Acceptance of the Internet has paved the way towards the development of virtual communities that keep increasing in the current information society making it imperative for business, especially the small and medium enterprises (SMEs) which form the backbone of any economy, to keep abreast with e-commerce and remain competitive. To stimulate and facilitate SME participation in business activities through the Internet, it is necessary, therefore, to provide clear guidance and direction with suitable models and frameworks specifically tailored for the purpose. This chapter highlights an attempt to develop a suitable framework for the e-transformation of SMEs in Sri Lanka. In the belief that new models and frameworks can help SMEs to equip themselves to better understand their current stage and identify the main barriers at each stage of the adoption process, this attempt starts with an initial exploratory study of 17 SMEs, followed by a regional survey involving 625 SMEs from various industry sectors, along with interviews with the SME intermediary organizations. The proposed model facilitates establishing the current stage of an SME with regard ICT and e-commerce sophistication using five stage variables. It also assists to determine current position with regard to barriers towards the adoption of e-commerce and helps determine the support necessary to overcome such identified barriers. The research detailed in this chapter establishes that barriers show variance when SMEs proceed to more advanced stages in the adoption process. Likewise, the necessary support required indicates a similar trend. Going further, the chapter proposes a model for adoption of e-commerce for SMEs in Sri Lanka and identifies the essential need for support while acknowledging available support. Finally, it proposes an initial framework to e-transform SMEs in developing countries
Barriers to E-Commerce Adoption in SMEs
This section outlines recent literature on the barriers/inhibitors for adopting e-commerce by SMEs. Many studies carried out in developed countries investigate the factors affecting the adoption of e-commerce technologies such as Internet, e-commerce, e-mail and electronic data interchange (EDI). As research on this subject in developing countries is relatively limited, the literature on developed countries can serve as a preliminary guideline to identify barriers in developing countries.
Investigations into the barriers that affect SMEs’ adoption of e-commerce have identified a variety of factors, which can be grouped into several categories. A number of authors (Lawson et al, 2003; Chau & Turner, 2001; Mehrtens et al, 2001) identify factors relating to three major categories: owner/manager characteristics; firm characteristics; and costs and return on investment.
Owner/managers play an important role in decision making in SME organizations. Hence it can be concluded that a number of factors that affect adoption of e-commerce have to do with owner/manger characteristics. The knowledge of new technologies and e-commerce does affect the degree of use of e-commerce (Rashid & Al-Qirim 2001). Iacovou Benbasat & Dexter (1995) found that the owner’s lack of awareness of the technology and perceived benefits is a major barrier to a take up of e-commerce. The lack of knowledge of how to use the technology and low computer literacy are other contributory factors for not adopting e-commerce (Lawson et al, 2003; Kirby & Turner, 1993). Julien and Raymond (1994) report that the owner’s level of assertiveness in decision-making affects the adoption of e-commerce. If the owner is subjective and refers to the opinions of experienced people who recommend adoption of e-commerce into the organization, then the owner is more likely to accept their opinions (Harrison, Mykytyn & Riemenschneider, 1997). Concern about return on investments make them reluctant to make substantial investments when short-term returns are not guaranteed. Taken together with lack of time, these two other factors affect decisions to adopt e-commerce (Akkeren & Cavaye, 1999). Related industry experience of owners is also critical to their e-commerce success (Mahajan, Siriniwasan &Wind, 2002).
Among the barriers related to the characteristics of the organization, which affect adoption of e-commerce is the current level of technology usage within the organization (Iacovou et. al,1995). As summarised by Courtney and Fintz, (2001); low use of e-commerce by customers and suppliers, concerns about security aspects, concerns about legal and liability aspects, high costs of the development of computer and networking technologies when moving towards e-commerce, limited knowledge of e-commerce models and methodologies, and the perception of the lack of any accrued benefits to the company make many SMEs remain unconvinced about adoption of e-commerce. In addition, SMEs have limited resources (financial, time, personnel). This “resource poverty” has an effect on the adoption of e-commerce. They cannot afford to experiment with these technologies and make expensive mistakes (EBPG, 2002).