An E-Commerce Key Success Factors Framework for Chinese SME Exporters

Small and medium-sized enterprises (SMEs) have been playing a key role in Chinese economic development since the 1990s. However, little research focuses on how Chinese SME exporters succeed in the global market through e-commerce system. The purpose of this paper is to critically develop an e-commerce key success factors framework for Chinese SME exporters in an effort to help them gain long term success in the global market.


Introduction
Small and medium-sized enterprises (SMEs) have been playing a key role in Chinese economic development since the 1990s (Wei et al., 2007).In the 1990s, China had only about one million private sector SMEs (Hall, 2007).This number increased to 400 million by the year of 2012.Of the 400 million SMEs, the number of the SME exporters is about 5 million.The first decade of the 21 st century witnessed the rapid export achievement of China (shown in Figure 1).This achievement highlights that the Chinese economy has been greatly involved in economic globalization.According to "SMEs export" (2012), 60 percent of China's exports are contributed by SME exporters.While China's export growth is about double its GDP growth (shown in Table 1), it is not surprising that Chinese SME exporters draw much attention from researchers.Along with the rapid development of SMEs, commercial applications of the internet for e-commerce have proliferated.In 2001, the volume of Chinese business to business (B2B) e-commerce transactions reached 107.7 billion Yuan (about 16.60 billion USD), and was still growing; in 2007, Chinese B2B trade amounted to 24.5 trillion Yuan (about 3.77 trillion USD), of which the proportion for SMEs was up to 57.8% (Li & Tao, 2009).In 2011, the volume of Chinese B2B e-commerce transaction reached 3.4 trillion Yuan (about 520 billion USD).Also, the number of SMEs who employ e-commerce exceeded 48 million (iResearch, 2011).It is expected that the number of SMEs who employ e-commerce will increase at 8% annually (iResearch, 2011).
E-commerce shows such great potential in that it offers huge opportunities for SMEs, especially those exporters, to enter foreign markets by allowing them to communicate globally with customers, distributors and suppliers as efficiently as multinationals do.The adoption of e-commerce by SMEs has been studied by a number of researchers (Nguyen & Barrett, 2006;Gilmore, Gallagher, & Henry, 2007;Li & Tao, 2009;Cao, Hartung, Forrest, & Shen, 2011;Senik, Scott-ladd, Entrekin, & Adham, 2011; R. Ramanathan, U. Ramanathan, & Hsiao, 2012).Based on a review of the literature, this study has found some important gaps.First, there are only a few studies looking at adoption of e-commerce by Chinese SME exporters.For those who looked at adoption of e-commerce, they only discussed the drivers of e-commerce (Cao et al., 2011;Li & Tao, 2009).Second, while most of the studies have focused on the general adoption of e-commerce in SMEs, there seems to be relatively few studies that attempt to understand the success factors of e-commerce, with one exception (Chong, Shafaghi, & Tan, 2011).Chong et al. (2011) provides a framework addressing the internal and external critical factors for SMEs operating in Chinese B2B marketplace, in an effort to assist in the marketing management of B2B in China.Third, while some studies focus on SMEs who develop export capability through e-commerce (Castleman & Cavill, 2001;Nasah, Japang, & Leng, 2012), very little research focus on Chinese SME exporters.To the best of our knowledge, there are currently no other studies that discuss the critical factors of e-commerce adoption for Chinese SME exporters.To fill this literature gap, we will develop an E-commerce key success factors framework for Chinese SME exporters.
The remaining of the paper is organized as follows.We clarify the definition of SMEs in section 2. We then discuss the rationale for Chinese SMEs to implement e-commerce in section 3. E-commerce key success factors framework including the propositions are analyzed and addressed in section 4. Managerial implication is discussed in section 5. Finally, conclusions are drawn.

Definitions of SMEs
There is no consensus on the definition of SME worldwide.This study is conducted under the Chinese context, so it is of importance to make clear the definition of Chinese SMEs."According to this definition, 99 percent of the country's 10.3 million companies are SMEs, which account for more than 80 percent of urban employment and produce 60 percent of China's GDP", Xinhua News Agency reported in 2010 (China Daily, 2010).In this study, we will adopt the definition under manufacturing category, since the manufacturing SMEs with export-orientation is of interest in this study.

E-Commerce
There is not universal definition for E-commerce.Turban, King, Mckay, Marshall, Lee, & Viehland (2008) define e-commerce as the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the internet.According to Gregory, Karavdi, & Zou (2007), e-commerce is more than simply buying and selling goods electronically.They define e-commerce as an environment for presenting, trading, distributing, servicing customers, collaborating with business partners, and conducting transactions using electronic technologies.However there is general consensus among researchers that the main components of e-Commerce include: website, email, intranet, extranet, LAN and wireless area network (WAN), and Voice over Internet Protocol (VOIP) (Iddris, 2012).These types of E-commerce including but not limited to B2B, B2C, B2G, C2C, and Mobile Commerce.In this study, we will focus on B2B e-commerce, and define it as an electronic platform adopted by Chinese SMEs in order to communicate with foreign distributors and to better serve various needs of customers in that foreign country.

Rationale for E-Commerce
Several proactive drivers have been identified as rationale for SMEs to adopt the e-commerce (Gilmore et al., 2007).Proactive reasons include the chance to reduce traction costs by passing some of the intermediary and facilitating linkages to the global supply chains (Molla & Licker, 2005), and to increase communications and performance (Jeffcoate, Chappell, & Feindt, 2002).Gilmore et al. (2007) identify four major e-commerce drivers, both internal and external, in terms of their relevance to export marketing strategy."Internal e-commerce drivers include product online transferability and e-commerce assets, and external drivers include e-commerce infrastructure and demand for e-commerce" (Gilmore et al., 2007).In line with the above mentioned literature, we claim that the Chinese SMEs adopt e-commerce to reduce transaction cost, better understand the needs of foreign customers, reduce communication barrier, and quickly transfer product.First, e-commerce can help Chinese SMEs cut out middlemen and going straight to foreign distributors, thus reduce their transactions cost.Second, Chinese SMEs can acquire information about particular customer needs and foreign competitors from foreign distributors through e-commerce all over the world 24/7.Third, due to the fact that most Chinese SMEs  Bharadwaj (2000) also demonstrated that the average performance of firms identified as possessing superior IT was significantly superior to the average performance of a matched set of firms.

Security and Trust
In the e-commerce setting, security is one of the predominant risks that the business may perceive, especially those in China.When businesses look for opportunities online, they may be exposed to the risk of online fraud, information theft, theft of service, and corruption of data.For these reasons, security concerns may carry a lot of weight with businesses who want to conduct transaction online.The potential risks thus may influence businesses' decision making about whether or not to conduct business with other parties online.
Various studies address the impact of security risk on online business intention.For instance, the research of Ling, Daud, Piew, Keoy, & Hassan (2011) reveals that security risk is highly related to online trust, which in turn is positively related to business intention.Kim, Ferrin, & Rao (2008) found that the internet consumers' trust and perceived risk have strong impacts on their purchasing decisions.Chen & Barnes (2007) indicate that perceived security is one of the important antecedents to online initial trust, which has a positive impact on business intention.Mukherjee & Nath (2007) argue that privacy and security features of the e-commerce are the key antecedents of trust, which in turn positively influences relationship commitment.
The sharing of information between exporters and foreign distributors can be done through e-commerce system.IT adoption in terms of software, hardware, and website development will facilitate the information sharing between exporters and foreign distributors.The advancement in IT means that communications among the two parties are more efficient now than in the past (Chong, Ooi, Lin, & Tang, 2009).Security won't be an issue given that two parties get to know each other well and trust each other.

Government Support
Chong et al. ( 2011) surveyed 114 Chinese SMEs participating in B2B e-marketplace and find that government plays a critical role in creating a favorable and consistent commercial e-environment.They thus recommend that governments should "facilitate and assist in the provision of information for the development and adaptation of B2B e-commerce at international level" (Chong et al., 2011).Khalifa, Banerjee, & Ma (2003) attributed the rapid Chinese B2B e-commerce growth to the commitment of the Chinese government towards building up the necessary infrastructure and working towards framing of laws governing cross-border trade, taxation in e-commerce.The Chinese government not only facilitates e-environment, but also takes a series of steps to help SMEs boost export.For example, during the financial crisis between 2008 and 2009, China raised its export tax rebates seven times on a wide range of goods ("China to raise", 2012).In addition, the Ministry of Finance has set up a 1.9-billion-yuan (about 292 million USD) special budgetary fund to support the innovation and technological progress of SMEs and set aside 1.2 billion Yuan (about 185 million USD) to support their international economic cooperation activities.

Market Orientation
Market orientation is the "organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it (Kohli & Jaworski, 1990).From this definition, we can see that market orientation has the potential to help an organization understand and meet customers' needs and expectations.When it refers to exporting firms, some scholars assert that with market orientation, exporting firms continually identify and respond to customers' needs, competitors' new marketing strategies, and environmental changes in export markets (Ju, Murray, Kotabe, & Gao, 2011).Empirical evidence offered by these scholars (Ju et al., 2011) suggests that market orientation activities help attenuate distributor opportunism caused by information asymmetry.In global markets without e-commerce, information asymmetry prevails as exporters tend to have less information about customers and competitors in foreign markets than distributors.Gebhardt, Carpenter, & Sherry (2006) find that creating a market orientation requires dramatic changes to an organization's culture and the creation of organizationally shared market understandings.In addition, some empirical research confirm that there is a positive relationship between market orientation and export performance (Akyol & Akehurst, 2003;Cadogan & Cui, 2004;Gonzalez & Chiagouris , 2006;Armario et al., 2008).Although these studies do not test the relationship in e-commerce context, there won't be much difference.As a platform, e-commerce system can facilitate the information sharing among SME exporters and foreign distributors to nurture or reinforce market orientation.With market orientations, SME exporters constantly identify and respond to customers' needs, competitors' new marketing strategies, and environmental changes in export markets (Ju et al., 2011).For this reason, SME exporters will obtain better e-commerce performance.

Knowledge Acquisition
There are two major ways by which SMEs become internationalized.One is "born global", the other is go global with a "learning process" (Armario, et al., 2008).Knowledge acquisition is necessary for the latter.As far as we are concerned, knowledge acquisition refers to acquiring of information about customers, competitors, and environmental forces in the foreign markets.The knowledge about foreign market obtained through export experience not only creates opportunities for exporters to increase foreign market share, but also ensures their survival in the long run, thus, increase their performance in foreign markets (Lord & Ranft 2000;Armario et al. 2008;Dib, Da Rocha, & Da Silva, 2010).With the help of e-commerce system, knowledge acquisition may become more efficient.The foreign market knowledge can be used by SME exporters to cope with environment uncertainty, manage distributor and to create and deliver superior customer value.
Exporters with market orientation should have superior capabilities to sense the market (Armario et al., 2008).These capabilities can help exporters to identify new market opportunities overseas.However, just because they can identify new market opportunities overseas does not necessarily mean that they can export goods to that new market successfully.They have to get to know the knowledge about market norms and rules.Even if they can enter that market, they still have to learn through experience to gain long term success.E-commerce system is the platform through which knowledge will reach the exporters.

Managerial Implications
Our framework suggests five success factors for Chinese SEM exporters who conduct business through e-commerce system.Exporters can increase their e-commerce performance by investing in IT, ensuring security to build trust with foreign exporters, gaining government support, adopting market orientation strategy, and acquiring knowledge through learning process.This framework will give exporters a guideline as to how to conduct business through e-commerce, not just for the sake of adopting e-commerce.We believe that e-commerce equipped SME exporters will tend to gain long term success given that they employ the method implicated in this framework.One the other hand, this framework will give foreign distributors a clear picture about the Chinese SME exporters' business strategies.The information transparency will ease their concerns while conducting business with Chinese SME exporters.It will follow that the two parties will build long term relationship to reach win-win situation.

Conclusion
SME exporters play an increasingly important role in Chinese economy.This study provides an original attempt to develop an e-commerce key success factors framework in an effort to help Chinese SME exporters to succeed in foreign market through e-commerce system.Academic research on this field is still very rare.We hope that this study serve as a starting point and call for more attention on this field.We suggest several directions for further research.First, we hope more empirical research will be conducted to examine the validity of this framework.Second, other factors mentioned in the literature such as cultural considerations, supply chain facilities, successful customer relationships, and global competitiveness can be added to this framework and tested through empirical research.Thus, a more reliability framework will be obtained to help Chinese SMEs gain competitive advantage in global market., A., & Akehurst, G. (2003)

Figure 1 .
Figure 1.Value of exports of China Data Source: National Bureau of Statistics of China.

Table 1 .
Export growth rate and GDP growth rate Data Source: National Bureau of Statistics of China; and World Bank.
In the year 2003, State Economic and Trade Commission of China announced a standard for Chinese SMEs.The SME criteria are set based on industry, annual sales and number of employees.The classification is summarized and shown in Table 2.
Li & Tao, 2009).But now this situation is changing due to the importance of IT adoption is realized by Chinese SMEs.According to a survey conducted byCCW Research, in 2009, 28.6% of SMEs work on LAN construction, 22.1% of SMEs invest in financial information systems, 19.3% of SMEs work on their own website construction, and 14.3% of SMEs start to build their OA systems.As for the more advanced IT system, 7.9% of SMEs start to build ERP system, 5.0% of SMEs start to build SCM, and 2.9% of SMEs work on BI distribution.E-commerce is entirely an Internet-based platform, and the establishment of such a platform is dependent on IT adoption.So if SMEs invest in various IT systems, they will be more likely to gain e-commerce success.