Managing Impressions of SME Legitimacy: Valuing Information and Communications Technologies as Signals and Symbols

Managing Impressions of SME Legitimacy: Valuing Information and Communications Technologies as Signals and Symbols

Susan J. Winter (National Science Foundation, USA), Connie Marie Gaglio (San Francisco State University, USA) and Hari K. Rajagopalan (Francis Marion University, USA)
DOI: 10.4018/978-1-61520-627-8.ch005
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To succeed, SMEs must create legitimacy by mimicking the cues that signal credibility to convince potential stakeholders that something stands behind their promises. This research examines the role of information and communications technology (ICT) in legitimacy-building from the perspective of both SME founders and potential customers. Small and medium-sized enterprises (SMEs) face more serious challenges to their survival than do larger firms. To succeed, SMEs must establish and maintain credibility in the marketplace to attract the resources required for survival. Most borrow legitimacy by mimicking the cues that signal credibility to convince potential stakeholders that something stands behind their promises. This research examines the role of information and communications technology (ICT) in legitimacy creation from the perspective of both SME founders and customers. In-depth, semi-structured interviews were conducted in a variety of industries to determine whether the ICT-related legitimacy schema from the customers’ perspective differs substantially from that of firm founders. Results indicate that customers compare the ICT information provided in SME’s sales pitches to pre-existing ICT expectations about the nature of desirable sales transactions. We describe the relationship between violations of ICT expectations, legitimacy, and purchase decisions. Implications for theory and practice are discussed.
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Small and expanding firms generate 50 percent of all innovations and 95 percent of all radical innovations in the U.S. (Timmons, 1999; Vesper, 1996). Great opportunities cannot be realized unless innovative firms can attract the resources and support required for their survival and growth (Pfeffer & Salanick, 1978; Starr & MacMillan, 1990; Stinchcombe, 1968). Research on the business value of information and communication technologies (ICT) for small and medium sized enterprises (SMEs) emphasizes its substantive performance role in garnering resources by efficiently managing internal operations and supply chain activities to improve productivity and profitability (Levy & Powell, 2005). While this narrative has value, reliance on a single paradigm limits our understanding of any IS phenomenon (Orlikowski & Iacono, 2001). We explore the business value of ICT using a nontraditional approach that draws upon commonly accepted traditions in non-IS business research and explores the value of ICT in SME legitimacy and competitiveness.

As new ICTs are developed, researchers have attempted to understand their adoption and use by SMEs. This work has determined that many of the resources developed for larger firms to guide strategic IS planning, alignment and the evaluation of ICT investments are often inappropriate for SMEs (Bharati & Chaudhury, 2006; Blili & Raymond, 1993; Dandridge, 1979; Senn & Gibson, 1981; Wainwright, et al., 2005; Welsh & White, 1981). Previously identified barriers to ICT adoption by SMEs include negative attitudes and the financial and knowledge constraints faced by many smaller firms (Parker & Castleman, 2007). Investments in ICT are usually justified based on demonstrating its substantive business value as a complementary asset in the efficient and effective handling of information to improve the efficiency of transactions and other routine operations, enabling better analysis and strategic decision making (Gregor, et al. 2006; Melville et al. 2004; Murphy & Simon 2002, Peppard, et al. 2007).

However, the organizational literature has long recognized that operational efficiency and productivity are not the only prerequisites for organizational success (Meyer & Rowan, 1977; Scott, 2001). Although SME success is related to internal operational efficiency and effectiveness, it also requires access to external resources such as labor, financing, and most importantly, a steady stream of income from sales (Harrison, Dibben, & Mason, 1997). Attracting the resources and support required for SME survival and growth requires that firms also establish that they are credible players in the marketplace; this process is referred to as gaining legitimacy (Pfeffer & Salancik, 1978; Suchman, 1995).

Previous research (Gaglio, Cecchini & Winter, 1998) regarding SME founders' beliefs about creating legitimacy revealed a surprising uniformity about the characteristics of a legitimate new firm. In most cases, new firms have borrowed or co-opted legitimacy (Starr & MacMillan, 1990) by garnering endorsements and associations and by mimicking the standards, practices, and cues of their relevant industries (Heugens & Lander, 2009). This paper investigates whether these mimicked standards include expectations regarding the use of ICT and whether ICT acts as a signal and symbol of legitimacy among potential customers.

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Editorial Advisory Board
Table of Contents
Pratyush Bharati, In Lee, Abhijit Chaudhury
Chapter 1
Efthymios Constantinides
This chapter explains the nature, effects and current standing of the new generation of Internet applications, commonly known as Social Media or Web... Sample PDF
Connecting Small and Medium Enterprises to the New Consumer: The Web 2.0 as Marketing Tool
Chapter 2
Arvind Karunakaran, Sandeep Purao, Brian Cameron
Small and Medium Enterprises (SMEs) in legacy industrial era regions face unique challenges that vary from the challenges faced by SMEs in other... Sample PDF
Leveraging University Research to Assist SMEs in Legacy Industrial Era Regions: The Case of I-99 Corridor
Chapter 3
Julie E. Kendall, Kenneth E. Kendall
It is often assumed in the MIS literature and in practice that only large organizations are capable of transmitting culture and information... Sample PDF
IT and the Transmission of the SME Culture of Nonprofit Theatres
Chapter 4
Andreja Pucihar, Gregor Lenart, Frantisek Sudzina
This chapter presents the importance of ERP system selection criteria for SMEs. Altogether, 28 ERP selection criteria were investigated. The... Sample PDF
ERP System Selection Criteria: SMEs’ Perceptions
Chapter 5
Susan J. Winter, Connie Marie Gaglio, Hari K. Rajagopalan
To succeed, SMEs must create legitimacy by mimicking the cues that signal credibility to convince potential stakeholders that something stands... Sample PDF
Managing Impressions of SME Legitimacy: Valuing Information and Communications Technologies as Signals and Symbols
Chapter 6
Sandy Chong
Since July 2003, Australia demonstrated the promotion of EC outside the country by forming an international EC partnership with Singapore. While... Sample PDF
A Comparative Study of Small- and Medium-Sized Enterprises in Australia and Singapore: Overall Satisfaction of Electronic Commerce Implementation
Chapter 7
Ada Scupola
This chapter presents the results of a study on factors affecting adoption of e-commerce in small and medium size enterprises in Australia. The... Sample PDF
Australian SMEs and E-Commerce Adoption: Newer Perspectives
Chapter 8
Robert C. MacGregor, Deborah Bunker, Mira Kartiwi
Electronic commerce (e-commerce) has been utilised as a vehicle to rapidly transform the world into an information society. Yet despite the proven... Sample PDF
The Perception of Barriers to E-commerce Adoption by SMEs: A Comparison of Three Countries
Chapter 9
Jaume Franquesa, Alan Brandyberry
This study explores the relevant dimensions of organizational slack in small and medium enterprises (SMEs) and investigates their impact on adoption... Sample PDF
The Role of Organizational Slack in Technology Innovation Adoption for SMEs
Chapter 10
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This chapter describes the development and testing of a method for information systems (IS) strategy formulation in small and medium enterprises... Sample PDF
The Dual Lens Method: A Practical Approach to Information Systems Strategy in SMEs.
Chapter 11
Pattama Kanavittaya, Jocelyn Armarego, Paula Goulding
The alignment of business strategy and IT strategy has been recognised as a strategic weapon within organisations. Small and medium sized... Sample PDF
The Alignment of Business Strategy with Agile Software Development within SMEs
Chapter 12
Tom R. Eikebrokk, Dag H. Olsen
The low e-Business implementation in small and medium-sized enterprises (SMEs) is an important issue in most countries. This chapter examines the... Sample PDF
Supporting SMEs Towards E-Business Success: Exploring the Importance of Training, Competence and Stimulation.
Chapter 13
Frank Schlemmer, Brian Webb
SMEs frequently suffer from resource poverty. The authors suggest that the Internet can be used to leverage their strategic assets and propose a... Sample PDF
Deploying the Internet for Leveraging Strategic Assets
Chapter 14
Jun Li, Michael Merenda
Previous research has largely ignored how business process digitalization across the value chain enhances firm innovation. This chapter examines the... Sample PDF
Business Process Digitalization and New Product Development: An Empirical Study of Small and Medium-Sized Manufacturers
Chapter 15
Sajda Qureshi, Mehruz Kamal, Peter Wolcott
The use of Information and Communication Technologies (ICTs) by Small and Medium Sized Enterprises (SMEs) have the potential to enable these... Sample PDF
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