Omega, h~t. J. Mgmt Sci. Vol. 23, No. 4, pp.

429442, 1995
Copyright t" 1995 ElsevierScienceLtd
~ Pergamon 0305-0483(95)00017-8 Printed in Great Britain. All rights reserved
0305-0483/95 $9.50 + 0.00

CEO Characteristics, Organizational

Characteristics and Information Technology
Adoption in Small Businesses
JYL THONG

CS Y A P

National University of Singapore

(Received May 1994; accepted after revision March 1995)

The importance of information technology (IT) to businesses is widely acknowledged. Yet, while large
businesses have been using computers for some time, small businesses have been slow in adopting IT.
The literature on technological innovation suggests that there are two main classes of variables that
are important in determining adoption of an innovation: individual characteristics and organizational
characteristics. As IT can be viewed as a technological innovation, these two classes of variables are
possible determinants of IT adoption. This paper examines the effect of three characteristics of the
Chief Executive Offtcer (CEO) and three organizational characteristics on adoption of IT. The three
CEO characteristics studied are CEO innovativeness, CEO attitude towards adoption of IT, and CEO
IT knowledge. The three organizational characteristics studied are business size, competitiveness of
environment, and information intensity. Six hypotheses were formulated and tested using data
collected from a sample of 166 small businesses. The results suggest that notwithstanding the business
size, CEO characteristics are important factors affecting IT adoption in small businesses. Small
businesses are more likely to adopt IT when the CEOs are more innovative, have a positive attitude
towards adoption of IT, and possess greater IT knowledge.

Key words~CEO characteristics, organizational characteristics, adoption of information technol-

ogy, small businesses

INTRODUCTION ment agencies or small business development

SMALL BUSINESSES form the vast majority of
businesses in most countries. Ninety-five per-
cent of enterprises in the European Community
are small businesses [23]. In the US, the Small
Business Administration (SBA) classifies ap-
prox. 98% of all businesses as small businesses
[58]. The importance of small businesses as
significant creators of employment and contrib-
utors to national economies is also widely
recognized [5]. Many governments have also
acknowledged the contribution of small
businesses and have attempted to provide rel-
evant support structures in the form of govern-
429
centres [23, 30].
Information technology (IT) provides an op-
portunity for businesses to improve their
efficiency and effectiveness, and even to gain
competitive advantage [6, 24, 38, 60]. There are
many reported cases in the information systems
(IS) literature of the positive contribution of IT
to large businesses. With the decreasing cost and
ever more powerful user-friendly microcom-
puters and standard software packages, today
the benefits are accessible even to the smallest
business. Yet, while large businesses have been
using computers and other IT products for
some time, small businesses have been slow in

OME 2314---G
430 Thong, Yap--lnformation Technology
adopting these technological innovations. For
example, in the US estimates of small business
use of computer range from 27 to 68%, depend-
ing on location, size, and nature of businesses
surveyed [39, 54, 68]. Gray [31] warned that if
small businesses do not 'catch up' with their
larger competitors with respect to use of IT then
large businesses will continue to outperform
small businesses. Eventually, this will allow
large businesses to lower prices further and
improve services leading to increased market
share and maybe even to buying out their small
competitors.
Hence, the research question "what are the
distinguishing characteristics of small businesses
that adopt IT?" is not only of theoretical inter-
est, but also has important practical impli-
cations. Government agencies responsible for
promoting IT adoption and IT consultants and
vendors can make use of this knowledge in their
marketing programmes. They can target their
promotional efforts at small businesses which
have not computerized but have characteristics
of computerized companies, since this group
of small businesses is most likely to adopt IT.
A review of the published literature shows
that to-date there has been little empirical re-
search on this topic. Existing studies tend to
concentrate on large businesses, and the
findings of these studies are unlikely to be
applicable to small businesses because of
various fundamental differences between large
and small businesses [11, 14, 71]. Other studies
have focused on level of IT usage among
businesses which have computerized
[19, 45, 62, 63].
As IT is a relatively recent technological
innovation, the technological innovation litera-
ture was studied to identify factors that might
affect adoption of IT by small businesses. Inno-
vation theory has been successfully applied to
study the adoption of IT innovations such
as spreadsheet software, database machines,
office automations, and telecommunications
[1, 8, 32, 50]. Innovation has been defined as a
renewal by means of technology, but it can also
refer to renewal in terms of thought and action
[61]. The innovation itself need not be new as
measured by the time of its discovery or inven-
tion. It only has to be perceived as new by the
unit of adoption [65, 74]. This means that an
innovation is any product or process which has
been put into practice, and is non-trivial to the
business. Technological innovations present po-
tential adopters with new means for solving
problems and exploiting opportunities [8].
Hence, IT can be characterized as a technologi-
cal innovation. Further, IT is a radical inno-
vation. For a small business, embarking on IT
adoption for the first time is non-trivial as there
is a lot of uncertainty and risk involved [73]. The
introduction of IT is likely to cause changes in
work procedures and increase computer anxiety
among the employees.
The technological innovation literature has
identified many variables that are possible deter-
minants of organizational adoption of an inno-
vation. Most of these studies have investigated
the effect of organizational characteristics on
adoption of innovations. Organizational char-
acteristics that have been studied include size,
competition, centralization, specialization, func-
tional differentiation, and external integration
[4, 33, 40, 41, 65, 66, 76]. Besides organizational
characteristics, the importance of individual
characteristics has also been investigated. In
particular, researchers have focused on the
characteristics of the chief executive officer
(CEO) [7, 36, 43, 52, 64]. The rationale is that
the CEO plays a major role in a business. He is
the main decision maker and shapes the future
of the business. The ability of the entrepreneu-
rial 'mould maker' to break free from the chains
of bureaucracy, fan the flames of innovation,
and create new situations has been the basis of
the growth of many of today's great corpor-
ations [9]. The impact of the CEO is even
stronger in small businesses. Although a small
business may not influence the industry as
tremendously as its larger counterparts, its CEO
plays just as major a role in the survival of the
business. This is because in a small business, the
CEO, who is usually also the owner of the
business, tends to have more personal contact
with other key managers and have to do more
work by himself [48].
This paper investigates the effect of organiz-
ational characteristics as well as individual
characteristics of the CEO on adoption of IT by
166 small businesses. Three organizational
characteristics, namely, business size [25], com-
petitiveness of business environment [41,47, 60],
and information intensity [60, 74], which have
been hypothesized to influence adoption of IT,
are included in the study. The three attributes of
CEO characteristics studied are CEO innova-
 Omega, Vol. 23, No. 4
tiveness, CEO attitude towards adoption of IT,
and CEO IT knowledge.
RESEARCH MODEL AND HYPOTHESES
Based on a review of the literature on techno-
logical innovation, a research model was devel-
oped (see Fig. 1). As this is an early study and
the objective is to identify primary relationships,
we decided to use a one-stage model relating
independent and dependent variables, without
any intermediate variables. As more experience
is gained, the model can be refined.
Adoption of IT
The dependent variable is adoption of IT. In
this study, adoption of IT is defined as using
computer hardware and software applications
to support operations, management, and de-
cision-making in the business [16]. This implies
that IT is used productively and is not a 'white
elephant'. The primary purpose is to identify the
important factors that lead to adoption of IT.
CEO Characteristics
CEO Innovativeness
) AttitudeTowards HI
Adoption of IT
CEO IT Knowledge
H3
Organizational Characteristics
H4
J
Business Size
H5
Competitivenessof
Environment
Information Intensity
Fig. 1. Research model.
431
It is not possible to study all the factors
identified in the technological innovation litera-
ture. Further, innovation researchers have ar-
gued that it may not be possible to develop a
unifying theory of innovation due to the funda-
mental differences between innovation types
[22,41]. Hence, we selected factors that are
more applicable to the adoption of IT in the
small business context. These selected factors
may be grouped into two major classes: CEO
characteristics and organizational character-
istics. Each of these factors is discussed below,
and a corresponding hypothesis enunciated.
CEO characteristics
C E O innorativeness. The CEO is an en-
trepreneur figure who is crucial in determining
the innovative attitude of a small business [64].
This is because the CEO's qualities are the
determinants of the overall management style of
the business [66]. In fact, the rate at which a
small business changes depends not only on
factors like business size or market forces, but
Adoption of IT
432 Thong, Yap--Information Technology
also on the abilities and inclinations of the CEO
and the extent to which he is able or prepared
to devolve management [7]. It is the role
adopted by the CEO that determines the inno-
vativeness of the business [9]. Kirton [42] con-
tended that everyone is located on a continuum
ranging from an ability to do things better to an
ability to do things differently. He called the two
extreme ends of the continuum adaptors and
innovators respectively. In a business, the
adaptor CEO would seek solutions that have
already been tried and understood. On the other
hand, the innovator CEO would prefer sol-
utions that change the structure in which the
problem is embedded--in other words, sol-
utions that have not been tried out and are
therefore risky [43]. Unless the CEO has the will
to innovate, there is little that other members of
the business can do to expedite the adoption of
IT.
Hypothesis l: Businesses with more innovative
CEOs are more likely to adopt
IT.
CEO attitude towards adoption o f IT. Accord-
ing to Rogers' [65] model of an individual's
innovation-adoption process, formation of a
favourable or unfavourable attitude towards an
innovation takes place before a decision to
adopt is made. In the case of a small business,
the chief decision-maker is the CEO. Hence, the
CEO's perception of the adoption of IT is of
prime importance. As IT is a new innovation to
the CEO, he or she has no way of knowing
whether it will be superior to existing methods
of operations. A degree of uncertainty exists as
adoption of IT is risky, and each CEO will
perceive the degree of risk or uncertainty associ-
ated with IT differently. If the CEO perceives
the benefits of IT adoption outweigh the risks,
then the business is more likely to adopt IT.
Nickell and Seado [55] have found that in
computerized businesses, the senior managers
tend to have a more positive attitude towards
adoption of IT.
Hypothesis 2: Businesses with CEOs who have
more positive attitude towards
adoption of I T are more likely
to adopt IT.
CEO I T knowledge. Typically, small
businesses are lacking in specialized IT knowl-
edge and technical skills [17, 19, 28, 45]. Niedle-
man [56] attributed the failure of European
small businesses to utilize IT to lack of IT
knowledge. In a study of Singapore small
businesses, Gable and Raman [29] found that
CEOs in such businesses tend to lack basic
knowledge and awareness of IT. Many of them
rejected the notion that IT could be of any use
to their business as they had no idea of the
benefits that IT could potentially offer. This
would seem to imply that if these CEOs could
be educated on the benefits of IT, they may be
more willing to adopt such technology.
Hypothesis 3: Businesses with CEOs who are
more knowledgeable about I T
are more likely to adopt IT.
Organizational characteristics
Business size. Small businesses suffer from a
special condition commonly referred to as re-
source poverty. Resource poverty results from
various conditions unique to small businesses,
such as operating in a highly competitive en-
vironment, financial constraints, lack of pro-
fessional expertise, and susceptibility to external
forces. Because of these unique conditions,
small businesses are characterized by severe
constraints on financial resources, a lack of
in-house IT expertise, and a short-range man-
agement perspective [71]. Consequently, small
businesses face substantially more barriers to
adoption of IT and are less likely to adopt IT
than large businesses [25]. Alpar and Reeves [2]
argued that even amongst small businesses, the
larger the business, the more able it is to hire
people with specialized skills, such as knowledge
of IT. In addition, it would appear reasonable
to suppose that larger businesses have more
potential to use IT than small businesses, simply
because of their larger scale of operations [46].
Hypothesis 4: Businesses that are larger in
size are more likely to adopt IT.
Competitiveness o f environment. By competi-
tiveness of the business environment, we mean
the competition faced by the business in its
particular industry. It is tough rivalry that
pushes businesses to be innovative [59]. Porter
and Millar [60] saw businesses as having to cope
with five competitive forces, namely new en-
trants, the threat of substitute products or
services, bargaining power of customers, bar-
gaining power of suppliers, and rivalry amongst
current competitors. They suggested that by
adopting IT, businesses will be able to change
 Omega, Vol. 23, No. 4
their environment in three ways, IT can change
the industry structure and, in so doing, alter the
rules of competition. IT can also create competi-
tive advantage by giving businesses new ways to
outperform their rivals. Finally, IT spawns new
businesses, often from within existing oper-
ations of the business. Therefore, a business in
an environment that is more competitive would
feel a greater need to turn to IT to gain a
competitive advantage. On the other hand, a
business in a less competitive environment
would not be faced with a push to be innovative.
Economists generally believe that competition
increases the likelihood of adoption of inno-
vation [41] and market power is generally be-
lieved to have a positive influence on innovation
[47].
Hypothesis 5: Businesses that are in a more
competitive environment are
more likely to adopt IT.
Information intensity. The degree to which
information is present in the product or service
of a business reflects the level of information
intensity of that product or service. Businesses
in different sectors have different information
processing needs and those in more infor-
mation-intensive sectors are more likely to
adopt IT than those in less information-inten-
sive sectors [74]. For instance, travel agencies
are more information intensive, as their main
functions are to process and package tour infor-
mation. Further, the greater the information
intensity, the greater the potential for strategic
uses of IT in a business [60].
Hypothesis 6: Businesses that are in more in-
formation-intensive environ-
ments are more likely to adopt
IT.
METHODOLOGY
Data collection procedure
There is no one generally accepted definition
of a small business. Three commonly used cri-
teria for defining a small business are number of
employees, annual sales, and fixed assets [37]. In
this study, the criteria for defining a small
business are adopted from the Association of
Small and Medium Enterprises (ASME) in Sin-
gapore. A small business is one that satisfies at
least two of the following criteria: (1) the
number of employees in the business should not
433
exceed 100; (2) the fixed assets of the business
should not exceed S$12 million (S$1.00=
US$0.60 approximately); and (3) the annual
sales of the business should not exceed S$15
million.
The names and addresses of 800 small
businesses which fulfil the ASME criteria were
obtained from a small business database main-
tained by the National Computer Board (NCB)
in Singapore. The N C B is the main government
agency overseeing the promotion of IT to im-
prove productivity and competitiveness in all
sectors of the economy. Although the number of
businesses supplied by the NCB is large, the
proportion of adopters and non-adopters of IT
may not be balanced as most of the businesses
supplied by the NCB would have adopted IT.
Hence, 400 additional businesses were selected
at random from the telephone directory. A total
of 1200 questionnaires were sent out.
This study was conducted in two phases: a
pilot study and a questionnaire survey. One
questionnaire was designed for data collection.
In the pilot study phase, five small businesses
were randomly chosen from the small business
database to pre-test the questionnaire. Five
CEOs completed the questionnaires. Next, in-
terviews were conducted with these CEOs to
determine whether there were any problems
with the questionnaire. Based on feedback from
these CEOs, minor modifications were made to
the questionnaire for the next phase of the
study. Responses from these five pilot study
businesses were not included in the final sample.
In the questionnaire survey, a package was
mailed to the CEO of each of the small
businesses in the survey sample. The package
contained three items: a covering letter; one
CEO Questionnaire; and a pre-paid reply envel-
ope. The covering letter explained the purpose
of the survey and requested the CEO to return
the completed questionnaire within three weeks
in the pre-paid reply envelope. The respondents
were assured of the confidentiality of their re-
sponses. A follow-up letter was sent to the
businesses that had not responded 3 weeks after
sending out the questionnaires.
Two hundred and ninety-four small
businesses returned the questionnaires. How-
ever, 122 questionnaires were returned uncom-
pleted as the businesses had changed their
addresses or were no longer in operation. The
remaining 172 questionnaires gave an effective
434 Thong, Yap--Information Technology
response rate of 16% (172/[1200-122]). This
response rate is considered reasonable notwith-
standing that the survey was unsolicited,
without any prior knowledge on the part of the
respondents. To ensure that these responses
were representative of the larger population,
non-response bias was assessed by comparing
early respondents with late respondents in terms
of three key organizational characteristics of the
sample [27]. Late respondents are likely to have
similar characteristics to non-respondents. The
three characteristics were number of employees,
fixed assets, and sales turnover, t-tests show no
significant difference between the two groups of
respondents in terms of number of employees
(t = 1.23; P - 0 . 2 2 8 ) , fixed assets (t = 1.29;
P =0.208), and sales turnover (t =0.64;
P =0.528) at the 5% significance level,
suggesting that non-response bias is not a prob-
lem. Responses from 6 businesses were excluded
from the final sample as they did not fulfill the
criteria of a small business. This resulted in 166
usable questionnaires for data analysis.
Measurement of the variables
The operationalizations of the research vari-
ables are exemplified in Appendix A. Standard
instruments were utilized as far as possible.
Where no standard instruments exist, the re-
search variables were operationalized in close
consultation with experienced IS researchers.
CEO innovativeness was measured by the
Kirton's [42] Adoption-Innovation Inventory
(KAI) instrument. The KAI is a list of 32 items
that is descriptive of the adaption-innovation
scale to measure a person's innovativeness.
Thomson's [70] study of managers from various
businesses in Singapore and Malaysia provides
empirical evidence that the KAI is applicable to
the English-speaking but ethnically different Far
East. Attitude towards adoption of IT was
measured by Moore and Benbasat's [51] instru-
ment. Their instrument is applicable to this
study as it is intended to be a tool for the study
of the initial adoption of IT innovations by
individuals in organizations. This instrument
was adapted to the small business context.
Business size was measured by number of em-
ployees, a popular measure used by other small
business researchers [13, 17, 21,49, 62, 63]. The
operationalizations of the remaining research
variables were developed specially for this
study. Two items were used to operationalize
CEO IT knowledge, three items for competitive-
ness of environment, and three items for infor-
mation intensity. All items except one were
measured by 5-point Likert scales representing
a range from 'Strongly Disagree' to 'Strongly
Agree'. The exception is one item of CEO IT
knowledge, where a score of one was assigned
when the respondent had no computer experi-
ence; otherwise, a score equivalent to the num-
ber of types of experience plus one was assigned.
The types of IT experience were adapted from
[18]. The rationale behind this item is that the
variable, CEO IT knowledge, is multi-dimen-
sional. However, there is insufficient research
into the relative importance of the different
dimensions of CEO IT knowledge. As such, in
this operationalization of CEO IT knowledge, it
was assumed that all hypothesized dimensions
are equally important. Further, the CEO was
asked to ascertain his or her IT knowledge
before adoption of IT by the small business.
This was to ensure that the CEO did not inflate
his or her level of IT knowledge with IT experi-
ences gained after adoption of IT. In future,
more research needs to be conducted to improve
operationalization of this variable. Finally, it
should be noted that the current CEO is the
same CEO who decided on IT adoption because
the CEO is typically the owner-manager in a
small business.
The dependent variable, adoption of IT, was
measured as a binary value: whether the
business is computerized or not computerized.
A dichotomous measure rather than a continu-
ous measure was used because the objective of
this study is to identify the factors that dis-
tinguish a computerized small business from a
non-computerized one. Following the example
of Alpar and Reeves [2], a business was defined
as computerized if it used at least one major
software application listed in the software appli-
cation table (see Appendix A). This list excludes
word processing packages. Thus, a business that
used only a word processing application was not
considered to be a computerized business. In
fact, none of the small businesses that have
adopted IT listed word processing as their only
software application. Besides soliciting data on
the research variables, the questionnaire also
solicited data on IT characteristics such as types
of hardware and software applications.
Instrument validation. Pilot testing was con-
ducted on 5 small businesses to improve the
 Omega, Vol. 23, No. 4 435

Table I, Factor analysis

Information Competitiveness CEO IT
Items intensity of environment knowledge
I. My company is dependent on up-to-date information 0.85*
2. It is very important for my company to have access
to reliable, relevant and accurate information 0.91
3. It is very important for my company to access
information fast whenever we need the information 0.89

I. It is easy for our customers to switch to another

company for similar services/products without
much difficulty 0.83
2. The rivalry among companies in the industry my
company is operating in is very intense 0.82
3. There are many products/services in the market which
are different from ours but perform the same functions 0.64

1. I have the following computer experience 0.84

2. I would rate my own understanding of computers as
very good compared to other people in similar positions 0.85
*Factor Ioadings.

validity and completeness of the questionnaire. analysis, the score for each composite research
For each composite research variable, the re- variable is the sum of a respondent's scores for
liability or internal consistency was assessed by items defined to measure that variable.
calculating Cronbach's c~coefficient as suggested
by Carmines and Zeller [10]. The reliability
coefficients were 0.82 for CEO innovativeness, RESULTS
0.87 for CEO attitude towards adoption of IT,
Sample characteristics
0.62 for CEO IT knowledge, 0.70 for competi-
tiveness of environment, and 0.89 for infor- The characteristics of the sample of 166
mation intensity. All the reliability coefficients businesses are shown in Table 2. The businesses
met Nunnally's [57] guideline of 0.60 and above sampled are in the manufacturing, commerce
for newly developed research variables and service sectors. The distribution of business
suggesting that the research variables are re- sectors is a reflection of the profile of small
liable. businesses in Singapore. The number of
Construct validity is the extent to which a businesses that have adopted IT constituted
particular item relates to other items consistent 72% of the responding sample. This figure
with theoretically derived hypotheses concern- corresponds closely with the national average
ing the variables that are being measured [10]. of 68% for businesses with < 100 employees,
To assess whether the specially developed vari-
Table 2. Sample characteristics
ables constituted different measures of CEO IT
Frequency*
knowledge, competitiveness of environment,
Seclor
and information intensity, a factor analysis was Manufacturing 49
performed. The factor loadings indicate the Commerce 46
Service 7I
extent to which each item is associated with an Adoption O/IT
underlying variable. Table 1 indicates that all Computerized 120
Non-computerized 46
the factor loadings are greater than the cut-off Hardware
point of 0.50 as recommended by Nunnally [57] Microcomputers only 61
Minicomputers only 9
and the items loaded on their hypothesized Mini and microcomputers , t5
variables. Confirmatory factor analysis of CEO Sq[)u'are applitation
Accounting 88
innovativeness suggested three underlying di- Sales 70
mensions which correspond to Kirton's [42] Inventory control 68
Purchasing 52
study. Similarly, factor analysis of attitude Personnel and payroll 51
towards adoption of IT confirmed the derived CAD/CAM 18
MRP 8
factors in Moore and Benbasat's [51] study. EDI 6
Hence, we are confident that construct validity Others 9
has not been violated. For subsequent statistical *Total may not add up to 166 due to missing data,
436 Thong, Yap--information Technology
Table 3. Hypotheses testing
Adopter (n = 120)* Non-adopter (n = 46) t-test

Variable Mean SD Mean SD t-value 2-tail sig

HI: CEO innovativeness 96.3 12.2 91.4 13.0 2.24 0.026*
H2: CEO attitude towards adoption of IT 79.9 9.8 71.3 16.2 3.38 O.OOl**
H3: CEO IT knowledge 5.5 1.9 4.3 2.0 3.40 0.001"*
H4: Business size 43. I 52.8 14.2 12.7 5.48 0.000"*
H5: Competitiveness of environment 10.9 2.8 11.5 2.6 -1.17 0.244
H6: Information intensity I 1.4 3.0 10.6 3.4 1.42 0.157
tSample size; *significant at P < 0.05; **significant at P < 0.01.

giving further confidence about the representa-
tiveness of the sample [53]. On hardware, the
majority of the businesses have microcomputers
only. Finally, most of the businesses have im-
plemented operational and management appli-
cations such as accounting systems, sales,
inventory control, purchasing, personnel and
payroll.
Hypotheses testing
The research data were analysed in two
stages. First, two bivariate data analysis tech-
niques t-test and Pearson correlation, were used
for testing individual hypotheses. Second, the
multivariate analysis technique, discriminant
analysis, was used to study the effects of all
independent variables simultaneously.
The individual hypotheses were tested by
using t-tests for independent samples. The de-
tails of the various hypotheses testing are sum-
marized in Table 3. The results provide support
for four of the hypotheses: HI, H2, H3, and H4.
They suggest that businesses that have CEOs
who are more innovative, have a better attitude
towards adoption of IT, and those with CEOs
who are more knowledgeable about IT, are
more likely to adopt IT. In addition, businesses
that have more employees tend to adopt IT.
There is no significant difference between
adopters and non-adopters of IT in terms of
competitiveness of environment or information
intensity.
The Pearson correlation matrix is presented
in Table 4. Adoption of IT is positively corre-
lated with CEO innovativeness, CEO attitude
towards adoption of IT, CEO IT knowledge,
and business size at the significance level of 0.05.
Only competitiveness of environment and infor-
mation intensity are not correlated with adop-
tion of IT. These results are in agreement with
the t-test results. In addition, there are other
correlations that should be noted. First, both
competitiveness of environment and informa-
tion intensity are positively correlated with CEO
attitude towards adoption of IT. This suggests
that higher levels of competitiveness of environ-
ment and information intensity will increase the
probability of the CEO forming a more positive
attitude towards adoption of IT. Second, com-
petitiveness of environment is positively corre-
lated with information intensity. Businesses
with higher level of information intensity in the
product or service of the business tend to oper-
ate in a more competitive environment.
The Pearson correlation matrix can also be
used to assess the extent of multicollinearity
among the independent variables. The presence
of high multicollinearity would make determin-
ing the contribution of each independent vari-
able to the dependent variable difficult as it
means that the effects of the independent vari-
ables are 'mixed' or confounded. From Table 4,
the highest squared correlation between vari-
ables is 0.15 between CEO attitude towards

Table 4. Pearson correlation matrix

Variable ( 1) (2) (3) (4) (5) (6)
(1) CEO innovativeness
(2) CEO attitude towards adoption of IT 0.040
(3) CEO IT knowledge 0.021 0.298**
(4) Business size 0.086 0.103 0.180"
(5) Competitiveness of environment -0.002 0.205** 0.144" -0.027
(6) Information intensity -0.015 0.389** 0.143" 0.031 0.342**
(7) Adoption of IT 0.173" 0.311"* 0.300** 0,272** -0.094 0.114
*Significant at P < 0.05: **significant at P < 0.01.
 Omega, Vol. 23, No. 4 437

Table 5. Discriminant analysis of adoption of IT

Univariate Standardized Structure matrix:
F-test canonical pooled within-groups
Variables probability coefficients correlations
CEO characteristics
CEO innovativeness 0.0127* 0.43 0.38
CEO attitude towards adoption of IT 0.0005** 0.47 0.53
CEO IT knowledge 0.0005** 0.42 0.53
Organizational characteristics
Business size 0.0005** 0.48 0.53
Competitiveness of environment 0.2912 - 0.39 - 0.16
Information intensity 0.1180 0.22 0.23
*Significant at P < 0.05; **significant at P < 0.01.

adoption of IT and information intensity. None
of the squared correlations are close to 0.80 to
suggest a problem with multicollinearity among
the research variables [35].
The second stage of data analysis involved
using discriminant analysis to identify the com-
bination of independent variables which best
accounts for the statistically significant differ-
ences between businesses that adopt IT and
businesses that do not adopt IT. Discriminant
analysis is a technique which allows the re-
searcher to study the differences between the
two groups with respect to two or more inde-
pendent variables simultaneously [44]. It is the
appropriate statistical technique when the de-
pendent variable is categorical (e.g. adopters or
non-adopters) and the independent variables are
interval data [35]. Here, the discriminant analy-
sis examines the effects of the individual charac-
teristics (CEO innovativeness, CEO attitude to-
wards adoption of IT, and CEO IT knowledge)
and organizational characteristics (business size,
competitiveness of environment, and infor-
mation intensity) on the adoption of IT.
The results of the discriminant analysis are
shown in Table 5. Based on the calculated
Wilks' ~. of 0.75 (Z 2 = 38.22, d.f. = 6, P < 0.01),
the overall model is significant. A further indi-
cator of the effectiveness of the discriminant
function is the degree of predictive accuracy
measured by the percentage of cases (or
businesses) classified correctly. The discriminant
function correctly classified 74% of the cases in
the sample, which exceeds the hit ratio of 60%
that would be expected due to chance [35]. The
individual correct classification rates for
adopters and non-adopters were 74.2 and
73.2% respectively. The probabilities for the
F-statistics identify the independent variables
which are significant discriminators between the
two groups while the standardized canonical
coefficients indicate the relative importance of
the variables included in the model. The pooled
within-groups correlations show how closely a
variable and the discriminating function are
related.
Based on the results of the discriminant
analysis, it can be inferred that small businesses
that adopt IT are:
(1) larger in size;
(2) more likely to have CEOs who possess
positive attitude towards adoption of
IT;
(3) more likely to have CEOs who are
more innovative and;
(4) more likely to have CEOs who are
knowledgeable about IT.
The remaining organizational characteristics
(competitiveness of environment and infor-
mation intensity) are not significant discrimina-
tors between adopters and non-adopters of IT.
This confirms the previous findings, providing
evidence to support hypotheses HI, H2, H3,
and H4.
DISCUSSION
This study has examined potential determi-
nants of IT adoption in small businesses. The
main finding is that in addition to business size,
CEO characteristics are significant determinants
of the decision to adopt IT in small businesses.
Not surprisingly, business size is the most
significant discriminator between adopters and
non-adopters of IT among small businesses.
Businesses that are bigger in size are more likely
to adopt IT. As small businesses are character-
ized by severe constraints on resources such as
finance and in-house technical expertise, adop-
tion of IT represents a disproportionately large
financial risk [1 I, 14, 71]. Only businesses that
438 Thong, Yap--Information Technology
have adequate financial and organizational re-
sources would consider adoption of IT a viable
project to undertake. Hence, having adequate
resources is a necessary first-step towards the
decision to adopt IT. This is in agreement with
findings from other studies in the technological
innovation literature [e.g. 41,47].
The main finding of this study is that besides
business size, individual characteristics are im-
portant determinants of the decision to adopt
IT. This finding is significant because previous
studies on adoption of IT innovations by organ-
izations have tended to focus on organizational
characteristics, without giving due emphasis to
individual characteristics such as those studied
here. Hence, this study contributes to the litera-
ture by providing empirical evidence that high-
lights the significant roles played by the CEOs
in adoption of IT innovation, especially in small
businesses. This finding is in agreement with the
technological innovation literature that those
who allocate organizational resources influence
innovation adoption [34, 67, 72]. The CEO in
a small business is the main decision-maker,
especially when it comes to major decisions.
And a major decision would be what to do to
maintain or gain a competitive edge. Adoption
of IT would be one possible avenue towards
competitive advantage.
For small businesses, adoption of IT rep-
resents a radical innovation that not only re-
quires a large outlay of financial resources, but
also involves complex technology [75]. In this
context, adoption of IT would be regarded as a
risky venture that not many small businesses
would be willing to undertake as potential losses
would be substantial both in terms of tangible
and non-tangible losses. It is quite likely that the
less innovative CEOs will look for other sol-
utions that are less radical and therefore less
risky. Only CEOs who are more innovative
would be willing to do things differently by
taking the risk of adopting IT in their
businesses. Risk-taking is in fact a characteristic
of successful champions of technological inno-
vation [36].
Small businesses with CEOs who have more
positive attitude towards adoption of IT are
more likely to adopt IT. This finding provides
support for Rogers' [65] model of an individ-
ual's innovation-adoption process. According
to this theory, formation of a favourable or
unfavourable attitude towards an innovation
takes place before a decision to adopt is made.
Attributes of an innovation that are especially
important during the formation of attitude in-
clude its relative advantage, compatibility, com-
plexity, trialability, and observability. If the
innovation is perceived to be better than the
manual system it supersedes, is consistent with
needs of the potential adopter, is easy to under-
stand and use, allows for experimentation, and
the results of usage are easily observed and
communicated, it is more likely that a favour-
able attitude towards the innovation is formed.
In addition, this finding also supports the theory
of reasoned action which postulates that the
intention of an individual to behave in a certain
manner is influenced by his or her attitude
towards the behaviour [26]. There is empirical
support for this theory in the context of usage
behaviour of personal computers [e.g. 12, 15]. In
the context of IT adoption by small businesses,
those CEOs who perceive IT adoption to be
beneficial and advantageous to their businesses
economically and in other intangible ways
would be more willing to undertake an IT
project.
In addition, small businesses with CEOs who
are more knowledgeable about IT are more
likely to adopt IT. The CEO must be aware of
the ability of the IT innovation and how to use
it properly. With greater knowledge, the degree
of uncertainty involved in IT adoption will
diminish, resulting in a less risky adoption of IT.
This is consistent with the findings of other
studies which reported that the lack of knowl-
edge of the IT adoption process and insufficient
awareness of the potential benefits may be in-
hibiting businesses from adopting IT [3, 69, 75].
To the extent a CEO can lower the knowledge
inadequacies, it will facilitate the path to adop-
tion of IT. This finding is also supported by
evidence from the technological innovation
literature. For example, Dewar and Dutton [20]
found that extensive knowledge is important
for the adoption of technical process inno-
vations.
Contrary to our hypotheses, competitiveness
of the environment and information intensity do
not have any significant direct effects on the
decision of small businesses to adopt IT. This
suggests that businesses that adopt IT do not do
so because of their environment, since both
adopters and non-adopters are actually operat-
ing in similar environments. Therefore, the corn-
 Omega, Vol. 23, No. 4
petitiveness of environment does not really
provide any direct 'push' for businesses to adopt
IT. The finding that information intensity has
no significant effect on the decision of small
businesses to adopt IT does not support the
finding by Yap [74]. There are two possible
explanations. First, the measures of information
intensity adopted in both studies were different.
Second, Yap's [74] study consists of both large
and small businesses. These differences may
account for the inconsistency. Future research
should develop and validate more detailed
measures (e.g. volume of transactions) to study
information intensity. Further, although com-
petitiveness of environment and information
intensity have no direct effects on the decision to
adopt IT, there is evidence that they may have
indirect effects on adoption of IT through the
CEO attitude towards adoption of IT. CEO
attitude towards adoption of IT is positively
correlated with both of these variables. Thus,
the competitiveness of the environment and
an information-intensive business sector may
influence the CEO's perception towards
IT adoption, resulting in the decision to adopt
IT.
These findings have implications for IT
consultants, vendors, and government agencies
responsible for promoting IT adoption. To in-
crease their chances of success, IT consultants
and vendors are advised to target their market-
ing at businesses with innovative CEOs. They
ought to look out for indicators of innovative
behaviours such as adoption of new production
technology or processes, imaginative advertise-
ments, and participation in trade organizations
and exhibitions. For those CEOs who are less
innovative and thus highly adaptive, consult-
ants and vendors should take steps to create IT
awareness among these CEOs so as to educate
them. Adaptive CEOs prefer not to adopt IT
unless they are sure that adoption of IT is one
way of doing things better and not doing things
differently. With a better understanding of IT
and its potential benefits, these CEOs may
develop more positive attitudes towards adop-
tion of IT. As their attitudes become more
positive, they will be more receptive towards
the idea of adopting IT. Government agencies
responsible for promoting IT adoption
should focus their effort on raising IT literacy.
This can be achieved through subsidized IT
seminars and training programmes specially de-
439
signed for CEOs and employees of small
businesses.
Finally, two limitations of this study are
discussed. First, due to the cross-sectional
nature of the study, direction of causality can
only be inferred. It was not possible to
measure directly the perception of the CEO at
the time of adoption of IT. This is ameliorated
to some extent by requesting the respondent to
ascertain his or her perceptions before IT adop-
tion. However, we cannot be completely certain
that the respondent can back-track his or her
mind uninfluenced by the experience of IT
adoption to what the state was before adoption
of IT. Longitudinal studies will have to be
conducted to determine the causality links
more explicitly. Second, this study has investi-
gated a subset of the individual and organiz-
ational characteristics. There may be other
characteristics of the CEO and other organiz-
ational characteristics which may be potential
determinants of IT adoption by small
businesses. Future research should examine
this possibility. Notwithstanding these limi-
tations, we believe that this study has identified
important determinants of IT adoption in small
businesses. The findings of this study are also
applicable to small businesses in other countries
because small businesses everywhere suffer from
similar resources constraints due to their
size.
CONCLUSION
This study has examined the effects of CEO
characteristics and organizational character-
istics on the decision of small businesses to
adopt IT. It concludes that regardless of
business size, the characteristics of the CEOs of
small businesses are important determinants of
the decision to adopt IT. Small businesses that
have CEOs who are more innovative, possess
more positive attitude towards adoption of IT,
and are more knowledgeable about IT, are more
likely to adopt IT. This study has also provided
evidence that technological innovation theories
can be successfully applied to the study of
organizational adoption of IT, particularly in
the context of small businesses. The technologi-
cal innovation field presents IS researchers
with a new avenue for studying IT adoption,
diffusion, and implementation.
440 Thong, Yap--lnJbrmation Technology

APPENDIX A
Questionnaire Items
Examples of the items used are shown below.
Strongly Strongly
disagree agree
CEO Innovativeness
1 have original ideas I 2 3 4 5
I would sooner create something new than improve something existing 1 2 3 4 5
1 often risk doing things differently I 2 3 4 5
CEO Attitude Towards Adoption of IT
Computers increase the productivity of my employees I 2 3 4 5
My employees find computers easy to use I 2 3 4 5
1 have seen what other small companies have achieved with computers I 2 3 4 5
CEO IT Knowledge
I have had the following computer experience (You may circle more than one)
(i) Attended computer classes
(ii) Use a computer at home
(iii) Use a computer at work
(iv) Have formal qualifications in the use and operation of a computer
(v) None
I would rate my own understanding of computers (before my company I 2 3 4 5
computerized) as very good compared to other people in similar positions
Business Size
Number of employees:
Competitiveness of Environment
It is easy for our customers to switch to another company for similar I 2 3 4 5
services/products without much difficulty
The rivalry among companies in the industry my company is operating I 2 3 4 5
in is very intense
There are many products/services in the market which are different from ours I 2 3 4 5
but perform the same functions
Information Intensity
My company is dependent on up-to-date information 1 2 3 4 5
It is very important for my company to have access to reliable, relevant I 2 3 4 5
and accurate information
It is very important for my company to access information fast whenever I 2 3 4 5
we need the information
Adoption of IT
Is your company computerized? YES/NO

Software Applications ,For each manufacturer and model of mk'rocomputer in your com-
For each computer applications in use in your company, please put pany, please fill in a row of the following table:
tick against the application.
Manufacturer Model Operating system Number
Application In-use
Accounting
Inventory control
Sales
Purchasing
Personnel and payroll
REFERENCES
CAD/CAM
EDI I. Alexander M (1989) The adoption and implementation
of c o m p u t e r technology in organizations: the example
MRP of database machines. Unpublished Ph.D. thesis, Indi-
Others (please specify) ana University.
2. Alpar P and Reeves S (1990) Predictors of M S / O R
application in small businesses. Interfaces 20, No. 2,
2-11.
3. Attewell P (1992) Technology diffusion and organiz-
ational learning: the case of business computing. Org.
Computer Hardware
Sci. 3, No. 1, 1-19.
For each minicomputer in your company, please fill in a row of the 4. Baldridge JV and B u r n h a m RA (1975) Organizational
following table: innovation: individual, organizational and environmen-
tal impacts. Admini. Sci. Q. 20, 165-176.
Number of 5. Bannock G and Peacock A (1989) Governments and
Manufacturer Model Operating system Terminals Small Business. C h a p m a n , London.
6. Benjamin RI, Rockart JF, Scott-Morton MC and
W y m a n J (1984) Information technology: a strategic
opportunity. Sloan Mgmt Rev. 25, No. 3, 3-10.
 Omega, Vol. 23, No. 4
7. Birley S (1982) Corporate strategy and the small firm.
J. Gen. Mgmt 8, No. 2, 82-86.
8. Brancheau JC and Wetherbe JC (19903 The adoption
of spreadsheet software: testing innovation diffusion
theory in the context of end-user computing. Inform.
Syst. REs. 1, No. 2, 115-143.
9. Cannon T (1985) Innovation, creativity and small firm
organization. Int. Small Business J. 4, No. 1, 33-41.
10. Carmines EG and Zeller RA (1981) Reliability and
ValidiO, Assessment. Sage, Beverly Hills.
I 1. Cohn T and Lindberge RA (1972) How Management is
Different in Small Companies. American Management
Association, New York.
12. Collins F and Mann GJ (1988) Change-related be-
haviour and information systems. Omega 16, 369-381.
13. Cragg PB and King M (1992) Information system
sophistication and financial performance of small
engineering firms. Eur. J. Inform. Syst. 1,417-426.
14. Dandridge TC (1979) Children are not 'little grown-
ups': small business needs its own organizational theory.
J. Small Business Mgmt 17, No. 2, 53-57.
15. Davis FD, Bagozzi RP and Warshaw PR (1989) User
acceptance of computer technology: a comparison of
two theoretical models. Mgmt Sci. 35, 982-1003.
16. Davis GB and Olson MH (1985) Management Inform-
ation Systems: Conceptual Foundations, Structure, and
Development. McGraw-Hall, Singapore.
17. DeLone WH (1981) Firm size and characteristics of
computer use. MIS Q. 5, No. 4, 65-77.
18. DeLone WH (1983) Determinants of success for small
business computer systems. Unpublished Ph.D. thesis,
University of California, Los Angeles.
19. DeLone WH (1988) Determinants of success for com-
puter usage in small business. MIS Q. 12, No. 1, 51-61.
20. Dewar RD and Dutton JE (1986) The adoption of
radical and incremental innovations: an empirical
analysis. Mgmt Sci. 32, 1422-1433.
21. Doukidis GI, Smithson S and Lybereas T (1992)
Approaches to computerization in small businesses in
Greece. Proceedings of the Thirteenth International
Conference on Information Systems, Dallas, Tex.,
pp. 139-148.
22. Downs GW Jr and Mohr LB (1976) Conceptual issues
in the study of innovation. Admin. Sci. Q. 21, 700-714.
23. Dyson K (1990) Small and Medium Sized Enterprises.
Spicers European Policy Reports, Routledge, London.
24. Earl M (1989) Implementation: Management Strategies
for Information Technology. Prentice-Hall, New York.
25. Ein-Dor P and Segev E (1978) Organizational context
and the success of management information systems.
Mgmt Sci. 24, 1064-1077.
26. Fishbein M and Azjen I (1975) Belief, Attitude,
Intention, and Behavior: An Introduction to Theory
and Research. Addison-Wesley, Reading, Mass.
27. Fowler FJ (1988) Survey Research Methods. Sage,
Beverly Hills.
28. Gable GG (1991) Consultant engagement for first time
computerization: a pro-active client role in small
businesses. Inform. Mgmt 20, 83-93.
29. Gable GG and Raman KS (1992) Government
initiatives for IT adoption in small businesses. Int.
Inform. Syst. 1, No. 1, 68-93.
30. Gibb AA and Manu G (1990) Design of extension and
support services for small scale enterprise development.
Int. Small Business J. 8, No. 3, 10-27.
31. Gray TA (1988) Small business in the Year 2000. Small
Business in the American Economy. U.S. Government
Printing Office, Washington D.C.
32. Grover V and Goslar MD (1993) The initiation,
adoption, and implementation of telecommunications
441
technologies in U.S. organizations. J. Mgmt In/brm.
Syst. 10, 141-163.
33. Hage J and Aiken M (1967) Program change and
organizational properties: a comparative analysis. Am.
J. Sociol. 72, 503-519.
34. Hage J and Dewar R (1973) Elite values versus organ-
izational structure in predicting innovation. Admin. Sci.
Q. 18, 279-290.
35. Hair JF Jr, Anderson RE, Tatham RL and Black WC
(1992) Multivariate Data Analysis, 3rd edition.
Macmillian, New York.
36. Howell JM and Higgins CA (1990) Champions of
technological innovation. Admin. Sci. Q. 35, 317 341.
37. Ibrahim AB and Goodwin JR (1986) Perceived causes
of success in small business. Am. J. Small Business 11,
No. 2, 41-50.
38. Ives B and Learmonth GP (1984) The information
system as a competitive weapon. Commun. ACM 27,
1193-1201.
39. Jackson WM and Palvia P (1990) The state of comput-
ers and MIS in small businesses, and some predictive
measures of computer use. J. Computer InJorm. Syst. 31,
No. 1, 49-53.
40. Kimberly JR (1978) Hospital adoption of innovation:
the role of integration into external information
environments. J. Hlth Soc. Behav. 19, 361-373.
41. Kimberly JR and Evanisko MJ (19813 Organizational
innovation: the influence of individual, organizational,
and contextual factors on hospital adoption of techno-
logical and administrative innovations. Acad. Mgmt J.
2,4, 689-713.
42. Kirton MJ (1976) Adaptors and innovators: a descrip-
tion and measure. J. Appl. Psychol. 61, 622-629.
43. Kirton MJ (1984) Adaptors and innovators--why
new initiatives get blocked. Long Range Plann. 17,
137-143.
44. Klecka WR (1981) Discriminant Analysis. Sage, Beverly
Hills.
45. Lee JD (1987) Successful development of small
business information systems. J. Syst. Mgmt 25, No. 3
32-39.
46. Lind MR, Zmud RW and Fischer WA (1989) Micro-
computer adoption--the impact of organizational size
and structure. Inform. Mgmt 16, 157-162.
47. Link AN and Bozeman B (1991) Innovative behaviour
in small-sized firms. Small Business Econ. 3, 179-184.
48. Miller D and Toulouse J (1986) Chief executive person-
ality and corporate strategy and structure in small firms.
Mgmt Sci. 32, 1389-1409.
49. Montazemi AR (1988) Factors affecting information
satisfaction in the context of the small business environ-
ment. MIS Q. 12, 239-256.
50. Moore GC (1987) End user computing and office
automation: a diffusion of innovations perspective.
INFOR 25, 214-235.
51. Moore GC and Benbasat I (19913 Development of an
instrument to measure the perceptions of adopting an
information technology innovation. Inform. Syst. Res.
2, 192-221.
52. Mudd S (1990) The place of innovativeness in
models of the adoption process: an integrative review.
Technovation 10, 119-136.
53. National Computer Board (1993) Singapore IT Usage
Survey 1993. National Computer Board, Singapore.
54. Nazem SM (1990) Sources of software and levels of
satisfaction for small business computer applications.
Inform. Mgmt 19, 95-100.
55. Nickell GS and Seado PC (1986) The impact of
attitudes and experience on small business computer
use. Am. J. Small Business 10, No. 4, 37 47.
442 Thong, Yap--Information Technology
56. Niedleman LD (1979) Computer usage by small and
medium sized European firms: an empirical study.
Inform. Mgmt 2, No. 2, 67-77.
57. Nunnally J (1978) Psychometric Theory. McGraw-Hill,
New York.
58. Pickle HB and Abrahamson RL (1990) Small Business
Management, 5th edition. Wiley, New York.
59. Porter M (1990) The Competitive Advantage of Nations.
The Free Press, New York.
60. Porter M and Millar VE (1985) How information gives
you competitive advantage. Harvard Business Rev. 63,
No. 4, 149-160.
61. Poutsma EF, Van Uxem FW and Walravens, AHCM
(1987) Process Innovation and Automation in Small
and Medium Sized Business. Delft University Press,
The Netherlands.
62. Raymond L (1985) Organizational characteristics and
MIS success in the context of small business. MIS Q. 9,
37-52.
63. Raymond L (1990) Organizational context and
information systems success: a contingency approach.
J. Mgmt Inform. Syst. 6, No. 4, 5-20.
64. Rizzoni A (1991) Technological innovation and small
firms: a taxonomy. Int. Small Business J. 9, No. 3,
31-42.
65. Rogers EM (1983) Diffusion oflnnovations, 3rd edition.
The Free Press, New York.
66. Rothwell R (1977) The characteristics of successful
innovators and technically progressive firms. R&D
Mgmt 7, 191-206.
67. Sapolsky HM (1967) Organizational structure and
innovation. J. Business 40, 497-510.
68. Scheich JF, Corney WJ and Boe WJ (1990) Microcom-
puter implementation in small business: Current status
and success factors. J. Microcomputer Syst. Mgmt 2-10.
69. Senn JA and Gibson VR (1981) Risks of investment
in microcomputers for small business management.
J. Small Business Mgmt 19, No. 3, 24-32.
70. Thomson D (1980) Adaptors and innovators: a replica-
tion study on managers in Singapore and Malaysia.
Psychol. Rep. 47, 383-387.
71. Welsh JA and White JF (1981) A small business is not
a little big business. Harvard Business Rev. 59, No. 4,
18-32.
72. Wilson JQ (1966) Innovation in organization: notes
towards a theory. Approaches to Organizational Design
(Edited by Thompson JD), pp. 193-218. University of
Pittsburgh Press, Pittsburgh.
73. Yap CS (1989) Computerization problems facing small
and medium enterprises: the experience of Singapore.
Proceedings of the 20th Annual Meeting of the Midwest
Decision Sciences Institute, Miami University, Ohio,
pp. 128-134.
74. Yap CS (1990) Distinguishing characteristics of organ-
izations using computers. Inform. Mgmt 18, 97-107.
75. Yap CS, Thong JYL and Raman KS (1994) Effect of
government incentives on computerization in small
business. Eur. J. Inform. Syst. 3, 191-206.
76. Zaltman G, Duncan R and Holbek J (1973) Innovations
and Organizations. Wiley, New York.
ADDRESS FOR CORRESPONDENCE: Dr Chee Sing Yap, Inform-
ation Systems Division, DISCS, National University of
Singapore, Singapore 0511.