e-commerce adoption by malaysian smes

367 Pages·2013·41.44 MB·English

E-COMMERCE ADOPTION BY
MALAYSIAN SMES
by
NOOR AZUAN BINTI HASHIM
A thesis submitted to the University of Sheffield for the
Degree of Doctor of Philosophy in the
Faculty of Social Sciences
MARCH 2012
-
SHEFFIELD UNIVERSITY MANAGEMENT
SCHOOL
PAGE
NUMBERING
AS
ORIGINAL
ACKNOWLEDGEMENTS
I wish to express my sincere gratitude to my supervisor, Dr Sunil Sahadev, for
his moral support and assistance throughout the process of correcting this thesis.
Without his encouragement, dedication, insight and guidance in sharpening and
strengthening the thesis, the correction would never have been completed. To
him lowe my sincerestgratitude.
My warmest thanks must go to all my friends and colleagues, who have
expressed continualmoral support and encouragement. To my special friend, the
late Dr John Gardner, thank you for being a good listener, and for helping me in
ironing out various English language problems. I defmitely will miss your
kindness. I also thank my new friend, Emeritus Professor John Norman for his
support. To Prof Stuart Macdonald, my first supervisor, despite the challenges
that Ifaced, Iwould like to thank you for givingme insightsandmoral support at
the beginning of myjourney. To my examiners, Professor Paul Quintas and Dr
Ana Vasconcelos,thank you for givingme the chanceto improvethis thesis.
My gratitude goes to Public Service Department of Malaysia and National
University of Malaysia for providing me the opportunity and financial resources
to pursue my study. My sincere thanks also go to the SME managers and
policymakers who participated in this study. This research would not have been
possible without their kind cooperation and participation. A special thanks to the
staff at SUMS and my colleagues at UKM and SIC for providing all the support
andassistancethroughout myPh.D. years.
Last but not least, I would like to express my deepest gratitude to my family
whose endless love and support have given me the strength and confidence to
finish the thesis. To my dearest husband, Ahmad Suzaili Shaari, and my
wonderful children, Muhammad Arif Atiq, Muhammad Faris Nazmi, Aina
Syuhada and Adneen Safiyya, thank you for your unconditional love, prayers,
understanding and encouragement throughout my studies, .which have enabled
me to endure the demands and frustrations of preparing this thesis. I know that
these few years have been very challenging, and there is no word to describe
what yoursacrificesand supporthave meant tome. Tomy lovingmother, Meme,
and to my late father, Hashim, who never had the chance to see me throughout
this lastjourney, thank you forteaching me topersevere and for alwaysbelieving
in me. To my mother in-law, sisters and brothers, thank you for the moral and
spiritual support.
ii
DEDICATION
In the Name of Allah the Most Merciful and Compassionate
ToMy Parents, My Husband and My Children
iii
PUBLICATIONS FROM THIS RESEARCH
Hashim, N. A. (2012). SMEs' Characteristics of E-commerce Adopters, Journal
ofManagement and Science, 9(2),forthcoming.
Hashim, N. A. (2011). E-commerce and Government Policy Initiatives for
Malaysian SMEs: The Need for Assessment, Science and Public Policy,
38(10),pp.807-816.
Hashim, N.A. (2011). Impediments of E-commerce Adoption: The Case of
SMEs, International Conference on Business and Information (BAI
2011), Bangkok,Thailand, 3-6July, Issue4,No. 4055.
Hashim, N.A. (2010). SME Characteristics of E-commerce Adopters: The
Malaysian Case, Malaysia - Indonesia International Conference in
Economics, Management and Accounting - Regional Development in the
Era of Global Innovation Economy, Bangi, Selangor, Malaysia, 25-26
November.
Hashim, N. A. (2009). E-Commerce and SMEs: The Need for Caution,
Prometheus, 27(2),pp.125-140.
Hashim, N.A. (2008). Analysis of CEOs Characteristics of E-commerce
sr
Adopters: The Malaysian Case, ISBE International Entrepreneurship
Conference - Promoting Excellence in Education, Research & Practice,
Belfast, Northern Ireland, 5-7November, Track E, ID No 597, pp.1-18,
ISBN978-900862-07-3.
Hashim, N.A. (2007). Government Grant for E-commerce in SMEs: The Need
for Assessment, 30th ISBE Conference International Entrepreneurship -
Stimulating Smarter Successful Small Businesses Worldwide, Glasgow,
Scotland, 7-9 November, Track E, ID No109, pp.I-17, ISBN 978-
900862-02-8. (This paper was nominated as Scottish Enterprise Award
forbest "newcomer's" paper).
Hashim, N. A. (2007). E-commerce and SMEs: The Need for Caution.
International Council Small Businesses (ICSB) 2007 - 52nd World
Conference.Turku, Finland, 13-15June, pp.I-20, ISBN951-564-263-9.
Hashim, N.A. (2006). SMEs and E-commerce: An Exploratory Study Of
Effectiveness of Government ICT Assistance Programmes, SME-
Entrepreneurship Global Conference 2006 - SME: Entrepreneurship
Competitiveness, Challenges, and Prospects in the New Global
Environment, Kuala Lumpur, Malaysia, 17-18October,No. 1147,pp.l-S.
Hashim, N.A. (2006). E-commerce Adoption Issues in Malaysian SMEs,
International Conference of E-commerce (lCoEC) 2006 - A Route of
Competitive .Advantage (lCoEC 2006), Penang, Malaysia, 19-20
September,pp.167-177.
IV
Hashim, N. A. (2006). Adoption of E-commerce by Small Medium-sized
Enterprises (SMEs): The Research Method. Doctoral Colloquium 2006,
Northern Doctoral Training Network (NDTN), Leeds,UK, 20-21July.
v
ABSTRACT
E-commerce adoption among SMEs has been much discussed in management
information technology and technological innovation literature. However, most
of these prior studies focused mainly on e-commerce awareness or factors that
influence e-commerce adoption. This study, on the other hand, attempts to
develop a holistic insight into e-commerce adoption by SMEs. It investigates
why some SMEs adopt e-commerce readily, and others do not. In addition, this
study investigates the appropriateness of government support for SMEs
encouragingthem to adopt e-commerce. Thereis very littleresearch that assesses
e-commerce adoption by SMEs, certainly none as extensive as this, and there is
also very limited empirical investigation of government support for SMEs to
adopt e-commerce, This study helps to fill this gap by exploring these issues
relatingto e-commerce and SMEs.
The frameworkmodel proposed inthis studywas developedout of an integration
of various perspectives using the technological innovation literature, specifically
the DOl and TOE frameworks. This model considers internal factors (the
demographic characteristics of managers and their organisations), external
factors (particularly government support), and reasons for, benefits of, and
inhibitors to e-commerce adoption. Data for this study were collected through a
questionnaire survey of over three thousand SMEs in Malaysia and forty face-to-
face semi-structured interviews with SMEmanagers and government officials.
Results show there is a low level of adoption of e-commerce by SME managers
whether or not they received government e-commerce supports. E-commerce
usage hardly extends beyond e-mail. Online buying and complex websites, such
as websites with online ordering and online payment facility are not common.
Websites are used to provide contact details and information about the firm and
information about its goods and services only, without displaying prices. The
SME and SME manager demographic characteristics show significant
association with e-commerce adoption. Two important factors that facilitate e-
commerce adoption emerge from these characteristics namely 8ME location and
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the manager's experience of living abroad. To encourage e-commerce adoption,
SMEs in developing countries need not only to have appropriate technology
infrastructure installed, but also to be in a location with good public
transportation services and efficient delivery methods. SME managers also need
experience of buying and selling on the Internet, which they might gain while
livingabroad. The interviews raise anumber ofquestions aboutthe effectiveness
of government support programmes, and the ulterior motives of SMEs. The
benefits of e-commerce are more often perceived than achieved. Interestingly,
the reason that SMEs adopt e-commerce is to enhance company image, rather
than its efficiency. From the research findings, a series of recommendations for
e-commerceadoption among SMEs inMalaysia emerges,providing guidancefor
policymakers, practitioners, and academics. Many recommendations, such as the
need to evaluatee-commerce initiatives, may perhapsbe extended to government
K'T policies in the developing world as a whole. The study exposes many gaps,
oftenoverlooked,between the rhetoric ofe-commerceadoption andthe reality.
The model proposed in this study may be comprehensive for e-commerce
adoption in firms. Future research can build on and extend the proposed
integrated model by including other potential factors from different contexts. It
will be helpful to explore other statistical analysis, either in the current model or
in an enhanced one. The findings will help towards a better understanding for
firms and government and suggest a quantitative basis for them to determine
favourable policies and conditions for expanding their e-commerce. This study
provides the impetus for futureresearch onmany issues.
VB
TABLE OF CONTENTS
ACKNOWLEDGEMENTS.................................................................... ii
DEDI·CATION iii
PUBLICATIONS FROM THIS RESEARCH.......................................... iv-v
ABSTRACT........................................................................................
vi-vii
TAB·LEOF CONTENTS....... viii
LISTOFTABLE........... x
LISTOF FIGURES xi
LIST OF APPENDIXES xiii
CHAPTER1 ..........•..........•.......•...............................................................•..........••...................... 1
INTRODUCTION •.•..•.•......•.••..•.•.•••.•.•...•.•.•.....•................•....•.......•.......•..•.•...•.•.•.•..•...•.•.•.•........... 1
1.0 INTRODUCTION ..••••.•.•.•••.•.•.•.•••.•.•.•.•.•.•.•.....•.•...........••.•.......•.•.•...•.....•.•....•.•...•.•.......... 1
1.1 BACKGROUND OFTHERESEARCH 1
1.2 RATIONALE OFTHESTUDY 3
1.3 SCOPEOFTHESTUDY 6
1.4 OBJECTIVESOFTHESTUDY 7
1.5 CONTRIBUTIONS OFTHESTUDY 8
1.6 ORGANISATION OFTHETHESIS 9
1.7 CONCLUSIONS 12
CHAPTER 2 •••••••••••••.•••••••••••••••••••••.•••••••.••••••••.••••••••••••••••••••••••••••••••••••••••••••••••••••••••.•••••••••••••••• 13
THECONTEXTUAL: MALAYSIA AND ICT 13
2.0 INTRODUCTION ..••..••.•.•.•••.;.•.•.•.•.•.•..•••.•.•.•••...•.......•.................•.•.....•.••.•.•.•.•.••......••... 13
2.1 MALAYSIA GEOGRAPHICALBACKGROUND 13
2.2 BRIEFMALA YSIAHISTORICALBACKGROUND.......•, 14
2.3 MALAYSIAN ECONOMY: FROM AGRICULTURAL TOINDUSTRIAL TOKNOWLEDGE-
BASEDECONOMY 16
2.4 MALA YSIAAND NATIONAL ICTPOLlCY 20
2.4.1 The Multimedia Super Corridor (MSC) 21
2.5 CONCLUSIONS•.•.••...•.•••••.•••.•.•.....•.••••.•••...•.•..••.•...•••...•....•..•..••......•••..............•...•.•..... 25
CHAPTER 3 •••••••••••.••••••••.•.••••.•.••.•..••..•••••.......•.•••••.••.•..•.•••.•..•.•.••••••••.•••.•••.••.•..••.••••••••...•.•...•... 26
LITERATUREREVIEW: E-COMMERCE AND SMES 26
3.0 INTRODUCTION 26
3.1 SMAll AND MEDIUM-SIZED ENTERPRISES(SMEs) 26
3.1.1 Definition of SMEs 26
3.1.2 The Significance of SMEs 28
3.1.3 Strencths and weaknesses of the SME 29
3.1.4 SMEs and Large Firms Relatlonshlp 30
3.1.S SMEs In Malaysia : 32
3.2 ELECTRONICCOMMERCE (E-CQMMERCE) 36
3.2.1 Defining E-commerce 37
3.2.2 E-commerce Background 38
3.2.3 E·commerce Adoption 40
3.2.3.1 E-commerce Adoption by SMEs 43
3.2.3.2 E-commerce Adoption by Malaysian SMEs 43
3.2.4 E-commerce Activities Adopted by SMEs 44
3.2.4.1 E-mail •••••••.•.•.•.••.•.•••••••••.•.••.•••.•.•.••.••....•..•....•.•••...••.••..•.•.•.•.•.•.....•.•..•.•.•.•.•.•.•51
3.2.4.2 Website jor Online Selling 51
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3.2.4.3 Online Buying 54
3.2.5 Facilitators of E-commerce Adoption 55
3.2.5.1 Diffusion of Innovation (DOl) Theory 56
3.2.5.2 Technological- Organisational-Environmental (TOE)Framework 59
3.2.5.1 Internal factors - Organisation related factors 63
3.2.5.2 External factors - Environment related factors 70
3.2.6 Reasons for, Benefits of, and Inhibitors to E-commerce Adoption 71
3.2.6.1 Reasonsfor E-commerce Adoption 72
3.2.6.2 Benefits for Adopting E-commerce 73
3.2.6.3 Inhibitors toE-commerce Adoption in SMEs 76
3.2.7 Government and E-commerce Policy For SMEs 77
3.2.7.1 Government and E-commerce 78
3.2.7.2 Government, SMEs and ICTin Malaysia 80
Malaysian government policy programmes for SMEs 80
E-commerce policies in Malaysia 82
E-commerce schemes for SMEs in Malaysia 83
E-commerce grant for SMEs 84
3.3 SUMMARY 85
CHAPTER 4 .•..•.••....••.••.••••••••••.•..•...•.•..•••••••••••••••••••.••••.••.•.•••••••••••••••••••..•...••••.••••••••••••••••••••••••• 89
PRELIMINARY STUDY 89
4.0 INTRODUCTION 89
4.1 RESEARCHMETHODOLOGY 89
4.1.1 Telephone Interviews 90
4.1.2 Website Analysis 91
4.2 FINDINGS 93
4.2.1 The Telephone Intervlews 93
4.2.1.1 Firm descriptions 93
4.2.1.2 Manager's demographic characteristics 97
4.2.1.3 Reasonsfor, inhibitors ot and benefits of e-commerce adoption 97
4.2.2 The Website Analysis 99
4.3 DISCUSSIONS 100
4.4 CONCLUSIONS 101
CHAPTER 5 ••••••••••••••••••••••••••••...•.•••••••••••••••••.••..••••••••••••••••••••••.••.•••.••••••••••••••••.•••••..•••••••••.••••• 103
CONCEPTUAL FRAMEWORK 103
5.0 INTRODUCTION .........•.•....................................................................................... ; 103
5.1 CONCEPTUALFRAMEWORK 103
5.1.1 Factors Influenc:ing E-commerc:e Adoption 104
5.1.1.1 SME managers' demographic characteristics 105
5.1.1.2 SME characteristics 108
5.1.1.3 Government Support 111
5.1.2 E-commerce Adoption 111
E-commerce uses 113
Existing literature 113
5.1.3 Reasons for, Benefits of, and Inhibitors of E-commerc:e Adoption 113
5.1.3.1 Reasonsfor and benefits of e-commerce adoption 114
5.1.3.2 Inhibitors of e-commerce adoption 115
5.2 _ CONCLUSIONS 116
CHAPTER 6 ..............•..•...............•••............•.•..•...•..••.•••.•.••.•.....................••.........•••....•...•••••••• 117
METHODOlOGY 117
6.0 INTRODUCTION : 117
6.1 EPISTEMOLOGICAL CONSIOERATIONS 117
6.2 RESEARCHMETHODS 118
6.2.1 Quantitative Methods 118
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