Application capability of e-business, e-business success, and organizational performance: Empirical evidence from China

Abstract

Previous research efforts suggested that firms' overall e-business success tends to deliver greater organizational performance. However, few researchers examined how a firm leverages e-business investment to gain greater e-business success. Even fewer researchers investigated the different impacts of different levels of e-business success on organizational performance. This paper addresses two questions: (1) what capabilities influence a firms' ability to build e-business success and enjoy greater organizational performance, where firm-level e-business success is measured by e-business service capability and IT-enabled collaborative advantage; and (2) whether the two ways of measuring e-business success result in different impacts on organizational performance? We propose that a firm's application capability of e-business involving systems development and systems usage is positively related to a firm's overall e-business success, thus having a positive impact on organizational performance. We use survey data from 152 Chinese manufacturing firms and their B2B e-business systems participants to test our theoretical hypotheses and proposed model. The findings suggest that both systems development and systems usage have significant and positive impacts on e-business service capability, which in turn leads to greater IT-enabled collaborative advantage. This finding could be translated into the important role of a firm's application capability of e-business on e-business success. It is concluded that the application capability of e-business acts as one of the main mechanisms through which the e-business investment leads to greater e-business success. We also find that IT-enabled collaborative advantage, compared with e-business service capability, has a more significant and greater impact on organizational performance. This study extends prior e-business success research by opening up the ‘black box’ between a firm's e-business investment and its e-business success, and by distinguishing the relative impacts of e-business service capability versus IT-enabled collaborative advantage on organizational performance. Another contribution of this study is that the effect of context factors (firm size, industry, and system duration) in developing country on our proposed model.