2.4 Online Experts Panel Evaluation (Year 2: Phase 3) . ..... bachelor degree, and only one manager has master degree. It is noticed that the managers in service ...
Factors Affecting e-Business Systems Adoption by Small and Medium sized Enterprises (SMEs) PhD Mid-Candidature Report By
ALI ABU ABID
Supervisors:
Dr Mahbubur Rahim Associate Professor Stephen Burgess (External)
Monash University Faculty of Information Technology Caulfield School of Information Technology March, 2012
Contents 1.0 INTRODUCTION ............................................................................................................... 3 2.0 RESEARCH DESIGN ......................................................................................................... 4 2.1 Six Phases of Research Design ........................................................................................ 4 2.2 Literature Review (Year 1:Phases 1) ............................................................................... 6 2.3 Filtering process (Year 1: Phase 2) .................................................................................. 6 2.4 Online Experts Panel Evaluation (Year 2: Phase 3) ........................................................ 8 2.4.1 Summary of the Evaluation Process for the Research Model by Online .................. 8 Experts Panel ..................................................................................................................... 8 2.5 Multiple Case Study in Saudi Arabia (Year 2: Phase 4) ................................................ 10 3.0 GENERAL FINDINGS (Year 3: Part of phase 5) ............................................................. 12 4.0 DIFFICULTIES to FIND APPROPRIATE SMEs ............................................................ 18 5.0 PROPOSED THESIS STRUCTURE ................................................................................ 18 6.0 PROJECT PLAN ............................................................................................................... 19 7.0 REFERENCES .................................................................................................................. 20 Appendix A: Interview protocols............................................................................................. 21 Appendix B: Key characteristics of the Participating Case Organizations.............................. 25 Appendix C: A Profile of Participating Interviewees .............................................................. 27 Appendix D: IT Profile of the Case Organizations .................................................................. 29
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1.0 INTRODUCTION SMEs in Saudi Arabia play an important role in its economy. They contribute 28% of total national economic activity and employ about 40% of all employees in Saudi Arabia. Due to rapid globalization, SMEs in Saudi Arabia are however encountering greater intensity in competition. Moreover, computer and Internet literacy is gradually increasing in Saudi Arabia (Shaikh 2009). Hence, the expectations on the part of the Saudi population in general and large industries in particular for SMEs to deliver products and services in more innovative manners are increasing. In response, Saudi SMEs are expected to consider the adoption of innovative e-business systems. However, successful adoption of these technologies require the existence of a range of facilitating factors (Dubelaar, Sohal et al. 2005). Existing e-business literature (e.g. Wen and Chen, 2010 ) identifies a rich set of factors. Regrettably, it is not known whether these factors (which were identified and assessed for the SMEs operating in Western nations and some developed Asian countries) apply equally to SMEs in Saudi Arabia due to the following reasons: First, Saudi Arabia(located in the Gulf region) is characterized by large power distance (PD score: 80) and uncertainty avoidance (UA score: 68) which are the predominant characteristics for this region (Hofstede 2010). This implies that at an organizational level, a clear distinction is likely to be maintained between owner and operational levels of management. These characteristics are quite different from those found in developed nations. Second, another characteristic of Saudi Arabia is that the employment context within Saudi SMEs is strongly dominated by two distinct types of expatriates. One group involves knowledgeable and educated managers and another group includes less educated labour force employed from various developing Asian/African countries. Therefore, the culture and education level of employees among Saudi SMEs is quite heterogeneous. Hence, unlike other developed nations, the employee characteristics of Saudi SMEs are quite different due to the involvement of three distinct groups of people. It is argued that the attitude of these varied groups of people may in turn affect e-business adoption process in Saudi SMEs. Third, various scholars (e.g. Vega, Chiasson et al., 2008) urge e-business comunity to broaden their investigation agenda by addressing the influence of government assistance programs to understand the uptake of e-business systems particularly within a SME context. Nonetheless, few scholars have attempted to actually examine how the existence of such programs may influence the broader adoption process of e-business systems among SMEs for an emerging economy like Saudi Arabia. It is not however known how the government’s support programs contribute in promoting the uptake of e-business systems among SMEs. Fourth, it is not clear for Saudi context how over time they conceive, decide, implement and then use e-business systems, and what issues, challenges, and facilitators may affect their ebusiness adoption process. Much of the existing e-business literature on SMEs focuses on understanding adoption decision making or implemenation which represents a particular (though important) stage of broader e-business adoption process. In contrast, relatively less emphasis is given in the scholarly literature about understanding e-business adoption as a temporal process involving multiple stages. This in turn calls for further research to examine e-business adoption process among Saudi SMEs. Finally, it is not known whether the factors affecting various stages of e-business systems adoption process differ between manfucturing and service industry. It is argued that industry characterstics of Saudi SMEs may have an effect on how various factors are pervieved important by Saudi SMEs.
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In light of these observations, this doctoral research project seeks to address the following broad research goal: “To develop a comprehensive model that would facilitate understanding of the e-business systems adoption process for the SMEs operating in Saudi Arabia and how various factors influence the key stages of that process.” This broad goal is then translated into the following specific research questions: a) How do the unique employee characteristics of SMEs operating in Saudi Arabia affect e-business systems adoption process? b) In what ways, the Saudi government assistance programs influence e-business systems adoption process for Saudi SMEs? c) How does the influence of Technology-Organizational-Environmental (TOE) factors (including unique employee characteristics of Saudi SMEs and Saudi government assistance programs) affect e-business adoption process across the key stages of ebusiness adoption of the Saudi SMEs? d) Does the influence of the factors affecting e-business adoption process vary between manufacturing and service industry? e) Are there any common or new factors that are perceived important across the key stages of e-business adoption by Saudi SMEs?
2.0 RESEARCH DESIGN
2.1 Six Phases of Research Design In order to answer the research questions (indicated in the previous section), this doctoral research project is initiated and consists of 6 phases spread over 3 years. Figure 1 shows the research design phases. Year 1 includes the literature review (Phase 1) and filtering process (Phase 2) for identified factors which affect e-business systems adoption stages (initiation, adoption decision, and implementation). Year 2 includes the online experts panel (Phase 3) and a multiple case study in Saudi Arabia (Phase 4). The deliverable of these phases is refined research model. Year 3 includes the analysis for the collected data (Phase 5), and thesis writing (Phase 6). The resultant of these phases is final research model. The research design phases are shown in Figure 1 in two colours: blue which indicates the phases that have already completed and orange which shows the phases that are not completed yet.
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Phase1 (Literature Review) (Year 1)
131 Factors
Phase 2 (Filtering process) (Year 1)
Phase 2.1 (Removal of redundant 31 factors) Delivered 99 Factors
Initial Research Model Initial Interview’s questions
Domain expertise
Phase 2.2 (Stage wise filtering)
Phase 3 Online Expert Panel (Year 2)
Initiation Stage (7 factors) Adoption Stage (10 factors)
Evaluated Research Model
Implementation Stage (9 factors)
Evaluated Interview’s Questions 22 Interviews
Phase 2.3 (Filtering for S.A) Phase 4 Multiple Case Study in Saudi Arabia (Year 2)
Initiation Stage [9 factors]
Adoption Stage [16 factors]
Refined Research Model Nvivo software
Implementation Stage [11 factors]
Phase 5 Data Analysis (Year 3)
Final Research Model (Year 3)
Phase 6 Thesis Writing (Year 3)
Figur1: Research Design Phases [5]
2.2 Literature Review (Year 1:Phases 1) A review of the broader IT and e-business literature sources indicates the existence of two streams of adoption related studies. One stream of studies (e.g. Kwon and Zmud, 1987; Rogers, 2003) focuses on IT/e-business adoption process involving stage model concept. Another stream of studies (e.g. Eikebrokk and Olsen, 2007; Spanos and Voudouris, 2009) is concerned with a particular stage (e.g. adoption, implementation) of e-business adoption process. A detailed discussion of each group is provided in Chapter 2 of the thesis. The deliverable of this phase was three stages (initiation, adoption decision, and implementation) of e-business systems adoption process and 131 factors that could potentially affect various stages of e-business systems adoption process.
2.3 Filtering process (Year 1: Phase 2) As the presence of 131 factors is quite exhaustive, a filtering process was designed to shortlist those key factors which are more likely to be relevant for influencing the three stages of ebusiness adoption process for the Saudi SMEs context. The filtering process (Phase 2) includes three sub phases (shown in Figure 1). Phase 2.1 is concerned with identifying those factors which have somewhat overlapping in meaning. Phase 2.2 of the filtering process involves shortlisting those factors (for each stage of e-business adoption process) that received support from both stage model and stage model empirical literature. Phase 2.3 involves identifying seven additional factors which address specific characteristics of Saudi SMEs. The filtering process is described in details in Chapter 3 of the thesis. In total, 9 factors were identified affecting initiation stage, 16 factors were identified affection adoption decision stage, and 11 factors were identified affecting the implementation stage of ebusiness systems adoption process. This is shown in Figure 2.
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Initiation (Stage 1)
Common Factors Cost Management Support Uncertainty in business environment External pressure Relative advantage Government support
Adoption Decision (Stage 2)
Stage Factors Need for technical expertise Information availability Knowledgeable employee attitude toward technology
Stage Factors Complexity Compatibility Communication E-business law Security concerns High competence in IS Organisational readiness Owner attitude toward technology Knowledgeable employee attitude toward technology Company’s awareness of need for change
Stage Factors
Implementation (Stage 3)
Training High competence in IS Information availability Company’s awareness of need for change Lower level employee attitude toward technology
Figure 2: Initial Research Model Showing Key Factors Affecting 3 Stages of E-business Adoption Process in Saudi SMEs [7]
2.4 Online Experts Panel Evaluation (Year 2: Phase 3) This phase was initiated to gain valuable insights from the participating domain experts about the initial version of the research model (Figure 2). The domain experts were chosen based on publication records, journal articles, conference papers, book chapters, and other relevant literature, and recommendations by peers. The major areas of expertise of these domain experts include: e-business, SME, adoption, and development. A total of 22 invitation emails were sent to the domain experts to seek their willingness to participate in an online expert panel. The email includes a brief description about the researcher, the research topic, and the approach that will be used. A copy of the human ethics certificate of approval and an explanatory statement about the research project were attached with the invitation email. Only 8 experts accepted the invitation and expressed their willingness to participate in the evaluation process for the research model. Another email was sent to these participating experts stating the commencement date and supplying the URL to the online expert’s panel. The commencement date for domain expert’s panel discussion was set on May 23, 2011 and the end date was on June 12, 2011 (about three weeks). Before the commencement date, a reminder email was sent to the participating experts with clear instructions and guidelines for the domain experts on how to post their comments. The discussions were based on weekly basis (i.e. each week includes one or two new topics). The participating experts posted their comments between Tuesday and Sunday as Monday was the day for researcher to update and administer the online expert panel. For those participants who missed the previous week’s discussion, they were allowed to post their comments on previous week’s discussion in addition to current week’s discussion. Friendly reminders were sent to the experts every Sunday to remind them about participating in the on-going discussion. Only two experts participated in Week 3 discussion, whereas, all 8 experts participated in Week 1 discussion. This indicates that the domain experts in general demonstrated a high level of enthusiasm in the beginning of the expert panel evaluation and then they gradually lost enthusiasm for participating in this process. One possible explanation for this could be the long time (3 weeks) needed for evaluation process. 2.4.1 Summary of the Evaluation Process for the Research Model by Online Experts Panel Drawing on the suggestions offered by the domain experts, a total of 7 new factors (e.g. trailability, observability, customer readiness, perceived e-business value, owner/manager characteristic, trading partner’s readiness, and organizational culture) were identified. Furthermore, a total of 51 factors (44 identified from the literature, and 7 identified by the domain experts) were considered important by the domain experts which could affect all three stages of e-business systems adoption process in SMEs. Out of 51 factors, 17 were believed to affect initiation stage, 19 were identified to affect adoption decision stage, and 15 were identified to affect the implementation stage. Figure 3 shows the refined research model based on the successful exercise of the online domain experts panel (Phase 3).
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Stage Factors
Initiation (Stage 1)
Compatibility Complexity Trailability Observability
Perceived e-business attributes Need for technical expertise Knowledgeable employee attitude toward technology
Common Factors Cost Relative advantage External pressure Management Support Government support programs Uncertainty in business environment Owner/manager characteristic Organizational readiness and awareness Trading partner’s readiness Organizational culture
Stage Factors Communication E-business law
Customer readiness Adoption Decision (Stage 2)
Security concerns High competence in IS
Perceived e-business value Owner attitude toward technology Knowledgeable employee attitude toward technology
Stage Factors Implementation (Stage 3)
Training High competence in IS
Perceived e-business attributes Lower level employee attitude toward technology
E-business Systems Success (Beyond the scope of this research project) ----- New factors ----- Factor moved from area to another ----- Factor renames
Figure 3: Refined Research Model based on Online Domain Experts Panel [9]
2.5 Multiple Case Study in Saudi Arabia (Year 2: Phase 4) A total of 20 SMEs from manufacturing and service sectors of Saudi Arabia participated in this data collection process. The SMEs were selected using the following criteria: a) Each SME should belong to either manufacturing of service sectors. b) Each SME should currently be in one of the adoption stages (initiation: is concerned with gathering and evaluating information about the technological innovation in question, adoption decision: is concerned with making a decision about which technology is to be used, and implementation: involves the introduction of the innovation into an organization). c) The number of employees should be less than 100 employees for each SME (Otsuki 2002). An interview protocol based on the revised research model (Figure 3) after the online expert panel was developed to guide the interview process with the managers of the selected SMEs (Appendix A). In addition, two more interviews were conducted with the managers of SME Development Centres in two chambers of commerce of Saudi Arabia. The interview process started on July, 2011 and ended on October, 2011. Table 1 shows the number of participating organizations and SMEs development centres which took part in this research project. Table 1: Number of Case SMEs and Government Agencies Participated in this Research Project Industry Sectors
Total
Manufacturing Service SME’s Development Centre Managers Total
10 10 2 22
The location of the participating SMEs is shown in Figure 4. The SMEs were chosen from the major provinces of Saudi Arabia (Makkah, Riyadh, Eastern and Asir). The selection of these provinces is based on the following reasons: a) Makkah province includes the city of Jeddah which is a modern commercial centre that is considered one of Saudi Arabia’s most vibrant cities, b) Riyadh is Saudi Arabia’s capital city, and it is the geographic and cultural hub of the country and its largest city, c) Eastern province is an important hub for shipping, oil, commerce and industry, and d) Asir is the major tourism region of Saudi Arabia.
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Figure 4: Locations of Participating SMEs on Saudi Map
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3.0 GENERAL FINDINGS (Year 3: Part of phase 5) An overview of the characteristics of the participating SMEs, profile of participating interviewees, and a summary of IT profile of the case organization is provided in Table 2. It is observed that most of the participating SMEs from manufacturing sector are mainly investing in laboratories' equipment and materials, chemistry consulting company, chemical analytical instruments, and geographic information system (GIS) services. Whereas, SMEs from the service sector are investing in plumbing equipment, media, and hospitality services. In addition, the maximum amount of annual sales for SMEs from manufacturing sector is SAR 100 million, while it was SAR 30 million for SMEs from service sector. Moreover, the lowest amount of annual sales for SMEs from manufacturing sector was SAR 0.4 million and almost similar amount (SAR .45 million) for SMEs from service sector. Furthermore, the average annual sales of SMEs from manufacturing sector was SAR 37.2 million, whereas, it was SAR 9.2 million for SMEs from service sector. The number of employees for SMEs from both sectors is somewhat similar. For instance, the largest number of employees was reported for manufacturing sector was 90, while it was 88 for service sector. Likewise, the lowest number of employees in manufacturing sector was 7 employees, whereas, it was 4 employees for SMEs from service sector. Three SMEs from both sectors have been in the market for more than 20 years. Furthermore, four SMEs from manufacturing sector have been in operation for less than five years, while three SMEs from service sector have been in business for less than five years. Only two SMEs from both sectors were found to be in the adoption decision stage of ebusiness systems adoption process. Moreover, six SMEs from manufacturing sector and four SMEs from service sector were in the implementation stage. In contrast, three SMEs from manufacturing sector and five SMEs from service sector were in the initiation stage of ebusiness systems adoption process. In relation to the size of SMEs, both manufacturing and service sectors are represented by micro, small, and medium. The sizes of the participating SMEs are shown in last column of Table 2. Details can be found in Appendix B.
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Table 2: Key Characteristics of Participating SMEs: A high Level Summary Industry Sector Manufacturing
Service
Natures of Businesses
Annual Sales (Million/SAR)
No. of Employees
Years of Operation
Laboratories material & equipment Chemistry consulting company Chemical analytical instruments GIS services
Max= 100 Mid =20 Min =0.4 Not Provided 3
Max = 90
3 SMEs> 20
Min = 7
4 SMEs < 5
Media services Car and Car’s spare parts Hospitality service Plumbing equipment
Max= 30 Mid =5 Min =0.45 Not Provided 3
Max = 88
3 SMEs> 20
Min = 4
3 SMEs
