Transforming Government: People, Process and PolicyWillingness to Adopt e-Procurement to Reduce Corruption: Results of the PLS Path Modeling:Arjun Neupane Jeffrey Soar Kishor Vaidya Jianming Yong

Article information:To cite this document:Arjun Neupane Jeffrey Soar Kishor Vaidya Jianming Yong , (2014),"Willingness to Adopt e-Procurement to ReduceCorruption: Results of the PLS Path Modeling", Transforming Government: People, Process and Policy, Vol. 8 Iss 4 pp. -Permanent link to this document:http://dx.doi.org/10.1108/TG-03-2014-0007

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Willingness to Adopt e-Procurement to Reduce Corruption: Results of the PLS Path Modeling

Purpose: This paper reports on research that evaluates the perceived willingness of potential bidders to adopt

public e-procurement for the supply of goods and services to the government of Nepal. The authors have

identified anti-corruption attributes through an extensive literature review and developed a theoretical model

representing the impact of four latent variables, monopoly of power, information asymmetry, trust, and

transparency and accountability upon the dependent variable, the intent-to-adopt e-procurement.

Design / Methodology / Approach: Data for this research were obtained by the use of a questionnaire survey of

bidders who were officially registered with the Government of Nepal. As part of the fieldwork for this research,

the first author collected the perceptions of 220 bidders regarding the potential of public e-procurement to

reduce corruption in public procurement processes.

Findings: The findings suggest that a high level of the intent-to-adopt e-procurement has a positive and

significant relationship with the independent variables that might inform the developed and emerging countries

to make a decision to adoption of e-procurement to combat corruption in public procurement.

Research limitations /implications: This study has some limitations that should be taken into consideration.

The evaluation of anti-corruption factors as they affect the willingness of users to adopt e-procurement on the

bidder’s perception research model is relatively new to e-procurement research. A limitation of the research

was that it gathered and analysed data from a single country with a limited number of respondents. More

research is needed to identify the anti-corruption factors of e-procurement in reducing corruption and also need

strong empirical test to valid the factors that influence the adoption of e-procurement.

Originality / value: This study aimed to contribute to the academic scholar, government agencies, and public

procurement practitioner in enhancing their understanding of the perceived anti-corruption factors of public e-

procurement to reduce corruption.

Keywords: Public Procurement, E-procurement, Corruption, Bidders

Introduction

The potential of new and innovative uses of information and communication technologies (ICTs) as a tool have

been credited for playing a significant positive role to reform the traditional system to new modernized IT-

enabled integrated system. There is interest amongst governments across the world in the adoption of ICT tools

for the promotion of the better service delivery (Ndou, 2004), greater transparency and improved accountability

(Bertot, Jaeger & Grimes, 2010; Kim,Kim & Lee, 2009). There are potential benefits in reducing corruption

risks (Iqbal & Seo, 2008; Mistry & Jalal, 2012) and other benefits. To date, there are varieties of ICT-enabled

technology tools have been adopted by the government, including e-government, e-governance, e-procurement,

e-tendering, web-based ERP, e-services, e-democracy, and other electronic services. Each system is developed

for specific purposes with its own specific function and characteristics. This study is not going to discuss the

technical details of each system. However, the main question is how these integrated systems importance link to

reduce the chances of corruption. This study evaluates only the potential of perceived benefits of public e-

procurement technologies to help to curb corruption in public procurement processes. This focus is on three

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important key terms public procurement, corruption in public procurement, and how public e-procurement can

help to reduce the risk of corruption.

Public procurement refers to the processes whereby public sector organizations acquire goods and services,

works, and other activities from third parties. Governments spend much of their budget on goods and services.

Government procurement of goods and services typically accounts for 10-15 % of Gross Domestic Product

(GDP) for developed countries (Kashap, 2004) and 20 % to 70% GDP in developing countries (GTN, 2003;

UNDP, 2006). Vaidya, Callender and Sanjib (2009, p. 474) research found that “governments aspire to use

public procurement as a lever of economic, technological or social reform”. Burton (2005) and Thai (2001)

argued that public procurement is the central instrument and major function of the government to assist in the

efficient management of public resources.

Corruption in the public procurement is increasing, especially in developing countries as evidenced by reports of

the World Bank, the United Nations (UN), Transparency International, and the Asian Development Bank (ADB)

reports. The important thing that the annual value of bribes paid, worldwide is US $1 trillion (WB, 2004).

Corruption threatens to economic and human development of many countries. Public procurement processes are

more vulnerable and have a greater risk of corruption because unjustified and hidden procurement planning,

lack of monitoring and controlling mechanism, lack of transparency and accountability, and weak

professionalization of the bureaucracy (Del Monte & Papagni, 2007; Kolstad & Wiig, 2009; Neupane et al.,

2012; Pellegrini & Gerlagh, 2008; Subedi, 2006; Ware et al., 2012).

Nepal is ranked as one of the most corrupt countries in South Asia (TI 2013). The Corruption Perception Index

2013 ranked Nepal at 116th position out of 177 countries with a total score of 31 that is the lowest level (less

corruption) since 2005. Corruption in public procurement is a serious problem in Nepal, where the process of

awarding public contracts and tenders can be perverted by government officials and is subject to political or

outside interference. Potential contractors (bidders) are reported to have used coercive power to win contracts.

Corrupt government officers and bidders are involved directly or indirectly to advance their own personal

interests or monopoly power. In some situations, other contractors have not been able to submit tender

documents because of coercive behaviour from influential contractors. The political party’s youth members are

reported to be involved and use their power to manipulate procurement processes for their ends. The

Commission for the Investigation of Abuse of Authority (CIAA) is an apex constitutional body to curb

corruption in Nepal and is the distinctive anti-corruption agency in South-Asia. The Sudan Darfur Scam was one

of the most widely reported public procurement cases in Nepal, where the high-ranking Nepali police officers

faced embezzlement charges. They were accused of corruption during the US$4m purchase of an Armoured

Personnel Carrier (APC) for the Nepalese peacekeeping mission in the Darfur region of Sudan. CIAA charged

senior retired and incumbent officials of the Nepal Electricity Authority (NEA) for corrupt procurement of low-

quality transformers. The CIAA (2013) reported that corruption in public procurement was reaching an alarming

level in Nepal. Violation of the existing public procurement act / rules is the main causes of corruption in

procurement without going through the competitive bidding.

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The research objective of this paper is to evaluate the potential of public e-procurement technology on the

perception of the bidders in relation to the intent-to-adopt e-procurement technology to reduce corruption in

public procurement. For the purpose of this paper, public e-procurement is defined as the use of information and

communication technology (ICT) such as internet or web based system used by government institutions in

conducting procurement-related tasks, such as the acquisition of goods, services, and the allocation of work to

the bidders (Davila,Gupta & Palmer, 2003; Leipold et al., 2004). Vaidya (2007) defined public e-procurement

as an internet based inter-organisational information system that integrates and automates any parts of

procurement processes in order to improve transparency and accountability. The internet is typically used for

providing comprehensive information about bidding at a single web portal that can be accessed by all the

register potential bidders. Reducing corruption in government procurement has a key component of the agenda

of governments around the world (Henriksen & Andersen, 2003). In recent years, the countries of Asia and the

Pacific have increasingly adopted ICT systems in order to enhance government services and business

transaction (Wescott, 2001).

In this paper, we report on research to investigate the bidders’ perceived willingness to participate in public

e-procurement systems when measured against the four main criteria of reduction of monopoly power,

information asymmetry, increasing trust, and transparency and accountability. Based on these criteria, the

potential of public e-procurement to reduce the chances of corruption in procurement processes has been

discussed in the context of a developing country. We present an empirical study that surveyed the perceived

willingness of 220 bidders that were registered with the Government of Nepal.

The paper is divided into seven sections. In Section Two, there is a discussion of the theoretical foundation of

the study and related literature on anti-corruption capabilities as they relate to public e-procurement. The

development of the research hypothesis and research model based on Principal-Agent theory presented in

Section Three. The research methodology has been discussed in Section Four. Section Five presents the

empirical data analysis. Section Six discusses the finding of the research and in the final section; the Conclusion

is presented, including academic contributions to literature and practitioner implications of the research.

IT-enabled anti-corruption research

ICTs enable more transparent and accountable government as well as improving the living standards. ICT can

be seen as the leader in the socio-economic development of most countries (Braund et al., 2007). IT-enabled

systems reduce opportunities for corruption. Pathak et al. (2009) highlighted the community perceptions on the

service delivery that IT enabled technology such as electronic government initiatives can reduce corruption as

well as reshape public sector activities and processes, increase overall transparency, and strengthen relations

between government and citizens. Kim et al (2009) highlighted an anti-corruption system called OPEN (Online

Procedures Enhancement for civil application) made a positive role in reduction of corruption. Citizens can

acquire the real time information system for their applications, their status, estimated date of approval, and

reason of the return application. Such as, Krishnan, Teo and Lim (2013) study suggest the maturity of e-

government helps to reduce the level of corruption. Oye (2013) suggested that e-government can reduce the

administrative corruption and transparency in service delivery in African developing countries. In this study, we

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are going to highlight another important ICT tool public e-procurement. There is different valid reason why the

public e-procurement is important for reducing corruption compare to other systems. Public procurement is a

major function of the government. In developing countries, major fraud and corruption happens in public

procurement processes including procurement planning, project documentation, tender processes, contract

awards and implementation, and accounting and auditing. A report published by Independent Commission

Against Corruption (ICAC) Australia, indicates that procurement processes are vulnerable to corruption (ICAC,

2011). OECD (Organization for Economic Co-operation and Development) argued that corruption risk exists in

every stage of tendering process such as identification of needs and design of tenders, selecting a business, the

bidding procedure, contract awards, and contract execution (OECD, 2007). Public e-procurement can provide

anti-corruption factors in public procurement. Table 1 demonstrates some public e-procurement factors.

Table 1 Public e-procurement anti-corruption factors

Anti-corruption factors Key references

Avoid unnecessary purchase / project Achterstraat (2011)

Real time access information or real time bidding Ndou (2004)

Automation of procurement process Henriksen and Mahnke (2005)

Increase competition among the bidders or suppliers Hanna (2010) IMF (2010) Mahmood (2010) Thai (2001)

Reduce human intervention in bidding process Khanapuri et al. (2011) Magrini (2006)

Standardization enactment (More consistency in procurement phase)

UN (2006) Zhang and Yang (2011)

Monitoring and tracking application Achterstraat (2011) ADB (2010) OECD (2011)

Efficient and secure document transmission AG (2005) Chang (2011) Hanna (2010) Zhang and Yang (2011)

Managerial control and collaboration Henriksen and Mahnke (2005)

Transparency and accountability Croom and Brandon-Jones (2005) Panda, Sahu and Gupta (2010) Pathak et al. (2009) Vaidya, Sajeev and Callender (2006)

Make a procurement process faster and easier Hanna (2010)

Obtain the best quality / price ratio Kaliannan,Raman and Dorasamy (2009), Lee, Oh and Kwon (2008)

Source: Neupane et al. (2012)

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Theoretical Approach

Theories provides guidelines that govern research and provide a structure to the concepts and relationships

between constructs that collectively present logical, systematic, and coherent explanation of the phenomenon of

the interest with some assumption (Bacharach, 1989). This study has used the agency theory that is also known

as Principal-Agent model that refers to the relationship between two parties: the Principal and the Agent who

makes the decision or takes any action on the behalf of the principal (Eisenhardt, 1989; Jensen & Meckling,

1976). According to Dawson, Watson and Boudreau (2011, p. 1) “Agency theory has long been a stalwart of IS

research and is one of the most commonly used lenses to study the relationship between a principal and an

agent”. Dawson, Watson and Boudreau (2010) research highlighted the agency theory can be useful in the

contractual and social relationship between consultant and clients. This study uses the principal-agent concept, it

is assumed that the government is the Principal body that provides public services to the people and Agents are

the bidders (Contractor, supplier) who work for the government and are providers of goods and services. The

main role of Principal or government authority is its responsibility for formulating policy options to help in the

regulation and development of the public procurement, the monitoring of the various procurement activities, the

regulation and maintenance of standards of procurement, capacity-building and professional development,

information management and dissemination. Similarly, Agents’ roles are to bid for the government work and

services, comply with all statutory, legal and award requirements relative to the work and services, complete all

tasks within agreed cost structures, maintain quality and also complete all tasks within the designated time

frame. In this regard, the main contribution of Principal-Agent Theory is to explain the risk of corruption in

public procurement processes between two parties - Principal and Agent - and examine contracting problems to

determine the most efficient contract type that will satisfactorily govern the Agency relationship (Whipple &

Roh, 2010).

The theory provides us with the three factors the monopoly of power, information asymmetry, and trust within

the public procurement processes as they affect the relationship between government officials and bidders. All

of these factors are expected to have a relationship (either positive or negative) with a dependent variable, which

is the intent-to-adopt e-procurement.

Development of Research Model and Hypothesis

In the context of the public procurement process, a government official plays an important role in the provision

of goods and services and they are the key person to provide a goods and services to the public in a transparent

way. In some situations, “government officers have monopoly power over the provision of goods and services

that are crucial for explaining the incidence of corruption without theft” (Neupane,Soar & Vaidya, 2012a).

Similarly, Klitgaard (1988) pointed out that “Corruption tends to emerge when an organization or a public

official has monopoly power over a good or service that generates rent, has the discretionary power to decide

who will receive it, and is not accountable”. This is more common in developing countries in relation to the

awarding of public contracts where many tenders are assigned to favoured contractors or bidders for corrupt

reasons. To avoid these serious problems, public e-procurement can provide perceived benefits (see Table 1) to

the government or bidders to reduce the risk of corruption. The following hypothesis is employed to explain this

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relationship: H1: Higher level of perception of the potential of public e-procurement to reduce Monopoly power

is positively related to willingness to adopt.

Information asymmetry (IA) is a core component of the Principal-Agent Theory (Amagoh, 2009, p. 6). The

relationship of Principal to Agent exists during the procurement processes between government tender

administrators and bidders (Finkle, 2005; Larbi, 2006). Information asymmetry arises when the Agent has more

information than the Principal does, or vice versa, in the contract between government and bidders (Amagoh,

2009). These kinds of information gaps take place due to incomplete information, incompleteness of contract,

problems with monitoring mechanisms, and the cost of the configuration of the projects in the contracting

process (Finkle, 2005; Gauld, 2007; Taylor, 2005). The perceived benefits of public e-procurement (see Table 2)

can be considered to reduce information asymmetry problems as well as to reduce the chances of corruption in

public procurement. The present study examines this relationship: H2: Higher level of perception of the

potential of public e-procurement to reduce information asymmetry is positively related to willingness to adopt.

Trust is an important factor in e-commerce to explain the inter-organisational relationship (Barratt 2004) and it

creates positive attitudes towards trust between government administrators and bidders in contracting processes

(Neupane,Soar & Vaidya, 2012b). In fact, the security of transactions is an important consideration for users /

bidders when making online financial transactions (Pi, Liao & Chen, 2012). Trust has been identified as an

important factor in determining the intention to adopt of any inter-organisational information system (Barratt,

2004; Dubelaar, Sohal & Savic, 2005; Ngai,Lai & Cheng, 2008). The present study examines this relationship:

H3: Higher level of perception of the potential of public e-procurement to increase trust is positively related to

willingness to adopt.

Transparency and openness are core principles of public procurement and transparency is widely recognised as a

foundation of good governance (Parigi et al., 2004). Lack of transparency and accountability creates more

opportunities for public officials and politicians to abuse their positions for corrupt purposes. In some instances,

both government officers and bidders negotiate with each other to create a corrupt outcome. To overcome these

problems, public e-procurement provides huge range of perceived benefits (see Table1) to help reduce the risk

of corruption in public procurement processes. The present study examines this relationship: H4: Higher level of

perception of the potential of public e-procurement to increase transparency and accountability is positively

related to willingness to adopt.

Figure 1 represents a research model of this study based on the above discussion. Similar kinds of research

models were presented by Neupane et al. (2012b, p. 6) as part of an evaluation of the anti-corruption capabilities

of public e-procurement in developing countries. Yusoff & Islam’s (2011) study into electronic government

procurement adoption behaviour amongst Malaysian SMEs supported this finding. Van der Heijden,Verhagen

and Creemers (2003, p. 44) presented a research model of understanding of online purchase intentions:

contributions of technology and trust perspective. Figure 1 shows the four independent variables as they relate to

the intent-to adopt e-procurement as dependent variables.

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Figure 1: Research model of this study

Research method

This study employed the positivist paradigm to examine the intent-to-adopt public e-procurement technology in

government, and to explore the potential of public e-procurement technology to reduce corruption in

government procurement. In research context, positivist philosophy involves the hypothesis testing to obtain the

objective truth and predict what may happen at the future date as well (Greener, 2008). The positivist

philosophy has number of implication for social science research including methodological, value-freedom,

causality, operationalization, independence, and reductionism (Bond, 1993; Easterby-Smith,Thorpe & Lowe,

1997; Hughes, 1994). Hence, this study used scientific method to design the research project including survey

instruments, focusing on facts and objective of the assessment of attributes that is supported by the concept of

positivism research approach.

A survey is one of the most widely-used methods for collecting data in a consistent way. Tanur (1982) has

defined a ‘survey’ “gathering information about the characteristics, actions, or opinions of a large group of

people, referred to as a population”. Surveys have three distinct characteristics in research (Pinsonneault &

Kraemer, 1993) which include: quantitative description of some aspect of the studied population, an exploration

of the relationship between variables, requiring standardised information.

The data for this research was obtained by the use of a questionnaire survey of bidders who were officially

registered with the Government of Nepal. The registered bidders were private companies who worked for the

government and provided services as contractors, suppliers, or vendors who have responded to an invitation to

bid. The Federation of Contractors Association of Nepal (FCAN) is an umbrella organisation of five regional

and seventy-five district contractors associations, associates, and commodity association members. Currently,

255 companies are associate members of FCAN. All member companies are classified into Class A, Class B,

Class C, and Class D based on their equipment possession, work-specialty, and financial aspects (FCAN 2011).

Major companies’ head offices are located in Kathmandu, the capital of Nepal. This study used a convenience

sampling approach as determined by the level of interest shown by the participants to respond to the survey and

finally, 220 bidders were approached to complete a questionnaire survey. Most of the questionnaires were filled

through face-to-face surveys.

Monopoly Power

Information Asymmetry

Transparency and Accountability

Intent to adopt e-procurement Technology

H1

H2

H4

Increasing trust

H3

Figure 1 Research model of this study

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First, the researcher asked the questions to the participants about the public e-procurement in terms of their

perceived benefits. The questionnaires were designed to reflect four latent variables of the study that are

determinants of organisations’ willingness to participate in government e-procurement systems. In addition, it is

shown how this system can help to reduce the information gap between government agents and bidders, increase

transparency and accountability in procurement systems, increases trust among bidders to adopt e-procurement,

and reduce the monopoly on power of the individuals in contracting processes. Previous studies have provided

guidance in developing the survey instruments. Four independent variables, namely: monopoly power,

information asymmetry, increasing trust, transparency and accountability, were used in this study to determine

the willingness of agents to adopt public e-procurement as a dependent variable. All of the respondents were

asked to rate the extent to which each of the variables was the area of concern that could influence their

willingness to participate public e-procurement technology in order to reduce corruption. Their responses were

expressed in ratings on a five-point Likert scale 1 to 5, ranging from 1 (strongly disagree) to 5 (strongly agree).

The questions are thirty indicator variables of the four independent construct and one dependent construct

shown in Table 2.

Table 2 Operationalisation variables

Variables Code Description of measurement items

Monopoly Power (MP)

MP2 It provides the automation in procurement processes MP3 It improves internal efficiency across procurement processes MP5 It helps to provide fixed-price contracts to all bidders MP6 Overall I found it helps to reduce monopoly power of government officers

Information Asymmetry (IA)

IA1 E-procurement contributes to enhanced competition in terms of quality (participation) and quality (openness and fairness) in tendering processes

IA2 It provides me with up-to-date tender information IA3 It provides equal opportunities to all bidders for tendering process IA4 It provide more transparency in bidding process than manual systems IA5 Overall, I found a reduction in the information asymmetry is related to decreased

chances of corruption in public procurement

Trust (IT)

IT1 E-procurement enables me to track and monitor my bidding document, which can

increase the level of trust between government agents and bidders IT2 It contributes to the security of transactions IT3 Anywhere any-time bidding platform of e-procurement services may help to build-

up levels of trust

IT4 Overall, increasing trust between government and bidders through e-procurement is related to a decrease in the potential for corruption in public procurement

Transparency and accountability

(TA)

TA1 Public e-procurement improve the transparency and accountability in procurement processes

TA2 Public e-procurement technology services provided a real time access / real time bidding information form e-procurement portal ( e.g. automated e-mail notification)

TA4 It increases competition among bidders / suppliers in contracting processes TA6 It provides more consistency in bidding processes

TA7 It reduces human interference in bidding processes

Intent to adopt e-procurement (ITA)

ITA1 My organisation would request government work and services via e-procurement portal

ITA2 I would continue visiting to e-procurement web portal for tender information

ITA3 I can always relay on tender information provided in e-procurement portal ITA4 I would be willing to provide information such as personal / organisation

information to an e-procurement portal ITA5 In future, I would have an enhanced intent-to-adopt approach towards e-

procurement systems for my organisation’s needs ITA6 In future, I would implement e-procurement systems for handling my procurement

tasks

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Note: Response rate (1-5) 1 Strongly Disagree 5 Strongly Agree; some of the item was deleted where the

loading value is <0.50

Data analysis

Partial Least Squares (PLS) approach was used to analyse the quantitative data through SamrtPLS 2.0 software.

There are different valid explanations as to why PLS is an important technique for data analysis, and has been

used in various fields of computer science, marketing, management and psychology (Ismail, Hamid & Idris

2012). The Table 3 reveals the summary of previous literature as it relates to the perceived benefits of the use of

the PLS approach.

Table 3 Perceived Benefits of PLS

Description why PLS is important References

Predict complex relationships within large models with multiple independent and dependent variables

Abdi (2003)

Special features for multi-group comparison Chin and Dibbern (2010)

Prediction of dependent endogenous variables as PLS generates latent variables scores that can be used predict model

Chin (1998b) Henseler, Ringle and Sinkovics (2009)

It is used when the sample size is comparatively small Chin (1998b) Henseler et al (2009) Lehner and Haas (2010) Wetzels,Odekerken-Schroder and Van Oppen (2009)

PLS uses a combination of principal component analysis, path

analysis, and regression to simultaneously evaluate theory and data

Pedhazur (1982)

PLS takes each latent variables as an estimate of its respective

blocks of measurement items

Aibinu and Al-Lawati (2010)

PLS Path Modeling (PLS-PM) has been considered as a very flexible and soft modeling approach to multi

block analysis by the means of both hierarchical PLS path model and more as an exploratory approach than a

confirmatory one (Vinzi, Trinchera & Amato, 2010). Similarly, Hanafi (2007) pointed out PLS-PM is a

statically different approach from covariance structure analysis for path analysis with latent variables,

interpretation of the basic entities of model, type, and parameters. A glance at Figure 2 reveals the PLS-PM

structural model of factors influencing the willingness of agents to adopt public e-procurement. The path arrows

represent the hypothesised relationship between independent constructs (MP, IA, IT, TA) and the dependent

construct (ITA). The path coefficient values represent the beta value β1=0.225, β2=0.303, β3=0.186, and

β4=0.229. The rectangular boxes represent the observed variables, indicators, or measurement items of latent

variables that are shown in operationalisation variables in Table 1. In Figure 2, the latent variables are monopoly

power, information asymmetry, increasing trust, transparency and accountability as measured by six

measurement items, five items, four items, and nine items respectively. Six items measured the dependent

variable intent-to-adopt e-procurement. Some of the item was deleted where the loading value is less than 0.50.

The R2 value for the intent to adopt e-procurement is 0.572 that is interpreted as 57.2 percent of the variance of

intent to adopt e-procurement explained by the PLS model.

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Figure 2 PLS-PM Structural Equation Model

PLS-PM is a component based estimation method (Chin, 1998a; Vinzi et al., 2010) and it uses an iterative

algorithm to obtain latent variables estimates through the system of multiple regression or simple linear

regression (Aibinu & Al-Lawati, 2010). This study uses Partial Least Squares (PLS) regression for obtaining

cross loading, path coefficient, discriminant validity, R2 value, and the weight value for the latent variables of

the measurement items. The below equation presents PLS regression model of the equation: Intent-to-adopt e-

procurement (ITA) = 0.225 *MP+0.303 * IA+0.186*IT+0.229 *TA.

The reliability of the cross loading value of the measurement items is illustrated in Appendix 1. Generally,

loading should exceed over 0.70 to be considered more variance between the latent variables and its measure

than error variance (Carmines & Zeller, 1979). Some other authors argue that the cross loading value above 0.40

or 0.50 as appropriate (Hulland, 1999). In this study, based on the PLS-PM results (Appendix 1), all the items

have loading mixed range from 0.585 to 0.809. Lew and Sinkovics (2012, p. 23) stated that a score of outer

loading over 0.5 can be acceptable and Chin (1998) stated 0.40 can be acceptable. As a result, the factor loading

has met the recommended threshold value 0.4 (Chin, 1998; Henseler,Ringle & Sinkovics, 2009). Table 4

presents the results of reliability of the construct including Average Variance Extracted (AVE), composite

reliability (CR), and Cronbach’s alpha. Internal reliability was examined via Cronbach’s alpha and composite

reliability (CR) (Lew & Sinkovics, 2012). All the constructs demonstrate the composite reliability (CR) and

Cronbanch’s alpha value is higher than 0.70 that is greater than the threshold value 0.7, except monopoly of

power (0.689) that is also close to an acceptable value. George & Mallery (2003, p. 231) providing the range of

Cronbach’s alpha value “>.9-Excellent, >.8-Good, >.7-Acceptable, >.6-Questionnable, >.5-Poor”. The CR

values of construct ranged from 0.81 to 0.87, all greater than the threshold value of 0.7 (Bagozzi & Yi, 1988).

Henseler et al., (2009) suggested that the AVE value of above 0.50 indicates the sufficient level of convergent

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validity. The Table 3 results reveal all AVE value is greater than 0.5 that indicate a sufficient level of

convergent validity.

Table 4 Reliability and validity of constructs

Variables AVE Composite Reliability Cronbach’s Alpha

Information Asymmetry (IA) 0.515725 0.841635 0.765977

Increasing Trust (IT) 0.555306 0.832936 0.733192

Intent to adopt e-procurement (ITA) 0.538681 0.875005 0.828860

Monopoly of Power (MP) 0.517243 0.810118 0.689736

Transparency and Accountability (TA) 0.532984 0.849357 0.776452

Discriminant validity is another type of construct validity used in PLS path modelling to examine the square

root of AVE and Cross loading. The table 5 demonstrates the square root of AVE for each construct were

greater than the highest correlation between that the construct and the other constructs (Fornell & Larcker, 1981;

Gefen & Straub, 2005).

Table 5 Latent constructs a correlation table with squared of AVE values

Items IA IT ITA MP TA

IA 1.000000

IT 0.578846 1.000000

ITA 0.644351 0.610595 1.000000

MP 0.373909 0.584866 0.541308 1.000000

TA 0.647631 0.505617 0.611692 0.406639 1.000000

The exploratory power of the PLS structural model can be evaluated by examining the amount of variation in

the dependent variables that can be explained by the model Figure 2. According to the PLS model results,

information asymmetry to be the most important and stronget driver for intent to adopt public e-procurement

with path coefficient value is 0.303. Similarly, other important factors path coefficient values are transparency

and accountability (0.229), monopoly power (0.225), and increasing trust (0.186).

In PLS-PM structural equation modelling, bootstrapping method was used to test the significance of paths in the

study measurement model. The bootstrap is an alternative way to produce better approximations for the true

small sample properties (Schmidheiny & Basel, 2012). Bootstrap techniques are used for testing hypothesis

(Beaumont & Bocci, 2009) and Chin (1998) research suggested bootstrapping conducted with 500 samples.

Hair, Ringle & Sarstedt (2011) pointed that critical t-values for two-tailed test is 1.65 (significance level =10

percent), 1.96 (significance level =5 percent), and 2.58 (significance level=1 percent). Table 6 demonstrated the

standardised path coefficient results and hypothesis test. The result found that all the independent variables are

positively significant to the dependent variables intent-to-adopt e-procurement (MP β=0.225 t-value=4.122 p

0.01; IA β=0.303 t-value=4.561 p 0.01; IT β=0.186 t-value=2.614 p 0.01; TA β=0.229 t-value=3.194 p 0.01).

The path coefficient value needs to be at least 0.20 and ideally above 0.30 in order to consider as a strong

relationship and meaningful for discussion (Chin, 1998). As a result, all relationships suggests that all the

bidders have a higher level of intention to adopt e-procurement and willingness to participate in government

procurement systems. It helps to reduce the monopoly power of government officers in the provision of

contracting processes, minimises the information gap between government agents and bidders as it affects

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information asymmetry, increases trust, and most importantly, it improves transparency and accountability in

procurement systems. These outcomes will help to reduce the chance of misuse of public office for private gain

in public procurement.

Table 6 Path Coefficient (Intent-to-adopt e-procurement)

Path relationship Path Coefficient (β) t-value (by bootstrap)

Significance (two-tailed)

Inference

H1:MP�ITA 0.225 4.122 Sig. at 1% Supported H2:IA�ITA 0.303 4.561 Sig. at 1% Supported H3:IT�ITA 0.186 2.614 Sig. at 1% Supported

H4:TA�ITA 0.229 3.194 Sig. at 1% Supported

Discussion

This study set out to analyse the willingness to adopt e-procurement for reducing corruption on the perception of

the bidders. The study contributes to the existing literature on the perceived benefits of public e-procurement by

combining the different constructs into a single research model and by direct link to intent-to-adopt e-

procurement.

The principal-agent theory applied as a core theory in this research evaluates the technology benefits in relation

between government and bidders, including transparent and real time information, automation of transaction

processing, fixed price contract, track, and monitor, fairness of competition, and in general reduce the chances

of corruption in public procurement. Study constitutes the empirical test of the relationship between principal-

agent theory and intent to adopt public e-procurement, this area has not been comprehensively examined by the

previous studies in the context of reducing the risk of corruption. In fact, the principal-agent theory can be an

appropriate theory to analyse the risk of corruption between two parties in order to reduction of monopoly

power and information asymmetry, increase trust, transparency and accountability.

The result of this research suggests that monopoly power, information asymmetry, trust, and transparency and

accountability are antecedent’s attitudes towards intent-to-adopt public e-procurement. All the latent variables

were positively significant to the intent-to-adopt public e-procurement. First, our results indicate that a positive

and moderate relationship (β=0.225) between reduction of monopoly power and intent to adopt public e-

procurement. Monopoly upon power of official is one of the critical factors bearing upon opportunities for

corruption (Klitgaard 1988). So this study emphasize that monopoly of power of government officers

(Principal) is a critical factor of corruption in principal-agent relationship and public e-procurement can be

considered a best option to eliminate the power of government officers in procurement processes.

Second, the results from the relationship between the information asymmetry and public e-procurement

demonstrated strongly significant and correlated with each other (β=0.303). Information asymmetry is a critical

factor in principal-agent relationship that leads to create an information gap, incomplete of contract, and

problem of monitoring between two parties. Singh & Sirdeshmukh (2000) argued that asymmetrical information

increases the probability of opportunistic behaviour. Similarly, Wathne and Heide (2000) research claimed that

information asymmetry is facilitating conditions for opportunism. Therefore, this study believed and found that

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public e-procurement reduces the information gap (lowering information asymmetry problem) between

government and bidders. Indeed, lower level of information asymmetry directly decreases opportunities of

corruption in public procurement. Therefore, this study justify that willingness to adopt e-procurement reduce

the information asymmetry problems as well as mitigate corruption.

Third, trust is another important factor that helps to make good environment between government and bidders.

Public e-procurement create trustable environment in complete public procurement processes such as project

identification to contract awards. Previous scholars demonstrated that trust is a fundamental element of e-

commerce or information system research that determines the intention, behaviour, attitude, or belief of the user

to adopt any inter organizational information systems (Bachmann & Inkpen, 2011; Dubelaar, Sohal & Savic,

2005). Our results indicate that trust is an important anti-corruption factor with a positive relationship to intent-

to-adopt public e-procurement. The main contribution of e-procurement provided to numerous benefits to the

bidders such as track and monitor, security of transactions, any time anywhere bidding, user friendly system,

these features played a major role to reduce corruption as well as helped to make a good relationship.

Fourth, our results indicate that transparency and accountability was positively significant to the intent to adopt

e-procurement. Both transparency and accountability are two important pillars of the government and bidders to

reduce corruption. Kolstad and Wiig (2009) research result claimed that transparency can reduce the political

and bureaucratic corruption as well as facilitate cooperation over opportunistic rent-seeking, maintain norms of

integrity, and trust. Public e-procurement can facilitate to the bidders real time information access, automated

procurement procedure, more consistency in bidding procedure, and importantly reduces the human intervention

in bidding processes. Our research found that these anti-corruption factors lead to reducing the chances of

corruption. Filho & Mota (2012) and other study pointed that the main contribution of e-procurement to

reforming government procurement system and enhanced efficiency and quality of government services, as well

as enhance transparency and accountability (Brun et al., 2010; Wen & Wei, 2007).

Similarly, the finding also supports the previous research by Neupane et al. (2012b) that highlighted the anti-

corruption capabilities of public e-procurement in developing countries. Similarly, Pathak et al. (2008) suggests

that electronic government initiatives, improved government-citizen relationship and reduce corruption. Further

Carayannis and Popescu (2005) study highlights that information technology provides an opportunity to make

procurement activities more transparent and accountable. They pointed out that information technology creates

more transparent European public procurement market. On the other hand, Kim, Kim and Lee (2009) in their

research demonstrated that electronic government has made a positive impact upon improving transparency in

the government sector as well as helping to combat corruption.

Overall, our findings suggest that public e-procurement anti-corruption capabilities can help to guide

government, bidders, public procurement practitioners, and the research focuses on the perceived benefits of

public e-procurement for reducing the chances of corruption in public procurement. The findings are in line with

recent research conducted by Vaidya & Hyde (2011) who have evaluated the benefits of public e-procurement

in light of the diffusion of innovation theory.

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Our research has some limitations; the evaluation of anti-corruption factors as they affect the willingness of

users to adopt e-procurement on the bidder’s perception research model is relatively new to e-procurement

research. The discussed findings and their implications were obtained from the study of a single country with a

limited number of respondents that examined only the bidder’s perceptions in Nepal. The proposed model can

be validated in different user group populations in the context of public e-procurement’s perceived benefits and

need to add more anti-corruption factors that will help to generalize the results and findings.

Based on our analysis, we have some implications for future research. First, it will need to work on cross-

sectional country analysis, adding more variables, and employing rigorous research methodologies interview,

focus group discussion about the better understanding of perceived benefits of e-procurement to reduce

corruption in public procurement. Secondly, more research is needed to identify the anti-corruption factors of

perceived benefits of technologies in reducing corruption in government procurement and it also need to be a

strong empirical test to valid the factors that influence the adoption of e-procurement systems. Third, the results

of this study should be considered in the context of governments’ public e-procurement and anti-corruption

policies. This has been supported by (Concha et al., 2012) who observe that e-procurement has profoundly

transformed the Government’s procurement process exceeding the policy makers’ expectations (Concha et al.,

2012).

Conclusion

This study has analysed the perceptions of the potential of e-procurement to reduce corruption in public

procurement. The results from the study have several implications for academic, government, international

agency, procurement practitioners of developing and transitioning countries by enhancing their understanding of

the perceived anti-corruption benefits of e-procurement to reduce corruption. Academically, this study proposed

a research model and it identified four anti-corruption factors that have significant impact upon the intent to

adopt e-procurement. The principal-agent model (agency theory) has applied as a core theory to investigate a

relationship between government and bidders. This study results provided positive message to government and

practitioners about the anti-corruption role of e-procurement and has been a watchdog for public sector integrity

and reduced the red tape in public procurement. This work is beneficial for procurement professionals to

promote and priorities public e-procurement as an anti-corruption agenda and the strength and relevance of use

of technologies to procurement reform.

Overall, this study findings provide a clear guideline for developed and emerging countries concerning adoption

of e-procurement technology for the purpose of reducing corruption in public procurement. This study

demonstrated high level of intent-to-adopt public e-procurement having a positive and significant effect on

reducing corruption in procurement with the concept of monopoly power, information asymmetry, increasing

trust, and transparency and accountability that may help officials in the government departments, international

agencies, practitioners, and policy in their endeavours to combat corruption in government procurement.

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Appendix 1: Cross loading analysis

Items IA IT ITA MP TA

IA1 0.708446

IA2 0.661610

IA4 0.743507

IA5 0.749183

IA6 0.724514

IT1 0.726919

IT2 0.700868

IT3 0.778050

IT4 0.772162

ITA1 0.700405

ITA2 0.736861

ITA3 0.749478

ITA4 0.709817

ITA5 0.748513

ITA6 0.756785

MP2 0.757643

MP3 0.700928

MP5 0.645981

MP6 0.765740

TA1 0.809121

TA2 0.780626

TA4 0.759545

TA6 0.693600

TA7 0.585559

D

ownl

oade

d by

DIP

ON

EG

OR

O U

NIV

ER

SIT

Y A

t 19:

08 0

6 O

ctob

er 2

014

(PT

)