Adoption of internet inMalaysian SMEs

Syed Shah AlamFaculty of Economics and Business, Universiti Kebansaan, Bangi Selangor,

Malaysia

Abstract

Purpose – This paper aims to investigate empirically the decision of small to medium-sizedenterprises (SMEs) to adopt the internet in their businesses.

Design/methodology/approach – Using a survey of 465 sampled SMEs from Klan valley area inMalaysia, this study tests seven hypotheses about the factors that influence internet adoption.

Findings – The findings show that manager’s characteristics, perceived benefits, organisationalculture, technological competency and cost of adoption have significant relationships with internetadoption. The results of the study of highly educated managers of SMEs also revealed anon-significant relationship between language, growth of web and internet adoption.

Originality/value – The study provides more understanding of managers’ perceptions aboutinternet adoption in their businesses. Those interested in promoting the web may find these resultshelpful in guiding their efforts.

Keywords Internet, Small to medium-sized enterprises, Malaysia

Paper type Research paper

IntroductionThe increased use of technology has brought about numerous changes in the businessworld. According to Scull et al. (1999) the internet is increasingly recognised for thevast array of information, services, meeting places, and communities-of-interest that itoffers. Although studies on internet adoption by businesses have proliferated in thelast few years, this kind of research has, however, been limited in some developingcountries like Malaysia.

Small and medium-sized enterprises (SMEs) (Small and Medium IndustriesDevelopment Corporation (SMIDEC)) are playing a significant role in the country’seconomic development, particularly in the manufacturing sectors (Ramayah and Koay,2002). As of December 2005, a total of 600,000 SMEs were registered in Malaysia (SMEbank), of which their contribution to the manufacturing sector was 29.3 per cent of totaloutput or RM75.2 billion to gross domestic product (GDP). Adoption of the internet isconsidered to be a means to enable these businesses to compete on a global scale, withimproved efficiency, and closer customer and supplier relationships (Chong et al.,2001).

Malaysian businesses, SMEs have been relatively slow in web adoption. TheEconomist Intelligence Unit (2006) reported that although SMEs in Malaysia can applyfor soft loan through SMIDEC to use information and communications technology(ICT) to improve competitiveness, efficiency and productivity, but only about 20percent of Malaysia’s manufacturers have an online presence and use informationtechnology (IT) extensively in their daily operations. This reflects a poor rate of ITadoption among the estimated 600,000 local SMEs. Most SMEs perceived the barriers

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Journal of Small Business andEnterprise DevelopmentVol. 16 No. 2, 2009pp. 240-255q Emerald Group Publishing Limited1462-6004DOI 10.1108/14626000910956038

of implementing IT into their business operations as: expensive initiative; risk;complex procedure; technical expatriate; and customer services (Yeung et al., 2003;Chong et al., 2001; Pires and Aisbett, 2001). According to Soh et al. (1997), if SMEs inMalaysia implement the internet in their company, potential commercial functions canbe performed, which include: marketing themselves both locally and globally;gathering business information and consumer’s feedback; providing customer support;and conducting electronic transactions. On the other hand, if internet implementation issuccessful, it will have severe repercussions on small businesses with their limitedresources (Chong et al., 2001).

Malaysia has been recognised as having a high potential and prospect for ECimplementation in South East Asia in the future and is expected to be a role model fordeveloping countries in terms of ICT implementation and establishment within thenext five years. According to the Economist Intelligence Unit (2006), Malaysia has beenranked 37 in the world ranking in terms of e-readiness accessibility.

In spite of having better opportunities and encouragement in terms of technological,business and organisational resources as well as the government e-readiness towardsits implementation, empirical research on internet adoption by SMEs has been verylimited. Furthermore, because of the competitive and dynamic environment ofbusinesses, there is a need to conduct a study on internet adoption among MalaysianSMEs. Therefore, this research tries to fill the gaps on internet adoption research byattempting to identify the factors which predict the rate of adoption of the internet inMalaysian SMEs.

Objectives of the studyThis research study has two objectives:

(1) To determine some aspects that influence internet adoption, i.e. language,manager characteristics, perceived benefits, growth of the world wide web(WWW), organisational culture, technical compatibility and cost of adoption.

(2) To determine which, among language, manager characteristics, perceivedbenefits, growth of the WWW, organisational culture, technical compatibilityand cost of adoption, is the most influential factor of the internet.

Theoretical perspectiveAccording to Molla and Licker (2005) and Tan et al. (2007), the literature on technologyadoption by businesses suggests that most researches are based on the followingframeworks:

. The Diffusion of Innovation (DOI) (Rogers, 1995; Zhu and Kraemer, 2005).

. Technology Acceptance Model (TAM) (Davis, 1989).

. The Technology-Organisation-Environment Model (TOE) (Kuan and Chau, 2001;Tornatzky and Fleischer, 1990; Zhu and Kraemer, 2005).

. Institutional Theory (Chatterjee et al., 2002; Scott, 1995).

. Resource-based Theory (Barney, 1991; Zhu and Kraemer, 2005).

These models have differences in term of their focus and are designed to examinedifferent aspects of business technology adoption. Some models examine only the

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external environment of firms (Gibbs et al., 2003; Hempel and Kwong, 2001; Kshetriand Dholakia, 2002), while some are focused on technological aspects (Claycombet al., 2005; Tornatzky and Klein, 1982; Bajaj and Nidumolu, 1998; Igbaria et al.,1997).

DOI (Rogers, 1995) and TAM (Davis, 1989) have been widely used in previousstudies (Rogers, 1995; Tornatzky and Klein, 1982; Bajaj and Nidumolu, 1998; Igbariaet al., 1997; Davis et al., 1989; Riemenshneider et al., 2003). However, these modelstend to ignore other important factors influencing technology adoption. SMEs donot adopt the internet because of the negative attitude of entrepreneurs on ICT. Byassessing owner’s characteristics, we provide empirical evidence on howowner/manager characteristics have a significant effect on internet adoption inbusinesses.

In studies of technology adoption in SMEs, researchers have emphasised theowners/managers of SMEs especially their characteristics, behaviours and attitudes(Damanpour, 1991; Fichman and Kemerer, 1997; Grover and Goslar, 1993). This isbecause such individuals usually directly and/or indirectly involved in all decisionmaking in their organisation. According to Lakhanpal (1994), study reveals thatindividual characteristics i.e. innovators, leaders and other individuals in key positionshave been found to have significant impacts on explaining differences in the degree ofinnovation adoption. As internet adoption is the preliminary process of ICT adoptionfor business purposes, the ICT and technology adoption literature would be a goodplace to start identifying factors that might affect the individual adopting the internetin SMEs. Van Akkeren and Cavaye (1999) summarise some factors that are identifiedas affecting IT adoption in SMEs. They can be classified into owner/managercharacteristics such as perceived benefits, firm characteristics such organisationalreadiness and other factors. These factors are used to explain the adoption patterns ofthe internet by SMEs in Malaysia.

Most SMEs do not adopt ICT if the benefits do not outweigh the costs of developingand maintaining the system (Vatanasakdakul et al., 2004). According to them SMEs aregenerally concerned about the costs of establishing and maintaining ICT since theygenerally suffer from budget constraints and are less sure of the expected returns onthe investment. Indeed, SMEs, especially those that outsource web page design andupdating, have found it difficult to contain site development costs that are more or lessbeyond the firm’s control (Ernst & Young, 2001)

Indeed, this study is focused on the adoption and utilisation of the internet indeveloping countries. Therefore, it is replete with references to the adoption of IT insmall business (Hazbo et al., 2006; Ratnasingham, 1997; Premkumar and Roberts, 1999;Thong and Yap, 1996).

HypothesesSeven hypotheses are developed based on the review of the literature on variousstudies done in other countries in the world. The model identifies seven factors asindependent variables influencing internet adoption.

Language concernLanguage is an important negative factor affecting the adoption and utilisation of theweb in non-English-speaking countries (Bazar and Boalch, 1997). This is because

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English is a gateway of information and knowledge transfer in the digital age (Gloor,2000). According to a survey by the online marketing research firm Global Reach, thedominance of English language on the internet continues. The IDC eWorld 2001 surveyrevealed that about 43 per cent of all web sites are multilingual, although English isstill included for multilingual sites (38 per cent). English is a primary language used inmany Western countries where new technologies originate (Vatanasakdakul et al.,2004). According to them it is the predominant language for the development of ICTand it is also the main language used on the web (Chieochan et al., 2002). A NuaInternet survey found that English still dominates as the language of the internet with56 percent. However in Malaysia, the most commonly used language in the country isMalay instead of English. If it is possible to overcome the language barriers, theadoption and utilisation of the web will increase and hence benefit companies inMalaysia because the web contains more information compared with other media ofcommunication such as radio and television:

H1. There is a positive relationship between proficiency of English language andthe adoption of the internet.

Managers’ characteristicsIt can be summarised from the previous research that managers’ characteristics areimportant factors affecting the adoption and utilisation of the web. The manager is anentrepreneur figure who is crucial in determining the innovative attitude of a smallbusiness (Rizzoni, 1991). This is because managers determine the management style ofthe company. Managers’ characteristics, which include prior experiences, resistance tochange, education level and training, are important factors that affect the adoption andutilisation of the web (Trocchia and Janda, 2000; Larsen and Wetherbe, 1999;Woodcock and Chen, 2000; Nutt, 1995; Folger and Sharlicki, 1999; Mick and Fournier,1998; Kennickel and Kwast, 1997; Thong and Yap, 1996):

H2. There is a positive relationship between manager characteristics and theadoption of the internet.

Perceived benefitsCompanies may gained many perceived benefits in adoption and utilisation of the webprovides lots of information on the web. A company will adopt a new innovation suchas the web if there are more benefits than existing methods. Perceived benefits, whichinclude reduced transaction costs, improved cash flow, increased productivity, bettercustomer service, competitiveness, reaching new customers, better relationships withexisting customers and improved operational efficiency, are the benefits that effect theadoption and utilisation of the web (Beatty et al., 2001).

H3. There is significant relationship between the perceived benefits of the internetand adoption of the internet.

Growth of the internetOne of the fundamental factors affecting the potential for internet adoption by theSMEs is the number of people connected to the internet. The internet is growingrapidly and it means the information on the web have also increased rapidly. Since thelaunch of the internet service in 1994, the internet plays an ever-increasing role in the

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vast information market in many countries (Srikantaiah and Dong, 1997). The ease ofthe use and open standards of internet are the factors that affect the growth of the web.The web has greatly revolutionised the way business is conducted. Compared to thediffusion of other technologies, the internet is the fastest technology to be adopted. Asof December 31, 2005, documented internet world usage, according to the InternetWorld Stats database is 1,018 million people are now using internet. This figurecorresponds to a 15.7 per cent penetration rate. As a result, the web contains variedinformation and ideas that are able to help companies in daily business application anddecision making:

H4. There is significant relationship between growth of the internet and theadoption of the internet in the SMEs.

Organisational cultureOrganisational cultures describes the fundamental assumptions people share about anorganisation’s beliefs, values, norms, symbols, language, rituals, and myth that givemeaning to organisational membership and are collectively accepted by a group asguides to expected behaviours (Cook and Hunsaker, 2001). Organisational culture is animportant factor that affects the adoption and utilisation of the web (Cook andHunsaker, 2001):

H5. There is significant relationship between organisation culture and adoption ofthe internet.

Technical compatibilityTechnical compatibility is also an essential factor that affects the adoption andutilisation of the web (Beatty et al., 2001; Rogers, 1995; Frambach, 1993; Bazar andBoalch, 1997). When the companies have adequate infrastructure for the adoption andit is compatible then the adoption and utilisation of the web is usually high because thecompanies are not require to invest large sum on the infrastructure (Bazar and Boalch,1997). However lack of compatibility cause low adoption and utilisation (Beatty et al.,2001):

H6. There is significant relationship between technical compatibility of andadoption of the internet.

Cost of adopting the internetThe cost of adoption is an important factor in the adoption and utilisation of the web(Ernst & Young, 2001). The cost factor can be divided into two types, which are theaccess fees of internet and the income of the company (Guadagni and Little, 1983;Gupta, 1988; Gattiker et al., 1996). The lower the cost of adoption, the higher the newinnovation such as the web will be adopted by the company and vice versa. Besidesthat, company with high profit and income will be more likely to adopt new innovationcompared with a low earning company:

H7. There is significant relationship between costs of adoption and the adoptionof the internet.

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MethodsParticipants and procedureA questionnaire survey was conducted in 2005. The sampling frame used was drawnfrom SMIDEC-listed members in Klang Valley region in Malaysia. The target groupswere SMEs, considered based on the number of employees in the industry is mostcommonly used in management research (Ghobandian and Gallear, 1996; Haksever,1996; Terziovski and Samson, 1999). The SMIs industries are classified as thoseindustries with total workforce of less than 150 employees (SMIDEC, 2002). Thepopulation under study consists of 465 managers representing the private sectorssmall and medium industries (SMI) in Malaysia. Out of 465 questionnaires distributed,368 were collected and returned to the researcher. This consequently provided aneffective overall response rate of 79.13 per cent.

SMEs were the focus of the study for two reasons. First, there is little researchconducted in the area using these types of organisations. Second, on of the aims of thestudy sought to assess the adoption rate of internet in this sector. By the nature of theindustrial structure of the Malaysia, the majority of the firms are SMEs (SMIDEC,2002). A study concentrating solely on larger organisations may be well known andfamiliar with the term of the internet. On the other hand, concentrating on SMIs willnot necessarily identify areas of “IT usage”.

The database comprised private sector and manufacturing and serviceorganisations. This was seen as an advantage as much of the work on IT usage hasfocused on Electrical and Electronics manufacturing sectors (example, Alam et al.,2004). Questionnaire was targeted at the individual having responsibility for makingdecisions in the company. The reasons choosing managers to the subjects for thestudy: managers are involved in decision leading to the adoption of technology in theirbusiness settings (Rogers, 1995), managers are responsible for most of the decisionmaking in the firm such as finance, budget and plant maintenance. Managers also havethe ability to recognise complex and dynamic issues and to resolve problems for thebenefits of the organisation (Bateman and Snell, 1999).

Justification of choosing Klang valleyFor this study Klang valley area in Malaysia was selected for data collection. BecauseKlang Valley is the main business centre in the country and it is on the advantageousedge in this study as it is equipped with modern facilities, such as fast internetconnections and advanced telecommunications systems, compared to other states inMalaysia (Siwar and Kasim, 1997). Besides that, the study will face difficulties if it ismade throughout Malaysia because there are shortages of local databases on businessinformation, and we are required to have a large sample to reflect the study.

Klang Valley area has great facilities for businesses, for example, advancedtelecommunications system, modern business facilities, excellent roads systems andfast internet connections (Siwar and Kasim, 1997). As a result, Klang Valley is a realmodel business in Malaysia. Therefore, many large corporations try to maintainbusiness presence in that area.

Dependent and independent variablesThe dependent variable is the adoption and utilisation of the internet among SMEs inKlang Valley area in Malaysia. In this study, the adoption and utilisation of the web is

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defined as using the computer hardware and software to access the internet and use theinternet to support operations, management and decision making in business (Davisand Olson, 1985). The main purpose is to identify the factors that lead to the adoptionand utilisation of the internet.

However, it is not possible to study or research on all the factors that cause theadoption and utilisation of the internet. As a result, selected factors that are moresuitable to the adoption and utilisation of the web are chosen in the SMIs businesscontext. These selected factors are language, manager characteristics, perceivedbenefit, growth of the internet, security, technical compatibility and cost considered asthe independent variables for this study.

Data analysisThe data collected were coded and keyed into the computer before analysis was carriedout using SPSS. Pearson correlation was then used to measure the magnitude orstrength of relationship through the numerical value of 21 to þ1. The conversion ofmeasurement is as shown below:

. r is 1.0 – magnitude is perfect;

. r is 0.7-0.9 – magnitude is high;

. r is 0.5-0.69 – magnitude is substantial;

. r is 0.3-0.49 – magnitude is moderate;

. r is 0.1-0.29 – magnitude is low; and

. r is 0.01-0.09 – magnitude is negligible.

To describe the population of the respondents, descriptive statistics were used.Frequency distribution and measurements were also utilised to show whether otherselected statistical method fulfilled the basic assumptions in terms of the distributionand linearity between dependent and independent variables.

Measurement of variablesDependent variableThe purpose of this study is to investigate the factors that would likely to influence thelevel of WWW adoption. The adoption and utilisation of the web is defined as usingthe computer hardware and software to access the internet and use the web to supportoperations, management and decision making in business (Davis and Olson, 1985).Dependent variable for this study was measured and modified the scale developedbased on the study by Kinyanjui and McCormick (2002). The respondents were askedto rate the statements on a five-point scale. One question therefore contains sevenpossible responses that address how frequently the respondents were used WWW totheir business (1 ¼ never, 2 ¼ very rarely, 3 ¼ rarely, 4 ¼ occasionally,5 ¼ frequently, 6 ¼ very frequently, 7 ¼ always). The study depended on an overallweight rating that was based on the responses received from the following statements:

. Internet is used to get information about input market.

. Internet is used to obtain information for product market.

. Internet is used to obtain information about specific customers.

. Internet is used to obtain information about specific suppliers.

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. Internet is accept to orders from international business customers

. Internet is used to place orders with international suppliers.

Independent variablesSome of the indicators were developed by the researcher, while some were adopted ormodified from previous scholars. In cases where a previous measure is good, theresearcher adopts or adapts the items and due credit was properly given. Thequestionnaire comprised three sections. The first section presented respondents with alist of 20 statements on innovation adoption tendency, language concern, managercharacteristics, perceived benefits and security fears. Respondents were required torate the agreement and disagreement on a Likert scale (1 ¼ disagree very strongly,2 ¼ disagree strongly, 3 ¼ disagree, 4 ¼ neutral, 5 ¼ agree slightly, 6 ¼ agreestrongly, 7 ¼ agree very strongly).

The second segment of the questionnaire was made up of a list of five statements ontechnical compatibility. The respondents were asked to rate the statements on aseven-point scale. On question therefore contains five possible responses that addresshow they were agreeing with the statement. (1 ¼ disagree very strongly, 2 ¼ disagreestrongly, 3 ¼ disagree, 4 ¼ neutral, 5 ¼ agree slightly, 6 ¼ agree strongly, 7 ¼ agreevery strongly).

The cost of web adoption is an important factor was developed on the basis ofprevious studies (Vatanasakdakul et al., 2004; Ernst & Young, 2001), measuring on aseven-point Likert scale was used in the empirical testing (1 ¼ disagree very strongly,2 ¼ disagree strongly, 3 ¼ disagree, 4 ¼ neutral, 5 ¼ agree slightly, 6 ¼ agreestrongly, 7 ¼ agree very strongly). Managers were asked to assess each statementin terms of their agreement.

A list of four statements made up on growth of web in the final selection of thequestionnaire. Managers were required to assess each statement in terms of theiragreement to them in adoption of WWW. Rating was likewise carried out on aseven-point Likert scale (1 ¼ disagree very strongly, 2 ¼ disagree strongly,3 ¼ disagree, 4 ¼ neutral, 5 ¼ agree slightly, 6 ¼ agree strongly, 7 ¼ agree verystrongly).

ValidityThe questionnaire was send to three academicians and three practitioners in theindustry to test the validity of the questions in term of sentencing, phrasing andconception. After receiving the comments from the six experts, the amendments weremade. Then, a pilot study was conducted with 20 SMEs to check for the relevancy andclarity of the questions before it could be sent out on a large scale to the targetedrespondents.

Reliability and validity of dataThe internal reliability of the items were verified by computing the Cronbach’s alphaand it suggested that a minimum alpha of 0.7 was sufficed for early stage of research(Nunally, 1978). The Cronbach alpha estimated for WWW adoption scale was 0.8495,language scale was 0.7139, managers’ characteristics scale was 0.7783, perceivebenefits scale was 0.7123, growth of the web was 0.7312, organisation culture was0.7829, technical compatibility scale was 0.8539, and cost of adoption scale was 0.7631.

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As the Cronbach alphas in this study were much higher than 0.7, the constructs weretherefore deemed to have adequate reliability.

Sample characteristicsMore than 70 per cent of the respondents for this study are operating in themanufacturing sectors (272 companies and 73.91 per cent) and 96 (26.09 per cent) areservice oriented (see Table I).

Of the sample firms only 152 SMEs (41.33 per cent) have internet access to theirbusiness. In terms of length of internet access, 253 SMEs (68.75 per cent) have beenconnected to internet for less than three years and the remaining 115 (31.25 per cent)have been connected to internet at least three years and more.

In this study we tried to identify whether the language is one of the factor thatinfluence WWW adoption or not? For this reason respondents education level wasconsidered as one of the demographic variable. The survey results show that themajority of the respondents have at least a Bachelor degree (202 managers, 54.89 percent). Followed by 119 managers (32.33 per cent) who have Master degrees and the restwith either a diploma or a STPM qualification. According to Abdulai, (2001) companiesin Malaysia prefer to employ well-educated managers as they can acquire criticalthinking skills.

Results and discussionNormality of data and multicollinearityThis study involves a relatively large sample (368 companies) and therefore, theCentral Limit Theorem could be applied and hence there is no question on normality ofthe data. An adequate examination was conducted to ascertain whether the linearityassumptions are met in order to use correlation and regression. In investing thenormality of the data, non-existence of multicollinearity is an important assumption tobe examined. A tolerance test was carried out for each independent variable byselecting collinearity diagnostics in SPSS (Kleinbaum et al., 1988). None of thetolerances for each of the independent variables is, 0.01 or less than 0.01 (Table II). Theresults of collinearity test show that the data are not seriously multicollinear.

Another method to test multicollinearity is estimating the variance inflation factor(VIF) for each independent variable. Kleinbaum et al. (1988) also suggest that, as a rule

No. Demographic variables No. of respondents % Cumulative %

1. Primary sectorsManufacturing 272 73.91 73.91Service 96 26.09 100.0

2. Internet accessYes 152 41.33 41.33No 216 58.77 100.0

3. Length of internet accessLess than 3 years 104 68.42 68.42Above 3 years 48 31.58 100.0

4. Education level of the manager/ownerBelow 150 employees 123 63.4 63.4Above 150 employees 71 36.6 100.0

Table I.Samples characteristics

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of thumb, if the VIF of a variable exceeds ten, that variable is said to be highly collinearand will pose a problem to regression analysis. This condition is adopted to check formulticollinearity among independent variables. Table II shows the variables togetherwith their respective VIF values. From the table, all of the VIF values are well belowten, ranging from 7.255 to 2.238. Therefore, there is really no problem ofmulticollinearity.

Testing of hypothesesTo test the hypotheses, correlation and multiple regression analysis was utilised. Thestrength of the proposed relationships is summarised in Tables III and IV.

The results of testing H1 indicate that, there is no significant relationship betweenthe proficiency of English language and the adoption of the web in SMEs in KlangValley. Correlation analysis shows language having (r ¼ 0:274; p , 0:05) and multipleregression having (beta ¼ 0:031; p-value ¼ 0:268). This suggests that the proficiencyof English language is not a barrier to the adoption and utilisation of the web. Since

Variable Tolerance VIF

Language 0.138 7.255Manager characteristics 0.216 4.626Perceive benefits 0.318 3.148Growth of the internet 0.442 2.265Organisation culture 0.441 2.267Technical competency 0.447 2.238Cost of adoption of the internet

Table II.Test of collinearity

Variables Internet adoption (R)

Language 0.274Manager characteristics 0.446Perceive benefits 0.683Growth of the internet 0.120Organisation culture 0.728Technical competency 0.741Cost of adoption of the internet 0.660

Table III.Pearson correlationcoefficient between

internet adoption andother factors

Variables Beta t-value p-value

Language 0.031 1.110 0.268Manager characteristics 0.126 4.321 0.000Perceive benefits 0.179 4.907 0.000Growth of the internet 0.048 1.792 0.074Organisation culture 0.296 8.123 0.000Technical competency 0.321 8.794 0.000Cost of adoption of the internet 0.161 4.558 0.000

Table IV.Regression results

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most of the managers of SME hold Bachelor or Master Degrees (see Table I), theircommand of English is thus sufficient for them to understand and use the web.Managers of SMEs are therefore facing no hardship with the English language used inmost of the information obtained from the internet. This is consistent with previousresearch in which the education system in Malaysia plays an important role in buildingup the standard of English and thus reaps benefits from the web. Therefore, H1 is notaccepted, that is the proficiency of English language does not influence the adoption ofthe internet in SMEs.

The managers play important roles in the adoption and utilisation of the internetamong SMIs. Spearman correlation was used to analyse the data. It shows thatmanagers’ computer experiences have a strong correlation of ,r ¼ 0:475 . at 0.01level (two-tailed). Regression analysis showed managers characteristics having(beta ¼ 0:126, p-value ¼ 0:0001), indicating that managers who possess computerskills will adopt the internet at a faster rate. This suggests that managers with handson experience are able to influence the adoption rate of the internet. This is consistentwith the study done by Trocchia and Janda (2000) in which it was concluded thatmanagers with prior experience in computing and hands on experience influence theadoption of web.

Managers who have been using the internet for some time are able to know theadvantages and disadvantages of the internet. Consequently, the managers are able touse the information of the web effectively expressed comfort with the internet. This isconsistent with these studies done by Trocchia and Janda (2000) and Larsen andWhetherbe (1999), in which researchers concluded that computer skills and internetusage in jobs by managers might increase the efficiency and effectiveness of adoptionand utilisation of the internet. Therefore, H2 is accepted. This further confirmed theconsolation made by Thong and Yap (1996) that the manager is the main decisionmaker of the company and he/she has the power to determine the adoption of newtechnology.

The support of H3 (perceived benefit) is in line with the results found by Hoppe et al.(2001). With a positive correlation of 0.386 at the 0.05 level and multiple regressionanalysis shows perceived benefit having beta ¼ 0:179, p-value ¼ 0:0001 as anotherpredictor that influences internet adoption positively. This is consistent with the studydone by Beatty et al. (2001) which concluded that companies tend to adopt when thenew innovation brings greater benefits in terms of information to the company.

Although the findings show that growth of web has a positive relationship withinternet adoption, this relationship is not significant (beta ¼ 0:048, p-value ¼ 0:074).One possible reason is that, to date only 37 per cent of SMEs found to have webpresence. This is not enough influence to adopt internet by the SMEs. Small-scaleindustries are now believe that failure of internet business is very high. In Malaysiaonly 37 per cent of the SMEs have a web site, but there is enough evidence that inMalaysia online business is increasing. These conditions can consequently lead to anunimportance of world wide growth.

Studies like that carried out by Cook and Hunsaker (2001), in which they concludedthat organisations tend to adopt the new innovation, are coherent with theorganisational cultures. Regression analysis showed organisation culture having(beta ¼ 0:296, p-value ¼ 0:001). This research therefore further proves the earlierfindings that showed, if the web application is similar to the innovation adopted by the

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company, tendency for the SMEs to adopt and utilise the internet is higher. This isbecause when the norms of the organisation are suitable with the new innovation thenthe adoption rate will be greater.

Finally the acceptance of both H6 (technical compatibility) and H7 (cost of adoption)is in agreement with a wide range of previous studies (Bazar and Boalch, 1997; Tanand Teo, 2000; Hoppe et al., 2001; Gattiker et al., 1996). Multiple regression analysisshows results of technical compatibility (beta ¼ 0:321, p-value ¼ 0:0001) and cost ofadoption (beta ¼ 0:161, p-value ¼ 0:0001), indicating that technical compatibility andcost of adoption have a positive effect upon internet adoption among Malaysian SMEs.This finding is consistent with the research of Beatty et al. (2001) in which theyconcluded that organisation are more likely to adopt the web if it is persistent with thepreferred work practices. Tan and Teo(2000); Hoppe et al., (2001); Cooper and Zmud(1990); Tornatzky and Klein (1982) have generally shown that perceived compatibilityof an innovation has a positive influence on the adoption of the innovation.

Conclusion and recommendationThe finding of the research may have implication for IT consultants, vendors andgovernment agencies responsible for promoting innovation adoption and utilisation.Therefore IT consultants and vendors are advised to target their marketing at SMIwith positive attitude toward innovation adoption.

They ought to look out for indicators of innovated behaviours such as adoption ofnew technology and participation in trade organisations and exhibitions. Whereasfrom managers of SMEs that are more reluctant to response to innovations, consulatesand vendors should take steps to create awareness among them so as to educate themabout the benefits and importance of the web adoption and utilisation to theircompanies. With a better understanding of the potential benefits that the webapplications can bring, managers may develop more favourable attitudes and becomemore receptive the idea of adopting the web.

Government ministries and agencies that are responsible for promoting IT adoptionshould focus their effort on resting the literacy, especially in terms of web adoption.This is because findings of the study showed that computer knowledge and experienceof a manager drive the adoption and utilisation of the web. This can be achievedthrough subsidised seminars and training programmes specially designed formanagers and employees in the company in order to create a strong innovative culturewithin the company.

Although this study has investigated factors such as language concern, managercharacteristics, perceived benefits, organisational culture, cost of adoption, technicalcompatibility and growth of the web, there may be other potential determinants of webadoption and utilisation SMEs. Hence, future research should examine this possibility.

In addition, it would be useful to study managers from SMEs in differentgeographic areas. This would provide some interesting trending information allowingus to see if the adoption and utilisation of the web is influenced by geography, and ifthat geographic influence is significant. This would allow IT consultants and vendorsto tailor their service and products based on geographic issues, and would allow them agreater opportunity of increasing the level of the web adoption. Our research showsthat personal perception plays a large part in influencing a manager to adopt the web,and it would be useful to see if that held true across different geographic areas.

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Finally, further studies need to be carried out knowing that developing countrieshave different cultures those in developed countries. This would provide insights intothe way of using the web in these countries.

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About the authorSyed Shah Alam is based at the Faculty of Economics and Business Management, UniversitiKeebansaan Malaysia, Malaysia. He has a Doctorate in E-commerce. Prior to joining UiTM hewas a coordinator of Postgraduate program and an active member of the faculty researchcommittee in the Faculty of Business and Law at Multimedia University, Malaysia. His teachingand research interests are internet marketing, e-commerce, mobile e-commerce, and internetbanking. He has published many articles in the areas of e-commerce, marketing, and onlinebrand trust in leading international journals. Syed Shah Alam can be contacted at:drsyed2005@gmail.com

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