Adoption of information and communication technology (ICT) in small and medium sized enterprises (SMEs)

The SME sector has an important role to play in economic development, poverty reduction and employment creation in developing economies (Hallberg, 2000). The SME sector is the sector in which most of the world’s poor people are working (Stern, 2002). The sector largely exceeds the average economic growth of national economies in many countries and contributes signiªcantly to employment creation. Accordingly, governments and donors alike have recognized the important role of the SME sector for overall development. As a result, many government policies are geared toward supporting SME sector growth through a variety of programs that range from tax incentives to technical assistance, from regulatory provisions to policy interventions, training and other types of business development services (O’Shea & Stevens, 1998).

1.0 Introduction

Despite the growing number of studies on the adoption of information and communication technology (ICT) in small and medium sized enterprises (SMEs), the literature still suggests the need for advancing understanding of the key factors experienced in different contexts around the world. In addition, this area of study is still under-researched in African settings. Most of the existing literature represents other contexts in countries and regions of the world such as Europe, USA, Asia and Australia while far less research in this area has been carried out in African contexts.

ICT is defined as ‘any technology used to support information gathering, processing, distribution and use’ (Beckinsale and Ram, 2006). The definition taken in this paper classifies ICT into information technologies, telecommunications technologies and networking technologies (Nicol, 2003). This covers all forms of technologies such as computers, Internet, websites as well as fixed-line telephones, mobile phones and other wireless communications devices, networks, broadband and various specialised devices (Manueli, Latu and Koh, 2007). From a stream of ICT literature that focuses on the small firm sector, this research takes the ICT adoption approach (Beckinsale and Ram, 2006; Zappala and Gray, 2006; Manueli et al., 2007) to advance the understanding of technology uptake among small businesses in developing nations within Southern African Development Community (SADC). More specifically, the research identifies the key driving and inhibiting factors, including some barriers of ICT adoption and their contextual significance and implications to national government policy-makers in South Africa.

2.1 Distinctive and behavioural characteristics of SMEs and ICT adoption factors

The review of literature revealed that small firms are found in various sectors of the economy Understanding of the distinctiveness and behavioural characteristics of SMEs is important for explaining ICT adoption patterns in the small firm sectors which are, for example, particularly of interest to policy-makers, support agencies and researchers. Accordingly, some researchers revealed that:

“Entrepreneurs and owner-managers come from different genders and/or a wide range of ethnic, cultural and educational backgrounds and from every age group. While some start their own businesses from scratch, others inherit or buy an on-going business. Some are sole owners while others run their businesses with partners or other directors. Some are family businesses with owners, partners or fellow directors and even employees linked by blood or marriage. Others are run by people who have come together solely because they share common goals, complementary skills or access to capital”, (Curran and Blackburn, 2001: p.6). The insights from the behavioural and distinctive characteristics of SMEs and the relevant existing theories are discussed in this paper with a view to subsequently offering a strong basis for analysing the key ICT adoption drivers and inhibitors from the case study data collected from South Africa. It is important to bear in mind that the ICT adoption factors, as drivers or attributes, may also play a role in inhibiting ICT uptake in SMEs (Beckinsale and Ram, 2006). Other previous studies (Manueli et al., 2007; Van Akkeren and Cavaye,1999) identified and classified key ICT adoption attributes in SMEs into owner manager characteristics and small firm characteristics.

SME owner managers viewed as ‘more entrepreneurial, risk-takers, innovative and invariably creative’ are considered to be critical to the organisational readiness for ICT adoption (Zappala and Gray, 2006; Beckinsale and Ram, 2006). Furthermore, Manueli et al. (2007) suggested that business action is driven from the key decision-makers responsible for defining appropriate ICT goals and identifying critical ICT business needs and allocating financial resources to facilitate ICT adoption. According to Gray (2006), “SMEs planning to invest are also much more likely to provide training and development to their staff and managers.” The source further suggested that SME owner managers with technical and vocational qualifications are more likely to engage in more innovation activities that include ICT adoption and development of e-business. In addition, the source argued that small business owners with appropriate qualifications and ICT skills are more growth-oriented while those without these prerequisite characteristics are more likely to be growth averse.

Further review of literature revealed that age and experience of owner managers are some of the distinctive characteristics which influence on ICT adoption in small businesses (Manueli et al. 2007; Windrum and de Berranger, 2002). In terms of age, the second generation (youthful) business owners are more likely to be receptive to ICT than their first generation (elderly) counterparts (Beckinsale and Ram, 2006). Clearly, this view carries an assumption that 2nd and 3rd generation (youthful) business owners, born and educated in recent years characterised by advanced technologies and applications in daily activities, have greater awareness of ICT than the 1st generation (elderly) counterparts. However, such studies are mainly looking at Western developed economies and this view may be different in less developed economies such as those found in the SADC region. According to Gray (2006), resources and capabilities of SMEs, which are both linked to the age and experience of owner manager as well as age and size of the firm, are viewed as important attributes for effective innovation and growth (Smallbone et al., 1995). The source argued that SMEs that are oriented towards competition and growth may lack the resources and personal capabilities to adopt ICT and manage growth successfully, perhaps due to age, cultural and educational background of the owner.

Social networks of business owners also play a crucial role in driving or inhibiting ICT adoption in SMEs. For example, in communities where culture is viewed as a key factor, particular cultural traits, beliefs and values attached to resources and investment may influence ICT adoption in several different ways (Beckinsale and Ram, 2006; Straub et al., 2002; Yap et al., 1992). In addition, the size and type of social structures as well as the nature of social links and preference for personal friendships and contacts (Beckinsale and Ram, 2006) may have positive or negative influence on ICT adoption in SMEs.