Diffusion and Impacts of the Internet and E - Commerce in Japan 1 February 2004

Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation. ABSTRACT Our analytical concern is the extent e-commerce does and does not diffuse across industries and within establishments, and the consequent impacts on firm performance. We begin with the Center for Research on Information Technology and Organizations (CRITO) research framework, which examines the forces for globalization and e-commerce readiness as the preconditions for the diffusion and adoption of e-commerce. In Japan, these factors are embedded in the social organization of corporate groupings (keiretsu) and its political economy (iron triangle). Thus, we extend the baseline CRITO model by adding these " relational " factors. We believe this provides more understanding of the configuration of e-commerce diffusion and adoption and its subsequent impacts on business. The main data source for this study is a telephone survey conducted in Japan by the International Data Corporation during the period February 18, 2002 – April 5, 2002. Establishments were selected from three major industry sectors that are known to be more advanced users of e-commerce—that is, manufacturing, distribution (wholesale and retail), and finance (banking and insurance). The number of respondents is 227 establishments, evenly split by industry as well as establishment size (from 25 to 249 and 250 or more employees). In addition, we use primary data from the Fujitsu Research Institute and other secondary sources in order to draw out the relational side of the diffusion and adoption story. ! Overall we found that keiretsu firms play an important role in adopting business-to-business technologies, but the small and medium-sized enterprises in the retail sector and companies in the bank and finance sector are more active in adopting business-to-consumers technologies. ! These differences in the diffusion of e-commerce across industries, on one hand, reflect the ability of companies to overcome the barriers and inefficiencies in the existing political economy. As liberalization loosens the grip of the iron triangle on the Japanese political economy, there is a leveling of the playing field for e-commerce. ! The uneven adoption of e-commerce within establishments, on the other hand, reflects how well information technology applications speak to the strategic priorities in a company's business plan. As IT technologies speak to the " voice of the customer " (total quality management), there is greater adoption of e-commerce into the business plans of …