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An Innovation Adoption Study of Online E-Payment in Chinese Companies

An Innovation Adoption Study of Online E-Payment in Chinese Companies (9781599049397): Qile He, Yanqing Duan, Zetian Fu, Daoliang Li: Book Chapters.
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  48 Journal of Electronic Commerce in Organizations, 4(1), 48-69, January-March 2006 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group prohibited. An Innovation Adoption Studyof Online E-Payment inChinese Companies Qile He, Middlesex University Business School, UKYanqing Duan, Juton University Business School, UKZetian Fu, China Agriculture University, ChinaDaoliang Li, China Agriculture University, China EXECUTIVE SUMMARY  Adoption of IT innovations is attracting increasing attention. Researchers are particularlyinterested in factors that affect the adoption of IS and IT innovations. Innovation diffusiontheory is used frequently to evaluate the effect of perceived innovation attributes and theadoption of innovations. Nevertheless, explanatory power of perceived innovation attributesvaries across different innovations. Given the importance of online e-payment to the further development of e-commerce and its importance as a payment innovation, this research examinesthe adoption of online e-payment by business enterprises using Rogers’ relational model of  perceived innovation attributes and rate of adoption. The findings indicate that only perceived compatibility has significant influence on online e-payment adoption of Chinese companies. It is hoped that this research can help other researchers with related statistical procedures and analytical steps in their study of IS/IT adoption using innovation diffusion theory.Keywords:adoption of innovation; e-commerce; online electronic payment systems;innovation attributes; innovation diffusion P.R. China INTRODUCTION Adoption of information technologyinnovations is attracting more and moreattention from researchers in recent years(Venkatesh, Morris, Davis & Davis, 2003).Scholars are particularly interested in thefactors that affect the adoption decision of potential adaptors (Adams, Nelson, & Todd,1992; Chau & Tam, 1997; Harrison,Mykytyn, & Riemenschneider, 1997; Teo,Wei, & Benbasat, 2003; Venkatesh &Brown, 2001). A major focus of previousstudies on technology adoption has beenhow potential users’ perceptions of the tech-nology innovation influence their adoptionor usage (Agarwal & Prasad, 1997; Lewis,  Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group prohibited. Journal of Electronic Commerce in Organizations, 4(1), 48-69, January-March 2006 49 Agarwal, & Sambamurthy, 2003; Moore& Benbasat, 1991; Tornatzky & Klein,1982). The innovation diffusion theory of Rogers (1983, 1995) is cited frequently bythose researches which studied acceptanceand diffusion of information systems andinformation technologies (Adams et al.,1992; Agarwal & Prasad, 1997; Chau &Tam, 1997; Davis, 1989; Premkumar,Ramamurthy, & Nilakanta, 1994).Rogers (1983, 1995) proposed thetheoretical framework that reveals the re-lationship between perceived innovationattributes and the rate of adoption. It is re-garded as an important theory to under-stand the adoption behavior of potentialadopters and to predict the adoption of tech-nological innovations. Based on this theo-retical framework, researchers typicallyconsidered perceived innovation character-istics of potential adopters as independentvariables so that the explanatory power of those characteristics on the innovationadoption was examined empirically (Adamset al., 1992; Agarwal & Prasad, 1997; Chau& Tam, 1997; Davis, 1989). Nevertheless,prior research reveals that the predictivepower of perceived innovation character-istics tends to be varied with different in-novations.As an emerging technology, online e-payment is playing an important role in thedevelopment of e-commerce in that the lack of online e-payment could hinder the suc-cessful implementation of e-commerce(Goldfinger & Perrin, 2001). Research sofar has been carried out mainly on the ac-ceptance of online e-payment from con-sumers’ points of view (Abrazhevich,2001b, 2001c; Buck, 1996; Pilioura, 1998).However, given the importance of compa-nies as e-payment users as well as provid-ers and their role in the overall diffusion of online e-payment, limited research has beenconducted to examine the factors affect-ing companies’ decisions to adopt onlinepayment method. Because companies areorganizations, which is different from indi-vidual consumers, the process of adoptingnew technologies would be more complexthan that of consumers. It appears that noempirical research has been conducted sofar to analyze systematically business or-ganizations’ adoption behaviors. Therefore,this research aims to focus on companies’adoptions of online e-payment systems andto provide some in-depth understanding of why companies adopt or refuse to useonline e-payment methods.This research attempts to use Rogers’(1983, 1995) theoretical framework to ex-plore the effect of management’s percep-tions of the company’s adoption of e-pay-ments in order to shed light for future re-searchers on how to utilize the innovationdiffusion theory and to examine the adop-tion and acceptance of particular techno-logical innovations from the perspective of potential adopters. An online questionnairesurvey was conducted with a sample of Chinese companies. The data were usedto refine the survey instrument and gainsome initial understanding of how compa-nies’ perceptions of e-payment affect theiradoption decision. It is assumed that thisstudy will provide some statistical proce-dures and analytical steps in order for fu-ture researchers to use innovation diffu-sion theories to examine the adoption of information systems and information tech-nology innovations.The following section discusses thereason why e-payment is viewed as inno-vation for companies. This is followed bythe demonstration of Rogers’ (1983, 1995)relational model. This model is served as  50 Journal of Electronic Commerce in Organizations, 4(1), 48-69, January-March 2006 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group prohibited. the basis for the development of main re-search hypotheses. A survey instrument isthen developed based on the previouslyestablished scales. Confirmatory FactorAnalysis (CFA) is used to validate and re-fine the instrument. The logistic regressionmodel is fitted to the data to test the hy-potheses in order to provide some basicunderstanding of the effect of perceivedinnovation attributes on companies’ adop-tions of online e-payments. This article con-cludes with the discussion of research limi-tations and some implications for futureresearchers on innovation adoption stud-ies. ONLINE E-PAYMENT AS ANINNOVATION FOR COMPANIES With the rapid development of e-com-merce, the traditional ways of payments(e.g., cash, check, etc.) are not appropri-ate for online transactions. Although someonline payment solutions have been intro-duced, since the electronic payment is thetechnology in development, its acceptanceis still a bottleneck for the growth of e-com-merce industry (Abrazhevich, 2001a,2001b; Mei & Lu, 2000). A review of theliterature indicated that there is a lack of consistent and clear definition for e-pay-ment, as different researchers may use dif-ferent working definitions. Nevertheless,this research followed the definition givenby UNCTAD (2001) that e-payment oronline payment refers to “the process of finance or payment mainly using the me-dium of the Internet” (p. X). Thus, Internet-mediated payment methods are a majorconcern in this research.According to Rogers (1995), “the in-novation is an idea, practice, or object thatis perceived as new by an individual orother unit of adoption” (p. 11). Comparedto other payment systems, the online e-pay-ment system is still in the stage of trial anddevelopment for many businesses. Al-though online e-payment is considered oneof the key issues in e-commerce, it is fre-quently regarded as an independent aspectof payment innovation (Mantel, 2001; Man-tel & McHugh, 2001, 2002; Wonglimpiyarat,2002). Ideally, e-commerce should have e-payment as a component, but for somecompanies engaged in e-commerce, to setup an online payment system is still a chal-lenge. Actually, due to security concernsand consumers’ payment traditions, onlinee-payment is still a new idea for many busi-nesses, even for those who launched e-commerce years ago (UNCTAD, 2002).Literature reveals that online e-payment isan emerging payment method that may re-place traditional payment methods. There-fore, it is reasonable to regard e-paymentas an independent innovation for busi-nesses. THEORETICAL FRAMEWORKAND RESEARCH HYPOTHESES Rogers’ Relational Model According to Rogers (1983; 1995),relationships among perceived innovationattributes and the rate of adoption as per-ceived by members of a social system canbe described as follows:• Relative Advantage and Rate of Adoption.  The relative advantage of aninnovation is related positively to its rateof adoption. This tends to give a reason-able explanation for the adoption of in-novations, as the higher the economicor social relative advantages of the in-novation, the more likely it is that theywill adopt the innovation.  Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group prohibited. Journal of Electronic Commerce in Organizations, 4(1), 48-69, January-March 2006 51 • Compatibility and Rate of Adoption. The compatibility of an innovation is re-lated positively to its rate of adoption (i.e.,the more an innovation is perceived asconsistent with present systems, proce-dures, and value systems of the poten-tial adopter, the more likely that it will beadopted).• Complexity and Rate of Adoption. The complexity of an innovation is re-lated negatively to its rate of adoption.Since complexity of an innovation canfunction as an inhibitor to adoption, itusually is related negatively to adoption(Premkumar et al., 1994).• Trialability and Rate of Adoption. The trialability of an innovation is relatedpositively to its rate of adoption. Rogersand Shoemaker (1971) suggested thatinnovations will be adopted and imple-mented more often and more quickly if they can be tried on the installment plan.• Observability and Rate of Adoption. The observability of an innovation is re-lated positively to its rate of adoption.This means that the more visible the re-sults of an innovation are, the more likelythe innovation will be adopted and imple-mented quickly (Tornatzky & Klein,1982).Rogers’ (1995) relational model isimportant in providing practical implicationsand analytical guidelines for research oninnovation adoption. However, as five at-tributes measure different perceptions of the potential adopters, the predictive powerof perceived innovation attributes wasfound to be different. According to Rogers(1995), relative advantage is one of the bestpredictors of an innovation’s rate of adop-tion, while compatibility is of relatively lessimportance in predicting rate of adoption.Research evidences are relatively weak insupporting complexity, trialability, andobservability in order to predict adoption of innovations. In contrast, Tornatzky andKlein (1982) concluded that relative advan-tage and compatibility were usually but notalways related consistently to the rate of adoption in a positive direction, and com-plexity was related negatively to the rateof adoption.The significance of those five per-ceived innovation attributes is different inpredicting adoption of innovations, sincedifferent innovation diffusion research con-centrated on different innovations and in adifferent period. Therefore, it is unreason-able to exclude certain attributes from thetheoretical framework, simply becausethey have shown less significance in previ-ous research. The srcinal proposed frame-work does provide general theoretical andanalytical framework for examining theadoption of innovations. Thus, this researchwill adapt the Rogers’ (1995) proposed re-lationship between perceived innovationattributes and adoption of innovation as atheoretical framework (see Figure 1).In the srcinal framework of Rogers(1995), the rate of adoption of innovation isregarded as the dependent variable. Therate of adoption is the relative speed withwhich an innovation is adopted by mem-bers of a social system. The relationshipbetween innovation attributes and rate of adoption, therefore, has been examined.Without breaking the consistency of thesrcinal framework, some researchers haveregarded the adoption or usage of the in-novation as the dependent variable instead(Agarwal & Prasad, 1997; Chau & Tam,1997; Moore & Benbasat, 1991), so thatthey studied relationships among perceivedattributes and the actual adoption of the  52 Journal of Electronic Commerce in Organizations, 4(1), 48-69, January-March 2006 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group prohibited. innovation successfully. Likewise, this re-search also will use adoption status of e-payment by companies as the dependentvariable. Perception of Adoptersand Adoption Decision Since the relationship model of inno-vation characteristics and adoption of in-novation highlight the importance of a po-tential adopter’s perception in that it is theattributes perceived by the adopters thatinfluence the actual adoption behavior, it isnecessary to clarify the essentiality of per-ceptions over social behavior. The ChicagoSchool of Sociology suggested, “If menperceive situations as real, they are real intheir consequences” (Thomas & Znaniecki,1927, p. X). As explained by Rogers (1995),“Perceptions count … the receivers’ per-ceptions of attributes of an innovation, notthe attributes as classified by experts orchange agents, affect its rate of adoption”(p. X). Attitudes of potential adopters formthe intention to the innovation so that theywill decide to adopt or reject the innova-tion.IS researchers have suggested thatintention models or behavioral decisiontheories from social psychology can pro-vide a foundation for research on IT adop-tion by firms and IT usage by individuals(Harrison et al., 1997). Moreover, thetheory of planed behavior (Ajzen, 1988;Ajzen, & Madden, 1986) reveals that atti-tude toward behavior, subjective norm, andperceived behavior control together deter-mine intentions, which, in turn, determineactions. The predictive power of attitudesto actual behavior is well supported byempirical studies (Mathieson, 1991). In thissense, the perception of decision makers isan effective predictor and explanation of the decision behavior.Many IS researchers have been in-spired to study the adoption and usage of innovations by the consistency betweenattitudes and social behavior (Bhattacherjee  Figure 1  Horizontal and vertical classification systems   Relative Advantage Compatibility Complexity Trialability Observability Adoption of Online E-payment
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