Risk in Electronic Commerce: It Does Matter, but Not Equally for All Companies

Based on the Electronic Commerce Enquête 97/98, one of the largest empirical investigations on business-tobusiness electronic commerce issues in the German-speaking world (n>900), companies’ perception of risk factors in electronic commerce is revealed using multivariate statistical procedures. As a contribution to the field this paper presents the integral relationships and the importance of technical and nontechnical dimensions of risk related to electronic commerce in various industry segments. Furthermore, using the innovative Limit Conjoint Analysis the potential of Electronic Commerce in terms of market share under alternative risk scenarios is calculated. Companies belonging to different industry segments were asked to rate eight different electronic commerce scenarios with respect to their attitude and willingness to engage in electronic commerce transactions via the World Wide Web. The scenarios incorporate different levels of associated risks capturing the fundamental trade-off between opportunity for profit making versus danger of loss. Using Conjoint Analysis the relative importance of risk factors including psychological risk, financial risk, and technical/legal risk was then quantified. In most cases technical/legal risk over financial and psychological risk is of most importance to the vast majority of firms. In order to group the responding companies for further investigation we used the variable “industry segment”. Applying t-tests, main findings support the hypothesis that there are significant industry segment specific differences of risk perception. The potential of electronic commerce in terms of market share is roughly 40 times bigger if technical/legal risk is low compared to a scenario where technical/legal risk is high. In conclusion, risk matters in varying degrees for all companies and contributes largely to the potential of electronic commerce, thus helping us to better differentiate and assess the importance of risk in electronic commerce.