Adoption of technology

A number of scholars have studied the adoption of technological innovation. For example, Tornatzky & Fleischer (1990), Iacovou, Benbasat, & Dexter (1995), Molla & Licker (2005a) and Karanasios (2008). For instance, Tornatzky & Fleischer (1990) discussed technological innovation by enterprises and Iacovou et al.(1995) discussed electronic data interchange (EDI) adoption by small business enterprises. Molla & Licker (2005a) explained the adoption of e-commerce amongst small business enterprises, particularly in developing countries. More recently, Karanasios (2008), in his study, examined e-commerce adoption amongst small tourism enterprises in developing countries. Each of the studies classified the drivers and factors related to technological adoption and consideration to make a decision to adopt new technology.

Technology-organization-environment framework

Tornatzky & Fleischer (1990) introduced the technology-organization- environment framework, which highlights the innovation of businesses –internally and externally. This framework addresses the context of innovation, the factors internal to the organization and to the external environment. Tornatzky & Fleischer’s (1990) framework outlines e-readiness in the context of small businesses. Researchers that adopted Tornatzky & Fleischer’s (1990) framework

96

in their studies include Rashid & Al-Qirim (2001); Scupola (2009); Weng & Lin (2011); Ghobakhloo, Arias-Aranda, & Benitez-Amado (2011). The framework will now be described.

There are three elements from the perspective of a business that influence the process of adopting technology innovations. These are the organizational context, technological context, and environmental context. The three contexts are briefly explained.

Organizational context

This describes several descriptive measures, such as size of the firm, the centralization, formalization, and complexity of the managerial structure, the quality of human resources, and the amount of slack resources7 available internally.

Many elements contribute or relate to the implementation of technological innovation from a business perspective (Tornatzky & Fleischer, 1990). The internal characteristics of an organization are important indicators for the innovation of the organization (Pullen, De Weerd-Nederhof, Groen, Song, & Fisscher, 2009). Business scope,8 business size, and business strategy are the components that may influence the adoption of the Internet in businesses (Del

7

Slack resources are referred to as excess resources to what is required to reward the dominant coalition that governs the organization (Cyert and March, 1963).

8

Business scope refers to the range of products and/or services offered by businesses and their target markets.

97

Aguila-Obra & Padilla-Melendez, 2006; Ramdani, Kawalek, & Lorenzo, 2009; Scupola, 2009; Zhu, Kraemer, & Xu, 2002). Zhu et al. (2002) posited that businesses with greater scope are more motivated to adopt the Internet. Businesses with greater scope may have more potential benefits through synergies between Internet adoption and traditional business processes, such as high internal coordination costs, search costs, and inventory holding costs.

Business size can also influence Internet adoption by businesses (Al-Qirim, 2008; Brown & Kaewkitipong, 2009; Ghobakhloo, et al., 2011; Niehm, Tyner, Shelley, & Fitzgerald, 2010; Ramdani, et al., 2009). Business size is significant as it relates to the capabilities of businesses, including their resources, such as financial and human resources (Mole, Ghobadian, O'Regan, & Liu, 2004). A study by Premkumar (2003) found that larger businesses are more likely to adopt the Internet than smaller businesses. Size impacts the capabilities and willingness of small businesses to invest in Internet adoption (Brown & Kaewkitipong, 2009).

Pullen et al.(2009) highlighted business strategy as one of the indicator that contributes to technology performance. Teo & Pian (2003) agreed that there were positive relationships between business strategy and Internet adoption. In addition to the business strategy, the owner’s attitude also influences Internet adoption

(Levy & Powell, 2003). Spencer, Buhalis, & Moital (2011) argued that ownership and leadership influences business strategy and the use of resources in making decisions to adopt the Internet. Beckinsale, Levy, & Powell (2006) posited that

98

the owners-managers of small businesses act as a key for planning business strategy and making decisions for business purposes.

Organizational readiness is also necessary to assess the capacity of businesses to adopt new technologies (Grandon & Pearson, 2003; Iacovou, et al., 1995). In the context of small businesses, one of the major challenges faced by these businesses is limited internal resources, which reduces their capabilities to meet market demands (De Toni & Nassimbeni, 2003; Madrid-Guijarro, Garcia, & Van Auken, 2009). Several limitations for small businesses to adopt the Internet include limited financial resources, lack of knowledge and ICT skilled employees (MacGregor & Vrazalic, 2005).

Technological context

This explains both the internal and external technologies that are relevant to the organization. It focuses on how technology features can influence the adoption process and implementation.

The technology context highlights a number of technologies available for businesses to adopt (Scupola, 2009; Tornatzky & Fleischer, 1990) and how they fit to the current technology that a business possesses (Chau & Tam, 1997; Jeyaraj, Rottman, & Lacity, 2006; Tornatzky & Fleischer, 1990). A number of factors related to this context include telecommunication infrastructure, ICT knowledge and skills, and Internet adoption know-how (Jutla, Bodorik, &

99

Dhaliwal, 2002; Kuan & Chau, 2001;Zhu, et al., 2002). This context refers to how technology can be accessed and the skills required to support the technology.

Environmental context

This is the area in which an organization conducts its business –its industry, competitors, access to resources supplied by others, and dealings with governments. These areas can influence the level to which the organization sees the need for, seeks out, and brings in new technology. The environmental context presents both challenges and opportunities for technological innovation. Industry members, knowledge producers, regulatory agencies, customers, and suppliers can provide innovation-related information and financial and human resources.

The environmental context refers to the environment of the industry in which the business operates. Industry, market scope, and competitive pressure are included as factors that can influence Internet adoption (Ramdani, et al., 2009). Levenburg et al. (2006) argued that the type of industry influences the adoption of the Internet by small businesses. Market scope is defined as “the horizontal extent of a firm’s operations” (Zhu, Kraemer, & Xu, 2003, p. 254). Zhu et al. (2003) added

that firms should consider consumer readiness before adopting the Internet. Competitive pressure and trading partner pressure (customers and suppliers) have been identified as factors that influence Internet adoption (Grandon & Pearson, 2004; Iacovou, et al., 1995; Jeyaraj, et al., 2006; Lertwongsatien & Wongpinunwatana, 2003; H. Wang & Hou, 2012; Zhu, et al., 2003). Businesses

100

can gain competitive advantage with the use of the Internet by altering the competitive pressure that collectively determines industry profitability (Porter, 2001). The Internet can reduce the traditional challenges faced by small businesses in conducting overseas business transactions, such as communication costs, and market entry (Chrysostome & Rosson, 2009). For small businesses, expanding overseas would be costly due to their limited resources, as they cannot afford to pay the higher costs for searching for foreign partners. Small businesses are able to reduce their costs and can search for information on inter-firm networks and potential partners quickly through the Internet. They can also establish contacts and assess the previous experience or performance of their potential partners cheaply. Thus, the Internet also provides an opportunity for small businesses to establish strategic alliances (Soliman & Janz, 2003).

Another identified factor that can influence Internet adoption is government readiness (Molla & Licker, 2005a). Government readiness includes the policies, support programmes, and initiatives to assist businesses with Internet adoption (Vatanasakdakul, Tibben, & Cooper, 2004). Nevertheless, many small businesses in developing countries are still left behind and lack the resources to engage in ICT development (Karanasios, 2008).

101

Figure 6 illustrates the links between the three context areas.

Figure 6 The Context of Technological Innovation

Source: Adapted from Tornatzky & Fleischer (1990, Figure 7-1, p. 153)

Resource-based Theory (RBT)

The resource-based theory (RBT) describes how businesses can gain a sustainable competitive advantage by exploring and developing their resources (such as competencies, business assets, knowledge, and capabilities), which vary from competitors, and can be used by businesses to formulate and implement competitive business strategies (Caldeira & Ward, 2003; Rivard, Raymond, & Verreault, 2006). Ray & Ray (2006) contended that resources can be internal or external to business environments (such as trading partners or customers).

Organization Formal and Informal

Linking Structures Communication Process Size Slack External Task Environment Industry Characteristics

and Market Structure Technology Support Infrastructure Government Regulation Technological Innovation Decision Making Technology Availability Characteristics

102

Caldeira & Ward (2003), and Rivard et al. (2006) viewed Internet technologies as business resources and Internet adoption as a result when businesses apply and use the Internet technologies effectively.

Several scholars have adopted RBT, particularly to address the issue of Internet contribution to business value (Melville, Kraemer, & Gurbaxani, 2004; Wade & Hulland, 2004). Wade & Hulland (2004) identified three categories of resources. The first category is outside-in resources, which involve the external relationship management and market responsiveness that relates to the establishment of external relationships with trading partners and competitors. The second category is inside-out resources, such as ICT infrastructure, skilled workers, development of ICT, and cost effective ICT adoption that form internal resources (business resources) to respond to the market requirements. The third category is spanning resources, which relate to business partnerships, ICT planning and change management where both internal and external analysis capabilities are involved.

The strength of RBT is that it focuses on the resource capabilities of businesses, including whether small businesses have or need to adopt the Internet, and recognize their tangible and intangible resources (C. M. Parker & Castleman, 2009). However, Rivard et al.(2006) and Melville et al. (2004) argued that most small businesses do not use their resources to their fullest potential as assumed by RBT. Studies found that businesses that applied RBT were proactive businesses that performed better in Internet adoption as they were able to use their internal

103

capabilities to support their business strategies and leverage competencies (Melville, et al., 2004; Rivard, et al., 2006).