Understanding Factors Affecting e-Business Technology Introduction ...

Understanding Factors Affecting e-Business Technology Introduction by Saudi Small and Medium Enterprises (SMEs): Toward Developing a Conceptual Framework *Ali Abu Abid, King Khalid University, Faculty of Computer Sciences, Abha, Saudi Arabia, [email protected] Md Mahbubur Rahim, Caulfield School of IT, Monash University, Australia [email protected] Abstract Despite the popularity of e-business technologies and applications, few studies have attempted to understand the factors affecting introduction process for these technologies. Introduction of e-business technologies among Small and Medium Sized Enterprises (SMEs) has enormous potentials. However, much of the current e-business literature to date concentrates on introduction concerns in general; little research has so far been reported to investigate the factors which affecting the introduction of e-business technology by SMEs in Saudi Arabia. This paper aims to develop conceptual framework to understand the factors affecting e-business technology introduction in Saudi SMEs. Keyword: E-business, Adoption, Introduction, SMEs, Saudi Arabia 1. 0 Motivation of Research SMEs in Saudi Arabia play an important role for its economy. It contributes 28% of total national economic activity and employs about 40% of all employee‟s in Saudi Arabia (Hertog 2009). Due to rapid globalization, SMEs in Saudi Arabia however encounter greater intensity of competition. Moreover, computer and Internet literacy is gradually increasing in Saudi Arabia(Shaikh 2009). Hence, the expectations on the part of Saudi population for SMEs to deliver products and services in more innovative manner are increasing. These dual forces are exerting tremendous influence on Saudi SMEs to consider adopting innovative e-business technologies in both sides of their supply chains. Many definitions of e-business can be found in the literature. According to Davies (1999), e-business is defined as a business model which enables buyers and sellers to exchange information and services using a range of electronic technologies. In this research, we recognize the broader view of e-business articulated by Browne et al. (2003); e-business is about conducting business both internally and externally by electronic means. When successfully adopted, e-business technologies can provide SMEs with a range of benefits: increased sales (Ali Abu Abid, et al. 2010), increased ability to compete (Scupola 2009) and greater access to a wide range of markets (Quaddus and Hofmeyer, 2007). It is important for Saudi SMEs to adopt e-business technologies to gain the above mentioned benefits and to stay in business. However, several factors are required to be present in order to facilitate e-business introduction among Saudi SMEs. Currently, there is a rich body of literature on e-business in SMEs. The focus of this literature is however limited to SMEs operating in Western countries (Simpsons and Docherty, 2004; Sandy, 2006; Scupola, 2009) and some developed Asian nations (Tan, Tyler et al., 2007; Tan, et al., 2010). The assumptions about the context of SMEs operating in those studies and the attitude of SME owners and managers about e-business technology introduction may not apply directly to those of Saudi SMEs. This may be due to cultural differences and economic circumstances unique to Saudi Arabia. Regrettably, studies investigating e-business in Saudi context is very limited. Therefore, it is not clear whether the factors reported in the existing e-business literature (which are believed to critically affect e-business adoption decisions and introduction) are applicable to the Saudi SME context without further empirical confirmation. According to Hertog (2009), only 2% of the employees of Saudi SMEs in 2007 were Saudi citizens and the employment is dominated by expatriates. Therefore, the culture and education level of employees among Saudi SMEs is heterogeneous. Moreover, major business decisions are often either by owners or some time jointly by owner and their trusted expatriate managers (Tashkandi 2010). These characteristics are quite unique and hence, the outcomes of the factor based research reported in the existing studies need to be revisited in order to better understand e-business introduction phenomena for the Saudi SME context.

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To bridge this gap in the literature, this study proposes development of a framework drawn from a synthesis of several streams of literature (innovation adoption, e-business, SMEs, IT implementation). This framework helps identify a range of factors that would influence various stages of e-business introduction among Saudi SMEs. It will be empirically evaluated using a rigorous qualitative approach. This study would make important practical and theoretical contributions. On the practical side, factors affecting e-business technologies introduction by SMEs in Saudi Arabia will be identified which have not been specifically addressed in the current e-business literature. This will help owners and managers of Saudi SMEs to carefully reflect on when considering the introduction of e-business technologies. On theoretical side, the notion of conceptualizing e-business introduction intro three distinct stages (as shown in Figure 1) and identifying a set of factors associated with each stage represents a genuine contribution to theory development. Existing e-business literature primarily identifies factors affecting adoption decision for SME context and is silent on how those factors affect other stages of broader e-business introduction process. The structure of this paper is organized as follows. The next section presents the definition of key terms used in this study. Following that the literature analysis of e-business technologies adoption by SMEs is presented. Then, a conceptual framework of e-business introduction by Saudi SMEs is proposed. This is followed by an outline of the proposed research approach. Finally, the paper concludes by highlighting its contributions and indicating future research directions.

2.0 Key Definitions 2.1 SMEs Definition and Characteristics in Saudi Arabia SMEs are defining according to three criteria when a business considered a small or medium enterprise: employee‟s numbers, annual turnover and company assets. Due to lack of financial company data in Saudi Arabia, most public and private bodies dealing with SMEs base on the first criterion, the number of employees (Hertog, 2009). The Saudi Arabian General Investment Authority (ASGIA) has defined small business as having less than 60 workers and medium size as having less than 100 workers (Otsuki, 2002). Whereas, small businesses have defined as having less than $1.3 million of capital, and medium size as having between $1.3 million and $5.3 million of capital(Hertog, 2009). SMEs are considered the backbone of national economy and constituted the majority of the total business enterprises in World. They are considered one of the driving forces in the national economy. According to the Riyadh chamber of commerce and industry, 96% of Saudi businesses have less than 100 employees. 95% of commercial registrations in Saudi Arabia are SMEs, and 71% of industrial establishments are also SMEs. However, SMEs contribute 28% of total national economic activity (Hertog, 2009). In Saudi Arabia, there are more than 700,000 SMEs active in the kingdom. 47% of SMEs are take part in commercial and hotels businesses, 27% in constriction, 12% in industry, 6% in social services and 8% in sundry other sectors(Shaikh, 2009). 2.2 Adoption Definition The term „adoption‟ has several different interpretations (Rahim, 2004). According to Tornatsky and Fleischer (1990), who described the introduction of a technological innovation in organization as a threestage process: initiation, adoption and implementation. The initiation stage is concerned with gathering and evaluating information about the technological innovation in question, the adoption stage is concerned with making a decision about which technology is to be used, and the implementation stage involves the introduction of the innovation into an organization. The lack of a widely accepted definition of the term „adoption‟ has also been reflected in the e-business literature in which the notion of „adoption‟ was found to be synonymously used with several other related terms such as „decision to accept‟, „use‟, „implementation‟ and „utilisation‟. This study however looks at „adoption as the process of implementing e-business technologies in an organisation. Therefore, the term „adoption‟ used in this research can be said to follow the three stages of Tornatsky and Fleischer‟s (1990).

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2.3 Type of E-business Technologies Kula et al., (2003) identified various types of e-business technologies used by SMEs. These technologies include: e-procurement systems, electronic data interchange (EDI), online marketplaces, web-based portals and online supply chain solutions. 3.0 Literature Analysis 3.1 E-business Introduction by SMEs Several studies on e-business technologies adoption by SMEs are reported in the literature. A sample of these studies is shown in Table 1. It appears that considerable research attention was given to understand e-business adoption by SMEs in USA, Australia, European Union and developed Asian nations (e.g. Hong Kong, Malaysia. Singapore). Table 1: Sample of e-business introduction by SMEs studies Countries Literature USA Johnston, et al. (2007); Wen and Chen (2010) Australia Quaddus and Hofmeyer (2006); Scupola, (2009); Ali Abu Abid, et al. (2010) European Union Simpson and Docherty (2004); Scupola, (2009); Oliveira and Martins (2010) Asian nations Sarosa and Underwood (2005); Tan, et al. (2010) However, a few scholars (e.g. Sait, et al., 2004 and Alwabel and Zairi, 2005) have examined e-business adoption for Saudi Context. Sait, et al. (2004) have identified the factors which influence e-business adoption in Saudi Arabia. For instance, lack of skills, security concern, privacy and competition. Whereas, Alwabel and Zairi (2005) found the most important factors which influence e-business introduction in Saudi Arabia are competition intensity, supplier /customer pressure, regulatory issues, value chain process and, top management support & commitment. Although they are useful, their focus is not on SME context. Hence, further research is needed. The studies shown in Table 1 have identified a range of factors which affect SMEs decision to adopt ebusiness technologies. These factors are selected from a range of IT adoption theories. It is also noted that the focus of these studies is on SME adoption decision making process only and they did not consider other stages of broader adoption process. This is the gap that addressed by the proposed conceptual framework presented in this paper. 3.2 IT Adoption Theories in Macro Level Existing studies on e-business adoption among SMEs have made reference to both macro and micro level of IT adoption theories. According to Carr (2003) micro level theory means adoption of IT and practices at individual institutions and macro means adoption of IT and practices at organizational institutions. A large part of past IT adoption studies involves the construction of micro-level theory which explains an individual‟s intention to adopt an IT application. This study however would focus on IT adoption theories in macro level. Various theories have been formulated to evaluate e-business introduction (see Table 2). These theories are summarized in Table 2 and were used to identify factors affecting e-business introduction by SMEs. These theories have been used to examine IT adoption within organization at different levels such as functional units and entire organizations (Jeyaraj, et al., 2006).In addition, numerous innovation have been examined by using these theories, for instance, electronic data exchange, telecommunications technologies and computer-aided software engineering tools (Jeyaraj, et al., 2006).

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Table 2: Theories used in organizational IT adoption research Theory Diffusion/Implementation Model Innovation Diffusion Theory Tri-Core Model Technology Organization Environment(TOE) Framework DELONE AND MCLEAN IS Success Model Transaction cost theory/ Transaction cost economic Structuration theory/ Theory of structuration Diffusion of Innovation Theory in IS

Authors Kwon and Zmud (1987) Rogers (1995) Swanson (1994) Tornatzky and Fleischer (1990) Delone and McLean (2003) Oliver Williamson (1985) Giddens, A. (1984) Moore and Benbasat (1991)

In fact, these theories employed in different IT introduction stages such as decision to adopt (e.g. Grover and Ramanlal, 1999), intention to adopt (e.g. Davis, 1999) intention to use (e.g. Fygenson, 2006), adoption (e.g. Simpson and Docherty, 2004) and diffusion (e.g. Panzano, et al., 2004). Additional, these theories have been used to examine the adoption in specific stages of IT introduction, for instance, initiation or implementation (e.g. Cooper and Zmud, 1990). IT introduction has several stages which identified by several scholars, such as Kwon and Zmud (1987) proposed 5 stages which include: adoption, adaptation, acceptance, routinization and, infusion, while Rogers (1995) proposed two stages initiation and implementation. Furthermore, these theories offer numerous classes of independent factors which include environment characteristics, organizational characteristics and innovation characteristics (Jeyaraj, et al., 2006). The factors which indentified by these classes are as the following: a) environment characteristics which include External pressure (e.g. Iacovou, et al., 1995) and competition (e.g. Grover and Ramanlal, 1999), b) organizational characteristics which include top management support, championship (e.g. Grover and Ramanlal, 1999) organization structure and centralization and formulation (Grover and Ramanlal, 1999) innovation characteristics which include relative advantage, complexity, observability, and trialability (e.g. Rogers, 1995). 4.0 A proposed Conceptual Framework of e-business introduction by Saudi SMEs This research considers e-business introduction to be a process that consists of 3 distinct stages: initiation, adoption and implementation. Drawing on a synthesis of adoption and cultural literature review, a number of relevant theories will be identified from which a set of factors will be selected which are believed to affect each of these 3 stages of e-business introduction by SMEs in Saudi Arabia. Based on Technology-Organization-Environment framework, we categories factors affecting e-business introduction in Saudi SMEs (e.g. F1 (T) means that factor 1 is from technology context). The research model is shown in Figure 1.

Legend:

time order

Figure1: Research model

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5.0 Research Approach The model presented in previous section will be evaluated using a qualitative approach which is divided into two stages. Stage 1, focus group will be formed and a set of factors affecting each stage of e-business introduction process (shown in figure 1) will be identified. Stage 2, 27 Saudi SMEs from three top industry sectors (Commercial and hotel, Construction and Industry) will be selected to investigate the applicability of the model. These SMEs will be selected based on the council of Saudi chambers. Key informants of each participating SME will be interviewed: SME owner/manager and a person responsible for the IT function. Data will also be collected from any relevant documents the Saudi SMEs may have with regard to their e-business introduction. The interview will be transcribed and later analysis using Nvivo software. 6.0 Conclusion and future research E-business introduction among Saudi SMEs is relatively unexplored area which needs to be better understood. This is because SMEs play very significant role for Saudi economy and e-business introduction can transform this sector more productive and competitive. Hence, government policy creators, e-business researchers, IT vendors and SME‟s management would be interested in the findings of this proposed study. 7.0 References Alwabel, S. and M. Zairi (2005). Factors influencing the implementation of e-commerce technologies by financial services in Saudi Arabia: an empirical study, University of Bradford, School of Management Ali Abu Abid, M. M. Rahim, et al. (2010). Perceived Benefits and Barriers of e-Business Technology Adoption: An Exploratory Study of the Victorian SME Suppliers. 14th International Business Information Management Association (IBIMA) Conference, Istanbul, Turkey Argoneto, P. and P. Renna (2010). "Production planning, negotiation and coalition integration: A new tool for an innovative e-business model." Robotics and Computer-Integrated Manufacturing 26(1): 1-12. Brown, D. and N. Lockett (2004). "Potential of critical e-applications for engaging SMEs in e-business: a provider perspective." European Journal of Information Systems 13(1): 21-34. Carr, V. H. (2003). Technology adoption and diffusion http://tlc.n1m.nih.gov/resources/publications/sourcebook/adoptiondiffusion.html Cooper, R. and R. Zmud (1990). "Information technology implementation research: a technological diffusion approach." Management Science 36(2): 123-139. Davis, F. D. (1999). A Technology acceptance Model for Empirically Testing New End-User Information System: Theory and results. Sloan School of management Massachusetts, Massachusetts Institute of Technology. Delone, W. and E. McLean (2003). "The DeLone and McLean model of information systems success: A ten-year update." Journal of Management Information Systems 19(4): 9-30. Drew, S. (2003). Strategic Uses of E-Commerce by SMEs in the East of England. European Management Journal, 21(1): 79-88. Fygenson, M. (2006). "Understanding and predicting electronic commerce adoption: An extension of the theory of planned behavior." MIS Quarterly 30(1): 115-143. Giddens, A. (1984). The constitution of society: Outline of the theory of structuration, University of California press. Grover, V. and P. Ramanlal (1999). "Six Myths of Information and Markets: Information Technology Networks, Electronic Commerce, and the Battle for Consumer Surplus." MIS Quarterly 23(4): 465-495. Grant, Robert M. (1991) “The resource-based theory of competitive advantage: Implications for strategy formulation”. California Management Review, 33(3), spring, pp. 114-135. Hertog, S. (2009). Benchmarking SME Policies in the GCC:a survey of challenges and opportunities. Iacovou, C., I. Benbasat, et al. (1995). "Electronic data interchange and small organizations: adoption and impact of technology." MIS Quarterly: 465-485. Jeyaraj, A., J. Rottman, et al. (2006). "A review of the predictors, linkages, and biases in IT innovation adoption research." Journal of Information Technology 21(1): 1-23.

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