Online or not online: the impact of business owner's risk preference on the adoption of e-business

The significant growth of internet users has driven businesses to develop their capacity in e-commerce and meet the increasing demand for e-consumption, e-services, and e-business. To gain the benefits of e-business, firms may choose to extend or transit their offline-operated businesses to online or hybrid modes. Opportunities are accompanied by risks in this process. Therefore, it is important to understand how business owners' financial risk preferences affect their choice of business operation models, namely, online and offline operations. Using data from the China Household Finance Survey (CHFS) in 2017 and 2019, this study examined the impacts of business owners' risk preferences on e-business adoption, considering social insurance as a moderator on the relationship between risk effect and online business operation. In addition, we used heterogeneity examination to test for regional differences between rural and urban areas. Our results show that, compared to high-risk takers, low-risk takers are less likely to choose online or hybrid businesses; and having social insurance reduces the effect of risk preference on adopting e-business. This finding indicates social insurance may provide financial security to business owners with low-risk preferences and makes them more likely to adopt online business, whilst it may distort adoption incentives for high- and medium-risk groups. Results of the heterogeneity examination suggest a discrepancy in the risk preference effect on the adoption of e-business between the rural and urban areas: the impact of risk preference is found to be significantly higher on businesses in the rural area than those in the urban area.