EJISDC (2014) 61, 4, 1-15 1 FORMATION AND FAILURE OF AN E-MARKETPLACE PIONEER IN A DEVELOPING COUNTRY John Effah University of Ghana Business School Ghana jeffah@ug.edu.gh ABSTRACT The purpose of this study is to understand the formation and failure of an e-marketplace pioneer in a developing country. Much of the research on e-marketplaces focuses on the developed world. Within the limited literature on the developing world, the dominant focus has been on user adoption and related constraints. Little research thus exists on how e- marketplaces are formed and whether they succeed or fail. This study therefore follows qualitative interpretive case study methodology to investigate the formation and failure of an e-marketplace pioneer in a developing country. The findings show that the e-marketplace was formed without a clear e-business model and without enough attention to the developing country environment. The failure was subsequently caused by inability to generate revenue and failure to renew domain name license. The paper advises potential entrepreneurs to pay attention to their local environment and develop e-business models with appropriate revenue options to guide their e-marketplace initiatives. KEYWORDS: e-business, e-business model, e-marketplace, interpretive case study, developing country, Ghana 1. INTRODUCTION The purpose of this study is to understand the formation and failure of an e-marketplace pioneer in a developing country. Continuing growth of the Internet and related Web technologies offers entrepreneurial opportunities for advanced e-business models such as e- marketplaces (Truong and Bhuiyan, 2011). E-marketplace generally refers to an electronic platform that enables multiple buyers and sellers to exchange information about products and services and engage in economic transactions (Molla and Deng, 2009; O'Reilly and Finnegan, 2009). Since the dot-com era from the late 1990s to the early 2000s, e-marketplace has attracted much research attention in the e-business literature (see Standing et al., 2010; Wang et al., 2008). However, the bulk of this attention has been on the developed world. Relatively little empirical research therefore exists on e-marketplaces from the developing world (e.g. Pare, 2003; Pucihar and Podlogar, 2006; Humphrey et al., 2003). Within the limited developing country literature, the dominant focus has been on adoption and use by buyers and sellers and the challenges involved. As a result, not much empirical research exists on how e-marketplaces are formed and whether they succeed or fail. Researching e-marketplace formation and outcome is important because the findings can help researchers to understand the developmental phase of the technology before its adoption and use. Moreover, the findings can offer rich insight to potential entrepreneurs on how to found e-marketplace innovation in developing countty context while avoiding failure. This study therefore investigates the formation and failure of E-GhanaMarket (pseudonym), a pioneer e-marketplace start-up in the developing country context of Ghana. The research question motivating the study concerns how e-marketplaces in developing countries get formed and why they may fail. To address the research question, the study followed qualitative interpretive case study methodology (Walsham, 1995; 2006; Klein and Myers, 1999) to understand the formation and failure process of the e-marketplace pioneer. The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 2 The rest of the paper is organized as follows. Section 2 reviews the literature on e- business model in relation to e-marketplaces. Section 3 reviews the literature on e- marketplaces in relation to developing country context. The research methodology is discussed in Section 4. Section 5 reports on the case study findings. The findings are subsequently discussed in Section 6. The paper concludes in Section 7 with its contribution and implications for research and practice as well as recommendations for future research. 2. E-BUSINESS MODEL AND MARKETPLACE E-business model describes value proposition, nature of organization and products and services offered, and revenue generation options for e-business firms (Osterwalder and Pigneur, 2004; Kshetri, 2007). As an advanced form of e-buiness model, e-marketplace offers a virtual platform for multiple buyers and sellers to interact and transact business electronically (Truong and Bhuiyan, 2011; Bakos, 1991). Within the e-marketplace literature, three common types of e-business models have been discussed, namely e-catalogue aggregator, e-exchange and e-auction (Standing et al., 2010; Raisch, 2001). The e-catalogue aggregator model presents a one-stop virtual shop of multiple products and services for multiple buyers and sellers, targeting a vertical or horizontal markets (Zheng, 2009; Brunn et al., 2002). The e-auction model enables sellers to invite buyers to engage in competitive bidding until an acceptable higher price is reached (Domaracki, 2001). Conversely, the model may also take the form of e-reverse auction where buyers rather invite sellers to engage in competitive bidding until an acceptable lower price is reached (Emiliani, 2001). The e- exchange model presents a virtual version of the traditional stock or commodity exchange to buyers and sellers (Ranganathan, 2003). The focus of an e-business model may be on B2C, B2B or C2C e-commerce options (Brunn et al., 2002; Chaffey, 2009). In terms of value offering, e-marketplaces enable buyers and sellers to exchange information on a wide range of products and services for e-commerce to occur (O'Reilly and Finnegan, 2009). They also offer other valued-added services including transaction advice, e- catalogue aggregation, conflict resolution, communication services, brokerage, and transaction costs reduction for market participants (Milliou and Petrakis, 2004; Sharif, 2006; O'Reilly and Finnegan, 2009). As an online platform, e-marketplaces play an important role by matching buyers who seek sellers and vice versa (Ranganathan, 2003; Rao et al., 2007; Molla and Deng, 2009). In addition, e-marketplaces build trust relationships among buyers and sellers, ensuring integrity of their interactions and reduction in information asymmetry (Bailey and Bakos, 1997; O'Reilly and Finnegan, 2009; Soh et al., 2006). However, whatever value e-marketplaces intend to offer, it is important that they consider such values from the participating buyers and sellers’s perspective (Brunn et al., 2002). Brunn et al. (2002) further note that as part of e-business modelling, e-marketplaces need to develop revenue models by defining how they intend to generate and appropriate income. The authors discuss a number of revenue options for e-marketplaces, including transaction fees, licensing fees, subscription fees, value-added fees and advertising fees, and also advise e-marketplace promoters to reduce economic vulnerability by combining revenue options rather than sticking to just one. In terms of success and failure, a number of critical success factors for e-marketplaces have been discussed in the literature. One such critical success factor is the need for e- marketplaces to acquire critical mass of buyers and sellers as market participants and offer them a very wide selection of options in terms of products and services (Brunn et al., 2002; Dou and Chou, 2002; Raisch, 2001). Critical mass in this context means attracting sufficient number of active buyers and sellers in order to maintain high market liquidity on the e- marketplace platform (Raisch, 2001). Without high liquidity and critical mass, the e- marketplace will be unable to dominate and sustain its existence. Another critical success factor is a revenue model that can generate sufficient income to sustain the e-marketplace The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 3 (Brunn et al., 2002). As Bruun et al. (2002) point, without an appropriate revenue model and strategy for appropriating part of the revenue, the e-marketplace will not be profitable and sustainable. Therefore, in order to survive, e-marketplaces need to generate enough revenue over time (Zheng, 2006). The need to create a fit with the socio-technical environment of the e-marketplace has also been identified as a critical success factor. Zheng (2006) notes that e- marketplaces need to create a balance among technology, organisation and their socio- technical environment . 3. E-MARKETPLACE IN DEVELOPING COUNTRIES Although e-marketplace has been common in the developed since the dot-era, such has not been the case in the developing world (Hafez, 2006; Humphrey et al., 2003; Pucihar and Podlogar, 2006; Travica et al., 2007). A number of factors have been attributed to the challenges with promoting e-marketplaces in the developing world. Travica et al. (2007) highlight lack of trust as one of the reasons for the limited adoption and use of e-marketplaces in the developing world. As a result, buyers and sellers are often unwilling to sign up for e- marketplace services. In their study on e-marketplaces and developing country export firms for garment and horticulture, Humphrey et al. (2003) found that e-marketplaces accross Bangladesh, Kenya and South Africa failed to attract participants due to failure to build enough trust. The authors note that despite initial promises that e-marketplaces would benefit developing country export firms in terms of better information, market accessibility and lower transactions costs, empirical evidence to prove such benefits remains limited. The authors note that most of the e-marketplaces they studied lacked the necessary online infrastructure such as e-payment to support total completion of electronic transactions. The authors conclude that despite extensive registration, the buyers and sellers were disappointed with the e-marketplaces. Another study on e-marketplace in Slovenia (Pucihar and Podlogar, 2006) found that e-marketplace use in developing county context is limited due to lack of awareness of the possible benefits and unavailability of standardized data on products and services for e-catalogues. The limited success of e-marketplace in the developing world has also been attributed to the failure of e-business entrepreneurs to localize their websites to the developing country environment. Vatanasakdakul et al.(2004) observed that rather than create a fit between B2B e-marketplace business model and their developing country environment, some entrepreneurs in Thailand modelled after successful e-businesses in the developed world. In a later study, Vatanasakdakul (2008) recommends that developing country developers align their e- business models to the local context rather than create websites that fit customer needs in the developed world. Meanwhile, it is established that given the contextual differences between the developed and the developing world, not all e-business models copied from the former can work in the latter (Kshetri, 2007). Therefore e-marketplaces in developing countries may not succeed if they fail to align with the culture and conditions of their local context (Vatanasakdakul and D'Ambra, 2007). To ensure that e-marketplace websites fit the context of the target market, Singh et al. (2013) recommend that entrepreneurs localize their business models. In relation to e-business models in developing countries, Kshetri (2007) identifies a number of barriers, including slow adoption of the Internet, lack of economies of scale for e- commerce, unreliable electricity supply, dominant cash culture and limited use of credit cards, non-readiness of local banks to process credit card transactions and other forms of e- payments, limited infrastructure and logistics to support physical delivery of online purchased items and low bandwidth availability. Others are cultural preference for personal and face-to- face communication to anonymous online transactions. Mbarika et al. (2005) also describe developing country open-air market culture as inconsistent with virtual shopping culture The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 4 required by e-commerce platforms. The authors further note that most consumers in the developing world, especially in Africa, are less e-ready for online transactions. In addition, firms in this part of the world are also less e-ready for online transactions and payments (Effah and Light, 2012). In short, it is important that developing country entrepreneurs intending to promote e-marketplace become aware of these barriers and account for them in their e-business modelling. 4. METHODOLOGY The research methodology for this study is informed by qualitative interpretive case study (Walsham, 2006; 1995; Klein and Myers, 1999; Barrett and Walsham, 2004). Interpretive case study research seeks to understand research phenomenon not as a given but as a social construction. It views social reality and knowledge from research as situated in socio-cultural contexts and emergent from interactions between researchers and research participants (Klein and Myers, 1999; Walsham, 2006). Interpretive case study is therefore considered appropriate for investigating information system as situated and shaped by its real-life context and how the research participants make sense of the phenomenon. As this study seeks to understand the e-marketplace phenomenon not as a given but as context bound and interactive with its environment, the author considers interpretive case study as the appropriate research approach. 4.1 Research Setting This study forms part of a larger multiple-case study research into e-business innovations in developing countries. The research setting for the current study is Ghana, a developing country context in Sub-Saharan Africa. In 1995, Ghana became one of the first countries in Africa to achieve Internet connection (Saffu et al., 2008). Since 2004, the country has been experiencing substantial improvement in personal and corporate Internet access through desktop and mobile computers (Boateng et al., 2009). Although Internet access at home has been limited, numerous internet cafes have sprung up across the country, especially in the urban areas, to provide access to people (Foster et al., 2004). In recent years, availability and adoption of mobile Internet via smartphones has contributed immensely to Internet penetration in the country. Despite the business opportunities afforded by the growing Internet penetration, usage has largely been limited to information exchange. Less commercial transactions occur through e-commerce due to challenges such as lack of e-payment services and location address for delivering online-purchased items. Yet some entrepreneurs intending to take advantage of the growing Internet penetration by promoting online business innovations have attempted to transfer e-business models from the developed to the developing world. One of such initiatives is the formation of E-GhanaMarket, which forms the case study for this study. 4.2 Data Collection Fieldwork for data gathering occurred over a two year period from 2008 to 2010. The researcher gained access to the case organisation by first locating it on an e-business directory website (www.ghanaweb.com) and subsequent personal contact with the owners. The study began when the firm was in existence and continued till it failed. The e-marketplace innovation case was considered interesting and significant for research because it offered a rare opportunity to understand a pioneer e-marketplace in a developing country context. In line with interpretive case study approach, the researcher gathered qualitative data from multiple sources, including semi-structured interviews, document analyses, newspaper archives, internet search and observation through demonstrations. The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 5 In all, the researcher conducted semi-structured interviews with 17 participants of the start-up firms. The participants included: 2 owner-partners as the entrepreneurs, 4 managers, 5 software developers, and 6 employees including administrative staff and sales personnel. The participants were selected through snowball sampling (Patton, 1990) beginning with the two owners who nominated other participants to be interviewed, who in turn nominated others and so on. The interview questions focused on the role of the interviewees as the stakeholders, significant activities in the formation and failure process of the venture as well as reasons for its failure. The average duration of the interviews was between 1 and 2 hours. All the interviews were tape recorded after gaining participant’s consent and were subsequently transcribed. Additional data came from observation and analysis of the e-marketplace website, including a series of website and application demonstrations by one of the two owners being an IT partner. Moreover, because the website was online, the researcher had unrestricted access to monitor ongoing events. Further data came from internal reports and online documents available on the website. The researcher also gathered data on general description of the e-business environment in the country at the time from Internet search and newspaper archives. Follow-up interviews with participants continued via e-mail and telephone conversation while the researcher continued to monitor the e-marketplace. These post- fieldwork data gathering continued well into the analysis phase. 4.3 Data Analysis The data analysis was informed by the hermeneutic circle, which is considered as a fundamental principle of interpretive case data analysis (Klein and Myers, 1999). The hermeneutic circle posits that human understanding is gained from interaction between meaning of parts and the whole of a text and text analogue (Myers, 2009). In line with the interpretive tradition, data analyses occurred alongside data gathering. This was informed by the understanding that from hermeneutic perspective, interpretive data analyses affect data gathering which in turn affact the analyses (Myers, 1997). During the analysis, the researcher checked back with the participants and the e- marketplace website to clarify emerging themes in a reflexive fashion. The objective of the analysis was to identify the context and the activites and significant phases involved in the e- marketplace formation and failure including reasons for the failure. The process involved continuous and careful reading and reflecting on all the gathered data from the interviews, documents and observation. The researcher followed an inductive analytical process, allowing concetps and themes on the contexts, activities, phases and processes to emerge from the analysis. The resultant concepts and themes were then used to structure the case study findings as presented in the next section. The researcher used peer review by colleagues and other researchers to evaluate the authenticity, plausibility and criticality of the emerging findings (Walsham, 2006). 5. CASE STUDY FINDINGS: E-GHANA MARKET TRANSLATION The attempt to establish E-GhanaMarket (pseudonym) began in 2004. The e-marketplace website was conceived by two partners: an account and an IT professional, hereafter referred to as accounting partner and IT partner. Each of the partners had their own firm that provided professional services to clients in Ghana. In 2003, before coming together to establish E- GhanaMarket, the accounting partner had contracted the IT partner to build a website for his firm. After a successful delivery of the website, the accounting partner was very impressed about the output. Following further discussions on opportunities for collaboration, the two agreed to form a partnership to promote an e-marketplace website as a one-stop online platform for buyers and sellers in Ghana. The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 6 At that time, the e-business environment in Ghana presented both opportunities and challenges for e-business formation. The two professionals saw the growing Internet access for organisations and individuals in offices, homes, internet cafes and schools as an opportunity for e-commerce innovation in the country. Internet access through mobile phones had also begun to pick up and was increasing individual access. Moreover, a number of organisations had begun to setup their own websites to market products and services online. The two professionals identified such developments as opportunities for forming the e- marketplace platform. The environment at that time also presented economic and infrastructural challenges for e-business formation. Online payment services were virtually unavailable. As a result, e- commerce transactions had to be settled by cash, cheque or money transfer. Another constraint was the absence of reliable physical location infrastructure such as city maps, street names, house numbers and post-codes to support distribution of online purchased items. Other constraints included high cost of computer hardware and Internet access for the public and the business community (Foster et al., 2004; Hinson and Boateng, 2007) as well as unreliable power supply for constant availability of the Internet (Foster et al., 2004). It was within this environment that the two professionals decided to promote the e- marketplace innovation. Following this background, the rest of this section presents the formation and failure trajectory of the e-marketplace. 5.1 Initial Planning According to the two entrepreneurs, their awareness of successful e-marketplaces in the developed world such as the Amazon and eBay platforms and lack of similar platforms in the country were the key factors that motivated them to initiate plans E-GhanaMarket. Between themselves, the two partners agreed on their roles and responsibilities for the formation and operation of the business. They agreed that the IT partner would be responsible for developing and maintaining the website for E-MarketGhana and providing all necessary technical support. The accounting partner would provide all the necessary financial and other resources for the formation and initial operation of the firm. In terms of roles, it was agreed that the accounting partner act as the interim managing director of the firm. The entrepreneurs then conceived the E-GhanaMarket website to be the one-stop e- commerce platform where buyers and sellers in Ghana would meet to exchange information on goods and services and engage in economic transactions. The entrepreneurs expected that buyers and sellers in the accountry would accept the innovation and consider it as the most convenient marketplace for goods and services. Their plan was that sellers would be interested in advertising and selling products and services through the E-GhanaMarket website, considering it as an opportunity for reducing transactions costs and generating online revenue anytime anywhere. The IT professional described their expectation of buyers in the country as follows: Consumers need hassle-free and convenient means for both actual and window-shopping. Consumers can shop conveniently via E-GhamaMarket website from their homes, offices and anywhere 24/7, make enquiries and get all the necessary information without wasting time on travelling. The entrepreneurs had high expectation that suppliers in Ghana would accept the E- GhanaMarket platform to advertise and sell to buyers in the country. To meet the expectation, the entrepreneurs planned that the E-GhanaMarket website would provide links to websites of suppliers. Suppliers without their own websites will also have the opportunity to advertise and sell goods and services directly from the e-marketplace platform. The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 7 For buyers, the entrepreneurs hoped that they would be interested in searching for and buying goods and services via the e-marketplace platform and have them conveniently delivered to their homes or offices. In short, the partners expected buyers and sellers in Ghana to accept the E-marketplace platform, preferring it to the existing physical marketplaces. However, according to the entrepreneurs, it did not occur to them at the time to plan for other important services such as online payment and logistics for distribution of online purchased items respectively. 5.2 Website Development Once the entrepreneurs had finished planning for the e-marketplace venture, the IT partner formed a team of developers from his firm and led them to develop the e-marketplace website. According to the IT partner, his team drew on experiences and knowledge from their previous corporate website projects. In addition, the team modelled the website after that of famous e-marketplaces in the developed world such as Amazon and eBay. He also noted that, in developing the website, the team followed international standards. When the website was ready, it was demonstrated to the accounting partner. However the latter was not impressed and called for major changes to the interface, navigation structure and various components. The proposed changes generated a heated debate between the two partners on what constitutes an appropriate website for the e-marketplace. The IT partner narrated his frustration as follows: Designing the website became a bone of contention between us. As IT professional I knew what a website should be like. The accounting partner also believed that being a business consultant and having served on the board of several organisations, he knew what organisations in Ghana wanted. The back and forth arguments between the two partners delayed the completion of the website for nearly two years. To avoid further delays, the IT partner agreed to make the changes requested by the accounting partner. Nonetheless, the IT partner believed that because of the changes the website did not meet international standards. For example, he felt that the homepage was too clumsy and cluttered. The completed website was designed as a generic platofrm without targeting specific vertical or horizontal market. It was also not designed to meet specific e-commerce option such as B2B, B2C or C2C. The enterpreneurs’s expectation was that the platform meet the needs of all categories of buyers and sellers in the country. After the development, the entrepreneurs found it difficult to get a suitable local firm to host the website. As a result they contracted a firm in the US to host it. 5.3 E-Marketplace Launching Following the completion of the website, the partners moved to promote the e-marketplace to the general public in order to attract buyers and sellers to patronize the platform. The website was officially launched in August 2006. Before the launch, the accounting partner engaged the media to advertise and promote the event and the website on radio and television as well as in newspapers. The accounting partner also invited a number of dignitaries from Government and industry to attend the launch. The Vice-President of Ghana was invited as the guest of honour. Unable to attend, the he appointed the deputy minister of communication as his substitute. The minister subsequently chaired the occasion and ceremoniously launched the e-marketplace website to the audience. In his speech, the minister congratulated the entrepreneurs and praised them for bringing such a state-of-the art innovation to Ghana. He noted that the one-stop e- marketplace innovation coincided well with the Ghana Government’s plan to transform the country into a digital economy. The minister assured the entrepreneurs of full Government The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 8 support and cooperation. He also invited the audience and the general public to patronise the website and also promote it to their relatives, friends and colleagues. The following is an excerpt of the minister’s speech as was captured in a local newspaper article: It is my hope that all of us gathered here today and others out there will take advantage of this innovation. I understand that it is the first of its kind in West Africa and it is an attestation to the favourable and friendly investment climate we have built in Ghana. The accounting partner demonstrated the website to the audience, convincing them about the benefits it can offer to the business community and consumers in a hassle-free online trading environment. He made the effort to promote the website to the business community as follows: Ghanaian businesses, from now on have a cheaper means of advertising and expanding sales. Being exposed to the E-GhanaMarket website 24 hours a day, 7 days a week and 365 days a year means you are still working even whilst you are sleeping. He also attempted to promote the website to the general public as follows: Goods come with detailed descriptions and detailed prices in all major international currencies. This enables consumers to make buying decisions more easily, shop online and get items delivered to any of their chosen location. Consumers can shop in the comfort of their homes, offices or anywhere. He concluded that E-GhanaMarket would bring together a critical mass of buyers and sellers in Ghana in an unprecedented manner as found in the US and Europe. Following the launch, E-GhanaMarket and its website continued to receive publicity, featuring in radio and TV programmes as well as in newspapers. The accounting partner became overwhelmed by the massive response from the media. This forced him to continue spending on advertisement and promotion. However, the IT partner was still not convinced about the success of the initiative. As far as he was concerned, the website failed to meet the required international standard. To him, his partner was just wasting money on advertisement. 5.4 Initial Operation After the launch, E-MarketGhana commenced business with a very simple organisational structure. Following the effort of the accounting partner, a board of directors was constituted and he became the chair. In addition to his operational and technical responsibility, the board also appointed the IT partner as the acting managing director until a substantive one was appointed. The earlier agreement that the accounting partner provides all financial and non- technical resources while the IT partner provide technical support remained. It was also agreed that the accountant’s firm provide all necessary financial and administrative services while the IT partner’s firm provide technical support. E-MarketGhana then established a sales and marketing unit and recruited personnel who were charged to get firms to subscribe to the e-marketplace platform. However, the nature of training for the sales and marketing team generated a controversy between the two partners. The accounting partner believed that the team only needed to know about the website and not about its technicalities. However, the IT partner believed that the team The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 9 needed technical understanding about the functionality and operation of the website in order to address questions from potential clients. He expressed this believe as follows: If you are selling the e-market concept especially being a novelty in Ghana you don't under estemate your potential clients out there so your sales personnel should be on top of their brief to answer any questions that might come from prospective clients. So in training them, I wanted to take them through the rudiments of Web technologies, helping them to understand what e-business is, what e-commerce is, what domain name means and stuff like that. The IT partner began to train the team on the functionalities and components of the websites. The accounting parter however argued that the technical training he was giving to the sales and marketing team was a waste of time and resources. To the accounting partner: All that [technical training] is waste of time and money. Just dispatch them to go and look for organisations to register. To avoid further controversies, the IT partner stopped the training. The team was sunsequently tasked to get organisations to subscribe to the e-marketplace platofrm at a fee. However, after several attempts only a few firms agreed to subscribe. The IT partner therefore decided to allow free subscription for a grace period, after which the firms would be asked to pay or be removed from the website. The accounting partner initially accepted the plan. The free registration attracted a number of firms to signed up. However, after three months, the accounting partner decided demand for their registration fees. The IT partner argued that the firms needed enough time, at least 6 months of free access, to experience the benefits of the platform before they should be ready to pay. The disagreement also generated further controversy between the two partners. Unknown to the IT partner, the accounting partner had already written to the firms demanding subscription fees. An excerpt from the letter reads as follows: Your three months grace period has expired. It is time to pay and this is your bill. We give you a discount of 10% and you are requested to pay by [a given date]. The action annoyed the IT partner who felt being side-lined by his partner as the board chair. The IT partner narrated his frustrations as follows: You want to do things from a certain perspective then he [the accounting partner] also thinks he knows a better way of doing it because he is a consultant. The request for payment however yielded no results as the firms were not prepared to pay. The accounting partner became disappointed with the sales team for their poor performance. He thought the innovation would be readily embraced by local organisations and that the firm would begin to make profit quickly. His biggest challenge was how to continue financing the firm without generating revenue and for how long. The situation worried him because he was not sure when the firm would become financially independent so that he could recover his investment. The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 10 5.5 Towards Failure After the firm failed to attract enough buyers and sellers to the e-marketplace platform, the accounting partner refused to fund the firm any longer, blaming virtually everybody for the unfortunate situation. He complained of having spent so much without recovering his money. The IT partner disagreed and argued that the accounting partner was just being inconsiderate and unappreciative of what the IT partner had also invested in terms of time and technical effort. Because the accounting partner refused to continue the funding, the IT partner decided to resign as the interim managing director and focus solely on providing technical support for the website and spend time on his own IT firm. The board appointed a new director who decided to review the performance of the firm. The new director contacted some of the few firms who subscribed to the website to found out whether they had benefitted. They complained about low patronage by buyers and sellers and therefore the limited opportunity for online transactions. They also complained about lack of online payment services and logistical support for item delivery. The new director reported the challenges to the board. With the report, the board called for redesign of the website in order to address the challenges raised. The complaints caused management to agree on two major changes to the E-GhanaMarket website. The first involved introduction of e-payment services to facilitate buying and selling. The second involved establishing a logistics unit for E-Marketplace support distributed of online purchased items. The IT partner also called the need for the redesign to meet international standards. While the redesign was ongoing, the subscription renewal for the E-Marketplace domain name became due. The IT partner kept reminding the accounting partner to pay for the renewal but the latter refused. Due to the failure to renew the domain name license, warning messages started appearing on the website. In 2010, the domain register caused the hosting firm to advertise the domain for sale. The firm eventually lost the domain name. With the domain lost, the IT partner and his team stopped the redesign, leading to the final closure and failure of the e-marketplace. 6. DISCUSSION OF FINDINGS The purpose of this study has been to understand e-marketplace formation and failure in a developing country. The findings present a number of interesting issues for discussion. However, based on the research question, this section discusses issues related to e-business modelling, e-marketplace environment and e-marketplace failure. 6.1 E-Business Modelling The complex nature of e-marketplace calls for the need to consider not only the technology involved but also appropriate e-business model with clear value proposition and revenue options. From the findings, the e-marketplace was formed without a clear e-business model with proposed value and revenue plan. The two entrepreneurs just problematized the absence of e-marketplace in the developing country and went through the formation process based on their understanding of international standards and how the innovation should work. They failed to consider a comprehensive e-business model inclusive of value proposition for local buyers and sellers and revenue options for the firm. Throughout the formation, dominant attention amidst controversies was paid to the technology—nature of the website and whether the design met international standards. Another source of contention was the kind of training to give to sales and marketing personnel. Not much attention was paid to other significant compoments of e-business modelling such as finding out from potential buyers and sellers what value would attract them and considering how to generate revenue for the firm. E- business model options for e-marketplaces discussed in the literature include e-catalogue The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 11 aggregator, e-auction and e-exchange (Standing et al., 2010; Raisch, 2001). The models can be used to target vertical or horizontal markets as well as any of the B2B, B2C and C2C e- commerce options (Brunn et al., 2002). Nevertheless, in planning for the e-marketplace formation, the entrepreneurs failed to consider a clear e-business model with a target market focus. In terms of value to market participants, e-marketplaces may offer a variety of services including matching buyers and sellers to identify and satisfy their needs (Ranganathan, 2003; Rao et al., 2007; Molla and Deng, 2009), aggregating information on goods and services, and providing assurance of trust and integrity for buyers and sellers (Bailey and Bakos, 1997; O'Reilly and Finnegan, 2009; Soh et al., 2006). Others include logistics and payment services (Singh et al., 2013). In addition to value proposition, e- marketplaces also need to develop a revenue model, clarifying their sources of revenues. Revenue options for e-marketplace include transaction fees, licensing fees, subscription fees, value-added fees, advertising fees and more (Brunn et al., 2002). Beyond building an e- marketplace platform, the entrepreneurs failed to plan for value-added services to be offered. Eventually how and when to charge for just subscription fees became a bone of contention between the partners. Yet as Brunn et al. (2002) advise, e-marketplaces need to pursue a combination of revenue options in order to reduce economic vulnerability rather than stick to just one option. Surprisingly, they did spend much time on how to allocate costs and effort but not on how to generate revenue. Because the entrepreneurs failed to develop an appropiate e-business model, the strategy to convince the target market was purely based on rhetoric of e-marketplace values offered in the developed world. However, e-marketplace value proposition for buyers and sellers need to be aligned to the needs and perception of the target market (Brunn et al., 2002) and not on what pertains in other contexts or the beliefs of market makers. As Pucihar and Podlogar (2006) point out, the success of e-marketplace depends much on the perceived value of buyers and sellers. One key lesson from the above discussion is that problematizating the absence of e-marketplace and forming the innovation is not enough. In order to succeed, entrepreneurs need to develop appropriate e-business model with clear value proposition and revenue plans. 6.2 E-Marketplace Environment In forming the e-marketplace, the entrepreneurs failed to consider their developing country environment and its potential impact on the innovation and performance. The findings show how the partners placed much emphasis on e-marketplace in the developed world to the neglect of their own context in the developing world. Although they were motivated by e- marketplace success stories in the developed world, it was important that they also accounted for contextual differences between the two worlds. E-marketplace environment in the developing world has been characterised with limited trust and lack of awareness of online transaction benefits (Travica et al., 2007; Humphrey et al., 2003) due to preference for face- to-face and open market culture (Mbarika et al., 2005). Moreover, limited infrastructure including e-payment services and supporting logistics to distribute online purchased items constrain e-commerce transactions (Kshetri, 2007). Also, most businesses are often not e- ready for online transactions and payments (Effah and Light, 2012). It was therefore important for the entrepreneurs to understand their local environment and align the innovation with appropriate e-business model to their developing country context. In the end, they failed to offer value that would attract the local target market. Therefore, entrepeneurs seeking to transfer innovation from the developed to the developing world need adapt rather than adopt the technology. As the findings show, the accounting The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 12 partner in particular promised a hassle-free E-GhanaMarket platform based on rhetoric of success stories in the developed world. However, such rhetoric failed to guarantee the expected success for the e-marketplace; hence the need to pay equal atteniton to the developing country environment. The above discussion suggests that entrepreneurs who intend to transfer e- marketplace innovation from the developed to the developing world need to account for contextual differences between the two worlds and align the technology to their developing country environment. Within the developing country e-buisness literature, the tendency for entrepreneurs to blindly copy innovations from the developed world without aligning them to their developing country context has been criticised (Vatanasakdakul, 2008). Vatanasakdakul (2008) therefore advises developing country entrepreneurs to adapt rather than adopt technologies from the developed world. As Zheng (2006) notes, e-marketplaces that seek a balance between their e-business models and their socio-technical environment are more likely to succeed than those that fail to do so. It is therefore important that entrepreneurs localize rather than copy e-marketplace innovations from other contexts (Singh et al., 2013). 6.3 E-Marketplace Failure The poor performance and final failure of the e-marketplace can be attributed to the inability of the platform to attract critical mass of buyers and sellers in order to generate enough revenue to sustain the business. However, what led to the final closure was the failure to renew the domain name license. Despite the hope that the platform would provide hassle free environment for buyers and sellers, it could not attract enough participants. Because the partners failed to appreciate the local environment and the needs of the target buyers and sellers, they could not offer value that could attract enough buyers and sellers to patronize the online platform. Attracting critical mass of buyers and sellers has been discussed as a key success factor for e-marketplaces (Brunn et al., 2002; Dou and Chou, 2002; Raisch, 2001). Another reason for the e-marketplace failure was lack of appropriate revenue model. The accounting partner seemed to have believed that once the e-marketplace commenced business it would automatically generate revenue. Such belief was based on his thinking that e-marketplace was successful and profitable in the developed world. When the venture failed to generate revenue, he became disappointed and stopped the funding. Thus generating revenue from e-marketplaces is not automatic. The experiences of dot-com failures in the developed world confirm that making profit from onlne business is not automatic (Howcroft, 2001). Entrepreneurs therefore need to develop appropriate revenue model with plans on how to generate income and make profit (Brunn et al., 2002). The final factor that led to the closure and final failure of the e-marketplace was failure to renew the domain name license. Domain name license renewal is significant for the continuing availability of an e-marketplace. Although plans were being made to redesign the website and revise the business model, the lost of domian name brought about the closure and final failure of the firm. The experience demostrates the need to maintain domain name as a key success factor for e-marketplaces. 7. CONCLUSION This study set out to understand the formation and failure of an e-marketplace pioneer in a developing country. The findings show how two entrepreneurs, an accountant and an IT professional, partnered to promote an e-marketplace innovation but failed to develop a clear e-business model and alignment to the local environment. The entrepreneurs rather formed the e-marketplace platform amidst controversies on the nature of the technology and rhetoric on international standards and success stories in the developed world. As a result, less attention was paid to the local context and revenue model. Eventually, the e-marketplace The Electronic Journal of Information Systems in Developing Countries www.ejisdc.org EJISDC (2014) 61, 4, 1-15 13 failed due to inability to attract adequate participants, generate revenue and pay for domain name license renewal. Table 1 summarises the key reasons for the failure as follows: Table 1: Key reasons for the E-Marketplace Failure  Lack of appropriate e-business model with value proposition and revenue options.  Lack of attention to the local e-business environment  Failure to achieve critical mass of buyers and sellers  Failure to generate revenue early  Failure to renew domain name license These findings suggest appropriate e-business model with value proposition and revenue options, attention to the local e-business environment, critical mass of buyers and sellers, early generation of revenue, and renewal of domain name license as among the key success factors and best practices for founding and sustaining e-marketplaces in a developing country. The paper contributes to research by offering rich insight into an e-marketplace formation in a developing country and how and why it failed. The experience can provide lessons entrepreneurs who share similar contexts and want to promote e-marketplace innovation in their countries. In terms of research contribution, the study extends e- marketplace research from the dominant focus on adoption and use by buyers and sellers to the initial formation and failure phases. The paper offers some implications for practice and research. For practice, the findings suggest the need for developing country e-marketplace entrepreneurs to focus not only on the technology, international standards, operational issues and success stories from the developed world, but also pay enough attention to e-business modelling and technology adaptation. 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