Determinants of Internet standards adoption: The case of South Korea

Research Policy 40 (2011) 253–262

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Determinants of Internet standards adoption: The case of South Korea Anat Hovav a , Martin Hemmert a,∗ , Yoo Jung Kim b a b

Korea University, School of Business, Anam-dong, Seongbuk-gu, Seoul 136-701, South Korea Hoseo University, Department of Digital Business, 268, Anseo-dong, Cheonan, Chungnam 330-713, South Korea

a r t i c l e

i n f o

Article history: Received 7 July 2009 Received in revised form 17 September 2010 Accepted 24 September 2010 Available online 29 October 2010 Keywords: Technology adoption Government policy Internet standards Resource concentration Normative pressure Korea

a b s t r a c t We develop an adoption model of infrastructure technologies and test it with survey data collected from companies in six industries in South Korea (hereafter: Korea). The implementation of a new Internet standard such as Internet Protocol version 6 (IPv6) depends on the usefulness of the technology to the adopting organizations and the environment in which they operate. The adoption of IPv6 in Korea is mostly driven by a governmental strategy that created user demand, and normative pressure. IPv6 adoption in Korea is also driven by perceived resource concentration and power due to the uneven allocation of IPv4 addresses. Conversely, killer applications, technical sponsorship and financial factors had no influence on the adoption decision by Korean companies. Taken together, the findings of our explorative study suggest the need to consider technical as well as social and policy factors to understand the adoption dynamics of infrastructure technologies. © 2010 Elsevier B.V. All rights reserved.

1. Introduction Most research on the adoption of innovation, standards or technology assumes a dichotomy between non-adoption and full adoption. For example, Van de Ven (1993) suggests that government regulations support the adoption of new standards. Conversely, irreversible investments or sunk costs hinder adoption (Keil et al., 1995). These and similar adoption studies are based on the assumption that organizations (or individuals) either fully adopt or do not adopt a new technology. Hovav et al. (2004) proposed the concept of partial adoption in the context of Internet standards to capture reality in a more differentiated way, resulting in four “modes” of adoption (i.e., status-quo, full adoption, adoption through co-existence, and adoption through replacement). Organizations may adopt only specific features they need to gain competitive advantage. This is possible if the new standard is complex and has several distinct features. Organizations may also adopt a new standard by attrition. That is, they will introduce the new standard in stages, while maintaining the existing standard (co-existence) until full implementation occurs. That scenario is possible if the two standards are backwards compatible and can co-exist. The above four modes are driven by two dimensions: environmental conduciveness (EC) and usefulness of the features (UF). EC describes the environmental factors that influence the adop-

∗ Corresponding author. Tel.: +82 2 3290 2605; fax: +82 2 922 7220. E-mail addresses: [email protected] (A. Hovav), [email protected] (M. Hemmert), [email protected] (Y.J. Kim). 0048-7333/$ – see front matter © 2010 Elsevier B.V. All rights reserved. doi:10.1016/j.respol.2010.09.016

tion decision of an organization (e.g., government support, network externalities) and UF the organizational elements that encourage adoption such as relative advantage, and user demand. Full adoption is expected to be the ultimate goal and can occur either directly or via one of the other modes. Whereas the model proposed by Hovav et al. (2004) is more granular than previous adoption models, it is also designed as a general framework of standards adoption. Therefore, it does not specifically consider situations where some factors in each of the two dimensions support adoption and others do not. The four modes are presented as pure cases where all “the elements of each dimension (the EC and UF) align with the overall direction of that dimension” (Hovav et al., 2004, p. 289). For example, in the co-existence case, the assumption is that all the environmental conditions are unfavorable to full adoption while every feature of the new technology is conducive to its full adoption. Thus, all the elements of EC imply that the dimension is “low” and all the elements of the UF dimension imply that it is “high.” In reality, there may be mixed cases where some elements drive the dimension in one direction while other elements drive it in the opposite direction. One such example is the adoption patterns of Internet Protocol Next Generation, also known as Internet Protocol version 6 (IPv6) in Korea. The extensive development of “IPv6 related” applications place Korea in the “adoption through co-existence” quadrant. Yet, within that quadrant some environmental elements are conducive to the adoption of IPv6 and others are not. For example, high switching costs and investments in current Internet technology (i.e., IP version 4 and its related technologies) drive EC in one direction (low EC) while government

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sponsorship and network externalities drive EC in the opposite direction (high EC). Similar arguments can be made for the UF dimension. The availability of certain applications such as IPTV (Internet based television) and ubiquitous computing might drive UF in one direction (high UF), while the complexity of the adoption might drive it in the opposite direction (low UF). The objective of this work is to investigate the perceived relative importance of the EC and UF factors to organizations in Korea. Korea is an interesting case because the adoption rates of Internet technology in general and IPv6 in particular are relatively high compared with many other developed countries (OECD, 2008). In addition, several policy and cultural features set Korea apart from Western industrialized countries. First, the Korean government has a clear policy in regards to the adoption of the new standard (NIA, 2005). Second, its collectivistic culture implies that peer pressure to adhere to societal norms and dominant trends is stronger than in Western countries with more individualistic cultures (Hofstede, 2001). In the next section, we review the adoption literature in the context of Internet standards and IP next generation (IPv6). Thereafter, we describe the case of IPv6 adoption in Korea, our research model and hypotheses, the methodology used for data collection, and our data analysis. We conclude with a discussion of the results, policy implications, limitations and future research. 2. Literature review Adoption of Internet standards is unique in that the Internet is a loosely organized system of self-governing yet interconnected networks (Bradner, 1996) which depend on the voluntary adoption of common protocols and procedures. The Internet’s distributed nature leads to autonomous adoption decisions by its participants. However, since Internet players are also strongly interrelated and share common resources and protocols, their adoption decisions need to be coordinated. This tension is intensified by the fact that the Internet is not controlled by any one body or organization and upgrades cannot be mandated via global policies, laws or regulations. The relationship between the autonomous decision making of Internet players and the need for interrelatedness in the context of Internet standards adoption is described in Fichman and Kemerer (1993) and Hovav et al. (2004). Research on adoption of innovation can be divided into two main streams. Diffusion of innovation literature’s basic focus is the attributes of the innovation itself and their value to the adopting organization. Rogers (1962, 1983) identified five innovation characteristics: (1) relative advantage, (2) compatibility, (3) complexity, (4) trialability, and (5) observability. Tornatzky and Klein (1982) found only relative advantage and complexity to be consistently related to adoption. In the context of IPv6 adoption, Hovav and Schuff (2005) found that due to the unique characteristics of IPv6 as an infrastructure technology (Gawer and Cusumano, 2002), the existence of a “killer application” – a new application that is perceived as being of potentially high value (Whitesides, 2006), is particularly important for early adopters because: 1. IPv6 is not owned by any one entity and rents can be created only via value added applications that depend on the new standard. 2. IPv6 is removed from the casual end user. Therefore, user demand might be limited. The main driver for the adoption of IPv6 has been the depletion of IPv4 addresses in certain parts of the world (Ladid, 2009). However, supplemental technologies enable a more efficient use of the current allocation of addresses, which is likely to extend the current pool. A full depletion was estimated to occur between 2009 and 2016 assuming no change in usage and policies (Hain, 2005). Due

to the uneven distribution of IPv4 addresses, address depletion is of concern only to companies in low-allocation countries (Hovav and Schuff, 2005). In addition, features such as Quality of Service (QoS) and dynamic address allocation enable IPv6 to support mobile and multimedia services more efficiently. IPv6 also purports to increase network management efficiency.1 Gallaher and Rowe (2005) identified nine IPv6 adoption stakeholders. For the purpose of this study we define “a user” as any entity to which the surveyed organization provides services. Therefore, the term “user” varies by company. “User demand” refers to the organization’s perceptional view of their respective users (organizational or individual) and their business needs. At present, one of the main inhibitors to the adoption of IPv6 is the lack of perceived value. There are very few applications that require the use of IPv6 and that cannot be implemented using alternative technology (Gallaher and Rowe, 2006). Yet, Papagiannidis et al. (2006) describe the need for IPv6 to support emerging technologies such as IPTV. Broadcasting content over the Internet enables vendors to provide customization, interactive TV experience, new pricing models, and global markets. Internet TV may have the potential to become one of the home network’s related killer applications using IPv6. The economic perspective literature primarily focuses on the innovation’s economic value to potential adopters (e.g., Rosenberg, 1982; Katz and Shapiro, 1986; Arthur, 1996; Gallaher and Rowe, 2006). This value depends on several factors: (1) A large install base of an existing technology (drag) is likely to hinder the adoption of a new technology (Farrell and Saloner, 1986). (2) Irreversible investments or sunk costs (Keil et al., 1995). When the existing install base is compatible or can be upgraded to work with the new technology, the economic value is higher than when large portions of the existing infrastructure have to be discarded. High sunk costs usually occur when the new technology is based on competency destroying innovation. This factor is also known as switching costs (Joseph et al., 2007). (3) The size of both the existing and potential network of adopters; also referred to as network externalities (Farrell and Saloner, 1985; Katz and Shapiro, 1986; Arthur, 1996). The larger the network of potential adopters, the more economic value the new technology provides (i.e., economies of scale). (4) The existence of sponsorship (Katz and Shapiro, 1986). Sponsorship can reduce the risk of an early adoption (Hovav and Schuff, 2005) by providing financial incentives, education, and technical support. Sponsorship could be vendor (Gawer and Cusumano, 2002) or government driven. (5) Social and political dynamics such as governmental regulations (Van de Ven, 1993). For example, governments may mandate the adoption of a new technology, create adoption timetables, and thereby ensure a large base of potential network of adopters. (6) The uneven or disproportionate allocation of resources (Kwon and Zmud, 1987). When an innovation alleviates a resource crisis, it provides high economic value and thus is more likely to be adopted. Although the literature lists a number of factors that influence the adoption of a new technology, not all factors are applicable for each technology and context. In this study we will focus on the par-

1 Initially, IPv6 was promoted as a solution to current network security issues. However, recent studies found that IPv6 has introduced a new set of security challenges (Popouciu et al., 2006). Therefore, at present we do not regard security concerns as a major adoption driver.

A. Hovav et al. / Research Policy 40 (2011) 253–262 Table 1 Significant events leading to the deployment of IPv6.

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Table 2 Reliance of applications on IPv6.

Date

Event

Application

Reliance on IPv6

Contributors to IPv6 (%)a

2001 2004

Korea begins IPv6 address allocation 30 million Internet users (70% of the population) The Act on Internet Address Resources Korean government established an “IPv6 Distribution Promotion Plan” Portable Internet (WiBro) service providers KT, SK Telecom to provide mobile wireless Internet access at the speed of 2–3 Mbps Voice over IP. (070) is an area code that will cover the entire country

WiBro DMB Home Networks Telematics RFID W-CDMA Terrestrial DTV VoIP

High Low High High High High Low High

74 76 82 79 85 82 74 73

2004 2004 2005

2006

Source: Adopted from NIA (2005). a The percentage of respondents that felt that these applications will contribute to the diffusion of IPv6.

Source: Compiled based on the NIA (2005) report.

ticular factors that affect adoption decisions of Internet standards (IPv6) in Korea. As mentioned above, Korea’s extensive investments in “IPv6 related” applications (Kim, 2007; Appendix A) leading to high UF combined with its large base of IPv4 architecture (i.e., low EC) places it in the “adoption through co-existence” mode. While IPv4 and IPv6 technologies co-exist, IPv6 features are used for niche markets and specialized applications such as Internet based television.2 However, not all the elements in the EC and UF dimensions align with their overall direction. For example, switching costs for Korean organizations are likely to be high because Korea has a substantial investment in IPv4 infrastructure (typical for low EC) while sponsorship and political dynamics are also high (typical for high EC). Therefore, it is unclear which environmental elements are more important for Korean organizations in their decision to adopt IPv6 or IPv6 related applications. 3. IPv6 adoption in Korea The Korean government views the Internet as a strategic tool and an economic enabler. An integral part of the country’s strategic plan is the deployment of the Next Generation Internet and IPv6 (NIA, 2005). Although the Korean economy mostly relies on a “market” model, the government believes that it needs to provide some direction to encourage the adoption of IPv6 (Lee, 2009). Table 1 lists some of the key milestones in Korea’s IPv6 deployment. One of the key policies proposed by the Korean government in 2005 is the IT839 (see Appendix A), which refers to a technology based strategy including eight new services, three main core architectures driven by nine growth (economic) forces. The policy was designed to increase Korea’s GDP, encourage the development of a ubiquitous society, and promote Korea’s presence in the global IT industry. To support the eight proposed services (see Table 2), Korea is in the process of implementing an IPv6 based infrastructure. The Korean government plans to complete the deployment of the infrastructure by 2010–2011. This architecture allows functionality such as Quality of Service and added address resources. The relationships between the eight new services and the implementation of IPv6 are depicted in Table 2. As of March 2006, Korea had approximately 43 million IPv4 addresses (about 1 address per person). The implementation of an IPv6 infrastructure will increase the number of available addresses by 7.6 × 1024 . As of September 2007, the Korean government has been providing the general public IPv6-based services. In addition, Korean telecommunication companies (e.g., Samsung, LG, SK Telecom, KT) have invested 2.25 billion Korean Won in IPv6

2 A detailed description of the use of IPv6 in the implementation of IPTV can be found in Papagiannidis et al. (2006).

related infrastructure and services (e.g., u-city in Daegu). Government agencies such as the National Police Agency (NPA) also began adopting IPv6 based systems to improve crime prevention and detection tactics. The goal of the Ministry of Information and Communications (MIC) is to increase the number of IPv6 users to 200,000 and the number of government agencies to 179 (Kim, 2007). The IPv6 distribution promotion plan is being deployed on a national level. The IPv6 strategic committee includes industry executives, government officials, and members of research centers and academia. The committee proposes policies and advises on the project plan to promote IPv6. The Korean government is laying the foundations for an early adoption of the new standard and is helping firms to deploy IPv6 by providing test beds and research and development (R&D) labs. However, the Korean government is not supporting the adoption of IPv6 financially or via tax incentives. As of 2007, the NIA has completed the following activities (partial list): 1. The development of IPv6 applications and an IPv6 portal services (http://www.vsix.net). 2. The development of a Pilot IPv6 Domain Name Server services. 3. Two pilot IPv6 networks. IPv6 Next Generation Internet Exchange Node (6NGIX) and IPv6 Korea Advanced Network (6KANET). 4. IPv6 standardization and certification system. An IPv6 logo is given to vendors producing IPv6 ready equipment/systems that are verified and certified by participation in the Interoperability ON (ION) events held by the NIA and TTA (Telecommunication Technology Association). 5. International cooperation: participation in the global IPv6 Forum, formation of a China–Japan–Korea IPv6 Committee, and Asia-Pacific IPv6 Task Force. 6. Marketing campaigns including publishing an annual IPv6 status report, distributing promotional pamphlets, and sponsoring exhibitions. 7. Education and training. As apparent from Table 2, six out of the eight proposed services depend on IPv6 and over 70% of surveyed firms believe that these services will contribute to the expansion of IPv6. We deem these applications as potential killer applications as defined above. 4. The research model Hovav et al. (2004) proposed three UF factors: relative advantage, observability (the ability to identify the benefits of the new standard), and trialability (the ability to test the new standard and measure its benefits). Hovav and Schuff (2005) suggested an additional factor, the existence of a killer application.

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As mentioned above, the Korean government established a number of R&D labs and several test beds that are available to interested companies. In addition the NIA publishes reports and provides information regarding IPv6. Thus, trial data are readily available for organizations to observe and measure. Therefore, we exclude observability and trialability from the model since it appears that they are not differentiating factors for Korean organizations’ adoption decision. Relative advantage is a broad term and can be conceptualized and operationalized in many ways. Hovav et al. (2004) defined relative advantage of a new standard as the features that enable the organization to increase its markets, introduce new services or gain competitive advantage. As IPv6 is an infrastructure technology, organizations need to introduce killer applications that will increase users’ demand for the technology to create value (Hovav and Schuff, 2005). The Korean government is facilitating the development of IPv6 based applications and services, such as Internet telephony, wireless broadband, and telematics (see Appendix A). As per our definition above, these applications can be considered killer applications, since most organizations believe that these services would contribute to the diffusion of IPv6 (see Table 2). We hypothesize that the perceived existence of one or more of the killer applications listed in Table 2, is likely to increase the adoption of IPv6 in Korea. H1. The perceived existence of IPv6 related killer applications is positively related to organizational adoption of IPv6 in Korea. However, an organization’s adoption decision is not only influenced by the existence of related applications but also by the demand for services these applications can afford. Organizational users need to be aware of the existence of the new standard and what the standard can offer. In addition, they need to be asking for these new features or services. Therefore, we hypothesis that organizational perception of user demand, as defined above, for IPv6 related services such as voice over the Internet (VOIP), advanced mobile capabilities and advanced home networks, will positively affect the adoption of IPv6. H2. Perceived user demand for IPv6 related services is positively related to organizational adoption of IPv6 in Korea. The second dimension that affects the adoption of Internet standards is the conduciveness of the environment. Environmental factors account for the interrelatedness required to efficiently use the Internet (in the form of common protocols and standards). In Korea, some of the environmental factors support the adoption of IPv6 and some do not. At present, Korea has large investments in IPv4 infrastructure and related technologies (NIA, 2005). Korea has been connected to the Internet (USENET) since 1983, and over 70% of its population uses it. A typical user accesses the Internet 12 h a week and owns an average of two to three e-mail addresses. Similarly, most companies use the Internet to conduct their business. Overall, there is a steady (linear) increase in the number of Internet users and the Internet is an integral part of everyday life. The current investments in IPv4 related technology and services are creating high switching costs (drag, cost to upgrade, and sunk costs). We therefore, propose the following: H3. Perceived switching costs for Korean companies are negatively related to organizational adoption of IPv6 in Korea. An uneven or disproportionate allocation of a resource could create a resource crisis. A resource crisis often facilitates the adoption of an innovation if adopters believe that the innovation would alleviate that crisis (Kwon and Zmud, 1987). The IPv6

forum (http://www.ipv6forum.com) estimates the depletion of IPv4 addresses by 2011. However, due to the unique characteristics of IP and the first-come-first-served allocation method used in the early days of the Internet, this depletion is not equally universal. The U.S. controls 66% of current IPv4 addresses and is not under pressure to adopt IPv6. Conversely, the rest of the world controls only 34% of all addresses and is potentially under increasing pressure to adopt the new standard to circumvent an address crisis (Hovav and Schuff, 2005). Although the IPv4 address crisis is touted as the main reason for the adoption of IPv6, as of the date of this study, Korean organizations are not experiencing an immediate address crisis (see Section 3 above for details). Therefore, we do not anticipate such a crisis to be a major adoption driver. However, the uneven allocation of a scarce resource could create a perception of control. That is, regardless of need, the fact that North America (i.e., the U.S. and Canada) owns the majority of the current address space enables them to exert control over the direction and future development of the Internet, thus increasing their governing power. In addition, Korea perceives hi-tech as a key economic driver. Lacking the resources required to support the IT839 policy could be regarded as a major political and economic barrier. As a result of the multiple political and economic shocks Korea has endured in the past several decades, Korean companies and organizations tend to engage in aggressive competition to secure their long term survival (Cho and Yoon, 2001). They are especially sensitive to resource constraints and tend to act aggressively to overcome such perceived restrictions. Therefore, we expect that perceived resource concentration and power regarding control over the Internet would drive the adoption of IPv6 by Korean organizations. H4. Perceived resource concentration and power are positively related to organizational adoption of IPv6 in Korea. Government sponsored R&D labs provide Korean organizations with trial data and technical support (see Section 3 above for details). The IPv6 department of the National Computerization Agency (now known as the NIA) began developing experimental IPv6 based technology as early as 2003. The department holds training sessions and provides information about IPv6 related issues, implementation and potential benefits. In general, government agencies in Korea are more involved in inducing the private sector to adopt new technical standards and innovations than in most Western countries (Kim, 1997). Due to the extensive involvement of the Korean government in the promotion of IPv6, we expect that government sponsorship will have a positive influence on adoption. H5. Perceived government sponsorship is positively related to organizational adoption of IPv6 in Korea. The Korean government policies also create expectations that IPv6 will become the norm. Korea is a collectivistic, high power distance society where paternalism of leading organizations tends to exert a strong influence over the behavior of others (Kim, 1994; Biggart, 1997). We label this influence “normative pressure.” Historically, government policies enticed and directed the development and implementation of Korea’s IT infrastructure (KII), resulting in a widespread adoption of various IT related technologies. These policies were characterized by strong ties with the country’s large business groups (chaebols) and top–down mandates (Lee, 2009). Due to the social characteristics of Korea we expect that normative pressure from the government and peer companies will have a positive effect on the adoption of IPv6.

A. Hovav et al. / Research Policy 40 (2011) 253–262

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Usefulness for niche markets 1.

Killer applications

2.

User demand

IPv6 adoption decisions 1.

Environmental conditions 1.

Switching costs

2.

Resource concentration and power

3.

Government sponsorship

4.

Normative pressure

Already adopted

2.

In the planning stages

3.

Will adopt in 2-3 years

4.

No plans to adopt

Control variables: • Industry • Firm size • Market leadership Fig. 1. Adoption model of IPv6 in Korea.

H6. Perceived normative pressure is positively related to organizational adoption of IPv6 in Korea. Fig. 1 depicts our research model. 5. The empirical study 5.1. Methodology and sample characteristics To validate our model, we conducted a survey among organizations in Korea. In phase I (early 2006), we surveyed 46 companies. This sample was taken from 66 Korean Internet Service Providers (ISPs) and member companies of the IPv6 Forum Korea, resulting in a response rate of 70%. In all cases, the CIO or CTO of the company completed the questionnaire. In early 2007, an additional 38 companies were surveyed. The second set of companies was a convenience sample and included managers that attended an IPv6 symposium. Table 3 describes the demographics of the organizations in both phases. Since the objective of our study was examining the adoption of an IT-related infrastructure technology, we expect a relatively large percentage of our sample to include telecommunication companies. Our sample is composed of 20% manufacturing, 39% telecommunications, and 27% services and public services. This distribution is representative of the Korean market (e.g., heavily concentrated on telecommunication, electronics and manufacturing) and the extensive involvement of the Korean government in Internet technology (e.g. e-government). As apparent from Table 3, there are some differences in the characteristics of each sample. However, t-tests comparing the overall

distribution of values between the two sub-samples revealed significant differences only with regards to two variables: government sponsorship (p < .05) and IPv6 adoption (p < .05). Both observations are not surprising, as the Korean government augmented its support for the adoption of the new standard in recent years (OECD, 2008). It is also expected that IPv6 adoption is progressing over time. Regarding all other variables, no significant differences between the two sub-samples were found, indicating they are highly similar and comparable. Therefore, we decided to combine them into one common sample for our study. As of the end of phase I of our study, 23% of the surveyed organizations have implemented IPv6 to some extent. By the end of phase II, the number of adopting companies reached 31.6%. In addition, 36.8% of the surveyed companies were in the development stages and 5.3% were planning to implement IPv6 within the next 2–3 years. Slightly over 26% of the organizations are not going to adopt the new standard in the near future. Although the number of adopters has increased between phase I and phase II, it should not preclude us from combining the samples since our goal was to examine the determinants of the adoption decision and not the variability in the adoption decision itself. Since all information was collected from a single respondent in each firm, we applied various measures to control for a possible common method bias, as recommended by Podsakoff et al. (2003). First, we organized the survey as an unstructured list of questions with very neutral wording to prevent the application of implicit theories by our respondents. Second, we conducted a Harman single factor test on our data and found that there is no single dominant factor which explains much of the variance. Third, we

Table 3 Demographic characteristics of the surveyed organizations. Industrya

Phase I

Phase II

Combine

Sizeb

Phase I

Phase II

Internet maturity (years)

Phase I

Phase II

Manufacturing Telecommunications Service Public service Education Finance/insurance Other Unknown

11 50 9 10 9 0 6.5 4.5

31.5 26.5 8 23.5 0 0 10.5 0

20 39 8.5 17 5 0 8 2.5

>10 10–100 100–300 300–500 500–1000 1000–2000 Above 2000 Unknown

0 35 22 2 11 11 15 4

8 29 5.5 0 5.5 13 21 18

Less than 2 2–4 5–7 8–9 10–11 11–12 Over 13 Unknown

0 8.5 24 19.5 6.5 5 32.5 4

0 3 21 8 42 0 13 13

a b

Percentage of participants. Number of employees.

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Table 4 Correlations, means and standard deviations of key variables. 1

2

3

1 Market leadership 2 Industry dummy (telecommunications) 3 Firm size 4 Killer applications 5 User demand 6 Switching cost 7 Resource concentration and power 8 Government sponsorship 9 Normative pressure 10 Adoption of IPv6

.107 .212 .095 .222* .285** −.107 .176 .338** .303**

.094 .078 −.163 .302** −.074 −.127 .146 .288**

.112 .044 .368** .177 −.110 .284* .094

Mean Standard deviation

4.48 1.64

0.39 .49

3.96 2.11

4

.270* .122 .175 .217 .081 .184 5.30 1.01

5

.053 .137 .491*** .428*** .368** 3.95 1.22

6

.147 .109 .301** .184 4.66 1.25

7

.259* .116 .218 4.67 0.92

8

.333** .322** 4.10 1.17

9

10

.637*** 4.32 1.58

2.49 1.03

n = 84. * p < .05 (two-tailed). ** p < .01 (two-tailed). *** p < .001 (two-tailed).

used the responses to a question on whether the company regards itself as an innovator as a marker variable. Whereas this question is not directly related to the survey, it can be regarded as proxy for social desirability. Companies and managers tend to perceive being innovative as socially desirable. When controlled for this marker variable, the correlation between our key variables does not change significantly, providing reasonable evidence that common method bias is not substantial in this study.

The six key variables loaded on a six factor solution explaining 70.1% of the total variance, with all factor loadings (except one) larger than .62 and no cross loadings above .40, with only one exception. Moreover, the communalities for all constructs averaged >.69 and did not vary over a wide range, indicating overall good internal and discriminant validities (MacCallum et al., 1999).

5.2. Measures

Table 4 summaries the means, descriptive statistics of and correlations among our survey variables. These variables were then subjected to OLS regression, as shown in Table 5. Since the variance inflation factors (VIF) for the variables did not exceed 1.6, we found multi-collinearity not to be a serious problem. To validate our hypotheses, we ran four different models. In Model 1, we considered only the control variables. Both market leadership and the dummy variable for the telecommunication industry are significantly related to the adoption of IPv6, whereas firm size is not. In Model 2, we included the two variables related to usefulness: killer applications and user demand. User demand is strongly associated with IPv6 adoption, whereas killer applications are not. Thus, Hypothesis 2 is supported while Hypothesis 1 is rejected. In Model 3, the four variables related to environmental conduciveness are added. Resource concentration and power and normative pressure are both significantly related to the adoption of IPv6. Thus, Hypotheses 4 and 6 are supported. However, the negative association of switching cost and the positive relation of government sponsorship with IPv6 adoption are not significant. Therefore, Hypotheses 3 and 5 are not supported by our data. Finally, when the variables related to usefulness and environmental conduciveness are combined (Model 4), the associations of normative pressure and resource concentration and power with IPv6 adoption remain significant, whereas the relations of market leadership and user demand with the dependent variable become insignificant.

5.2.1. Dependent variable The adoption of IPv6 was measured through a direct question on a four point ordinal scale ranging from “we have no plans to adopt IPv6” to “we have already implemented IPv6.” 5.2.2. Independent variables As our study explores a new research theme, all independent variables were measured on newly developed multiple-item Likert scales ranging from 1 (“do not agree”) to 7 (“fully agree”). See Appendix B for the multiple items measures and related Cronbach’s alpha of each construct. 5.2.3. Control variables Companies which regard themselves as market leaders may adopt new technical standards more aggressively. Alternatively, they may be reluctant to adopt IPv6 when they fear that the new technology would hinder the quality of their service (Cisco, 2006). Therefore, we included market leadership measured on a seven point scale. Furthermore, the adoption of IPv6 may be influenced by industry specific circumstances. Particularly, it can be expected that telecommunication companies adopt the new standard earlier than companies in other industries, as their very business focus is on IP networks. Therefore, we included an industry dummy for telecommunications (coded as “1” if the company is a telecommunication firm and “0” otherwise). Finally, IPv6 adoption could also be influenced by firm size. Larger firms may adopt the new standard earlier than smaller ones, since they have more human, technical and financial resources. Alternatively, large firms may be reluctant to adopt a new standard if they have extensive investments in the existing standard and related technology (drag). Thus, we included firm size as a further control variable. It was measured on a seven point scale ranging from “company has less than 10 employees” to “company has 2000 employees or more” (see Table 3).

5.3. Results

6. Discussion Our model (Fig. 1) depicts two main drivers to the adoption of IPv6. The first deals with the usefulness of the technology and the second with environmental conditions. Hovav and Schuff (2005) found that most ISPs interviewed cited relative advantage and a killer application as an adoption motivator. That is, ISPs stated that the development of IPv6 specific applications would encourage early adoption of the new standard. As IPv6 is an infrastructure technology, companies need to cultivate user

A. Hovav et al. / Research Policy 40 (2011) 253–262

259

Table 5 Regression analysis for adoption of IPv6.

Controls Market leadership Industry dummy (telecommunications) Firm size Factors related to usefulness Killer applications User demand Factors related to environmental conduciveness Switching cost Resource concentration and power Government sponsorship Normative pressure R2 R2 (p) F-Value (p)

Model 1

Model 2

Model 3

Model 4

.27* .26* .01

.18* .32** .00

.14 .26** −.09

.13 .28** −.09

.04 .37***

.15 **

4.87

.29 .13*** 6.27***

.05 .12 −.11 .19* .11 .53***

−.11 .19* .06 .50***

.50 .34*** 10.75***

.51 .36*** 8.60***

n = 84. * p < .05 (two-tailed). ** p < .01 (two-tailed). *** p < .001 (two-tailed).

demand to obtain some relative advantage. Our second model measured the impact of the UF dimension on organizational adoption decisions keeping the EC dimension constant. Our results indicate that all else being equal, user demand is a significant adoption motivator while perceptions regarding killer applications are not related to adoption behavior. The last result can be explained by the context of our study. A killer application relies on the new technology and is likely to create value (rents or competitive advantage) for the developing company. However, the killer applications in this study are either infrastructure related (e.g., W-CDMA) or are being provided by the Korean government and thus are not proprietary. For example, any one of the Korean telecommunication companies can offer Voice over the Internet, since the infrastructure to do so has been made available by the government. Our findings suggest that the Korean government IT839 policy reduces the differential affect of killer applications for companies in Korea. Our third model measured the EC dimension. Switching cost had a negative but statistically insignificant effect on adoption, suggesting that cost to upgrade is not a major concern for Korean companies. This could be because: (1) most recent equipment is IPv6 ready, thereby reducing the cost to purchase new equipment, (2) the cost to maintain IPv4 is relatively high, or (3) some of the indirect costs such as training and technical support are mitigated by the Korean government. In addition, organizations are adopting IPv6 while maintaining their investment in IPv4 (co-existence) and thus reducing switching costs. Industry experts cite the depletion of IPv4 addresses as the main reason for the development and adoption of IPv6. For example, the IPv6 Forum website displays a counter indicating the number of available addresses and the “drop dead” date – a day when companies will no longer be able to obtain new IPv4 addresses. However, this panic is not universal because of the uneven distribution of addresses. Our study found that Korean companies’ perceptions regarding resource concentration and power over the Internet have a significant influence on their decision to adopt the new standard. However, rather than reflecting a real shortage of addresses, this result appears to be the outcome of the high sensitivity of Korean companies towards resource constraints. North America owns over 66% of IPv4 addresses and thus is perceived as having command over the Internet. This situation seems to induce Korean companies to invest aggressively in IPv6. This behavioral feature of organizations in Korea can be instrumentalized by the government policies. Leading companies can also enhance the adoption of new technologies by creating a sense of crisis (Kim, 1998).

The Korean government’s IPv6 strategy which focuses on extensive investments in the development of related technology, test environments, and prototyping was designed to demonstrate the technical capabilities of IPv6 and create network externalities and related infrastructure. Yet, our study found that government sponsorship has no significant influence on the adoption decision of the surveyed companies. This could be due to one of several reasons: 1. The Korean government sponsorship is mainly technical in its nature. Since it does not include direct business incentives, it may have limited impact on adoption. 2. It is possible that sponsorship has an indirect effect on adoption through switching costs (i.e., reducing cost of R&D, training) or through the increase in user awareness. However, the association of government sponsorship with adoption is also insignificant when user demand is not considered (Model 3). Moreover, additional statistical tests revealed that in our survey sample, there are no other interaction (moderating or mediating) effects of government sponsorship on the association between switching costs or user demand and IPv6 adoption. 3. By encouraging companies to develop certain technologies which may not align with their business strategy or core competency, the Korean government is intervening in companies’ internal business decisions. Thus, sponsorship might be regarded by managers as interference rather than an adoption motivator. Our study found that the existence of network externalities and the socio-political dynamics created by the Korean government’s support for IPv6 are adoption drivers. Normative pressure has the most significant influence on adoption decision by the surveyed companies. This result can be explained by the group-oriented and hierarchical Korean society and the structure of its industry. Generally, Korea has a collectivistic, high power distance culture (Kim, 1994; Hofstede, 2001), resulting in a tendency by organizations to follow peer behavior, particularly when new trends and developments are initiated by powerful organizations. This behavioral pattern has been strongly reflected and reinforced in the inter-organizational and industry–government relationships. Following Confucian tradition, the Korean government exerted a strong influence over the behavior of private business throughout the country’s industrial development since the Korean War (Chung et al., 1997). Although direct intervention with the private sector has declined in the past two decades, the government is still perceived by most companies as relatively powerful. Moreover, Korea’s industrial structure is also very

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hierarchical, with a dominant role played by tightly managed business groups (chaebols). These groups have a strong influence over smaller companies which are often dependent on them through industrial supply chains (Biggart, 1997). Thus, normative pressure by leading governmental or private organizations on other companies is much stronger in Korea than in most other countries. Although user demand was a significant adoption driver when we considered only factors related to usefulness (Model 1), it was no longer significant when we added the environmental factors to our model. These results could be explained in several ways: 1. It is possible that in the case of Korea, environmental conditions supersede user demand and technical features. 2. User demand is still weak as there is no real killer application at present. 3. Government policies (IT839) reduce some of the competitive forces that traditionally drive “usefulness.” Finally, our study found that organizational size does not have a significant effect on adoption. On one hand, large organizations have more drag. Conversely, they may have more resources to support the cost of upgrading. Similarly, market leadership had no significant influence on adoption. Some market leaders fear that adopting a new technology may interfere with the quality of their service while others might view a new technology as an enabler of new services. As expected, the industry dummy was significantly related to the adoption of IPv6. Companies in the telecommunication industry are more likely to adopt IPv6 than companies in other industries. Overall, our study explains 51% of the adoption decision of Korean companies. The explanatory power of our model is driven by the perceptions of normative pressure. 7. Policy implications Our analysis highlights a slight disconnect between the Korean government policy and organizational perceptions of that policy. A similar disconnect was observed by Lee (2009) in the context of the KII project. While the government is investing in related technology and test beds, organizations are more concerned with normative pressure and their customers’ demands. Therefore, to increase the speed of IPv6 adoption, the Korean government should address the business concerns of potential adopters rather than concentrate on technical solutions. Our results indicate that all being equal, user demand influence adoption decisions. Yet, none of the policies described in the IT839 document address user awareness, publicity or marketing. To increase awareness of the potential benefits of IPv6, the Korean government should embark on a marketing campaign. It is possible that there will never be a killer application based on IPv6 technology. However, when the world is depleted of IPv4 addresses, Korean networking and telecommunication companies will be well positioned to provide the technology and services needed to support a migration to IPv6. In that sense, the Korean government’s policies have created an environment of strong normative pressure which may be additionally supported by amplifying organizations’ perceptions of resource depletion. This pressure may create positive indirect economic outcomes. Countries that look to increase their economic status may be able to use applicable social dynamics as a guide to their policies. However, Korea is also risking losing its first mover advantage, if other countries adopt more comprehensive policies (e.g., policies that address business concerns, extensive financial incentives, better publicity and educational campaigns). Thus, the Korean government should observe second movers and their policies, analyze their potential threats and update their strategy accordingly.

By providing the infrastructure and by developing a set of potential IPv6 related applications, the Korean government is “leveling the playing field.” The initial intention of the Korean government policy was to lower the risk involved in the early adoption of an uncertain innovation. However, this policy resulted in two unintended consequences: (1) moderate competition among potential adopters, and (2) decreased perceived value of the technology. The results of this study may also be applicable to the adoption patterns of other infrastructure technologies. The emphasis on social norms as an adoption driver highlights the need for government policies and direction when new technological foundations with a relatively long economical horizon are developed. These policies mediate the financial risk involved in early adoption by creating networks of potential adopters and underlying norms. However, disconnect between government policies and perceived organizational business environment may hinder such efforts. In other words, our study suggests that building up normative pressure through the “guidance” of companies or the creation of general expectations in society can be a powerful means to enhance the rapid adoption of infrastructure technologies. However, policymakers should accompany such pressure by support policies which address the business concerns of adopting companies. Otherwise, managers may perceive the government’s campaign as an inappropriate interference in their affairs. Such interference could result in delayed adoption decisions or, in extreme cases, even “protest campaigns” by companies.

8. Limitations and future research This study has its limitations. Due to the novelty of the topic, we opted for an exploratory analysis. The results are limited to companies in Korea and could not be generalized to other countries. Moreover, our sample size is relatively small. However, a power analysis revealed that the statistical power of our model is >.999, indicating that all statistical significant relationships between our variables are accurately detected. Another limitation is that we collected all of the information from a single source within each company. Although we employed various measures to control for common method bias, its existence should not be dismissed. Future research can expand the statistical validity of the study by conducting large-scale, multi-national survey of IPv6 adoption. While the majority of IT adoption work is focused on intraorganizational and user acceptance, this paper provides an insight into the determinants of infrastructure technology adoption at the country level. The interplay between organizational needs (user demand) and interoperability is highlighted by the Korean government’s strong support of the new technology. Our study also emphasizes the potential importance of social factors as compared with economic and technical aspects of technology adoption processes, particularly in countries with collectivistic societies. These assertions are also applicable for the diffusion of consumer products (e.g., new entertainment or communication devices). The buildup of normative perceptions that these new products are used by almost everyone may be very effective for enhancing acceptance as consumers fear that otherwise they deviate from the norm and will be left behind. Future research should integrate adoption theories with social network and power relations theories to achieve a better understanding of technology adoption patterns at a country level. This approach is especially pertinent when the technology is not owned by one or more entities (i.e., organizations, countries). Prior studies introduce the concept of partial adoption. Our study set out to measure the relative importance of elements within each dimension (UF and EC). Our analysis indicates that user demand has a significant impact on adoption only when environ-

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mental conditions are ignored. Within the EC dimension, normative pressure and resource concentration appear to be more important than switching costs and government sponsorship. Acknowledgements Funding for this research was provided by IBRE Research Grant, Korea University Business School. We would like to thank the editor and anonymous reviewers for their helpful comments on earlier versions of this paper. Appendix A. The Korean government’s IT839 policy IT839 is an information technology driven policy proposed by the Korean government in 2005 (NIA, 2005). The goal of the strategy is to support the development of a number of new services, technologies and infrastructures. The three core infrastructures needed to support the IT839 policy are: 1. Broadband Convergence Network (BcN). Providing 50–100 Mpbs BcN services to 20 million households by 2010. 2. Ubiquitous Sensor Network. Realizing u-life (ubiquitous life) by developing and distributing ubiquitous sensor technologies and service models by 2010. 3. IPv6. Switching over to IPv6 based Internet by 2010. The IT839 policy introduces eight services based on the three infrastructures described above (NIA, 2005): 1. Wireless Broadband (WiBro) services. Provide seamless access to broadband Internet on the move, WiBro commercial services began in June 2006. 2. Digital multimedia Broadcasting (DMB). Satellite and terrestrial DMB services were launched in metropolitan areas in 2004. Expanded coverage across the country began in 2006. 3. Home network services. Provide home network services to 10 million households by 2007. 4. Telematics. Become one of the leading countries in telemetric services by increasing the market size to 3.2 trillion won, and providing telemetric equipment to 27% of the total population. 5. RFID (radio frequency identification). Complete the development of core technologies such as RFID chips, readers, and middleware by 2010. The completion of RFID based services (e.g., public procurement services, defense ammunition’s management systems, ex-import logistics management services, and airport luggage tracking-system) is planned for 2012. 6. W-CDMA and 3G. Focus on the expansion of existing W-CDMA services by introducing a flexible pricing scheme and handset subsidies. 7. Terrestrial DTV. Provides nationwide Digital TV services. 8. IP Telephony. 070 area code was assigned to Internet based telephony in 2005. High quality Voice over IP services will be available to users using BcN by 2010. Appendix B. Multiple item measures (1 = do not agree . . . 7 = fully agree) Killer applications (˛ = .91) Voice over Internet protocol services contribute to the diffusion of IPv6 Wireless broadband contributes to the diffusion of IPv6 Home network services contribute to the diffusion of IPv6 Telematics services contribute to the diffusion of IPv6 RFID services contribute to the diffusion of IPv6 Mobile Internet (W-CDMA) services contribute to the diffusion of IPv6 User demand (˛ = .72) Our customers are aware of IPv6

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Our customers are demanding from us the adoption and servicing of IPv6 Our customers expect that IPv6 will be needed within two years Switching cost (˛ = .64) We have invested a lot into IPv4 infrastructure Converting the network environment into IPv6 creates a lot of cost Resource concentration and power (˛ = .67) The pool of IPv4 addresses is controlled by North America Possessing many IP addresses increases the Internet governance The U.S. currently control the Internet Government sponsorship (˛ = .89) We can receive financial support from the government when adopting IPv6 The government supports training and staff education for IPv6 The government provides publicly available test beds for IPv6 The government provides the necessary information for adopting IPv6 We can receive technical support from the government when adopting IPv6 Normative pressure (˛ = .88) Our adoption of IPv6 is following the government’s IPv6 promotion policy We adopt IPv6 because other companies adopt it We adopt IPv6 due to a general awareness that it is an important infrastructure for the next generation Internet

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