Appendix 2. The OECD Methodology
The following details the thinking behind the development of the OECD's recommendations for measuring Electronic Commerce. It is based upon Alessandra Colecchia's paper Defining and Measuring Electronic Commerce: Towards the development of an OECD methodology, presented at the Conference on the Measurement of Electronic Commerce, Singapore 6-8 December 1999.
The paper identifies that focus is needed on standardizing statistics and methods (internationally) that measure the level, growth and composition of e-commerce. As well as for measurement this is needed for the purposes of comparison. Currently there is not even an internationally agreed definition of e-commerce, resulting in vastly different outcomes from different research companies. Measurement becomes difficult because of the different methodologies used. A common measurement framework is required. Double-counting is an issue, with the output of one e-commerce industry potentially being included in the sales figure of another e-commerce industry.
It is necessary to determine the scope of transactions included in definitions. The challenge is to determine the economic impacts of e-commerce, by monitoring changes, looking at impacts of e-commerce on productivity and employment, new skills employed and obtaining measurements of new product and business models.
There is a need to develop a set of e-commerce definitions that can be statistically measured. This necessitates determining what needs to be measured, how it should be measured and who should do the measuring. But there is also a need to recognize that public and private sector requirements are not the same, although they are likely to overlap in some areas. Clarification is required regarding inclusions, e.g. EDI, EFT, credit cards or just purely Internet transactions. Clearly, widely varying outcomes will result from the parameters used. However, an e-commerce definition will need to be dynamic and will vary with the purpose of the measurement exercise. E-business tends to describe the broader outlook, with e-commerce defining the narrower. There is also a need to consider definition of the type of networks or applications on which, e-commerce occurs.
The need exists to know what is NOT happening, as well as what is, for the purposes of strategic planning. This requires the identification and capture of fundamental economic changes as well as growth.
The OECD concludes that when looking at what should be measured there are three broad indicators:
- E-commerce readiness (technical and commercial infrastructures that are necessary/in place).
- E-commerce intensity (usage, volume, value and nature of transactions) with the aim being to identify who is taking advantage of e-commerce opportunities, as well as who is not.
- E-commerce impact (as far as efficiency and/or wealth creation).
As growth in e-commerce stabilizes, the focus will move away from growth towards wealth creation potential, which is when details will be needed in respect of who is transacting, how products and services are evolving, market and industry structure, and industrial organization and management. This implies that there is less of a need to define requirements for public statistics, as they are only concerned with that which is directly measurable and mostly concerned with collecting data on the use of certain technologies/applications and electronic processes. However, there is a need for clear definitions with respect to policy concerns (e.g. the need to measure the development of different segments separately e.g. B2B, B2C). In a policy context definitions are required that capture size and impact, and are comparable between countries.
Most of the existing e-commerce definitions differ with respect to the activities or transactions that are included in the definition as well as the communication infrastructure on which the activities/transactions are carried on. The paper reports three key elements that allow for the differing definitions:
- activities/transactions,
- applications,
- communication networks.
Further, it identifies the need to consider the issue of transformation of economic activities.
The paper concludes that the main considerations in developing a measurement methodology are:
- WHY DO WE WANT TO MEASURE? Is it for economic and social impacts? Social impacts will necessitate broader definitions in order to capture fundamental changes in the economy (as mentioned above).
- WHAT DO WE WANT TO MEASURE? Is it the size of e-commerce and if so is it business activity or transactions? Different definitions will be required for each purpose. Similarly if the purpose were to measure impact, the definition would be broader still. Furthermore, we need to measure what is not occurring and why, as well as size and impact of e-commerce on non e-commerce transactions/activities. This requires measurement of the relative size or impact of e-commerce.
- WHAT CAN WE MEASURE? There will be different kinds of measurability. Some information will be that which countries generally collect - others will present greater measurement challenges.
In order to develop a framework to guide research in the e-commerce measurement area it is necessary to translate policy concerns into a set of e-commerce indicators. There is a need for indicators on e-commerce readiness, intensity and impact, with information needed from all areas across the electronic marketplace (consumers, business and government). Due to rapid growth, some information gathered has been less structured and some countries will have less of a statistical infrastructure within which to gather information.
The OECD identifies the research and measurement priorities as:
READINESS:
| Potential usage and access |
|---|
| Technology infrastructure / socio-economic infrastructure |
INTENSITY:
| Transaction/business size |
|---|
| Nature of transaction/business |
IMPACT:
| Efficiency gains |
|---|
| Employment/skill composition; work organization |
| New products/services |
| New business models |
| Contribution to wealth creations |
| Changes in product/value chains |
Currently available e-commerce indicators across OECD countries include:
READINESS:
| Number of Internet Service Provider's (ISP's) |
|---|
| Number of telecommunications carriers |
| Telephone and digital fixed access lines |
| Internet, Extranets, Intranets access |
| Perceived obstacles to e-commerce |
| Perceived benefits of e-commerce (ex-ante) |
| Persons with computer skills |
| Expenditure on e-commerce |
| Internet access baskets |
| Internet hosts |
| Secure servers |
This is the area that has received the greatest statistical attention to date. Indicators have been generally of two types, either relating to telecommunications infrastructure available in a country, or relating to skills and training of the population using the infrastructure.
INTENSITY:
| Intensity of Internet use |
|---|
| Frequency of Internet use |
| Expectations to use Internet |
| Internet transactions |
| Penetration rates |
| Value of Internet transactions |
Priorities for data collection in this area have been mainly in the regions of business enterprise and household sectors. Generally information has been broad, almost with an economy wide approach and measure the technological infrastructure in place and usage of technologies, with particular emphasis on the Internet. It is considered that the measurement of the value of electronic sales has not proven to be very reliable due to the small numbers of people, households and business that undertake these transactions.
IMPACT:
| Effects on firms' performance |
|---|
| Perceived benefits of e-commerce (ex-post) |
These measurements pose the greatest challenge. With the dynamic nature of the processes and sector, it is difficult to determine the impact of electronic commerce. However, some patterns are emerging and conclusions from business case studies can be used for insights regarding similarities and differences at sector and country level.
Generally there has been considerable work done in developing measures of readiness, but relatively little on developing measures of either the size of e-commerce or its impacts. This reflects the fact that it is relatively more difficult to measure impact than readiness or intensity. Potential social and economic impacts of e-commerce generate the largest need for information. It is expected technical and conceptual challenges will be faced in the data collection process.
Priorities need to be set for measurement, due to potential challenges, limited resources and speed of evolution. Frameworks need to be flexible and meet different user needs. Indicators need to be developed which respond to policy needs and capture the key elements and processes that are common to a range of operational e-commerce models in the OECD countries.
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