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India have the advantage of access to frontline technologies and cost-effective infra-
structure development without the sunk costs in extent systems carries out by many
developed countries. There exists real opportunities for promoting ICT diffusion through
involvement of the society at large. This chapter suggests that in order to maintain its
relative technological position and to increase its comparative advantage in the IT
sector, government policy should focus on domestic ICT diffusion. The chapter re-
views several local public, private and public-private initiatives to spread the use of
ICT throughout Indian regions that has been successful and may serve to offer ex-
amples for future development. The author concludes that ICT-driven development
may be achieved with supportive central government policies in order to maximize the
wider economic and social benefits, lessening both the International Digital Divide and
the Domestic Digital Divide.


The 13 th chapter is Digital Technologies and the Cross-Border Expansion of South
African Banks, which has been written by Joanne Roberts and Chipo Mukonoweshuro.
The increasing intensity of competition since the 1970s, together with the deregulation
of financial markets and the internationalization of financial services, has driven the
application of digital technologies in the financial services sector. However, the impact
of digital technologies combined with the deregulation of financial markets has led to a
growing concentration of financial service activity in the global cities of developed
countries. Nevertheless, digital technologies do influence the financial services sec-
tors in the developing countries, both in terms of the availability and cost of capital,
consumer access to services and the organizational development of service providers.
This chapter focuses on the impact and role of ICTs in the development of financial
services organizations in the developing countries of Africa, and, in particular, on the
international development of South African banking organizations.
Through a review of relevant literature and evidence, together with a number of case
studies, this chapter explores the role of ICTs in the international development of South
African banking organizations. The aim of this chapter is to explore the role of digital
technologies in facilitating the cross-border expansion of South African banking orga-
nizations. Specific challenges do exist for financial sector organizations operating in
Africa where the ICT infrastructure is poorly developed. Nevertheless, it is argued here
that South African banking organizations derive important advantages from the use of
xx


ICTs in their expansion into neighboring countries. Using Dunning™s (1989, 1988) eclec-
tic approach as a mechanism with which to assess the importance of digital technolo-
gies, ICT is explored both as an ownership-specific internal capacity, and as a locational-
specific factor influencing the geographical pattern of international expansion, and as
a facilitator of the internalization of cross-border banking networks. This chapter high-
lights the opportunities and challenges related to ICTs for South African banking orga-
nizations. In so doing, the chapter will make a contribution to the understanding of
intra-African foreign direct investment in the banking sector and the emerging digital
economy in developing countries.
A review of banking in Africa with particular attention focused on South Africa is
provided, followed by an analysis of the internationalization of South African banking
organization. The use of digital technologies in the delivery of services and the organi-
zation of banking networks is then explored before their role in the South African
banking organization networks is investigated. Finally, conclusions are drawn regard-
ing the role of digital technologies in the international development of South African
banks.


Technology and Culture: E-Commerce in China is the 14th chapter of this book written
by Alev M. Efendioglu and Vincent F. Yip.
The number of Internet users around the world has been steadily growing and this
growth has provided the impetus and the opportunities for global and regional e-
commerce. As part of this trend, over the recent years access to technology in China
dramatically increased and it is projected that 10.3 million PCs were sold during 2002,
making China the 3rd largest market after U.S. and Japan. Furthermore, China is now
second only to the United States in the number of home Internet users with nearly 57
million people with web access at home. Internet subscriptions are growing by 5-6%
every month, and in just three or four years 25% of the population could have Internet
access, translating to over 250 million people. During 2002, 31.67% of Internet users in
Shenzhen made online purchases. However, as with the Internet, different characteris-
tics (infrastructure and socio-economic) of the local environments have created signifi-
cant levels of variation in the acceptance and growth of e-commerce in different regions
of the world and in China. The author™s research focuses on the impact of these infra-
structures (payment systems and access to technology), and socio-economic factors
on e-commerce development in China. The findings provide insights into the role of
culture in e-commerce, issues such as “socializing effect of commerce,” “transactional
and institutional trust,” and “attitudes toward debt,” that may impact a broader accep-
tance and development of e-commerce in China. To identify the current infrastructure
and socio-economic influences on the development and growth of e-commerce in China,
a 20-question questionnaire was administered to a total of 252 individuals that formed
the study group. The study participants were located in Beijing, Shenzhen, Shanghai,
Guangzhou, Wuhan, and Shandong during the time of the study, worked for different
types of organizations (Joint Ventures, State-Owned Enterprises, Multi-National Cor-
porations, etc.), resided and worked in different regions in China, and had different
educational levels, professions, and gender. The participants identified some infra-
structure and social issues that will impede and be obstacles to full development of e-
commerce in China in the near future. Among the most identified and repeatedly men-
xxi


tioned issues were lack of credit cards (availability of them for the general public in
China) and convenient payment means, poor distribution logistics, lack of specialized,
trustworthy online merchants of reasonable size (too many small players facing many
bottlenecks and without necessary resources to set up e-commerce systems), an imper-
fect legal system, and lack of large scale telecommunication transmission capability
(broadband). Overall, the respondents were reasonably positive about the availability
of hardware/software, government and industry support for IT in China and were over-
whelmingly less positive when asked if the Chinese culture “supports” the propagation
of IT and e-commerce. The group thought the Chinese consumer society was not quite
ready (lack of confidence in technology and off-site transactions, online culture, and
overall sophistication of the general public) and the conditions were not “ripe” for e-
commerce. In this chapter, the authors present and discuss the findings in detail, and
propose some strategies for success for e-commerce in China.


The 15th chapter is Internet Economy of the Online Game Business in South Korea: The
Case Of Ncsoft™s Lineage written by Kyonghwan Park.
This chapter attempts to lay the groundwork for in-depth discussions on the economic,
social and cultural dimensions of the online game business as one of the most success-
ful forms of the contemporary digital contents industry using the Internet. Theorizing
the Internet as a “general purpose technology” is a useful framework to elucidate its
“complementary” role in commerce and telecommunication sectors, and its “general-
purpose” diffusion in socio-cultural spheres. However, the framework has an overall
danger in downplaying the significant “discontinuity” of the emerging Internet economy,
which takes the Internet “network” itself as a core, as an alternative economic resource
and a social “space” of economic activities. Based on this problematic, this chapter
explores the way in which the online game as a form of digital economy has evolved
both through and within the “space” of the Internet.
For an empirical analysis, this chapter investigates the case of the South Korean online
game company NCsoft™s Lineage: the blood-pledge. The rapid success of NCsoft™s
Lineage is mainly indebted to two factors. The first is the formation of South Korean
national innovation systems (NISs) in the recent development of the Internet broad-
band infrastructure. Since the 1997 financial crisis, the South Korean government has
implemented massive projects to construct nationwide, high-speed Internet networks
in order to boost a knowledge-based and techno-intensive national economy. About
24,000 broadband-based Internet-caf©s on every street corner in built-up areas played
a crucial role in the success of the online game business, not only because Internet-
caf©s provided high-quality Internet service along with low price, but also because
they were pivotal “off-line” places of the online game users™ communities. The second
is the company™s technology-intensive, elaborate efforts at constructing the cyberspace
of Lineage as a social space in-between the real and the imaginary. Lineage is a spatial
simulacrum consisting of not only hyper-real images of basic realities, but also its own
spatio-temporal scale. It is a distinct social space in which game users share common
time-space compressed experiences and socialize with other game users in order to
survive the cyber-society of Lineage. In short, the broadband Internet infrastructure
and the construction of the game users™ community constitute two necessary condi-
tions for the economic success of the online game business.
xxii


Although a digital economy could not be completely separate from conventional eco-
nomic principles, the online game business contains emerging forms of new economic
space not only in-between the real space and the virtual space, but also between the
production and the consumption. The author conceptualizes such a socio-cultural
economy of the Internet business as the economy of a “third” space. The case of
NCsoft Lineage implies the third space is not just social, but also economic space with
the game users™ real consumption of simulacra and its spread effects on other off-line
economic sectors. The emergence of the digital economy containing certain forms of
new economic space would give rise to a neo-economic environment in which many
businesses such as e-business could explore new economic opportunities.


The 16th chapter is Opportunities and Challenges of the New Economy for East Asia
which is written by Donghyun Park.
The first part of the chapter discusses the economic impact of the New Economy on
East Asia. First, the author discusses the potential economic benefits of the New Economy
for the region. The author argues that East Asian countries should focus on applying
existing IT technology to improving the efficiency of the manufacturing sector, the
main engine of the region™s economies. Second, the author points out that while the IT
revolution may enable East Asian countries to leapfrog some technological barriers, it
does not enable them to leapfrog sound economic policies. Furthermore, the potential
of IT will remain largely unfulfilled in the absence of complementary investments such
as a sound infrastructure for transportation and logistics. Third, East Asian countries
must fulfill certain pre-conditions to make sure that the New Economy takes hold.
Above all, they must liberalize their telecommunication sectors so as to improve the
quantity and quality of telecom services. They should also make the necessary invest-
ments in human resource development. In short, although the New Economy holds out
tremendous economic potential for East Asia, realizing that promise will require a lot of
determination and hard work. That promise is already being realized in the more devel-
oped countries of the region, namely Japan and the NIEs, and the author looks at some
examples of their success in the New Economy.
The second part of chapter deals with the implications of the IT revolution for regional
development. The second part is essentially an application of the first part, which
addressed the broader issue of economic development, to the narrower issue of re-
gional development. East Asian countries suffer from significant inter-regional eco-
nomic inequalities. Such inequalities inevitably interfere with well-balanced economic
development and impose costs on both the magnet cities and the rest of the country. A
more balanced pattern of development is therefore desirable, and IT can make signifi-
cant contributions toward this objective. In particular, by reducing the concentration
of information and knowledge in the main city and disseminating those valuable re-
sources to the rest of the country, IT reduces the inequality of opportunity that lies at
the root of the inter-regional economic inequality. However, IT by itself will not enable
poorer regions and cities to catch up with the main cities, and will facilitate regional
development only if the other fundamental ingredients of regional development are in
place.
In the last section, this chapter summarizes the main points and provides some con-
cluding thoughts. In addition, policy implications of the analysis for FDI in Asia, along
xxiii


with implications for potential foreign investors, especially in the telecommunications
industry are given. FDI into IT sectors can not only be profitable for the investors, but
also can promote the host country™s economic growth.


Digital Engineering Campus: Economics, Acceptance, and Impact is the 17th chapter
of this book written by Milind J. Mahajan, Sunil S. Umrani, and Narendra S. Chaudhari.
Widespread uses of many web-based, e-learning approaches have established the use-
fulness of these technologies. The cost of development of contents is a major compo-
nent for appropriate “soft” infrastructure for such web-based, e-learning approaches.
To have a wider impact of these technologies on the society, we need to have the
models to keep the development cost self-sustainable within the society. In advanced
countries, in the educational sector, the costs are mostly borne by government / public
supported educational institutions. In developing countries like India, there is not
sufficient financial support. However, there is a huge market. Tapping such a market at
an early stage is important.
To highlight these issues, in this chapter, the authors introduce two existing web-
based, e-learning approaches, and examine economic and social aspects of their usage
in the society. Specifically, the authors first briefly introduce an e-learning initiative in
Singapore. Secondly, the authors introduce a scenario in developing countries like
India. The demand for an engineering degree within India has led to widespread engi-
neering education within the country. While there are a few “elite” institutes like IITs,
that have been funded heavily by government, offering engineering degrees, the wider
societal impact is increasingly being driven by a large number of private educational
institutions. However, such an expansion has resulted in concerns for maintaining
necessary educational standards. The cost-effectiveness and success of low-cost,
web-based, e-leaning initiatives is the main focus in the discussions within this chap-
ter.
In this respect, the authors briefly introduce the role of universities and other govern-
ment agencies for monitoring educational standards. Next, the authors give a scenario
of an engineering education at a wider level with a focus on a typical state. The authors
have chosen to focus on Maharashtra state for this purpose. A brief sketch of the
socio-economic perspective for the adoption of web-based, e-learning in the context of
engineering education in India is examined. The impact of non-governmental organiza-
tions (NGOs) is illustrated through the detailed description of a case study regarding
the experiment called “Digital Engineering Campus” (DEC). DEC is an NGO initiative to
provide supplementary educational facilities for engineering colleges in India. Consid-
ering the economic as well as social benefits, using the detailed case study of DEC,
authors argue that developing countries like India have tremendous growth potential
in web-based education. Further, the experiences of developed countries with web-
based education will prove to be highly beneficial for developing countries like India.


The last chapter of this book is Corporate Strategies in a Digital World: Supply Chain
Management and Customer Relationship Management “ Development and Integra-
tion-Focus written by Purva Kansal and Keshni Anand Arora.
xxiv


These days, the majority of management literature stresses the concept of “learning
organizations,” i.e., an organization™s capacity to change. However, it is not easy for
people to accept this fundamental especially when it comes to the Internet and
technology™s growing importance in business operations. They claim it as a temporary
trend that will leave little visible change in the way business is conducted. For these
businessmen the philosophy seems to be “keep making better products and offering
new services, and the customers will keep buying.” They ignore changes occurring in
the buying habits of customers and ignore the impact of technology.
There are some businesses that are happy to follow the leader and adopt tools like
supply chain management. Supply chain management is a recognized discipline to
shorten cycle times, reduce inventories, decrease logistics™ costs and streamline com-
munication process across the business network.
On the other hand are the businessmen who understand the learning organization
concept and develop a forward orientation. They are prepared to ride the technology
wave to new heights and accomplishments by using technology as a defining element
in business operations. This chapter suggests a new approach for this new breed of
Entrepreneurs. In this chapter, the authors are trying to give supply chain management
a customer orientation and study its results. The authors highlight the synergistic
advantage of linking supply chain management with customer relationship manage-
ment into a tightly knit network using technology. The main focus is on finding solu-
tions to deal with Internet-empowered customers and to learn how to apply technolo-
gies demanded in the new digital economy.


All the chapters included in this book are original and have been published for the first
time. This book covers various aspects of global production, trade and investment and
the effects of the Internet from a socio-economic angle.
While paying attention to the current status of the intertwined issues of electronic
commerce in technology, standards, policy and legal issues, the focus is on many
socio-economic issues and aspects of the electronic commerce that other books do not
cover. This book aims to provide relevant theoretical frameworks and latest empirical
research findings in this area.
xxv




Acknowledgments



A collaborative project like this doesn™t exist in vacuum. Such projects can-
not be kept running without enormous support and help. Producing a book
is just like entering a long-term relationship with many partners like con-
tributors, reviewers, editors, and a publisher. It is appropriate to acknowl-
edge all of those people we know who have directly or indirectly shaped our
work by contributing to the successful production of this book.
We would like to express an especially warm note of thanks to Professor
Mehdi Khosrow-Pour, Chief Editor, Idea Group Publishing, which made the
start of this project possible by planting the seed of inspiration by suggesting
this project to us.
We wish to thank all the contributors for their excellent contributions to this
book. Many of the contributors also served as reviewers for the chapters
written by other contributors and assisted the editors in producing a won-
derful product. Thanks go to all those who provided constructive reviews to
enhance the quality of the book. Irrespective of having congested schedules,
these people responded promptly and enthusiastically to all our requests.
However, some of the individuals need a special mention as their help set the
benchmark. These include: Professor Alev M. Efendioglu, Professor Vincent
F. Yip, Mr. Kwonghwan Park, Dr. Saugata Poddar, Professor Yutaka Kurihara,
and Dr. Fjodar Ruzic, among others. A special vote of thanks is due to Profes-
sor Stanley D. Brunn for providing us access to his listserv, introducing us to
potential authors and contributors and encouraging us to persist with the
project until successful completion. A special vote of thanks is also due to
Professor Gary P. Schnieder for kindly accepting our invitation and making
a highly valuable contribution within the tight delivery schedules.
A special environment at the University of Western Sydney in Australia facili-
tated our work on this project. The cooperative attitude of all the colleagues
had a direct impact on the successful completion of this task.
xxvi


Special thanks go to the publishing team at Idea Group Inc. particularly to
Jan Travers, who via her timely emails prompted us to always meet the dead-
lines and keeping the project on schedule. We also acknowledge the help of
Michele Rossi, Jennifer Sundstrom and Amanda Phillips for their unstinting
support to this project.
We would like to express our sincere thanks and gratitude to our families,
who have been supportive and patient throughout this venture, without which
this project could not have been completed successfully. We are highly grate-
ful to Mrs. Harbans Kehal for her great moral support and encouragement
that bolstered us in tough situations.
A special mention must be made of Harinder Samatani for his technical help
in the editing process and also for his contribution with his computing and
linguistic skills.
In closing, we wish to acknowledge the unselfish help and technical support
provided by Dr. Kiranjit Sohi during the end days of the project.


H.S. Kehal
V.P. Singh
January 2004
Socio-Economic Impacts and Influences of E-Commerce in a Digital Economy 1




Chapter I



Socio-Economic
Impacts and
Influences of
E-Commerce in a
Digital Economy
Sushil K. Sharma
Ball State University, USA




Abstract
Innovations in information and communications technologies have created a digital
revolution that is changing the way the world works, learns, communicates and
transacts business. E-commerce continues to show strong growth and has been
influencing the social and economic growth of nations. On one hand e-commerce
technologies have helped nations to accelerate their economic growth and to provide
more opportunities for businesses to grow, but it has also created many challenges and
effects across numerous domains of society, and for policy makers. These issues involve
economic productivity, intellectual property rights, privacy protection, and affordability
of and access to information, among other concerns. This chapter describes the various
socio-economic impacts and influences that have been created by e-commerce in a
digital economy.



Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
2 Sharma


Introduction
The revolution in computing and communications of the past few decades, indicate that
technological progress and use of information technology will continue at a rapid pace.
The Internet™s growth and e-commerce has begun to create fundamental change in
government, societies, and economies with social, economic and political implications
(Boulton et al., 2000; McGarvey, 2001). These advances present many significant
opportunities but also are having wide-ranging effects across numerous domains of
society, and for policy makers. Issues involve economic productivity, intellectual
property rights, privacy protection, and affordability of and access to information,
among other concerns (Sharma and Gupta, 2001; 2003b). Electronic commerce promises
to be the momentum behind a new wave of economic growth (Mariotti and Sgobbi, 2001).
E-commerce has already improved business value by fundamentally changing the ways
products are conceived, marketed, delivered, and supported. The relationship and
interaction of various stakeholders such as customers, suppliers, strategic partners,
agents, and distributors is entirely changed. On the positive side, e-commerce has been
creating opportunities for individuals and businesses in the new economy. E-commerce
is helping organizations to reduce transaction, sales, marketing, and advertising costs.
E-commerce is also helping businesses to reach global markets efficiently 24 hours per
day, seven days per week, 365 days per year. Many of the benefits come from improved
consumer convenience, expanded choices, lower prices, and the opportunity for better
interactions with partners, suppliers and targeted customers for service and relation-
ships. E-commerce has also improved product promotion through mass-customization
and one-to-one marketing.
Adoption of new information technologies, particularly e-commerce, is expected to result
in improvements in firm performance, such as reducing transaction costs and closer
coordination of economic activity among business partners (e.g., Malone et al., 1987;
Mukhopadhyay et al., 1995). E-commerce specifically (especially B2B) is predicted to
result in lower coordination or transaction costs due to automation of transactions
online, as well as productivity and efficiency gains (Amit and Zott, 2001; Lucking-Reiley
and Spulbur, 2001; Wigand and Benjamin, 1995). E-commerce also is expected to facilitate
entry into new markets and the extension of existing markets (Garicano and Kaplan, 2001),
and greater integration of systems with suppliers and customers (OECD, 1999; Timmers,
1999; Wigand and Benjamin, 1995). As e-commerce continues to grow rapidly, it could
have significant effects on the social and economic structures of economy. The impacts
of these changes are diverse and may even widen the digital divide among nations, alter
the composition of trade, disrupt labor markets, and change taxation (Anonymous, 2000).
Widespread use of the Internet for e-commerce may have ramifications for intellectual
property rights, privacy protection, and data filtering, etc. Therefore, in the digital
economy, it is becoming imperative to know how e-commerce affects organizations and
society and raises social concerns. Some of these effects of e-commerce are unintentional
and create adverse business and personal conditions that could have societal conse-
quences. Social and economic aspects of ICTs have been studied by a wide variety of

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