The Impact of Risks and Challenges in E-Commerce Adoption Among SMEs

The Impact of Risks and Challenges in E-Commerce Adoption Among SMEs

Pauline Ratnasingam (University of Central Missouri, USA)
DOI: 10.4018/978-1-60566-026-4.ch289
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Abstract

E-commerce provides different opportunities to small businesses as it overcomes part of their technical, environmental, organizational, and managerial inadequacies (Bergeron, Raymond, & Rivard, 2001; Hussin, King, & Cragg, 2002). According to Forrester Research, e-commerce in the US will grow at 19% reaching $230 billion by 2008. Further, the Internal Revenue Service (IRS) estimated that in 2003, there were 27 million small business tax returns. Small businesses are an important and integral part of every nation’s economy (Hambrick & Crozier, 1985). The US Small Business Administration (SBA) defines a small business as “an independent business having fewer than 500 employees or is independently owned and not dominant in its field of operation.” Small firms play an increasingly crucial role in US economy. They employ more than one half of the US private sector work force, are responsible for about one-half of the GDP, and generate more than one half of all sales in the US create 60%-80% of net new jobs annually (Ibrahim, Angelidids, J. & Parsa, 2004). Alternatively, small businesses are often more challenged than larger firms by resource constraints, such as lack of fi- nancial capital, and technical or managerial skills, knowledge and expertise that significantly reduce the number and types of options available to management (Hodgetts & Kuratko, 2001). Previous research suggests that although most small businesses were connected to the Internet, the potential use of the Internet in their business was rarely explored. Security concerns has a direct impact on every critical part of the small business including reputation, productivity, and business continuity, as they need to adhere to the legal requirement for information management. The research question thus designed for this study is what factors inhibit or pose challenges for e-commerce adoption among small businesses? We discuss the findings of an exploratory case study with four firms, across a section of different industries, on the risks and challenges they encountered when adopting e-commerce. The study contributes to managerial and theoretical implications by increasing the importance and awareness of small businesses in e-commerce adoption.
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Background

The rapid growth of the Web, and its importance to the US economy, make it imperative to develop a greater understanding about the challenges and barriers experienced by small businesses. Small businesses use the Internet mainly to send electronic mail messages, and to conduct e-commerce, including financial transactions. Other uses include communicating internally and externally, thereby sharing data; providing customer service and vendor support; purchasing and selling products and services; and collaborating with other businesses (Schneider & Perry, 2001; Turban, Lee, King, Chung, 2006).

Small businesses are typically characterized by a flat organizational hierarchy and close proximity to coworkers, thereby contributing to effective communication practices comprised of informal channels (Vinten, 1999; Wickert & Herschel, 2001). Their communications are typically carried out face-to-face as the need arises, rather than applying a formal standard operating procedure. Small businesses lack human resources and budgets allocated for information security management. Many small businesses think they are not at risk because of the size of their business information. They display the “if it’s not broke, don’t fix it attitude.” Due to the lack of IT, staff leads to no one thinking about the IT security of small businesses, thereby leading to the lack of IT security policies. Further, they are often pressured by their large manufacturers to adopt e-commerce. Their systems are often vulnerable, and are related to unpatched systems that are improperly configured. The next section discusses factors that inhibit small business adoption.

Key Terms in this Chapter

E-Commerce: Refers to buying and selling over the Internet

Risks: Refer to possibility of an adverse outcome and uncertainty.

Trust: The willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party.

Relationship-Related Factors: Refer to risks derived from mistrust among business partners.

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