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in much of Asia means that e-marketplaces have to provide numerous complemen-
tary services in the areas of logistics, payments, assurance, and credit checks for
a successful launch.
These differences are well illustrated by an industry important in both
locales—nonferrous metals (e.g., aluminum and copper) (Hempel and Kwong,
2001). In this industry, key structural characteristics plausibly related to e-
commerce business models and e-business adoption differ sharply in China and the US—
industry consolidation/fragmentation, spot versus systematic sourcing patterns, and e-
commerce infrastructure.
Industry concentration is an important structural condition likely related to e-
commerce activity, because fragmentation (of buyers, suppliers, or both) is
believed to promote the formation of electronic marketplaces and exchanges
(Kaplan and Sawhney, 2000). In the US, the ten largest companies account for
70% of aluminum extrusion production. In China, the ten largest companies
produce only 30%; about 600 small companies account for roughly half of all
production. Therefore, one would expect that electronic marketplaces would be
more successful in the highly fragmented Chinese nonferrous metals industry than in the
US, where the industry is quite concentrated.
Industry sourcing patterns—systematic versus spot—are also plausibly
related to e-commerce activity, since widespread use of spot purchasing is believed
favorable to the use of electronic exchanges (Kaplan and Sawhney, 2000). In the US,
systematic sourcing of nonferrous metals predominates, whereas spot purchasing is
more common in China. Again, one would expect electronic marketplaces to be
more successful in China.
However, while both industry fragmentation and spot sourcing
patterns favor
e-marketplace activity, the quality of e-commerce infrastructure does not. The
quality of the e-business infrastructure differs greatly between China and the US in
a direction that bodes ill for the use of electronic marketplaces in China. For
example, China lacks a well-functioning electronic payment system (Silwa, 2001).
Most business funds transfers involve currency: business checks are uncommon,
and use of credit cards is considered an unsound practice. Business interruption