ROLE OF INFORMATION TECHNOLOGY ON

PERFORMANCE OF SMALL AND MEDIUM-

SIZED ENTERPRISES (AFGHANISTAN AS A
CASE STUDY)

SHORT SYNOPSIS
Submitted in partial fulfillment of the requirement of the degree of
DOCTOR OF PHILOSOPHY
to
Manav Rachna International Institute of Research and Studies
(deemed to be university)
by
Firooz Ahmad Ganji
Registration number:18/PhD/059
Under the supervision of
Dr. Bhavesh P. Joshi
Assistant Professor, Faculty of Management

FACULTY OF MANAGEMENT
MANAV RACHNA INTERNATIONAL INSTITUTE
OF RESEARCH & STUDIES
SECTOR-43, SURAJKUND- DELHI ROAD, FARIDABAD-121001

FACULTY OF MANAGEMENT STUDIES

 Contents

Abstract........................................................................................................................................................ 3
1- Introduction ......................................................................................................................................... 1
1-1 Importance of small and medium enterprises in economy: .......................................................... 2
1-2 Small and Medium enterprises in Afghanistan: ............................................................................ 3
1-3 Information Technology................................................................................................................... 4
2- Literature Review ............................................................................................................................... 6
3- Description of Broad Area ................................................................................................................. 9
4- Objectives............................................................................................................................................. 9
5- Research Methodology ....................................................................................................................... 9
6- Proposed Outcome ............................................................................................................................ 10
7- References .......................................................................................................................................... 10
 Abstract

In developing countries such as Afghanistan, adopting policies related to supporting and

developing small and medium-sized economics enterprises for increasing of growth, creating
income and employment, and even reducing of poverty which is the most essential and valuable
economic and social priorities of the governments. Small and medium-sized enterprises are the
most factor of growth, innovation and economic mobility and development of the country,
especially in developing countries. One of the most important and effective components in case of
developing of small and medium enterprises in the world refers to the using of information
technology. However, despite of the obvious development of information technology, some
companies have completely ignored the need of adopting such technologies. The main reason is
the inability of managers in using these technologies against their competitors or their inability in
case of capitalizing from the opportunities which are raised from information technology. The
purpose of this study is the investigation of the role of using information technology on the
performance of small and medium companies. This study has been conducted in Herat city of
Afghanistan, on 300 small and medium-sized enterprises, out of more than 3,000 small and
medium-sized enterprises which were registered in the ministry of information and technology.
Statistic society is including managers of small and medium enterprises. The type of research in
terms of purpose is applied research, and in terms of data collection, it is descriptive.

Keywords: Information Technology, Small and Medium Enterprises, Performance

 1- Introduction

The complicated and rapid revolutions of the last few decades and as well as the
acceleration of the globalization process have led various societies to make them ready for
acceptance of revolution. What was considered as an economic privilege until a few decades ago
was the maintaining and keeping active of large companies and consequently becoming state-
owned most organizations and it was argued that as much these companies be larger as much the
economy becomes more dynamic and powerful. Since the second half of 20th century, different
patterns of industrial growth and development have been experienced in countries around the
world. One of these models is small and medium-sized industrial corporations. SMEs are
recognized as essential elements of socio-economic development in most countries. These firms
are especially important and valuable in case of creating job opportunities with low-investment,
institutional development of companies based on technology principles, product innovation, and
creating new ways of doing business. According to this reason, nowadays economical corrections
from type of framing and launching of small and medium jobs are considered as a strategic
approach in many countries especially in developing countries. It is necessary to change the role
of government, empowering of the private sector, economy competitiveness and interacting with
the rules of globalization etc. Policies makes economic sense necessary based on economic
liberalization and strengthening of private sector for developing of economic activities.
(Maimunah, 2009). Many factors influence the firm’s competitiveness. However, most of the
researchers since 1980 have examined the concept of IT as a powerful competitive factor for
organization (Barney, 1999). IT, in its nascent business world form, was generally considered a
support tool. However, as time passed and technological sophistication grew, IT’s usage and
impact increased dramatically (Chan, 2000). This pattern of progress is due to the advancement of
technology. A technological diffusion or infusion may be attributable to the fact that IT’s
introduction into an organization creates a further technological needs and encourages product and
policy innovation to meet such needs.

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1-1 Importance of small and medium enterprises in economy:
In recent years, the importance and role of small and medium-sized companies in
industrialized and developing countries has been increasing. In the last two decades, by the advent
of new technologies in production and communication, changes in the capabilities of industrial
units, production and distribution methods and organizational structure have emerged that have
generally increased the importance of small and medium-sized enterprises (Ye Young & Zeng,
2005). These companies have very high value to developing economies, due to obvious and
valuable help was done to employment and GDP growth and the growth of this sector makes the
economy dynamic. In many countries, most jobs are created by these firms. In 30 countries with
the highest earnings in the OECD1, more than two-thirds of the people who have job and they are
busy with small and medium jobs. For example, according to surveys, small and medium-sized
enterprises comprise were involved more than 99 percent of US business entities and more than
80 percent of the nation's workforce are dealing in these work. Small and medium-sized enterprises
in industrialized countries such as Japan, Australia, Germany, France and Canada also have high
value and are important drivers of economic growth and technological advancement. These
businesses also play a vital role in developing countries because of their potential for improving
of income distribution, creating employment, reducing poverty, growing of exports and creating
entrepreneurship. Small and medium marketing in various countries of the world have a lot of
similarities with each other but in spite of this, they cannot be defined in the same way as a single,
and each country has given its own definition from them based on their own special condition. In
some countries, this definition is based solely on the number of workers, while in others, financial
variables such as turnover or assets are included. Despite of this, the most important variable that
underpins all the definitions is the number of employees, which are different in different countries
and even in different industries.
Business Classification Number of Personnel Total Assets / Annual Sale
Tiny businesses less than 10 people less than $ 100,000
Small businesses between 10 - 50 people between $ 100,000 - $ 3 million
Medium sized between 50 - 300 people between $ 3 million - $ 15 million
businesses
(Table 1, Rostamzaman, M. (2019) [online] https://blog.tejaratbank.ir/blog/1755242)

1
Organization for Economic Co-operation and Development

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 According to the World Bank's definition from small and medium-sized enterprises, these
small and medium enterprises are called to the firms which had maximum of 300 employees and
total annual sales should not be more than $ 15 million. According to the given definition by World
Bank, such businesses can be divided into three categories: tiny, small and medium.
(Rostamzaman, 2019)

1-2 Small and Medium enterprises in Afghanistan:

Afghanistan has been turning to the free market system, which means is accepting of
private sector as a machine of the economic growth. Small and medium-sized enterprises are
located in the heart of private sector. These enterprises paved the workspace for about 80 percent
in Afghanistan and half of the country's interior GDP are produced by these enterprises.
Meanwhile, one-third of the country's workforces are also involved in these enterprises. Although
the role of small and medium-sized enterprises is very important and valid in the economy of this
country but prosperity and development of this sector has not been a priority until recently.
Since then that Afghanistan turned to free market economy in 2001, the private sector was
known as the engine of its economic growth. However, the massive arrival of foreign aids and the
huge money which were consumed by foreign forces so it did not allow the government to pay
attention to the development of small and medium-sized enterprises in the context of a market
economy frame. Paying attention to enterprises could provide long-term economic stability and
economic stability. The current strategy of this country for small and medium-sized enterprises
was finalized in 2009 and it is more focused on manufacturing sectors active in the production of
alternative goods for imports. At the same time, however, these enterprises have been encountered
to major challenges and have raised questions about competitiveness, skills and creativity as well
as their survival after the transition. The main issues that hinder the growth of small and medium-
sized enterprises include lack of clarity and unpredictability of the country's economic space,
dependency on donor organizations, lack or deficit of industrial energy, lack of access to market,
and lack of clear communication between the markets’ needs and education system of the country.
Due to societal limitations, the magnitude of the above challenges for women-led businesses was
increasing, and support of women who are working outside the home seems to be diminishing. In
this case, Afghanistan has been facing to trade deficit but its trade has grown well over the last

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decade. However, that trade remains limited to the trade items that the country has long been
known for. In Afghanistan, small companies are called to have employees ranging from 1 to 5, and
medium-sized enterprises are those ones which have employees between 6 to 12, and large
companies are those ones to have more than 20 employees. (Marshal, 2014).

1-3 Information Technology

In the last few decades, IT has grown rapidly and has had a significant impact on the status
and performance of many communities, organizations, individuals, and along with the tremendous
advances made in this regard, the fate of communities, organizations, and individuals that every
day more than ever before, we are tied to this modern technology. Although the term information
technology seems to be a new term, its meaning goes back to the time when cavemen began
communicating. Smoke signs, wall cave paintings, animal skins, and other forms of
communication are among the earliest embodiments of the communication. In more clearly way,
the printing industry is one of the first forms of information technology in recent centuries. Having
access to the comprehensive information and using of information technology in the appropriate
time can enhance creativity and technology. On the other hand, it prevents wasted resources and
unnecessary and unwanted rework and above all useless decisions. Undoubtedly, the efficiency of
the informative system will improve many things. In the economic realm of information
technology, it has made fundamental changes in the way of management, business activities, and
how their competitions in foreign and domestic markets. On the other hand, it allows business
managers to understand the economic and taxation rules, commodity technology, raw material
characteristics, standards requirements, tables scheduling control and delivery procedures for
goods, market fluctuations, competitors, etc… they can have beneficiated in the shortest amount
of time, and by studying and selecting the most reasonable solution, achieving optimal results in
economic, natural and energy resources can have access to the wanted results. Through utilizing
of technical informative business, businesses can easily communicate with suppliers of raw
materials and with consumers anywhere in the world. Technical information makes it easier to
predict future status and make decisions about the type of product by enabling accurate and fast
information on customer needs and preferences. (Shahpasandi, Sohaila, 2014).

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 Organizational performance means making changes for the betterment of the organization,
which is a systematic approach for changing. It seeks to provide the organization with the most
emphasis on human values based on value beliefs by integrating the goals of the organization and
the individual (Waezi, 1996). Information technology also has been source of many benefits and
beneficiaries for the organization and it had an undeniable role in speed of work, speed of
information gathering, decision making and management. However, along with the benefits in case
of being ignorant, it has its human disadvantages results. It is due to that, that friendliness and
gentleness make the working environment somewhat cold. (Kargar & Partner, 2009)
During the last half century, investment in information technology has been increased.
Modern and successful organizations have grown because they believe that information
technology is one of the most important factors influencing changes in organizational structure
and performance. (Harris& Davison, 1999) have found that in recent years more than 90% of the
World Bank's lending system in advanced countries has been provided through IT components.
They also have estimated that the cost of information technology will not exceed from $ 1.5 trillion
in all around the world per year and also it is increasing by approximately 10% per year (Anadore
Jen& Anakori 2002). It is generally accepted that increasing of investment in information
technology has naturally led to development of organizational performance, of course not in all
dimensions (Adpdra &Clevizer 1998).

The impact of information technology on the performance of organizations can be

investigated through four key indicators such as efficiency and effectiveness, flexibility and
integration, electronic trading and communications, which improve the performance of
companies’ activities. However, Afghanistan as one of the third world countries has been failed to
take advantage of the information technology's capabilities. There are many challenges toward
development and institutionalization of information technology in Afghanistan. The most
important challenge is lack of awareness among small and medium enterprises’ managers and also
disregard to the usefulness and characteristics of this technology in these companies. (Tavasoly,
2017). Therefore, in this study, it has been planned to pave the way for progress and achievement
of efficient economy by providing favorable conditions for application of information technology
in small and medium enterprises. Therefore, it is mandatory to clarify the benefits of using
information technology and identify the limitations of its application in small and medium-sized
industries.

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 2- Literature Review

Through using of information technology and its impact on small and medium-sized
enterprises in Afghanistan is one of the issues that has rarely been investigated. In order to illustrate
the state of using and impact of information technology on small and medium-sized enterprises in
Afghanistan, I have studied numerous books, articles, and topics in order to help me to be able to
study on challenges of using information technology which are available in the mentioned
enterprises. It should be mentioned that despite of the significant development of information
technology, some companies have either completely overlooked the need to adopt such
technologies or are moving too slowly to make decisions about processes and implementation of
them. The reason for this, is the inability of managers to be aware of the usage of information
technology and its potential benefits. However, according to the research which was done shows
the positive results of using information technology in small and medium-sized companies around
the world.

 Shawkat &Zafaralah (2009) a study entitled "The Impact of Information Technology on

organizational Performance:’’ A qualitative analysis of the performance of banking
indicators and manufacturing Companies of Pakistan was done by them. Initial data were
collected through in-depth interviews and field surveys of 48 companies about 24 cases in
manufacturing sector (local and foreign) and 24 cases were in banking sector (local and
foreign). The results of this research showed that information technology had a positive
impact on the organizational performance of all organizations but the banking sector
performance has been higher than the manufacturing sector because in the banking sector,
local companies outperform their competitors, while in manufacturing companies,
multinational companies are at the peak.
 Olgbod and colleagues (2008) conducted a study on the effect of information systems on
performance of the company and profitability through using a case study approach. Studies
showed that Bill and Cole company experienced a significant level of growth in their
business. However, its existed operating methods and the ICT infrastructure were unable
in case of maintaining their growth levels. A complete analysis of operating systems,
including manual systems and systems which have been covered by computerized
accounting, revealed some useful changes, including the implementation of a major new

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 business system for replacing of old accounting system. Currently, Bill and Cole have been
fully supported by an IT system that maintains its competitive advantage and facilitates
and also Its continued profitable growth. (4)
 Almari and colleagues (2014), conducted a study entitled "The role of different types of
information systems in business organizations.’’ They stated that different types of
information systems are used in business organizations that Includes: event processing
systems, which are commonly used in organizations for recording of simple tasks,
repetitive tasks, and tasks that are performed on a daily basis which are used for guiding of
work. Office automation system, the main task of these systems is document management
and making facility in letter writing and information within the organization. In these
systems through the helping of communication and communication technology by using
word processors, electronic files, e-mails, e-conferences, etc. are used for office
automation. Process Control Systems which are designed for monitoring and controlling
industrial processes and installations. Management Information systems which are
basically related to converting data from internal sources into information whose function
is to communicate between managers at all levels and thus help them to make effective and
timely decisions. The protector systems of system, are used to perform complex statistical
and mathematical models, data analysis and decision support, and also for better choosing
of the best option and anticipated results. Executive information systems help senior
executives make strategic and tactical decisions. Expertise Information System has been
designed for applying of human reasoning.
 (Islam Hassan and colleagues,2014), did a research entitled "The impact of management
information system on organizational making decision process Sudan River State Title "
For this purpose, 200 employees were selected by random cluster sampling in different
positions in the public sector and the same number in the private sector too. Findings show
that there has not been any difference between managers' adjustment levels between the
private and public sectors. There has not been significant difference between two parts in
the existence of information systems to enhance the efficiency and efficiency of the making
decision process. The study also has shown that there was no meaningful difference
between two departments in helping the management information system to managers in
terms of policies and strategic formulations. Finally, the results show that there has not

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 been meaningful difference between the public and private sectors in the managerial and
technical barriers that impede the implementation and application of the information
system.
 Dervish and colleagues (2014) conducted a research by the name of this title "The impact
of administrative automation system on managers' making decision in airlines in Iran.” the
results showed that the automation system has a positive effect on increasing the accuracy
and correctness and still suitability of managers’ making decision and enhancing their
capabilities.
 According to Manochehri, Al-Esmail and Ashrafi (Manochehri, 2012) the use of IT in
SMEs will reduce the barriers of trade, improve the transactions level and support the
enterprise with the information needed SMEs adapt IT to compete in the global market as
it gives competitive advantage to the business over its competitors (Alam and Noor, 2009).
 Many empirical studies focus on the determinants of innovation and its impact on a firm’s
performance (Thornhill, 2006; Love et al., 2009; Lemonakis et al., 2013). Atalay et al.
(2013) examined the relationships between innovation and firm performance and
concluded that technological innovation (product and process innovation) has a significant
impact on firm performance, while no evidence found for a significant and positive
relationship between non-technological innovation (organizational and marketing
innovation) and firm performance.
 operational applications such as word processing, databases and spread sheets are used
more widely by the SMEs (Ahmed 2010). However, there is still dissatisfaction with
purchasing software, and there is a strong need for advice with purchasing software, and
there is a strong need for the advice provided by concerned parties other than vendors.
Requirements analysis should be supported by a feasibility study, which is still a poorly
understood the concept by many owner-managers. Suggestions by Levy et al (1997)
include a more proactive approach from the software provider who would review strategy
with the company and advise on future IT requirements; bring in a consultant to act as an
intermediary; ensure that one person has responsibility for reviewing IT needs and liaising
with the software provider.

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 3- Description of Broad Area

One of the major issues for government of Afghanistan and supporting countries is the
growth and development of small and medium enterprises. Since I have worked as a financial
advisor in many small and medium-sized enterprises in Herat province in Afghanistan for a while,
I have come to realize that the majority of small and medium-sized enterprises do not use
information technology for improving of their operations because it can make a positive impact on
different parts of company. According to the done investigation study, information technology is
one of the key components in growth and development of small and medium-sized enterprises in
developing countries. Therefore, the purpose of this study is to investigate the status of the use of
information technology and its impact on the performance of small and medium-sized enterprises
in Herat province in Afghanistan.

4- Objectives

The main objectives of this study are investigating of recognition status, using and impacts of
information technology on small and medium enterprises. By achieving these goals, the status of
companies is determined by extent in which new technologies are used by other companies in other
countries. In fact, the important objectives of this study are as following:

1. What the level of information technology usage is in small and medium enterprises.
2. The effect of information technology in SMEs on their performance.
3. kind of problems challenge companies regarding of information technology usage.

5- Research Methodology

Although this research seeks for discovering of existing reality, the research method is a
survey of a set of descriptive research methods. However, the researcher is trying to determine
how is the state of information technology use in the country based on the proposed model which
relies on scientific research. In addition, because the relationship between research variables is

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analyzed based on the purpose of the research, the research method is kind of correlational. 300
questionnaires on information technology and organizational performance has been used for data
collection. SPSS software is used for analysis of data and statistics. The statistical population of
this study is consisting of managers of small and medium-sized enterprises.

6- Proposed Outcome

According to the findings despite of the government investments and supportive countries in
Afghanistan, small and medium-sized enterprises have not had much growth in recent years. The
subject of this study is about the impact of using information technology on the performance of
small and medium-sized enterprises in Afghanistan that after accomplishment of that the following
results will be achieved:

1. What is the level of IT managers' awareness of SMEs?

2. How many small and medium-sized enterprises use from information technology?
3. What kind of information technology is used by small and medium-sized enterprises?
4. What impact has been created on the performance of small and medium-sized enterprises
through using of information technology?
5. Providing effective suggestions for improving of small and medium-sized enterprises’
condition in Afghanistan.

7- References

 Alam, S. S., & Noor, M. K. M. (2009). ICT adoption in small and medium enterprises: an
empirical evidence of service sectors in Malaysia. International Journal of Business and
Management, 4(2), 112–125.
 Thornhill, S. (2006) ‘Knowledge, innovation and firm performance in high- and low-
technology regimes’, Journal of Business Venturing, Vol. 21, No. 5, pp.687–703.

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  Ahmed, I., Shahzad, A., Umar, M. and Khilji, B. (2010). Information Technology and SMEs
in Pakistan. International Business Research, 3(4).
 Olugbode, M. Elbeltagi, I. Simmons, M. and Biss, T. (2008). “The Effect of Information
Systems on Firm Performance and Profitability Using a Case-Study Approach.” The
Electronic Journal Information Systems Evaluation Volume 11 Issue 1, pp. 11-16.
 Shaukat, Muhammad; Zafarullah, Muhammad. (2009). Impact of Information Technology
on Organizational Performance: An Analysis of Qualitative Performance Indicators of
Pakistan‟s Banking and Manufacturing Companies. European Journal of Economics,
Finance And Administrative Sciences - Issue 16, 37-49.
 Al-Mamary, Y.H., Shamsuddin, A. and Aziati, N. (2014). The Role of Different Types of
Information Systems In Business Organizations: A Review. International Journal of
Research (IJR), 7(1): 333-337.
 Eslam Hassan, M., Wang, P., Zhi, F. and Osman Abdalla, E. (2014). The Impact of the
Sector Type on the Role of Management Information Systems for the Decision- Making
Process: RNS-Sudan as Case Study. International Conference on Global Economy,
Commerce and Service Science, Published by Atlantis Press. 396-402.
 Darwish, H., Saki, N., Sahraei, M., Zakrifar, F and Talebi, M. (2014). Effects of Automated
Office Systems (Automation) on Improve Decision-Making of Staff Managers (At the
Airports Company of Country). Journal of Educational and Management Studies, 4 (3):
554-564.
 Omar, Siti sarah bt. and Ismail, Maimunah. The Background and Challenges Faced by the
Small Medium Enterprises. A Human Resource Development Perspective.Internatinal
Journal of Business and Management, (2009).Vol. 4, No. 10.
 Yeh-Yun Lin, & Zhang, J., (2005), “Changing Structures of SME Networks: Lessons from
the Publishing Industry in Taiwan”, Long Range Planning, No.38, pp.145-162.
 Mashal, M. (2014). Small and Medium Enterprises Development and Regional Trade in
Afghanistan. SSRN Electronic Journal.
 Shahpasandi, Soheila (2014). Impact of information technology on the organization and
its role in the management and operation of the organization. International conference on
business development and excellence Tehran, Published by Edepardaz, ICBDE01_337.

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  Rostamzaman, M. (2019). Small and medium-sized businesses and their role in economic
development [online] Blog.tejaratbank.ir. Available at:
https://blog.tejaratbank.ir/blog/1755242-
%DA%A9%D8%B3%D8%A8%DA%A9%D8%A7%D8%B1%D9%87%D8%A7%DB%8
C%DA%A9%D9%88%DA%86%DA%A9%D9%85%D8%AA%D9%88%D8%B3%D8%
B7%D9%86%D9%82%D8%B4%D8%A2%D9%86%D9%87%D8%A7%D8%AA%D9%
88%D8%B3%D8%B9%D9%87%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%
AF%DB%8C.html.
 Tavasoli, Elham. (2017). Investigating the Effectiveness of Information Technology on
Organizations. Journal of Management and Entrepreneurship Studies.3(2).

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