An exploratory study of Internet adoption by SMEs in ...

An exploratory study of Internet adoption by SMEs in an emerging market economy Veysel Kula and Ekrem Tatoglu The authors Veysel Kula is an Assistant Professor at the Faculty of Economics and Administrative Sciences, Afyon Kocatepe University, Afyon, Turkey. Ekrem Tatoglu is an Assistant Professor at the Faculty of Economics and Administrative Sciences, Beykent University, Istanbul, Turkey. Keywords Internet, Electronic commerce, Small- to medium-sized enterprises, Emerging markets, Turkey Abstract This paper investigates the nature and extent of Internet use and the role of firm- and industry-specific factors affecting Internet adoption by SMEs in an emerging market economy, Turkey. Based on the evidence from a sample of 237 manufacturing SMEs with Internet access in Turkey, the highest ranked Internet applications with the largest frequency of usage were found to be principally concerned with external communication and gathering information for market and product research. Of the five relevant firm- and industry-specific subgroups, the most significant differences were found for two of the characteristics: amount of resources allocated for export development and international experience of the SME. In general, the SMEs have positive attitudes regarding Internet use. The SMEs are of the opinion that the Internet will become more attractive in future in terms of enhancing company image and being an important tool of doing business electronically. Electronic access The Emerald Research Register for this journal is available at http://www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0955-534X.htm European Business Review Volume 15 . Number 5 . 2003 . pp. 324-333 # MCB UP Limited . ISSN 0955-534X DOI 10.1108/09555340310493045

Introduction For over a decade, global network diffusion has been occurring at exponential rates. The Internet and the World Wide Web (www) as mainstream communication tools have been widely used throughout the world by various organisations including private companies, universities and governmental departments. Nicknamed as ‘‘the information superhighway’’ (Samiee, 1998) the Internet has become known as a ‘‘global network of networks’’ or ‘‘global information infrastructure’’ (Hauben and Hauben, 1995). More accurately, it is the communications protocol that allows heterogeneous computers and protocols to communicate with each other, thereby linking local area networks into a single communication network (Montealegre, 1998). Since the mid-1990s, commercial users and providers of information and communications infrastructure have been involved in the growth of the Internet, and worldwide traffic increased rapidly making the Internet an important new channel for commerce. The high approval and use of the Internet by business organisations may largely be attributed to two factors. First is the compatible nature of the Internet with every network and individual information system, which entails lower setup and operational costs and elimination of switching costs. Second are the enhanced informational and interactive communicative capabilities of the Internet, which enable it to be used both as a communication tool and marketing channel, thus inducing the development of more effective interorganisational relationships and the emergence of new network cooperative opportunities (Avlonitis and Karayanni, 2000). Despite the widespread acceptance of Internet use in corporate environments, the extent of Internet use continues to vary widely among small- and medium-sized enterprises (SMEs). While some SMEs benefit from rapid Internet growth, selling and purchasing over the Internet or experimenting with new business models, others are barely interested in the medium (Sadowski et al., 2002). Drawing on the evidence from a sample of 237 manufacturing SMEs in Turkey, this study serves two main objectives. First, it delineates the extent of Internet usage over various Internet activities and also provides a

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Internet adoption by SMEs in an emerging market economy

European Business Review Volume 15 . Number 5 . 2003 . 324-333

Veysel Kula and Ekrem Tatoglu

brief account of managerial expectations and attitudes regarding Internet usage. Second, the study attempts to identify a number of firm- and industry-specific factors that influence the adoption of Internet technology by SMEs. Despite some attempts on Internet use by SMEs, there is a lack of systematic empirical evidence regarding the extent of its use and the role of firm- and industry-specific factors affecting Internet adoption by SMEs in emerging market economies such as Turkey. SMEs play a very crucial role in the economies of most emerging nations from the viewpoint of generating employment and economic growth. They account for more than half the employment and added value in most countries (UNCTAD, 1993). A similar trend is also observed in Turkey where SMEs represent the largest category of business firms constituting nearly 53 per cent of total employment in the country (Sarislan, 1994). In view of the fact that the success of small business has a direct impact on the national economy, this paper presents new data and empirical insights into the Internet dimension of SMEs operating in Turkey. The rest of this paper is set out in the following way. The next section reviews the literature relating to Internet use by business entities in general and SMEs in particular. The research methodology for the study is provided in the third section. The fourth section presents the analysis and discussion of the findings. A summary and conclusions are in the last section.

Literature review The Internet offers direct links with customers, suppliers and distributors and facilitates transactions, processes and information transfer. It also enables companies to develop new products and services for existing and new customers (Walters and Lancater, 1999). The Internet also offers opportunities for companies to market their products around the world without physically contacting customers or advertising in other parts of the world (Karakaya and Karakaya, 1998; Tiessen et al., 2001). Though it is widely accepted that the Internet offers companies a wide range of application opportunities, there is a lack of

any established criteria for measuring the use of the Internet. Avlonitis and Karayanni (2000), for instance, measured Internet use by the most popular Internet services of e-mail, Usenet, file transfer protocol (ftp) and the www. In their study of 80 companies located in six European countries, Dutta and Evrard (1999) measured Internet usage in the following categories: . communication; . researching information; . marketing; . business with suppliers/partners; and . business with customers. In another study, Pawar and Sharda (1997) specified Internet utilities in terms of four broad categories: (1) communication utilities such as e-mail, mailing lists and newsgroups; (2) various resource locator tools such as Web pages; (3) information retrieval tools such as ftp and Web pages; and (4) browser tools including Telnet and www. In her survey of Internet use for business in Bahrain, Palmer (2000) evaluated the Internet use in two main categories: (1) Internet tools used; and (2) applications used on the Internet. The resulting rank order of the former category was e-mail, Netscape, www, ftp, Usenet, Archie and Gopher, while the rank order of the latter was e-mail, financial news, market research, information gathering, electronic marketing, post answers to queries, receive orders, job posting and receive payment. In a similar survey focusing on the use of the Internet by SMEs in The Netherlands, Walczuch et al. (2000) noted that the first three ways of using the Internet in terms of the highest usage percentage included e-mail, searching for company Web sites and randomly looking for information. Conversely, the ways with the lowest usage percentage were found to be receiving orders from customers, voice/video-conferencing and placing job vacancies. Despite the widespread recognition of Internet use in corporate environments, small firms are not adopting the Internet with the same speed as their large counterparts do. There are mixed views regarding the Internet adoption level of SMEs. Unlike the general

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view from the outside that all businesses have grasped and understood the implications of new technologies on an ongoing basis, the actuality of the situation is somewhat different with discrepancies in terms of utilisation rates of the various new capabilities available (Dutta and Evrard, 1999). Rovere (1998) argues that although firms are encouraged to adopt information technology (IT) due to the positive impacts on competitiveness, in practice there are obstacles to IT diffusion, especially in the case of SMEs. Most SMEs innovate only when they clearly perceive business opportunities involved with the organisation, or because they are under pressure from suppliers and clients. This is because the search and selection of information for SMEs are important but extremely focused due to time and human resources constraints. Besides, SMEs have fewer resources than large firms, which lead to weaknesses in planning, training, finance and organisation of internal information. An OECD survey, for instance, noted that the two main reasons SMEs do not use e-commerce are that they tend to be unfamiliar with the technology and its benefits and they perceive it to be both costly and a source of security concerns (OECD, 1998). These all lead information systems, including Internet application of SMEs to remain underutilised. Despite these barriers, it is estimated, however, that the small business share of e-commerce in the world will rise from 17 per cent in 1997 to 30 per cent by 2003 (Goldman Sachs, 1999). The cheapness of Internet access through the use of Internet applications means that it is within the reach of most organisations regardless of their size (McBride, 1997; Hormozi et al., 1998). Small businesses especially can take advantage of the opportunities offered by the Internet which enables them to go global virtually overnight. The small entrepreneur, for instance, can compete on the Internet simply by setting up a homepage (Sterrett and Shah, 1998). Hamill (1997), in the same vein, proposes a model especially from a SME perspective in which the three principal applications of the Internet in international marketing are network communications, market intelligence and global sales promotion. A survey by Grant Thornton International (2000) on SMEs in 15 member states of the EU together with Sweden, Norway, Poland

and Turkey revealed that in ten of the stated countries no other issue was regarded as more important than the issue of information and communication technologies. The survey’s overall sample also included 250 SMEs from Turkey. Based on the survey results, it was found that the ratio of companies with a Web site is 44 per cent for whole sample and 51 per cent for Turkish sample; 73 per cent of Turkish SMEs use e-mail for internal communication while 75 per cent use it for external communication. Also, 91 per cent of Turkish SMEs use the Internet for information gathering, while this ratio is 51 per cent for advertisement, 40 per cent for procurement and 37 per cent for marketing.

Research methodology Survey instrument The research has been aimed at revealing the managerial expectations and attitudes towards Internet use and identifying firm- and industry-specific factors that influence the adoption of Internet technology by SMEs. To obtain adequate quantitative information on these factors, a survey questionnaire was constructed drawing upon the prior literature reviewed and discussions based on semi-structured interviews with representative managers. The first part of the questionnaireconsisted of 14 applications of Internet use. Questions were designed to measure managers’ perceptions of the relative frequency of each Internet application or tool using three-point scales, i.e. 1 = frequent use, 2 = seldom use, 3 = never use. The respondentswere also asked to displayboth their present and future attitudes towards the Internet using five-point scales, i.e. 1 = strongly agree, 5 = strongly disagree. The second part of the questionnaire included a set of questions in order to identify the respondents’ evaluations on five firm- and industry-specific characteristics: (1) relative strength of the SME in the industry (2) international experience of the SME; (3) amount of resources allocated for export development (4) technology-intensiveness of the sector; and (5) competitive intensity of the sector. For instance, respondents were asked to indicate ‘‘the relative strength of their firm in

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the industry’’ on five-point scales, i.e. 1 = very low, 5 = very high. Sampling frame and data collection method In line with small business research, this study adopted the number of employees as the base for the definition of SME. An SME is identified as one that employs fewer than 100 persons. The minimum of at least ten employees was also chosen in order to exclude very minor firms that would not be suitable for the purposes of this study. The second restriction for specifying the sample companies was to have connection to the Internet at the time of conducting the survey. Finally, only manufacturing firms were included in the sampling frame in order to ensure the consistency of the sample. The survey which was conducted in October/November 2001, randomly selected 1,200 firms from the databases of major provincial Chambers of Commerce and Trade scattered throughout Turkey so as to make the sample sufficiently large but also manageable. A self-administered mail questionnaire was used to reach the sample firms located nationwide at low cost. Of the 1,200 questionnaires posted, 117 were returned as address unknown. A total of 438 questionnaires were returned after one follow-up and 27 questionnaires were eliminated owing to largely missing values. The overall response rate was thus 37.9 per cent (411/1,083). Of the 411 respondents from the original data set, a sub-sample of only those firms with the employment criterion of ten to 99 employees was created. This study thus reports on the data concerning the responses of 237 firms complying with the SME criterion. Sample characteristics From the SMEs in the sample, 91 (38.6 per cent) are joint stock company, 134 (56.7 per cent) limited company with the remainder being sole proprietorships. The majority of the sample firms are located in three main geographic locations including Southern Anatolia, Central Anatolia and Aegean region. The industry category of the SMEs is as follows: machinery and equipment (24.6 per cent), food production (17.4 per cent), textile and garments (17.4 per cent), marble (11.5 per cent), plastics (9.8 per cent), forest

productions (9.0 per cent), chemical goods (3.5 per cent) and other (7.7 per cent). In terms of the length of Internet access, 168 (70.9 per cent) of the total SMEs have been connected to the Internet for less than three years and the remaining 69 (29.1 per cent) have been connected to the Internet for at least three years and more. Of the sample firms, 142 SMEs (59.9 per cent) have their own Web sites, while the remaining 95 (40.1 per cent) are without a Web site. From the total of 142 SMEs with their own Web sites, 69 have Web sites in multiple languages. Nearly 70 per cent of the sample firms have been involved in foreign trade activity. The characteristics of the sample are summarised in Table I.

Results and discussion Internet adoption The extent of Internet adoption for the sample of 237 SMEs, based on the mean measure of the usage frequency of the 14 Internet applications, is shown in Table II. Scores are significantly different on the Friedman two way ANOVA test (p < 0.001). For the full set of 14 Internet applications, the first group of Internet applications with the largest frequency of usage are as follows: ‘‘e-mailing’’ (1.33), ‘‘browsing company homepages’’ (1.54) and ‘‘market and product research’’ (1.57). It is clear from Table II that the highest ranked Internet applications in terms of the frequency of usage are principally concerned with external communication and gathering information for market and product research. The second group of Internet applications (those ranked 4-10) are centred around the median value of 2: ‘‘exchange of information with clients’’ (1.91), ‘‘information search’’ (1.93), ‘‘exchange of information with suppliers’’ (1.99), ‘‘Usenet’’ (2.18),‘‘receiving orders from clients’’ (2.22), ‘‘placing orders to suppliers’’ (2.25) and ‘‘intra-company communication’’ (2.39). This group of Internet applications is particularly associated with SMEs’ willingness to do business electronically in terms of both business-to-business (B2B) and business-to-consumer (B2C) dealings. The third and lowest ranked group (11-14) consists of a number of distinct applications. First, SMEs are less likely to adopt the

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Table I Sample characteristics No. Legal status of SME Joint stock company Limited liability Sole proprietorship Geographical location Marmara Aegean Central Anatolia Southern Anatolia Other Sectoral breakdown Machinery and equipment Food production Textile and garments Forest productions Marble Plastics Chemical goods Other Total

%

91 134 12

38.6 56.7 4.7

70 65 12 85 5

29.5 27.4 5.1 35.9 2.1

58 41 41 21 27 23 8 18 237

24.6 17.4 17.4 9.0 11.5 9.8 3.5 7.7 100

Length of connection to Internet 1 year and less 1-3 years 3 years and more Job classification of Internet users Members of board Top managers Middle managers Clerks, secretaries Combination of the groups Existence of own firm Web site Yes No Having Web sites in multiple languages Yes No Involvement in foreign trade activity Yes No Total

No.

%

69 99 69

29.1 41.8 29.1

31 53 50 14 89

13.1 22.4 21.1 5.9 37.6

142 95

59.9 40.1

69 168

29.1 70.9

165 72 237

69.6 30.4 100

Table II Frequency of Internet usage Internet applications E-mailing Browsing company homepages Market and product research Exchange of information with clients Information search Exchange of information with suppliers Usenet Receiving orders from clients Placing orders to suppliers Intra-company communication Medium of payment Ftp Placing job recruitment advertisement Video-conferencing

Rank

Mean

SD

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1.33 1.54 1.57 1.91 1.93 1.99 2.18 2.22 2.25 2.39 2.43 2.60 2.71 2.91

0.57 0.66 0.70 0.78 0.69 0.81 0.82 0.82 0.79 0.82 0.81 0.60 0.56 0.32

Notes: n = 237; The mean is the average on a scale of 1 = frequent use, 2 = seldom use and 3 = never use; SD = standard deviation; Scores are significantly different on the Friedman two way ANOVA test (p < 0.001)

Internet as a ‘‘medium of payment’’ (2.43). Similarly, Internet applications of ‘‘ftp’’ (2.60) and ‘‘placing job recruitment and advertisement’’ (2.71) are hardly used by SMEs. Finally, ‘‘video-conferencing’’ (2.91) is the lowest ranked Internet application for this sample of SMEs. Internet adoption and firm- and industry-specific characteristics In order to investigate the underlying nature and pattern of Internet adoption for this

sample of SMEs, the analysis was developed by considering the extent of Internet usage in terms of the firm- and industry-specific characteristics of the sample firms. These characteristics have been identified as relative strength of the firm in the industry, international experience of the firm, amount of resources allocated for export development, technology-intensiveness of the sector and competitive intensity of the sector. Given the relatively large sample size and the reasonable assumption that the sample is

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from a normal distribution, it was appropriate to use ANOVA. To facilitate the statistical testing of the usage frequency of each Internet application, SMEs are classified into three different groups with regard to intensity of each firm- and industry-specific characteristic as low, medium or high. For each of the relevant characteristics, Table III shows the mean and standard deviations of each Internet application and the appropriate test statistic for comparing differences in mean scores. Of the 70 F-values for the full set of 14 Internet applications by the five firm- and industry-specific characteristics, Table III shows that only 35.7 per cent (25 items) are significant at less than 10 per cent level. By relevant firm- and industry-specific subgroups, the most significant differences (p < 0.1) were found for only two of the relevant characteristics: amount of resources allocated for export development (nine items) and international experience of the firm (eight items) followed by relative strength of the firm in the industry (four items) and technology-intensiveness of the sector (four items). However, Table III shows that the usage frequency of Internet applications does not vary with competitive intensity of the sector with none of the subgroups having significant mean scores on each Internet application. When viewed from the usage frequency of individual Internet applications with significant differences, there are interesting results worthy of note. First, the SMEs which allocate more resources for export development use the following Internet applications more than other SMEs: ‘‘e-mailing’’ (p < 0.01), ‘‘ftp’’ (p < 0.05), ‘‘browsing company homepages’’ (p < 0.01), ‘‘exchange of information with clients’’ (p < 0.01), ‘‘receiving orders from clients’’ (p < 0.01), ‘‘intra-company communication’’ (p < 0.01), ‘‘making market and product research’’ (p < 0.01) and ‘‘medium of payment’’ (p < 0.05). Similarly, in terms of the relative international experience of the firm, the SMEs with the highest level of international experience also have a higher level of Internet adoption: ‘‘e-mailing’’ (p < 0.01), ‘‘browsing company homepages’’ (p < 0.01), ‘‘exchanging information with suppliers’’ (p < 0.01), ‘‘exchanging information with clients’’ (p < 0.01), ‘‘receiving orders from

clients’’ (p < 0.01), ‘‘intra-company communication’’ (p < 0.01) and ‘‘market and product research’’ (p < 0.05). The finding that the SMEs with a higher level of international experience and more resources to allocate for export development have a higher level of Internet use is not particularly surprising. The twin phenomena of globalisation and IT technologies pose new challenges and provide new competitive opportunities especially for SMEs seeking to broaden their involvement into new international markets. The lack of capital and the general complexity of serving international markets constitute the main barriers to exporting faced by SMEs. The increasing pace of Internet technologies offers economical ways of serving international markets and thus reduces these barriers by lowering the costs of extending geographic reach. Table III shows that the SMEs with a relatively strong position in their own industry make more use of the following Internet applications: ‘‘e-mailing’’ (p < 0.05), ‘‘intra-company communication’’ (p < 0.01) and ‘‘receiving orders from clients’’ (p < 0.05), and ‘‘market and product research’’ (p < 0.1). On the other hand, the SMEs operating in the more technology-intensive sectors use the following Internet applications to a greater extent than other SMEs operating in relatively less technology-intensive sectors: ‘‘e-mailing’’ (p < 0.01), ‘‘intra-company communication’’ (p < 0.01), ‘‘video-conferencing’’ (p < 0.05) and ‘‘market and product research’’ (p < 0.01). Regarding the intensity of competition in the sector, no significant differences were found between the extent of Internet adoption and the competitive intensity of the sector, a finding that provides further evidence to a recent study by Sadowski et al. (2002). This might be seen as an indication that the SMEs rarely decided to utilise various Internet applications and services because of competitive reasoning. That is, the decisions concerning Internet adoption are not perceived as vital for SMEs to gain or sustain competitive edge. In their mostly niche market segments, competitive motivations are seemingly of lesser importance. Attitudes towards the Internet Internet adoption can be regarded as a strategic decision. Therefore, intuition and personal opinions of managers in SMEs play a

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Table III Extent of Internet usage by firm- and industry-specific characteristics

Internet applications

International Amount of resources TechnologyRelative strength of experience of the allocated for export intensiveness of the Competitive intensity the SME in the sector SME development sector of the sector Group Mean SD F-value Mean SD F-value Mean SD F-value Mean SD F-value Mean SD F-value

E-mailing (A) (B) (C)

1.48 1.30 1.25

0.62 0.53 0.56

1.44 1.29 3.34** 1.18

0.63 0.50 0.46

1.44 1.23 5.02*** 1.13

0.63 0.48 0.40

1.36 1.49 6.69*** 1.23

0.58 0.64 0.49

1.34 1.44 5.35*** 1.30

0.61 0.62 0.55

1.10

(A) (B) (C)

2.11 2.29 2.11

0.78 0.83 0.84

1.41

2.17 2.27 2.13

0.82 0.79 0.84

0.42

2.15 2.19 2.23

0.84 0.80 0.81

0.18

2.24 2.28 2.09

0.77 0.81 0.84

1.38

2.13 2.22 2.17

0.82 0.85 0.82

0.11

0.31

2.65 2.52 2.53

0.57 0.58 0.68

1.30

2.62 2.70 2.40

0.58 0.51 0.72

2.50 2.69 3.51** 2.56

0.63 0.49 0.66

1.71

2.57 2.56 2.60

0.63 0.62 0.60

0.14

0.19

1.61 1.67 1.34

0.66 0.69 0.59

1.62 1.57 4.93*** 1.31

0.67 0.62 0.61

1.52 1.65 4.51*** 1.48

0.67 0.67 0.65

1.56

1.50 1.64 1.52

0.63 0.74 0.64

0.66

0.15

1.90 1.88 2.03

0.68 0.67 0.71

0.98

1.92 1.98 1.92

0.68 0.71 0.68

0.13

1.83 1.93 1.97

0.73 0.68 0.67

0.59

2.13 1.87 1.91

0.68 0.69 0.68

1.57

1.00

2.12 2.04 1.71

0.76 0.82 0.81

2.08 1.94 6.28*** 1.79

0.78 0.82 0.82

2.63*

1.90 2.13 1.93

0.76 0.81 0.81

1.83

1.93 2.11 1.96

0.83 0.83 0.80

0.67

2.00

2.34 2.23 2.12

0.74 0.83 0.86

1.73

2.32 2.28 2.06

0.76 0.77 0.87

2.09

2.43 2.29 2.17

0.77 0.78 0.80

1.85

2.13 2.33 2.25

0.86 0.80 0.78

0.57

1.71

2.07 1.85 1.66

0.80 0.71 0.73

2.09 1.74 6.57*** 1.60

0.81 0.71 0.63

2.00 1.99 9.48*** 1.83

0.80 0.80 0.76

1.23

1.77 2.07 1.90

0.73 0.84 0.77

1.46

2.42 2.13 3.68** 1.94

0.73 0.89 0.84

2.38 2.13 8.37*** 1.90

0.78 0.88 0.80

2.24 2.35 7.01*** 2.14

0.79 0.81 0.83

1.45

2.10 2.29 2.23

0.96 0.84 0.79

0.48

2.52 2.42 4.30*** 2.13

0.75 0.77 0.93

2.46 2.53 5.04*** 2.06

0.78 0.78 0.89

2.64 2.59 5.70*** 2.17

0.69 0.68 0.90

2.40 2.44 8.73*** 2.37

0.89 0.76 0.83

0.15

2.23*

1.64 1.60 1.40

0.72 0.64 0.67

1.70 1.49 2.90** 1.27

0.72 0.69 0.53

1.86 1.61 8.15*** 1.43

0.75 0.70 0.64

1.63 1.62 6.31*** 1.54

0.76 0.75 0.67

0.43

0.07

2.93 2.92 2.87

0.29 0.28 0.38

2.92 2.94 2.85

0.32 0.25 0.36

2.95 2.96 2.86

0.31 0.20 0.37

3.00 2.96 2.91** 2.88

0.01 0.21 0.38

2.17

Usenet

Ftp (A) 2.58 0.59 (B) 2.63 0.57 (C) 2.56 0.66 Browsing company homepages (A) 1.58 0.69 (B) 1.55 0.67 (C) 1.51 0.63 Information search (A) 1.91 0.77 (B) 1.92 0.68 (C) 1.96 0.63 Exchange of information with suppliers (A) 2.09 0.73 (B) 1.99 0.82 (C) 1.90 0.84 Placing orders to suppliers (A) 2.42 0.71 (B) 2.19 0.82 (C) 2.19 0.81 Exchange of information with clients (A) 1.98 0.79 (B) 1.98 0.77 (C) 1.79 0.78 Receiving orders from clients (A) 2.38 0.77 (B) 2.29 0.77 (C) 2.04 0.88 Intra-company communication (A) 2.59 0.71 (B) 2.42 0.82 (C) 2.20 0.88 Market and product research (A) 1.72 0.70 (B) 1.53 0.71 (C) 1.49 0.67 Video-conferencing (A) 2.91 0.34 (B) 2.90 0.34 (C) 2.92 0.28

0.75

1.27

(continued)

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Table III

Internet applications

International Amount of resources TechnologyRelative strength of experience of the allocated for export intensiveness of the Competitive intensity the SME in the sector SME development sector of the sector Group Mean SD F-value Mean SD F-value Mean SD F-value Mean SD F-value Mean SD F-value

Placing job recruitment advertisement (A) 2.80 0.44 (B) 2.69 0.58 (C) 2.68 0.62 0.98 Medium of payment (A) 2.50 0.76 (B) 2.43 0.84 (C) 2.39 0.82 0.33 n = 237 n(A) = 64; n(B) = 89; n(C) = 84

2.80 2.54 2.68

0.48 0.65 0.61

2.75 2.74 3.98** 2.58

0.52 0.53 0.67

1.98

2.81 2.73 2.67

0.40 0.58 0.60

2.80 2.80 2.67

1.09

2.42 0.82 2.43 0.85 2.48 0.80 2.46 0.82 2.66 0.60 2.47 0.76 2.46 0.80 0.06 2.25 0.86 3.19** 2.40 0.84 1.00 n(A) = 121; n(B) = 48; n(A) = 138; n(B) = 47; n(A) = 42; n(B) = 75; n(C) = 68 n(C) = 52 n(C) = 120

0.48 0.46 0.60

1.32

2.60 0.67 2.27 0.89 2.46 0.81 1.64 n(A) = 30; n(B) = 45; n(C) = 162

Notes: The mean is the average on a scale of 1 = frequent use; 2 = seldom use and 3 = never use; The meaning of the group codes: (A) = Low; (B) = Medium; (C) = High; * p < 0.1; ** p < 0.05; *** p < 0.01 (two-tailed)

very important role in strategic decision making regarding the extent of Internet use. To investigate managerial attitudes towards the Internet, six statements were formulated in the form of five-point Likert scales ranged from 1 = strongly agree to 5 = strongly disagree. Paired t-tests were used to investigate if there were significant differences between the respondents’ attitudes towards the Internet at present and in future. Table IV shows that for five of the six statements, the mean values of managers’ attitudes towards the Internet at present are significantly different from those in future. Of these five evaluations, three statements have mean scores significantly less than for those related to the future of the Internet, i.e. ‘‘Internet as an effective communication tool’’ (p < 0.01), ‘‘Internet as an important way of conducting business’’ (p < 0.05) and ‘‘Internet as an important tool to enhance company image’’ (p < 0.01). For both present and

future, a mean value that is significantly less than 3 means a positive attitude on that particular variable towards the Internet. These findings confirm that the SMEs at present have positive attitudes towards the Internet and also expect the Internet to be more rooted in their future business environment. On the other hand, for two of the five evaluations with significant mean scores - ‘‘Internet as not a suitable tool for our company’’ (p < 0.05), ‘‘Internet with little chance of success in trade’’ (p < 0.01) - the mean scores are significantly higher than the value of 3 for both present and future indicating a strong disagreement with these two statements. That does not, however, represent any contradiction, as the higher mean scores of these negative phrases again confirm the SMEs’ favourable attitudes towards the role of the Internet for both present and future. In a similar vein, the only remaining statement with insignificant mean

Table IV Attitudes towards the Internet Attitudes Not suitable to our company An effective communication tool An important way of conducting business Has little chance of success in trade An important tool to enhance company image For only technical people

Present Mean SD 4.07 1.55 1.72 3.72 1.86 3.94

1.18 0.84 0.96 1.07 0.93 1.04

Mean

Future SD

t-value

4.20 1.43 1.61 3.91 1.72 4.00

1.35 0.90 0.96 1.18 0.97 1.14

±2.24* 2.61** 2.49* ±3.31** 3.78** ±1.35

Notes: The mean is the average on a scale of 1 = strongly agree to 5 = strongly disagree; SD = standard deviation; * p < 0.05; ** p < 0.01 (two-tailed)

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value - ‘‘Internet as only for technical people’’ (p > 0.01) - has also a mean score higher than the value of 3 indicating a favourable attitude towards the Internet.

Summary and conclusions This study has made an attempt to investigate the underlying nature and pattern of Internet adoption by SMEs. Based on the evidence from a sample of 237 manufacturing SMEs with Internet access in Turkey, the highest ranked Internet applications with the largest frequency of usage were found to be principally concerned with external communication and gathering information for market and product research. It was also noted that the SMEs are willing to do business electronically in terms of both B2B and B2C dealings as reflected by their use of relevant Internet tools. The study has also attempted to identify a number of firm- and industry-specific factors that influence the extent of Internet adoption by SMEs. Of the five relevant firm- and industry-specific subgroups, the most significant differences were found for two of the characteristics: amount of resources allocated for export development and international experience of the SME followed by relative strength of the SME in the sector and technology-intensiveness of the sector. However, no significant differences were found between the usage frequency of Internet applications and competitive intensity of the sector. The finding that the SMEs with a higher level of international experience and more resources to allocate for export development have a higher level of Internet use tends to provide support for SMEs’ willingness to broaden their involvement into new international markets. Finally, an investigation of managerial expectations and attitudes regarding Internet usage was undertaken. In general, the SMEs have positive attitudes regarding Internet use. The SMEs are of the opinion that the Internet will be more attractive in future in terms of enhancing company image and being an effective communication means and an important tool of doing business. As the Internet becomes more widespread, the relatively less used Internet applications such as video-conferencing, placing job recruitment advertisement and medium of

payment will gain more acceptance in the future. The study has presented an exploratory research on the diffusion of the Internet among SMEs by empirically delineating the underlying nature and pattern of Internet adoption. To improve our understanding of Internet adoption, further research has to focus on the link between Internet adoption and its likely environmental and organisational determinants using multivariate tests. A comparative survey that will take into account size and sectoral differences would also prove valuable in furthering our understanding on firms’ decision to implement Internet technologies.

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Internet adoption by SMEs in an emerging market economy Veysel Kula and Ekrem Tatoglu


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