Global e-business: firm size, credibility and desirable modes of payment

Authors:
Xia Pan;Angappa Gunasekaran;Ronald E. McGaughey
Affiliations:
College of Business and Management, University of Illinois at Springfield, UH 4042, One University Plaza, Springfield, IL 62703, USA.;Department of Management, Charlton College of Business, University of Massachusetts Dartmouth, 285 Old Westport Road, North Dartmouth, MA 02747 2300, USA.;Department of Management Information Systems, College of Business, The University of Central Arkansas, Conway, AR 72035 0001, USA
Venue:
International Journal of Business Information Systems
Year:
2006

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Abstract

This paper explores the impact of company size on an important financial consideration affecting the decision to adopt e-business in international trade. We assert that firm size will influence the choice of payment method in global e-commerce. When a Letter of Credit (L/C) is used among global supply chain partners in the e-business setting, payment flows will move faster than the physical flow of products. This asymmetric speed is not preferable for importers, particularly small importers. In this case, the diffusion of e-business adoption will likely be upstream rather than down. We predict that the usance Letter of Credit and usance L/C payable at sight will become more popular as payment modes in global e-business, particularly for Small- to Medium-size Enterprises (SMEs). New ICC regulations for e-business, if actually implemented, will likely popularise a payment mode similar to the current usance Letter of Credit.