IMCS 17,2. Govindan Marthandan Faculty of Management, Multimedia University, Cyberjaya, Malaysia

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1 The current issue and full text archive of this journal is available at IMCS 17,2 166 Received 24 November 2008 Revised 28 December 2008 Acceted 14 January 2009 E-commerce usage and business erformance in the Malaysian tourism sector: emirical analysis Mohamed Intan Salwani Faculty of Accountancy, Universiti Teknologi MARA Malaysia, Shah Alam, Malaysia Govindan Marthandan Faculty of Management, Multimedia University, Cyberjaya, Malaysia Mohd Daud Norzaidi Faculty of Business Management, Universiti Teknologi MARA Malaysia, Shah Alam, Malaysia, and Siong Choy Chong Princial and Chairman s Office, Putra International College, Ayer Keroh, Malaysia Information Management & Comuter Security Vol. 17 No. 2, q Emerald Grou Publishing Limited DOI / Abstract Purose Based uon the E-VALUE model develoed, this aer aims to investigate the imact of e-commerce usage on business erformance in the tourism sector. Design/methodology/aroach A cross-sectional survey is carried out on 165 Malaysian firms involved in the tourism sector (hotels, resorts, and hositals engaged in health tourism) through the use of a structured questionnaire. Findings The structural equation modeling results indicate that technology cometency, firm size, firm scoe, web-technology investment, ressure intensity, and back-end usage have significant influence on e-commerce usage. Among these variables, back-end integration is found to function as a mediator. E-commerce exerience (in years) is found to moderate the relationshi between e-commerce usage and business erformance. Research limitations/imlications The aer focuses on the tourism sector in Malaysia and concentrates only on the management ersective of e-commerce adotion. Practical imlications The results rovide insights to the Malaysian tourism sector and other organizations of similar structures of how they could imrove uon their e-commerce adotion and/or usage for imroved business erformance. Originality/value This aer is erhas one of the first to investigate e-commerce usage in the tourism sector using a comrehensive set of variables through an interactive, comrehensive and multi-dimensional theoretical model (the E-VALUE model) in investigating their influences on business erformance. Keywords Electronic commerce, Business erformance, Tourism, Malaysia Paer tye Research aer Introduction It is widely acknowledged that the emergence of information and communications technology (ICT) have contributed to the raid growth of electronic marketlace (Norzaidi et al., 2007). With the strong waves of globalization and liberalization across

2 the world, ICT, articularly the internet, is believed to be the most cost-efficient tool to hel brick and mortar comanies gain bigger markets and the ability to comete with other rival organizations in attracting customers to their roducts, services and information (Tan et al., 2009). The favourable characteristics inherent in the internet such as seed, user-friendliness, low cost and wide accessibility have allowed electronic commerce (e-commerce) to be increasingly diffused globally, bringing countries together into a global networked economy (Gibbs and Kraemer, 2004). It is for these reasons that e-commerce has been widely regarded as a new frontier for business environment and that businesses all over the globe are attemting to shift to e-commerce to achieve their business objectives (Chandran et al., 2001) in terms of ursuing efficiency and quality (Mougayar, 1998). There is, however, consensus that many organizations in general, irresective of size, have not been able to realize the full otential of the values brought about by e-commerce. In a develoing country such as Malaysia, for instance, enterrise attitude has been identified as a major hindrance to e-commerce involvement. It has been found that Malaysian comanies tend to be followers rather than ioneers in e-commerce investment because many of them fear failure to invest in such an unknown sace (Ng, 2000). Further, lack of success stories by click and mortar comanies have been identified as a reason why traditional businesses are reluctant to embark in e-commerce investments. In a study on e-commerce stimuli and ractices among the small and medium enterrises (SMEs) in Malaysia, Ainin and Noor Ismawati (2003) rovide emirical suort where 79 ercent of the resondents cited not many success stories of e-commerce as the main barrier to e-commerce adotion, followed by not having knowledge in e-commerce (72.6 ercent), low internet access among buyers (72.2 ercent), and lack of knowledge on the otential of e-commerce (69.6 ercent). This roblem is also revalent among larger organizations in different arts of the world where most of them are still at the infancy stage of ositioning themselves to exloit business oortunities enabled by the internet (Zhu, 2004). Notwithstanding, it is believed that e-commerce has the otential to create value for different tyes of firms across different sectors, including the tourism industry. Being a sector that is largely service-based, e-commerce can serve as a unique tool for the tourism industry to enhance their services, which could well determine their value creation and business erformance. This in turn could ensure the success of e-commerce imlementation. However, the involvement of the firms in e-commerce in Malaysia is still in its formative years. Chow (2000) found that only 20.5 ercent of the firms involved in hositality services are involved in e-commerce due to the lack of success stories and information on the otential imact of e-commerce imlementation on firms erformance. It is therefore imerative to further conduct research to understand the issues and otential of e-commerce imlementation on the erformance of the firms in the tourism industry. The literature indicates that relevant studies conducted on this industry are scarce (Intan Salwani et al., 2008). Further, while many efforts have been devoted to studying e-commerce at the re-adotion stage (initiation) and its formal adotion (Norhayati, 2000), very little attention has been aid to the ost-adotion issues (Zhu and Kraemer, 2005), esecially in the develoing countries. While similar reasons have been advanced of why organizations in general still struggle with e-commerce imlementation, the theories develoed articularly in the context of mature markets The Malaysian tourism sector 167

3 IMCS 17,2 168 may not be suitable to the develoing economies (Austin, 1990). As such, in order to fully realize the value of e-commerce investment and usage in the tourism sector, a full-scale deloyment at the ost-adotion stage and its imact on business erformance esecially in a develoing economy such as Malaysia stand out as an imortant research toic. Secifically, this aer aims to fulfill the following objectives:. to advance our understanding on the extent to which technological, organizational and environmental factors influence the level of e-commerce usage and business erformance by considering the direct and indirect effects;. to rovide inut on how e-commerce caabilities (front-end functionalities and back-end integration), through usage, will influence business erformance; and. to rovide information on the relationshi between level of e-commerce usage and business erformance by considering the effects of moderating variables (i.e. e-commerce exerience). To accomlish the above research objectives, this research uses an interactive, comrehensive and multi-dimensional theoretical model (E-VALUE model) to fill the gas of knowledge in the literature. The findings of this aer serve to not only inform decisions on the value of e-commerce but also to furnish useful guides to the organizations in the tourism sector as well as firms of similar structure on how e-commerce can be best deloyed for imroved business erformance. The findings also rovide useful information to related bodies such as the regulatory bodies and industrial and/or business associations. The rest of the aer is organized as follows. The next section reviews the technological, organizational, and environmental (TOE) model and the resource-based view (RBV) theory. The resulting model, i.e. the E-VALUE model, acts as the theoretical foundations of this aer. The research framework and a series of testable hyotheses are resented next before the methodology is rovided. The data collected were then analyzed and interreted. The imlications are discussed and recommendations are rovided before concluding the aer. Literature review E-commerce is an unfolding henomenon in view of technological advancement. From the research ersective, technological innovations have led to the develoment of various theories related to the diffusion of information technology (IT) and information systems (IS). A review of literature indicates that there is a rich stream of research focusing on technology diffusion on individuals and organizations (Cooer and Zmud, 1990; Rogers, 1962; Tornatzky and Fleischer, 1990). Some of the oular areas studied were on adotion and/or usage of different tyes of technologies such as electronic fund transfer (EFT), electronic data interchange (EDI), enterrise resource lanning, adotion drivers, adotion barriers or hindrance, and many others. In the late 1990s, however, the focus seems to shift to e-commerce adotion. In line with the objectives of this research, the following sub-sections discuss one of the more oular models, i.e. the TOE model and the corresonding RBV theory in brief. Technological, organizational and environmental (TOE) model Realizing the imortance of technology adotion, Tornatzky and Fleischer (1990) develoed the TOE model to evaluate technology adotion. The TOE model is consistent with the theory of innovation diffusion in organizations by Rogers (1983).

4 The model identifies three asects of firm s characteristics that influence the rocess of adoting, imlementing and using technological innovations (DiPietro et al., 1990; Robertson, 2005; Tornatzky and Fleischer, 1990) which is exlained below: (1) Technological context. Technological context describes both existing and new technologies relevant to the firm such as rior technology usage, and number of comuters in the firm which determines the ability of the firm to move to e-commerce and other technology initiatives. (2) Organizational context. Organizational context refers to descritive measures related to organizations such as firm scoe, firm size and managerial beliefs. (3) Environmental context. Environmental context focuses on areas which the firm conducts its business oerations, with the riority given to external factors influencing the industry that have significant imacts on the firm such as government incentives and regulations. The Malaysian tourism sector 169 According to DePietro et al. (1990), the three suggested elements interact with each other in influencing technology adotion decisions. One can safely conclude by drawing uon rior theoretical and emirical evidences that the TOE model has been a oular foundational model used for studying the drivers contributing to successful e-commerce initiatives from the interactions of the three characteristics, articularly in examining issues such as adotion, imlementation and usage. Table I summarizes some of the more oular studies in chronological order. Dedrick and West (2003), however, believe that the TOE framework is just a taxonomy for categorizing variables and does not reresent an integrated concetual framework or a well develoed theory. However, they agree that the model is a useful analytical tool to distinguish between inherent qualities of an innovation itself and the motivations, caabilities, and broader environmental context of adoting organizations. As e-commerce has been viewed as a global technological innovation (Kraemer et al., 2006), more meaningful insights on the whole rocess of e-commerce diffusion can be generated if the TOE model is used to study e-commerce adotion and value creation in conjunction with other theories or model. To achieve this, Zhu and Kraemer (2005) combined the TOE model with the RBV theory to study the ost-adotion variations in usage and value of e-business. As the drivers of e-commerce are categorized into three characteristics; technology, organization, and environment, the value creation of e-commerce is analyzed from a resource-based ersective that stems from the unique characteristics of the internet, i.e. the front-end functionalities and back-end integration (Zhu, 2004). The next sub-section discusses the RBV theory and relates it to the current research. Resource-based view (RBV) theory The RBV theory has been develoed to facilitate the understanding of how organizations achieve sustainable cometitive advantages (Caldeira and Ward, 2003). Rooted in the strategic management literature, the RBV theory focuses on the idea of costly-to-coy attributes of the firm as sources of business returns and as a means to achieve suerior erformance and cometitive advantage (Conner, 1991). The theory argues that sustained cometitive advantage is generated by the unique bundle of resources at the core of the firm (Conner and Prahalad, 1996) where business owners build their businesses from the resources and caabilities that they currently ossess or acquired (Dollinger, 1999). In general, the RBV theory addresses the central issue of

5 IMCS 17,2 170 Table I. Summary of revious studies that intersect with TOE model Theoretical framework Study Constructs Technology Organization Environment Zhu et al. (2006) Technological context: (technology readiness, technology integration) Innovation assimilation Organizational context: (size, global scoe, managerial obstacles) Environmental context: (cometition intensity, regulatory environment) Robertson (2005) Technological context: (discontinuity of services, comatibility integration, Critical drivers in B2B benefits of new technology, EDI, asset secificity) e-commerce Organizational context: (readiness, decision makers IT knowledge, managerial structure) Environmental context: (cometitive environment, relationshi with business artners, industry dynamics, external resources, industry suort, institutional factors) Zhu and Kraemer (2005) Technological context: (technology cometence) Usage and value of Organizational context: (size, international scoe, financial commitment) e-business Environmental context: (cometitive ressure, regulatory suort) Zhu et al. (2004) Technological context: (technology readiness) IT ayoff in e-business Organizational context: (firm size, firm scoe) environments Environmental context: (cometition, government regulation) Kuan and Chau (2001) Technological context: (erceived direct benefits) EDI adotion Organizational context: (erceived financial cost, erceived technical cometence) Environmental context: (erceived industry ressure, erceived government ressure) Thong (1999) CEO characteristics: (CEOs innovativeness and IS knowledge) IS adotion IS characteristics: (relative advantage/comatibility, comlexity) Organizational characteristics: (business size, emloyees IS knowledge) Environmental characteristics

6 how suerior erformance can be attained relative to other firms in the same market and osits that suerior erformance results from acquiring and exloiting unique resources of the firm (Saffu, 2004). Prior IS literature indicates that the RBV theory has been used to analyze IT caabilities (Mata et al., 1995) and to exlain how the business value of IT resides more in the organization s skills to leverage on IT as comared to the technology itself (Soh and Markus, 1995). It shows that the business value of IT deends on the extent to which IT is used in the key activities in the firm s value chain (Zhu and Kraemer, 2005). In relation to e-commerce innovation, the RBV theory is used to demonstrate how firms leverage their investments in e-commerce to create unique internet-enabled caabilities that determines a firm s overall e-commerce effectiveness (Zhu, 2004). Although some eole might argue that e-commerce technologies are already available in the software and hardware market (e.g. EDI and EFT) for which the investment in e-commerce will not create value, there is a counterargument that regardless of how commodity-like the technology is, the architecture that removes the barriers of system incomatibility and makes it ossible to build a cororate latform for launching e-business alications is never a commodity (Keen, 1991). The costly-to-coy attributes of e-commerce caabilities are tightly connected to the resource base and embedded in the business rocess of the firms but the degree varies as the firms themselves are unique with resect to their resource endowments (Smith et al., 2001). As such, the value creation through information sharing and the availability of online communities will lead to erformance advantages in e-commerce (Lederer et al., 2001). Looking at the alication of the RBV theory in discussing e-commerce usage and value creation, Zhu and Kraemer (2005) attemt to integrate the TOE model and the RBV theory as their concetual model to assess the use and value of e-business in organizations. By investigating the e-business functionalities that make use of the unique characteristics of the internet, which consequently enable value creation, they osit that e-business leverages the unique characteristics of the internet to imrove business erformance. In this case, e-business caabilities are classified as front-end functionalities and back-end integration. The front-end functionalities refer to the medium in which customers interact with the marketsace. It refers to the seller s ortal, electronic catalogs, a shoing cart, a search engine and a ayment gateway. On the other hand, activities related to order aggregation and fulfillment, inventory management, urchases from sulier, ayment rocessing, ackaging, and delivery are known as back-end integration of the business (Turban et al., 2006). By alying the RBV theory in looking at the ost-adotion variations in usage and value of e-business, Zhu and Kraemer (2005) found that both front-end functionalities and back-end integration contribute to value creation of e-business, but back-end integration has a much stronger imact. The following sub-section discusses the E-VALUE model which is a result of combination of the TOE model and the RBV theory. The Malaysian tourism sector 171 E-VALUE model the theoretical foundation of the study As the e-commerce technology is increasingly attracting the attention of researchers and managers, the literature on e-commerce remains fragmented and ambiguous esecially from organizational ersectives, articularly on e-commerce usage and value creation (Govindarajulu et al., 2004). The absence of an integrated theoretical framework has led to a fractured research stream with many simultaneous but

7 IMCS 17,2 172 non-overlaing conversations (Chan, 2000). There is thus a need to develo a concetual model that is not based only on theory, but rooted in one that is inherently suitable for analyzing the comlexity of IT and firm erformance (Melville et al., 2004). This issue is merely solved by Zhu and Kraemer (2005) who develoed an integrated, multi-dimensional model of e-business use and value which combined the TOE model and RBV theory. Although the efforts by Zhu and Kraemer (2005) solved some missing link in the literature, there are at least four imrovements that can be made on the integrated model as shown in Table II. The combination of Zhu and Kraemer s (2005) model with the imrovements shown in Table II lead to the develoment of an interactive, comrehensive, and multi-dimensional theoretical model known as E-VALUE model (Figure 1) which is used in this aer, to further examine the imact of e-commerce usage on business erformance. In short, in roosing the secific constructs within the E-VALUE model, this aer considers all significant factors found in rior studies such as the re- and ost-adotion of e-commerce usage, direct and indirect effects, and effect of the moderator variable. Besides, combining the TOE model with the RBV theory, this aer also includes an e-business scorecard which contains elements from IT and accounting ersectives in order to rovide a comrehensive and multi-dimensional research model. Based on Figure 1 and the research objectives above, the following section resents the hyotheses constructed for this aer. Table II. Proosed imrovements to Zhu and Kraemer s (2005) model Gas existed in Zhu and Kraemer s (2005) model 1. The absence of imortant variables such as managerial beliefs and ressure intensity (as suggested in the literature) that could have significant influence on e-commerce usage 2. In the RBV theory, front-end functionalities and back-end integration were regressed directly to e-business value. Both variables should be regressed towards e-commerce usage because front-end functionalities and back-end integration are the redictors of e-business usage 3. The absence of a moderator variable which could have a strong contingent effect on the relationshi between e-commerce usage and business erformance 4. The measurement of business erformance is not comrehensive enough from the accounting oint of view. The model only focused on three factors; the imact of sales, imact on internal oerations, and imact on rocurement. Other imortant dimensions and attributes were ignored Suggested imrovements to the roosed model 1. The inclusion of two new variables: managerial beliefs and ressure intensity 2. Front-end functionalities and back-end integration were regressed towards business erformance 3. EC exerience is included as a moderator variable to test whether its inclusion could modify the original relationshi between the indeendent and the deendent variables 4. Business erformance is measured based on the four ersectives of balanced scorecard as suggested by Kalan and Norton (1992). However, with some modifications in the measurement attributes to suit the needs of erformance measurement from technological and accounting oints of view, this study introduces e-commerce scorecard as a comrehensive and multi-dimensional erformance measurement tool

8 Technological context Technology cometence H1 The Malaysian tourism sector Organizational context Firm size H2 H8 Front-end functionalities Back-end integration H Firm scoe H3 H9 Web-technology investment H4 H5 E-commerce usage H11 Business erformance Managerial beliefs H12 H6 Environmental context Regulatory suort Pressure intensity H7 EC exerience Mediator Moderator Figure 1. E-VALUE model Hyotheses develoment Technological cometence and e-commerce usage Many researchers found technological resources an imortant factor for successful IS adotion (Crook and Kumar, 1998; Kuan and Chau, 2001), secifically as an enabling backbone of e-business service (Robertson, 2005). The resources consist of infrastructure, human resources and knowledge (Bharadwaj, 2000; Mata et al., 1995) which could well determine the technological cometency of the firm. In this aer, technological cometency refers to the technological infrastructure and IT ersonnel that enable the develoment and imlementation of e-commerce. The infrastructure establishes a latform on which e-business can be develoed. With the availability of infrastructure, the IT ersonnel function by using their knowledge and skills to develo e-commerce alications (Zhu and Kraemer, 2005). Realizing the imortance of technology cometence towards e-commerce usage, H1 is develoed to test the relationshi of technology cometence and e-commerce usage: H1. Technology cometence significantly exlains the variance in e-commerce usage. Firm size and e-commerce usage Firm size is one of the most commonly studied factors in the diffusion of innovation literature (Damanour, 1991; Zhu et al., 2004). While increasing the efficiency of business rocesses such as reducing rocessing costs related to commercial transactions, it is also a major objective that drives comanies to imlement e-commerce irregardless of the size-bands (The Euroean E-Business Reort, 2004). Large comanies are more likely to benefit from the smaller ones in view of the higher fixed costs for technology imlementation and maintenance. This is not difficult to understand as firm size reresents several imortant asects of the organization such as resource availability, decision agility and rior technology exerience (Zhu and Kraemer, 2005). It is therefore

9 IMCS 17,2 174 osited in this aer that size (as roxied by the number of emloyees) has a significant effect on firm s e-commerce usage: H2. Firm size significantly exlains the variance in e-commerce usage. Firm scoe and e-commerce usage Firm scoe is another commonly studied factor in the diffusion of technology literature. It refers to the geograhical extent of the firm s oeration and its trading globalization. Dewan and Kraemer (2000) and Hitt (1999) roose that greater scoe leads to greater demand of IT. This is because e-commerce eliminates the geograhical boundaries of doing businesses (Khan and Motiwalla, 2002). With e-commerce, firms are now connected to the global market which rovides oortunities to widen their market size and reach. Based on these arguments, H3 is constructed to test the relationshi between firm scoe and e-commerce usage: H3. Firm scoe significantly exlains the variance in e-commerce usage. Web technology investment cost and e-commerce usage The findings on the extent to which web technology investment influences e-commerce usage have been mixed and inconclusive. Caldeira and Ward (2003) argue that desite high IT investments, not all firms are successful in innovating an effective IT caability. Zhu and Kraemer (2005) however, believe that higher investment on e-business develoment lead to greater extent of usage. The degree of investment normally relates to what extent the to management believes that e-commerce leads to firm s value creation. It relates to the financial commitment of the firms in terms of their willingness to invest in hardware, software, system integration, and emloyee training. As such, H4 is roosed to identify the nature of relationshi between costs of web technology investment and e-commerce usage: H4. Web technology investment costs significantly exlain the variance in e-commerce usage. Managerial beliefs and e-commerce usage Many studies have singled out to management suort and leadershi as the most critical factor for successful imlementation of technology innovation and e-commerce usage (Gould, 2001; Igbaria et al., 1998; Quinn et al., 1997). In this aer, managerial beliefs refer to how to management erceives and acts on e-commerce technology innovation. This relates to their beliefs on the ease of use and usefulness of e-commerce investment in creating values for the firms. To test whether managerial beliefs have significant effect on e-commerce usage, H5 is develoed: H5. Managerial beliefs significantly exlain the variance in e-commerce usage. Regulatory suort and e-commerce usage The develoment of digital technology and the emergence of new roducts and services require formulation of a new olicy and regulatory framework. This is because without arallel develoment of laws, olicies and strategic directions by government can result in abuses and discourages the adotion and use of e-commerce (Dasguta et al., 1999; Zhu and Kraemer, 2005). For e-commerce to flourish, the legal

10 framework needs to facilitate the use and access to basic infrastructure and technology (Country Progress Reort, 2005). Besides, regulatory framework, government suort in terms of roviding incentives would facilitate e-commerce usage. To test whether regulatory suort rovided by the Malaysian government affects e-commerce usage, H6 is roosed: H6. Regulatory suort significantly exlains the variance in e-commerce usage. Adotion intention and e-commerce usage Sociological research on threshold models suggest that decisions to engage in a articular behaviour deends on erceived number of similar others in an environment that have already done likewise (Krassa, 1988). According to Windrum and Berranger (2003), factors that influence firms decisions to invest in e-commerce can be classified into two, internal drivers and external drivers. Imroved knowledge-sharing, costs reduction, and increased efficiency are some of the internal drivers to e-commerce adotion intention (Daniel and Wilson, 2002; Martin, 2001) while customer ressures, cometitive ressures and key suliers make u the external drivers (Martin, 2001; Quayle, 2002). To identify whether adotion intention has significant effect on e-commerce usage, H7 is formulated: H7. Adotion intention significantly exlains the variance in e-commerce usage. The Malaysian tourism sector 175 E-commerce usage, front-end functionalities, and business erformance Customers interact in the digital market via a front-end, defined as the ortion of an e-seller s business rocess through which customers interact (Turban and King, 2003). In simle words, front-end refers to the seller s web site, an interface that hels business organizations to interact directly with customers and to outerform their cometitors. Front-end functionalities have been identified as a critical success factor of e-commerce (Wen et al., 2003). Interactive technology such as live chat, interactive catalogs and three dimensional modeling gives online buyers more control over their shoing exerience and draws them deeer into the buying rocess. Front-end functionalities hel firms to deliver real-time roduct information, offer customization and facilitate customers via online account management which lead to imroving transactional efficiencies and exanding the existing channel (Zhu and Kraemer, 2002). This would hel firms to imrove their business erformance. To test whether front-end functionalities create values in e-commerce, H8 is develoed: H8. Through e-commerce usage, front-end functionalities significantly exlain the variance in business erformance. E-commerce usage, back-end integration, and business erformance Turban and King (2003) define back-end as the activities that suort online order taking and fulfillment, inventory management, urchases from suliers, ayment rocessing, ackaging, and delivery. Zhu and Kraemer (2005) discover that the rocess of back-end integration which is more difficult to imitate, have stronger imact on e-business erformance comared to front-end functionalities. Since not much focus was given on how back-end integration affects business erformance in rior literature, H9 is constructed to test the relationshi between back-end integration and business erformance:

11 IMCS 17,2 176 H9. Through e-commerce usage, back-end integration significantly exlains the variance in business erformance. As back-end integration hels to fit the transactions offered by front-end systems by linking disarate systems and fragmented resources which hel to facilitate order fulfillment and logistics management with suliers and distributors (Zhu, 2004), thus, H10 is formulated to test the relationshi between front-end functionalities and backend integration: H10. Front-end functionality has significant influence on the level of back-end integration. E-commerce usage and business erformance The ultimate goal of using e-commerce is to imrove business erformance (Zhu and Kraemer, 2005). Clayton and Criscuolo (2002) demonstrate firms that use e-commerce are more likely to assess their innovations as having high ositive imacts on firm erformance than those without e-commerce. Similarly, Khan and Motiwalla (2002) in their aer on the influence of e-commerce on cororate erformance in the USA found that from 44 comanies under study, 64 ercent of them found favourable e-commerce imact on return on investments. There is so far no evidence on the extent of how e-commerce usage influences business erformance in the Malaysian tourism industry. To answer this question, H11 is formulated: H11. E-commerce usage significantly exlains the variance in business erformance. In this aer, a moderating variable is roosed. It is osited that exerience of imlementing e-commerce will have a strong contingent effect on the relationshi between e-commerce usage and business erformance. This makes u H12: H12. The relationshi between e-commerce usage and business erformance is significantly moderated by e-commerce exerience (years). The next section exlains the methodology used in this aer. Methodology Samling rocedures Firms involved in online tourism services such as hotels, resorts, and hositals engaging in health tourism constitute the oulation of interest. These firms were chosen because of their high degree of usage of technological equiments such as comuters and more imortantly, their involvement in e-commerce initiatives. As of June 2006, there are about 456 members registered with the Malaysian Virtual Tourism Portal, which largely consists of hotels and resorts. The Directory of the Association of Private Hositals of Malaysia reveals that there are 35 hositals involved in health tourism as of Setember The oulation is thus made u of 491 comanies. Based on the oulation of interest, a samle was selected using the stratified random samling method. Sekaran (2003) considers this the most efficient samling design when differentiated information is needed from the various strata within the oulation, with the aim to avoid members of oulation being significantly under or over reresented (Hussey and Hussey, 1997). The otimum samle size was

12 determined based on the samling table rovided by Sekaran (1992) where 217 samles are deemed adequate for a oulation of 491. Data collection and analysis rocedures A set of structured questionnaires is used for rimary data collection. Only one questionnaire is distributed to each organization through the resective human resource or ublic relations managers to be given to the aroriate higher-level ersonnel who is identified to be involved in olicy setting and is well aware of the overall asects and erformance of his or her firm. It is observed that among the ositions of the resondents involved in this aer include the resident, managing director, chief executive officer, chief information officer, chief technology officer, chief oerating officer, chief financial officer, vice resident of information systems, information systems director/manager, business oerations manager, administration manager and/or finance manager. The constructs and number of questions (Table III) are based uon the research objectives and the H12 formulated earlier in this aer in which the sources are largely based on literature reviews, reorts, and documents gathered. Based on the 217 questionnaires sent through mail to the comanies, 165 resonses were received. According to Hussey and Hussey (1997), in order to avoid samle bias, the resonse rate using the mail distribution method should be more than 10 ercent. In this research, the resonse rate of 33.6 ercent (165 out of 491 comanies) indicates that samle bias was avoided and the resonses received reresent the oulation adequately. The data were coded and run using the Statistical Package for Social Sciences version and Analysis Moment of Structure Grahics version 5.0. The main data analysis involved the use of the structural equation modeling (SEM) technique. SEM is noted as a more owerful data analyzing technique that takes into account the modeling of interactions, non-linearity, correlated indeendents, measurement errors, correlated error terms, multile latent indeendents each measured by multile indicators, and one or more latent deendents also each with multile indicators (Garson, 1999). The use of SEM is believed to be able to allow more meaningful and accurate results to be generated. The Malaysian tourism sector 177 Constructs No. of indicators Cronbach s a Technology cometence a Firm scoe Managerial beliefs Web technology costs Regulatory suort Pressure intensity E-commerce usage Front-end functionalities Back-end integration Business erformance Note: a Standardized item a (due to multile-item scales to quantify the construct) Table III. Cronbach s a for each construct

13 IMCS 17,2 178 Construct reliability In this aer, Cronbach s a was erformed on each construct to measure internal consistency reliability for the individual scales and the overall measures. As shown in Table III, all the constructs scored above 0.70 and therefore are considered reliable in all asects. Evaluation of model fit Table IV shows the results of evaluation of the model s fitness. The x 2 /DF value is which is less than the desired cut-off value of 3.0 suggested by Segars and Grover (1993). Moreover, the incremental fit index (IFI) (0.983), comarative fit index (CFI) (0.983), and Tucker-Lewis index (TLI) (0.976) values are considered close to the recommended values. Further, the root mean square error of aroximation (RMSEA) score of shows that the model meets a reasonable error of aroximation with a cut-off of 0.08 (Browne and Cudek, 1993). It can therefore be concluded that the model used in this aer is valid in all asects. The results confirmed that the resonses of the managers generally suort the theoretical and concetual distinctions of all the variables roosed in this aer. As such, the data can be alied for further analyses. The next section resents the results of the H12 tested in this aer. Results Table V resents the results of the H12. Technology cometence, firm scoe, costs of web technology investment, and adotion intention were found to have significant Goodness-of-fit-measure Recommended value Aroximate boundary as a good fit Table IV. Evaluation of model fit Relative x 2, IFI Close to 1.0 is better TLI Close to 1.0 is better CFI Close to 1.0 is better RMSEA, Proosition Causal relationshi b a b Result Table V. Summary of hyothesis testing H1 TC! ECU Suorted H2 SZ! ECU NS Not suorted H3 FS! ECU * Suorted H4 WTI! ECU Suorted H5 MB! ECU NS Not suorted H6 RS! ECU NS Not suorted H7 AI! ECU * Suorted H8 FE! BP NS Not suorted H9 BE! BP Suorted H10 FE! BE * Suorted H11 ECU! BP * Suorted H12 EC exerience on ECU! BP * Suorted Notes: a Regression coefficient; b statistical significant of the test (a ¼ 0.05, *, 0.001)

14 influence on the extent of e-commerce usage. As such, H1, H3, H4, and H7 are suorted. Back-end integration and e-commerce usage were found to significantly exlain the variance in business erformance and therefore, H9 and H11 are suorted. H10 is also suorted where front-end functionality has significant influence on the level of back-end integration. Finally, the relationshi between e-commerce usage and business erformance is significantly moderated by number of years of exerience in e-commerce and therefore, H12 is suorted. No suort was found for H4, in that, firm size (H2), managerial beliefs (H5), regulatory suort (H6) do not significantly exlain the variance in e-commerce usage, while front-end functionalities do not significantly exlain the variance in business erformance (H8). The Malaysian tourism sector 179 Discussion and imlications This research has fulfilled all the three objectives set forth in the aer. It offers significant contributions to the tourism sector not only in terms of the otential of e-commerce usage but also advances knowledge as far as the use of the E-VALUE model is concerned. Grounded in the diffusion of innovation literature which covers the TOE model and the RBV theory, this aer has emirically evaluated the roosed E-VALUE model and roven its alicability in assessing the various issues related to e-commerce. By examining firms with exerience in e-commerce, it rovides a holistic icture of the ost-adotion diffusion and the consequences of e-commerce adotion and usage. The results suggest that usage aears to be determined by adotion intention (H7), followed by costs of investment (H4), firm scoe (H3), and technology cometence (H1) of the firm in chronological order. The findings are consistent with the results of rior studies (Crook and Kumar, 1998; Dewan and Kraemer, 2000; Hitt, 1999; Khan and Motiwalla, 2002; Kuan and Chau, 2001; Robertson, 2005; Windrum and Berranger, 2003; Zhu and Kraemer, 2005). This is not difficult to comrehend as many of the firms involved in tourism in Malaysia have engaged in e-commerce due to their nature of businesses and stakeholders which transcends their geograhical boundary. Further, their key suliers such as hotels, airlines, and harmaceutical comanies have gone online and they require the firms to synchronize their oerations through the use of comuterized and e-commerce systems. These become the external drivers for the other firms which wish to have businesses with the suliers and distributors to follow (Martin, 2001; Quayle, 2002). However, e-commerce imlementation requires a certain amount of investment on web technology in order to fulfill the needs of suliers. For the firms, their ultimate aim is rofit through working with the key suliers and distributors in offering their services to customers. Their investment is imortant in order to get business suort from the suliers. The substantial investments made on e-commerce develoment for the sake of suliers and distributors exlained the adotion intention and utilization by the firms (Zhu and Kraemer, 2005). It is therefore not difficult to understand the relationshi between firm scoe and e-commerce usage. The wider the scoe of the tourism firms activities, the more likely it is for the firms to use e-commerce (Dewan and Kraemer, 2000; Hitt, 1999). These, however, deend very much on the technological cometency of the firms as the availability of necessary technological infrastructure and knowledgeable IT ersonnel can determine the success of the firms e-commerce initiatives and usage (Crook and Kumar, 1998; Kuan and Chau, 2001; Zhu and Kraemer, 2005). The findings suggest that the tourism firms must consistently create value through their willingness to invest in hardware, software, system integration, and emloyee training.

15 IMCS 17,2 180 On the other hand, firm size (H2), managerial beliefs (H5), and regulatory suort (H6 ) do not determine e-commerce usage. This is in contrast with rior studies (Dasguta et al., 1999; Gould, 2001; Igbaria et al., 1998; Quinn et al., 1997; Zhu and Kraemer, 2005). The finding on firm size reaffirms the earlier argument on the riority given to the key suliers across geograhical boundaries. The firms are required to have e-commerce resence in order to meet the requirements of their suliers, be they small or large in size. This also exlains why managerial beliefs are not a significant criterion for e-commerce usage. It seems to indicate that e-commerce use is not a riority to key managers of the firms, but rather meeting the needs and requirements of key suliers that dictate their e-commerce initiatives. The significance of back-end integration to e-commerce usage and business erformance (H9) substantiates this claim. This may also be the reason why the firms erceive regulatory suort rovided by the Malaysian government does not induce e-commerce usage due to the many such laws enacted for the benefits of rotecting customers. The non-significance between front-end functionalities and business erformance (H8) imly that the firms erceive usage of e-commerce as an imortant means of meeting the requirements of their key suliers rather than their customers. This is in contrast with rior studies which insist that front-end functionalities are critical success factors that create values for firms (Wen et al., 2003; Zhu and Kraemer, 2005). The results of which front-end functionalities significantly influence back-end integration suggest that Zhu s (2004) argument is suorted where integration is needed to facilitate the activities of key suliers and distributors rather than towards meeting the requirements and needs of customers. It aears clearly that although front-end functionalities are not seen as imortant as back-end integration, an integration of both is necessary to facilitate e-commerce usage. Consistent with rior studies, the findings also demonstrate that e-commerce exerience significantly moderates the relationshi between e-commerce usage and business erformance (H11 (Clayton and Criscuolo, 2002; Khan and Motiwalla, 2002; Zhu and Kraemer, 2005)). This is roven by the increase of 6.9 ercent in the R 2 value. This imlies that exerience in e-commerce is an imortant factor which determines usage and business erformance (H12). Firms with e-commerce exerience, such as the ones surveyed in this aer, are able to determine what works better and what does not by exloring, exerimenting, examining market and erformance feedback, and learning from the exeriences of others throughout a eriod of time (Kauffman et al., 2002). Their feedback reinforces the imortance of the variables under study and more imortantly, the confirmation on the value creation of e-commerce usage in terms of imroved business erformance. In short, the results suggest that e-commerce usage, back-end integration and exerience in e-commerce, and business erformance are closely linked. These will have imlications on the firms lanning to use or enhance utilization of their e-commerce technology. The results imly that the otential of e-commerce technology and usage towards imroved business erformance should not be overlooked. The firms should realize that the focus is no longer on whether to deloy e-commerce but how to deloy it rofitably. As e-commerce exerience lays a significant role towards imroved firm erformance, younger firms cannot afford to delay their e-commerce develoment and utilization due to the reason of size. In this resect, the government and industry associations can lay a more ivotal role by creating awareness and

16 rendering assistance to the firms. For SMEs, some associations such as the Malaysian Association of Hotels rovide services on develoing online businesses and roviding training to its members. By articiating in these activities, the investment cost can be minimized for greater benefits. For firms that are at the advanced stage of e-commerce imlementation, it is of aramount imortance that they continuously assess the suitability of their e-commerce initiatives. The firms must be willing to invest in technological infrastructure, articularly in hardware, software, and integration of the systems as well as human cometencies by hiring IT ersonnel with aroriate knowledge and skills to develo e-commerce alications. These ersonnel ought to be sent for frequent technical trainings in order to ensure that their knowledge and skills are ket u-to-date. Both key suliers and customers require significant attention from the firms. Many customers are tech-savvy today and they are increasingly relying on transactions made on the internet. As such, equal emhasis must be given to both the front-end functionalities and back-end integration by keeing in mind the needs of the key suliers, distributors, and customers. This will undoubtedly hel to boost the erformance of the firms. The Malaysian tourism sector 181 Conclusion and suggestions for future research This aer has advanced knowledge by addressing the otential of e-commerce usage and its relation to business erformance from multi-dimensional ersectives through the use of an integrative model. In many instances, the aer found suort from rior research conducted across different industries in different countries and therefore, generalizability is not so much of an issue. As such, it is not only useful to the tourism industry but also other service-based industries which intend to venture into e-commerce initiatives. It rovides useful guides to the click and mortar comanies to evaluate their current e-commerce initiatives and to determine the areas that need to be re-engineered in the rocess of rofiting from their e-commerce investments. In addition, it also encourages brick and mortar comanies to embark into e-commerce. In this hyercometitive world, firms should react fast to the changing business environment. They should grab the oortunities and take the risk to change the internet sace for business on the internet (Paynter and Lim, 2001). Future research should consider bigger samle size. Ideally a larger samle size would rovide a clearer understanding of the relationshis between the variables. A retest of the survey instrument with different industry grous and sectors and/or in different countries may yield interesting insights as well as lead to greater generalizability of the results obtained. Since e-commerce imlementation is time dimensional and that business erformance needs to be measured over time, a longitudinal rather than a cross-sectional study is warranted to gras the details. References Ainin, S. and Noor Ismawati, J. (2003), E-commerce stimuli and ractices in Malaysia, Proceedings of 7th Pacific Asia Conference on Information Systems (PACIS), Adelaide. Austin, J. (1990), Managing in the Develoing Countries: Strategic Analysis and Oerating Techniques, The Free Press, New York, NY. Bharadwaj, A.S. (2000), A resource-based ersective on information technology caability and firm erformance: an emirical investigation, MIS Quarterly, Vol. 24 No. 1,

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