Estimating the Determinants of B2B E-Commerce Adoption among Small & Medium Enterprises

ABSTRACT This paper examines the factors that influence e-commerce adoption levels among SMEs in Malaysia. Based on Technological-Organisational-External (TOE) framework, it is found that external support is significant across all e-commerce adoption levels. This finding suggests that future policy to encourage e-commerce uptake in Malaysia should focus on providing support to facilitate e-commerce adoption effort. The findings also show that owners or CEOs of SMEs who are experienced, have completed tertiary education and used computer frequently, are more likely to adopt e-commerce. Hence, to further promote e-commerce adoption among SMEs, owners or CEOs of SMEs who are less experienced, high-school leavers, and who used computer less frequently, ought to be targeted in future e-commerce initiatives. Relatively, based on TOE framework, CEO attributes are more significant in terms of e-commerce adoption among SMEs in Malaysia. Keywords: E-Commerce adoption; SME; multinomial logit model. (ProQuest: . denotes formulae omitted.) 1. INTRODUCTION For the past two decades, it has been argued that information revolution is having a significant impact upon all aspects of firms (Porter and Miller, 1985). Due to the rapid advancement of information and communication technology (ICT), technology adoption is regarded as one of the key determinants for firms' survival irrespectively of their size. For instance, Ramayah et al. (2009) suggests that SMEs (Small and Medium Enterprises), although with limited resources, should not ignore the importance of ICT and to adopt new technologies in their business activities There is a growing amount of studies focusing on technology adoption. One of the major criticisms of technology adoption research is that adoption is mainly viewed as a dichotomous outcome (either the innovation is adopted or not adopted). The adoption versus non-adoption approach does not fully address the issue of technology adoption (Hovav et al., 2004; Daniel et al., 2002)). Besides, only limited studies have explored the adoption or uptake of e-commerce among Small & Medium Sized Enterprises (SMEs). These studies mainly view adoption in terms of dichotomous outcome such as using or not using e-commerce applications (e.g. Teo and Ranganathan, 2004; Waarts et al., 2002). Others studies examined e-commerce adoption using stage approach that depicts e-commerce adoption from non-adoption to full implementation or integration of e-commerce with the rest of firm's enterprise systems (e.g. McKay et al., 2000; Parish et al., 2002; Rao et al., 2003; Teo and Pian, 2004) This paper examined the adoption of B2B e-commerce among SMEs in the Malaysian manufacturing sector. It empirically examined the determinants of adoption using the multinomial logit model with multiple outcomes on the adoption levels. The factors that influence the SMEs' choice on the level of adoption are analysed using probability choice model, i.e., multinomial logit model. The findings from this study aimed to contribute knowledge on the uptake of B2B e-commerce specifically for SMEs from the manufacturing sector in Malaysia. 2. LITERATURE REVIEW Studies have attempted to identify the contexts that impact innovation adoption and implementation. Tornatzky and Fleischer (1990) have conceptualised the contexts of innovation adoption decision as consisting of organisational, external and technological contexts. This framework suggests that at organization level, the e-commerce adoption are influenced by three key constructs namely technology, organisation and external as depicted in Figure 1 below. Technologies are perceived to possess attributes that have effect on the decision to adopt and how they will be implemented. Rogers (1995) highlights five innovation attributes namely; relative advantage, compatibility, complexity, trialability and observability that have systematic effects on innovation adoption and diffusion. …