E-Commerce Readiness: Institutional Environment and International Competitiveness

Abstract

A systematic cross-country analysis of e-commerce activity reveals that although physical infrastructure explains much of the variation in basic Internet use, e-commerce activity also depends significantly on a supportive institutional environment. Chief among the characteristics of such an environment are national respect for the “rule of law” and, secondarily, the availability of credible payment channels such as credit cards. These results suggest that an institutional environment that facilitates the building of transactional integrity is critical to the development of e-commerce.