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in the use of ICTs. Table 3 provides a summary of the ownership, locational and
internalization advantages from which South African banking organizations, including
Stanbic and ABSA, benefit in their competition with non-African and indigenous banks
in African markets. It is the desire to exploit these advantages that motivates South
African banks to expand into other African markets.
Clearly, both Stanbic and ABSA are well endowed with ICTs and the necessary skills to
apply them successfully to the banking sector in Africa. Their expertise in the use and
development of technology is an important source of ownership advantage for these
organizations when expanding into foreign markets. Combined with their emerging
market specialization and experience with African conditions, their use of digital tech-
nologies provides them with the opportunity to dominate the banking sector in Africa.

The banking sector worldwide has experienced significant organizational change result-
ing from the adoption of ICTs. This chapter has examined the role of digital technologies
in facilitating the cross-border development of African banking organizations by
investigating the activities of a number of South African banks. In addition, the analysis
explored ICT both as an ownership specific internal capacity, as a locational specific
factor influencing the geographical pattern of international expansion, and as a facilitator
of the internalization of cross-border banking networks.
Specific challenges exist for financial sector organizations operating in Africa. These
arise from the low level of development and the weak ICT infrastructure. South African

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268 Roberts & Mukonoweshuro

banks have several advantages beyond those available to other African banks and to
non-African banks. Firstly, South African banks have the knowledge and experience of
operating in Africa and have strong brands and reputations across the continent.
Secondly, the size and maturity of the South African banking sector has promoted the
strength and stability of these banks, which are amongst the largest in Africa. Thirdly,
their origins in South Africa give them an advantage over non-African banks because
African governments prefer to use African rather than non-African banks. Finally, South
African banks have well-developed information systems and invest heavily in telecom-
munications and information technology in order to maintain their advantage arising from
the use of digital technologies.
The locational advantages available to South African banks operating in Africa include
the ability to exploit the increasingly stable and liberalized economic environments in
these countries. National financial infrastructures are improving as countries adopt
standards that are more rigorous. Foreign investment in Africa has increased signifi-
cantly following these improvements. Furthermore, the technological weaknesses of
many African countries allow South African banks to develop a leading position in the
use of information systems.
South African banks also gain from the maintenance of control over ownership advan-
tages which leads to internalization within the boundaries of the firm. In particular, ICT
has played a key role in facilitating the control of assets through the organizational
structures of international banks. For example, both ABSA and Stanbic use real-time
communication networks to monitor activities in their subsidiaries.
This chapter has highlighted a number of issues regarding intra-African investment in
the banking sector. In particular, the evidence presented above supports the argument
that South African banks have an advantage over their regional competitors arising from
their ability to apply ICTs successfully to the production and delivery of their services
as well as to the operation of their organisational networks. Clearly, the technological
leadership of South African banks derives from historical factors and the policies
pursued by a government that is keen to promote the digital economy as a means to
improve opportunities across the country. Important also has been the regulatory
environment as it relates to both the banking and telecommunications sector and wider
social issues in South Africa. The government has sought to maintain a stable economic
environment, although the persistence of corruption and the AIDs epidemic present
great challenges which must be faced if the country is to continue to progress.
South African banks currently have an advantage in the use and development of digital
technologies. However, there is no guarantee that this technological leadership will
persist. As noted, a major challenge for South African banks is the ability to recruit, train
and retain a skilled workforce. There is then the danger that South African banks will not
be able to sustain their advantages as they expand across Africa. This would allow non-
African banks to takeover and build upon the foundations laid by South African banks.

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Digital Technologies and the Cross-Border Expansion of South African Banks 269

Tier 1 capital is a measure of the strength of the bank and is defined as common
equity, qualifying non-cumulative perpetual preferred stock, and minority inter-
ests, less goodwill.
For a critical discussion of Dunning™s eclectic approach see, for example, Ietto-
Gillies (1992), chapter 12, pp. 120-124.
For a detailed discussion of the application of Dunning™s eclectic approach to the
internationalisation of service firms see Roberts (1998).
See Dicken (2003, p. 446), for examples of product innovations in financial markets.
Briefly, difficulties arise because of the asymmetric distribution of information
concerning the transaction between buyer and seller. The exchange of knowledge
gives rise to problems of adverse selection and moral hazard that may prevent such
transactions occurring in the open market. Adverse selection is an ex ante
information problem referring to a situation in which one party in a potential
transaction is better informed about a relevant variable in the transaction than the
other party. Moral hazard is an ex post information problem referring to action which
parties in a transaction may take after they have agreed to execute the transaction.
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Technology and Culture 273

Chapter XIV

and Culture:
E-Commerce in China
Alev M. Efendioglu
University of San Francisco, USA

Vincent F. Yip
University of San Francisco, USA

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. However, as with the Internet, different characteristics (infrastructure and
socio-economic) of the local environment have created a significant level of variation
in the acceptance and growth of e-commerce in different regions of the world. Our
research focuses on the impact of these infrastructure and socio-economic factors on
e-commerce development in China and the findings provide insights into the role of
culture in e-commerce, and the factors that may impact a broader acceptance and
development of e-commerce in China. In this chapter, we present and discuss our
findings, and propose some strategies for success for e-commerce in China.

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274 Efendioglu & Yip

In this chapter, we will present and discuss our findings from a research study we
conducted that focuses on culture and its implications on e-commerce development in
China. To identify the current infrastructure and socio-economic influences on the
development and growth of e-commerce in China, we developed a 20-question question-
naire and pre-tested it by administering it to small group of participants. It was eventually
administered to a total of 252 individuals that formed our 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 Corporations, etc.), resided and
worked in different regions in China, and had different educational levels, professions,
and gender.
Over time, similar studies have been conducted in other countries and various models,
by Zwass (1996), Wolcott et al. (2001), and Travica (2002), were developed to identify
diffusion of e-commerce in different environments, with Travica™s study being the only
one that presented some discussion of the impact of social factors in e-commerce
development, focusing on Costa Rica. These models have looked at “infrastructure” and
“services” as the primary diffusion factors and we did incorporate some of the concepts
and characteristics identified in these models into our questionnaire. However, in our
study, we combined the “infrastructure” and “services” categories into a broader
infrastructure group and focused on cultural issues more so than these models have
incorporated in their studies. However, we do recognize the importance of infrastructure-
related issues and have collected some information on these issues as well.
Based on similar previous research, we identified three primary infrastructure-related
elements and two cultural issues that impact consumer participation in e-commerce in
China. The infrastructure elements we identified are access to technology (computers,
connectivity, and gateway to the Internet), payment systems for enabling transfer of
funds (credit cards, bank transfers, etc.), and distribution systems for physical transfer
of goods (physical delivery to consumers). The two cultural issues we consider to be
most relevant and unique to China and that we focused on are: transaction trust
(representations of the goods are accurate and true, purchased goods will be delivered
and payment will be made) and attitudes towards debt (role and acceptance of debt in
Chinese society). Previous studies have identified that Chinese rely on face-to-face
contact and personal relationships (“guanxi”) much more than other cultures (Davies
and Lsung, 1995), and we consider this to be an element and manifestation of the
importance of “transaction trust” in Chinese society and support our assumptions about
the concept. Our questionnaire was designed to test the relative importance of these
characteristics. As we present and discuss the responses of our participants on cultural
issues, we will also present our infrastructure-related findings. However, in our opinion,
the infrastructure issues, as important as they may be, are in a constant state of change
and improvement, and we project that, in a relatively short time, they will cease to be a
major constraint for e-commerce development in China. Whereas, the unique social and
cultural characteristics of China and the concepts associated with off-site exchange

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Technology and Culture 275

systems, which are the foundations of e-commerce, will pose much greater challenges
and will act as the major impediments.

The Research Study
Our objective was to find answers to three primary research questions and present some
possible solutions.
1. What is the degree of e-commerce participation among Chinese consumers that
have similar characteristics to participants in a consumer society such as the U.S.
(compare and contrast the development and acceptance of e-commerce)?
2. What are some of the prevailing attitudes and cultural issues associated with e-
commerce in China (identify and test the influence and impact of prominent Chinese
cultural characteristics on e-commerce)?
3. What can domestic and foreign businesses do to facilitate e-commerce in China
(present some short-and-long run recommendations and approaches to e-com-
merce development in China)?

Our study has some unique characteristics when compared with similar studies done in
China. The survey questions, developed in English, were translated into and adminis-
tered in Chinese. The translation was done by one of the co-authors, who is very
proficient in English and Chinese, Internet and E-Commerce terminology, and has a
profound understanding of cultural nuances of the Chinese language. This is important
because of the possible danger of lost meanings and incorrect interpretations of what
is being asked when questionnaires are developed in one language and administered in
another language (especially in Chinese) to a culturally different population. The
questionnaires were administered by one of the authors personally, increasing the
validity of the study by minimizing contamination that may be inserted into mail or online
surveys, increasing the participation rate, and decreasing the rejection of responses that
were unclear or incomplete. The participants were asked to fill out the questionnaire
without any inducements, such as prizes or money, as is the tradition in most of the mail
in or electronic surveys conducted in China. The questionnaire contained questions
designed to collect information on demographics, Internet usage, e-commerce activities
(frequency of commerce and type of purchase, means used for purchase, transaction
experience), and perceptions and attitudes towards e-commerce in China.
The study group (252 participants) was specifically selected to represent a group of e-
commerce users that we identified and classified as “early adopters” and considered to
be a close match to e-commerce users in developed countries. As researchers with
previous research experience in China and knowing the degree of technological and
economic development among the general populace, we selected these participants
because we considered them to be the most likely users of e-commerce, with access to
technology, significant purchasing power, exposure to concepts and practices outside
China, and open to trying new/novel things. Since we wanted to focus on the “impact

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276 Efendioglu & Yip

Table 1. Organizational affiliation of study participants (n=252)

MNC Domestic Enterprises* Joint Venture
53 160 39
Participants in Sample
21.03% 63.49% 15.48%
% of Participants
* Includes Private Enterprises, SOE, and University

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