Electronic Commerce:From a Definitional Taxonomy Toward

a Knowledge-Management View

Clyde W. HolsappleSchool of Management

Carol M. Gatton College of Business and EconomicsUniversity of Kentucky

Meenu SinghDepartment of Management

M. J. Neeley School of BusinessTexas Christian University

Electronic commerce has become one of the major factors that will determine the futuresurvival or success of organizations. Like any new field, electronic commerce aboundsin confusion and lack of coherence. Consequently, a host of definitions can be foundpresenting a confusing picture of the field. We have collected and qualitatively ana-lyzed an assortment of definitions representative of this variety, resulting in the identi-fication of five clusters: the trading view, the information exchange view, the activityview, the effects view, and the value chain view. For each cluster, examples of recent re-search along the lines of its view are given. Although each cluster represents a distinctview of electronic commerce and has merit, none fully subsumes all others. To helpunify the five perspectives, an integrated definition is advanced. However, this inte-gration, which is as good as the five views from which it is synthesized, has limitations.A modified version of the integrated definition, incorporating richer notions of knowl-edge management, is introduced. Befitting the knowledge-based economy, thisknowledge-management view of electronic commerce can benefit both researchersand practitioners by furnishing a relatively comprehensive, unified, organized foun-dation for understanding and performing electronic commerce.

definitions, electronic commerce, information exchange, integration,knowledge management, taxonomy, trading, value chain

1. INTRODUCTION

The cutting edge for business today is electronic commerce (EC) and it standspoised to make a momentous contribution to the way government, business, and

JOURNAL OF ORGANIZATIONAL COMPUTINGAND ELECTRONIC COMMERCE 10(3), 149–170 (2000)

Correspondence and requests for reprints should be sent to Clyde W. Holsapple, School of Manage-ment, Carol M. Gatton College of Business and Economics, University of Kentucky, Lexington,KY 40506–0034. E-mail: cwhols@pop.uky.edu

individuals conduct business [1]. We are witnessing a revolution in the businessworld due primarily to an explosion in information technology and the resultingrapid emergence of EC [2]. EC signifies a fundamental shift in how organizationsoperate, interact, and compete. It is emerging as a key enabler in changing the waycompanies do business and represents one of the most intriguing challenges facingthe business world today [3].

Organizations, inanever-ending quest tostaycompetitive in theglobal economy,are increasingly turning to EC [4]. It has become one of the major factors that will de-termine the future survival and/or success of organizations. “Organizations can ei-ther embrace it [EC] or be embraced by it” ([5], p. 1). Yet, like any new field, EC isreplete with confusion and lack of coherence [6]. This broad—and somewhatvague—term has been understated, overstated, ripped apart, and embraced. It is of-ten poorly, partially, or narrowly understood, having different meanings for differ-ent people.

To help make sense out of the many meanings, we have collected a wide rangeof EC definitions, analyzed them, and developed a taxonomy of EC perspectives.This taxonomy provides a structure for clarifying EC viewpoints and a platform forthinking about what an organization needs to consider in its quest for competitive-ness in the emerging EC world. The taxonomy classifies EC definitions into fivecategories: the trading view, the information exchange view, the activity view, theeffects view, and the value chain view. It leads us to an integration of the five cate-gories in the guise of a unifying definition of EC. This integration can benefit bothresearchers and practitioners by furnishing a common, organized foundation forunderstanding and performing EC. Beyond an EC definition that integrates thefive categories, we introduce an EC definition with a knowledge-management ori-entation. It builds on the integrated definition but overcomes some limitationsrooted in the information exchange view of EC.

The article is organized as follows: In Section 2, we furnish a background for ap-preciating various perspectives of EC. In Section 3, we establish a taxonomy forclassifying diverse EC definitions (and practices). We compare and contrast thefive categories and outline sample research projects in each. In Section 4, we intro-duce an integrated definition of EC and discuss its relation to the taxonomy catego-ries. In Section 5, we point out limitations in this view of EC and advance aknowledge-management perspective of EC. Examples and benefits are discussed.In Section 6, we conclude the article by pointing out implications of the taxonomyand new definitions for EC practice, research, and study.

2. BACKGROUND

The EC concept began to creep into the business vocabulary in the 1970s [7] and hasbeen greatly expanded and popularized since the mid 1990s. Although EC has beenaround for some time in the forms of electronic funds transfer (EFT) and electronicdata interchange (EDI), neither EFT nor EDI is a synonym for EC, but rather forparts of it [8]. For instance, EDI involves use of standardized electronic-message for-mats for business documents (e.g., requests for quotations, purchase orders, bills oflading, receiving notices, invoices), allowing computers in one company to talk to

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computers in another company without producing paper documents. Com-puter-to-computer exchange of business information has become an increasinglypopular form of EC [9]. Over 50,000 companies use EDI in North America, includ-ing 40% of the Fortune 500 companies [10].

Semich, editor-in-chief of Datamation, editorialized, “It’s pretty clear from thecase studies in our cover feature that the combination of the Internet and e-com-merce is the next step in building competitive advantage” ([11], p. 5). The list of cor-porations conducting EC seems to grow daily [12]. U.S. businesses will exchangean estimated $327 billion in 2002 [13]. Industry analysts expect worldwide businessdemand for EC technologies to more than double in the next 4 years [4].

According to Steve Mott, senior vice president at MasterCard, who heads upMasterCard’s stake in EC, “Electronic commerce is bigger than the Internet. Mostpeople think the Internet is driving electronic commerce, but it is the reverse case.… The Internet is an integral part of electronic commerce” ([8], p. 30). Often, a dis-tinction is made between traditional EC and EC on the Internet (i.e. Internet com-merce) [14]. Although traditional EC, through such means as EFT, EDI, faxcommunication, symbol technology, and interenterprise messaging and file trans-fer, has steadily grown for many years, EC on the Internet is turning out to be thereal dynamo [14].

As a field of study and research, EC cuts across every functional business disci-pline. It will eventually pervade practically every aspect of management. The land-scape of this emerging world of business will be shaped, in part, by amultidisciplinary community of researchers who set out to investigate theoretical,applied, and empirical questions about the nature, design, and operation of EC [6].Today, this EC landscape is still very much an unsettled frontier, and, much likethe wild West of the past, needs to be “tamed” [9]. Research along this frontier ischaracterized by a great variety of topics, diversity of functional orientations, andlack of common definitions. “The term electronic commerce is poorly understoodand frequently used to denote different meanings, very often depending on the in-dividual’s job function, professional orientation and background, focal product orservice, and type of information technology deployed” ([7], p. 5).

Although the many perspectives on the nature of EC enrich the field, they canalso present a tangled panorama, like viewing the back side of a tapestry. To helpappreciate the pattern being woven, we introduce a taxonomy of EC definitionsthat delineates five major themes, plus an integrative definition that encompassesall of those themes. The result is a broad basis for organizing study and investiga-tion in the EC field.

3. A TAXONOMY OF EC DEFINITIONS

In an initial attempt to discern the best, most inclusive, comprehensive character-ization of what EC is, we collected a variety of EC definitions from diverse print andelectronic sources. On the whole, the resultant list seemed representative of the ECliterature. Individually, each definition appeared to have merit, but not one of themdominated or encompassed all the others. Lacking a dominant characterization ofEC, we sought to organize the definitions into a taxonomy, in which all definitions

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in each category share a common theme. The result suggests what factors shouldappear in a relatively inclusive characterization of EC. It also points out major per-spectives that have been taken in investigating the EC field.

As illustrated in Figure 1, the taxonomy is comprised of five views of EC: the trad-ing view, the information exchange view, the activity view, the effects view, and thevalue chain view. Each perspective has value in its own right, furnishing a lens forviewing the EC landscape. The taxonomy should not necessarily be taken as ex-hausting all possibilities. It is certainly possible that a definition implying one cate-gory may have been overlooked or may arise in the future. Some of the definitionsclustered to form one category may have elements that secondarily relate it to othercategories as well (just as there can be loadings on multiple factors in factor analysis).The five definition categories as well as the definitions clustered to identify each arepresentedinaroughlyincreasingorder: fromthenarrowest tothebroadest inscope.

3.1 The Trading View

Insofar as the term commerce connotes market-based activities, EC tends to be asso-ciated with computer-based means for performing commercial transactions—buy-ing and selling. For example, shopping services allow a consumer to seek and pur-chase goods or services through electronic networks. This type of EC is probably theone that springs to the popular mind when the term electronic commerce is used, asthe following definitions suggest.

T1. “EC is the use of computer networks to conduct business—basically thebuying and selling of goods and services—electronically with one’s suppliers, cus-tomers, and/or competitors” ([12], p. 54).

T2. “Commerce is the exchange of products and merchandise, usually on alarge scale. The implementation of electronic commerce then is the act of exchang-

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Figure 1. Five perspectives on electronic commerce.

ing products and merchandise facilitated wholly or in part through electronicmeans” ([15], p. 1).

T3. “Electronic commerce is the communication of any object of commercial in-terchange by electronic means” ([16], p. 15).

T4. “Electronic commerce is the use of telecommunication networks for the pur-pose of linking organizations and/or individuals who engage in some form ofcomputer-mediated commercial trading relation. It incorporates things like buyingand selling over such platforms as the internet, EDI, Interorganizational Systemssuch as EFT, Point of Sales Systems, etc” ([17], p. 2).

T5. “The term electronic commerce has been used to describe a wide variety ofIT-enabled market transactions” ([18], p. 155).

T6. “Electronic commerce can be defined as all activities related to interactionbetween two trading partners except production and delivery of physical goodsand services” ([19], p. 1).

T7. “More commonly, e-commerce is associated with the buying and selling ofinformation, products, and services via computer networks today and in the futurevia any one of the myriad of networks that make up the Information Superhigh-way” ([1], p. 1).

T8. “Electronic commerce is a general term applied to the use of computer andtelecommunications technologies, particularly on an inter-enterprise basis, to sup-port trading in goods and services” ([20], p. 1).

By focusing on computer-based means for accomplishing buying–selling trans-actions, the foregoing definitions coalesce around a trading view of EC. This viewis concerned with what kind of buying–selling can be done electronically, what as-pects of such transactions can be electronic, identification of enabling technologies,and exploration of electronic trading behaviors. Although the emphasis is on trad-ing relations, a few of the aforementioned definitions hint at the importance of in-formation in electronic transactions and suggest the inclusion of electronicallyaided activities related to these transactions. These notions are focal points forother categories in the taxonomy.

A variety of research issues emanate from the trading view. Consider examplesfrom a recent Association for Information Systems (AIS) conference. Ambrose andJohnson [21] examined failure of ventures devised to sell goods or services over theInternet. They attribute these failures to improper understanding by sellers as tohow buyers buy products or services. They developed a trust-based model that ex-plains buying behavior in Internet retailing using trust and buyer motivation as es-sential components. Ramaswami et al. [22] contended that, when identifyingpotential customers for online sales channels, managers should concentrate less ondemographics and more on consumers who have the ability, motivation, and op-portunity to buy online.

Chen and Sukpanich [23] developed a 10-item instrument for measuring fiveconstructs characterizing customers’ involvement in electronic purchasing: senseof security, trust, preference, role of purchase, and accessibility to the Internet.Such work has both practical and theoretical uses. Ba, Whinston, and Zhang [24]examined an issue that has not received much attention in EC trading: the qualityuncertainty problem that could result in public mistrust of products and services

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offered online. Using a game theoretic approach, they developed a new design fortrusted third parties that can help achieve a proper climate for trading online.

3.2 The Information Exchange View

From the trading view perspective, EC is basically the buying and selling of goodsand services by electronic means. Its purpose is to link organizations and/or indi-viduals who engage in some form of computer-mediated commercial trading rela-tion. In actuality, EC involves the exchange of not only products and services butalso information. Definitions clustered into the information-exchange view may ormay not mention transactions or buying–selling. However, each explicitly recog-nizes the importance of transferring information in EC.

Foragivenbusiness transaction, the flowofmaterial is secondaryto the flowof in-formation that enables, facilitates, and guides it [25]. Information can be consideredas characterizing the substance of a market transaction, and can itself can be the com-modity being bought and sold. Beyond this, information transferred can occur priorto a transaction (e.g., to enable it) or following a trade (e.g., to assess it). The followingcluster of definitions emphasizes an information-exchange view of EC.

I1. “EC has been used to describe a wide variety of business related transac-tions, but is at its core the data used for conducting day-to-day business operationswith suppliers and customers” ([26], p. 136).

I2. “EC provides the ability to share a wide range of communiqués and dataeasily with trading partners. This broad view includes public e-mail networks suchas MCI mail, Compuserve, and the Internet as well as groupware programs, suchas Lotus Notes® and WordPerfect Office®” ([27], p. 34).

I3. “EC can be defined as commercial activities conducted through an exchangeof information generated, stored, or communicated by electronic, optical, or analo-gous means, including electronic data interchange (EDI), e-mail, and so forth”([28], p. 1).

I4. “Electronic commerce can be considered to be the integration of communica-tions, data management and security services to allow business applications withindifferent organizations to automatically interchange information” ([5], p. 1).

I5. “Electronic commerce is the art of doing business without the use of paper.Virtually any non-paper-based means for exchanging business information can beclassified as EC. This includes the common voice telephone and facsimile (fax) aswell as numerous other technologies” ([10], p. 3).

I6. “EC is concerned with providing electronic solutions to all activities of infor-mation communication between two parties” ([19], p. 1).

I7. “EC is the sharing of business information, maintaining business relation-ships, and conducting business transactions by means of telecommunication net-works” ([29], p. 3).

I8. “The term EC also applies to the use of computer networks to search and re-trieve information in support of human and corporate decision making” ([1], p. 1).

These definitions emphasize the distribution of information in the conduct ofbusiness (e.g., as messages passed electronically between trading partners, and

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electronic information transfer within a business). Fundamentally, every businessis an information business; even in many industries not widely considered infor-mation businesses, information handling actually represents a large percentage ofthe cost structure [30]. To be sure, business has always been about acquiring andusing information. For instance, in 1850, Paul Julius Reuter, founder of ReutersNews Services, started using pigeons to deliver information faster than competi-tors [31].

Every business today competes in two worlds: a physical world of resourcesthat managers can see and touch, and a virtual world of information. The latter hasgiven rise to the world of EC, as a locus of value creation [32]. On a broader scale,this view, implicitly or explicitly, recognizes the new paradigm shift sweeping thebusiness world today: that information is not just a supporting element of thevalue-adding process but a source of value itself; that organizations apply usefulinformation to make more timely and better informed decisions.

When buyer–seller transactions occur in the electronic marketplace, informationis accessed, absorbed, arranged, and sold in different ways. In fact, the informationabout a product or service is separated from the physical product or service and hasbecome important on its own. In some cases, this information can become as crucialas the actual product or service in terms of its effect on a company’s profits [1].

Representative examples of research flowing from an information exchangeview of EC can be found in recent AIS conference presentations. For example, topromote effective EC in health care, Forgionne et al. [33] devised an integrated in-formation system to help health care provider and payer decision makers captureuseful transactional data and exchange needed information. The system consists ofa database for capturing relevant data, model base for modeling and simulation offinancial outcomes, and a knowledge base for analyses and evaluation of variousreports, forecasts, and actions. Nakayama [34] explored how information inter-change using EDI shifts power in grocery marketing channels. His study con-firmed that this EC application favors the suppliers because they obtain tradinginformation and gain marketing flexibility more than the wholesalers do. Senn [35]contended that interorganizational systems, as an element of EC, are rapidly be-coming an essential mechanism for competitive success. He conducted a fieldstudy that identified an evolutionary pattern of four stages by whichinterorganizational systems are advancing, with common information sources andinformation exchange capabilities increasing from each stage to the next.

3.3 The Activity View

A third class of EC definitions is comprised of those that go beyond the activity oftrading. They acknowledge the use of technology in accomplishing other businessactivities as well. In this view, the notion of commerce is extended to encompasstrading and nontrading activities. Thus, EC involves the use of technologies forsuch activities as transaction execution, presale and postsale efforts, plus a host ofancillary activities [6]. The following definitions embody this activity view of EC.

A1. “Electronic Commerce broadly connotes business activities (with associ-ated technical data) conducted electronically” ([36], p. 17).

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A2. “Electronic commerce can be defined as the entire collection of actions thatsupport commercial activities on a network” ([37], p. 5).

A3. “Broadly speaking, electronic commerce includes any form of economic ac-tivity conducted via electronic connections” ([7], p. 2).

A4. “Electronic commerce is a generic term that encompasses numerous infor-mation technologies and services to improve business practices ranging from cus-tomer service to inter-corporation coordination” ([38], p. 31).

A5. “Electronic commerce is an integrative concept, designed to draw togethera wide range of business support services, including inter organizational e-mail;directories; trading support systems for commodities; products, customized prod-ucts and custom-built goods and services; ordering and logistics support systems;settlement support systems; and management and statistical reporting systems”([39], p. 1).

The activity view of EC is more expansive than the trading view and comple-ments the information exchange view. It recognizes that EC can involve activitiesboth across and within organization boundaries, ranging from tactical to strategiclevels, and entailing both business and consumer contacts. EC activities, services,and operations that can be technologically enabled or facilitated include establish-ment of initial contacts, supplier search and negotiation, exchange of information,sales lead generation, presales and postsales support, electronic payment, distribu-tion logistics, projection of a favorable corporate image, establishment and cooper-ation of virtual enterprises, shared business processes, and so forth. These activitiescan affect strategic planning, entrepreneurial opportunities, organizational designand performance, business law, and taxation policies [6].

A number of research issues arise from the activity viewpoint. Because there isno past experience from which to imagine commercial possibilities, Stohr andViswanathan [40] suggested that it may be possible to understand the directions ofEC by reasoning from the underlying activities that must be provided. They intro-duced a framework that identifies 10 functions necessary for the successful con-duct of EC. As another example, Liu and Arnett [41] proposed a model forappraisal and evaluation of the design quality of EC web sites. Their model coversthree marketing activities (presales, online sales, and after sales) applicable to theelectronic marketplace.

3.4 The Effects View

The foregoing categories are concerned with the what and how aspects of EC. Theyfocus on what is done (trading transactions, other activities) and how it is done (viatechnology-based information exchanges). None of them stresses the why aspect ofEC. A fourth category of definitions emphasizes the reasons and effects of conduct-ing EC.

Effects of EC are appearing in all areas of business, from customer service to newproduct design [1]. It facilitates new types of business processes for reaching andinteracting with customers. It can reduce costs in managing orders and interactingwith a wide range of suppliers and trading partners, areas that typically add signif-icant overhead to the cost of products and services. From the broad perspective, EC

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is well suited to facilitate the reengineering of business processes occurring atmany firms [1]. Broad goals for taking an electronic approach to business are re-markably similar to those of reengineering: reduced costs, lower product cycletimes, faster customer response, and improved service quality.

The following EC definitions are symptomatic of those focusing on the effectsof EC.

E1. “Broadly defined, electronic commerce is a modern business methodologythat addresses the needs of organizations, merchants, and consumers to cut costswhile improving the quality of goods and services and increasing the speed of ser-vice delivery” ([1], p. 1).

E2. “In a broader sense, e-commerce can be considered as another businessmethodology that helps organizations to improve customer service, reduce cost,improve quality, and thereby create competitive advantage for the organization”([19], p. 1).

E3. “Viewed conceptually and as a whole, EC can be defined as the use of infor-mation and communication technologies to network economic activities and pro-cesses, in order to reduce information-related transaction costs or gain a strategic,information advantage” ([42], p. 18).

E4. “Electronic Commerce refers to the conduct of business between two ormore companies, using an integrated set of electronic tools to streamline businessprocesses and reduce cycle time” ([10], p. 3).

Thus, the effects view explicitly defines EC in terms of its various outcomes andbenefits. Because trading, information exchange, and business activities implicitlyunderlie the effects, this view is more inclusive than the previous three views.

From the effects perspective, investigation focuses on understanding EC resultsand how to achieve them. For example, Tang and Wang [43] developed a frame-work to analyze the impact of EC on the international electronic marketing envi-ronment, strategies, and future trends in the information service industry. Palmer[44] presented a model to capture the interdependency of relations and define keyinterorganizational boundaries that must be managed effectively to generate thepotential benefits of EC. The model identifies opportunities for creating value viaEC at each of the boundaries such as reduction in cycle time for response, improvedmonitoring of remote operations or processes, and gathering of corporate intelli-gence. Chatterjee and Jin [45] proposed active networking to perform computa-tions on the messages that are in transit and hence facilitate more EC functionalcapabilities and benefits than what is possible with today’s Internet. Their activenetworking architecture, which is more than just a passive transport vehicle,would allow customization of the Internet or intranets according to a user’s need,with the effect that quality-of-service guarantees can be met for each individual ECapplication.

3.5 The Value Chain View

A fifth category of EC definitions clusters around the factor of a value chain. Thevalue chain is a basic tool for understanding the role of technology and information

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in achieving competitive advantage [46]. As EC uses a number of technologies andinformation exchange, it is reasonable to define EC in terms of the value chain con-cept. This highlights the role of EC in achieving the effect of competitive advantage.

The value chain model identifies economically distinct activities (called “valueactivities”) that an organization performs in the course of doing business [47].These value activities fall into nine generic categories: five primary and four sec-ondary. Primary activities are inbound logistics, operations, outbound logistics,marketing and sales, and service. Primary activities involve physical creation ofproducts, their marketing and delivery to buyers, and their support and servicingafter a sale. Secondary activities are development and operation of firm infrastruc-ture, human resource management, technology development, and procurement.These support activities provide the inputs and infrastructure that allow the pri-mary activities to take place. Every primary activity employs procured inputs, hu-man resources, and a combination of technologies. Firm infrastructure, includingsuch functions as general management, legal work, and accounting, supports theentire value chain.

Applegate et al. [6] asserted that EC involves using network communicationstechnology to engage in a wide range of value-adding activities up and down thevalue-added chain both within and outside the organization. As the following defi-nitions indicate, the value chain view is related to elements of the previously dis-cussed views.

VC1. “In EC, interdependencies are created between a company’s value chainand the value chains of its suppliers and customers. The company that optimizes,or coordinates, those links to the outside creates competitive advantage” ([48], p.1).

VC2. “EC is commerce which is enabled by WWW-era technologies, to permitthe seamless integration of information, communication, and logistical technologyalong the entire value chain of business processes from the suppliers of raw goodsand services to the final customers” ([49], p. 272).

VC3. “Electronic commerce denotes the seamless application of informationand communication technology from its point of origin to its endpoint along theentire value chain of business processes conducted electronically and designed toenable the accomplishment of a business goal. These processes may be partial orcomplete and may encompass business-to-business as well as business-to-con-sumer and consumer-to-business transactions” ([7], p. 5).

The value chain view takes the stand that the unfolding world of EC cuts acrossevery functional field of business and pervades practically every aspect of manage-ment. EC represents a new means of value adding and value creation for organiza-tions and consumers. It has both an internal orientation (facilitating valueactivities) and an external orientation (linking value activities with suppliers andcustomers). Dyson [50], chairwoman of the electronic frontier foundation, and amember of the U.S. National Information Infrastructure Advisory Council, said, “Ifa company doesn’t add value to its product, then it is missing the point” (p. 1).Added value may be realized in various forms, such as cost reductions, cycle timereductions, inventory reduction, cash flow improvement, sales increases, customer

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service improvements, productivity increases, opening of new marketing and dis-tribution channels, enablement of just-in-time delivery, gains in competitive ad-vantage, and others.

One example of research within the value chain perspective of EC involves neworganization forms. Becker et al. [49] claimed that, in the realm of EC, most of thefocus has been on the virtual information-based products. Physical goods that can-not be transformed into information-based commodities or services have beenlargely ignored or treated as a somewhat less interesting or sophisticated form ofEC by academic researchers. Becker et al. [49] said that a major source of customerdissatisfaction will stem from EC’s inability to deliver tangible products and ser-vices quickly and inexpensively. Consequently, they proposed the development ofa new kind of organization with a streamlined value chain, called a Rapid Orderand Delivery Virtual Organization. It is characterized by having virtual store-fronts, Just In Time inventories, zero or near-zero physical inventories, and rapiddelivery of a physical good or service.

As another example, Wagner [51] suggested that lack of coordination betweenparties within a value chain can create considerable inefficiencies. Technology, es-pecially the use of EDI and point-of-sale information capture–distribution, pro-vides an opportunity to reduce these inefficiencies. His empirical study found thatpoint-of-sale automation not only improved the performance of the entire chainbut also lessened the competitive advantage of retailers. Zimmermann [52] con-tended that prosperous growth of EC is hindered by applying traditionally orga-nized value chains and business processes in the new field of electronic markets.He proposed a holistic framework for value creation in the EC era.

3.6 Commentary

In assembling the definitions that came to be clustered for identifying taxonomycategories, the objective was to be representative of as much diversity as could befound. The resultant taxonomy is indicative of substantial diversity. Because thecollected EC definitions are not exhaustive, it is conceivable that other existing orforthcoming definitions could require an extension of the taxonomy to accommo-date entirely new categories. However, to date, we have not uncovered other defini-tions of EC that fall outside of one or more of the five categories.

The taxonomy brings structure to the multitude of EC definitions and view-points. Each of the categories has merit and is thought provoking in its own right.Each has been adopted by a group of researchers and practitioners that holds thatview to be useful. Each is a different lens for focusing and looking at the same phe-nomenon. Together, the categories and their relations point the way toward a uni-fying definition of EC.

One way to portray relations among the taxonomy’s five categories is shown inFigure 2. Technology for transferal of information, the focal point of one class of ECdefinitions, is a necessary substrate for EC that underlies all other views. Gaugingand studying effects of EC, the focal point of another category, is an inevitable ef-fluence emanating from all other views. The other three categories cut across thesetwo, providing contexts in which information exchange produces effects. The trad-

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ing view is the most narrow of these contexts. The activity view is broader, permit-ting additional activities. The value chain view is more definitive, referringspecifically to nine areas of organizational activity.

The relations depicted in Figure 2 suggest that it may be possible to have a singleunifying definition that integrates all five views of EC. No single category of ECdefinitions seems sufficient for furnishing an overarching, comprehensive defini-tion of EC. Perhaps the value chain view comes the closest. It recognizes specific ac-tivities and notes the application of information technology to these activities toaccomplish a certain business goal. Porter and Miller [46] recognized the impor-tance of information exchange in the context of value chain: “Information is perme-ating the value chain at every point, transforming the way value activities areperformed and the nature of the linkages among them” (p. 151). The trading viewconcentrates on the primary value activity of sales and marketing. On the otherhand, the activity view is exemplified by the value chain view. The effects view isinterested not only in overall business goals but also considers lower level out-comes such as those of individual activities along a value chain.

4. AN INTEGRATED DEFINITION OF EC

Definitions influence and guide the nature or focus of research efforts. They are veryimportant in shaping young and dynamic fields such as EC. Without some kind ofdefinition and structure for a field, “progress is but a fortunate combination of cir-cumstances, research is fumbling in the dark, and the dissemination of knowledgeis a cumbersome process” ([53], p. 1). The taxonomy brings order to diverse defini-tions, thereby providing structure for the EC field. It also points the way toward anintegrated definition of EC that improves on others surveyed here in the sense of be-ing more inclusive, complete, and unifying.

An integrated definition is useful in several respects. Given the need for a clearerunderstanding of what EC is [54], a more complete definition that subsumes andrelates prior definitions is beneficial. Such a definition is needed to help focus ECpolicy debates [55], identifying salient factors for consideration. By helping illumi-nate the unfamiliar and formative EC world, it can foster better organizational fo-

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Figure 2. Relations among the fiveperspectives of economic commerce.

cus by the firms in that world [56]. For researchers, an integrated definition canfurnish a common starting point for launching and comparing research initiatives,yielding a less fragmented picture of EC investigations. For learning about EC, anintegrated definition gives both educators and students a foundation on which tobuild that is more comprehensive and inclusive than prior definitions.

Based on the EC taxonomy, we advance the following integrated definition ofEC as a synthesis of the viewpoints inherent in all five categories:

EC is an approach to achieving business goals in which technology for informa-tion exchange enables or facilitates execution of activities in and across valuechains as well as supporting decision making that underlies those activities.

This integrated definition subsumes each of the EC taxonomy’s five views. No ef-fort is made to enumerate the relevant technologies. They are numerous and subjectto change. The definition does not enumerate possible business goals or activities ina value chain. The former involve various effects at multiple levels. The latter arewell-known and include the notion of trading.

By including activities within and across value chains, the definition allowsfor both intraorganizational relations and interorganizational relations (businessto business and business to consumer) in EC. The integrated definition empha-sizes that EC involves not only electronic support for the execution of activitiesbut also electronic support for the decisions that determine what the activities areto be. Decision making underlies each activity in a value chain. The essence ofmanagement is decision making for the purpose of determining what course ofaction will be taken to achieve desired effects [57]. Those decisions that benefitfrom (or even require) the use of technology for information transfer fall in theEC domain. An examination of decision support systems in EC can be found inHolsapple et al. [58].

The integrated definition of EC can be readily modified to define segments ofthe EC world. For instance, Internet commerce can be defined as:

An approach to achieving business goals in which Internet technology enablesor facilitates execution of activities in and across value chains as well as support-ing decision making that underlies those activities.

Similarly, for defining web commerce, the word Internet can be replaced by web.

5. A KNOWLEDGE-MANAGEMENT VIEW OF EC

The integrated EC definition is comprehensive only to the extent that the views ex-pressed in the taxonomy’s five categories are complete. It does not capture all theimportant elements of EC if another category can be identified or if an existing cate-gory view deserves expansion. For instance, expanding on the notion of informa-tion exchange to account for knowledge management (KM) leads us to an enhance-ment of the integrated definition that we refer to as a KM view of EC. As a variationof the integrated definition, it offers similar benefits to practitioners, researchers,

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and educators, but it furnishes the additional advantage of explicitly connecting ECto the increasingly pervasive realm of KM.

Businesses operate in a knowledge-driven economy and increasingly functionas knowledge-based organizations [57, 59, 60]. This is an economy in which thevalue of knowledge as input and output is growing, knowledge is a key ingredientof what is bought and sold (both explicitly and implicitly), knowledge resourcesare rising in importance relative to traditionally recognized resources (e.g., finan-cial, material), and new technologies and techniques for managing knowledge re-sources are emerging [61]. Broadly speaking, KM is concerned with making theright knowledge available in the right format, to the right processor (human orcomputer), at the right time, with the right appearance, for the right cost [62].

Accepting the proposition that EC occurs within and among knowledge-basedorganizations in the knowledge-driven economy, we contend that it might be use-ful for an EC definition to explicitly recognize knowledge and technology for man-aging it. None of the prior EC definitions does so. KM goes well beyond the notionof information exchange, and EC can as well. First, more than information is in-volved in the conduct of EC. EC employs different types of knowledge, of which in-formation is just one kind. “All information is knowledge, not all knowledge isinformation” ([63], p. 12). Second, the conduct of EC goes beyond the act of trans-feral or exchange. EC can be seen as part of an organization’s conduct of KM, whichincludes such knowledge manipulation activities as acquiring, selecting, internal-izing, generating, and externalizing [64]. These knowledge manipulation activitiesare linked in various patterns by knowledge flows (i.e., transferals, exchanges). Inthe conduct of KM, to achieve business objectives, both the manipulation activitiesand the flows that connect them can be electronically enabled or facilitated.

Thus, we suggest that the integrated view of EC can be expanded to reflect theKM setting in which EC occurs. As a prelude, there is a brief discussion of knowl-edge and KM. We then introduce a modification of the integrated EC definitionthat gives a KM view of EC. An example of this perspective is examined and someof its potential benefits are summarized.

5.1 Knowledge and KM

Knowledge exists when there is a usable representation of something [65]. It is com-mon to see distinctions drawn between data, information, and knowledge. For ex-ample, data imbued with relevance is said to be information, and information im-bued with context is said to be knowledge [66]. Interesting as these gradations inusability may be, they are meaningful only in a relative sense and they are con-cerned only with one type of knowledge: knowledge that describes the state of someworld. Aside from this descriptive knowledge (“know what”), there are other impor-tant types of knowledge that need to be managed [67]. These include proceduralknowledge, which is a step-by-step procedure for accomplishing some task (“knowhow”), and reasoning knowledge, which specifies what conclusion can be drawnwhen a specified situation exists (“know why”). KM is concerned with ways inwhich computers and humans represent and manipulate these types of knowledge.As such, KM involves much more than the information transferals found in EC defi-

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nitions. The implication is that EC can involve more than information exchange, byalso dealing in procedural and reasoning knowledge as well and by encompassinga variety of manipulations activities beyond exchange.

The world in general and the business world in particular is experiencing a para-digm shift: a shift toward knowledge-based organizations and a knowledge-basedsociety [59, 68]. The explicit sale of knowledge is widespread and the implicit saleof knowledge (via incorporation into bundles of goods and services) is ubiquitous[69]. Interorganizational EC is an important facilitator and enabler of the knowl-edge economy. Success in that economy requires effective management of an en-terprise’s knowledge resources. A variety of technologies have emerged to fosterknowledge access, sharing, preservation, and reuse in an organization [70]. Thesemake up the interorganizational dimension of EC.

Top management is increasingly recognizing that the knowledge inherent in anorganization is an extremely valuable asset and that it is no longer sufficient toleave it unmanaged and underleveraged [71]. It has been reported that over 40% ofFortune 1000 companies have chief knowledge officers [72]. In 1998, consultingand service firms had revenues of over 1 billion dollars for KM work and invested10 billion in their own internal KM efforts [66]. The effective management ofknowledge is increasingly seen as an important basis of competitive advantage[73]. Robert Hiebler [74] of Arthur Andersen wrote: “Those companies that de-velop best practices for managing knowledge capital will be the ones that ride thiscompetitive wave” (p. 22). In this view, all businesses involve creation, dissemina-tion, renewal, and application of knowledge toward organizational sustenanceand survival in the face of increasingly discontinuous environment change [75].

The field of KM is concerned with techniques, guidelines, principles, and sys-tems (technological and nontechnological) for effectively managing organizationalknowledge resources. For many years, organizations have formally and explicitlycaptured and managed knowledge by way of such computer systems as manage-ment information systems (emphasizing descriptive knowledge), decision supportsystems (emphasizing descriptive and procedural knowledge), and expert systems(emphasizing reasoning knowledge). For instance, in the knowledge-based view ofdecision support, a decision is a piece of knowledge indicating the nature of an ac-tion commitment [76]. It is produced by manipulating knowledge of various typesand represented in various ways. The production effort can be aided by com-puter-based decision support systems that are able to store and manipulate knowl-edge representations. Decision support systems are increasingly deployed on theWeb to promote EC by furnishing knowledge needed for decision making in valuechain activities [58].

New technologies for managing knowledge continue to emerge [62, 70]. Be-cause they can be employed to facilitate or enable execution of an enterprise’s valueactivities or the making of decisions that underlie those activities, these KM tech-nologies can be instrumental in EC.

Activities that an organization’s participants perform when manipulatingknowledge resources can be viewed from multiple levels. At a high level, there aresuch activities as experimentation and decision making. At a elemental level, fourkinds of knowledge manipulation activities are involved in the conduct of KM: ac-quiring, selecting, internalizing, and using [64]. Acquiring garners knowledge

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from the external environment and transforms it into a “form” that can be internal-ized and/or used within an organization. Selecting extracts requested knowledgefrom an organization’s own knowledge resources and provides it in an appropriateform to a requesting activity—acquiring, using, and/or internalizing. Internalizingalters an organization’s knowledge resources based on acquired, selected, or gen-erated knowledge.

Using is a manipulation activity that applies knowledge to generate new knowl-edge and/or to produce outputs for the purpose of externalization. To generate isto produce a unit of knowledge that did not exist previously, by either derivingnew knowledge from existing knowledge or discovering new knowledge (e.g., viacreative insight). Externalizing may be only partially a KM activity because it caninvolve physical activities (e.g., using existing knowledge to produce a productthrough transformation of raw materials). As a subset of KM technology, technol-ogy for information exchange is concerned with transferals of descriptive knowl-edge among the various knowledge manipulation activities. However, technologythat performs or enhances any of these manipulation activities fosters EC.

5.2 KM and EC

A careful examination of past EC definitions shows no explicit mention of knowl-edge. Mention of information and technology for transferring it are common. How-ever, this is only one aspect of the far richer notions of knowledge and KM. We con-tend that both EC practitioners and EC researchers should be cognizant of and canbenefit from a view that relates EC to the knowledge-driven economy in which it ex-ists and which it facilitates. Thus, we advance the following definition of EC.

EC is an approach to achieving business goals in which technology is used tomanage knowledge for purposes of enabling or facilitating the execution of ac-tivities in and across value chains as well as the making of decisions that under-lie those activities.

Here, we have adapted the integrated definition of EC by substituting for infor-mation exchange the richer concept of KM. In this view, EC deals not only with de-scriptive knowledge (i.e., information) but also with procedural and reasoningknowledge. For instance, it includes applet processing, which involves transfer ofprocedural knowledge (as distinct from information) from a server to a client. Inthis view, EC also involves more than transfer. For example, it can also include thegeneration of knowledge that occurs when interacting with an online calculator orreceiving advice from a Web site’s expert system.

In their framework for studying EC, Applegate et al. [6] included a “messagingand knowledge distribution infrastructure” (p. 4), which refers to various meansfor sending and receiving knowledge. The foregoing EC definition goes beyondthis transferal by recognizing the importance in EC of such knowledge manipula-tion activities as acquiring, selecting, generating, externalizing, and internalizingknowledge. These knowledge manipulation activities occur in the execution ofvalue activities and in the decision making that determines such execution. KM

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technologies enable and facilitate both individual value activities and the linkagesamong them. They do so by compressing time and distance. They do so by amplify-ing and augmenting the knowledge handling abilities of individual humansand/or organizations of knowledge workers.

The KM view of EC subsumes the integrated definition and hence, the five ECcategory views. It is a unifying definition establishing a connection between twomegatrends reshaping the business world as we enter the new millenium: EC andKM. In the last decade, it was noted that:

The very nature of organizations is changing from an emphasis on working with mate-rials to an emphasis on working with knowledge and we will eventually come to viewwork with material goods as a secondary or almost incidental aspect of an organiza-tion’s mission. Furthermore, managing an organization’s human and financial re-sources will also become exercises in knowledge management. ([57], p. 77)

In large measure, this prediction has come to pass along with great strides in tech-nologies for representing and processing knowledge. When applied to the conductof business throughout the value chain, these technologies usher in the new ap-proach to business known as EC.

5.3 A Practical Example

An illustration of the KM view of EC is Ernie, an online consulting system fromErnst & Young (http://ernie.ey.com/). Organizations that cannot afford in-houseexperts or consultants on a topic can use the Ernie Web site to acquire neededknowledge. Ernie serves as a direct interface to Ernst & Young knowledge in suchforms as proprietary databases, professional resources, and human knowledgeproviders. It opens a new way to provide (i.e., sell) Ernst & Young’s primary prod-uct: knowledge. It also gives clients a way to acquire knowledge they need withouttraditional time, distance, and cost obstacles.

When a client accesses Ernie to acquire knowledge, he/she is asked to formulatea question, assign it to a consultation category, and offer some background infor-mation as to how results are to be used. If a client has trouble formulating a ques-tion or simply does not know what to ask, he/she can access an extensive FAQdatabase for help. Based on the question submitted, Ernie selects relevant knowl-edge from knowledge repositories that may be human based or computer based.The knowledge selected could be descriptive (who, where, when, what, andhow-much aspects); it could be procedural (how-to aspect), indicating a recipe ofactions to perform; it could be reasoning knowledge (why aspect), in the form ofadvice suggesting what to conclude about various circumstances. If needed knowl-edge is not in an available repository, Ernie may attempt to generate it.

Knowledge acquired from Ernie’s question–answer facilities may be internal-ized (e.g., in a computer or in artifacts), and/or externalized in products. Clientscan build knowledge received from Ernie into their decision-making processes.Ernie can handle a wide range of business issues. Some sample questions that maybe posed to Ernie include: Can you provide recommendations on pursuing cost

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savings on electricity, pending deregulation due to begin in the next 2 to 5 years? Isweighted average still acceptable as an inventory costing method in accordancewith generally accepted accounting principles? What are the problem areas in myvalue chain and how can my chain be unblocked for a smoother flow? Which enter-prise-wide software will be most suitable for my business? I don’t want to hagglewith multiple vendors and I have limited time; is there an easy way to shop forcomponents and peripherals?

For Ernst & Young to achieve the goal of market expansion to firms unable to af-ford traditional consulting, Ernie is technology used to manage knowledge in theexecution of value activities such as operations, outbound logistics, and sales. Forhelping a client to achieve its business goal, Ernie is technology that is used to ac-quire knowledge needed in the execution of (or underlying decision making for)one or more of its value chain activities. The KM view of EC can be adopted simi-larly in designing or analyzing nearly any EC application.

5.4 Potential Benefits of a KM View of EC

Although it integrates categories of traditional EC definitions, the new definitionalso highlights the essential characteristics of EC in the context of knowl-edge-driven organizations in a knowledge economy. This unified, KM-orienteddefinition can benefit practitioners, policymakers, researchers, educators, and de-velopers by providing a common, organized foundation for understanding, per-forming, developing, and instructing EC.

For practitioners, it suggests looking for competitive advantages of EC in termsof primary and secondary KM activities that add value. For instance, knowledgeacquisition can add value to a firm. What EC mechanisms can be applied or in-vented to give a substantial advantage in performing this activity? The same ques-tion can be asked and investigated with respect to any of the primary knowledgemanipulation activities as well as with respect to secondary KM activities that en-able and guide the performance of these primary activities.

For researchers, the definition gives a common ground for using consistent ter-minology and units of analysis across a variety of EC research settings. To date, ECresearch and KM research efforts have proceeded in largely independent fashion.The definition calls attention to a need for investigations of the interplay betweenEC and KM.

Implications for EC policymakers are numerous. Policymakers need to be awarethat as EC becomes more widespread, it will drive changes in the labor market for anew kind of flexible, multiskilled workforce comprised of knowledge workers.New EC possibilities for improved knowledge handling and sharing need to beconsidered in light of knowledge worker mobility, knowledge privacy, and knowl-edge security issues.

In the realm of education, the unified definition can be used as a means for orga-nizing coverage of the EC field. The KM view of EC suggests that an EC courseneeds to incorporate KM components.

For developers of EC applications, the definition can function as a road map toidentify what areas of EC product development deserve exploration. It suggeststhat KM activities be considered in the value chain and challenges EC developers to

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determine how value may be added technically to these activities. For instance,Microsoft has recently described plans to provide an infrastructure for KM technol-ogies that will help business add value by accumulating, integrating, sharing, andaccessing knowledge across their organizations [77].

6. CONCLUSIONS

AmongtheevergrowingreamsofcommentaryonEC,ahostofECdefinitionscanbefound. The wide variation in these definitions can present a confusing picture of thefield. Here, we have collected an assortment of EC definitions representative of thisvariety. We found no definitions that fully subsumed all others. However, a qualita-tive analysis of the EC definitions resulted in the identification of five clusters, eachrepresenting a distinct view of EC. For each cluster, examples of recent researchalongthelinesof itsviewweregiven,suggestingsomemerit foreachperspective.

An analysis of the five views reveals that they are related to each other and notinconsistent with each other. The perspectives differ in breadth of vision and in fo-cus. To help unify the five EC perspectives, an integrated definition of EC was ad-vanced. Each of the five EC category views is accommodated in this integrateddefinition. The integrated definition is only as good as the five views from which itis synthesized.

One possible limitation stems from limits of the information exchange view ofEC. Specifically, there is no recognition that EC happens in a knowledge-driveneconomy, that EC can deal with types of knowledge other than information (i.e.,other than descriptive knowledge), and that EC can involve more than transfers ofknowledge (e.g., the knowledge manipulation activities that lead to or producetransfers). To address these concerns, a modified version of the integrated EC defi-nition was introduced by replacing notions of information transfer with the richernotions of KM. That is, EC can be seen as being based on technologies for represent-ing and processing knowledge. It should be noted that there are manynontechnological approaches to managing knowledge; these are outside the imme-diate scope of EC.

The KM view of EC indicates that technologies for knowledge handling enableand/or facilitate the implementation of value activities. They can also support themaking of decisions that underpin these implementations. Thus, such technologiescan contribute to a firm’s competitiveness by enhancing the performance and out-come of one or more value activities. Before they can do so, these technologies mustfirst contribute to the performance and outcome of activities involved in the con-duct of KM. That is, each value chain activity depends on the conduct of KM, andthe technologies directly enable or facilitate that conduct. Only secondarily or indi-rectly do they impact value chain activities. This suggests that future researchshould investigate what activities in the conduct of KM are potential sources ofcompetitive advantage via EC.

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