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A Model of Factors Influencing Electronic Commerce Adoption Among Small and Medium

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  Hong-Cheong Looi A Model of Factors Influencing Electronic Commerce Adoption among SMEs in Brunei Darussalam 72 A Model of Factors Influencing Electronic Commerce Adoption among Small and Medium Enterprises in Brunei Darussalam Hong-Cheong Looi  Department of Computing & Information Systems  Institut Teknologi Brunei, Jalan Tungku Link, BSB, Brunei Darussalam BE1410.  Phone: +673 2461020 Ext 5237  Email: looi@itb.edu.bn Abstract  This study aims to develop a model of factors motivating and inhibiting electronic commerce adoption among small and medium enterprises (SMEs) in Brunei Darussalam. Recent statistics show that total number of businesses employing web sites in Brunei Darussalam is very small compared to those in Singapore and Malaysia. Organizations are coming under increasing  pressure to adopt electronic commerce as part of the need to be efficient and competitive and to  play a greater role in driving the economy. With the new century, the continued prosperity of Brunei Darussalam can no longer be taken for granted. Qualitative research method, in the form of semi-structured interviews, was used to identify factors that are important and relevant to encourage willingness to adopt. Findings indicate that owner characteristics like lack of  perceived benefits, lack of knowledge and skill, perceived lack of trust are significant inhibitors while environment characteristics like competitive pressure, government support and infrastructure are significant motivators of electronic commerce in Brunei Darussalam. The model forms a basis for further research as further quantitative study, in the form of survey, can  be carried out to assess the model’s validity and provide further insights into the relationships among the factors. Keyword : Electronic Commerce, Diffusion of Innovation, Adoption, Small and Medium Enterprises 1. INTRODUCTION For most of the twentieth century, the country of Brunei Darussalam has enjoyed growing  prosperity. This prosperity has been the result of bountiful oil and gas resources relative to a small population. Brunei Darussalam’s Gross Domestic Product (GDP) per capita in 1997 was estimated at US$14,800, the second highest in ASEAN and the fourth highest in Asia [6]. With the new century, the continued prosperity of Brunei Darussalam can no longer be taken for granted. There are warning signals of fundamental economic problems which threaten to undermine the prosperity and with it the social stability enjoyed by the people of Brunei Darussalam. Since 1994, the government has been incurring a budget deficit averaging B$1  billion a year which is equivalent to an average of 15% of GDP [3]. Official statistics show current unemployment to be at 5.1%. Forecasts of job prospects by the Department of Statistics for school leavers between 1992 and 2001 suggest that up to 25% may not be able to secure employment [3]. With the private sector facing the worst crisis since 1984, nearly every sector is recording sharp declines ranging from 20% to 60% for year ending 1998. The burden on his  International Journal of Information Technology, Vol. 10 No. 1 73 Majesty’s Government therefore remains very large. Over 75% of Brunei national workforces are employed by the government. Government and government related contracts account for most of domestic economic activity. This situation is increasing unsustainable. The government’s financial ability to undertake these burdens is sharply reduced as a result of sharply reduced oil and gas revenues and losses in the investment of Brunei Darussalam’s foreign reserves. Given these warning signs, organizations in Brunei are coming under increasing pressure to adopt e-Commerce technology as part of the need to be efficient and competitive and to play a greater role in driving the economy. Recent statistics [4] show that number of total businesses employing web sites in Brunei is very small compared to those in Singapore and Malaysia. Only 1.82% out of 2,188 private companies in the country has web sites. In comparison, Singapore has more that 90% of total private companies have web sites. Another study indicates that only 18% of the SMEs use e-Commerce with revenues of only B$500,000. Internet use is only to attain advantage over other business in image building. It is also said that the use of the facilities is influenced by social cultural values or simply for status. Given these problems, the following research questions were formulated to address the issues: 1.   What factors influence the adoption of e-Commerce by SMEs in Brunei Darussalam? 2.   What relationship that exists between these factors and the decision to adopt e-Commerce? To what extent do these factors explain the decision to adopt e-Commerce? This paper is concerned with the first research question. It reports the findings of a qualitative study to identify the major inhibitors and motivators. The second research question will be answered by a subsequent field survey and quantitative analysis to provide further insights into the relationships among the factors identified. 2. SIGNIFICANCE OF THIS STUDY This study is significant for two reasons. Firstly, it fills a knowledge gap about e-Commerce adoption in Brunei Darussalam, and aims to identify which factors are important for encouraging willingness to adopt e-Commerce. Prior research by Pricewaterhousecoopers [25] in all twenty-one APEC member countries has identified a number of perceived barriers and motivators. However, the result is a generalization for all APEC countries and did not include detailed investigations on relationships of the factors and their relative importance. Using a qualitative approach, this study attempts to uncover and understand a phenomenon about which little is known. Secondly, this study focuses on a relatively unexplored and important sector in Brunei – the SMEs. Little research has been conducted on this size of firm. The importance of SMEs stems from their increased role in job creation and economic growth for Brunei [6]. It is hoped that this new knowledge would help researchers and practitioners alike to better understand the e-Commerce development and implementation in Bruneian SMEs. Such an understanding will be useful for government authorities and private companies in drawing guidelines on how to encourage and motivate widespread adoption of e-Commerce.  Hong-Cheong Looi A Model of Factors Influencing Electronic Commerce Adoption among SMEs in Brunei Darussalam 74 3. LITERATURE REVIEW Technology and diffusion literature suggests a range of motivators and inhibitors of innovation and technology adoption. These motivators and inhibitors can be reviewed to provide the basis for the questions to be used during qualitative interviews. The next few sections review these related literature and those theoretical motivators and inhibitors that may be used for the interviews. 3.1. Innovation Diffusion Theory The Rogers’ innovation diffusion theory [28] is perhaps the most frequently cited theory in most research on diffusion of innovation [1; 29; 13; 32; 10]. Rogers’ theory is useful because it attempts to explain, not only the factors which influence the adoption of an innovation, but also the manners in which new innovations are disseminated through social systems over time [24]. An effort by Moore and Benbasat [19] to evaluate user perceptions of information technology innovations supported the characteristics of innovation described by Rogers. Rogers defines diffusion as the process by which an innovation is communicated through certain channels over time among the members of a social system [27:pp.5). Innovation is defined as any idea, practice or object that is perceived to be new by an individual. Rogers defines the five innovation characteristics as follows: 1)    Relative advantage  – the degree to which an innovation is perceived as being superior to its  predecessor in terms of economic profitability, low initial cost, a decrease in discomfort, savings in time and effort, and the immediacy of the reward. Many change agencies offer incentives or subsidies to clients in order to speed the rate of adoption in innovations. 2)   Compatibility  – the degree to which an innovation is perceived as being compatible with existing beliefs, experience and needs of potential adopters. A faster rate of adoption occurs when an adopter perceives an innovation as meeting the needs of the client. 3)   Complexity  – the degree to which an innovation is perceived as being relatively difficult to understand and use. The perceived complexity of an innovation is negatively related to its rate of adoption. 4)   Trialability  – the degree to which an innovation can be used on a trial basis before confirmation of the adoption must occur. Rogers’ studies found that “the trialability of an innovation, as perceived by members of a social system, is positively related to its rate of adoption. Early adopters are models for later adopters” [28; pp 243]. 5)   Observability  – the degree to which the potential adopter perceives that the results of an innovation are visible to others. Displaying an innovation’s superiority in a tangible form will increase the adoption rate [5; 27]. According to Rogers [28], a technological innovation will diffuse faster if it is perceived as having the five attributes of an innovation. These five attributes represent the main determinants that explain 49% to 87% of the variance in the rate of adoption.  International Journal of Information Technology, Vol. 10 No. 1 75 3.2. Information Technology Adoption Models The technology acceptance model proposed by Davis [7] suggests that IT adoption is affected by  prior use-related beliefs. The model identifies two such beliefs: perceived usefulness (PU) and  perceived ease of use (PEOU). Economic factors or outside influences (suppliers, customers, and competitors) are not specifically addressed in this model, nor the influence and personal control factors on behavior. PU is “the degree to which a person believes that using a particular system would enhance his or her job performance [7 pp.320]; while PEOU is the degree to which a  person believes that using a particular system would be free of effort [7 pp320]. Study conducted by Gefen and Straub [9] that tested the applicability of technology acceptance model to e-Commerce adoption have found that PEOU and PU played a significant role in the use of websites for product browsing and purchasing. Another IT adoption model known as the Decomposed Theory of Planned Behaviour model [30] discusses technology adoption in terms of behaviour and social influence. In this model, technology adoption is a direct function of behavioural intention and perceived behavioural control. The model further suggests that innovation characteristics (e.g. relative advantage, compatibility) help to form intention. Constructs used in these two models are generally based on perceptions, attitudes, beliefs and social influence, together with psychological considerations in determining technology adoption, acceptance and usage. Limitations of these models are that they tend to ignore factors both within and outside the organization that may impact IT adoption and diffusion, for example, economic factors (cost, pressure from suppliers or customers or competitors), and characteristics of the firm (size, sector and status). 3.3. Nature of Small Businesses Small businesses are different from large organizations in terms of their small numbers of employees and the subsequent influence of a single person (that is, the owner/manager) [20; 23]. A review of the literature on the nature of small business provides valuable insight into the owner or individual factors likely to influence adoption of e-Commerce. Poon et al. [23] and Reynolds et al. [26] find that, in small firms, strong owner influence plays a significant role in the adoption of an innovation. For example, if a small business owner is strong-minded, then his or her strong influence will have a significant impact on decisions (such as innovation adoption) made by the company. This influence is therefore likely to be more significant than that of other managerial staff within the organization. Poon et al. [23] add that the innovativeness of small business owner/manager varies, so that this personal trait is likely to influence decisions (such as innovation adoption) made by the organization. The education and experience of employees of small businesses, and owner/managers  particularly, have also played a role in influencing the adoption of an innovation. Owner/manager with narrowly focused education and experience has been found to be less likely to appreciate the value of e-Commerce [20]. Studies by Poon et al. [23] and Reynolds et al. [26] reveal that small  businesses often have difficulty obtaining finance. For this reason, e-Commerce adoption might  be considered too expensive for many small businesses because of their lack of financial resources.
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