Organizational Capabilities and Market Opportunities Impact on B2B E-Market Performance

Electronic Commerce Research and Applications 11 (2012) 5974
Contents lists available at ScienceDirect
Electronic Commerce Research and Applications

journal homepage: www.elsevier.com/locate/ecra
On the performance of B2B e-markets: An analysis of organizational capabilities

and market opportunities
Shan Wang a,, Ji-Ye Mao a, Norm Archer b,1
a
b
School of Business, Renmin University, 59 Zhong Guan Cun Avenue, Beijing 100872, PR China
DeGroote School of Business, McMaster University, 1280 Main Street West, Hamilton, Canada L8S 4M4
a r t i c l e
i n f o
a b s t r a c t
Article history:
Received 30 April 2010
Received in revised form 1 July 2011
Accepted 1 July 2011
Available online 14 July 2011
This research is a study of factors leading to the success of business-to-business (B2B) electronic marketplaces (EMs). A model based on both organizational capability and market opportunity theories was
developed to explain the performance of B2B EMs. Organizational capabilities included service provision
capability and its enabling capabilities, entrepreneurial orientation and human resource capability,
whereas market opportunity was modeled as market size and e-commerce awareness of the industry.
Data were collected from 128 B2B EMs in China and analyzed using Partial Least Squares. Results suggest
that the research model explains the performance of B2B EMs well. More specically, among the two service capabilities studied, service width contributes signicantly to EM performance, while the effects of
service depth are yet to be seen. Moreover, the enabling organizational capabilities and market opportunity factors affect EM performance both directly and indirectly through their enhancement of EM service
provision capability.
2011 Elsevier B.V. All rights reserved.
Keywords:
B2B electronic marketplaces
Organizational capability
Market opportunity
Service capability
1. Introduction
This research is a study of the performance of business-tobusiness (B2B) electronic marketplaces. B2B e-markets are Internet-based business syste-markets that support transactions and
other interactions between companies. E-markets aggregate many
buyers and sellers in one platform by facilitating product search,
contract negotiation, and transaction fulllment among participating rms. Many e-markets also provide value added services such
as industry news and intelligence, supplier evaluation, feedback
mechanisms, and consultations (Bakos 1998, Choudhury and
Hartzel 1998, Christiaanse 2005, Grewal et al. 2010, Holzmuller
and Schluchter 2002, Pavlou 2002). E-markets are normally classied into three types: independent e-markets that are operated by a
third party, consortium-based e-markets formed by groups of
industry players, and private e-markets owned by single companies in order to support their own transaction and supply chain
management (Dai and Kauffman 2002a,b). This research focuses
on the rst type: independent third party e-markets.
The performance of third party B2B e-markets is of great interest to both entrepreneurs and researchers due to the innovativeness of their business models and the large potential of the B2B
market. However, despite the benets that B2B e-markets can
Corresponding author. Tel.: +86 82504648.
E-mail addresses: shanwang@ruc.edu.cn
(J.-Y. Mao), archer@mcmaster.ca (N. Archer).
1
Tel.: +1 905 525 9140x23944.
(S.
Wang),
jymao@ruc.edu.cn
1567-4223/$ - see front matter 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.elerap.2011.07.001
potentially bring to rms (Christiaanse 2005), many e-market

ventures have failed. These failures have been attributed to lack
of e-commerce awareness and participation (Rao et al. 2007,
Truong 2008).
However, there is a paucity of research on third party B2B
e-market performance, partly because of the limited number of
such e-markets (Laseter et al. 2001). Most previous research has
focused on e-market governance (Grewal et al. 2010, Pavlou
2002) and adoption (Cho 2006, Grewal et al. 2001, Hsiao 2003,
Son and Benbasat 2007, Truong 2008). Furthermore, existing
research about B2B e-market performance is primarily based on
case studies (Driedonks et al. 2005, Kambil and Heck 1998, Kumar
et al. 1998, Montazemi et al. 2008). Research ndings from these
studies remain to be veried and generalized.
This research strives to ll the gap by building a synthesized
model based on organizational capability and market opportunity
theories, and empirically testing it. Both theories are important
in strategic management for explaining heterogeneity in rm performance. The former suggests that organizational capabilities that
a company owns determine its success, and it helps to identify
important internal capabilities of B2B e-markets, which operate
in a dynamic environment. The latter suggests that the exploitation
of a large market leads to high rm performance (Venkataraman
1997), providing insights into environmental factors. The two
perspectives can be integrated in the sense that organizational
capabilities can be sources of business opportunity discovery and
exploitation.
60
S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974
The necessity for examining market opportunities is highlighted

by a comparison between different economic environments. The
actual market size for third party B2B e-markets in western countries seem limited due to trading habits rooted in long-term relationships, through which 70% of business purchases are made
(Hkansson 1982, Hakansson and Snehota 1994). Potential purchasing companies are generally reluctant to give up existing
long-term business relationships with suppliers because of noncontractible factors (Mithas 2008). Western B2B e-markets survive
by conforming to the expectations of the institutional environment
and converting to private and consortia based ownership (Ganesh
2004), suggesting that business opportunities for independent
e-markets are limited (Cousins and Robey 2005, Ganesh 2004,
Holzmuller and Schluchter 2002, Lee et al. 2003). In contrast, the
current stage of economic development in China is characterized
by rapid growth, the existence of a large number of small and
medium-sized enterprises (SMEs), and prosperous export businesses. The potential market size for e-markets is large because
companies are highly motivated to expand their market, launch
new products, and build company brands. This has led to the proliferation of B2B e-markets in China, which reached 4510 by the
end of 2007 (Xu 2007), compared to 200300 e-markets in the United States (Laseter et al. 2001). China has the worlds biggest B2B emarket, Alibaba, and numerous small and medium-sized ones.
Therefore, market opportunities as reected in sizes seem to be
important to the survival and growth of B2B e-markets.
The remainder of the paper is organized as follows. The existing
literature is reviewed, along with relevant theories in Section 2.
Next, a research model and hypotheses are developed in Section
3. The research methods are described in details in Sections 4
and 5. Data analysis is presented in Section 6. The paper concludes
with a discussion of research contributions, managerial implications, and future research opportunities.
2. Literature review and theoretical background

2.1. B2B e-markets
Two related streams of research are reviewed hereinafter, concerning the adoption and performance of B2B e-markets. Prior research has shown that the adoption of B2B e-markets is driven by
efciency and legitimacy motivations in order to save transaction
costs and achieve legitimacy within the industry (Choudhury and
Hartzel 1998, Grewal et al. 2001, Son and Benbasat 2007). Capabilities to adopt B2B e-markets, including learning capability, information technology (IT) capability, and e-readiness, are equally
important for both initial adoption and continued use (Grewal
et al. 2001, Truong 2008). This stream of research implies that
the ability of e-markets to attract participants depends on how
well their services can reduce transaction inefciencies, and the
ability of participants to assimilate the services and technologies
provided.
The performance of B2B e-markets has not received as much
attention as their adoption. Table 1 provides a summary of key
empirical studies, which identied a number of factors from a variety of e-markets.
Although there is only limited research on e-market performance, certain patterns have emerged. First, e-markets sponsored
by incumbent companies stand a better chance of success (Clasen
and Mueller 2006, Gosain and Palmer 2004, Laseter and Bodily
2004, Ordanini 2006). Second, advanced features, such as electronic data interchange (EDI) and collaborative planning, forecasting, and replenishment (CPFR), have not been found to correlate
with e-market success (Clasen and Mueller 2006, Gosain and
Palmer 2004), mainly due to their requirements for internal IT in
participating companies. Moreover, the scope of e-market

offerings, in terms of both market scope (Clasen and Mueller
2006, Gosain and Palmer 2004) and service scope (Clasen and
Mueller 2006, Laseter and Bodily 2004), correlates with most
e-market success criteria. Last, the amount of time an e-market
has been in business is signicantly related to its success (Clasen
and Mueller 2006, Gosain and Palmer 2004). This is largely due
to network externalities and the importance of early mover advantage for e-markets.
However, prior research has two weaknesses. First, these explorations of e-market performance have been mostly atheoretical in
the sense that a coherent theory about the performance of B2B emarkets has not been developed. Second, in some research, measurements of e-market performance have been based on website
trafc and the number of links pointing to the website rather than
more meaningful nancial performance measures (Clasen and
Mueller 2006, Gosain and Palmer 2004). In studies that used survey data (Laseter and Bodily 2004, Ordanini 2006), sample sizes
tended to be small, which limits the robustness of their ndings.
2.2. Theory of organizational capabilities
The theory of organizational capabilities is an extension of the
resource-based view (RBV), which argues that the performance of
rms is explained by the rare, valuable, inimitable and non-substitutable resources that the rms own (Barney 1991, Mahoney and
Pandain 1992). However, resources are static, and the process
through which particular resources provide competitive advantage
is not clear (Priem and Butler 2001). Organizational capabilities
theory was derived to address this deciency. Researchers have
suggested that the combination of a set of resources and complementary organizational components can form organizational capabilities, which empower a rm to gain competitive advantage
(Russo and Fouts 1997). These organizational components, including organizational structure, processes, control systems, and culture (Barney 1986), are conceptualized as implementation skills
(Barney and Mackey 2005) that ensure resources are properly leveraged or managed.
Organizational capabilities can be classied into functional
capabilities (Grant 1991, Pavlou and El Sawy 2006) and dynamic
capabilities (Teece et al. 1997). Functional capabilities, also called
operational capabilities, represent a rms ability to perform
repeatedly a productive task which relates either directly or indirectly to a rms capacity for creating value through affecting the
transformation of inputs into outputs (Grant 1996, p. 377). Examples include marketing capabilities (Morgan et al. 2009, Morgan
and Jenny 2008, Siu et al. 2004), new product development capabilities (Pavlou and El Sawy 2006), production capabilities (Zahra
and Nielsen 2002), and e-commerce capabilities (Zhu 2004, Zhuang
and Lederer 2006).
The term, dynamic capabilities, is dened as the ability of rms
to integrate, build and recongure internal and external competences to address rapidly changing environments (Teece et al.
1997, p. 516). From a dynamic view, organizational capabilities
can be renewed so as to achieve congruence with a changing business environment (Teece et al. 1997). Knowledge, learning and social relationships are enablers of organizational capabilities
renewal (Bhatt and Grover 2005, Kogut and Zander 1992, Pavlou
and El Sawy 2006, Teece et al. 1997). The current literature suggests that dynamic capabilities are more important for organizations operating in uncertain environments (Wiklund and
Shepherd 2003, Santos and Eisenhardt 2009), because they are
enablers of the renewal of an organizations functional capabilities
and thus are conceptualized as higher-order capabilities (Bhatt and
Grover 2005, Kogut and Zander 1992, Pavlou and El Sawy 2006,
Teece et al. 1997).
61

Table 1
Literature summary concerning e-market performance.
Laseter and Bodily

(2004)
Ordanini (2006)
Clasen and
Mueller (2006)
Independent variables (a)
Dependent variables
Sample (research method)
Industry concentration
Revenue
61 e-markets from around the globe

(survey)
Consortium ownership structure (+)

Initial funding ratio (+)
Strategic continuity (+)
Service breath ( )
Execution speed
E-markets targeting big companies (+)
Inclusion of established rms as shareholders
(+)
Offering e-auctions (+)
Offering complementary services (+)
Time to rst nancial milestone
Multiple languages (+)

E-readiness
Cost of e-market usage ( )
Gosain and Palmer

(2004)
Offering EDI
Start-up rms or attached to a conventional
brick-and-mortar rm
Age (+)
Trading agriculture machinery (+)
Informational benets
Transactional benets (+)
Relational benets ( )
Market focus (horizontal vs. vertical)
(Horizontal +)
Time online (+)
Resource endowment (afliation with existing
industry players) (+)
IT vendor-operated e-market
a
b
Percentage of revenues from transaction fees
32 European operators (survey)
Existence (a website must have undergone some

changes in 12 months)
177 e-markets from around the globe

(website codingb)
Number of hits received

Number of incoming links
Number of page views per visitor session
Exchange trafc
194 e-markets (website codingb)
Exchange prominence (websites links in)
The signs in brackets indicate signicant relationships, either positive or negative.

Website coding means that the values of variables were obtained by coding website information.
B2B e-markets operate with great uncertainty, such as what

services to offer and how to monetize their trading platforms,
due to the emerging nature of the industry. The characteristics of
most B2B e-markets as SMEs further complicate this problem because they have a lower capacity to collect and analyze information (Caldeira and Ward 2003, Dving and Gooderham 2008,
Wiklund and Shepherd 2003). Therefore, it is necessary to study
the effect of dynamic capabilities on e-market performance. In this
research, human resource capabilities (Chang and Chen 2002) and
entrepreneurial orientation (Moreno and Casillas 2008, Wiklund
and Shepherd 2003, 2005) are conceptualized as key elements of
dynamic capabilities because they are more pervasive in e-markets, affecting the conguration and renewal of e-market functional capabilities.
Human resources are a rms human capital. A highly skilled
and motivated workforce is a strategic asset that cannot be easily
imitated by other rms, and it can help a rm develop other critical
organizational capabilities (Huselid 1995). For rms facing high
uncertainty, such as entrepreneurial ventures in emerging markets
(Santos and Eisenhardt 2009), the knowledge and skill of employees become particularly important, due to the need for identifying
market opportunities and adapting to environmental changes
(Pena 2002, Teece et al. 1997, Ucbasaran et al. 2008).
Entrepreneurial orientation, as proposed by Covin and Slevin
(1991) and extended by Zahra (1993), is a rms strategic orientation. It involves a rms willingness to innovate in order to rejuvenate market offerings, to take risks in trying out new and uncertain
products, services, and markets, and to be more proactive than
competitors towards new marketplace opportunities. A number
of studies have found that businesses adopting a more entrepreneurial orientation perform better (Wiklund and Shepherd 2003,
Wiklund and Shepherd 2005, Zahra and Covin 1995). Enterpreneurial orientation is especially important for e-markets operating
in an uncertain market due to the need for ongoing new opportunity discovery and exploitation, and new capability building.
To date, little effort has been made to examine the organizational capabilities of third party B2B e-markets. Weill and Vitale
(2002) distinguished e-commerce capabilities among nine types
of business models, including intermediaries that aggregate buyers
and sellers. They suggested that capabilities possessed by an intermediary should include application infrastructure, communication,
database management, and IT management, and emphasized that
such a business model demands higher levels of IT infrastructure.
In this research, we incorporate into our model two dynamic organizational capabilities: human resource capabilities and entrepreneurial orientation, and service provision capabilities that reect
the characteristics of B2B e-markets as service providers.
2.3. Theory of market opportunity
The research domain of market opportunity makes entrepreneurial research stand out as a separate eld from other strategic
management research streams, because entrepreneurship is about
the discovery and exploitation of market opportunities (Shane and
Venkataraman 2000, Short et al. 2010, Venkataraman 1997). Entrepreneurial ability to discover and exploit market opportunities is
positively related to the success of entrepreneurial rms (Gruber
et al. 2008). Market opportunities are dened as those situations
in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production (Casson 1982). They include both the discovery of new
products and services or new usage of products, and the feasibility
62
of starting new businesses (Gruber et al. 2008). This denition suggests that new products and services are the physical embodiment
of business opportunities.
To date, the literature has concentrated on making sense of the
opportunity construct (Buenstorf 2007, McMullen et al. 2007). It
has focused on the type and nature of opportunities, by categorizing opportunities into three types: (1) creation of new information,
as with the invention of new technologies, (2) exploitation of market inefciencies that result from information asymmetry across
time and geography, and (3) reaction to shifts in the relative costs
and benets of alternative uses for resources, such as political, regulatory, or demographic changes (Drucker 1985, Eckhardt and
Shane 2003).
The nature of opportunity discovery and exploitation is also an
interesting topic. Two views emerge from this research stream.
One implicitly treats opportunity discovery and exploitation as
the launch of a new business, which is a one-time event. The other
research stream, mainly evolutionary economics, suggests that
opportunity discovery and creation is a continuous social process,
in which organizational development and evolution of industries
can be sources of opportunity discovery (Buenstorf 2007). In this
research, we adopt the latter view.
The value and signicance of opportunities has been ignored in
the literature. The limited literature suggests that the value of
opportunity can be contingent on favorable industry and market
environment factors, the substance of which includes high consumer demand (Choi and Shepherd 2004), and a product market
in the growth stage rather than emergent and mature stage
(Eisenhardt and Schoonhoven 1990). In this research, we focus
on external market factors as determinants of opportunity value.
3. The success of B2B e-markets: a model and hypotheses
A research model based on both organizational capability and
market opportunity perspectives was developed to explain the
success of B2B e-markets. (See Fig. 1.)
The two perspectives are not isolated from each other. First, the
evolutionary perspective of market opportunities suggests that the
activities and development of existing organizations are themarketselves sources of new market opportunity creation and
discovery (Buenstorf 2007). Therefore, services developed by an
e-market are a reection of the continuous capture and exploitation of emergent opportunities. Second, a focus on organizational
capability allows us to understand how opportunities are exploited
as service provision and its related driving forces.
Next, we will dene B2B e-market capabilities, followed by

the impact of market opportunity on e-market performance, and
the relationships between market opportunities and e-market
capabilities.
3.1. Organizational capabilities
As discussed earlier, organizational capabilities are classied as
functional and dynamic. Functional capabilities in this research are
dened as service provision capabilities, because e-markets are
mainly service companies. Human resource capability and
entrepreneurial orientation are studied as elements of dynamic
capabilities. They can enable the restructuring and adaptation of
functional capabilities to t with new technologies and environmental changes. B2B e-markets in emerging markets operate in a
highly uncertain environment, which creates special requirements
for dynamic capabilities that help them to adapt to market changes
(Bhatt and Grover 2005, Teece et al. 1997).
3.1.1. E-market service provision capabilities
Service provision capabilities are dened as the ability of an
e-market to provide a variety of services. B2B e-markets on the
Internet now offer a wide array of services, including consulting
and other services that may be intelligence related, transaction
related, or value added, in addition to IT services. Consulting and
intelligence related services not only give buyers and sellers the
ability to list information online, but also extend to leveraging
information about buyers and sellers that can be used to produce
industry intelligence reports and provide consulting services
related to buying and selling. It has been suggested that services
that leverage industry knowledge contribute to the success of an
e-market (Dai and Kauffman 2002a,b; Wise and Morrison 2000).
Transaction support services provide order placement, management, payment and fulllment of online transactions. Value added
services are not the main value proposition of e-markets, but they
can contribute signicantly to e-market survival and performance
(Cousins and Robey 2005). For example, e-markets can help evaluate products, or nance transactions. Some e-markets also offer IT
services to help SMEs build their own websites and internal IT
infrastructures.
The more services an e-market offers (its service width), the
more potential sources of revenue become available to the e-market, and the higher its perceived value from customer perspectives.
The service width of e-markets is therefore expected to contribute
positively to the performance of e-markets.
Hypothesis 1 (The Service Width and e-Market Performance
Hypothesis). Service width is positively related to e-market
performance
Fig. 1. Research model for performance of B2B electronic marketplaces.
Service depth is another dimension of e-market service provision capability. The use of in-depth service demands higher
involvement from participant companies and this enhances an
e-markets ability to charge higher service fees. The evolution of
B2B e-markets mostly follows three stages: from simply supporting aggregation, to supporting transactions, and then to supporting
integration and collaboration (Ganesh 2004), from the simplest
service to the most in-depth functions.
We propose that service depth contributes positively to
e-market performance because it adds more sources of revenue
for e-markets. Moreover, the revenue from more in-depth service
is likely to be higher than that from supporting simple aggregation
and information provision for the following two reasons. First,
customer transaction cost savings related to online payment,
logistics, and supply chain management are higher than savings
from simple information search. Second, the more depth there is
to these services, the higher the commitment that is needed from

customers and the higher the probability that customers will be
locked into the e-market platform. Based on the above argument,
we propose that:
Hypothesis 2 (The Service Depth and Market Performance
Hypothesis). Service depth is positively related to e-market
performance
3.1.2. Human resource capabilities
Human resources can contribute to e-market performance
either directly or indirectly by enabling service capability (Chang
and Chen 2002, Chang and Huang 2005, Wiklund and Shepherd
2003). The reason is that employees may have both technical skills
that qualify them for routine jobs, and entrepreneurial skills, which
enable them to discover more market opportunities and take strategic initiatives (Huselid et al. 1997, Schuler and MacMillan 1984).
Therefore, the quality of employees is positively related to the
quality of both service delivery and service design of e-markets.
With respect to the direct effect of human resources, services
offered by e-markets need to be delivered by their employees, thus
the quality of employees affects the quality of services delivered to
customers, whose satisfaction has a direct impact on e-market performance. Some e-market services need human intervention, such
as customized marketing packages and market intelligence reports,
so high quality employee support is important for the delivery of
service content. For services that are automated, the quality of
employees can also be important, because when human interaction is less frequent, customers may demand even better experience with each occasional employee interaction, resulting in
uncertainty assurance. The better the services are implemented
within the e-markets organization, the better the performance of
the e-market. Hence, we propose:
Hypothesis 3 (The Human Resources Capabilities and e-Market
Performance Hypothesis). Human resource capabilities is positively
related to e-market performance
In terms of the indirect effect, high quality human capital is
conducive to service design of e-markets. Talented and devoted
employees are able to discover and exploit more market opportunities than weaker ones (Sigal and Arie 2007, Ucbasaran et al. 2008,
Wiklund and Shepherd 2003). They can do a better job of researching, collecting, and analyzing customer needs, and discover more
services to eliminate inefciencies in supply chains and meet the
needs of client rms. This enhances B2B e-markets service provision capabilities. Therefore, we propose:
Hypothesis 4a (The Human Resources Capabilities and Service
Width Hypothesis). E-market human resource capabilities are positively related to service width
Hypothesis 4b (The Human Resources Capabilities and Service
Depth Hypothesis). E-market human resource capabilities are positively related to service depth
3.1.3. Entrepreneurial orientation
Entrepreneurial orientation is an important organizational
capability that affects e-markets performance. Innovation, risk taking, and proactiveness have been identied as three dimensions of
entrepreneurial orientation (Covin and Slevin 1991). Entrepreneurial orientation contributes directly to the performance of e-markets because e-markets the-marketselves are innovative business
models on the Internet. Since the environment in which they operate is characterized by high velocity technology changes, services
63
or even business model innovations can occur that may render

their current offerings less valuable. Moreover, customer needs
also change when customers grow (Ganesh 2004). This requires
e-markets to take risks, to continuously evolve their strategies,
and to modify their business models. Therefore, we propose that:
Hypothesis 5 (The Entrepreneurial Orientation and e-Market
Performance Hypothesis). Entrepreneurial orientation is positively
related to e-market performance
Entrepreneurial orientation also contributes to the service design of e-markets. An e-market with higher entrepreneurial orientation often encourages its employees to be innovative. This
creates a climate for employees to design or provide suggestions
on service design. Service innovation is more likely to be favored
by the management in such e-markets. Because service innovation
increases both service depth and service width, we propose:
Hypothesis 6a (The e-Market Entrepreneurial Orientation and
Service Width Hypothesis). E-market entrepreneurial orientation is
positively related to its service width
Hypothesis 6b (The e-Market Entrepreneurial Orientation and
Service Depth Hypothesis). E-market entrepreneurial orientation is
positively related to its service depth
3.2. Market opportunity
B2B e-markets exploit market inefciencies that result from
information asymmetry and invisibility by leveraging Internet
technology. Market opportunities for B2B e-market entrepreneurs
arise from supporting aggregation and information search, transaction fulllment, and supply chain activities. B2B e-market market
opportunities are hierarchical, in the sense that the above identied opportunities serve as the business concepts of many B2B emarkets that can frame later opportunity searches. Subsequent
opportunity discovery and exploitation are a social process involving interactions among entrepreneurs, their employees, and the
market. In this research, our focus is not how entrepreneurs discover opportunities in B2B e-markets, but the value of these market opportunities. That is, what determines the potential value of
the market opportunity, as evaluated by e-market performance?
3.2.1. Market size
Market size refers to the total transaction volume of the market
that a B2B e-market can potentially service. Both the new product
development literature (Brown and Eisenhardt 1995) and entrepreneurial opportunity literature (Carroll and Delacroix 1982,
Eisenhardt and Schoonhoven 1990) suggest that products or rms
entering a municent market are more likely to succeed. A larger
market size implies that the services of an e-market can reach
more customers, and the revenue generation capabilities of e-markets will be higher. Empirically, Gosain and Palmer (2004) found
that horizontal e-markets (covering more than one industry) are
better performers. Therefore, we propose:
Hypothesis 7 (The Market Size and e-Market Performance
Hypothesis). The size of the markets in which B2B e-markets operate
is positively related to their performance
Larger markets also imply more abundant opportunities for
rms to discover. They enable rms to generate a larger opportunity set, and the rms can make better choices of which opportunities to pursue (Bingham et al. 2007). In this sense, market
opportunity can help enhance the service provisions of B2B e-markets. In the process of catering to a larger customer population,
64
more service provision ideas can be generated and exploited by emarkets. This can increase both service width and depth. Thus we
propose:
Hypothesis 8a (The Market Size and e-Market Service Width
Hypothesis). E-market market size is positively related to e-market
service width
Hypothesis 8b (The Market Size and e-Market Service Depth
Hypothesis). E-market market size is positively related to e-market
service depth
3.2.2. E-commerce awareness
E-commerce awareness pertains to a client companys knowledge of e-commerce and its applications. A company with higher
e-commerce awareness is more likely to use e-markets for procurement and marketing. B2B e-market services also mean business opportunities to reduce transaction costs and extend
markets further aeld. Firms with high e-commerce awareness
are more likely to recognize the value of B2B e-market services,
to have developed a tendency to use e-commerce applications
(i.e., technological opportunism) (Mishra and Agarwal 2010,
Srinivasan et al. 2002), and to have higher acceptance of B2B
e-market services (Truong 2008). By targeting such clients, B2B
e-markets can attract more clients for their services. This may
lower the cost of customer acquisition and enhance opportunity
value appropriability due to having customers with a higher
willingness to pay. As a result, we propose:
Hypothesis 9 (The e-Commerce Awareness and e-Markets
Performance Hypothesis). The e-commerce awareness of the industry is positively related to B2B e-market performance
Cooperation from high acceptance customers also enlarges the
network of B2B e-market operators that are available for new
opportunity search, enabling them to develop more services
(Choi and Shepherd 2004, Shepherd and DeTienne 2005). Therefore, we suggest that an industry with higher e-commerce awareness enables B2B e-markets to discover more services, which may
contribute to the service capability of e-markets. Based on this
argument, we propose:
Hypothesis 10a (The e-Commerce Awareness and Service Width
Hypothesis). Industry e-commerce awareness is positively related to
the service width of an e-market
Hypothesis 10b (The e-Commerce Awareness and Service Depth
Hypothesis). Industry e-commerce awareness is negatively related
to the service depth of an e-market
4. Research methods
4.1. Measurement
The instruments used for data collection are described as follows, and shown in the Appendix:
Entrepreneurial orientation (EO). This was measured by four
ite-markets indicating a rms innovativeness, willingness to
collaborate, and growth orientation. The original eight-item
instrument was developed by Miller (1983), and validated by
other researchers (Covin and Slevin 1989, Ferreira and Azevedo
2007, Merz et al. 1994). We followed Ferreira and Azevedo
(2007) and used four of these ite-markets to measure this construct as a one-dimensional construct.
Human resource capability (HRC) was measured by four ite-markets indicating marketing knowledge, productivity, efciency,
and commitment to the company. The ite-markets were
adapted from Wiklund and Shepherd (2003).
Service depth (SD) was measured by an e-markets capability to
support transactions. This treatment is empirically necessary
and sound. In China, very few e-markets have started to support
integration and collaboration between companies, while some
support transactions and almost all support aggregation.2
If we used integration and collaboration supporting capability
as surrogates for service depth, there would be almost no companies in the sample. Second, even in western countries, empirical research shows that offering sophisticated features such as
CPFR and web-based EDI has not contributed to the performance of B2B e-markets (Clasen and Mueller 2006, Gosain
and Palmer 2004). Therefore, using transaction support as a surrogate of service depth is less likely to invalidate our major
argument that service depth is positively related to e-market
performance. Three ite-markets adapted from Zhuang and
Lederer (2006) were used to measure this capability.
These three constructs, service depth, human resource capability, and entrepreneurial orientation, were measured as reective
scales in the seven point Likert style, following their original
sources:
Service width (SW) was measured by the number of services that
an e-market provides. Nineteen services were identied from
previous research (Dai and Kauffman 2002a,b; Hopkins and
Kehoe 2007) and from interviews with industry informants.
Respondents were asked to indicate what services they offered,
and the construct was measured by the sum of the number of
these services.
Market size (Msize) was assessed by the annual total sales volume of the industry in which the e-market operated, segmented
into intervals of seven levels ranging from RMB5 million (about
US$0.67 million) to RMB1 billion (about US$133 million) and
above.
E-commerce awareness (EA) was measured by a single item, an
e-market operators estimate of the extent to which companies
in the industry that it served were aware of e-commerce. It was
measured by a ve-point Likert scale ranging from very low to
very high.
4.1.1. E-market performance
Specifying a suitable measure for e-market performance (PER)
was a challenge because most e-markets were still in their early
life cycles. They needed to strategically balance between extending
the size of their operations while sacricing prot, and pocketing
prot in their early life cycle while maintaining a restrained size
of operation. Three types of measures were identied from the literature: (1) the number of participating companies, (2) technical
measurements of e-market performance such as network trafc,
the number of page views per visitor session, and the number of
in-links (the number of other Web pages that link to this particular
website) obtained from a search engine www.Alexa.com, and (3)
nancial indicators, such as break-even in net prot before tax, positive operating cash ow on a quarterly basis, and revenue. These
were considered more direct and accurate measures of e-market
performance. Among all the nancial indicators, revenue was
2
As shown in Fig. 2 in the data analysis section, only 9.8% of the companies
supported system integration among companies, and their websites revealed that
most of them provided it as a software service, rather than as a hosting service.
65
highly recommended since it measured how large the business entity had become. It gave a sense of how well the entity had survived and its prospects for the future, and it was also more likely
to be revealed by respondents than more proprietary measures.
Last, it is a measure gainfully used by other researchers (Laseter
and Bodily 2004).
We used the number of companies participating in the e-market (including both registered members (PERM) and paying members (PERPM)), and nancial indicators including prot (PERP) and
revenue (PERR) as performance measurements. Technical measurements were not considered due to their inaccuracy. Since the number of members, revenue, and prot were different dimensions of
e-market performance, they were treated as formative indicators.
4.1.2. Control variables
We included several variables used in prior research as control
variables:
Organization size (Size) was measured by the number of
employees.
Organization age (Age) (in years) captured learning effects and
the early mover advantage of e-markets.
Type of e-market (WT) measured whether an e-market was a
comprehensive or an industrial e-market (coded as 1 or 0,
respectively). Organizational age, size and type (comprehensive
e-markets) were expected to positively correlate with
performance.
Regional e-commerce maturity (REM), was assessed using the
regional net entrepreneur development index produced by Alibaba (Aliresearch 2010). This comprehensive index included sixteen ite-markets covering many aspects of e-commerce
development in each province of China, including size, activeness of online vendors (net entrepreneurs), and e-commerce
service and infrastructure development in each region.
Industry structure (IS) Industry structure measured whether the
industry targeted by the e-market was concentrated or fragmented (coded as 1 or 0).
Targeted client size (Csize): The size of major targeted customers,
measured by a ve-level interval scale of revenue. e-markets
targeting larger clients are likely to generate more revenue.
were then further adjusted. For example, one item, SD3, was deleted from the service depth measure due to its low reliability.
The nal questionnaire, as presented in the Appendix, was
administered to a list of 524 Chinese B2B e-markets, provided by
the well-known Chinese e-commerce media company, Ebrun. The
questionnaire was posted on a website, and emails sent to all of
the contacts to invite their participation, requesting that the survey
be completed by a manager familiar with e-market operations.
Only 36 companies completed the questionnaire within one week
as a result of the rst email contact. Follow-up telephone calls
were made twice to the rest of the e-markets to urge them to complete it. To motivate subjects, a ticket to a SME conference hosted
by eBrun was awarded to those who completed the questionnaire.
Altogether, 145 of the 524 B2B e-markets completed it. The websites of participating companies were then checked, and fteen
companies that did not t our specications were deleted from
the survey, for example, those that supported B2C transactions or
were an afliate website of a major B2B company.
Table 2
Proles of responding e-markets.
Frequency
Percent
Position of respondent
Owner or CEO
Senior manager
Department manager
Other employee
Total
36
51
32
9
128
28.13
39.84
25.00
7.03
100.00
Industry
Multiple industries
Machinery
Energy and electricity
Others
Total
28
17
10
73
128
21.88
13.28
7.81
57.03
100.00
Number of employees (size)
020
2150
51100
101500
Total
36
31
32
29
128
28.13
24.22
25.00
22.66
100.00
Organization age (in years)
12
34
56
714
Total
38
37
25
28
128
29.69
28.91
19.53
21.88
100
Revenue (PERR) (Unit: RMBa)
01 million
13 million
35 million
510 million
1030 million
3050 million
50100 million
Total
46
31
19
14
10
5
3
128
35.94
24.22
14.84
10.94
7.81
3.91
2.34
100.00
Prot (PERP) (Unit: RMBa)
0100,000
110,000500,000
500,0001 million
15 million
510 million
1050 million
Total
40
36
16
28
3
5
128
31.25
28.13
12.50
21.88
2.34
3.91
100.00
Registered members (PERM)
3003000
300110,000
10,00150,000
50,001100,000
100,000 and above
Total
24
19
33
13
39
128
18.75
14.84
25.78
10.16
30.47
100.00
Paid members (PERPM)
1001000
10015000
500110,000
10,00130,000
30,00150,000
50,000 and above
Total
80
30
9
4
3
2
128
62.50
23.44
7.03
3.13
2.34
1.56
100.00
4.2. Instrument development and survey

An exploratory approach was used for instrument validation.
Initial interviews were conducted to provide face and content
validity. Executives from ve leading e-markets were interviewed.
A semi-structured questionnaire that included both market opportunity and organizational capability perspectives was developed to
guide the interviews. Subjects were asked about the importance
and relevance of each perspective and the relevant constructs
inuencing the success of an e-market. The interviews also included open questions about what other factors might contribute
to e-market success. Subjects were also asked how best to measure
success factors they identied in the e-market context. Interviews
were conducted by telephone, lasting between one and one and a
half hours. Conversations were recorded and transcribed for further analysis. The purpose of the interviews was to validate the relevance of the instrument ite-markets to the proposed constructs,
and the relevance and importance of the constructs to the research
question. This process enhanced the content validity of the
research.
The preliminary measures were pre-tested with 56 B2B e-markets, and validated using principal components analysis and conrmatory factor analysis, following published guidelines (Straub
et al. 2004, Straub and Carlson 1989). The preliminary instruments
Exchange rate between USD and RMB is approx. 1: 6.7.
66
Outlier checks were further performed using Mahanalobis distance (Tabachnik and Fidell 2001). Two cases had exceptionally
high Mahanalobis distance values, and were checked by calling
the company respondents and double-checking with other experts.
The two cases were found to be abnormal and therefore removed.
The nal count was 128 valid questionnaires, for a response rate of
24%.
To check non-response bias, t-tests were performed on the basic
variables listed in Table 2, to see whether there were signicant
differences between the initial 36 responses and the rest after
incentives were offered. There were no signicant differences between the two groups. Additionally, because not all companies in
the sample frame provided all the basic information required, additional information was retrieved on two variables for each e-market from Alex.com: Alex website trafc ranks and number of inlinks. Two t-tests were conducted to see whether the sampled
companies differed from other companies in the sample frame.
The test results showed that the two groups were not signicantly
different.
5. Data analysis and results
5.1. Descriptive statistics
Table 2 also shows basic information about the responding emarkets. In the survey, 77% of the e-markets were small companies
with fewer than 100 employees, and 78% had existed less than seven years. Furthermore, 86% had annual revenue less than RMB10
million (US$1.5 million). This threshold is called the growth ceiling, which was very hard to surpass, according to practitioners
whom we interviewed. Although Chinese B2B e-markets have large
numbers of registered users (more than 100,000), 86% of the surveyed e-markets had fewer than 5000 fee-paying members. They
paid various fees, such as subscription and advertisement fees.
Fig. 2 shows four types of services provided by the e-markets
surveyed. Supplier directories and product catalogues, web store
hosting, advertisements, and industry news were the most
frequently provided services, and can be considered the basic services for e-markets operating in China. Website building, purchasing and selling-related consulting services, and industry analysis
reports were among the next tier of popular services. Only 17%
of the e-markets support online payments, which is considered
to be a key and in-depth functionality in supporting online transactions. Table 3 shows the correlation coefcients among the variables studied.
5.2. Measurement model
Three latent variables with reective indicators: service depth
(SD), human resource capability (HRC), and entrepreneurial orientation (EO), were validated in terms of convergent validity, discriminant validity, and reliability.
5.2.1. Convergent validity
This ensures that all ite-markets measure a single underlying
construct (Bagozzi and Fornell 1982). Two decision criteria were
proposed by Straub et al. (2004). First, in principal component
analysis (PCA), the loading of each indicator should be at least
0.4, and ite-markets that do not load properly should be dropped
from the instrument. Table 4 shows the results of the PCA test.
One item, EO4, due to its high loading on a fourth factor that was
hard to explain, was dropped.
Second, indicators should pass the conrmatory factor analysis
(CFA) test used in structural equation modeling. Major t indexes
should pass the respective criteria, with an item loading higher
than 0.707, so that half of the variance is captured by the latent
construct. In this research we ran a CFA test with LISREL software
(version 8.7). Tables 5 and 6 show the results of the CFA test after
EO4 was removed, and all indicators met the above-mentioned
criteria.
5.2.2. Discriminant validity
This was assessed in the following three ways: (1) As shown in
Table 4, no cross loadings in the PCA test exceeded the criteria of
System integration
Firm internal IT services
Building company database
Website building
Building forum and community
Financial services
Sales and procurement
Evaluation services
Auctions or tendering services
Logistics
Online payment
Online management
Commodity exchange
Advertising
Consulting services
Industry analysis report
Industry news
Web store hosting
Supplier directory and product catalogue
%
0.00
%
%
00.01 00.02
%
%
%
00.03 00.04 00.05
Fig. 2. Services provided by B2B e-markets.
%
%
%
00.06 00.07 00.08
%
00.09
67

Table 3
Correlations among variables with Pearson correlations.
Size
Age
REM
Csize
PERPM
PERM
PERP
PERR
EA
Msize
SW
SD
EO
HRC
WTa
ISa
*
**
a
b
Mean
Std dev
Size
Age
68.84
4.52
1.18
1.64
1.64
3.19
2.48
2.52
2.72
3.62
7.08
5.19
6.01
5.72
0.22
10.29
240.18
2.94
0.41
0.97
1.08
1.48
1.39
1.62
1.02
1.73
3.05
1.33
1.15
1.07
0.42
8.97
1
.235**
0.014
0.125
.493**
.231**
.301**
.314**
0.15
0.129
.180*
0.116
0.024
0.067
REM
CSize
PERPM
PERM
PERP
PERR
EA
Msize
SW
SDb
EOb
HRCb
1
0.125
0.053
0.049
0.098
0.027
0.063
0.071
0.119
0.054
0
0.023
1
.192*
.206*
.425**
.400**
0.143
0.126
0.065
0.17
0.096
0.16
1
.412**
.551**
.600**
.351**
.274**
0.124
0.104
0.025
0.173
1
.452**
.406**
0.147
.292**
.317**
0.058
0.077
.250**
1
.828**
.221*
.396**
.303**
0.17
0.035
.222*
1
.294**
.383**
.260**
.192*
0.023
.214*
1
0.163
.198*
0.141
0.056
.177*
1
.191*
0.137
0.075
0.08
1
.197*
.229**
.300**
1
.433**
.269**
1
.527**
1
.257**
.267**
.382**
.416**
.374**
.442**
0.064
0.11
0.002
0.124
0.065
0.117
Signicant at the .05 level.

signicant at the .01 level.
They are categorical dummy variables, thus correlations are not provided.
Correlations of composite variables are calculated using the average value of ite-markets.
Table 4
Properties of the PCA for reective constructs.
Table 6
Goodness of t indices for the revised measurement model.
Component
HRC
HRC1
HRC2
HRC3
HRC4
EO1
EO2
EO3
EO4
SD1
SD2
EO
0.80
0.88
0.88
0.86
0.30
0.20
0.27
0.11
0.08
0.14
0.21
0.29
0.10
0.31
0.89
0.82
0.86
0.04
0.21
0.20
SD
0.01
0.12
0.12
0.12
0.15
0.21
0.21
0.05
0.94
0.93
4
0.15
0.10
0.10
0.12
0.06
0.24
0.06
0.98
0.02
0.05
The numbers are made bold in table 4 to indicate that these numbers are higher
than the threshhold value 0.5, and the items corresponding to these numbers
belong to the same factor.
Goodness of t indices
Revised model
Criteria
v2 (d.f.)
40.93
24
1.71
0.035
0.068
0.97
0.99
0.94
0.88
3
9
Smallera
d.f.
v2/d.f.
Standardized RMR
RMSEA
NFI
CFI
GFI
AGFI
Number of latent variables
Total number of ite-markets
a
<3.0
<0.05
0.050.08
>0.9
>0.9
>0.9
>0.8
The smaller, the better.
Table 7
Assessment of discriminant validity: condence interval and AVE test.a,b
Table 5
Properties of the CFA for Constructs.
HRC
Standardized
parameter estimate
t-value
HRC
HRC1
HRC2
HRC3
HRC4
0.81
1.06
1.05
1.19
10.03
13.99
10.61
13.29
EO
EO1
EO2
EO3
1.17
1
1.13
13.76
10.41
12.51
SD
SD1
SD2
1.25
1.3
10.87
11.45
0.4, thus the retained constructs meet the rst criteria of discriminant validity. (2) As per Fornell and Larcker (1981), the correlations between ite-markets in any two constructs should be lower
than the square root of the average variance shared by ite-markets
within a construct. As shown in Table 7, Fornell and Larkers criteria were met. (3) The condence interval test to assess discriminant validity between two factors involved calculating a
condence interval of plus or minus two standard errors around
the correlation between the factors, and determining whether this
interval included 1. If it does not include 1, discriminant validity is
HRC
EO
SD
EO
0.89
0.59
(0.47, 0.71)
0.31
(0.13, 0.49)
SD
0.89
0.44
(0.28, 0.6)
0.96
a
The square root of the variance shared between a construct and its ite-markets
is in the diagonal of the matrix.
b
The correlations and their condence intervals are reported by LISREL. The
correlation numbers may not correspond to Table 3, which was calculated in SPSS
using the average value of ite-markets.
demonstrated (Anderson and Gerbing 1988). Discriminant validity

is acceptable since no range within any bracket includes the value
1. (See Table 7.)
5.2.3. Internal consistency
Internal consistency was assessed by computing Cronbachs ,
composite reliability, and the average variance extracted (AVE)
Table 8
Internal consistency assessment of constructs.
HRC
EO
SD
Cronbachs a
Composite reliability
AVE
0.91
0.90
0.93
0.94
0.92
0.96
0.80
0.79
0.93
68
(see Table 8). All Cronbach a and composite reliabilities exceeded

Nunnallys criterion of 0.7 (Nunnally 1978) while the AVEs for
these constructs were all above the recommended threshold value
of 0.5 (Hair et al. 1998).
mixed evidence suggested that we should be careful in data analysis and interpretation. Therefore, we present PLS results using
either all four ite-markets or prot only to measure PER.
5.2.4. Common method bias

The extent of common method bias was assessed with the following tests. First, the correlation matrix of reective constructs
did not indicate any highly correlated factors (the highest correlation being 0.527), whereas common method bias would have resulted in extremely high correlations (q > .90) (Pavlou et al.
2007). Second, the dependent variables, the number of members,
revenues, and prots, were measured using different response formats including both objective and subjective measures. This contributed to the attenuation of common method bias (Podsakoff
et al. 2003). Third, the Herman one factor test was conducted by
loading all the variables in this study into an exploratory factor
analysis (Podsakoff et al. 2003). The test result shows only a slight
syndrome of common method since the highest factor explained
47% of the variance among all reective measures.
Fourth, the highest factor from the principal component analysis was added to the PLS model as a control factor on the dependent variable (Dong et al. 2009, Pavlou et al. 2007). This control
factor was not signicant, and the addition of this factor in the
PLS model did not change the results of any path coefcients. Finally, following Liang et al. (2007), we added a method variable to the
PLS model. As such, the variance of a specic observed indicator
was partitioned into three components: trait, method, and random
error. Among the nine weights from the method factor to indicators, only two were signicant at the 0.05 level, indicating the existence of a very small common method bias. However, the addition
of a method factor did not change the signicance level of any path
coefcients in the PLS model. These tests show a relatively minor
effect of common method bias, but controlling for the method factor did not change PLS data analysis results.
6. The structural model
5.2.5. Formative scale validation

The performance of e-markets (PER) was measured as a formative scale. The following tests were done to check the construct
validity of PER. First, the PLS weight for each indicator was checked
to see whether it could explain the PER results with signicance.
The results suggest that one indicator prot (PERP) was not significant (p-value of 0.55), and should be removed from the construct.
Second, we followed the approach suggested by Loch et al. (2003)
to calculate item-to-construct correlation. A composite score was
created by multiplying values by their individual PLS weights,
and summing them for each construct. An item would be considered to have no convergent validity on its construct if it was not
signicantly correlated with the composite value. The correlation
analysis showed that they were all signicantly correlated with
PER, as the Pearson coefcients were 0.901, 0.826, 0.723, and
0.755 for PERR, PERP, PERM and PERPM, respectively, all signicant
at the 0.05 level.
Third, we checked multi-collinearity among ite-markets by calculating the variance ination factors (VIF), following the method
prescribed in the literature (Bollen and Lennox 1991, Tabachnik
and Fidell 2001). The VIF indices for PERR, PERP, PERM and PERPM
were 3.509, 3.368, 1.320, and 1.658, respectively. The VIFs for PERR
and PERP were higher than the recommended cut-off value of 3.3
(Diamantopoulos and Siguaw 2006), but less than 10 (Tabachnik
and Fidell 2001). This result indicates a moderate multi-collinearity between PERR and PERP. Since we separated PERP from PER in
later data analysis, we also examined the multi-collinearity of
PER measured, only by three ite-markets (PERR, PERM and PERPM).
The VIF values for all three ite-markets were far below the threshold of 3.3, showing no multi-collinearity proble-markets. The
PLS, as implemented in SMART PLS Version 2.0, was used primarily for the following two reasons: (1) Compared with structural
equation modeling as implemented in LISREL, whose primary
emphasis is on overall model t, PLS is a more exploratory, datadriven, and prediction-oriented method. PLS ts the purpose of this
research better than LISREL since the goal of our research is to
predict e-market performance. (2) PLS allows for both reective
and formative scales to be modeled.
We performed four PLS analyses. In Model 1, both independent
and control variables were regressed on a composite performance
measure of e-market performance (PER). In Model 2, we excluded
the control variables to see how much variation the main constructs explained. Because prot did not load properly on PER as
indicated by Model 1, and exhibited multicollinearity with item
PERR, we performed two separate tests, using prot (Model 4)
and PER with the remaining three ite-markets (Model 3) as the
dependent variables.
The results of the PLS analysis of Model 1 are shown in Fig. 3
and Table 9. This model includes all predictors and explains 59%
of the variance in e-market performance.
Within the two dimensions of service capability, service width
(SW) has a signicant effect on e-market performance. The coefcient for SW is 0.15 and the t-value is 2.25 (p < 0.05). However, service depth (SD) is not signicantly correlated with e-market
performance. Its coefcient is negative at 0.04 but not signicant.
Therefore, the Service Width and e-Market Performance Hypothesis (H1) is supported, whereas the Service Depth and e-Market Performance Hypothesis (H2) is not.
The hypothesized direct effect of human resource capability
(HRC) (the Human Resources Capabilities and e-Market Performance Hypothesis, H3) on e-market performance is supported.
HRC is a signicant predictor of e-market performance (p < 0.05).
However, entrepreneurial orientation (EO) is negatively related to
e-market performance, but the coefcient is not signicant. Therefore, the Entrepreneurial Orientation and e-Market Performance
(H5) is not supported.
The hypothesized effects of HRC (the Human Resources Capabilities and Service Width/Depth Hypotheses, H4a/H4b) and EO (the
e-Market Entrepreneurial Orientation and Service Width/Depth
Hypotheses, H6a/H6b) on service capability received mixed evidence. First, both HRC and EO contribute signicantly to service
width. The coefcients for HRC and EO are 0.21, and 0.1, and the
t-values of these coefcients are 1.93 (very close to the critical value of 1.96 for p < 0.05), and 3.79 (p < 0.01). Second, HRC is not a
signicant explanatory factor of SD, while EO is. The coefcients
for HRC and EO are 0.03 and 0.4, and the t-values of these coefcients are 0.49 and 3.98 (p < 0.01).
The hypothesized direct effects of market opportunity on
e-market performance are supported. The size of potential B2B
service market (Msize) and e-commerce awareness (EA) are significant predictors of e-market performance, as hypothesized in the
Market Size and e-Market Performance Hypothesis (H7) and
the e-Commerce Awareness and e-Market Performance Hypothesis
(H9). The coefcients for Msize and EA are 0.26 and 0.12, and the
t-values of these coefcients are 6.4 (p < 0.01) and 2.21 (p < 0.05).
The Market Size and e-Market Service Width/Depth Hypotheses
(H8a/H8b) and the e-Commerce Awareness e and e-Market Service
Width/Depth Hypotheses (H10a/H10b) predict positive relationships among Msize, EA and service provision capabilities. The
69
Fig. 3. Results of PLS analysis (Model 1).
Table 9
Path Coefcients of PLS Results.
Model 1
Weights
EO
HRC
SW
SD
Msize
EA
REM
WT
Csize
IS
Size
Age
R2
Model 2
t-value
dep. var.: PER
0.01
0.10**
0.15**
0.04
0.26***
0.12**
0.10**
0.12**
0.23**
0.08
0.17
0.42***
0.59
0.19***
0.24***
0.19**
0.08
0.35***
0.15**
3.18
4.4
2.26
1.28
6.22
2.03
0.58
0.44
0.22
2.53
2.25
1.02
6.4
2.21
2.41
2.62
3.19
1.34
1.52
7.7
0.32
0.1
0.40***
0.03
0.09
0.21
Sub-DV: SD
1.64
3.98
0.49
1.5
0.21
0.1
0.40***
0.03
0.09
0.21
1.95
1.93
3.79
2.59
0.13**
0.10
0.21***
0.15**
0.14
Sub-DV: SW
EA
EO
HRC
Msize
R2
**
***
Model 3
t-value
dep. var: PER (4 ite-markets)
Sub-DV: SD
EA
EO
HRC
Msize
R2
Weights
0.13
0.10
0.21***
0.15**
0.14
Weights
Model 4
t-value
dep. Var.: PER (3 ite-markets)
dep. var.: Prot
0.01
0.10**
0.14**
0.04
0.25***
0.13**
0.11**
0.13**
0.21***
0.07
0.17
0.43***
0.02
0.07
0.18**
0.02
0.27***
0.04
0.01
0.05
0.36***
0.12**
0.12
0.24***
0.24
2.49
2.18
0.95
6.00
2.55
2.72
2.68
3.38
1.26
1.62
8.39
Sub-DV: SD
1.58
3.72
0.46
1.42
0.21
0.1
0.40***
0.03
0.09
2.01
1.95
3.72
2.59
0.13**
0.10
0.21***
0.15**
0.14
Sub-DV: SW
Weights
t-value
0.35
1.47
2.85
0.37
4.82
0.6
0.48
0.72
6.61
2.31
1.3
3.82
Sub-DV: SD
1.62
3.75
0.49
1.43
0.1
0.40***
0.03
0.09
2.13
1.95
3.73
2.70
0.13**
0.10
0.21***
0.15**
0.14
Sub-DV: SW
1.55
4.07
0.5
1.41
Sub-DV: SW
2.08
1.91
3.74
2.44
Signicant at the .05 level.

signicant at the .01 level.
results indicate that EA is positively related to SW but not SD. The

coefcients of SW and SD are 0.13 and 0.1, respectively, and the tvalues of these coefcients are 1.95 (very close to the critical value
of 1.96 for p < 0.05) and 1.64. The predicted relationship between
Msize and SW (the Market Size and e-Market Service Width
Hypothesis, H8a) is supported (coefcient is 0.15, p < 0.05), while
the predicted relationship between Msize and SD (the The Market

Size and e-Market Service Depth Hypothesis, H8b) is not supported
(coefcient and t-value of 0.09 and 1.5, respectively).
In sum, among the six variables (Msize, EA, HRC, EO, SD, and SW)
that were hypothesized to explain e-market performance directly,
four are supported and two (SD and EO) are not. Among all the
70
indirect effects, all factors accounted for SW to a certain degree,

and only EO signicantly explained service depth.
The control variables, organization age, regional e-commerce
maturity, and the size of clients, are positively and signicantly related to e-market revenue. Organizational age turns out to be very
important (with a coefcient of 0.42 and a t-value of 7.7), suggesting a rst-mover advantage in achieving higher performance.
Organizational type is also signicantly related to e-market performance, indicating that comprehensive e-markets have better performance than single industry e-markets. Organization size and
market structure show no signicant relationships with e-market
performance.
Model 2, as shown in Table 9, which includes only the main
constructs, explains 32% of e-market performance variance. None
of the previous conclusions changed except for EO. EO is still negatively correlated with e-market performance, but the coefcient
becomes signicant. This seems to imply that EO can contribute
to e-market performance through improved service capability,
but on the other hand, its risk effects may be detrimental to e-market performance. For example, Laseter and Bodily (2004) found
that e-markets without strategic continuity are unlikely to have
high performance.
Model 3 is a check of the robustness of the results of Model 1. It
indicates that the results of Model 1 do not change signicantly
after removing PERP from the composite dependent variable. In
fact, the relationships among e-commerce awareness, entrepreneurial orientation and SW become stronger.
In Model 4, we included only prot as the dependent variable.
Compared to Model 1, HRC becomes less signicant. Among all
the control variables, Csize becomes the most signicant variable,
and market structure becomes a signicant predictor of prot.
However, WT becomes insignicant.
7. Conclusion
7.1. Key ndings
The integrated model based on both the organizational capability and market opportunity perspectives accounted for a large portion of the variance in B2B e-market performance. More
importantly, consistent with the market opportunity perspective,
it was found that both market size and e-commerce awareness
have a signicant direct effect on e-market performance and an
indirect effect through service width. From an organizational capability perspective, we identied signicant enabling factors of service capability, including entrepreneurial orientation and human
resource capability. The latter contributes to the performance of
e-markets directly, and indirectly through service width. Table 10
summarizes the results of hypothesis testing based on Models 1

and 3.
Within the two service capabilities, service width is positively
related to e-market performance, whereas service depth shows
no signicant effect on e-market performance. This nding is different from Clasen and Mueller (2006) that service breath decreases e-market performance, but agrees with Ordanini (2006)
that offering complementary services enhances rm performance.
This is probably because the Chinese market is still not generally
ready to accept online transactions, and this market opportunity
is ambiguous, compared with a growing and mature market. An
ambiguous market is less able to yield signicant revenues and
prots (Eisenhardt and Schoonhoven 1990).
Human resource capability was found to be an important
enabling capability for service width. This result contradicts the
view that e-markets are impersonal, since operating e-markets
does require close interactions with customers. As one of the B2B
e-market leaders and participant in our pilot interviews explained:
We know each of our customers well. We are located next door to
our customers. I know not only their bosss name, but also his
wifes and childs names. We assign each of our staff members to
keep track of several customers. We know all that information
once their cargo ship leaves the harbor. Therefore, we argue that
close interaction with customers requires high caliber employees
to build a quality customer interface. It is up to these employees
to detect industry subtleties, and to leverage information they
gather in the eld to design diversied services (Wiklund and
Shepherd 2003).
7.2. Theoretical contributions
This research contributes to the literature by building a theoretical model to explain the performance of B2B e-markets. It identies important capabilities for B2B e-markets, including service
capability and its enabling capabilities. This approach contrasts
with prior research that emphasizes the importance of IT capabilities (Weill and Vitale 2002). The difference between our research
and that of Weill and Vitale (2002) can be attributed to the current
stage of Chinese B2B e-markets, which still focus on information
and complementary services. These services are labor-intensive
and relationship-based, which require high caliber human resources. When the B2B e-markets evolve into supporting transactions and supply chain infrastructure with sophisticated business
processes, the importance of IT capability may become more
prominent.
One of the key novel features of this research is the incorporation of market opportunities to explain rm performance. Prior research already suggests that the market opportunity that a rm
Table 10
Summary of hypothesis testing results.
#
Hypotheses
Results
1
2
3
4a
4b
5
6a
6b
7
8a
8b
9
10a
10b
Service width is positively related to e-market performance

Service depth is positively related to e-market performance
Human resource capability is positively related to e-market performance
E-market human resource capability is positively related to service width
E-market human resource capability is positively related to service depth
E-market Entrepreneurial orientation is positively related to its performance
E-market entrepreneurial orientation is positively related to its service width
E-market entrepreneurial orientation is positively related to its service depth
The size of the markets in which B2B e-markets operate is positively related to their performance
E-market market size is positively related to e-market service width
E-market market size is positively related to e-market service depth
Industry e-commerce awareness is positively related to B2B e-market performance
Industry e-commerce awareness is positively related to the service width of an e-market
Industry e-commerce awareness is positively related to the service depth of an e-market
Supported
Not supported
Supported
Supported
Not supported
Not supported
Marginally supported
Supported
Supported
Supported
Not supported
Supported
Supported
Not supported
exploits during its founding could result in a prolonged effect on its

performance (Eisenhardt and Schoonhoven 1990). Linking market
opportunity to rm performance also provides guidance on identication of attractive business opportunities, evaluated according to
their performance criteria, rather than the likelihood of a new
start-up, a criterion used in the current literature (Baron and Ensley 2006, Venkataraman 1997).
The integration of both market opportunity and organizational
capability perspectives has proven to be helpful in explaining emarket performance. In an attempt to synthesize market opportunities theory and organizational capabilities theory, Foss et al.
(2008, p. 26) commented that there is limited systematic research
in management on the processes by which new resource services
are discovered or created, and on how organizational structure,
incentives, and governance mechanisms affect the creation and
use of valued attributes. This research has addressed this issue
by showing that rm capabilities, such as human resource capability and entrepreneurial orientation, can enable market opportunity
recognition and exploitation via B2B e-market service capability
building.
71
provision of more services, but the content and weight of these

services can differ.
In sum, this research has shown that the incorporation of both
organizational capability and market opportunity perspectives is
promising for explaining the performance of business-to-business
electronic marketplaces, based on a large-scale survey in a key
emerging economy. In addition to lling some voids in the extant
literature, this research has identied a potentially fruitful path
for studying electronic marketplaces in other contexts. The proposed future directions for research could lead to a more comprehensive and rened understanding of B2B e-markets.
Acknowledgements
This research was supported partially by the National Natural
Science Foundation of China under Grants 70902078 and
70888001, a Young Faculty fund from the Ministry of Education
of China (20090004120001), and Renmin University Survey
Research Foundation.
7.3. Managerial implications

This research has several managerial implications for B2B
e-market operators. First, targeting a market with a large size
and high e-commerce awareness could result in improved
e-market performance. Second, in light of the importance of service
width, B2B e-markets should focus on providing more information
and complementary services to participating rms, before moving
to the next stage of supporting transactions and supply chain management. More importantly, e-markets should focus on recruiting
high quality employees or providing advanced training to existing
staff. Cultivating an entrepreneurial orientation culture is also
important for developing service depth.
7.4. Limitations and directions for future research
There are several limitations to this research. First, we mainly
used revenue and prot as performance measures. Financial measures like these may not offer an accurate assessment of rm performance, given that they measure short-term performance only.
Second, this research has a relatively narrow scope, focusing on
third party B2B e-markets only. As a result, what explains the performance of consortia and private e-markets remains unknown.
Third and lastly, the research model was validated in China.
Although our results might be generalized to third party e-markets
that mainly support aggregation, as well as transactions to a certain degree, the differences between Chinese and western e-markets were not addressed.
These limitations also suggest future research opportunities.
First, more research is needed to develop measures that capture
long-term performance of B2B e-markets, such as customer feedback and satisfaction. Second, a comparison of organizational
capabilities across different types of e-markets can also provide
useful guidance. For private and consortium e-markets, IT infrastructure may be more important for supporting complicated
transactions and supply chain management. Therefore, different
types of e-markets will need somewhat different sets of resources and capabilities. Third, a comparison of cultural differences between e-markets in western countries and in China or
Asian countries can be an interesting further direction. In particular, understanding cross-cultural differences can provide guidance for internationalization strategies of e-markets, which
could be benecial due to the importance of market size to emarket development. For example, our results recommend the
Appendix A. Appendix: Measurement item for key research

variables
A.1. Market Size (Msize)
By your estimation, what is the size of the industry that your
website is in (seven levels of measurement):
1.
2.
3.
4.
5.
6.
7.
5 million-10 million
10.01 million -30 million
30.01million-50 million
500.01million-1 billion
1 billion and above
A.2. E-Commerce Awareness (EA)

Company e-commerce awareness in this industry is (a ve point
scale ranging from very low to very high)
A.3. Entrepreneurial Orientation (EO)
To which degree you agree with the following statements (a seven point scale ranging from strongly disagree to strongly agree):

EO1:
EO2:
EO3:
EO4:
We
We
We
We
focus on product and service innovation

are willing to collaborate with competitors
have a strong incentive to grow
always follow our competitors
A.4. HR Capability (HRC)

Compared to other companies in your industry, does your company have a weak or strong position in terms of (a seven point scale
ranging from extremely weak to extremely strong)
HRC1: Staff with a positive commitment to the companys
development
HRC2: Staff willing to contribute with ideas for new products
and services
HRC3: Special expertise in marketing
HRC4: Highly productive staff
72
A.5. Service Depth (SD): Transaction Capability

(a seven point scale ranging from strongly disagree to strongly
agree)
SD1: Our e-commerce website allows customers to complete
their orders online easily
SD2: Our e-commerce website allows customers to complete
their orders online securely
SD3:Our e-commerce website allow users to track their orders
online
This item was dropped from the measurement in the nal

survey.
The number of employees in your company: _____________

Organization age (AGE)
In which year was your organization launched: ___________
The major targeted customers of your Website are (CSize):
Small companies with less than RMB 10million in sales revenue.
Small companies with sales revenue between 10 and 30 million
Medium sized companies with sales revenue between 30 and
100million
Medium sized companies with sales revenue between 100 and
300million
Large companies with sales revenue above 300million
The market structure can be described as (IS):coded as 0 (fragmented) and 1 (dominated)
A.6. Service Provision (SW)

The services your websites provide currently (yes/no)

Consulting and intelligence related services:

Supplier directory and product catalogue
Web store for members
Industry dynamics and news
Industry analysis report
Industry procurement, sales, or technology consulting services
Advertisement
Transaction related services:

Commodity exchange
Order administration and analysis
Online payment
Product delivery and logistics
Auction or tendering services
Value added services:

Product evaluation service

Sales and procurement delegation
Financing service
Business forum and communities
Informatization services:
Website building
Building company database
Company internal IT service (such as ERP, MRP and accounting
book system)
System integration between trading partners
A.7. Performance of e-markets (PER)
PEFR: The revenue of your company in 2008 was
________(RMB) .
01 million, 13 million, 35 million, 510 million, 1030 million, 3050 million, 50100 million, 100 million and above
PEFP: the prot of your company in 2008 was ________ (RMB)
0100,000, 100,000500,000, 500,0001million, 15 million,
510 million, 1050 million, 50 million and above
PEFM: the number of registered members in your website:
_____________
PEFPM: the number of fee paying members in your
website:________________
Control Variable:
Organizational size (SIZE)
Fragmented on both sides

Dominated on one side and fragmented on the other side.
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Organizational Capabilities and Market Opportunities Impact on B2B E-Market Performance

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Electronic Commerce Research and Applications 11 (2012) 5974

Contents lists available at ScienceDirect

Electronic Commerce Research and Applications

On the performance of B2B e-markets: An analysis of organizational capabilities

potentially bring to rms (Christiaanse 2005), many e-market

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

The necessity for examining market opportunities is highlighted

2. Literature review and theoretical background

participating companies. Moreover, the scope of e-market

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Laseter and Bodily

Independent variables (a)

Sample (research method)

61 e-markets from around the globe

Consortium ownership structure (+)

Time to rst nancial milestone

Multiple languages (+)

Gosain and Palmer

Percentage of revenues from transaction fees

32 European operators (survey)

Existence (a website must have undergone some

177 e-markets from around the globe

Number of hits received

194 e-markets (website codingb)

Exchange prominence (websites links in)

The signs in brackets indicate signicant relationships, either positive or negative.

B2B e-markets operate with great uncertainty, such as what

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Next, we will dene B2B e-market capabilities, followed by

Fig. 1. Research model for performance of B2B electronic marketplaces.

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

to these services, the higher the commitment that is needed from

or even business model innovations can occur that may render

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Number of employees (size)

Organization age (in years)

Revenue (PERR) (Unit: RMBa)

Prot (PERP) (Unit: RMBa)

Registered members (PERM)

Paid members (PERPM)

4.2. Instrument development and survey

Exchange rate between USD and RMB is approx. 1: 6.7.

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Fig. 2. Services provided by B2B e-markets.

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Signicant at the .05 level.

The smaller, the better.

demonstrated (Anderson and Gerbing 1988). Discriminant validity

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

(see Table 8). All Cronbach a and composite reliabilities exceeded

5.2.4. Common method bias

6. The structural model

5.2.5. Formative scale validation

S. Wang et al. / Electronic Commerce Research and Applications 11 (2012) 5974

Fig. 3. Results of PLS analysis (Model 1).

dep. var.: PER

dep. var: PER (4 ite-markets)

dep. Var.: PER (3 ite-markets)

dep. var.: Prot

Signicant at the .05 level.

results indicate that EA is positively related to SW but not SD. The

Fragmented on both sides