innovation are considered as factors affect E-commerce adoption rate. Security and ... positively related to the rate of E-commerce adoption by Thai SMEs.
The Effect of Perceived Characteristics of Innovation on E-Commerce Adoption by SMEs in Thailand Passachon Limthongchai University of Nebraska, Thailand Mark W. Speece Asian Institute of Technology, Thailand
Abstract The study investigates factors that effect E-commerce adoption rate by Small and Medium-sized Enterprises (SMEs) in Thailand. Based on Rogers’ Innovation Diffusion theoretical framework, five perceived characteristics of innovation are considered as factors affect E-commerce adoption rate. Security and Confidentiality is additional variable investigated this research. A multiple regression was conducted and the result shows that four characteristics of innovation – relative advantage, compatibility, security/confidentiality and observability – were positively related to the rate of E-commerce adoption by Thai SMEs.
Introduction In today’s business world, the Internet has come to play an important role. Since the early 1990s, the Internet has brought remarkable changes to nearly every aspect in our society. The Internet has created new industry structures and transformed the rules of competition in the marketplace, changing such things as intensity of rivalry, threats of new entrants, bargaining power of suppliers and buyers, and threats of substitutes (Hooft and Stegwee, 2001; Porter, 2001). The market therefore demands an entirely new business culture and set of processes for organization (Means and Faulkner, 2000). Among those changes is the emergence of electronic commerce. Electronic commerce, E-commerce or EC has become a source for organizational competitive advantage for today’s marketplace participants (Peffers and Santos, 1998). E-commerce is used as a new innovation strategy within many business sectors in order to increase business competitiveness. According to Watson et al. (1998), E-commerce involves the used of information technology to enhance communications and transactions with all of an organization’s stakeholders such as customers, suppliers, government regulators, financial institutions, managers, employees, and the public at large. E-commerce has changed and is still changing the way business is conducted around the world. One source estimates that by the year 2004, the value of worldwide E-commerce will reach $US 6.8 trillion (Forrester Research, 2000), while the Asia Pacific region will have E-commerce revenues of $US 992 billion (Gartner Group, 2000). E-commerce not only serves large businesses, but also can also serve small and medium-sized enterprises (SMEs). In today’s economy, SMEs have become an important sector of the economy as they contribute to economic growth, social cohesion, employment, as well as regional and local development (Scupola, 2001). Globalization and rapid technology change, including the Internet and E-commerce, can bring new opportunities for SMEs (Scupola, 2001). Technological innovations such as E-commerce are becoming more and more diffused among SMEs. Many authors mention various advantages of E-commerce relevant to SMEs, such as “leveling of the playing field” with big business (Longenecker, Moore, and Petty, 1997); location independence (Longenecker, Moore, and Petty, 1997; Purao and Campbell, 1998); time independence (Purao and Campbell, 1998); ease of communication (Iacovou, Benbasat, and Dexter, 1995); ability to achieve competitive advantages (Whiteley, 1998); and improvement of company innovation, production, sales and services (Esichaikul, and Thampanitchawong, 1998; Gosh, 1998; Hsieh, Lin, and Coveny, 1998). Additionally, barriers are substantially lowered by the advent of lower cost, open standards and more ubiquitous Internet-based technology. In particular, some believe that E-commerce can contribute to increased competitiveness and relative market power of SMEs, for example, through new kinds of specialized portals offering size hosting, promotion (OECD, 1999).
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In Thailand, the development of E-commerce is one of the keystones of Thailand’s IT-2000, supported by the Government. In January 1999, the government approved a proposal to set up an E-commerce Resource Center (ECRC) to provide E-commerce related information and training programs, particularly to SMEs. One goal of the center is to prepare SMEs to compete internally via E-commerce as well as to defend themselves against competition from outside the country (Nilles, 1999). Nonetheless, although E-commerce has already been implemented in many countries and the Internet has been used to improve efficiency and effectiveness in today’s business environment, SMEs in Thailand have been slow to adopt the technology, and are still reluctant to go online with E-commerce on the Internet (Dos and Peffers, 1998). Therefore, this study is designed to determine what factors affect the adoption of E-commerce by SMEs in Thailand. Diffusion of Innovation (Rogers, 1983,1995) was used as the primary theoretical framework for the study. Five perceived characteristics of innovation taken from Rogers’ Diffusion of Innovation framework were investigated. Security is introduced as an additional variable to the perceived characteristics of innovation. Security and the ability of the organization to ensure confidentiality (and privacy), integrity, and availability of information assets is the major barrier to wider adoption of E-commerce (ECRC, 1999; Rose, Khoo, and Straub, 1999). Companies my face security problems in many forms, such as the security in payment systems (Light, 2001); the privacy and confidentiality of the information (Bird, 1997; Light, 2001); or viruses and denial-ofservice attacks (Light, 2001). Nonetheless, whether Thai SMEs consider security a major barrier for the adoption of this new information technology is not known, as it has not yet been empirically studied. Therefore, based on the conceptual foundation provided by Rogers (1995) and from past research, the main objective of this study is to investigate what perceived characteristics of innovation best predict the rate of E-commerce adoption by SMEs in Thailand.
Adoption Of Electronic Commerce Wigand (1997) defines E-commerce as the “seamless application of information and communication technology from its point of origin to its end point along the entire value chain of business processes, conducted electronically and designed to enable the accomplishment of a business goal”. Rapid growth and commercialization of the Internet and World Wide Web (WWW) – which makes E-commerce much more accessible – has driven E-commerce to become one of the most used media for sharing of business information within organizations and between business partners. E-commerce is being adopted by businesses all over the world and Asian businesses are not an exception. However, E-commerce has penetrated into Asian business at a very slow rate. Until now, only about three percent of the Asian population accesses the Internet and uses E-commerce today. However, IDC (2001) expects that there will be as many Asian Internet users as Western European Internet users in 2005 and there will be more Asian users than American users. Ten percent of E-commerce spending will come from the Asia/Pacific by 2004. E-commerce is one of the keystones of Thailand’s IT-2000 and many organizations are set up to support E-commerce implementation. The Commerce Ministry predicted that Thailand E-commerce would grow to 23.04 billion baht in 2000, 24.17 billion baht in 2001 and 25.36 billion baht in 2002 (Kittikanya, 2000). It has been promoted to become an especially important issue for SMEs to compete in the market place locally and globally.
E-commerce Adoption and Innovation Diffusion Rogers’ innovation diffusion theory is widely used as a theoretical framework for various studies of adoption of technological innovation. The perceived characteristics of innovation are one most important explanation of the rate of innovation adoption. Rogers and Shoemaker (1971) constructed five innovation characteristics from the summary of previous research, consisting of relative advantage, compatibility, complexity, trialability, and observability. After additional work, Rogers (1983) further developed these five innovation characteristics, showing that across many studies, generally 49 to 87 percent of the variance in rate of adoption is explained by these five characteristics of innovation. Rogers (1983) suggests that each characteristic is described as being “somewhat empirically interrelated with the other four, while remaining conceptually distinct”. Those innovations which are perceived by individuals as having greater relative advantage, compatibility, trialability, observability will be adopted rapidly than other innovations, and innovations which are less complex will be adopted more rapidly than those which are perceived as more complex. Much research has been
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done regarding various other innovation characteristics or perceived characteristics of innovation (Moore and Benbasat, 1991; Spence, 1994; Taylor and Todd, 1995; Tornatzky and Klein, 1982). Nonetheless, relative advantage, compatibility, complexity, trialability, and observability, as identified by Rogers, still retains widespread acceptance in research on the characteristics of innovation and are most widely cited as factors influencing rate of adoption (Gatignon and Robertson, 1985) To view the adoption of E-commerce by SMEs as an adoption of technological innovation, a research model was constructed using these five perceived characteristics of innovation by Rogers – relative advantage, compatibility, complexity, trialability, and observability – to explain adoption of E-commerce. An additional characteristic – security / confidentiality – was proposed for the E-commerce context. Relative Advantage. Relative advantage is defined as “the degree to which an innovation is perceived as being better than the idea it supersedes”. Relative advantage is viewed as an advantage for the organization over previous ways of performing the same task (Agarwal and Prasad, 1997). Relative advantage has been found to be one of the best predictors and is positively related to an innovation’s rate of adoption (Premkumar, Ramamurthy, and Nilakanta, 1994; Rogers, 1983, 1995; Tan and Teo, 2000; Tornatzky and Klein, 1982). As noted, there are potential opportunities and benefits of E-commerce for SMEs. These include strengthening customer relationships, reaching new markets, optimizing business processes, reducing costs, improving business knowledge, attracting investment, and creating new products and services. Also, Ecommerce represents an opportunity for SMEs to compensate for their traditional weaknesses in areas such as access to new markets and gathering and diffusing information on an international scale ,which improve communication and creates greater job flexibility (Scupola, 2001). Therefore growing awareness and understanding of the advantages of E-commerce among SMEs can positively influence their desire and interest in adopting E-commerce in their businesses. Compatibility. Compatibility is defined as “the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters”. Tornatzky and Klein (1982) find that an innovation is more likely to be adopted when it is compatible with individuals’ job responsibility and value system. It will be likely to be adopted not only if it is compatible with deeply held cultural values but also if it is compatible with previous ideas. Compatibility of an innovation with a preceding ideas can either speed up or retard its rate of adoption in the organization. The degree to which innovation meets client needa is another dimension of the compatibility of an innovation. Organizations should seek to determine the needs of their customers, and then to recommend innovations that fulfill these needs. When felt needs are met, a faster rate of adoption usually occurs (Rogers, 1995). Scupola (2001) found that some SMEs feel their employees’ lack of frequent use of E-commerce is a major barrier. Lack of critical mass is another major reason. E-commerce requires other types of international systems such as electronic data interchange to reach a critical mass among business partners such as suppliers, customers, banks. The critical mass has been lacking over the last years, but recently it is getting better. Additionally, some companies have used E-commerce since the beginning but they cannot use it very much because their clients do not have it (Scupola, 2001). Complexity. Complexity is defined as “the degree to which an innovation is perceived as relatively difficult to understand and use”. Complexity is similar in definition to several studies’ – Adams et al., 1992; Davis et al., 1989; Moore and Benbasat, 1991 – notion of perceived ease of use (Agarwal and Prasad, 1997). New ideas that are easy to understand will be adopted more rapidly than innovations that require the adopters to develop new knowledge, skills, and understanding (Premkumar et al., 1994). Systems that are perceived to be easier to use and less complex have a higher likelihood of being accepted and used by potential users (Agarwal and Prasad, 1997). Based on the literature review, some SMEs found that since E-commerce is a high technology, they have limited resources to support it. For example, SMEs frequently feel that they have limited knowledge of technology in their organizations, especially knowledge of this new business model. It is difficult to attract employees and experienced in-house IT staff with the right skill sets for E-commerce. Forty percent of SMEs in UK felt they are not really sure how to make best use of technology that they currently have. In addition, some SME business owners also found that they lack appropriate education, information, and knowledge. They do not have the competencies to understand the full implications of E-commerce (Scupola, 2001). Trialability. Trialability is defined as “the degree to which an innovation may be experimented with on a limited basis”. New ideas that can be tried on the installment plan are generally adopted more rapidly than innovations that are not divisible (Rogers, 1995). It becomes an important feature for an innovation because it provides a means for perspective adopters to reduce the uncertainty they feel toward an unfamiliar technology or
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product (Weiss and Dale, 1998). Rogers argues that potential adopters who have an opportunity to experiment with an innovation before committing to its usage will feel more comfortable with the innovation and are more likely to adopt it (Agarwal and Prasad, 1997; Tan and Teo, 2000). To adopt E-commerce solutions, businesses must of course be concerned with the cost, which – like most services – varies depending on the size and needs of the business. An E-commerce solution can be bought off-the-shelf for as little as $40 - $60 per month, or a fully integrated site can be implemented for tens of thousands of dollars. A ready-to-use online package from a vendor that can provide the desired features at a specific rate is an alternative for SMEs, as opposed to investing in complete control of the system and integrating a new system into the existing system, which is very expensive (Mehta and Shah, 2000). Therefore, SMEs don’t have to spend a lot of start-ups cost for implementing E-commerce. They can develop on the scale that matches their resources and capabilities, which should lead to their willingness to adopt E-commerce in their organization. Observability. Observability is defined as “the degree to which the results of an innovation are visible to others”. Most of the innovations studied in past diffusion research are technological ideas. (Rogers, 1995). Observability is difficult to establish in a market that is already dominated by an established technology. Therefore, it will be important to establish observability in a niche market or a new application of the technology before attempting to challenge the dominant technology in its native market and application (Weiss and Dale, 1998). Right now observation of E-commerce is relatively easy for both consumers and industry adopters. E-commerce increases company visibility as the Website can be seen as a place where the homepage is a shopping window. Websites allow businesses to remain open 24 hours, 7 days a week to millions of potential customers and suppliers on the Internet (APEC, 1999; Blackwood, 1997). Customers and suppliers can visit the company Website to search for general information with a quick response anytime and anywhere they can access to the Internet. This creates convenience and flexibility for the organization to create relationships with both buyers and sellers. Security / confidentiality. Many surveys of E-commerce issues, including by the Electronic Commerce Resource Center (ECRC), have found that one major barrier in developing E-commerce is the security of using E-commerce. To adopt Ecommerce, Information safety is essential for the integrity of the entire system (Shim, Qureshi. Siegel, and Siegel, 2000). In addition, a survey of SME E-commerce in 1999, conducted by Price Waterhouse Coopers, showed that concerns about security, legal issues and liability are perceived as the second and the third most important barriers to the use of E-commerce by SMEs. The fear of losing trade secrets will create reluctance for SMEs to consider entering the E-commerce business arena (Kittikanya, 2000). This can be explained in that the lower the perceived security for the use of E-commerce, the less likely it is that E-commerce will be adopted.
Research Question and Hypotheses Based on Rogers’ Innovation Diffusion Theory, there are five perceived characteristics of innovation that will lead organizations to higher rates of E-commerce adoption. Security / Confidentiality is another important factor that can lead to higher rates of E-commerce adoption. Therefore, based on the conceptual foundation provided by Rogers (1995) and from past research, the main research question of the study is “What are the perceived characteristics of innovation that best predict the rate of E-commerce adoption by SMEs in Thailand?” Within the theoretical framework provided by Rogers (1995), it is hypothesized that positive perception of E-commerce will lead to early use of the innovation. At the same time, negative perception of Ecommerce will lead to late use of the innovation.Therefore, the hypotheses would be: Hypothesis 1 : The adoption of E-commerce by Thai SMEs will be positively related to the perceived relative advantage of using E-commerce Hypothesis 2 : The adoption of E-commerce by Thai SMEs will be positively related to the perceived compatibility of using E-commerce Hypothesis 3 : The adoption of E-commerce by Thai SMEs will be inversely related to the perceived complexity of using E-commerce Hypothesis 4 : The adoption of E-commerce by Thai SMEs will be positively related to the perceived Security/Confidentiality of using E-commerce. Hypothesis 5 : The adoption of E-commerce by Thai SMEs will be positively related to the perceived trialability of using E-commerce.
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Hypothesis 6 :
The adoption of E-commerce by Thai SMEs will be positively related to the perceived observability of using E-commerce.
Research Methodology Data Collection and Sample
The study was conducted with companies that were randomly selected from the Department of Industrial Works, Ministry of Industry, according to the following criteria: 1) the organizations in the study must be Small and Medium Enterprises (SMEs) – 1-50 employees for small-sized and 51-200 employees for medium-sized; 2) they must be manufacturing companies; 3) they must be located in Greater Bangkok – Bangkok and environs, Thailand. The questionnaires were distributed by mail to owners, presidents, or CEOs of 2000 SMEs. The respondents needed to fill out the questionnaire which was composed of three parts: E-commerce activities in the company, opinions on the use of E-commerce, and demographic information. The questionnaires were mailed back by using an enclosed self-addressed, postage-paid return envelope. Within 5 weeks, 415 questionnaires returned (excluding 150 questionnaires that were returned because of unknown address). After we excluded some questionnaires that contained too much missing data or obvious error, in the end, only 400 of them were useable. Therefore, the total response rate was = twenty percent of the designated mailing (n = 400). The average range of the respondents’ ages was between 30-39 and 40-49 (36.0% for 30-39 years and 34.3% for 40-49 years). The respondents included 209 men and 163 women (56.2% for men and 43.8% for women). The most frequent educational level was bachelor degree which accounted for 60.2% (n = 198). For the firm characteristics, 182 were small-sized enterprises (45.5%) and 218 were medium-sized enterprises (54.5%). Dependent Variable
E-commerce adoption rate. Four major levels of EC activities were used to measure the E-commerce adoption (ECRC, 2002) which composes of eight activities. The first level E-commerce activity is using basic services that come with the Internet package, e.g., sending e-mail to communicate with business partners, using the World Wide Web to access information such as information about markets, competitors, etc. The second level was to develop a simple Website for presenting company information and promoting company products/services. The third level of E-commerce activity was to put a business process online, e.g., having a business transaction over the Internet, such as having a Website with an ordering system, payment system, or delivery system. The final level was to link the back office with activities on the Website, linking business transactions on the Website with any or all of the company’s operating systems such as accounting, inventory; and to create business value chain activities with business partners over the Internet, e.g., supply chain management. To measure adoption rate of each activity, the scale ranged from 5 which indicates “currently user”, 4 indicates “intention to adopt within 1 year”, 3 indicates “intention to adopt between 1-3 years” , 2 indicates “intention to adopt 3-5 years, 1 indicates “intention to adopt after 5 years”, and 0 indicates “no intention to use”. Independent Variables
Perceived characteristics of innovation. Each of the perceived characteristics of innovation was measured on a five-point Likert Scale in which 1 indicated “strongly disagree”, 2 indicated “moderately disagree”, 3 indicated “neutral”, 4 indicated “moderately agree”, and 5 indicated “strongly agree”. Relative advantage. This construct was measured by asking respondents about their perception towards EC, whether E-commerce will reduce the company’s overall operating cost; help our company to expand market share and increase the customer base; increase company sales and revenues; reduce operating procedure (e.g., reduce the time to communicate across international boundaries, reduce the time to access resources / information); create a new channel for advertising and public relations to improve the company’s image; increase the competitive advantage for our company.
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Compatibility. This construct was measured by asking respondents about their perception towards EC on whether EC is compatible with the company’s traditional operating procedures; with the company’s current operations / processes; with existing values and mentality of the people in the company; with suppliers’ and customers’ ways of doing business; and with the culture of people in Thailand. Complexity. To measure this construct, the respondents were asked whether it is difficult to access the Internet to use E-commerce; whether the company lacks adequate computer systems to support E-commerce activities; whether people in our company lack necessary knowledge and understanding of E-commerce and require a lot of training to start using E-commerce; whether E-commerce applications are too complicated to understand and use; and whether the company lacks the technical knowledge to install the new hardware / software needed for E-commerce Security and confidentiality. The respondents were asked whether the company lacks confidence about the security of E-commerce transactions; is not confident about how to retrieve all information when the system is down; does not have confidence in the payment system of E-commerce; and whether using E-commerce may permit competitors to gain access to the company’s important information Trialability. This construct was measured by asking respondents whether they could access to a free trial before making a decision to adopt E-commerce; whether the company has the opportunity to try a number of E-commerce applications before making a decision and try out E-commerce software packages on a sufficiently large scale; whether the company is allowed to use E-commerce on a trial basis long enough to see its true capabilities; whether it is easy for to get out after testing an E-commerce package; and whether the start up cost for using E-commerce is low. Observability. This construct was measured by asking respondents whether there are many computers that people in the company can access to use the Internet and E-commerce; whether many competitors and business partners in the market have started using E-commerce; whether using E-commerce helps our company to connect with both domestic and international business partners at anytime, and whether it shows improved results over doing business the traditional way. Validity and Reliability of the Scales
To contain the validity of the scale, a critical evaluation of the definition of each construct was conducted by reviewing theories and research findings relevant to the construct under consideration. Then the item content for each construct was adapted either from exiting scales reported in the literature or from a panel of experts in the electronic commerce domain. These constructs were also subjected to various stages of pre-testing and pilot testing. Therefore, the measures are believed to have sufficient content validity. To ensure consistency and reliability, standard definition of E-commerce used in the survey was provided before the questions in the questionnaire. Internal consistency and measurement reliability of the items was verified by computing the Cronbach’s alpha (Nunnally, 1978). Nunnally (1978) suggested that a minimum alpha of 0.6 sufficed for early stages of research. The 33-item about perceived characteristics was composed of a 7-item relative advantage scale, a 5-item compatibility scale, a 6-item complexity scale, a 4-item security/confidentiality scale, a 6-item trialability scale, and a 5-item observability scale. The Cronbach’s alpha estimated for relative advantage scale was .8663, for compatibility scale was .8763, for complexity scale was .8107, for security/confidentiality scale was .8288, for trialability scale was .8667, and for observability scale was .8131. The Cronbach’s alpha for E-commerce adoption was .8835. As the Cronbach’s alphas in this study were all much higher than 0.6, the constructs are therefore deemed to have adequate reliability. Pearson Correlation was conducted to examine potential multicolinearity problems. The results in Table 1 indicate that none of the squared correlations was close to 0.80 to suggest a problem with multicollinearity among the research variables (Hair et al., 1995). Therefore, there was no evidence of significant multicollinearity among the research variables. Table 1: CORRELATION MATRIX BETWEEN PERCEIVED CHARACTERISTICS OF INNOVATION
Perceived Characteristics of Innovation Composite advantage Composite compatibility
Composite Composite Composite Composite Composite Composite advantage compatibility complexity security trialability observability 1.000… .579** -.084… .081… .305** .512** .579** 1.000 -.178** .209** .291** .517**
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Composite complexity -.084… -.178** Composite security .081… .209** Composite trialability .305** .291** Composite observability .512** .517** ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).
1.000… -.508** .118*.. -.180**
-.508** 1.000… -.058… .114*..
.118** -.058… 1.000… .380**
-.180** .114*.. .380*.. 1.000…
Result And Analysis An initial correlation analysis was conducted to analyze the relationship between perceived characteristics of innovation and E-commerce adoption. Table 2 shows the correlation of adoption rate and perceived characteristics. Five characteristics – relative advantage, compatibility, security, trialability, observability – were positively correlated with adoption rate and all were statistically significant. In addition, complexity negatively correlated with adoption rate and was also statistically significant. These correlations are all in the expected directions, and they provide support for the set of hypotheses noted above. Table 2: CORRELATION MATRIX FOR ADOPTION RATE AND PERCEIVED CHARACTERISTICS
Adoption total
Composite advantage
Composite Composite compatibility complexity
Pearson Correlation .436** .465** -.205** Sig. (2-tailed) .000… .000… .000 0 N 400… 400… 400… ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).
Composite security .220** .000… 400…
Composite trialability .134** .007… 400…
Composite observability .376*... .000…. 400 …
Multiple Regression Analysis
To examine the joint impact, a regression analysis was conducted to investigate which perceived characteristics of E-commerce best predicted the adoption rate. Taking a 5 % significance level (2-tailed), the results indicate that the six characteristics considered in the model account for 28 % for E-commerce adoption by SMEs in Thailand (Table 3). Relative advantage, compatibility, security / confidentiality, and observability were statistically significant. The beta weight indicated that compatibility was the strongest predictor followed by relative advantage, observability, and security/confidentiality. The smallest beta weight was found for trialability. Apparently, trialability such as trial anytime, trial without cost, etc. had too little to do with adoption rate of E-commerce in this study.
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Table 3: MULTIPLE REGRESSION
Dependent Variable: Adoption total
R
R Square
.539
.291
Adjusted R Square .280
Unstandardized Std. Error Standardized Coefficients Coefficients (B) (Beta) (Constant) -5.400 3.680 Composite advantage .449 .109 .228 Composite compatibility .575 .130 .248 Composite complexity -.121 .098 -.062 Composite security .277 .137 .101 Composite trialability -7.833E-02 .089 -.042 Composite observability .292 .128 .125 Notes. Independent variables : Perceived characteristics of innovation
F
Sig.
26.882
.000
t
Sig.
-1.467 4.140 4.418 -1.231 2.030 -.885 2.292
.143 .000 .000 .219 .043 .377 .022
Therefore, to summarize the hypothesis individually, our results show that • Hypothesis 1 stating that the adoption of E-commerce by Thai SMEs will be positively related to the perceived relative advantage of using E-commerce was supported. • Hypothesis 2 stating that the adoption of E-commerce will be positively related to the perceived compatibility of using E-commerce was supported. • Hypothesis 3 stating that the adoption of E-commerce will be inversely related to the perceived complexity of using E-commerce was not supported. • Hypothesis 4 stating that the adoption of E-commerce will be positively related to the perceived Security/Confidentiality of using E-commerce was supported. • Hypothesis 5 stating that the adoption of E-commerce will be positively related to the perceived trialability of using E-commerce was not supported. • Hypothesis 6 stating that the adoption of E-commerce by Thai SMEs will be positively related to the perceived observability of using E-commerce was supported.
Discussion This study surveyed SMEs in Thailand about their E-commerce adoption and the factors affecting it. Out of 2000 questionnaires mailed out, 400 usable questionnaire were obtained. There were 89 non-adopters (22.3%), 260 light adopters (65%), and 51 heavy adopters (12.8%). Non-adopters were respondent who did not use any activities of E-commerce. Light adopters were respondents who used some 1-3 activities of E-commerce and heavy adopters were respondents who used 4-8 E-commerce activities. The correlation analysis shows that there was a significant correlation between all perceived characteristics of innovation and E-commerce adoption. Relative advantage, compatibility, security, trialability, and observability all positively correlated with adoption rate, which means that the positive perception of these five characteristics led to higher adoption rates. On the other hand, complexity negatively correlated with adoption rate, which means that perceptions of more complexity led to lower adoption. Regression analysis further investigated which characteristics of innovation best predict E-commerce adoption with significant level. The results show that compatibility emerged as the most important factor affecting SMEs E-commerce adoption. For SMEs, the compatibility issue is significant because it deals with their perception of the importance of E-commerce to their businesses now and in the future. If E-commerce is compatible with the company’s traditional operating procedures, with the existing values and mentality of the people in the company, and is also compatible with suppliers’ and customers’ ways of doing business in the future, higher rates of E-commerce adoption occur. Relative advantage is also another important factor in explaining E-commerce adoption in SMEs. Perceived relative advantage in using E-commerce had the highest
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mean compared to other perceived characteristics (mean = 3.91, SD = .68). The mean represents that SMEs in Thailand positively perceived that E-commerce creates the advantages for the organization; e.g., reduces overall company operating cost, helps the company to expand market share and increase the customer base, increases company sales and revenues, reduce operating procedure, and creates a new channel for advertising and public relations. This positive perception influenced their intention to adopt E-commerce in which the higher relative advantage, the higher rate of E-commerce adoption. Security and confidentiality had the lowest mean comparing to other perceived characteristics of Ecommerce (mean = 2.17, SD = .85). This implies that respondents perceived that using E-commerce on the Internet is still insecure and lacks confidentiality. Most of them feel that that they do not have confidence about the security of E-commerce transaction / payment systems, they do not have confidence about how to retrieve all information when the system is down, or they believe that using E-commerce will allow competitors to access their important information. Security / confidentiality is positively related to the adoption of Ecommerce, which inplies that the higher security / confidentiality of using E-commerce, the higher rate of Ecommerce adoption. With respondents’ negative perceptions about security / confidentiality, this relationship indicates a serious barrier to adoption. Complexity and trialability were found to be insignificantly related to E-commerce adoption rate by SMEs in Thailand. Recently, there has been a dramatic increase in the number of business solution companies in Thailand, because of the promotion of E-commerce by the government. It has led to high competition in the markets, with companies providing many special services to attract customers. Customers have many options provided by those companies and users can choose what they want; including access to a free trial, trying various applications before making a decision, implementation at a certain scale, low start-up cost, or ability to get out anytime. These conditions can consequently lead to an unimportance of perceived trialability of Ecommerce. By the same token, the intense competition provides extensive support for SMEs to develop Ecommerce activities. When users have problems with the application, they can easily contact supplier companies, which usually have technical support 24 hours a day. Thus, maybe these elements of the model are not important because they are available very abundantly and potential adopters do not need to worry about them. Limitations and Directions for Future Research
This study has some limitations that need to be addressed. First, this study made several cross-cultural references to US studies. This might not be completely appropriate but it was unavoidable because there have not been many previous studies of E-commerce adoption in Thailand. Differences in the results of this study and the US studies might be due to cross-cultural differences both in terms of socioeconomic settings and SMEs practices. Secondly, in terms of methodology, the study was designed to be a survey of a large number of Ecommerce adopters among SMEs in manufacturing industries in Bangkok and environs, Thailand. Though the researcher attempted to obtain as many returned questionnaires as possible, time constraints kept the researcher from extensive follow-up on non-returned questionnaires. Therefore, this is a self-selected sample. These who were willing to take part or had time to fill out the questionnaire were those included in this study. The data obtained from self-selected respondents raises the question of external validity. However, the respondent companies do seem to be typical of SMEs in Thailand, and it is not obvious how they would differ from nonresponding ones. Thirdly, the research design is this study was cross-sectional. This design, however, was not ideal for studying the continuing process of adoption which happens over time. A longitudinal design might be more appropriate, but such design requires more time and money to conduct. Therefore, the timeline of adoption was established from self-reports by the respondents elicited through the questionnaire. Lastly, this study mainly focuses on the relationship between perceived characteristics of innovation and the rate of E-commerce adoption. Therefore the scope of this study is to study only perceived characteristics of innovation. For future research, other factors such as organizational characteristics, individual characteristics, environmental characteristics, etc. should be investigated. Those characteristics have also been hypothesized as influences on innovation adoption.
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Conclusion The propose of this study was to investigate how perceived characteristics of innovation affect E-commerce adoption rate by Thai SMEs. The research was done under diffusion of innovation theoretical framework, with security and confidentiality introduced as an additional variable. The correlational analysis and multiple regression analysis shows that Rogers’ perceived characteristics of innovation – relative advantage, compatibility, and observability – were useful predictors. Compatibility and relative advantage are the factors that primarily influence adoption E-commerce. Complexity and trialability were not useful predictors of adoption by SMEs in Thailand. Additional characteristic – Security and confidentiality – turned out to be a significant predictor of adoption. All non-adopters, light adopters and heavy adopters appeared to be aware of this issue.
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