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About this book

Recent economic, political, and technological forces are changing the landscape of electronic business and electronic commerce. Although great strides have been made over the past in understanding, researching and advancing e-business, rarely have we witnessed its use so profound and yet its limitations so pronounced, than what has been on global public display for the past 18 months. As a result, new e-commerce strategies and techniques are emerging, collaborative value creation is essential and e-business models are being refined and developed, with special attention towards IS in financial markets, health care and related institutions. It is for these reasons (and many more) that we are so particularly excited and grateful for the collection of papers included in this Value Creation in e-Business Management LNBIP volume number 36. The papers selected in this volume address these emerging e-business issues and are organized into four research lines: Business Models for the Digital Economy, Electronic and Mobile Commerce Behavioral and Global Issues, IS in Financial M- kets and Institutions, Web 2. 0 and E-Commerce and Collaborative Value Creation. The first group, Business Models for the Digital Economy, provides a closer exami- tion of business models from a rich mixture of segments in the IT industry. They - clude Hoyer and Stanoevska-Slabeva’s business model types for enterprise mashup intermediaries, Riehle’s ‘commercial’ open source business model, Chen’s interesting comparison between i-Phone versus Kindles in electronic book sales, and Lyons and coauthors business models in emerging online services.

Table of Contents


Business Models for the Digital Economy

Generic Business Model Types for Enterprise Mashup Intermediaries

The huge demand for situational and ad-hoc applications desired by the mass of business end users led to a new kind of Web applications, well-known as Enterprise Mashups. Users with no or limited programming skills are empowered to leverage in a collaborative manner existing Mashup components by combining and reusing company internal and external resources within minutes to new value added applications. Thereby, Enterprise Mashup environments interact as intermediaries to match the supply of providers and demand of consumers. By following the design science approach, we propose an interaction phase model artefact based on market transaction phases to structure required intermediary features. By means of five case studies, we demonstrate the application of the designed model and identify three generic business model types for Enterprise Mashups intermediaries (directory, broker, and marketplace). So far, intermediaries following a real marketplace business model don’t exist in context of Enterprise Mashups and require further research for this emerging paradigm.
Volker Hoyer, Katarina Stanoevska-Slabeva

The Commercial Open Source Business Model

Commercial open source software projects are open source software projects that are owned by a single firm that derives a direct and significant revenue stream from the software. Commercial open source at first glance represents an economic paradox: How can a firm earn money if it is making its product available for free as open source? This paper presents the core properties of com mercial open source business models and discusses how they work. Using a commercial open source approach, firms can get to market faster with a superior product at lower cost than possible for traditional competitors. The paper shows how these benefits accrue from an engaged and self-supporting user community. Lacking any prior comprehensive reference, this paper is based on an analysis of public statements by practitioners of commercial open source. It forges the various anecdotes into a coherent description of revenue generation strategies and relevant business functions.
Dirk Riehle

IPhone or Kindle: Competition of Electronic Books Sales

With the technical development of the reading equipment, e-books have witnessed a gradual and steady increase in sales in recent years. Last year, smart phones announced to be able to perform additional functions as e-book reading devices, making it possible for retailers selling e-books for smart phones (SPR) such as iPhone to differentiate with those selling e-books for specific reading equipment (SER) such as Amazon Kindle. We develop a game theory model to examine the competition between SER and SPR retailers. We derive the equilibrium price and analyze the factors that affect equilibrium outcomes under both scenarios of complete and incomplete information. Our results suggest that reduced cost due to inconvenience of reading e-books over iPhone lowers equilibrium prices, and reduced cost of specific reading equipment leads to more intense price competition. Under information asymmetry, we show that SER retailers will increase the price at equilibrium.
Li Chen

Business Models in Emerging Online Services

Due to advances in technology and the rapid growth of online services, a significant number of new and inventive web-based service models and delivery methods have been introduced. Although online resources and services are having an impact on more traditional service delivery mechanisms, it is not yet clear how these emerging mechanisms for online service delivery will result in profitable business models. In this paper, we consider emerging business models for online services and their implications for how services are delivered, used, and paid for.We demonstrate the changing roles of user / consumer and provider / seller. We also discuss the applicability of different business models for various domains.
Kelly Lyons, Corrie Playford, Paul R. Messinger, Run H. Niu, Eleni Stroulia

Business Model Design from an ANT Perspective: Contributions and Insights of an Open and Living Theory

The way the Internet has connected millions of users at negligible costs has changed playing field for companies. Several stakeholders can now come together in virtual networks to create innovative business models that would be unfeasible in the physical world. However, the more radical the departure from the established models of value creation, the bigger the complexity in ensuring the sustained interest of the involved parties and the stability of the bonds. To address this problem, we sought inspiration in the Actor-Network Theory (ANT), which is capable of providing insights into socio-technical settings where human and non-human agents interact. We describe how several of its principles, ideas, and concepts were adapted and embedded in our approach for complex business model design or analysis. A simple illustration is provided. Our iterative approach helps systematically scrutinize and tune the contributions and returns of the various actors, ensuring that all end up with an attractive value proposal, thus promoting the robustness of the network. Guidelines for the services that an underlying information system must provide are also derived from the results.
Cristina Chuva Costa, Paulo Rupino da Cunha

Customer-Specific Transaction Risk Management in E-Commerce

Increasing potential for turnover in e-commerce is inextricably linked with an increase in risk. Online retailers (e-tailers), aiming for a company-wide value orientation should manage this risk. However, current approaches to risk management either use average retail prices elevated by an overall risk premium or restrict the payment methods offered to customers. Thus, they neglect customer-specific value and risk attributes and leave turnover potentials unconsidered. To close this gap, an innovative valuation model is proposed in this contribution that integrates customer-specific risk and potential turnover. The approach presented evaluates different payment methods using their risk-turnover characteristic, provides a risk-adjusted decision basis for selecting payment methods and allows e-tailers to derive automated risk management decisions per customer and transaction without reducing turnover potential.
Markus Ruch, Stefan Sackmann

An Evaluation of Multiple Perceptions of Digital Rights Management

Digital Rights Management (DRM) solutions have generated much interest because of their influence on the expectations and responsibilities of customers and related organizations. It was created to restrict piracy and enhance digital media sales, however, it is found to be unable to fulfill its objectives. We find the protections by DRM lack an understanding of the end user and the evolving nature of copyright and fair use. The potential motives for pirating appear to increase as DRM becomes more intrusive causing a conflict in the objectives of DRM. Thus, adjustments must be made to the current DRM model in order for it to become beneficial for both the producer and the consumer. Our research identifies the needs, desires, and responsibilities of the various DRM stakeholders so that a successful use of DRM technologies can be modeled: a challenge faced by the media industry.
Allyn D. Stott, Aakash Taneja

Electronic and Mobile Commerce Behavioral and Global Issues

Consumer’s Online Shopping Influence Factors and Decision-Making Model

Previous research on online consumer behavior has mostly been confined to the perceived risk which is used to explain those barriers for purchasing online. However, perceived benefit is another important factor which influences consumers’ decision when shopping online. As a result, an integrated consumer online shopping decision-making model is developed which contains three elements—Consumer, Product, and Web Site. This model proposed relative factors which influence the consumers’ intention during the online shopping progress, and divided them into two different dimensions—mentally level and material level. We tested those factors with surveys, from both online volunteers and offline paper surveys with more than 200 samples. With the help of SEM, the experimental results show that the proposed model and method can be used to analyze consumer’s online shopping decision-making process effectively.
Xiangbin Yan, Shiliang Dai

Generation Gap and the Impact of the Web on Goods Quality Perceptions

This study explores how age and general online shopping experience affect consumer perceptions on product quality uncertainty. Using the survey data collected from 549 consumers, we investigated how they perceive the uncertainty of product quality on six search, experience and credence goods. The ANOVA results show that age and the Web shopping experience of consumers are significant factors. A generation gap is indeed seen for all but one experience good. Web shopping experience is not a significant factor for search goods but is for experience and credence goods. There is an interaction effect between age and Web shopping experience for one credence good. Implications of these results are discussed.
Yun Wan, Makoto Nakayama, Norma Sutcliffe

How the Website Usability Elements Impact Performance

This research builds on the results of a large scale study in which participants performed an informational task on one of 59 websites spanning various industries to examine how the website usability elements (graphical attractiveness, information, interactivity, trust, and ease of use) drive users’ attitudes and intentions toward the website and how these effects vary according to site experience and end product tangibility. Results show that while the effects of site interactivity and graphical attractiveness were more influential for services sites, the effects of site information and trust were stronger for tangibles sites. Alternatively, compared to returning site visitors, first-time visitors perceived the website as less easy to use, needed more time to accomplish the online task, and based positive attitudes and intentions more strongly on the site information and interactivity. The results of a second study performed in a proximate culture largely corroborate these findings.
Muhammad Aljukhadar, Sylvain Senecal

Effects of Website Interactivity on Online Retail Shopping Behavior

Motivations to engage in retail online shopping can include both utilitarian and hedonic shopping dimensions. To cater to these consumers, online retailers can create a cognitively and esthetically rich shopping environment, through sophisticated levels of interactive web utilities and features, offering not only utilitarian benefits and attributes but also providing hedonic benefits of enjoyment. Since the effect of interactive websites has proven to stimulate online consumer’s perceptions, this study presumes that websites with multimedia rich interactive utilities and features can influence online consumers’ shopping motivations and entice them to modify or even transform their original shopping predispositions by providing them with attractive and enhanced interactive features and controls, thus generating a positive attitude towards products and services offered by the retailer. This study seeks to explore the effects of Web interactivity on online consumer behavior through an attitudinal model of technology acceptance.
Hafizul Islam

Trust-Building in Electronic Markets: Relative Importance and Interaction Effects of Trust-Building Mechanisms

We examine the relative and complementary effectiveness of trust-building strategies in online environments. While prior research has examined various antecedents to trust, we investigated two trust-building mechanisms more in depth: Web site trust and vendor reputation. We tried to understand the relative effectiveness of these two important mechanisms to provide online businesses with a clear recommendation of how to establish trust in an effective and efficient manner. Drawing from the literature on trust, we proposed vendor reputation to be more effective than Web site trust. Moreover, we examined a potential complementary effect of these mechanisms so as to provide online businesses with a deeper understanding of how to derive superior trust. We hypothesize a small such effect. The study proposes a laboratory experiment to test the model.
Stefan Tams

Pricing Strategy in Online Retailing Marketplaces of Homogeneous Goods: Should High Reputation Seller Charge More?

There are two conflicting streams of research findings on pricing strategy: one is high reputation sellers should charge price premium, while the other is high reputation sellers should charge relatively low price. Motivated by this confliction, this study examines pricing strategy in online retailing marketplace of homogeneous goods. We conduct an empirical study using data collected from a dominant online retailing marketplace in China. Our research results indicate that, in online retailing marketplace of homogeneous goods, high reputation sellers should charge relatively low price, because the consumers of high reputation sellers are more price sensitive than the consumers of low reputation sellers.
Yuewen Liu, Kwok Kee Wei, Huaping Chen

Secure Mobile Support of Independent Sales Agencies

Sales agents depend on mobile support systems for their daily work. Independent sales agencies, however, are not able to facilitate this kind of mobile support on their own due to their small size and lack of the necessary funds. Since their processes correlate with confidential information and include the initiation and alteration of legally binding transactions they have a high need for security. In this contribution we first propose an IT-artifact consisting of a service platform that supports multi-vendor sales processes based on previous work. We then analyze use cases of sales representatives of independent sales agencies using this system and derive their security requirements. We then propose a security extension to the IT-artifact and evaluate this extension by comparing it to existing solutions. Our results show that the proposed artifact extension provides a more convenient and secure solution than already existing approaches.
Jochen Kokemüller, Heiko Roßnagel, Anette Weisbecker

IS in Financial Markets and Institutions

People-to-People Lending: The Emerging E-Commerce Transformation of a Financial Market

This paper provides an overview of the concept of people-to-people (P2P) lending, a relatively new e-commerce phenomenon that has the potential to radically change the structure of the loan segment of the financial industry. P2P lending creates a marketplace of individuals and a social fabric through which these individuals interact. It provides efficient information transfer, thus perhaps creating more perfect markets. P2P lending requires information systems support to make it function, and to provide a social network mechanism that may be crucial for its success. We discuss different P2P lending marketplace models, and how information systems support the creation and management of these new marketplaces, and how they support the individuals involved. We conclude by providing some important research questions and directions, and issues for which further investigation is called.
Hui Wang, Martina Greiner, Jay E. Aronson

Forecasting U.S. Home Foreclosures with an Index of Internet Keyword Searches

Finding data to feed into financial and risk management models can be challenging. Many analysts attribute a lack of data or quality information as a contributing factor to the worldwide financial crises that seems to have begun in the U.S. subprime mortgage market. In this paper, a new source of data, key word search statistics recently available from Google, are applied in a experiment to develop a short-term forecasting model for the number of foreclosures in the U.S. housing market. The keyword search data significantly improves forecast of foreclosures, suggesting that this data can be useful for financial risk management. More generally, the new data source shows promise for a variety of financial and market analyses.
G. Kent Webb

Organizing Equity Exchanges

In the last years equity exchanges have diversified their operations into business areas such as derivatives trading, post-trading services, and software sales. Securities trading and post-trading are subject to economies of scale and scope. The integration of these functions into one institution ensures efficiency by economizing on transactions costs.
Using balanced panel data from major equity exchanges over the period 2005-2007, we examine empirically the presence of economies of scale in securities trading. Moreover, we analyze the impact of vertical integration of trading, clearing, and settlement, the impact of the size of an exchange, and the impact of diversification on the profitability of exchanges. The evidence confirms that a large number of transactions leads to low costs per trade. The evidence shows that the profitability of equity exchanges is highest for vertically integrated exchanges and that diversification and size have a negative impact on their profitability.
Torsten Schaper

The Impact of New Execution Venues on European Equity Markets’ Liquidity – The Case of Chi-X

With the Markets in Financial Instruments Directive in effect since November 2007, new trading venues have emerged in European equities trading, among them Chi-X. This paper analyzes the impact of this new market entrant on the home market as well as on consolidated liquidity of French blue chip equities, newly tradable on Chi-X. Our findings suggest that owing to this new competition the home market’s liquidity has enhanced. This is apparently due to the battle for order flow which results in narrower spreads and increased market depth. These results imply that overall liquidity in a virtually consolidated order book is in the French case higher than without the new competitor.
Michael Chlistalla, Marco Lutat

System Latency in Linked Spot and Futures Markets

We examine the lead-lag effect between DAX index and DAX index futures under asymmetric latency in the exchange infrastructure. Using 1-min high frequency observations in 2006-2007, it is found that the market integration between stock index and stock index futures has significantly grown compared to prior research. While the degree of price discovery in the futures market decreased both markets react mostly contemporaneously towards new information. An event story of latency reduction on Xetra reveals that exchange latency is one important factor explaining this development. We find evidence that smaller asymmetric round-trip-times between Xetra and Eurex lead to a higher degree of market integration.
Martin Wagener, Ryan Riordan

Web 2.0 and E-Commerce and Collaborative Value Creation

Quantifying Users’ Interconnectedness in Online Social Networks – An Indispensible Step for Economic Valuation

Online social networks have been gaining increasing economic importance in light of the rising number of their users. Numerous recent acquisitions priced at enormous amounts have illustrated this development and revealed the need for adequate business valuation models. The value of an online social network is largely determined by the value of its users, the relationships between these users, and the resulting network effects. Therefore, the interconnectedness of a user within the network has to be considered explicitly to get a reasonable estimate for the economic value. Established standard business valuation models, however, do not sufficiently take these aspects into account. Thus, we propose a measure based on the PageRank-algorithm to quantify users’ interconnectedness in an online social network. This is a first but indispensible step towards an adequate economic valuation of online social networks.
Martin Gneiser, Julia Heidemann, Mathias Klier, Andrea Landherr, Florian Probst

Enhancing the Quality of Financial Advice with Web 2.0 – An Approach Considering Social Capital in the Private Asset Allocation

Although theoretically necessary, social capital is not considered within the process of asset allocation for private investors. Both the lack of appropriate practical valuation concepts and the effort of providing and processing the required information as input for a valuation were obstacles to include social capital in this process. However, first theoretical financial models for the evaluation of social capital recently have become available. Moreover, the fast growth of business community websites and the technological progress in Web 2.0 tools that allow and acquire the active involvement of users, facilitate the provision and processing of valuation relevant information. In this paper we focus on the second aspect and propose a social software-based concept that allows for an integration of social capital in the asset allocation process.
Dennis Kundisch, Robin Zorzi

Web 2.0 in SME Networks - A Design Science Approach Considering Multi-perspective Requirements

As small and medium sized enterprises (SMEs) face new challenges in a complex and dynamic competitive environment, they need to cooperate due to their restricted resources and limited capacities. At this, Enterprise 2.0 is seen as a supporting approach. To this date, there is a lack of academic publications concerning recommen dations for the application of Web 2.0 artifacts in SME-networks. This paper aims at bridging this gap by su ggesting a conceptual base following the design science approach. Based on tech ni cal and organizational requirements resulting from exploratory interviews with re presen tatives of SMEs participating in a regional SME-network, we transfer the requirements in a prototypic concept. This developed artifact provides a basis for a field test to evaluate the concept and for further research.
Nadine Blinn, Nadine Lindermann, Katrin Fäcks, Markus Nüttgens

Mashups: An Approach to Overcoming the Business/IT Gap in Service-Oriented Architectures

For quite a long time already, great importance has been attached to the concept of Service-Oriented Architectures for future IT-architectures. However, a major challenge in implementing this concept lies in the gap between the functional department and IT department. Mashups, an architecture also based on services, try to avoid this gap by letting the user himself integrate the services. The following article analyzes similarities and differences between both architecture approaches, and explains to what extent and in which cases Mashups could complement a Service-Oriented Architecture.
Stefan Bitzer, Matthias Schumann

Online Reputation Systems in Web 2.0 Era

Web 2.0 has transformed how reputation systems are designed and used by the Web. Based on a thorough review of the existing online reputation systems and their challenges in use, this paper studied a case of Amazon’s reputation system for the impacts of Web 2.0. Through our case study, several distinguished features of new generation reputation systems are noted including multimedia feedbacks, reviewer centered, folksonomy, community contribution, comprehensive reputation, dynamic and interactive system etc. These new developments move towards a relatively trustworthy and reliable online reputation system in the Web 2.0 era.
Weijun Zheng, Leigh Jin

Evolution of Decision Rules Used for IT Portfolio Management: An Inductive Approach

IT portfolio management and the related planning decisions for IT–dependent initiatives are critical to organizational performance. Building on the logic of appropriateness theoretical framework, we define an important characteristic of decision rules used during IT portfolio planning; rule appropriateness with regards to the risk-taking criterion. We propose that rule appropriateness will be an important factor explaining the evolution of rules over time. Using an inductive learning methodology, we analyze a unique dataset of actual IT portfolio planning decisions spanning two consecutive years within one organization. We present systematic comparative analysis of the evolution of rules used in planning over two years to validate our research proposition. We find that rules that were inappropriate in the first year are being redefined to design appropriate rules for use in the second year. Our work provides empirical evidence demonstrating organizational learning and improvements in IT portfolio planning capabilities.
Prasanna P. Karhade, Michael J. Shaw, Ramanath Subramanyam


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