Why do some small and medium enterprises (SMEs) adopt Internet broadband technologies (high-speed connection and complementary applications) and others do not? This chapter aims at analyzing the issue through an econometric investigation. Relying on the (thin) previous empirical literature on the topic and focusing on a large and representative sample of Italian SMEs, we analyze the determinants of broadband connection and adoption of complementary applications. Results of the econometric analysis reveal that: (i) among firm-specific characteristics, size and the firm’s need to communicate are major determinants both of broadband connection and use of complementary applications, while indicators of firm efficiency and of the competitive pressure suffered from the SME positively affect only the number of used applications, while not exerting any impact on the decision to connect; (ii) among location-specific characteristics, the level of telecommunications infrastructure positively influences both connection and applications use, while the presence within the local labor market of young and skilled workforce makes SMEs adopt more applications; (iii) time-specific variables like those related to the actual and future price of the high-speed Internet connection affect SMEs’ decision to adopt broadband. These findings have important implications for suppliers and policy makers.
Key Terms in this Chapter
IT Familiarity: Amount of competencies and capabilities in information technology practices possessed by individuals.
Diffusion of Innovation (DOI) Theory: Theory which aims to describe the patterns of adoption of innovations, explain the underlying dynamics and assist in predicting whether and how a new invention will be successful.
Firm’s Structural “Need to Communicate”: Structural characteristics of a firm (i.e., multiplant or affiliation to a group) that lead to a “natural” increase in its need to communicate with external parties.
Broadband Internet Connection: Internet wired connection via ADSL or other dedicated lines with an upstream speed higher of equal to 256 Kbps.
Competitive Pressure: Degree of competition faced by a firm which is reflected in its business performance.
Econometric Model of Adoption: A statistical technique that on the basis of economic theory estimates the determinants of adoption of a new product or process.
General Purpose Technology: A highly pervasive technology which gets better over time, keeps lowering the costs of its users, enables the development of other activities, makes it easier to invent and produce new complementary product or processes.
Small and Medium Size Enterprise: Number of employees comprises between 10 and 249.
Broadband-Based Applications: Software and service applications complementary to an Internet broadband connection. They range from very basic (e.g., e-mail) to advanced applications (e.g., supply chain management system). These latter applications require broadband to work properly.