EFFECTS OF ENVIRONMENTAL CONDITIONS ON BUSINESS SCHOOLS INTENTIONS TO OFFER E-COMMERCE DEGREE PROGRAMS

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1 EFFECTS OF ENVIRONMENTAL CONDITIONS ON BUSINESS SCHOOLS INTENTIONS TO OFFER E-COMMERCE DEGREE PROGRAMS Dharam S. Rana College of Business Jackson State University Phone: Jean Baptiste K. Dodor College of Business Jackson State University Phone: Palaniappan Thiagaranjan College of Business Jackson State University Phone: ABSTRACT Innovation diffusion literature, due to certain volitional control assumption, focused more on intra-organizational factors to the detriment of inter-organizations environmental conditions. Recently however, that trend has been fortunately changing with Teo et al. (2003), who used institutional pressures to predict organizations intentions to adopt inter-organizational linkages. In the current study, we tried to go beyond Teo et al. (2003) to use, in addition to institutional pressures, competitive pressures and resource dependence to investigate business schools intentions to offer electronic commerce degree programs (ECDP). Preliminary results indicated that environmental conditions constitute significant determinants of sampled schools intentions to offer ECDP. Background of the Research INTRODUCTION E-Commerce is a new way of doing business that continues to expand rapidly worldwide. Since it began in the mid 1990s, E-Commerce has grown in the United States alone from a standing start to a $172 billion retail business and a $1.5 trillion business-to-business juggernaut in

2 (Laudon and Traver, 2007). Beyond the USA, E-Commerce is growing also fast in Japan, China, Brazil, India, and Europe. Laudon and Traver (2007), therefore, predict that E-Commerce will eventually influence nearly all commerce, or that most commerce will take the form of Electronic Commerce by year Purpose of the Research Given the future prospects of E-Commerce, a question can be asked as to whether educational organizations intend to offer Electronic Commerce Degree Programs (ECDP). In the current paper, we tried to answer that question using established environmental theories: institutional, population ecology and resource dependence theories. Concept of Electronic Commerce Defined The concept Electronic Commerce has been defined in various ways in the literature. For example, Lawrence et al. (1998, p.2) defined electronic commerce as the buying and selling of information, products and services via computer networks, using any one of the myriad of networks that will make up the Internet. However, electronic commerce is not only about buying and selling ; it is about a much wider phenomenon. Turban et al. (2000, p.5) introduced the word exchanging to include more activities under the scope of E-Commerce. Further, researchers at the Australian National Office of Information Economy (1999, p.60) have argued that electronic commerce may include all intra-company and inter-company functions. This latter conception of electronic commerce is consistent with the broad and inclusive definition of the European Commission as any form of business transaction in which the parties interact electronically rather than by physical exchanges or contacts. Thus, we use the concept E- Commerce to refer to any form of business transaction in which the parties interact electronically rather than by physical exchanges or contacts. Concept of Environment Defined There exist several types of environment: task environment, social environment and physical natural environment. The focus in this study is on organizations task environment. The task environment is the environment in which organizations conduct their normal businesses. In other words, the task environment is the operation domain where an organization draws the majority of its customers and in which the majority of the dealers it considers to be its competitors are located (Achrol & Stern, 1988, p. 40). The social environment refers to the intra-organization climate in which people work together. The social environment is shaped by not only the people who work in the organization but also by the ergonomic aspect of the work place. The natural environment corresponds to the ecological environment, over which organizations do barely have control. In the current study, we use environment to refer only to the task or business environment. 2

3 HYPOTHESES DEVELOPMENT Research on organizations intentions about innovations has been conducted essentially from intra-organizations behavioral perspective, using such theoretical frameworks like the theory of reasoned action (Fishbein and Ajzen, 1975), the diffusion of innovations (Rogers, 1983), the technology acceptance model (Davis, 1986), or the theory of planned behavior (Ajzen, 1985, 1991). Despite strong insights into the interplay between organizations and their environments (Lawrence and March, 1967; Thompson, 1967; Hannan and Freeman, 1977; Meyer and Rowan, 1977; Pfeffer and Salancik, 1978), the inter-organizations environmental perspective has been neglected for a long time. Only very few prior studies have used environmental theory-based variables to investigate organizations intentions about innovations. Teo et al. (2003) utilized institutional factors to predict organizations intentions to adopt inter-organizational linkages, while Berrett and Slack (1999) used both competitive and institutional pressures to investigate corporate sponsorship decisions. More recently, Renzulli (2005) investigated the emergence of charter schools in the United States with several environment-based variables; however, he used secondary rather than primary data. This study extends on one hand Berrets and Slack (1999) and Teo et al. (2003) by using three environmental theory-based variables (institutional pressures, competitive pressures, and resource dependence) to investigate business schools intentions to offer Electronic Commerce Degree Program in the United States. On the other hand, it complements Renzulli (2005) by using primary survey data rather than secondary convenient data. The postulated research model is presented below in Figure 1. Figure 1: Hypothesized Model Institutional Pressures H1 Competitive Pressures H2 H3 Schools Environmental Conditions H2 H4 Schools Intention to offer ECDP Resource Dependence 3

4 Institutional Pressures and Environmental Conditions Institutional theorists (Meyer and Rowan, 1977; DiMaggio and Powell, 1983; Oliver, 1991) postulated that organizations are constrained by external non-competitive factors (social rules, taken-for-granted conventions, norms and practices) that subject them to important institutional pressures. Consistently, we formulate the study s first hypothesis as follows: Hypothesis 1: Institutional pressures will have an impact on a business school s perceived environmental conditions. Competitive Pressures and Environmental conditions It is generally agreed that competitive pressures exert some impact on organizations decision making. Kimberly and Evanisko (1981) argued that competition between firms within the same industry is one of the major environmental factors influencing their decisions to adopt innovations. Porter (1980), population ecologists (Hannan and Freeman, 1977) and Oliver (1991) recognized as well the effects of competitive factors. Bain (1956) suggested that the impact of competition on organizations is particularly observable in highly concentrated organizational populations. Thus, we formulated the following hypothesis: Hypothesis 2: Competitive pressures will impact on a business school s perceived environmental conditions. Resource Dependence and Environmental Conditions According to resource dependence theorists (Pfeffer & Salacik, 1978), organizations are constrained by others who have ownership and/or control needed resources. Therefore organizations decisions making is generally influenced by dependence on providers of resources. Bigelow and Stone (1995) and Schumaker (2002) have previously tested the effects of resource dependence of organizations decisions making. Following them, we expect that resources dependence will determine environmental conditions, which will then predict organizations intentions to act in response to an innovation. Consistently, we posit: Hypothesis 3: Resource dependence will impact on a business school s perceived environmental conditions. Environmental Conditions and Intention Environmental conditions within an organizational population generally affect the intention of individual organization to respond to an innovation. The more favorable are the conditions in the environment, the greater should be the likelihood that organizations be willing to respond to an innovation taking place in their organizational population. Consistently, we posit that: Hypothesis 4: Environmental conditions will impact on Business schools intention to offer electronic degree programs. 4

5 METHODOLOGY & RESULTS We collected data from a random sample of business schools using a web-based survey method. The survey was posted on the secure server of our university. Potential respondents visiting the survey web site could decide to proceed to complete the questionnaire or to exit. In September 2006, we sent s to potential respondents, from which we obtained data about 110 schools, or an overall response rate of 10.52% of the valid targeted population. Measurement Model As shown in Figure 1, the postulated model has five constructs, which have been measured in this study: behavioral intention to act, environmental conditions, institutional pressures to act, competitive pressures to act and resource dependence. The reliabilities of the study s constructs were all above the 0.70 threshold (Nunnally, 1978), which suggests that there was a good internal consistency among the items that comprised the study s constructs. Results for the Structural Equations On the basis of the measurement results, we carried out the analysis of the structural model and tested the postulated hypotheses. All hypothesized paths were significant. In addition to the original hypotheses, we found a strong significant path between resource dependence and schools behavioral intentions and a weak but significant path between competitive pressures and the outcome variable. DISCUSSIONS The overall goodness of fit of the postulated model was reasonable despite a significant Chi- Square, due probably to adverse influences of insufficient sample on model specification. Root Mean Square Error of Approximation (RMSEA) was 0.074, within the reasonable model fit range (Browne and Cudeck, 1992; Hair et al., 1998). Corroborating the reasonable model fit was the 90% confidence interval of the RMSEA, [0.04; 0.11], which fairly fell under the 0.10 ceiling. In addition to the RMSEA, alternative fit statistics were above or very close to the 0.90 threshold (Normed Fit Index = 0.89; Comparative Fit Index = 0.95; Incremental Fit Index = 0.96, and Goodness of Fit Index = 0.92). Thus, it was permissible to rely on the postulated model to interpret and discuss the results for the study s hypotheses. Institutional Pressures: The study s first hypothesis suggested that Institutional pressures will determine a business school s perceived environmental conditions. This hypothesis was supported because the path between institutional pressures and environmental conditions was significant. Further, environmental conditions mediated to some extent the relationship between institutional pressures and intention to act. Competitive Pressures: The study s second hypothesis has stated: competitive pressures will determine a business school s perceived environmental conditions. This hypothesis was supported, as indicated by the significant path between competitive pressures and 5

6 environmental conditions. In addition, environmental conditions did mediate the relationship between competitive pressures and intention to act. Resources Dependence: The study s third hypothesis posited that: Resources dependence will determine a business school s perceived environmental conditions. This hypothesis was not supported, as its path to environmental conditions failed to be significant. In contrast, the path between resource dependence and intentions to act was strongly significant (β = 0.65). The strong direct effect of resource dependence on intention to act suggests that resource dependence may potentially have unique effect on intentions to act. Environmental conditions: The path between environmental conditions and intentions to act was significant, which constitutes a support for the study s fourth and final hypothesis. CONCLUSION To conclude, our study has contributed to the debate on organizations agency, by enhancing our knowledge of some effects of environmental factors on business schools intentions to offer E- Commerce degree programs. The results provide evidences to indicate that environmental conditions influence business schools intentions to offer electronic commerce degree programs. Consequently, future research may pay more attention to the interplay between interorganizations environmental conditions and organizations intentions about innovations. Key References (Complete references available upon request from Jean Baptiste K. Dodor). Achrol, R.; Stern, L. Environmental Determinants of Decision Making Uncertainty in Marketing Channels. Journal of Marketing Research, 1988, 25, Hannan, M.; Freeman, J. The population ecology of organizations. American Journal of Sociology, 1977, 82, Laudon, C.; Traver, C. E-Commerce: Business, Technology, Society. Third Edition, NJ: Prentice Hall, Lawrence, P.; March, J. Organization and Environment. Cambridge, MA: Harvard Graduate School of Business Administration, Lwrence, E.; Corbitt, B.; Tidwell, A.; Fisher, J. Internet Commerce: Digital Models for Business. John Wiley & Sons, Ltd: Brisbane, Meyer, J. W., & Rowan, B. Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 1977, 83: Pfeffer, J., & Salancik, G. R. The external control of organizations: A resource dependence view. New York: Harper & Row, Renzulli, L. Organizational environments and the emergence of Charter Schools in the United States. Sociology of Education, 2005, 78 (January): pp Teo, H.; Wei, K.; Benbasat, I. Predicting Intention to Adopt Inter-organizational Linkages: An Institutional Perspective. MIS Quarterly, 2003, 27 (1),