The impact of owner’s risk preference on the adoption of e-business: Are there differences between urban and rural residents?

Abstract

Purpose - The significant growth of internet users has driven businesses to develop their capacity in e-commerce. To gain the benefits of e-business, firms may choose to extend or transit their offline-operated businesses to online or hybrid modes. Opportunities are accompanied by risks in this process. Therefore, it is important to understand how business owners’ financial risk preferences affect their choice of business operation models, namely, online and offline operations. Methodology/approach - Using data from the China Household Finance Survey (CHFS) in 2019, this study examined the impacts of business owners’ risk preferences on the adoption of e-business, considering social insurance as a moderator on the relationship between risk effect and online business operation. In addition, we used heterogeneity examination to test for regional differences between rural and urban areas. Findings - Our results show that, compared to high-risk takers, low-risk takers are less likely to choose online or hybrid businesses; and having social insurance reduces the effect of risk preference on adopting e-business. This finding indicates social insurance is perceived to provide financial security to business owners and makes them more likely to adopt online business. Results of the heterogeneity examination suggest a discrepancy in the risk preference effect on the adoption of e-business between the rural and urban areas. Originality - Being the first attempt, the study contributes to the literature on e-commerce adoption by addressing the important role of financial risk preference on business owners’ adoption of e-business. The finding of rural and urban differences is of great importance to policymakers in allocating recourses and support to businesses in rural China.