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EU SMEs and E-Business Innovation
relations with citizens, businesses and other arms of government. These technologies can serve a variety of different ends: better delivery of govern-ment services to citizens, improved interactions with business and industry, citizen empowerment WKURXJKDFFHVVWRLQIRUPDWLRQRUPRUHHI¿FLHQW JRYHUQPHQWPDQDJHPHQW7KHUHVXOWLQJEHQH¿WV can be less corruption, increased transparency, greater convenience, revenue growth, and/or cost reductions (World Bank, 2002).
Innovation: The process of innovation is divided into the following broad activities:
SMEs (Small- and Medium-Sized Enter-prises): In February 1996, the European Union DGRSWHGDVLQJOHGH¿QLWLRQRI60(VWREHDSSOLHG across all EU programmes and proposals dating from December 31, 1997. The communication recommended that member states, the European Investment Bank and the European Investment )XQGDGRSWWKHGH¿QLWLRQV+RZHYHUWKHFRPPX-QLFDWLRQSHUPLWVWKHXVHRIORZHUWKUHVKROG¿JXUHV if desired. The European Union recommended GH¿QLWLRQIRUD³PLFUR´EXVLQHVVLVWKDWLWPXVW KDYHDPD[LPXPRIQLQHHPSOR\HHV$³VPDOO´ business must satisfy the following criteria:
• Agenda setting: general organisational problems create a perceived need for change;
• Matching: an organisational problem is ¿WWHGZLWKDQLQQRYDWLRQ
• 5HGH¿QLQJ5HVWUXFWXULQJ the innovation LVPRGL¿HGWR¿WWKHRUJDQLVDWLRQDQGLW alters the organisational structure(s);
• Clarifying: the relationship between the
• A maximum number of 49 employees;
• A maximum annual turnover of 7 million euros;
• A maximum annual balance sheet total of 5 million euros; and
• The maximum of 25% owned by one, or jointly by several, enterprise(s) not satisfy-ing the same criteria.
organisation and the innovation is clearly GH¿QHGDQG
• Routinising: the innovation loses its identity as it becomes an ongoing element in the
7KH(8UHFRPPHQGDWLRQVWDWHVWKDWD³PH-dium-sized” business must satisfy the following criteria:
organisation’s activities (Rogers, 1995).
EU: European Union.
ICT: Information and Communication Tech-nologies.
IS (Information Systems): An information V\VWHPKDVEHHQGHVFULEHGDV³DV\VWHPWRFROOHFW process, store, transmit, and display information” (Avison & Wood-Harper, 1990, p. 3).
• A maximum number of 249 employees;
• A maximum annual turnover of 40 million euros;
• A maximum annual balance sheet total of 27 million euros; and
• The maximum of 25% owned by one, or jointly by several, enterprise(s) not satisfy-ing the same criteria.
This work was previously published in Encyclopedia of E-Commerce, E-Government, and Mobile Commerce, edited by M. Khosrow-Pour, pp. 464-471, copyright 2006 by Information Science Reference (an imprint of IGI Global).
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Chapter 1.13 Environmental Drivers of
E-Business Strategies Among SMEs
Alessandro Arbore Bocconi University, Italy
Andrea Ordanini Bocconi University, Italy
ABSTRACT
In front of traditional interpretations of the digital JDSEDVHGRQHQGRJHQRXVFRQGLWLRQVRIWKH¿UPV this chapter intends to emphasize the importance that some external pressures may have on the e-business strategy of small and medium enterprises (SMEs). The environmental factors analyzed here are market position, competitive intensity, and institutional pressures. SMEs have been grouped according to their level of e-business involvement, in relation to the number of e-business solutions adopted so far. Three layers are proposed: ex-cluded, tentative, and integrated e-business SMEs. A multinomial logistic regression was used to predict these strategies. A general conclusion is that different models seem to explain exclusion DQGLQYROYHPHQW6SHFL¿FDOO\WZRIDFWRUVDPRQJ
those analyzed reveal to be more suitable in ex-plaining e-business exclusion. They are the size of a SME and a lack of institutional pressures to adopt. On the other hand, e-business involvement seems to be primarily prompted by a selective competitive environment and not by imitative behaviors, as in the previous case.
INTRODUCTION
In this chapter, our general attention is on the adoption and diffusion of e-business solutions among small and medium enterprises (SMEs). 0RUHVSHFL¿FDOO\RXULQWHUHVWLVIRFXVHGRQVRPH external factors that may affect this process, since we are persuaded that external forces are espe-cially important within small organizations, while
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Environmental Drivers of E-Business Strategies Among SMEs
largely understated by the literature. We will try to analyze whether these factors do relate to the e-business involvement of an SME.
E-business is an umbrella term referring to a wide variety of Internet-based management solutions. The solutions considered here are: interactive Web sites, e-commerce platforms, e-procurement systems, customer relationship management systems, and telework.
BACKGROUND: SMES AND EXTERNAL FACTORS AFFECTING E-BUSINESS
Many researches explain the adoption of e-business solutions in terms of endogenous fac-tors, that is variables which are internal to the organization. Among these factors, different typologies of variables are recursive: the level of ¿QDQFLDOUHVRXUFHVDEOHWRDIIHFWDQ\LQYHVWPHQW GHFLVLRQWKHPDQDJHULDOFXOWXUHLQÀXHQFLQJWKH propensity to innovate; and the organizational readiness, which is relevant for the integration of new technologies (for a review, see Lee, Runge,
%DHN&RQYHUVHO\WKHSRWHQWLDOLQÀX-ence of exogenous pressures have been largely understated. Within this handbook, a review of internal factors is out of the scope of the current chapter. Instead, our goal is to deepen our un-derstanding about the following environmental drivers: market position, competitive intensity, and institutional pressures.
When focusing on SMEs, environmental elements must be considered as especially im-portant because of the high dependency of these organizations from the context: SMEs appear more sensible to external pressures, in terms of ERWKFRPSHWLWLYHDQGVRFLDO³UXOHVRIWKHJDPH´ (Fink, 1998). Therefore, important explanatory factors of adoption strategies shall be easily found by studying the environment where SMEs play, rather than focusing only on internal conditions. Above all, since e-business is basically considered
DQLQVWUXPHQWWRLPSURYH¿UP¶VFRPSHWLWLYHQHVV (Amit & Zott, 2000), we could expect that the competitive features of the arena where SMEs play require special attention.
Starting from the current literature, then, the environmental forces analyzed in this work are: (1) the level of perceived competition (Kuan & Chau, 2001; Riemschneider, Harrison, & Mykytn, 2003); (2) the pressure to be considered technology savvy (Iacovou, Benbasat, & Dexter, 1995; Zhu, Kremer, & Xu, 2003); and (3) the competitive position occupied in the marketplace (Daniel & Grimshaw, 2002; Lal, 1999).
2XUFKDSWHUZLOOEULHÀ\UHYLHZWKHWKHRUHWLFDO antecedents for each of these factors and then we will provide a set of hypotheses.
Competitive Intensity
According to the well known industrial organiza-tion framework (Andrews, 1971; Porter, 1985), it can be observed that an increasing competitive intensity worsens the balance between opportuni-WLHVDQGWKUHDWVUHTXLULQJ¿UPVWRDGRSWPRUHLQ-QRYDWLYHVWUDWHJLHVWRVXUYLYHDQGPDNHSUR¿WV
Within this view, Gatignon and Robertson (1989) found that competitive pressure in the adopter industry has a positive impact on adoption of information and communication technologies. In the same way, Thong and Yap (1995) found that the CEO attitude towards new technologies adoption is positively correlated with the degree of competition faced in the market. Similarly, Premkumar and Roberts (1999) demonstrated that the degree of competitive rivalry in the adopter’s industry affects the rate of adoption of digital technologies.
Also adopting the more recent resource-based approach (Barney, 1991; Peteraf, 1993), it could be observed that the strength of competition in the factor markets reduces the power of isolating mechanisms sustaining the competitive edge, thus requiring continuous innovation strategies. Within these contexts, innovations lead to re-
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Environmental Drivers of E-Business Strategies Among SMEs
source substitution phenomenon, acting as basic conditions for rent seeking (Malerba & Orsenigo, 1997). Especially here, e-business solutions may contribute to the development of dynamic capabili-ties sustaining long-term competitive advantages (Teece, Pisano, & Shuen, 1997). This discussion OHDGVWRIRUPXODWHRXU¿UVWK\SRWKHVLV
Hp1: The degree of perceived competition increases the intensity of e-business strategy among SMEs.
Institutional Pressures and Technology Legitimacy
$FFRUGLQJWRWKHLQVWLWXWLRQDOWKHRULHVD¿UP¶V behavior has to be coherent with norms and social rules requested by their environment (Di Maggio & Powell, 1983; North, 1990).
&RQVLVWHQWO\LQRUGHUWRJDLQDFFHVVWRVSHFL¿F resources, to collaborative networks, or to strategic DOOLDQFHVD¿UPPLJKWEHVXEMHFWWROHJLWLPDF\ assessment by other social agents (competitors, partners, and other stakeholders). The require-ments may be very selective especially for SMEs, since they are not usually perceived as legitimate players due to their lack of resources and capabili-ties (Grewal, Comer, & Metha, 2001).
Although for SMEs the last decision maker is generally the owner-manager, the pressure that she feels from other stakeholders (e.g., employ-ees, customers, suppliers) remains an important determinant of technology adoption. Harrison, Mykytyn, and Riemenschneider (1997) found that similar unwritten norms, maintained by SHHUVDQGVRFLHW\VWURQJO\LQÀXHQFHWKHLQWHQ-tion to adopt information technologies in small businesses. Along the same line, Lee et al. (2001) posit that SMEs’ managers hear about the relative advantages of digital technologies largely from the trade press, their friends, business competitors, and peer-social interactions.
This would create selective contexts, where it is important to be perceived as technology savvy and where e-business strategies may be driven,
among the other things, by a relational need to be reputed as innovative and technology savvy. This leads to our second hypothesis:
Hp2: The need for a technology legitimacy increase the intensity of e-business adoption among SMEs.
Market Position
Given a certain level of competitive rivalry, a lead-ing market position1 may reveal better resources to exploit the potential of the new technologies. This, in turn, would be a further driver for e-business intensity. Moreover, early e-business adoption might be interpreted as a pre-emptive strategy of the leader. From this point of view, the leader ZRXOGIHHODQH[WHUQDOSUHVVXUHWREHWKH¿UVW mover, in order not to loose its supremacy.
From a theoretical point of view, there is a general consensus on the fact that the adoption of information technologies, by itself, has a marginal GLUHFWHIIHFWRQ¿UPSHUIRUPDQFHZKLOHVLJQL¿-cant impacts emerge only when such technologies are combined and integrated with other distinctive competencies (see, among the others, Clemons & Row, 1991; Mata, Fuerst, & Barney, 1995; Powell & Dent-Micallef, 1997).
A possible implication is that e-business solu-tions, like other ICTs, would have greater power in consolidating leading positions rather than reduce competitive gaps: the instrumental nature of technology makes e-business strategies viable RQO\ZKHQWKHUHDUHVRPH³EXVLQHVVVWUDWHJ\´ beyond them, thus suggesting that technology FDQQRW¿[DÀDZSURFHVVE\LWVHOIEXWLWLVDEOH WR LPSURYH HYHQ VLJQL¿FDQWO\ DQ HVWDEOLVKHG process (Carr, 2001).
,QRWKHUZRUGVWKHUHLVD³VWUDWHJLFQHFHVVLW\ hypothesis” supporting the adoption of ICT tech-nologies, and it is more likely that this necessity is SUHVHQWDPRQJ¿UPVZLWKDVROLGPDUNHWSRVLWLRQ (Clemons & Row, 1991).
Following these considerations, SMEs feeling in a leading market position would be more likely
187
Environmental Drivers of E-Business Strategies Among SMEs
WRDGRSWQHZWHFKQRORJLHVWKDQ³PDUJLQDO´FRP-petitors, which would prefer to exploit existing knowledge and capabilities rather than exploring new possibilities (Leonard-Barton, 1992).
Hp3: Being in a leading market position increases the intensity of e-business among SMEs.
METHODOLOGY
Sampling and Collecting
The analysis is based on a survey of Italian SMEs. In this case, Italy can be considered as a
VLRQZDVPRGL¿HGDFFRUGLQJO\,QRUGHUWRUHGXFH potential response bias, a unique key informant was chosen: the CEO was selected as the most appropriate respondent. In answering the entire TXHVWLRQQDLUH¿UPVEHFDPHWKHDFWXDOVDPSOH of this study.
Variables
The dependent variable of our model is the inten-sity of e-business adoption among SMEs. More SUHFLVHO\ZHPHDVXUH³HEXVLQHVVLQWHQVLW\´DV a multinomial variable (EBUSINT) with three possible levels:
PHDQLQJIXO¿HOGWRLQYHVWLJDWHLVVXHVUHODWHGWR SMEs, given the high number of small organiza-WLRQVLQPRVWRIWKHLQGXVWULHV$UDQGRPVWUDWL¿HG sample of 1,000 SMEs was selected, respecting the breakdown of SMEs among manufacturing DQGVHUYLFHLQGXVWULHVH[FOXGLQJ¿UPVZLWKOHVV than 50 employees, considered as very small, and with more than 500 employees, considered as large organizations. Data was collected through a TXHVWLRQQDLUHDQG¿UPVZHUHFRQWDFWHGE\SKRQH using the CATI technique during the period No-vember/December, 2003.
$GUDIWRIWKHTXHVWLRQQDLUHZDV¿UVWWHVWHG RQDUDQGRPVDPSOHRI60(V7KH¿QDOYHU-
• 0, for SMEs which do not implement any kind of e-business strategy, and thus ex-cluded from e-business trajectories (EX-CLUDED)
• 1, for SMEs which tried to implement one e-business strategy among the following: in-teractive Web site, e-commerce, e-procure-ment, customer relationship management, DQGWHOHZRUN7KLVJURXSRI¿UPVZLOOEH called TENTATIVE
• 2, for SMEs that integrated more than one e-business solutions in their processes, and for which e-business could be seen as a normal practice (INTEGRATED)
Figure 1. The number of e-business solutions adopted by Italian SMEs
2 or more applications = INTEGRATED;
43,6%
0 applications -EXCLUDED;
26,1%
1 application = TENTATIVE; 30,3%
Source: I-LAB, Bocconi University
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