Elsevier

Information & Management

Volume 39, Issue 3, 20 December 2001, Pages 165-176
Information & Management

A model of Internet adoption by SMEs

https://doi.org/10.1016/S0378-7206(01)00086-6Get rights and content

Abstract

The study discussed in this paper used evidence from seven small firms to determine the significant factors that influenced their Internet adoption. Evidence from four firms was used to create a preliminary model of Internet adoption by SMEs. An additional three firms were then examined to refine the preliminary model. The study concluded that three factors significantly affect Internet adoption by small firms: perceived benefits, organisational readiness, and external pressure. The study identified both similarities and differences between Internet adoption and EDI adoption in small firms. The findings have important implications for managers and service providers.

Introduction

Opportunities for electronic commerce and global marketing have suggested that the Internet could be very important to small and medium sized enterprises (SMEs). There is already evidence that some SMEs have benefited [18]. However, despite numerous studies about Internet use by SMEs, there is a dearth of research identifying the organisational rationale behind Internet adoption. Thus, this study aimed to improve our understanding of Internet adoption by SMEs.

Adoption of the Internet can be viewed as an innovation for a firm, based on Damanpour’s argument [6] that an innovation is something that is “new to the adopting organisation”. An organisation’s decision to adopt an innovation is influenced by a number of factors. Some factors are based on attributes of the innovation and include: the relative advantage the innovation has over the current situation, the compatibility of the innovation with respect to all aspects of the organisation, the innovation’s complexity, the innovation’s trialability, and the observability of the innovation [20]. Pressure from within the organisation and externally are also factors that encourage adoption of technology [8]. Some argue that organisations must perceive the Internet as having relative advantage, i.e. it has to be better than what it supersedes [26].

Section snippets

Adoption of technology by SMEs

Studies of the adoption of other forms of technology indicate that SMEs are likely to consider numerous factors when contemplating the adoption of the Internet [14], [24]. Lefebvre et al. [14] identified four categories of factors that influence adoption of a new technology by SMEs:

  • 1.

    characteristics of the firm,

  • 2.

    competitiveness and management strategies of the firm,

  • 3.

    influences of internal and external parties on the adoption decision process, and

  • 4.

    characteristics of new technologies adopted.

The CEO

Method

The research aimed to develop a model of SME adoption of the Internet. Stated as a question, this is “why do SMEs adopt the Internet?”

The contemporary nature of the Internet favoured the case study approach. This has been considered particularly appropriate, where the theory in the area is not well developed [7], [22]. The case study can capture ‘reality’ in substantial detail and is particularly useful when a natural setting or a focus on contemporary events is needed.

Case studies can be used

The four IT case firms

Evidence from the first four firms in the IT industry was used to create a preliminary model, which was subsequently tested by evidence from three firms outside the IT industry.

The four firms consisted of a computer parts and systems retailer, a computer service company, a software development company, and a company with a variety of activities in the IT arena. In general, e-mail was adopted first, usually in conjunction with Internet browsing. Web site development and use followed much later

A preliminary Internet adoption model for SMEs

The first four cases were used to derive a preliminary model of Internet adoption by small firms. Each part of the Internet, in terms of email, web browsing and web site development, were considered separately. This within-case analysis showed that many factors were common to the various adoption decisions. Thus, these three components of Internet adoption are treated as one in much of the subsequent discussion, with some exceptions.

The cross-case analysis showed that the form of the model

Refining the Internet adoption model

The second phase of the study tested the factors and definitions summarised in Table 1 by investigating three more firms. None of these firms were in the IT industry. Case E was a clothing manufacturer and retailer, Case F was in entertainment, and Case G was in transport. The first two firms had adopted the Internet, while the third firm had chosen not to adopt the Internet.

The final model

The final model is presented in Table 2. Although, it is reasonably similar to the previous model (Table 1), it has incorporated the observations made in the final three firms. Throughout the analysis, the definitions for the content of the Internet Adoption model were reconsidered. If further support was found in the non-IT firms for the particular definition it was retained in the model.

However, if no support for the inclusion of the definition was found then that aspect was excluded. These

Discussion

This study provided a clear understanding of the influences on Internet adoption by small firms. Internet adoption was influenced by three major factors: perceived benefits, organisational readiness, and external pressure. Adopting firms seek benefits, which can come in numerous forms. Typically, firms seek relative advantage. Firms are also influenced by pressure from Internet users outside the firm who want to communicate via the Internet. Firms need to be ready for the Internet, through

Conclusions

The study used evidence from seven small firms to determine their reasons for Internet adoption. Evidence from four IT firms was used to create a preliminary model. Three non-IT firms were then examined to refine the preliminary model. The study concluded that three factors significantly effect Internet adoption by small firms: perceived benefits, organisational readiness, and external pressure. These factors were consistent across the different Internet innovations of email, web browsing, and

Jenni Mehrtens is a relocated New Zealander in Gainesville, Florida. She is vice-president at Micrographics, Inc. (a small privately-owned company) as a document/records management consultant. Previously a master’s student at the University of Canterbury, New Zealand, she has her MCom (Honours) degree in Management of Information Systems. She also has an undergraduate degree in Japanese. Her greatest love is the outdoors as is reflected by her hobbies; hiking, canoeing, water-skiing, fishing,

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    Jenni Mehrtens is a relocated New Zealander in Gainesville, Florida. She is vice-president at Micrographics, Inc. (a small privately-owned company) as a document/records management consultant. Previously a master’s student at the University of Canterbury, New Zealand, she has her MCom (Honours) degree in Management of Information Systems. She also has an undergraduate degree in Japanese. Her greatest love is the outdoors as is reflected by her hobbies; hiking, canoeing, water-skiing, fishing, and rugby — just to name a few. Jenni loves to learn and her current research has focused on the archival possibilities for vital records of clients, particularly in the government sector.

    Dr. Paul B. Cragg is an associate professor in information systems in the Faculty of Commerce at the University of Canterbury, New Zealand, where he teaches on the MBA programme, as well as within the BCom, MCom and PhD degrees. Previously he was on the staff at the University of Waikato, New Zealand, and before that at Leicester Polytechnic, England. Paul’s research centres on small firm computing. Current studies focus on IT alignment, bench-marking, IT sophistication, and adoption and use of the Internet. He has published in many international journals including MISQ, EJIS, Information & Management, and JSIS.

    Dr Annette M. Mills is a lecturer in the Department of Accounting, Finance and Information Systems at the University of Canterbury (New Zealand). She holds a PhD in Information Systems from the University of Waikato,1996 (New Zealand). Her research interests span a range of topic areas that include user sophistication, technology adoption, and IS education.

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