Factors affecting the utilization of the internet by internationalizing firms in transition markets evidence from vietnam

Learning orientation facilitates perceived usefulness and perceived ease of use of the internet by internationalizing firms, and hence its utilization.. Practical implications – This stu

Factors affecting the utilization of the internet by internationalizing firms in transition markets

Evidence from Vietnam

Tho D Nguyen University of Economics, Ho Chi Minh City, Vietnam and University of Technology, Sydney, Australia

Abstract

Purpose – This study investigates key factors that influence the utilization of the internet by internationalizing firms in one transition market, Vietnam.

Design/methodology/approach – A systematic sample of 306 internationalizing firms in Ho Chi Minh City was surveyed to test the theoretical model Structural equation modelling was used to analyze the data.

Findings – This study finds that the two key concepts in the technology acceptance model (TAM), perceived usefulness and perceived ease of use of the internet, can be used to predict internet utilization by organizations Market orientation is also a predictor of internet utilization Learning orientation facilitates perceived usefulness and perceived ease of use of the internet by internationalizing firms, and hence its utilization.

Research limitations/implications – Further research is needed to investigate other antecedents

as well as outcomes of internet utilization by internationalizing firms.

Practical implications – This study suggests that programmes for the assistance and training of internationalizing firms should promote the usefulness and ease of use of the internet, and foster market orientation and learning orientation, in order to stimulate them to use the Internet effectively in the pursuit of marketing success in international markets.

Originality/value – This study expands the explanatory power of the TAM in predicting the utilization of the Internet by internationalizing firms.

Keywords Market orientation, Learning, Linear structure equation modelling, Vietnam Paper type Research paper

Introduction The internet, a global network of interlinked computers operating on a standard protocol that allows information to be exchanged, offers several commercial applications for firms around the world (Hamill, 1997) For example, it is a powerful tool for supporting networks, both internal and external to the firm Internet connection can substantially improve communications with existing foreign customers, suppliers, agents and distributors The internet can assist the firm to identify new customers and distributors and to generate a wealth of information about market trends and on the latest technology and research and technical development (Hamill, 1997; Quelch and Klein, 1996) The internet also provides a new and efficient medium for conducting market research Firms can search for foreign market information through various internet tools (by communicating with foreign customers, distributors, suppliers, and

www.emeraldinsight.com/0263-4503.htm

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Received April 2006

Revised January 2007

Accepted February 2007

Marketing Intelligence & Planning

Vol 25 No 4, 2007

pp 360-376

q Emerald Group Publishing Limited

0263-4503

other businesses and business-related organizations, by using search engines, and by

conducting on-line surveys) This source of information is very promising because it is

cost effective and speedy (McDonald and Adam, 2003; Weible and Wallace, 2001;

Wilson and Laskey, 2003) It is the innovation of information and communications

technologies that has given an opportunity for information acquisition that is

substantially more efficient for firms all around the world (Porter and Millar, 1985)

Several studies have investigated the factors that affect firms’ internet adoption and

utilization (Dholakia and Kshetri, 2004), internet usage (Obra et al., 2002), and

international internet marketing success (Javalgi et al., 2005) However, these studies

focus mainly on advanced or industrializing economies Little attention has been paid

to the utilization of the internet by internationalizing firms in transition markets, such

as Vietnam In addition, although evidence has been given of the ability of the

technology acceptance model (TAM) (Davis, 1989) to predict information technology

usage (Adams et al., 1992; Lucas and Spitler, 1999), attempts to apply it to the

explanation of internet utilization by organizations have largely been ignored In order

to bridge this gap, this study uses an adapted version of TAM to explain the extent to

which internationalizing firms in transition markets utilize the internet as information

and communication channels for their international business activities The rest of the

paper is organized around the following key points: literature review and hypotheses;

method; data analysis and results; discussion and implications; limitations and

directions for future research

Literature review and hypotheses

Figure 1 shows a conceptual model that explains the utilization of the internet by

internationalizing firms Together with perceived usefulness and perceived ease of use,

market orientation is proposed to be a predictor of internet utilization In addition,

learning orientation is expected to have an impact on both perceived usefulness and

perceived ease of use of the internet Finally, learning orientation is expected to

underlie market orientation

TAM and internet utilization

A number of studies of the use of IT applications have been reported in the literature:

see Bhattacherjee (1998) for a review However, TAM has a strong base in theory and

Figure 1.

A conceptual model of internet utilization

Internet Utilization

Perceived Usefulness of the Internet H8

H6

H3

H4

H1

H7

Perceived Ease of Use of the Internet

Learning

Orientation

Market

Orientation

H5

H2

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been supported by a large number of empirical studies (Lucas and Spitler, 1999) Several other studies have also provided evidence in support of TAM (Igbaria et al., 1995) Moreover, the two main constructs in TAM, perceived usefulness and perceived ease of use, which have been hypothesized to be fundamental determinants of user acceptance of IT, can be widely applied (Adams et al., 1992) Perceived usefulness is defined as “the degree to which a person believes that using a particular system would enhance his or her job performance” and perceived ease of use as “the degree to which a person believes that using a particular system would be free of effort” (Davis, 1989,

p 320) Perceived usefulness and perceived ease of use are key antecedents of the intention to use IT applications Also, several researchers have used perceived usefulness and perceived ease of use, to predict IT usage (Adams et al., 1992; Lucas and Spitler, 1999) It can therefore be concluded that perceived usefulness and perceived ease of use can be used to predict not only the intention to use but also the usage of IT applications

TAM explains IT usage in terms of individual attitudes and intentions, but does not address organizational attitudes and actions directed at desired organizational goals The present research adopts the concepts of perceived usefulness and perceived ease of use applied in the organizational context by Nguyen and Barrett (2006) Specifically, it explores how internationalizing firms utilize the internet as a channel of information about foreign markets Therefore, perceived usefulness of the internet in this context refers to the degree to which an internationalizing firm believes that utilizing it would help to obtain relevant information about foreign markets for internationalization Perceived ease of use of the internet in the organizational context is the degree to which the internationalizing firm believes that utilizing the internet to obtain relevant information about foreign markets would be free of effort (Davis, 1989; Nguyen and Barrett, 2006)

The acquisition, development and of use of information and knowledge about foreign markets are among key factors that successfully explain a firm’s increase in international operations (Johanson and Vahlne, 1977; Ling-yee, 2004) This is because foreign markets are characterized by heterogeneity, sophistication and turbulence Moreover, the differences in cultural, national, economic, political, legal social and other environmental influences have made it more complex and difficult to conduct research in international markets (Craig and Douglas, 2000) As a result, internationalizing firms are confronted with greater risks than they face in their home markets These difficulties are more severe for firms in transition economies, such as Vietnam, compared to those in advanced economies Such firms typically lack resources for obtaining information about foreign markets through traditional modes, such as market experiments, foreign market research and foreign market visits, because these are costly and time consuming (Nguyen and Barrett, 2007) The literature on the diffusion of innovations (Rogers, 1983) posits out that, when confronted with a problem, firms always try to search for an alternative solution and tend to adopt an innovation Consequently, when a firm is confronted with the problem

of lacking foreign market information, it is expected that it would try the internet and, thereby, discovers its comparative advantages Using internet tools such as e-mails, search engines or electronic surveys, the firm is able to collect a considerable amount of foreign market information as well as communicate quickly with foreign customers and partners (Nguyen and Barrett, 2006; Sørensen and Buatsi, 2002) Accordingly, the

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firm could perceive the usefulness of the internet, and therefore be likely to utilize it.

Secondly, the firm may believe that it is too difficult to use the internet, even if it

believes it will be useful As a result, it can be argued that perceived ease of use is also a

potential predictor of internet utilization Moreover, it can be expected that the degree

to which the firm perceives that using these internet tools for its purpose is free of

effort would, in turn, influence its perception of their usefulness and utilization Thus:

H1 There is a positive relationship between the perceived usefulness of the

internet and internet utilization

H2 There is a positive relationship between the perceived ease of use of the

internet and internet utilization

H3 There is a positive relationship between perceived ease of use and perceived

usefulness of the internet

Market and learning orientations, and internet utilization

IT implementation research indicates that organizational utilization of an IT application

depends not only on organization’s attitudes toward the IT application, but also on other

organizational factors, such as strategies, policies and actions (Bhattacherjee, 1998;

Nguyen and Barrett, 2006) To address this issue, the research study reported here

attempts to examine the effects of two organizational factors – learning orientation and

market orientation – on the utilization of the internet by internationalizing firms

Several conceptualizations of market orientation can be found in the literature

(Narver and Slater, 1990; Jaworski and Kohli, 1993) For example, the former posit that

market orientation is an organizational culture that focuses a firm on customers,

competitors and the coordination among functional departments within the firm The

latter argue that market orientation consists of three organization-wide activities:

generation of market intelligence, dissemination of the intelligence across the firm and

responsiveness to it These conceptualizations assume that market-oriented firms

continuously collect market intelligence – customers’ needs and competitors’

capabilities, for example – and use this information to create and deliver superior

value to customers (Sinkula et al., 1997; Slater and Narver, 1995) Market orientation

can be viewed as a form of innovative behaviour, – that is, an antecedent to innovation

– because it involves doing something new or different in response to market

conditions (Han et al., 1998; Hult et al., 2004; Jaworski and Kohli, 1993) As a result,

internationalizing firms with high level of market orientation are more likely to search

for innovations, including the internet They may find the internet a useful channel of

information and communication and utilize it for their internationalization Thus:

H4 There is a positive relationship between market orientation and perceived

usefulness of the internet

H5 There is a positive relationship between market orientation and internet

utilization

Learning orientation is another organizational culture that influences the propensity

of a firm to create and use knowledge (Sinkula et al., 1997) Learning orientation

reflects the firm’s commitment to learning, open-mindedness, and shared vision

Commitment to learning reflects the fundamental value that the firm holds towards

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learning, which influences whether it is likely to promote a learning culture within the firm Open mindedness is linked to the notion of “unlearning” which refers to the process through which organizations eliminate knowledge Open-mindedness encourages the firm to reassess its long-held routines, assumptions, and beliefs Finally, shared vision directs a learning focus that fosters the energy, commitment and purpose among organizational members (Sinkula et al., 1997) The learning-oriented firm creates and encourages a learning environment throughout its organization This gives rise to the ability to adopt and implement new ideas, processes or products – that

is, to produce innovative capacity for the firm (Hurley and Hult, 1998) The firm continuously promotes the organizational learning process: information acquisition, information dissemination and shared interpretation (Sinkula, 1994) Consequently, internationalizing firms with higher levels of learning orientation are more likely to find the internet is useful and easy to use, and therefore use it for their internationalization Thus:

H6 There is a positive relationship between learning orientation and perceived usefulness of the internet

H7 There is a positive relationship between learning orientation and perceived ease of use of the internet

Learning orientation can help foster a firm’s market-oriented thinking and behaviour

A key component of learning orientation is the firm’s ability to engage in adaptive

as well as generative learning, in which existing values are questioned This has implications for how the firm acquires, processes and subsequently uses market intelligence – that is, their market orientation (Slater and Narver, 1995) A superior learning environment will leverage the use of all resources, including the behaviours that accompany a market orientation (Baker and Sinkula, 1999) Moreover, firms with a strong learning orientation that are located in transition markets (where their business values are embedded within a centrally-planned system) are tending to adopt a new way of looking at the market, involving a market orientation approach The greater the degree of their learning orientation, the greater the degree of “unlearning” these firms will undertake That is, they are likely to withdraw from their routine ways of doing business which have become embedded in their previous business approach Thus:

H8 There is a positive relationship between learning orientation and market orientation

Method Two phases of study were undertaken in this research: a pilot study and a main survey The pilot phase involved a focus group and a quantitative pilot study Its purpose was to modify and refine the measures The main survey was used to test the measurement and structural models: see Appendix 1 for the research process

Measurement Three first-order constructs (internet utilization, perceived usefulness and perceived ease of use of the internet) and two second-order constructs (learning orientation and market orientation) were used in this study

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Internet utilization was measured by two items The first was a measure of time

spent searching the internet – that is, for how many hours per week the firm uses the

internet to search for information about foreign markets, such as using search engines,

visits to websites of foreign distributors, competitors, suppliers and customers The

second item was about the frequency of using e-mails for international business

purposes This was measured simply by asking respondents how many times per week

the firm receives and sends e-mails related to international business activities

Although electronic survey is an important tool for market research on the internet

(Weible and Wallace, 2001; Wilson and Laskey, 2003), a discussion with managers of a

research firm in Vietnam revealed it had not been widely used there Therefore, this

tool was included in the measure of internet utilization a part of the e-mail item It is

also noted that these two indicators were expected to be closely related This is

because, when a firm needs information, it tries to find it by searching the internet

and/or e-mailing its foreign partners, customers and other business-related

organizations from whom it expects to find the information Therefore, reflective

indicators were used

Measurement of perceived usefulness and perceived ease of use of the internet were

based on the Nguyen and Barrett (2006) scales, a modified version of the Davis (1989)

scales Perceived usefulness of the internet was measured by six items, reflecting a

firm’s belief in its usefulness for obtaining information about and communicating with

foreign markets Perceived ease of use of the internet was measured by four items,

covering three aspects of use: understanding how to use the internet, using it for

searching for information about a particular foreign market and communicating with

foreign organizations through the internet

Market orientation was measured by the Narver and Slater (1990) scale Market

orientation was also a second order construct comprising three components:

customer orientation, competitor orientation, and inter-functional coordination

Customer orientation was measured by eight items, addressing the firm’s level of

commitment to customers Competitor orientation was measured by asking

respondents about the degree of understanding of, and reaction to, competition

Inter-functional coordination was measured by five items assessing the level of

coordination among the functions in the firm

Finally, learning orientation was measured utilizing the scale developed by Sinkula

et al (1997) Learning orientation was also a second-order construct, consisting of three

components: commitment to learning, shared vision and open-mindedness

Commitment to learning was measured by four items reflecting the degree of

willingness to commit to learning – that is, to promote and nourish a learning culture

within the firm Shared vision was also measured by four items embodying the focus

for learning that fosters energy, commitment, and purpose among every member of the

firm Finally, open mindedness was measured by three items mirroring the

“unlearning” process of the firm Except for the two items measuring internet

utilization, which were scaled at ratio levels, all other items were measured by a

five-point Likert scale from 1 ¼ strongly disagree to 5 ¼ strongly agree

Measurement refinement

A focus group was undertaken with six managers who had responsibility for

internationalization, and had used the internet for their international

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business activities Although most of the scales have been used widely in the past, this step is important because of the difference in the research setting: internationalizing firms in a transition market A quantitative pilot survey followed to refine the measures It was conducted by face-to-face interview with 89 firms in Ho Chi Minh City, Vietnam The scales were assessed via Cronbach’s alpha and exploratory factor analysis (principal axis factoring with promax rotation) Reliability assessment resulted in the deletion of one item measuring market orientation, due to its low item-total correlation of , 0.30 (Nunnally and Bernstein, 1994) The results indicate that another item measuring market orientation was further deleted because it had a low factor loading (, 0.50) The loadings for other items were acceptable ( 0.50), and they were used for the main survey to test the models

The sample Vietnam is an under-investigated transition economy (Tsang, 2005), with which the author has previous connections A systematic sample of 306 internationalizing firms

in Ho Chi Minh City, a major business centre, was extracted from the local Business Directories, containing about 5,000 internationalizing firms in all industries, which had used the internet The single key-informant approach, the most commonly used method in organizational research (Kumar et al., 1993), was used Respondents were senior executives in the sampled firms, but interviewers were further instructed to solicit specific information, such as internet usage levels, from people in the organization most likely to have access to it and to be willing to divulge it The original questionnaire was in English, and was translated into Vietnamese for managers unlikely to be sufficient fluent in English Back-translation was used to ensure equivalence of meanings Partial self-administered surveys, in which questionnaires were mailed to the target respondents and collected by interviewers, were chosen for this study Follow-up reminder telephone calls were made

In order to obtain a sample size of about 300, 400 questionnaires were distributed

to firms in the chosen sample About 327 completed questionnaires were collected:

a response rate of 82 per cent Among these, 21 were found to be invalid due to the respondents not being members of top management responsible for international business activities The remaining 306 valid completed questionnaires were the source

of the data for analysis The sample comprised 168 (54.9 per cent) state-owned firms and 138 (45.1 per cent) firms in other types of ownership (joint stock, limited-proprietary and privately owned) State-owed enterprises are the dominant ownership type ( 50 per cent) in Vietnam because the private sector has been promoted only in recent years In terms of size, 76 firms (24.8 per cent) had fewer than 100 employees, 170 (55.6 per cent) had between 100 and 300 employees, and

60 (19.6 per cent) had more than 300 Finally, all firms used the internet for e-mail and information-search purposes, though less than a third (30.1 per cent) had

a website

Data analysis and results The scales were assessed by confirmatory factor analysis (CFA), before structural equation modelling was used to test the theoretical model and hypotheses The screening process shows that the data exhibited slight deviations from normality Nonetheless, all univariate kurtoses were non-significant and all skewness values were

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within the range of (2 1, 1) Therefore, maximum likelihood estimation was used

(Muthen and Kaplan, 1985)

Measurement models

The first-order constructs in the model were perceived usefulness, perceived ease of use

and internet utilization Except for internet utilization, which was measured by two

items, the CFA models of perceived usefulness and perceived ease of use fit the data

well The second-order constructs were market orientation and learning orientation

Market orientation consisted of three components: customer orientation, competitor

orientation and inter-functional coordination Learning orientation also had three

components: commitment to learning, shared vision and open mindedness The CFA

results indicate that these two second-order constructs were a good fit to the data

In addition, the correlations between the components of each construct, together

with their standard errors, indicate that they were significantly less than unity

These findings support within-construct discriminant validity (Steenkamp and van

Trijp, 1991)

The final measurement model also achieved a good fit to the data The factor

loadings of all items were significant and substantial ($ 0.63, p , 0.001), and all

average variances extracted were high ($ 0.50) In addition, the composite reliability of

all scales was acceptable ($ 0.67) These findings indicate that all scales measuring the

first-order constructs and the components of the second-order constructs were

unidimensional (Fornell and Larcker, 1981) and within-method convergent validity

was achieved (Steenkamp and van Trijp, 1991) Finally, the correlations between

constructs, together with their standard errors, indicate that they were significantly

less than unity These findings again confirmed within-construct discriminant validity

Appendix 2 summarizes the results of measurement validation, and Appendix 3

presents the standardized item loadings

Structural results

The structural equation modelling results indicate that the theoretical model has a

good fit to the data: x2[651]¼ 730.88 ( p ¼ 0.016), CFI ¼ 0.983, TLI ¼ 0.982, and

RMSEA ¼ 0.021 The results also support all eight hypotheses were supported

The unstandardized estimates are presented in Table I, and the standardized estimates

Hypotheses

structural paths Est.(se) a CR b p-value

H1 Perceived usefulness ! internet utilization 1.23(0.234) 5.26 0.000

H2 Perceived ease of use ! internet utilization 0.64(0.212) 3.00 0.003

H3 Perceived ease of use ! Perceived usefulness 0.22(0.073) 3.07 0.002

H4 Market orientation ! Perceived usefulness 0.31(0.076) 4.05 0.000

H5 Market orientation ! internet utilization 0.97(0.225) 4.29 0.000

H6 Learning orientation ! Perceived usefulness 0.33(0.104) 3.19 0.001

H7 Learning orientation ! Perceived ease of use 0.43(0.087) 4.91 0.000

H8 Learning orientation ! Market orientation 0.60(0.110) 5.49 0.000

Note:aestimate (with standard error);bcritical ratio

Table I Unstandardized structural paths

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in Figure 2 It is worth noting that no improper solution was found in any of the CFA or structural models: Heywood cases were absent; all error variances were significant, and all standardized residuals were less than j2.58j

Discussion

By applying the TAM in the context of organizational utilization of the internet as a channel of information and communication for internationalizing firms, this study enhances our understanding of key antecedents of their internet utilization Specifically, it extends the use of the concepts of perceived usefulness and perceived ease of use to the context of organizational utilization of the internet

As predicted by H1, H2 and H3, perceived usefulness and perceived ease of use of the internet are predictors of internet utilization The results give evidence for the use of the TAM in explaining internet utilization Perceived usefulness and perceived ease of use have successfully predicted the acceptance and use of IT applications by individuals (Davis, 1989; Igbaria et al., 1995) They are also applicable for predicting IT usage by organizations This suggests that perceived usefulness is an important element in IT applications, not only for individuals, but also for organizations If firms believe that an application is irrelevant to them, they will not be likely to use it This is also appropriate when using the internet

as information and communication channels for international business activities Internationalizing firms are more likely to use the internet if they believe that it is

a useful source of information and an effective channel of communication with their customers and partners in foreign markets

Figure 2.

Structural results

(standardized estimates)

0.48**(H8)

0.32**(H4) 0.36**(H5)

0.20*(H3)

0.44**(H1)

0.27*(H6)

0.63

mcoo

mcom

0.82 0.71 0.75 0.66 0.66 0.84 0.70

0.67 0.88

Lsv Lop

0.77 0.660.72

0.760.72 0.70

0.73

0.68 0.74

0.86 0.71 0.65 0.78 0.80 0.70 0.76 0.74 0.77 0.75 χ 2 [651] = 730.88 (p = 0.016); CFI = 0.985; TLI = 0.984; RMSEA = 0.020

†Squared multiple correlations; *p < 0.01; **p < 0.001

0.81 0.70

0.78

UTI (0.61)†

LENOR

OPUI (0.36)†

MKOR (0.23)†

mcus

0.76 0.79 0.79 0.79 0.73 0.80 0.77 0.74

0.38**(H7) OPEI

(0.14)†

0.21*(H2)

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Together with perceived usefulness, perceived ease of use plays a role in this

context It stimulates firms to explore the usefulness of the internet and to utilize

it Alternately, if firms believe that using internet tools is complex, the propensity

to discover their usefulness and to use them will decrease These findings are

consistent with the literature on IT acceptance and usage (Igbaria et al., 1995;

Lucas and Spitler, 1999) It is noted that the role of perceived ease of use in

internet utilization is modest (b¼ 0.21), compared to that of perceived usefulness

(b¼ 0.44) The findings are also consistent with previous studies of IT adoption

and utilization For example, Adams et al (1992) found that there is a significant

relationship between perceived usefulness and usage of IT applications but that

perceived ease of use is less important in determining use Nguyen and Barrett

(2006) found that perceived ease of use is not a determinant of the intention to use

the internet by export firms

Furthermore, as argued by researchers in the field, organizational utilization

of IT applications depends not only on the beliefs and attitudes of organizations

toward IT applications but also on other organizational factors (Leonard-Barton

and Deschamps, 1988) The support for H4 and H5 (positive relationships between

market orientation and both perceived usefulness and internet utilization), and H6

and H7 (positive relationships between learning orientation and both perceived

usefulness and perceived ease of use of the internet) provides evidence for the role

of these two organizational factors in the utilization of the internet The process of

adoption and utilization can be regarded as an innovation-infusion process

Both, market and learning orientations facilitate innovation (Han et al., 1998;

Hurley and Hult, 1998) They are directly related to the process of

information acquisition, processing and use (Hurley and Hult, 1998; Baker and

Sinkula, 1999)

Finally, learning orientation underlies market orientation, as predicted by H8

This finding makes a clear distinction between market orientation and learning

orientation in the context of internationalizing firms in a transitional market:

Vietnam Adopting a market orientation approach in doing business can also be

considered as an innovation in these markets Learning-oriented firms are more

likely to adopt a market orientation approach In other words, firms have an

inclination to accept the value of “unlearning” by reassessing their long-held routine,

and are willing to adopt a new approach to doing business: market orientation

Management implications

The findings of this study offer a number of implications for senior managers, as

well as for international managers of internationalizing firms in transition markets

Research has shown that firms’ capability of gathering foreign market information

and building international relationships and networks with foreign agents,

distributors, customers and public sector organizations are among key success

factors in foreign markets (Doole et al., 2006) As a medium supporting foreign

market research and international business relationships (O’Toole, 2003; Wilson

and Laskey, 2003), the internet can assist internationalizing firms in achieving

such capability However, firms in emerging and transition markets do not fully

understand the opportunities offered by the internet and are not ready to utilize it

fully (Kaynak et al., 2005; Nguyen and Barrett, 2006) Therefore, internationalizing

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