.20
1.20

1.20

1.21

1.20

1.20

1.20

1.14

x 2/DF

0.90
0.90
0.90
0.90
0.90
0.90

0.90

0.90

0.90

0.90

0.90

0.97

CFI

0.89
0.90
0.89
0.90
0.90
0.90

0.90

0.89

0.90

0.90

0.90

0.97

TLI

0.04
0.04
0.04
0.04
0.04
0.04

0.04

0.04

0.04

0.04

0.04

0.03

RMSEA

CFA INV
Uniq
CFA INV
FL,Uniq
CFA INV
Uniq
CFA INV
Uniq
CFA INV
Uniq
CFA INV
CFA INV
CFA INV
CFA INV
CFA INV
CFA INV

1st FL, FCH6; Free FV, 2nd FL, Uniq

1st FL, FCH4; Free FV, 2nd FL, Uniq
1st FL, FCH5; Free FV, 2nd FL, Uniq
1st FL, 2nd FL, FCH6; Free FV, Uniq
1st FL, 2nd FL, FCH4; Free FV, Uniq
1st FL, 2nd FL, FCH5; Free FV, Uniq

1st FL, 2nd FL, FC(H4-H6), Free FV,

1st FL, FC(H4-H6); Free FV, 2nd FL,

1st FL, 2nd FL; Free FV, FC(H4-H6),

1st FL; Free FV, FC(H4-H6), 2nd

none; Free 1st FL, 2nd FL FV, FC,

Full e-commerce capabilities (ECC) model

Model description

Notes: CFI, comparative fitness index; TLI, Tucker-Lewis index; RMSEA, root mean square error of approximation; DF, degrees of freedom; CFA,
confirmatory factor analysis; SEM, structural equation model; PM, performance measurement; EBA, e-business adoption; SCS, supply chain strategy; BS,
business strategy; 1st FL, factor loading for first-order factors; 2nd FL, factor loadings for second-order factor; FC(H4-H6), factor correlations; FV, factor
variances; FC(H4), factor correlation between EBR and BS; FC(H5), factor correlation between SCS and EBA; FC(H6), factor correlation between EBA and BS;
PC(H1-H3), path coefficients; PCH1, path coefficient from BS to BP; PCH2, path coefficient from SCS to BP; PCH3, path coefficient from EBA to BP; Uniq,
uniqueness. In Model TG1 (see parameter estimates in Table I) the ECC model was fit to the total group, whereas for Models MG1-MG20 the ECC model
was fit separately for each of the two groups representing different groups. For Models MG2-MG19, some combination of parameters is required to be
invariant across the two groups

Model

x2

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E-business
capabilities
model
815

Table IV.
Measurement
goodness-of-fit analysis
for EBC model fit with
respect to the total group
and multiple (adopter and
non-adopter of
e-business) UK group
(n 143)

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Table V.
Structural goodness-of-fit
analysis for EBC model
fit with respect to the
total group and multiple
(adopted and non-adopter
of e-business) UK group
(n 143)

Model

x2

DF

x 2/DF CFI TLI RMSEA Model description

Multiple group SEM

MG12 1883.39 1,565

1.20

0.90 0.90

0.04

MG13 1868.06 1,554

1.20

0.90 0.90

0.04

MG14 1865.42 1,552

1.20

0.90 0.90

0.04

MG15 1871.22 1,554

1.20

0.90 0.90

0.04

MG16 1871.56 1,554

1.20

0.90 0.90

0.04

MG17 1870.02 1,560

1.20

0.90 0.90

0.04

MG18 1869.18 1,560

1.20

0.90 0.90

0.04

MG19 1872.09 1,560

1.20

0.90 0.90

0.04

MG20 1883.39 1,565

1.20

0.90 0.90

0.04

SEM INV 1st FL, 2nd FL, PC (H1-H3);

Free FV, FC (H4-H6), uniq
SEM INV 1st FL, PC(H1-H3); Free FV,
FC(H4-H6), 2nd FL, uniq
SEM INV 1st FL, PCH3; Free FV,
FC(H4-H6), uniq, 2nd FL
SEM INV 1st FL, PCH1; Free FV,
FC(H4-H6), uniq, 2nd FL
SEM INV 1st FL, PCH2; Free FV,
FC(H4-H6), uniq, 2nd FL
SEM INV 1st FL, 2nd FL, PCH3;
Free FV, FC(H4-H6), uniq
SEM INV 1st FL, 2nd FL, PCH1;
Free FV, FC(H4-H6), uniq
SEM INV 1st FL, 2nd FL, PCH2;
Free FV, FC(H4-H6), uniq
SEM INV 1st FL, 2nd FL, FC(H4-H6), PC;
Free FV, uniq

Notes: CFI, comparative fitness index; TLI, Tucker-Lewis index; RMSEA, root mean square error of
approximation; DF, degrees of freedom; CFA, confirmatory factor analysis; SEM, structural equation
model; PM, performance measurement; EBR, e-business readiness; SCS, supply chain strategy; BS,
business strategy; 1st FL, factor loading for first-order factors; 2nd FL, factor loadings for
second-order factors

FM
11

EM
12

1,11

1,12

CM
13

1,13

Business
Performance
1

1,1
1,3

Supply Chain
Strategy

1,2

Business
Strateg y

1,2 1,3 1,4

TI
2

OI
3

2,3

Figure 3.
Diagram representation
for SEM hypothesized
model

3,1

2,1

2,5 2,6 2,7

PS
4

TIn
5

OIn
6

E-Business
Adoption

3,8 3,9 3,10

SCR
7

TA
8

OC
9

AC
10

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that the fit indices were good and differed within a limited range. If good fit indices
were obtained from MG2, it supported the appropriateness of the measures across the
two groups and satisfied the minimum requirement for subsequent factorial
invariance.
With model MG3, constraints were imposed on the first- and second-order loadings
to measure the difference between the two groups. The path coefficients and
correlations with first- and second-order factor loadings were deemed equal across 2
groups. In each of the subsequent CFA models (MG4 MG11) in Table III, the
invariance of the factor loadings was imposed in combination with the invariance of
additional sets of parameters on factor correlations and second-order factor loadings.
The aim was to assess if the imposition of these added invariance constraints would
affect the goodness of fit indices comparing with models MG1 and MG2, respectively.
The results thus obtained, therefore support the cross generalizability of the measures
and relationship among them across these 2 groups for the sample.
Models MG12 to MG19 focus specifically on the structural component of the model
the path coefficients that are critical to tests predictions based on the EBC model
(Figure 3). With model MG12, the path coefficients and the first- and second-order
factor loadings were required to be the same in each of the two groups, whereas the
factor correlations were freely estimated across the both groups. Model MG13 is
similar to MG12 except the factor correlations and second-order factor loadings were
freely estimated across the groups.
The tests of invariance for the three path coefficients (H1-H3) provide a global test
that the predicted path coefficients were positive. In order to evaluate models MG14 to
MG19, specific path coefficients and factor correlations (H1-H6) were to be freely
estimated, while the rest of the factor loadings (first- or second-order depending on
model evaluation) showed invariance across the two groups. This was to demonstrate
the sensitivity of goodness of fit of these models in comparison with model MG2
when certain path coefficients were constraint to test for invariance.
In summary, these results illustrate that even the extremely demanding models
(with complete invariance of all parameters) provide a good fit to the data (MG12).
However, none of these multiple group models stood out clearly as the best model.
Therefore, further analyses were conducted to evaluate parameter estimates based on
the 20 selected models. The two groups were further tested to evaluate:
(1) parameters for the second-order factor loadings by constraining first-order
factor loadings to be mutually equalled (MG2); and
(2) path coefficients and factor correlations by constraining first- and second-order
factor loadings to be equal (MG3).
Cross-group generalizability: evaluation of parameter estimates between adopter and
non-adopter of e-business
In order to evaluate parameter estimates between adopter and non-adopter of
e-business, we employed the procedures of constructing and evaluating a series of
structural equation models across both groups where various model parameters were
held invariant across two groups. Models MG1 to MG11 were run to evaluate the
multiple groups CFA for adopter and non-adopter of e-business. However, with the
baseline multiple-group model (MG1), all of the factor loadings and path correlations

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818

were feely estimated between the two groups; that provided a good fit of TLI 0.90,
CFI 0.90, RMSEA 0.04 and x 2/df 1.14 (Table IV).
In the first test of invariance (model MG2), at first the factor loadings were
constrained to be mutually equal across the two groups. Fit indices were found to be
very good (TLI 0.90; CFI 0.90 and RMSEA 0.04) and match closely with
those based on the totally non-invariant solution (MG1). A good fit of indices result
were also produced for model MG3 where first- and second-order factor loadings were
held invariant (TLI 0.92; CFI 0.93 and RMSEA 0.04). This supports the
appropriateness of the measures across the 2 groups and meets the minimum
requirement for factorial invariance (Marsh and Hau, 2003).
For each of the subsequent CFA models (MG4 to MG11 in Table IV), the invariance
of the factor loadings were imposed in combination with the invariance of additional
sets of parameters first-order factor loadings, second-order factor loading, factor
correlations, and uniqueness. Although the imposition of these added invariance
constraints resulted in a marginal inferiority of fit, even the highly restrictive models
MG4 and MG5 of total invariance (i.e. requiring every parameter to be the same in all
two groups) provided a good fit to the data that marginally differed with Model MG1
(with no invariance constraints). These results support the cross-cultural
generalizability of the measures and the relations among them across these two
groups in the sample.
Comparison of parameter estimates for hypotheses H1-H6 across two groups based on
model MG3
Further analyses were conducted to evaluate the generalizability of the parameter
estimates based on model MG3 (Table IV). Of critical importance to this investigation
were the three path coefficients (H1-H3) and factor correlations (H4-H6) relating the
e-business success to the corresponding e-business capabilities drivers. Subsequently
model MG3 was evaluated for comparing path coefficients and factor correlations
between adopter and non-adopter groups assuming that all second factors (technology,
people and organization elements) invariantly load on business strategy, supply chains
strategy and e-business adoption across the two groups. At first, we evaluated our
main hypotheses (H1-H3) by having the first- and second-order factor loadings to be
invariant (constant) across the two groups. Parameter estimates for this highly
restrictive multi-group model MG3 were found to be closely matching with those on the
total group model TG1 (Table IV). Results based on model MG3 were concentrated on
the path coefficients (H1-H3); and the factor correlations (H4-H6) were the main
interests of investigation across the both groups (Table VI).
Table VII shows the first-order factor loadings based on model MG2, evaluating the
significant affect of TOP dimensions on the three constructs. In addition to providing
global support for the EBC model, the invariance of these parameter estimates
provided remarkably strong support for the cross-comparison generalizability of
prediction based on the EBC model for adopter and non-adopter of e-business.
Discussions
To understand e-business value and its impact on firm performance, we have
empirically tested the proposed EBC framework across two sub-groups for the UK
sample. Empirical analysis demonstrated a number of key findings:

H1
H2
H3
Factor correlations
H4
H5
H6

Hypotheses
0.29
0.09
0.60
0.28
0.47
0.46

BS l SCS
SCS l EBA
BS l EBA
0.45
0.09
0.18

0.27
0.45
0.13

Standardized weight, l
Adopter
Non-adopter

BP BS
BP SCS
BP EBA

Paths coefficients

0.06
0.07
0.07

0.13
0.14
0.20
0.10
0.05
0.05

0.15
0.15
0.38

Standard error (S.E)

Adopter
Non-adopter

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1.96
2.77
2.86

2.65
0.85
3.90

2.70
0.43
0.94

2.02
3.05
0.84

Critical ratio t-value

Adopter
Non-adopter

E-business
capabilities
model
819

Table VI.
A comparison between
adopter (n 80) and
non-adopter groups
(n 63) based on path
coefficients and factor
correlations model MG3

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820
Table VII.
A comparison between
adopter (n 80) and
non-adopter groups
(n 63) based on second
factor loadings for model
MG2

Standardized weight, l
Adopter
Non-adopter

Paths
OI BS
TI BS
PS BS
FM BP
CM BP
EM BP
SCR SCS
OIn SCS
TIn SCS
OC EBA
AC EBA
TA EBA

0.92
0.87
0.87
0.95
0.95
0.99
0.79
0.79
0.90
0.85
0.75
0.83

0.91
0.96
0.96
0.94
0.91
0.94
0.81
0.88
0.88
0.49
0.63
0.61

Standard error (S.E)

Adopter
Non-adopter

Critical ratio t-value

Adopter
Non-adopter

(Fixed)
0.12
0.14
(Fixed)
0.10
0.10
0.17
(Fixed)
0.21
(Fixed)
0.14
0.17

(Fixed)
7.36
6.39
(Fixed)
8.12
6.67
4.51
(Fixed)
5.38
(Fixed)
2.95
4.12

(Fixed)
0.14
0.15
(Fixed)
0.10
0.11
0.15
(Fixed)
0.23
(Fixed)
0.55
0.71

(Fixed)
7.86
7.25
(Fixed)
7.62
6.39
4.51
(Fixed)
5.10
(Fixed)
1.43
1.49

Adopter of e-business
From Table VI, sample for adopter of e-business group revealed that business strategy
(H1; g11 0.31) and e-business adoption (H3; g31 0.40) constructs and relevant
parameters (paths) are statistically significant with critical ratios of 2.65 and 3.90,
respectively, (critical ratio . 1.96 is the nominal requirement of significance). This
clearly provides evidence that these constructs have a positive and significant impact
on the overall business performance. However, there was no significant confirmation
linking supply chain strategy to business performance for group of e-business
adopter with a non-significant standardize value of (H2; g21 0.12) and critical ratio
of 1.10.
All constructs belonging to business strategy, supply chain strategy and e-business
adoption strategy had strong significant reciprocal effect for the e-business adopter
companies. As shown in Figure 4, supply chain strategy and e-business adoption (H5)
are the highest correlating factors with value f23 0.47 and c.r. 2.77. Correlation
Business
Performance
H1

0.29**
0.27**

H6

H2

0.09
0.45**

H3

0.60**
0.13

0.46**
0.18
Business
Strategy

0.28*
0.45**

Supply Chain
Strategy

H4

Figure 4.
Empirical results split
group (estimate on the
sub-groups of adopter and
non-adopter of e-business)

Bold
: Adopter of E - Business Group (n = 80)
Non Bold : Non Adopter of E - Business Group (n = 63)
Italic
: Not Significant path
* p < 0.05
** p < 0.01

0.47**
0.09
H5

E-Business
Adoption

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between business strategy and e-business adoption (H6) revealed the second highest
standardised value f13 0.46 and c.r. 2.86, followed by correlation between
business strategy and supply chain strategy construct (H4) with f12 0.28 with
c.r. 1.96.
E-business adoption is evaluated as a significant and strong determinant of
business performance in comparison with other constructs, and postulates a major
reason towards a successful e-business adoption in the UK companies. Attitudinal
capability (AC) for first-order e-business adoption construct revealed a strong and
significant standardised value g310 0.75 with c.r. 2.95. This supports the academic
view that successful e-business adoption require a dedicated individual (usually the
Chief Executive Office (CEO) paying attention to a multitude of good management
practices to develop right attitudes for his/her employees to adopt organisational
change (Tidd et al., 2001). Technology adoption (TA) and organisation capability
(OC) also observed to be a significant and strong determination of e-business
implementation for adopter of e-business in sample with g38 0.83: c.r. 4.12;
g39 0.75: c.r. fixed.
Adopter of the successful e-business in the UK also takes into consideration the
importance of having a well defined supply chain strategy. However, supply chain
strategy construct did not directly contribute towards the business performance. Some
of the reasons may due to the misalignment supply chain incentive that characterizes
the lack of consistent incentives among supply chain partners such as objectives
among the supply chain partners and lack of shared visions (and risks) between the
supply chain partners (Piplani and Fu, 2005). This is further support by Koh and
Simpson (2005) article which stated that:
. . . the new economy entails e-business and knowledge-driven enterprises that could lead to
more responsive and agile methods to deal with change and uncertainty in dynamic
manufacturing environments.

They further stated the importance of responsiveness and agility especially for
manufacturing enterprises to achieve key competitive advantages. Nevertheless, the
results in Figure 4 show that there is a strong correlation between e-business adoption
and supply chain strategy. This implies that adopters of e-business in UK may already
been on a supply chain integration maturity stage before embarking on the e-business
journey.
The theoretical model illustrated in this paper has identified and confirmed that a
successful e-business adoption require a comprehensive business strategy along with
supply chain and e-business strategy; developed on the embedded e-technology as well
as considering organisational and attitudinal factors as identified by Stevens (1989). It
also validates our claims that in order to adopt a successful e-business, it is vital to
assess e-business readiness for the firm. Where some previous studies have focused on
which dimensions are important in supply chain strategies and business strategies
(Gattorna, 2002), our model measures the influence of e-business adoption in order to
become a successful e-business firm. The challenge for the companies is to move up to
a whole new level of performance the second wave on the back of e-business
e-procurement, e-fulfilment, and shared services that will lead to Internet-enabled
supply chain (Gattorna, 2002).

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Non-adopter of e-business
As for as the non-adopter of e-business group, only two path coefficients (H1 and H2)
provide positive and significant results. Standardize path coefficient business strategy
construct (H1; g11 0.27, c.r. 2.02) and supply chain strategy construct (H2;
g21 0.45, c.r. 3.05) provide strong link to the business performance. However, as
suspected, e-business adoption construct (H3; g31 0.13, c.r. 0.84) shows a positive
but insignificant value, which means that e-business adoption strategy employed by
the non-adopters is either non-existent or negatively contribute towards the business
performance. However, the analysis validates fully the conceptual and theoretical
construct of the e-business model.
We also studied the factor correlation results for the both groups. In comparison
with adopter of e-business group, as expected, only correlation between supply chain
strategy and business strategy (H4) provide a positive correlation with standardise
value of f12 0.45 and c.r. 2.70. Meanwhile, a low and non-significant correlation
are recorded between supply chain strategy and e-business adoption (H5; f23 0.09
and c.r. 0.43) and business strategy and e-business adoption (H6; f13 0.18 and
c.r. 0.94). There were no significant causal paths found linking TA, OC and AC to
e-business adoption construct (Table VII). Perhaps for this group the main barrier to
e-business adoption could be unwillingness of mangers to be responsible for
technological change (Kalakota and Robinson, 2001), complexity of available
e-commerce services (Bodorick et al., 2002) and lack of required skills and
knowledge (Lawson et al., 2003).
It is not surprising that the business strategy and supply chain capabilities are the
main contributor for business performance for non-adopter of e-business. It is apparent
that for organisation to be successful, SCM need to be given a higher level of strategic
importance (Maede, 1998; Philip and Pedersen, 1997). The result also support the view
that organizations who articulate their strategic objectives and plans relating to SCM
are likely to perceive business benefits from traditional brick and mortar businesses
(Figure 5).
Business
Performance

Significant
Not - Significant

Business
Strategy

Figure 5.
Summary of findings for
non-adopter of e-business
describing strength of
business capability
constructs with business
performance

3
Supply Chain
Strategy

E-Business
Adoption

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Managerial implications
This study offers several implications for academics and practitioners. Firstly, the
proposed conceptual model would be able to provide an efficient framework to assess
the firms readiness for Internet adoption in hope to reap the e-business benefits. This
EBC framework has included a number of e-business requirements that need to be
taken into consideration within the firm, and includes business strategy, supply chain
and e-business adoption strategy which each of the factor describe the needs of
considering technology organization and technology dimensions. These specific
factors of indicator will be able to measure the readiness of firm for emerging
e-business. In addition, these indicators also allow manages to identify which of the
factors that is lack of strategic implementation when considering e-business adoption.
Therefore, managers will be able to evaluate the readiness for current and future
e-business development within their firms and how they must enhance technology
organization and technology dimensions witning each of the EBC factors to
improve e-business performance.
Secondly, the results also suggest that firms belong non-adopter of e-business group
must pay attention to their technological, organisational, and human capability for
improving e-business performance. These capabilities are critical when firms are
planning or at the very initial stage of e-business adoption, where most processes are at
low integration level and full of manual work (Hsin and Shaw, 2005). By doing top
managers will be encourage to initiate in developing a financial and human plan to
accommodate the appropriate resources and to handle the complexity of IT
infrastructure. Firms that intend to venture into e-business would need to consider on
issues such as IT promotion and training in order to overcome the organisation
barriers by offering training and knowledge for system integration, standards
development, and process automation as well as to overcome possible IT resistance
(Hsin and Shaw, 2005).
Thirdly, the results obtain from adopter of e-business groups from the UK indicated
that the significant drives for adopting e-business in their firms contributed much to
business partners willingness (people dimension), technology capability and
empowerment (organisational dimension). The results would suggest that in order to
improve supply chain readiness for e-business management maybe find the needs to
introduce support programs to increase partner willingness and offering initiative such
as training, on-site assistance, and financial resources to improve partner capability
(Barua et al., 2002; Hsin-Lu and Shin-Horng, 2005). Such initiatives in combination with
suitable market power enable firms to have a higher chance of e-business success. The
result also highlighted the crucial role of collaboration readiness as the firm starts to
implement more advanced e-business IT.
Conclusion
This study has tested a conceptual model that advanced the theoretical basis of the
technology- organization-people framework. Our results have demonstrated the
usefulness of this conceptual model by identifying factors affecting business
performance of a firm. We have developed several multi-item constructs, including
e-business adoption, business strategy and SCM strategy. These instruments have
passed various reliability and validity tests, and could be used in future studies. Third,
grounded in theory and empirical data, we have demonstrated varying relationships

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between the technology organization people factors and e-business value. These
associations may useful for other researchers to develop their own models and
hypotheses (Table VIII).
Firms that positioned themselves in the new economy by embracing Internet
technology will be expected to have a greater degree of success than traditional firms
(Leadbeater, 2000). This paper has promoted the need to understand how internal
(technology and organization) and external (people) factors encompass in business
strategy, supply chain strategy affecting on e-business adoption and development.
The theoretical model illustrated in this paper has identified and confirmed that a
successful e-business adoption require a comprehensive business strategy along with
supply chain and e-business strategy; developed on the embedded e-technology as well as
considering organisational and attitudinal factors as identified by Stevens (1989). Results
show that the adopter of the successful e-business in the UK takes into consideration the
importance of having a well-defined supply chain strategy. However, supply chain strategy
construct did not directly contribute towards the business performance. Comparisons
using the structural model indicate non-adopter of e-business lack appropriate e-business
strategy for a successful e-business implementation in their companies.
The research method used in this paper has its merits and limitations. The first
strength lied with the use of SEM where by this technique assess the theoretical and
measurement models. This approach requires a whole set of validation rules to be applied
and thereby provide a greater confidence in the results and conclusions (Croteau et al.,
2001). The measurement model is tested for unidimensionality, reliability, convergent and

Hypothesis

Description

H1

Appropriate implementation of business strategy

in consideration with TOP dimensions is a
significant determinant of perceived business
performance
The content of supply chain strategy in
consideration with TOP dimensions is a
significant determinant of perceived business
performance
Strategic e-business adoption in consideration
with TOP dimensions is a significant
determinant of perceived business performance
Successful e-business implementation is the
result of a positive reciprocal effect of business
strategy and supply chain strategy in
consideration with TOP dimensions
Successful of e-business adoption is the result of
a positive reciprocal effect of supply chain strategy
and e-business adoption strategy in consideration
with TOP dimensions
Successful e-business implementation is the
result of a positive reciprocal effect of business
strategy and e-business adoption strategy in
consideration with TOP dimensions

H2

H3
H4

H5

Table VIII.
Hypotheses result for the
e-business adopter and
non-adopter groups

H6

Sub-sample groups
Adopter

Non-adopter

Supported

Supported

Not supported

Supported

Supported

Not supported

Supported

Supported

Supported

Not supported

Supported

Not supported

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discriminant validity. From methodological point of view SPSS AMOS 4.0, compared with
the other SEM software, is a powerful tool that eases the statistical analysis of the four
second-order constructs (whereby each consists of three first-order constructs,
respectively). The use of the survey approach facilitates a greater number of variables
compare with other methods such as case study or experiments (Galliers, 1985).
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services industry, Journal of Management Information Systems, Vol. 21 No. 1, pp. 17-56.
Corresponding author
Kay Hooi Keoy can be contacted at: k.h.keoy@bradford.ac.uk

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