E-commerce Adoption in Developing Countries

Industry environment, location, and the state of the infrastructure are influences for the intention of firms to adopt new technologies. E-commerce is a technology that was launched in industrialised countries Zhu and Kraemer (2005), therefore, many theories and frameworks have been developed for e-commerce adoption in these countries in order to increase the rate and success of adoption( Gunasekaran & Ngai 2005; Tan, J, Tyler & Manica 2007). However, these studies cannot be applied in developing countries because these countries are different in their cultures, business conduct and regulatory environments (Abou- Shouk, Lim & Megicks 2013; Lawrence & Tar 2010)

According to Iddris (2012), e-commerce adoption in Ghana has been virtually non- existent due to a lack of legislation, telecommunications infrastructure and competencies,

48

high costs, and a lack of consumer demand. In Egypt, Abou-Shouk & Lim et al. (2013) pointed to pressure from global operators, suppliers, and consumers for small tourism operators to improve their Internet presence, as 59 per cent did not even have a website. The barriers included poor infrastructure and a lack of computer literacy.

In Malaysia, Alam, Ali and Jani (2011) determined that the adoption factors for smaller firms (N=200) taking up e-commerce were compatibility, relative advantage, organisational capabilities, executive support, and the country’s infrastructure, which all had significant impacts on adoption. Of these, management decisions to change the business model were the main determinant for embarking on a new strategy. Researchers exploring the expansion of e-commerce in Vietnamese small firms (N=926), since the country joined the World Trade Organisation in 2007, found little support for the concept. Van Huy et al. (2012) reported that some Vietnamese enterprises benefitted from the adoption of e-commerce, after classifying these firms on an extended technology-organisation-environment measure (Tornatzky & Fleischer 1990). They found that firms that did not adopt e-commerce differed in their sensitivity to the contributory factors. Further, due to the early adoption stage for innovation, the majority of the firms had a static web presence and had not yet embarked on creating a more dynamic use of the technology (such as creating and operating a website). This was due to the technological and legislative infrastructure available in Vietnam at the time. However, complexity of the innovation and perceived risk were significant impediment technology adoption

Similarly, Li and Xie (2012) investigated successful adoption factors in China, finding that corporate strategy, executive attitude, industry pressures, and the firm’s technological capabilities were the determining factors for the adoption of e-commerce. Again, Modimogale and Kroeze (2011) found little interest, in a province of South Africa, for e-commerce and this was due to structural issues in telecommunications and legislation, and high levels of perceived fraud.

Thatcher, Foster, Zhu (2006) had interviewed 20 managers and executives at electronics and textile companies in Taiwan regarding the impact of Chinese culture and institutional factors on B2B e-commerce adaption decision . Thatcher et al. (2006) found that organizational, industrial, governmental, and cultural factors had influences B2B e-commerce adoption decisions. Also, they found Chinese culture hampered the degree of adoption in the textile industry. While electronic industry overrode cultural tendencies due to competitive

49

pressure. Ghobakhloo et al. (2011) studied e-commerce adoption in small Iranian firms. They found that the grounds for adoption were the strength of the executive decision to innovate, the firm’s competencies, and industry factors including the firm’s competitive advantage, and industry practices in telecommunications. Other influences included information intensity and support from technology providers.

Moreover, Al-Fawaeer (2014) investigated e-commerce strategies for Jordanian telecommunications companies, as they would be expected to be among the first to adopt online marketing; however, the researcher concluded that the infrastructure was not yet in place in the country. Table 3.3 below shows the different factors that affecting e-commerce adoption in developing counties.

50

Table 3.3 factors affecting e-commerce adoption in developing counties

Author Country Industry Research objective and finding

Iddris (2012) Ghana Different industries

the study identified barriers to e-commerce adoption: the study found that a lack of legislation, telecommunications infrastructure and competencies, high costs, and a lack of consumer demand the significant barriers to r-commerce adoption

Abou-Shouk & Lim et al.

(2013)

Egypt Tourism Factor affecting e-commerce adoption among adopter and none-adopter. The Findings of the study revealed that resources limitation, a funding problem, The lack of governmental support, a lack regulatory system and consumer culture and the lack of public infrastructure readiness were the common barriers for e-commerce implication.

Alam, Ali and Jani (2011)

Malaysia Different industries

Conducted a study which aimed at examine the major determinants of e-commerce adoption by SMEs in Malaysia The research findings show that relative advantage, compatibility, organizational readiness, managers characteristics, and security have significant impacted on e- commerce adoption.

Van Huy et al. (2012)

Vietnam Different industries

Examine the major internal and external the factors that affecting the decision to adopt e-commerce among adopted and one-adopted. The findings exposed that most of SMEs had low level of website due to the technological and legislative infrastructure. However, complexity of the innovation and perceived risk were significant impediment technology adoption Modimogale and Kroeze (2011) South Africa Different industries

The purpose of study was to look at how organisations use ICT. The research shows that weakness of telecommunications and legislation, and high levels of perceived fraud hindrance the diffusion of e-commerce adoption in the country.

Thatcher et al. (2006)

Taiwan electronics and textile

Investigating the impact of cultural and institutional factors influences B2B e-commerce adoption decision. It finds that organizational, industrial, governmental, and cultural factors significantly influence the process of adoption.

Ghobakhloo et al. (2011)

Iran Manufacturing The purpose of this paper is to determinants the factors affecting the decision to adopt and extent of e-commerce adoption. Perceived relative advantage, perceived compatibility, CEO's innovativeness, information intensity, buyer/supplier pressure, support from technology vendors, and competition were critical factors for adoption.

Al-Fawaeer (2014)

Jordan Communication The study identifies the relationship between e-commerce adoption and the business strategy. The result indicates that the lake of telecommunication infrastructure was the main happened e-commerce adoption at organisation level in communication industry. (Kurnia &Ali 2012), Bahrain and Indonesia

Grocery This study compares the experience of the grocery industry in adopting B2B e-Commerce in Indonesia and Bahrain. The research uncover that both countries are lack of government support. Moreover, Indonesian’s companies are more willing to adopt B2B e-commerce than Bahrain’s firms due to the mangers awareness and industry structure in Indonesia.

51

According to table 3.3 different factors reported in the literature as the obstacles to e- commerce adoption in developing countries. Therefore, developing countries are considered to be very ‘heterogeneous’ in terms of political systems, economies, ideologies, demography, cultures, race, and so on; thus, such factors which might contribute or impede the adoption of e-commerce in one country may not be applicable in another ( Abou-Shouk & Lim et al 2013; Lawrence & Tar 2010).

For example, most countries lacked technology, infrastructure readiness and legalisation; however, the vitamin industry had the technology and legislative infrastructure to support firms’ adoption of e-commerce (Van Huy et al. 2012). Moreover, the literature review shows that industries had different influential factors, even from one country to the next. For example, one chain’s culture had a negative impact on B2B e-commerce adoption in the textile industry while no influential factors were found within the electronics industry.

Furthermore, in comparing studies between two developing countries, Indonesia in South-East Asia and Bahrain in the Arabian Gulf region (Kurnia &Ali 2012), it was found that although they share similarities in terms of a lack of government support for using B2B e-commerce, they found a different view in terms of the expected benefits of adoption, with Indonesian firms believing that e-commerce is beneficial, while Bahrainian firms did not view B2B e-commerce as being beneficial at all, and so struggled to justify investing in such technologies. This is due to the awareness and experiences of Indonesian managers in developed countries, such as the United Kingdom and the USA who are familiar with e- commerce technology. Moreover, Indonesian companies have adequate trust levels, but there is a lack of trust in Bahrainian organisations. Furthermore, the grocery structure is different between the two countries. Large firms in Bahrain are not interested in implementing B2B solutions within their local supply chains, while large companies in Indonesia are influential and support small trading partners in adopting B2B e-commerce solutions.

Thus, an outcome from one country might not be expected in another without re- examination and reconsideration, because each country has a unique situation that needs culturally-appropriate and specific strategies for e-commerce adoption (Abou-Shouk, Lim & Megicks 2013; Lawrence & Tar 2010). For instance, the Arab countries in the Gulf region differ from other developing nations in terms of their economy, political systems, religion, and culture (Al-Musalli & Ismail 2012; Al-Rawi & Sabry 2009).

52

Although in recent years, the research on e-commerce in developing countries has started to increase, most previous studies have been conducted in South Asia, while less attention has been paid to other developing nations, particularly in the Arab world (Abdallah & Albadri 2011; AL-Fawaeer 2014; Al-Rawi & Sabry 2009; Baabdullah, Dwivedi & Williams 2013; Muhannad and Ahmed 2014). Therefore, this study contributes to the knowledge by uncovering the factors that affect the adoption of e-commerce in the Saudi retail industry, as a developing country in the Arabian Gulf.