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Vol. 17, No. 1, January-February 2008, pp. 107119

issn1059-1478 eissn1937-5956 08 1701 0107
doi 10.3401/poms.1070.0006
2008 Production and Operations Management Society
An Exploratory Study of the Impact of e-Service
Process on Online Customer Satisfaction
Sulin Ba
Department of Operations and Information Management, School of Business, University of Connecticut,
Storrs, Connecticut 06269,
Wayne C. Johansson
U.S. Department of Homeland Security, Los Angeles International Airport, Los Angeles, California 90045,
lthough extensive academic research has examined the dynamics of interpersonal interactions between
service providers and customers, much less research has investigated customer service encounters through
technological interfaces such as the Web in electronic commerce transactions. Corporate websites have become
an important point of contact with customers for many companies. Service has been described as one of the
most important attributes for online business to inuence trafc and sales. However, more research is needed
to understand how Web-based technological capabilities of services affect customer satisfaction. In this paper,
we propose viewing the interface between online buyers and sellers through the lens of service management to
identify possible determinants of online customer satisfaction. A companys website is considered its electronic
service delivery system. We look at this electronic service delivery system from its process point of view. Our
ndings indicate that as the electronic service delivery system process improves, a customers perception of the
websites ease of use increases, leading to increased service value and perceived control over the process, which
increases customer satisfaction. The research provides evidence that the technological capabilities embedded in
the website processes are an important factor in determining service quality and ultimately online customer
Key words: Web-based technological capabilities; technology design of e-service process; online customer
satisfaction; electronic service delivery system
History: Received: November 2004; Revised: June 2005 and November 2005; Accepted: March 2006.
1. Introduction
Technology advancement is revolutionizing the way
business is conducted and reshaping how compa-
nies interact with their customers. This phenomenon
is particularly evident in the domain of electronic
commerce (EC). Companies have realized electronic
commerce not only is a way of reducing costs through
automation and increased efciency but, more impor-
tantly, is also a means to expand revenues through
enhanced customer service. Corporate websites pro-
vide an important interface through which customers
and rms interact with each other. This interface
has several characteristics that are uncommon to
the traditional forms of buyer/seller interaction (e.g.,
face-to-face or telephone). With little or no human
intervention, the capabilities embedded in the web-
site process technology enable a consumer to locate
a product or service, assess its utility, and purchase
it practically whenever and wherever it is conve-
nient. Indeed, the Internet technology has dramati-
cally impacted the service creation process.
However, surveys of online customers consistently
indicate that a big percentage is not satised with
the interaction (ICSA 2001, Bednarz 2003). As pointed
out by Meuter et al. (2000), although extensive aca-
demic research has examined the dynamics of inter-
personal interactions between service providers and
customers, much less research has investigated cus-
tomer service encounters through technological inter-
faces. There has been research on website design to
improve customer satisfaction. Most studies, how-
ever, focus on website navigation, information con-
tent, download speed, information presentation, etc.
(e.g., McKinney et al. 2002, Palmer 2002). More
research is needed to better understand how services
delivered through technological interfaces such as the
Web affect customer evaluations of service value and
how to manage the technology-based service process
for customer satisfaction and, ultimately, for creating
strategic advantage.
Service has been described as one of the most
important attributes for online business to inuence
trafc and sales (Lohse and Spiller 1998, Boyer and
Frohlich 2006). Provision of service over electronic
networks is referred to as e-service (Rust and Kannan
2003). Scholars have argued that e-service, compared
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
108 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
with ofine service, has the ability to serve consumers
more efciently, at a lower marginal cost, while simul-
taneously offering real-time product and/or service-
specic information (Shapiro and Varian 1999).
However, although Internet-based service tools and
technologies offer many benets, there are inevitably
costs associated with developing and delivering
e-services. A recent IDC survey found that in 2002,
e-service (such as online order taking and order
tracking, payment, and after-sales support) provi-
sion absorbed about 50% of the total investment in
new information technologies at a typical company
(Tsikriktsis et al. 2004). E-service entails many dif-
ferent dimensions and attributes, such as respon-
siveness of answering customer inquiries, website
security, customization, interactivity, service delivery
processes, etc. The rapid increase in e-service activ-
ity creates a challenge for rms: What combination of
features should be embedded in the service technol-
ogy to satisfy consumers while realistically consider-
ing operational and nancial constraints?
The ideal action for Internet companies is to
improve and maintain all service quality attributes
that satisfy their customers needs and wants. How-
ever, given that rms, even large ones, have limited
resources, priorities must be set among alternative
technological capabilities embedded in e-service in
making investment decisions based on a companys
business strategies. Not all technological capabilities
have the same effect on customer satisfaction. The key
is to nd, among various capabilities, which ones are
more crucial to enhancing the level of service qual-
ity. In other words, to be successful, e-services need
to identify and focus on developing technology-based
features that enhance consumer value. In this manner,
rms can understand what service areas should be
emphasized to most effectively improve quality while
avoiding investing valuable resources in technology
features that may not pay off.
The justication and deployment of new tech-
nologyin the case of this study, the e-service
processto a new market warrants special atten-
tion (Betz 2001). We build on theories from ser-
vice management and propose viewing the interface
between buyers and sellers (i.e., the website embed-
ding e-service technology capabilities) through the
lens of service management to identify and explain
possible determinants of online customer satisfac-
tion. In particular, the service management literature
has identied service process as a critical factor for
inuencing service quality. We evaluate the signi-
cance of the e-service process in terms of causality of
the level of customer satisfaction: How does a cus-
tomers e-service process perception about a website
affect customer satisfaction?
This research strives to make an important contri-
bution to the management of technology domain by
examining the impact of e-service capabilities on cus-
tomer satisfaction in the Internet market. Our insights
will help rms to understand whether investing in
and managing the e-service is justied and what
factors lead to customer acceptance of the e-service
2. Background and Theory
The service-prot chain model (Heskett et al. 1994)
hypothesizes relationships between the service deliv-
ery system (SDS) (internal service quality, employee
satisfaction, retention, and productivity), customer
satisfaction, and protability. In summary, prot and
growth result from customer loyalty, which develops
from customer satisfaction. Customer satisfaction, on
the other hand, is inuenced by the service value
a customer receives from the service delivery sys-
tem. This model provides an integrative framework
for understanding how a rms investments into ser-
vice operations are related to customer perceptions
of the value they receive from the rm. The frame-
work has been widely used by practitioners. Aca-
demic researchers have also empirically tested the
various links suggested by the model and found sup-
port for the positive effects of the SDSs performance
perceptions on service quality perceptions and cus-
tomer behaviors (Kamakura et al. 2002).
With recent technological advances and the explo-
sion of Internet usage, many services are delivered
through a companys website, and customers no
longer interact face-to-face with the service provider.
A companys website thus becomes the service deliv-
ery system, which is critical for a companys value
creation strategy. The focus of this study is to exam-
ine how this new electronic service delivery system
(eSDS) affects customers perceived service value and
customer satisfaction.
Roth and Jackson (1995) evaluated the service
delivery system in the operations capabilities-service
quality-performance (C-SQ-P) model based on the
process and people capabilities of the SDS: what the
system can do and what the outcomes of the ser-
vice interaction are, because these two factors are
what customers tend to use to make their judgment
of the service system. In their survey of the retail
banking industry, Roth and Jackson provided evi-
dence that the processes of a service delivery system
had a greater impact on service quality than people
capabilitiesthe knowledge and skills possessed by
employees interacting with customers. This nding
leads us to think that it is possible that technology and
the business processes embedded in the technology
have a greater signicance than human interaction
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society 109
on customers perceived service value, especially in
the online environment. A study by Meuter et al.
(2000) indicates that process failure and poor pro-
cess design are among the major factors leading to
a customers dissatisfactory evaluation of service in
a technology-based service encounter. In the Internet
environment, the technology typically is the website,
which is also the service delivery system. Therefore
we focus on the eSDS from the service process point
of view. Specically, service process is conceptual-
ized as a conguration of technological capabilities
through which service providers respond to customer
needs, and perceived eSDS process refers to the cus-
tomers view of how service processes are delivered
by the websites technological capabilities. Combining
the C-SQ-P model with the service-prot chain model
and adapting them to the EC service context, we con-
jecture the following:
Hypothesis 1A (H1A). Service value provided to cus-
tomers is positively correlated to customers perceived
eSDS process.
Hypothesis 1B (H1B). Customer satisfaction is posi-
tively correlated to the service value provided to customers.
Hypothesis 2 (H2). Customer satisfaction is posi-
tively correlated to perceived eSDS process.
One important factor that has been identied by
marketing researchers to have a considerable impact
in a service process is perceived control (Hui and
Bateson 1991), which is described as the amount of
control that a customer feels he has over the process
or outcome. Hui and Bateson (1991) concluded that
perceptions of control affect customer satisfaction rat-
ings in a variety of service situations. The sense of
control is especially important to customers in a self-
service setting and could increase the evaluation of
the experience (Langeard et al. 1981).
In an EC context, when a customer searches
through a companys website for a particular prod-
uct or checks inventory availability, the customer is
in fact performing a self-service. More recent stud-
ies on Internet retailing suggest that perceived con-
trol encourages Internet usage and loyalty, resulting
in more satised customers (Lee and Allaway 2002).
Indeed, new advances in technology have made it
possible for customers to choose the channel through
which to acquire the product, the channel through
which the product will be delivered, and the extent
to which they would like to be involved in the
development or delivery of the product. Therefore,
their expectations of perceived control have escalated.
Rust and Kannan (2003) believe that appropriately
designed and implemented service technologies can
provide customers with more control in their pro-
cess of conducting transactions, which can increase
customer satisfaction. In this research, we dene per-
ceived control as the amount of control the customer
has in the technology-based e-service encounter, such
as navigating through the website and determining
the e-service outcome. We hypothesize that
Hypothesis 3A (H3A). The customers perceived con-
trol in the online service process is positively correlated to
the perceived eSDS process.
Hypothesis 3B (H3B). Customer satisfaction is posi-
tively correlated to the customers perceived control in the
online service process.
Although it has been argued that the capabilities
embedded in an e-service technology provide many
potential benets for customers, if customers think
the technology is too difcult to use, customers may
not use the e-service technology at all. Therefore, cus-
tomer acceptance of this new technology is critical for
rms trying to push more service to the customer side
to lower their service cost and improve their service
efciency. The technology acceptance model (TAM),
which has been widely used to study user acceptance
of new technology, argues that perceived ease of use
is one of the key predictors of user acceptance of
new technology (Davis 1989). Perceived ease of use
is directly related to computer-mediated services and
refers to the extent to which a person believes using
the technology will be free of effort. In an e-commerce
setting, ease of use has been conrmed as a key factor
leading to channel satisfaction (Devaraj et al. 2002).
Ease of use, however, is dictated by what the sys-
tem can do and what it allows its customers to do,
i.e., the capabilities embedded in the e-service tech-
nology. Usability studies on online stores have looked
at website architecture, design, and various naviga-
tion processes to predict how easy it is for users to
achieve what they want to do (Lohse and Spiller 1998,
Palmer 2002). A recent study by Chen et al. (2004)
indicates that poorly designed website processes have
an adverse inuence on the websites perceived ease
of use. Therefore, we hypothesize the following:
Hypothesis 4A (H4A). The customers perceived ease
of use of a website is positively correlated to the perceived
eSDS process.
Hypothesis 4B (H4B). Customer satisfaction is posi-
tively correlated to the customers perceived ease of use of
the website.
Other than the process capabilities of the SDS, the
service literature also looks at how a service is deliv-
ered. Bitner et al. (1994) and Mittal and Lassar (1996)
both point out that in service settings, customer sat-
isfaction and evaluation of service are often inu-
enced by the quality of the interpersonal interaction
between the customer and the service provider. In the
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
110 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
EC context, services are provided through the tech-
nology medium and therefore are mostly impersonal.
The level of interaction between the service provider
and the customer or among the customers is normally
determined by the degree of interaction embedded
in the service providers websitea key technologi-
cal capability. For example, does the website enable
two-way synchronous or asynchronous exchanges
between the customer and the service provider? Does
the website provide a telephone number in case the
customer needs to contact the service provider? This
kind of reciprocal communication-based interaction is
termed interactivity in the literature and considered
an important inuence in building up online relation-
ships and total shopping experiences (Ha and James
1998, Merrilees 2002).
In addition to the social aspect of customer inter-
action with the service provider, many websites also
offer technological tools that allow customers to
receive information tailored to their specic needs.
For example, a customer shopping for a sports util-
ity vehicle (SUV) can choose to only receive informa-
tion comparing different SUV models. This type of
interactivitythe technological capability to create a
customized productis mainly process or system ori-
ented (see, e.g., McKinney et al. 2002, Palmer 2002),
instead of social content oriented, and therefore is
captured in our eSDS process construct. Interactivity
in our research focuses on the interpersonal commu-
nication aspect of the construct. Based on the above
discussion, we hypothesize the following:
Hypothesis 5A (H5A). Interactivity moderates the re-
lationship between the perceived eSDS process and service
Hypothesis 5B (H5B). Interactivity moderates the re-
lationship between service value and customer satisfaction.
Hypothesis 5C (H5C). Interactivity moderates the re-
lationship between the perceived eSDS process and the per-
ceived ease of use.
Hypothesis 5D (H5D). Interactivity moderates the re-
lationship between the customers perceived ease of use and
customer satisfaction.
Hypothesis 5E (H5E). Interactivity moderates the re-
lationship between the perceived eSDS process and the cus-
tomers perceived control.
Hypothesis 5F (H5F). Interactivity moderates the rela-
tionship between the customers perceived control and cus-
tomer satisfaction.
Figure 1 summarizes our research model.
Three demographic variables, namely gender, Inter-
net experience, and online shopping experience, are
important for control purposes. Prior research has
Figure 1 Research Model and Hypotheses
ease of use
Perceived eSDS
indicated that both gender and relevant prior expe-
rience play a role in how users perceive a technol-
ogy (e.g., Venkatesh and Morris 2000). To the extent
that perceived ease of use and perceived control may
be related to these demographics, it is necessary to
control for them in assessing the true relationship
between these constructs and customer satisfaction.
Therefore, these three demographic variables were
included as control variables.
3. Methodology
3.1. Research Design
The empirical study was conducted in two phases:
a pilot study (n = 100, with a response rate of
79.9%) and the nal study. Relying upon extant ser-
vice instruments and concepts, we rst developed an
instrument to measure our constructs. Through pilot
testing, we substantiated the reliability of the con-
struct indices and eliminated redundant questions.
The nal study instrument is a much shorter version.
Common method variance can be a potential source
of bias in survey research. Therefore, following sug-
gestions by Podsakoff and Organ (1986), a proce-
dural remedy was used to reduce method bias by
guaranteeing response anonymity. Another procedu-
ral remedy was the separation of predictor and crite-
rion variables psychologicallythe items measuring
different constructs were mixed throughout the ques-
tionnaire. In addition, almost half of the items on the
instrument were reverse-worded.
Data for the study were collected through self-
administered questionnaires over a period of three
weeks. Subjects for the study were students enrolled
in four operations and information management
courses at a major private university in the United
States. Two of the courses were undergraduate
courses, and two were MBA elective courses. All four
courses had roughly the same number of enrollment.
Each subject was asked to visit a specic website from
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society 111
six retailing websites, with the purpose of selecting
and possibly purchasing one of three products (a pair
of shoes, a briefcase, and a gift item of his or her
choice). An equal number of surveys was handed out
for each of the six websites. The surveys were handed
out randomly; therefore neither the subject nor the
researchers could know in advance who would be
asked to visit which website, thus creating random-
ization. Those enrolling in more than one of the four
courses were identied beforehand and received the
questionnaire only once. The incentive for participat-
ing was extra course credit (2% of course grade).
Heim and Sinha (2002) classify an electronic re-
tailers service process into four categories: service
kiosk, service mart, mass service customization, and
joint alliance service customization. According to
Heim and Sinha, a service kiosk, which is basically
an electronic brochure, has little or no ability to sell
online and an extremely limited service process, mak-
ing a service kiosk unsuitable for our study. Conse-
quently, we selected six websites, each belonging to
one of the other three categories, hence maximizing
the variation in the technological capabilities embed-
ded in the service processes offered by these e-tailers.
Three of the six sites were general broad-category
shopping sites (, http://nbci.
com, (this site has evolved into a general portal
instead of a shopping site since the study), and http://
netmarket. com) that can be considered joint alliance
service customizationservice products were de-
signed and delivered via interlinking systems between
several companies and service processes represented
operations oriented toward multiple-company deliv-
ery of service products. Two other websites, one lug-
gage retailer ( and one shoe
retailer (, were chosen as
mass service customization sites that were single-
company implementation of service process delivery.
Finally, a gift item retailer (;
no longer in operation as of November 2004) was cho-
sen as a service mart that provided basic technologi-
cal service capabilities such as searching and ordering
products but lacked more complicated service features
such as order tracking.
After the subjects completed an encounter with the
website, a survey instrument was self-administered.
The subjects were not required to complete a pur-
chasing transaction. Our nal sample consisted of
149 complete and valid responses out of 170 ques-
tionnaires that were handed out, for a response rate
of 87.6%. To determine whether nonresponse bias
was an issue, we used the procedure outlined by
Armstrong and Overton (1977) to compare early (sur-
veys returned within the rst week) with late respon-
ders. No signicant differences in any of our measures
were noted.
The age of respondents varied from 20 to 39, with
an average age of 24. Of these, 45% were female
and 55% male. Ninety-one percent of the respondents
had prior online shopping experience, with an aver-
age of eight online purchases. Ninety-ve percent of
the respondents used the Internet on a daily basis.
In addition, 60% of them typically used high-speed
Internet access (DSL, cable modem, or T1 connection).
3.2. Scale Development
In an effort to provide reliability, the study instru-
ment relied upon existing measures whenever possi-
ble, reverse questions, single-barrel questions, the test-
retest method, and pretesting of the questionnaire. The
nal survey instrument contained one binary ques-
tion that asked the users success in nding and/or
purchasing the target product, 36 questions (seven-
point Likert scale) to evaluate the constructs, and
11 demographic questions (please see Online Sup-
plement, available at
supplements, for the survey instrument).
3.2.1. Perceived e-Service Process. Because there
was no existing scale explicitly measuring the eSDS
process from the customers point of view, new items
were created according to Heim and Sinhas tax-
onomy of e-service process (2002). Heim and Sinha
suggest that website navigation, product information
and representation, order processing, and fulllment
are major e-service process dimensions. Because our
study did not require the subjects to actually pur-
chase a product, order fulllment was not measured.
Five items were created to measure the subjects per-
ception of various technological capabilities embed-
ded in a website, such as website navigation, infor-
mation searching, and product ordering. In addition,
Roth and Jackson (1995) and Meuter et al. (2000) both
identify process error as a major source of dissatis-
faction in a technology-based self-service encounter.
One additional item was thus adapted from Roth and
Jackson (1995) to measure process error.
3.2.2. Service Value. Service value in recent years
has been considered a key strategic variable to help
explain consumer purchase behavior and relation-
ship commitment (Patterson and Spreng 1997). In ser-
vice management and marketing, value is typically
dened from the consumers perspective. Heskett
et al. (1994) denes value as the results customers
receive in relation to the total costs (both the prices
and other costs to customers incurred in acquiring the
service). Perceived value is often viewed as the cus-
tomers overall assessment of the utility of a product
based on perceptions of what is received and what is
given (Zeithaml 1988).
Perceptions of value, however, are not limited to
the functional aspects but may include social, emo-
tional, and even epistemic value components. Prior
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
112 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
research indicates that three elements contribute to a
consumers perception of value: product price, prod-
uct quality, and shopping experience. Kerin et al.
(1992) investigated the effect price, product quality,
and shopping experience had on value perceptions of
a retail store (rather than a product), concluding that
the shopping experience had a greater effect on store
value than did price or product quality. Existing scales
measuring value, however, overwhelmingly focus on
price (see, e.g., Patterson and Spreng 1997, Sweeney
et al. 1999). In our research, since we were mainly
interested in service value relative to shopping experi-
ence (we did not ask our subjects to actually purchase
a product), new items were developed to focus on
measuring the give-and-receive trade-off in terms
of efforts.
3.2.3. Perceived Ease of Use. Ease-of-use items
were adapted from existing scales. The perceived ease
of use measures rst developed by Davis (1989) in
the technology acceptance model, then modied by
Devaraj et al. (2002) and Koufaris (2002) for online
transactions formed the basis for our scale.
3.2.4. Perceived Control. In developing the scale
for perceived control, our key focus was that the items
should refer to a technology-based (i.e., the Internet)
service encounter. Bowen and Johnston (1999) suggest
that perceived control emphasizes the importance of
the individuals subjective assessment of whether he
or she can exercise discretion and inuence. Nega-
tive consequences, such as alienation and frustration,
result when this basic need is not satised. There-
fore, incorporating the scales developed by Koufaris
(2002) for online retailing, and Hui and Bateson (1991)
for service encounters, we created a six-item scale for
perceived control that tried to capture the positive as
well as negative feelings customers might experience
in online service encounters.
3.2.5. Interactivity. As previously mentioned,
most existing scales for interactivity in the infor-
mation systems literature mainly refer to websites
technological capability. Our research focuses on
the communication and social aspects of the online
interaction, following the analysis of Ha and James
(1998). The only available scale for communication-
based interactivity is by Merrilees (2002), which has
a reported reliability measure of 0.85. After a careful
examination of the scale, we felt that some items (e.g.,
the overall shopping experience is very pleasant
and enjoyable; p. 115) were more about general
satisfaction with the website than the interactivity
aspect. Therefore, we adapted two out of the seven
items from that scale.
In their conceptualization of interactivity, Ha and
James (1998) list connectedness and information col-
lection as important dimensions of interactivity. Con-
nectedness refers to the feeling of being able to link
to the outside world and to broaden ones experience,
whereas information collection refers to a websites
ability to provide and collect necessary information
to and from consumers in a transaction. Based on this
conceptualization, we developed four new items for
the interactivity scale.
3.2.6. Customer Satisfaction. Five of the items
used to operationalize customer satisfaction came
from Oliver and Swan (1989), which had a reported
scale reliability of over 0.95. Although their scale was
developed when measuring respondents satisfaction
in the context of new car purchases, the wording of
the scale is very general and the items have been
used by others in various online research context
(e.g., Devaraj et al. 2002, Janda et al. 2002). There-
fore we adapted the scale and made some wording
adjustment to reect the Web technology-based ser-
vice experience. In addition, we added one more item
from McKinney et al. (2002) as a general measure of
overall satisfaction toward a website.
4. Data Analysis
All measurements of the constructs are based upon
the respondents opinions. Unknown covariates (e.g.,
trafc volume on the Internet, Internet service
providers technologies), which neither the website
nor the customer can control, may have an inu-
ence. We rely on a large sample size to mitigate these
unknowns. SPSS 13 for Windows was employed for
exploratory factor analysis. Amos 5 was the struc-
tural equation modeling (SEM) package utilized for
the conrmatory factor analysis and for determining
relationships among the constructs.
Heteroscedasticity was observed in the scatter plots
containing the ease-of-use index and unfortunately
could not be corrected by various transformations.
Although not desirable, the existence of heteroscedas-
ticity does not, however, invalidate the index. More
than likely, any hypothesis testing involving this
index will be either too conservative or too sensitive
(Hair et al. 1998). Across the three products, none of
the indices was found to signicantly differ.
As mentioned before, common method variance
can be a potential source of bias in survey research.
Negative affectivity, in particular, can be a problem
for this research because subjects may react negatively
to a website, which could affect all of their responses.
One of the procedures commonly used to test for
the presence of common method bias in a data set
is Harmans one-factor test (Podsakoff et al. 2003)if
a single factor is obtained from an exploratory fac-
tor analysis or if one factor accounts for a majority
of the covariance in the independent and dependent
variables, then the threat of common method bias is
high. Our factor analysis did not indicate a single-
factor structure that explained signicant covariance,
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society 113
suggesting that common method bias is not a cause
for concern in our sample.
4.1. Exploratory Factor Analysis
Responses to the questionnaire were subjected to
an exploratory factor analysis. Recent research has
demonstrated the benets of using exploratory fac-
tor analysis as a complement to theory in specifying
the appropriate factor loadings in the measurement
model (Gerbing and Hamilton 1996). The Kaiser-
Meyer-Olkin measure of sampling adequacy (MSA)
for our data is 0.882, well above the 0.80 level deemed
as meritorious for factor analysis (Kaiser 1970).
The principal factor method was used to extract the
factors, with a promax (oblique) rotation. The eigen-
value-one criterion suggested eight factors. However,
factors 7 and 8 each only accounted for less than 3%
of the common variance. A scree test suggested six
meaningful factors. Therefore, we decided to retain
only six factors, which together explained 60% of the
total variance.
In interpreting the rotated factor pattern, accord-
ing to Hair et al. (1998), our sample size requires a
factor loading of 0.45 at the minimum to be signif-
icant. A factor loading of 0.50 or greater would be
considered more ideal. Using this criterion, Table 1
presents the questionnaire items and their corre-
sponding factor loadings that are considered signi-
cant (0.45). Each factor is labeled in the table for easy
Several items turned out problematic (SAT4, VAL1,
VAL2, VAL5, EOU4, PC4, PC6, INT1, INT2, INT3, and
eSDS4). Given the exploratory nature of our study,
we decided to rst retain all the items with a 0.45 or
greater factor loading that loaded on their intended
constructs. Problem items were dropped from further
analysis. The fact that SAT4 did not load signicantly
on customer satisfaction was a surprise, given that
the item had been used in prior research. In addi-
tion, although PC4 is typically used as an indicator
for perceived control in the literature, the fact that it
loaded on customer satisfaction is consistent with the
study by McKinney et al. (2002), who used the item
as an indicator of overall customer satisfaction toward
a website and reported a reliability index of 0.98 for
the scale.
Items VAL1, VAL2, and VAL5 were created in an
attempt to capture the give-and-receive trade-off in
terms of effort, rather than price. However, these
items seemed ambiguous upon closer examination
(for example, the trade-off in VAL2 the service pro-
vided through the website was very efcient was not
obvious), justifying their exclusion from further data
analysis. INT1, INT2, INT3 also seemed to be more
about preparation than interactivity.
Items VAL6, EOU6, and INT6 all had marginal
loadings. However, reliability analyses indicated that
Table 1 Questionnaire Items and Corresponding Factor Loadings from
the Rotated Factor Pattern Matrix
1 2 3 4 5 6
Questionnaire Customer eSDS Service Ease of Perceived
item satisfaction process value use control Interactivity
SAT1 0.714
SAT2 0.563
SAT3 0.926
SAT5 0.548
SAT6 0.750
VAL1 0.886
VAL2 0.549
VAL3 0.681
VAL4 0.590
VAL6 0.469
EOU1 0.713
EOU2 0.829
EOU3 0.721
EOU5 0.586
EOU6 0.474
PC1 0.546
PC2 0.721
PC3 0.603
PC4 0.650
PC5 0.820
INT3 0.508
INT4 0.711
INT5 0.904
INT6 0.450
eSDS1 0.785
eSDS2 0.679
eSDS3 0.655
eSDS4 0.729
eSDS5 0.500
eSDS6 0.600
Note. r =149.
including VAL6 in the value scale would improve the
alpha from 0.482 to 0.629. EOU6 and INT6, on the
other hand, would reduce the alpha level for their
corresponding scale. Therefore, VAL6 was retained,
whereas EOU6 and INT6 were dropped.
Next, internal consistency reliability analyses were
conducted with the remaining items. Table 2 reports
the results and the summary statistics of all scales.
Although Nunnally (1978) recommends 0.70 as the
threshold for an acceptable alpha, Bagozzi and Yi
(1988) and Hair et al. (1998) have both endorsed reli-
abilities as low as 0.60 for exploratory research when
structural equation modeling is used, as is the case
with our research.
4.2. Testing the Measurement Model
The model derived from exploratory factor analy-
sis was then submitted to conrmatory factor analysis
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
114 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
Table 2 Summary Statistics and Cronbachs Alpha for All Scales
Construct Mean S.D. Cronbachs alpha
Customer satisfaction 4.89 1.20 0.869
(SAT1, SAT2, SAT3, SAT5, SAT6)
Perceived control 4.66 1.07 0.686
(PC1, PC2, PC3, PC5) (0.770 without PC3)
Ease of use 6.47 1.49 0.766
(EOU1, EOU2, EOU3, EOU5)
Service value 5.39 1.10 0.629
(VAL3, VAL4, VAL6)
Interactivity 6.89 2.07 0.739
(INT4, INT5)
Perceived eSDS process 4.54 1.35 0.824
(eSDS1, eSDS2, eSDS3, eSDS5, eSDS6)
to determine model t. The measurement model was
estimated using the maximum likelihood method,
and the chi-square value for the model was statisti-
cally signicant (chi-square (215, n = 149) = 396.048,
p -0.001). Technically, this chi-square statistic may be
used to test the null hypothesis that the model ts
the data. In practice, however, the statistic is very sen-
sitive to sample size and departures from multivari-
ate normality, and will often result in the rejection of
a well-tting model. For this reason, it has become
common practice to seek a model with a relatively
small chi-square value, rather than necessarily seek a
model with a nonsignicant chi-square. Many use the
informal criterion that the model may be acceptable
if the chi-square/df ratio is less than 2 (Hatcher 1994),
a criterion our model met (chi-square,d] =1.842).
Another result, however, indicated that there was
in fact a problem with the models t: the factor load-
ing for item PC3 failed to load above at least 0.30
(Hatcher 1994). Therefore, this item was dropped, and
the resulting model was tested again.
The overall model t statistics for the revised model
reected reasonable t. The chi-square,d] ratio is
less than 2 (chi-square =372.377, d] =194). CFI, GFI,
AGFI, and RMSEA are all within reasonable range,
although less than ideal (CFI = 0.879, GFI = 0.815,
AGFI = 0.760, and RMSEA = 0.078). Therefore, the
revised model was tentatively accepted as the studys
nal measurement model, and a number of tests
were conducted to assess its reliability and validity.
Construct reliability for ve of the six constructs
remained the same as listed in Table 2. The only dif-
ference is the construct perceived control, which now
has three indicators instead of four (PC3 was deleted
from the revised model). The reliability for the scale
increased from 0.686 to 0.770, suggesting that drop-
ping PC3 was the right choice. To summarize, all six
scales now demonstrated acceptable levels of reliabil-
ity for exploratory research.
Table 3 reports the standardized factor loadings for
the revised model. All factor loadings were signicant
Table 3 Standardized Factor Loadings for the
Measurement Model
Factor loading
Item description for revised model
F1: Customer satisfaction
SAT1 0.747
SAT2 0.729
SAT3 0.640
SAT5 0.854
SAT6 0.803
F2: Perceived eSDS process
ESDS1 0.578
ESDS2 0.521
ESDS3 0.663
ESDS5 0.838
ESDS6 0.862
F3: Service value
VAL3 0.462
VAL4 0.550
VAL6 0.775
F4: Ease of use
EOU1 0.735
EOU2 0.533
EOU3 0.831
EOU5 0.580
F5: Perceived control
PC1 0.822
PC2 0.780
PC5 0.589
F6: Interactivity
INT4 0.899
INT5 0.651
Note. All loadings are signicant at the 0.001 level.
(p -0.001). This nding provides evidence supporting
convergent validity of the indicators (Anderson and
Gerbing 1988).
Discriminant validity was assessed using two dif-
ferent criteria: the variance extracted test (Fornell
and Larcker 1981) and the chi-square difference test
(Anderson and Gerbing 1988). The variance extracted
estimate is a measure of the amount of variance cap-
tured by a construct, relative to the variance due
to random measurement error. A construct demon-
strates discriminant validity if its variance extracted
estimate is 0.50 or greater (Fornell and Larcker 1981).
Two of our six constructs failed this testthe variance
extracted estimate was only 0.374 for service value
and 0.463 for perceived ease of use. However, Hatcher
(1994) cautions that this test is quite conservative.
Therefore, the chi-square difference test was used to
further assess the discriminant validity of these two
constructs. We ran multiple models, constraining the
correlations between the construct in question and
one other construct to one in each model, and com-
pared each of these models to the original model. The
chi-square difference was signicant at the 0.05 level
for all pairs of models, providing evidence of discrim-
inant validity.
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society 115
Combined, these ndings generally support the re-
liability and validity of the constructs and their indi-
cators. The revised model was therefore retained as
the studys nal measurement model.
4.3. The Structural Model
Jreskog and Srbom (1996) state the minimum sam-
ple size is a function of the number of variables,
|: |(| 1),2. Our sample size would permit 17 vari-
ables, less than the number required to avoid identi-
cation issues. Therefore, the summated score for each
index was used in the SEM analysis. Baumgartner and
Homburg (1996) cite numerous articles employing
this approach as evidence of its acceptance in a vari-
ety of academic disciplines. Furthermore, Netemeyer
et al. (1990) report that this approach provides the
same results as models with multiple indicators.
Although the data set under consideration cannot
be assumed to have a multivariate normal distribu-
tion, Cortina et al. (2001, p. 326) state that there is
considerable evidence that the maximum likelihood
estimator (MLE) is robust with respect to many types
of violations of the multivariate normality assump-
tion. Therefore, because there is no indication of
extreme departure from normality, the MLE was used
in the SEM analysis without transforming any of the
data distributions. It is generally accepted that the
minimum sample size to ensure appropriate use of
MLE is 100 to 150 (Ding et al. 1995), a requirement
that our data set met.
The structural model was developed with the error
variance of each measurement variable set equal to
the product of its variance and one minus its reliabil-
ity coefcient. The path from the latent variable to the
composite indicator is xed at the square root of the
reliability coefcient

o (Jreskog and Srbom 1996,
Baumgartner and Homburg 1996).
Modeling of the interaction effects followed the
procedures developed by Mathieu et al. (1992). Selec-
tion of the Mathieu et al. method was based on the
comment by Cortina et al. (2001) that this method is
especially useful when testing complicated theoreti-
cal models that include both mediated and moderated
relationships, as is the case with our proposed model.
All interaction effects involving the interactivity
construct were found to be insignicant. Thus sup-
port for our Hypotheses H5A through H5F is not pro-
vided by the data. Another causal path also proved
to be nonsignicant: from ease of use to customer
satisfaction (H4B). In addition, none of the control
variables (i.e., gender, prior Internet experience, and
prior online shopping experience) was signicantly
related to perceived ease of use and perceived con-
trol. Goodness-of-t indices for the model appear
in Table 4, in the column headed A
: Theoreti-
cal model. Values on the CFI, NFI, GFI, and AGFI
Table 4 Fit Indices for the Structural Model
Guidelines M
: Theoretical M
: Revised
Criteria (Bryne 1998) model model

(df) Small 20.034 (6) 7.516 (5)
p value Large 0.003 0.185
CFI >0.90 0.947 0.993
RMSEA -0.08 0.126 0.058
NFI >0.90 0.929 0.979
GFI >0.90 0.954 0.984
AGFI >0.80 0.840 0.932
were acceptable. However, a review of the models
residuals revealed that one of the standardized resid-
uals was relatively large (in excess of 2.0). These
results showed that the initial theoretical model was
However, the model modication indices produced
by Amos indicated that additional relationships may
exist, namely, that service value and perceived control
might both be inuenced by perceived ease of use.
Furthermore, interactivity, instead of being a moderat-
ing variable, might have a direct impact on customer
satisfaction. Adding a path from perceived ease of
use to service value seems consistent with the def-
inition of service value in terms of the give-versus-
receive trade-offwhen a website is difcult to use,
customers might have to give more effort, decreas-
ing the perceived value the customer receives. In addi-
tion, when a customer thinks a website is easy to
use, conceptually, it makes sense that the customer
might also think he has more control. Interactivity,
on the other hand, according to a recent study by Lii
et al. (2004), is a direct driver of repeat visits. Because
the addition of these suggested relationships could be
justied on theoretical grounds, corresponding paths
were added to the theoretical model A
. The resulting
model, revised model A
, was then estimated.
Fit indices for the revised model are presented in
Table 4. It can be seen that the t indices (i.e., CFI,
NFI, GFI, and AGFI) were not only above 0.9 but also
higher than those displayed by the initial theoreti-
cal model. In addition, the revised model produced
a nonsignicant p value, thus justifying the addition
of the new paths. The
value showed that 80.2% of
the variance in customer satisfaction was accounted
for by the relationships in the model.
The revised model is presented in Figure 2 along
with the path coefcients.
4.4. Discussion
The revised model is the best model that ts the
data collected with the survey instrument. This new
model suggests that interactivity, instead of being
a moderator, actually acts as a mediator between
the eSDS process and customer satisfaction. How-
ever, there is an unusual element in this relationship.
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
116 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
Figure 2 Revised Model
ease of use
Perceived eSDS


: 0
H2(+): 0.490
* H
: 0


p -0.1.

p -0.05. All other path coefcients are signicant at p -0.001.
Specically, as the eSDS process improves, allowing
the customer to make more decisions and choices in
the service process, the interactivity allowed by the
website increases. Interactivity, surprisingly, does not
necessarily lead to higher customer satisfaction. On
the contrary, if a customer feels an increasing need
to interact with the service provider, his or her sat-
isfaction with the website decreases. This nding is
consistent with that by Zeithaml et al. (2002) in their
focus group discussions regarding important service
requirements in the e-commerce context. Only when
customers need special assistance, e.g., there is a pro-
cess error, do they feel the need to initiate an inter-
action with a customer service representative. Many
focus group participants were otherwise only inter-
ested in having efcient transactions.
The data also reveal that perceived ease of use has
a mediated impact, rather than a direct impact, on
customer satisfaction through both service value and
perceived control. That is, as the users perception of a
websites ease of use decreases, the service value they
feel they receive from using the website decreases and
the users perception of his ability to control the pro-
cess decreases. But perceived ease of use has no direct
impact on customer satisfaction. We think the proba-
ble reason for this is related to the demographics of
our study sample. The sample population reported
homogenous and high values for their self-assessment
of their technical competence.
It is worth noting that our result does not necessar-
ily contradict the TAM model, which theorizes that
perceived ease of use directly inuences a users atti-
tude toward a technology, which would be customer
satisfaction in this study. The TAM model suggests
that perceived ease of use inuences perceived useful-
ness because, other things being equal, the easier the
technology is to use, the more useful it can be. Per-
ceived usefulness is conceptually closely related to the
service value construct in our model. Our result that
perceived ease of use inuences customer satisfaction
through service value is in fact consistent with TAM.
Perceived ease of use is a construct related to
customer-specic characteristics. For example, when
a customer is technologically sophisticated and has
extensive experience shopping online, she may feel
that she has a great degree of control over how she
conducts the transaction. On the other hand, if a cus-
tomer is not experienced, she may feel at a loss and
not able to engage in the process. Intuitively, this
makes sense. The question that must be answered is:
How sound is the theoretical basis of the relation-
ship? Information systems literature has examined the
relationship between computer users self-efcacy
the judgment of ones ability to perform a specic
task using a computerand their perceived ease of
use of computer systems, and found signicant corre-
lations (e.g., Hong et al. 2002). Computer self-efcacy,
on the other hand, is considered the conceptualization
of perceived control (Venkatesh 2000). The question
of whether there is a causal relationship between per-
ceived control and ease of use, and if so, in which
direction, remains unanswered. Further research is
certainly needed to examine the precise relationship
between the two constructs.
Because the six websites we used belonged to three
types of service processes with regard to their cor-
responding technological capabilities, namely service
mart, mass service customization, and joint alliance
service customization, a post hoc analysis was done
to determine whether there were any differences in
customer satisfaction by type of website. Our analysis
did not yield any signicant result. Given our nding
that the eSDS process has a positive inuence on cus-
tomer satisfaction, conceptually, one could speculate
that the more comprehensive technological capabili-
ties embedded in a mass service customization site
might lead to happier customers than the basic web-
site capabilities from a service mart. Although this
conjecture is not supported by our data, we believe
this issue is an interesting one and should be explored
in future research.
5. Implications and Conclusion
In this paper we have argued that service is critical
to the success of electronic commerce. Building on
theories from service management, we have exam-
ined what e-service technological capabilities should
be embedded in a rms website and what technol-
ogy features should take priority. We contribute to
the management of technology domain by propos-
ing a theoretical model that helps rms understand
the impact of e-service technological capabilities on
online customer satisfaction. In addition, our model
also helps rms to justify their investment in e-service
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society 117
5.1. Research Implications
It is important to note that online customer satis-
faction has been evaluated along other dimensions.
For example, SERVQUAL is often referred to as
an important factor leading to customer satisfaction
(Devaraj et al. 2002). Information quality and avail-
ability is another factor examined by the literature
(e.g., McKinney et al. 2002). A key contribution of
our research is that we demonstrate that the techno-
logical capabilities embedded in the e-service process
through which services are delivered and information
is presented to the customer are critical to customer
satisfaction. For example, does the website have the
technological capability that allows the customer the
exibility of customizing the information content? If
a website offers an abundant amount of information
but does not allow much user freedom in terms of
choosing where to go at the website and what infor-
mation to see, the customer is unlikely to be satised.
The technological capabilities of the eSDS processes,
therefore, really are the foundation of other service
measurement parameters.
Although the service management literature has
established that the SDS has a direct impact on service
value, traditional service delivery systems are made
of very different components from an electronic SDS.
Traditionally, it is the service employees that deter-
mine the service value the customers perceive they
receive. By examining the linkage between the elec-
tronic SDS and service value, we demonstrate that
even without face-to-face interactions with service
employees, the eSDS plays a vital role in customer sat-
isfaction. Furthermore, we extended the current litera-
ture that looks at online customer satisfactionextant
research mainly focuses on the relationship between
service quality and customer satisfaction or system
quality and customer satisfaction. We have demon-
strated that the technological capabilities embedded
in e-service processes are really the key factor deter-
mining service quality and, ultimately, online cus-
tomer satisfaction.
The capabilities embedded in an e-service technol-
ogy have different dimensions. For example, Levitt
(1976) draws upon manufacturing sources in using
the words standardized and customized to dene
the poles of a service process continuum, whereas
Shostack (1987) uses complexity and divergence.
In this research, we did not drill down inside the eSDS
to these different capability dimensions to analyze
which ones are the most important in determining
online customer satisfaction. However, conceptually it
is possible that some dimensions play a more signi-
cant role than others. Indeed, customization has been
identied as an important e-service technology fea-
ture preferred by many online customers (Nunes and
Kambil 2001). Therefore, future theoretical investiga-
tions are warranted to understand what dimensions
of service processes are important in delivering qual-
ity online services.
From a practical point of view, our research pro-
vides investment guidance to rms in their cre-
ation of and upgrades for e-service technologies.
An e-service website can offer different techno-
logical capabilities. Many companies, however, are
nancially constrained in practice in terms of what
e-service technology features to focus on. It is there-
fore important to identify those features that are
critical to customer satisfaction. In addition to inter-
face design factors identied by prior research, such
as site aesthetics, graphics presentation, and visual
effects, our research results bring to the foreground
the importance of procedural and process design
capabilities embedded into an e-service technology
site. Companies deploying e-service really need to
understand that their website is not only an interface
with their customers, but also an information system
that embeds their business processes. Having smooth
and exible website processes means seamless system
integration. For example, the website needs to be inte-
grated with the companys inventory system so cus-
tomers can check the availability of products, with the
order tracking system so customers can check their
order status, etc. Therefore, presenting a pretty face
is only a small part of the whole website design effort.
How the whole system is designed, what technolog-
ical capabilities to offer, and what service processes
are enabled ultimately determine what service value
a company delivers to its customers and how satised
the customers are.
Although previous research has argued that web-
site interactivity is an important technology feature
for customer satisfaction, our research only provides
limited support for this argument. Offering real-time
interactivity between the service provider and the
customer can be expensive, as it involves more human
intervention. Based on our results, we believe that at
this point there is not enough justication for com-
panies to spend a signicant amount of money on
this aspect of e-service. More research on the role of
interactivity in e-service delivery and how interactiv-
ity affects customer satisfaction is clearly needed.
5.2. Limitations and Suggestions for
Future Research
There are several ways in which future research could
strengthen the results of this study. First, our survey
did not require the subjects to actually carry out
the purchase. Therefore the technology-based service
capabilities we examined in this paper do not cover
any post-purchase services such as fulllment and
returns. However, practitioners as well as researchers
Ba and Johansson: An Exploratory Study of the Impact of e-Service Process
118 Production and Operations Management 17(1), pp. 107119, 2008 Production and Operations Management Society
(e.g., Zeithaml et al. 2002) have voiced that post-
purchase service is also critical to customer satisfac-
tion and may explain why some customers never
come back to a certain website. This aspect of e-ser-
vice capabilities needs to be captured as well to eval-
uate the overall service value an eSDS can deliver.
Although prior research indicates that the users
perception of a systems ease of use is a signi-
cant direct driver of satisfaction, our empirical test-
ing failed to conrm this hypothesis. As pointed
out by Zeithaml et al. (2002), customer-specic char-
acteristics such as demographics and psychograph-
ics could have a strong impact on perceived service
value. Perceived ease of use is directly inuenced by
the customers technology prociency. The inability
to demonstrate the signicance of this construct, we
believe, may be an artifact of the sample population.
Therefore, further research is warranted: The size and
heterogeneity of the sample should be increased by
the inclusion of individuals outside of the setting of a
higher education institution.
The research design of this study has several limita-
tions. First, the measurement instrument needs to be
ne-tuned. As discussed in 4, quite a few items had
high cross-loadings in the exploratory factor analysis.
Although the constructs, e.g., service value, perceived
ease of use, and perceived control, are theoretically
different, they are also correlated. Developing scale
items that clearly distinguish these constructs from
one another is an important task for future research.
As mentioned in 4, common method variance can
be a potential problem for survey research. Given
that our constructs were all measured by the same
method from the same subjects, this study poten-
tially faces the same bias, although various procedu-
ral remedies were employed to reduce the bias. One
way of addressing this problem in future studies is
to use an objective measure of the technological capa-
bilities of an e-service website, instead of examining
it from the customers perspective. A more objective
measure not only helps to reduce methods variance
but might also yield more insight in how customers
view a websites service value and how that view ulti-
mately translates into satisfaction, providing the crit-
ical link between an organizations e-service process
design decision and customer response.
As electronic commerce continues to grow, e-service
is going to play an even bigger role in customer sat-
isfaction. Managing e-service technology will become
more critical for rms intending to compete online.
Firms need to carefully evaluate their technology-
based service offerings and understand how to design
Web-based technological capabilities to deliver the
type of services customers demand. Moreover, as
technology is constantly evolving, so is technology-
based e-service process and its impact on business
strategy. The effective management of the integration
of business and technology is becoming an indis-
pensable part of many organizations value creation
strategy. This work is only a rst step in trying to
understand the e-service technology and the impact
of the technology on customer satisfaction. We believe
that this is a promising research area for researchers
in the management of technology domain.
The authors are grateful to Department Editor Cheryl
Gaimon, the senior editor, and the anonymous reviewers for
their excellent suggestions on earlier versions of the paper.
The authors especially wish to thank Dr. Gaimon for her
tremendous effort on developing the paper with the authors.
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