Assessing Internet Enabled Business Value: An Exploratory Investigation

While the focus of electronic commerce has often been on “dot coms” or pure Internet based companies, a major transformation is under way in many traditional “bricks-and-mortar” organizations. The latter are investing heavily in Internet based technologies and applications in order to attain new heights of efficiency, productivity and business value. While anecdotes in the business press suggest that some firms have achieved unprecedented performance gains by leveraging the Internet, there is no systematic evidence in the Information Technology (IT) productivity or business value literature regarding the payoffs from Internet enabled business initiatives. We propose an exploratory model of electronic business value involving IT applications, processes, business partner readiness, and operational and financial performance measures. This model is rooted in IT business value and productivity research, and is empirically tested with data from over 1000 firms in manufacturing, retail, distribution and wholesale sectors. We find that electronic business initiatives involving customer-facing technologies lead to operational excellence in customer interactions and improved financial performance. Further, supplier related operational excellence is a key determinant of customer excellence, suggesting the related nature of customer and supplier related performance. Customer and supplier readiness to engage in online business have strong positive impacts on customer and supplier related operational excellence respectively, indicating the need for all entities in a value chain to simultaneously adopt Internet applications and business practices. To the best of our knowledge, this is the first study to address the business value of Internet initiatives.