Journal of Organizational Computing and Electronic

Commerce

ISSN: 1091-9392 (Print) 1532-7744 (Online) Journal homepage: https://www.tandfonline.com/loi/hoce20

A Meta-Analysis of Research on Information

Technology Implementation in Small Business

G. Premkumar

To cite this article: G. Premkumar (2003) A Meta-Analysis of Research on Information

Technology Implementation in Small Business, Journal of Organizational Computing and
Electronic Commerce, 13:2, 91-121, DOI: 10.1207/S15327744JOCE1302_2

To link to this article: https://doi.org/10.1207/S15327744JOCE1302_2

Published online: 18 Nov 2009.

Submit your article to this journal

Article views: 1482

View related articles

Citing articles: 50 View citing articles

Full Terms & Conditions of access and use can be found at

https://www.tandfonline.com/action/journalInformation?journalCode=hoce20
 JOURNAL OF ORGANIZATIONAL COMPUTING
AND ELECTRONIC COMMERCE 13(2), 91–121 (2003)

A Meta-Analysis of Research on
Information Technology Implementation
in Small Business

G. Premkumar
College of Business
Iowa State University

The small business sector is one of the fastest growing sectors of the economy. The
firms in this sector are becoming increasingly dependent on information systems (IS)
for their operations. Traditional research in IS has primarily focused on large corpora-
tions. The problems, opportunities, and management issues encountered by small
business in the IS area are unique, and research is too limited to provide useful guide-
lines. This study compares the research literature on IS implementation and research
on IS in small business, examines the commonality and differences, and identifies
research gaps. An overall research framework is developed to review the research in
the two areas and determine areas of opportunity. As a follow-up of this analysis, a
research model is developed to explore the factors influencing the adoption of com-
puter-mediated communication technologies in small business. The model incorpo-
rates some of the innovation factors that are identified as potential gaps in the earlier
analysis. The research model evaluates the impact of 6 factors—perceived usefulness,
cost, compatibility, top management support, competitive advantage, and size—on the
adoption of computer-mediated communications technologies. A telephone interview
was used to collect data from 207 firms. The results of data analysis reveal that com-
petitive advantage, top management support, and size are important determinants of
adoption of computer-mediated communication technologies.

IT adoption, innovation adoption and diffusion, IT implementation,

small business, communication technologies

1. INTRODUCTION

Computer and communication technologies play a critical role in the transforma-

tion of our economy to a digital economy. Most research studies have focused on
information technology (IT) implementation in a large corporate setting, and very
little research has focused on use of information and communication technologies

The author acknowledges the support provided by the Rural Development Initiative at Iowa State
University and James Quinn for help in the collection of data.
Correspondence and requests for reprints should be sent to G. Premkumar, 300 Carver Hall, College
of Business, Iowa State University, Ames, IA 50011. E-mail: prem@iastate.edu
92 PREMKUMAR

in the small business sector and the issues related to IT implementation and use in
small businesses. Traditional theories on organizations and information systems
may not be directly applicable to the small business sector [1]. Researchers in small
business have been pointing this out for more than two decades, as highlighted by
Dandridge [2] in his title, “Children are not little grown-ups: Small business needs
its own organizational theory.” A few studies have pointed out that IS theories and
practices developed for large businesses may not be suitable for small ones [3, 4].
Small firms are different from large firms in a number of ways. For example, in
small businesses, decision making is centralized in one or two persons, bureaucra-
cies are minimal, standard procedures are not well laid out, there is limited long-
term planning, and there is greater dependence on external expertise and services
for information systems (IS) operations. The problems, opportunities, and
management issues encountered by small business in the IS area are unique, and
research is too limited to provide useful guidelines. This study attempts to review
the research in this area and identify the research gaps.
Organizations, both big and small, have become critically dependent on infor-
mation systems for their daily operations. Traditionally, small businesses have
been the slowest in adopting modern information technologies [5]. However, in
recent years, they have invested a significant amount of resources in IT implemen-
tation. Investment in IT as a proportion of sales revenue for small firms is compa-
rable to that for large firms [6]. A recent study indicated that small firms were
expected to spend as much as $90 billion in information technology products and
services [6]. Case studies and the trade press highlight the benefits of IT for small
businesses including cost reduction, improved profitability, better customer serv-
ice, enlarged market scope, and tighter interorganizational relationships with their
trading partners. Information communication has become the predominant driv-
ing force in the Internet age. Computer-mediated communication technologies
such as e-mail, the Web, interorganizational systems (IOS), and electronic data
interchange have dramatically changed business processes. The latest trend toward
integrated supply chain management has highlighted the importance of commu-
nication technologies and IOS for businesses [7]. Research on the adoption of these
communication technologies by small businesses is very limited.
The main objectives of this study are:

• To develop a research framework for IT implementation and map prior

empirical studies to that framework.
• To analyze past research on IT in the small business area, identify major find-
ings, and map to that research framework.
• To examine major differences between the two research streams and identify
potential areas for future research.
• To present the results of an empirical study that examines one of the research
areas.

The primary objective of the article is an analysis of past research, and the
next three sections focus on that analysis. The article is organized as follows.
Section 2 presents the research framework for evaluating research on IT adoption
and implementation; Section 3 uses the same framework to map IT research in
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 93

small business; Section 4 compares the two research streams; Section 5 presents
the research model and the research methodology for the empirical study; and
the last section presents the results and discussion.

2. IT IMPLEMENTATION RESEARCH

Since the focus of this research is to develop a framework for IT implementation in

small business, we will borrow from other researchers who have done extensive
meta-analysis of IT/IS implementation research in corporate settings [8–11].
Researchers have emphasized the similarity between IT adoption and innovation
adoption/diffusion, and borrowed heavily from the diffusion of innovation litera-
ture [11, 12]. Information systems were considered as new technology adoptions in
organizations, and the field of diffusion of innovation adoption provided a rich set
of theory and findings that could be directly applied to study IT adoption.
Since IT implementation is a very broad field, it is necessary to define the scope of
this analysis. There are two broad areas of study, organizational and individual
adoption/diffusion of IT [9]. This study focuses only on organizational adoption/
diffusion of IT. Innovation adoption/diffusion studies have used various stage mod-
els, ranging from a simple two-stage model of initiation and implementation [12] to
a six-stage model of initiation, adoption, adaptation, acceptance, routinization, and
infusion [13]. This study includes all stages of IT use in its review of past studies, but
focuses on the adoption stage for its research model. Studies examine IT implemen-
tation from various perspectives including factors influencing adoption/diffusion
[8], political undercurrents that cause irrational behavior and roadblocks to imple-
mentation outcome [14], and processes used for implementation and their impact on
implementation success [15, 16]. Since the focus of this study is to evaluate the fac-
tors influencing IS implementation in a small business context, only studies from the
factors research stream in IS implementation research will be used for the review.
Although the earlier review [8] did not differentiate between information systems
and management science models, this study will only consider studies dealing with
information systems.

2.1 Research Framework

The study proposes a research framework, based on Leavitt’s [17] organizational

model, for reviewing and comparing the research on IT implementation with IT in
small business. The organizational model identifies four major domains in an
organization—task, technology, people, and structure—that work within the context
of an external environment. The model has been refined and used in various IT stud-
ies [8, 10, 18–20]. Kwon and Zmud [8], in their review of IT implementation, identi-
fied five broad categories of factors—individual, structural or organizational, techno-
logical, task, and environmental factors. The MIT study on information technologies
in the 1990s was patterned using Leavitt’s organizational model [19]. That study
included a fifth domain, external socioeconomic and technical environment, in its
framework because the external environment plays a very critical role in influencing
94 PREMKUMAR

the four internal domains. Alavi and Joachimsthaler [10] used a similar framework,
along with the environment domain, in their meta-analysis of research on decision
support systems. Hence, we propose using these five domains in our framework.
The five major domains are illustrated in Figure 1. We have slightly renamed
these domains to be consistent with contemporary research in the IT area. For
example, strategy and structure are combined to reflect the broader context of the
organizational domain. Although strategy and structure are important constructs
in organizational theory and strategic planning, they have been combined into a
single organizational domain in recent IT studies [8, 10].
The five major domains are individual, task, innovation/technology, organiza-
tion, and environment. The domains can be considered as different layers of the
environment that influence the design and use of information technology. The pri-
mary purpose of information technology in an organization is to enable people to
complete various work-related tasks. Hence, at the core of the framework we have
the individual and the task that needs to be completed. The technology domain
provides the tools and information to aid the individual in his or her task, and
therefore it is shown at the next layer. Because the technology is implemented in
an organization, various characteristics of the organization influence IT imple-
mentation. Often the decision to use a particular technology may be taken by a
person who may not be actually using the system to complete the task.
Organizations can be considered as a collection of individuals working to accom-
plish a business objective with a common set of rules, procedures, and value sys-
tems. We need to differentiate the organization from the individual environment
since the collective vision and belief system may not be the same as that of the
individuals within the organization. Hence, the organizational environment is
captured as a separate domain. Organizations react to external environment and
their decision making on innovations is influenced by the strategic necessity to
compete in the marketplace using resources from the internal and the external
environment. Hence, the external environment is shown as a separate domain.
Table 1 presents a summary of major studies on IT implementation that
appeared in leading IS research journals including MIS Quarterly, Information

Environment
Organization

Technology/Innovation

Task

Individual

Figure 1. Research framework.

 Table 1
Review of Research in Information Systems (IS) Implementation

Variable Description References

Environment
Competition Competition in terms of price, [30, 25, 21]
scope, quality, etc.
Power/interfirm dependence Power of trading partners, economic [23, 59, 21, 72, 24]
dependence on partner
Vertical interaction and climate Extent of interactions with [25, 24]
customers/suppliers
Supplier incentives Incentives through price, service [25]
support, etc., from the innovation
supplier to adopt the innovation
Organization
Top management support Extent of commitment and resource [39, 73, 21, 40, 24]
support from top management for
the innovation
Product champion Existence of a high-level individual [30, 74, 26]
to sell the innovation within the
organization
Size Organizations size in number of [75, 27]
employees or sales revenue
Communication channels Channels available and extent of use [76, 28]
of various channels
Centralization Level of centralization of decision [30, 29]
making in organization
Formalization Use of formal procedures for [30, 29]
operation and rule observance
Technology
Relative advantage Perceived usefulness of the new [35, 32, 33, 77, 58]
(perceived usefulness) technology
Complexity (ease of use) Level of ease of use [33, 32, 77, 58, 13]
Compatibility Organizational compatibility with [32, 33, 77, 58]
beliefs and value systems and
technical compatibility with the
task and work practices
Trialability Ability to experiment before adoption [32, 77, 58]
Observability Ability for others to observe results [32, 77, 58]
of innovation
Cost Relative cost to benefits of the [33, 23]
technology
Individual
Education Level of education [39, 30]
Job tenure Length of service in firm [30, 39]
User Involvement Extent of user participation in [41–43]
analysis and design
IS expertise Prior experience in IS [42, 40, 43]
Cognitive style Cognitive and decision-making style [38, 78, 79]
of individual
User training [42, 43, 37]
Computer self-efficacy Usage [80, 81]

(continued)

95
96 PREMKUMAR

Table 1 (Continued )

Variable Description References

Task
Task autonomy/responsibility Personal control over tasks [40]
Task structurability Level of structure to task [40]
Task interdependence [40, 45]
Task standardization [40]
Task uncertainty Deterministic, probabilistic, random [43, 20]
decisions
Task complexity Availability of well defined [43, 20]
procedure to solve tasks

Note. IS = information systems.

Systems Research, Journal of MIS, Decision Sciences, and Management Science. They
are listed under the five domains. A detailed analysis of the factors studied in each
domain is now presented.

2.2 Environmental Domain

In the early 1980s IS were primarily used to support back-end operations.

Therefore, environmental factors were not considered critical for research on IT
implementation. In the 1990s the use of IS to gain competitive advantage and the
growth in IOS spanning organizational boundaries highlighted the impact of
environmental factors on IT implementation. IS are catering no longer to just an
internal audience, but also to the firm’s customers, suppliers, and other trading
partners. Hence, it is not surprising that external environmental factors are
increasingly being studied in IT implementation. Studies have examined the
impact of competitive advantage in initiating the implementation of IOS [21].
Many studies on IOS have examined the role of interorganizational dependence
and power on adoption of these systems because in most cases the powerful trad-
ing partner in the dyad influences IT implementation [22–24]. Researchers have
also examined the role of incentives and the transaction climate between the trad-
ing partners in facilitating the implementation of IOS [25].

2.3 Organizational Domain

Since most IT implementation is in an organizational context, researchers have

examined the impact of various organizational factors on IS implementation. The
organizational factors that have been extensively studied are degree of top man-
agement support, existence of a product champion, organizational size, commu-
nication channels, centralization, and formalization [8, 21]. There are other factors,
such as user training and user involvement, which are individual factors but are
measured at the organizational level, that have been found to be related to IT
implementation. The importance of top management support and commitment
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 97

cannot be overemphasized. This support sends strong signals within the organiza-
tion, reduces any political roadblocks, and ensures adequate resources for imple-
mentation [21]. Product champions play a critical role in marketing the innovation to
the decision makers, developing an implementation plan, facilitating resource allo-
cation, and removing roadblocks to implementation [26]. The impact of organiza-
tional size on IT implementation is mixed. Although some studies have found it to
be important, others have not found it to have a significant effect. It seems like
there is a threshold level beyond which size is not an important factor [27]. Larger
organizations have more resources and IS expertise to facilitate IT implementation,
but could be bogged down with more bureaucratic practices and resistance to
change that smaller organizations may not have. A few studies have examined the
use of various communication channels to get information for adoption, but these
have not been examined in terms of their impact on adoption/diffusion [28].
Centralization and formalization, two variables extensively studied in early research
on IT implementation [29, 30], have not found much support in recent IS research
[21]. Organizations have become too complex to fit neatly into the categories
defined by centralization and formalization.

2.4 Technology Domain

Innovation adoption research has focused heavily on evaluating the impact of var-
ious innovation/technology characteristics on adoption/diffusion. Tornatzky and
Klein [31], in their meta-analysis of innovation research, identified three variables—
compatibility, complexity, and relative advantage—to be consistently related to
adoption. These characteristics have been extensively used in IT implementation
research [21]. Recent studies have also included other variables such as cost, trial-
ability, and observability [32, 33]. Compatibility of an innovation is “the degree to
which an innovation is perceived as consistent with the existing values, past expe-
riences, and needs of the receivers” [34]. Compatibility in the context of IS includes
both organizational and technical compatibility; that is, the innovation should be
compatible with the organization’s values and belief systems as well as with the
work practices and system interfaces. It has been found to be positively related to
adoption [13]. Relative advantage is “the degree to which an innovation is perceived
as better than the idea it supersedes” [34]. Although some researchers have criti-
cized this as a “catch-all” variable [31], it has been extensively used in IT adoption
studies and found to be positively related to IT adoption [23, 32, 33]. Complexity is
“the degree to which an innovation is perceived as relatively difficult to under-
stand and use” [34]. “Ease of use” of computer systems has been extensively
studied in IT implementation and has been found to be positively related to
adoption [23, 32, 33]. Recent studies have used the technology acceptance model
(TAM) and examined the impact of ease of use (or complexity) and perceived
usefulness (or relative advantage) on IT adoption and usage [35–37]. Trialability
is “the degree to which an innovation may be experimented with on a limited
basis”[34] and observability is “the degree to which the results of an innovation are
visible to others” [34]. The last two factors, trialability and observability, have
been problematic for researchers in terms of articulation as well as measurement
98 PREMKUMAR

[32]. Some studies have found the cost effectiveness of the innovation to be a
significant variable [23, 33].

2.5 Individual Domain

Factors in the individual domain have always taken a secondary role in studies
dealing with organizational-level IT implementation. Since the technology is
implemented across multiple individuals, it becomes difficult to clearly delineate
the effect of individual characteristics on IT implementation. Studies on individ-
ual factors such as demographics have been more useful in studying
individual-level IT implementation and in the design of systems and user inter-
faces. Various demographic factors such as education, job tenure, cognitive style,
and IS expertise and experience have been examined [30, 38–40]. Many studies
have examined the relationship between user involvement and system success
[41], but the results have been inconclusive. Whereas some studies considered it
as an individual variable, others operationalized it at the organizational level.
Similarly, user training has also been conceptualized at the user and the organiza-
tional level by different studies depending on the context of the study [42, 43].

2.6 Task Domain

Factors in the task domain, like individual factors, have been studied to only a
limited extent. Most studies have been in the context of decision support system
(DSS) research, examining the impact of task structure, task autonomy, task uncer-
tainty, and task interdependence on DSS implementation [10, 20, 40, 44]. There
have been some studies examining the task–technology fit [45].
The use of a single IS across multiple tasks makes it difficult to clearly delineate
the effects of task factors on organizational-level studies of IT implementation.
Task factors are very valuable for determining the fit among the system, the user,
and the task characteristics. However, these are of interest for studies on system
design rather than for studies on IT implementation.

3. RESEARCH ON IT IMPLEMENTATION IN SMALL BUSINESS

Research on IT adoption and implementation in small firms has been rather lim-
ited, with most studies focusing on various factors influencing system usage and
user satisfaction. A detailed review of research in leading management informa-
tion system (MIS) journals (Journal of MIS, Information Systems Research, MIS
Quarterly, Decision Sciences, Information and Management) for the last 10 years was
performed to identify all articles related to IT adoption and implementation in
small business. A summary of the major studies in this area is provided in Table 2.
A casual observation of the research indicates that the studies are widely diver-
gent and not comprehensive enough to create a cumulative research tradition. An
important question to answer is whether this research field has adequate research
 Table 2
Information Systems Research in Small Businesses

Study Dependent Variable Independent Variable Results

Igbaria et al. Individual system Direct: perceived usefulness Perceived usefulness, ease
(1997) usage and ease of use; indirect: of use, external training,
internal and external external support, and top
computing support, management support are
internal and external training, significant
and top management
support
Harrison Intention to adopt Attitude, subjective norm, Intention related to all three
et al. (1997) perceived behavioral control independent variables
Thong et al. User satisfaction, Top management support, Top management support
(1996) organizational consultant effectiveness, related to organizational
impact, overall IS vendor support impact, IS effectiveness;
effectiveness consultant effectiveness
related to all three
(satisfaction, impact,
effectiveness); vendor
support related to all
three
Palvia et al. Usage—yes/no, Size, education, manager’s Sales, number of employees,
(1994) amount of use IS skills and IS experience, education, IS experience,
(hr/day), number training, age of business, skills, age of business,
of software number of years of years of computing at
systems used computing at home, number home are significant
of years of computing,
profitability
Lai (1994) Usage Size, age of business, IS IS experience, IS rank, age
experience, in-house of business related to
development, MIS ranking computer use
Cragg and Growth Top management
King (1993) involvement, relative
Case study advantage were positive
relationships and
inadequate resources
was a negative
relationship
Raymond DSS satisfaction Type of application, origin, Task autonomy, experience,
and Begeron tool type, task variety, task application type, tool,
(1992) autonomy, training, and origin significant
experience
Soh et al. System usage Use of consultant Firms with consultant have
(1992) more system usage
Yap et al. Satisfaction Vendor support, consultant All variables significant
(1992) effectiveness, experience, except number of
resources, top management applications and
support, user participation, expertise
number of applications IS
expertise

(continued)

99
 Table 2 (Continued )

Study Dependent Variable Independent Variable Results

Raymond Use (offline Size, organizational maturity Size, maturity, time

(1990) and online), (formalization), resources,
satisfaction, planning time horizon
IS sophistication
Delone Use (time and IS experience, age of operations,
(1988) frequency), impact training, top management,
(success score × involvement, number of
importance score) complaints, planning, control,
applications (in-house/
external), operations
(in-house/external)
Raymond User comprehension, Computer training, computer
(1988) user participation, experience
usage (batch and
online)
Montazemi IS satisfaction Presence of system analyst,
(1988) level of analysis, user
involvement, computer
literacy, proportion of online
systems (IS sophistication),
proportion of specialized
software, duration of CBIS,
decentralization
Raymond Satisfaction, IS experience, development
(1985) utilization (in-house or packaged),
processing (in-house or
external), IS sophistication
(number of applications,
interactive applications), rank,
location (remote or urban)
Delone (1981) Size IS experience, in-house/
external, resources (budget
as proportion of sales)
horizon, sophistication
related to satisfaction;
sophistication related to
offline usage; size and
time horizon related to
online usage; resources
and maturity related to
sophistication
Top management, in-house
operation, IS knowledge
associated with computer
success
Training related to
comprehension and usage
(batch and online);
experience related to
user participation
Systems analyst, level of
analysis, involvement,
literacy, online, and
decentralization are
related to satisfaction
In-house operation, greater
applications, online
applications, rank related
to satisfaction; in-house
operation, greater
applications, online
applications, rank are
related to utilization
Less IS experience, more
externa l support, and
smaller resources are
associated with smaller
firm size

Note. IS = Information system; MIS = management information system; DSS = decision support
system; CBIS = computer-based information system.

100
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 101

potential for a separate research stream. This study attempts to answer this ques-
tion by reviewing existing studies, comparing them with IT implementation
research, and evaluating whether there are potential areas for research.
Most studies on IT implementation in small business have used satisfaction or
system usage as the primary dependent variable. Surprisingly, very few studies
have examined the adoption of new information technologies by small businesses.
A study on IT adoption by Harrison et al. [46] examined use of the theory of
planned behavior to evaluate the relationship among attitude, subjective norms,
and perceived control, and the intention to adopt IS.
Raymond [4, 5, 47] conducted a series of studies on computer usage in small
business. He examined the factors influencing user satisfaction and system uti-
lization using data from a survey of 464 small manufacturing firms [4]. He found
that IS sophistication in terms of number of in-house, online, and total applica-
tions and the rank of the top IS executive are related to user satisfaction and
utilization. He also found that various IS-related factors such as IS experience,
in-house operation, larger number of IS applications, and lower MIS rank were
related to the firm size. The relationship of organizational factors with the two
dependent variables also varied based on size. Raymond [5] examined the impact
of computer training and experience on usage, user comprehension, and user par-
ticipation. Training was found to be related to usage, highlighting the importance
of training users. He also examined the influence of size, resources, time frame,
maturity, and the mediation effect of IS sophistication on user satisfaction and
usage [47]. IS sophistication and time frame have a direct effect on both depend-
ent variables, and the effect of size, time frame, and maturity is mediated by IS
sophistication.
Montazemi [48], in an empirical study of 83 firms, found that user involvement,
IS expertise (literacy), IS sophistication in terms of online systems, and detailed
requirement analysis were all related to IS satisfaction. Delone [49] surveyed 98
small businesses and found that involvement of top management, in-house oper-
ation, and IS expertise/knowledge were related to computer success, a joint index
of computer use and impact. He did not find any relation between computer suc-
cess and external support, supporting the findings of Raymond’s [4] study.
Yap et al. [50] empirically examined the relationship between a large number of
environmental and organizational variables and system satisfaction. They found
that vendor support, consultant effectiveness, experience, top management sup-
port, and user participation had a significant relationship with satisfaction.
Raymond and Bergeron [51] studied the impact of a few task-related variables and
found task autonomy to be related to satisfaction in the context of use of DSS in
small businesses. Cragg and King [52] used case studies to examine IS growth in
organizations and found that whereas top management involvement facilitated
growth, resource constraints inhibited growth. Palvia et al. [53] found that size,
education, IS experience, and age of business were related to system use. Lai [54]
also found that IS experience and age of business were related to usage.
Igbaria et al. [44] surveyed 358 small business users and found, using TAM, that
perceived usefulness and ease of use had a significant impact on system usage.
They also found that top management support and external support had an indi-
rect impact through these two variables on system usage. Harrison et al. [46] used
102 PREMKUMAR

TAM and the theory of planned behavior model to find that IT adoption is relat-
ed to attitude, subjective norm, and perceived behavioral control.
In summary, an analysis of Table 2 indicates that researchers have been study-
ing IT implementation in small business on a regular basis starting from 1981
when computers were being introduced in small business in a limited fashion.
We have had a wide range of studies examining the relationships between vari-
ous dependent and independent variables. User satisfaction and system usage
are the two most common dependent variables in many studies. A wide range
of operationalization has been used on these two variables. Usage has been
measured with a variety of objective measures including frequency of use,
length of use, and range of software used, and as a dichotomous variable
(yes/no). A few studies have used subjective measures of usage. Studies have
used their own measures for user satisfaction, even though a few validated
measures such as that of Ives and Olson [41] were available. Perhaps these meas-
ures, developed for corporate settings, were not appropriate in a small business
environment.
Most studies have used a contingency framework of a wide range of inde-
pendent variables without a clear development of theory specific to small busi-
ness. There have been limited attempts to validate theories. Only recently have
studies used well-tested theories in the context of small business and found them
to be equally applicable [44, 46]. It should be noted that IT implementation
research in corporate settings was also developing during this period and new
developments in the IT area have contributed to a state of flux in IT research. In
spite of limitations, these studies have contributed significantly to our under-
standing of IT implementation in small business by identifying critical factors
for successful implementation. Some of these factors are IS expertise, availability
of an IS consultant, sufficient firm size, vendor support, perceived usefulness, ease
of use, appropriate level of IS education, resources, and training. A detailed com-
parison of the two research streams is provided in the next section.

4. COMPARISON OF RESEARCH

Table 3 compares and maps IT research in small business with similar variables
identified in IT implementation.
A cursory analysis of the table indicates many empty cells where IT research in
small business is nonexistent. Although some empty cells may indicate the irrele-
vance of the factors in the context of small business, other empty cells may indi-
cate the potential for future research. A detailed analysis of the different domains
is now provided.

4.1 Environment

There is very limited research on the impact of environmental factors on IT in

small business. Only one variable, vendor support, was examined in prior stud-
ies. This variable bears resemblance to the variable “supplier incentives” in IT
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 103

Table 3
Mapping Research in Small Business with Information System
Implementation Research

Variable Study

Environment
Competition
Power/interfirm dependence
Vertical interaction and climate
Supplier incentives [44, 55, 53, 82, 83, 49]
Vendor support [4, 75]
Organizational
Top management support [44, 55, 52, 50, 49]
Products champion
Size [75, 47, 53]
Communication channels
Centralization
Formalization
IS sophistication/IS experience [4, 48–50]
Rank of IS [4, 54]
Age of business [54, 53]
Resources [50, 52]
IS Support [47, 39]
Technology
Perceived usefulness (Relative advantage) [46, 44]
Ease of use (complexity) [44]
Compatibility
Trialability
Observability
Cost
Individual
Education [53]
Job tenure
User involvement [48]
IS expertise [4, 5, 47, 54, 53, 48]
Cognitive style
User training [5, 51]
Task
Task autonomy responsibility [51]
Task structurability
Task interdependence
Task standardization
Task uncertainty
Task complexity

Note. IS = information systems.

implementation, which examines the incentives provided to the firm by the sup-
plier for adopting the innovation. Interestingly, although earlier studies indicated
that external support is not a significant variable and in-house support and oper-
ations lead to greater usage and satisfaction [4, 49], later studies indicated that
external support is a significant variable influencing system satisfaction and usage
[44, 55]. It is not clear whether the significance of vendor support is a recent
104 PREMKUMAR

phenomenon. Perhaps the increased sophistication of IS and the scarcity of IS staff

is forcing small businesses to depend on external support for their IS operations.
Newer communication technologies and innovative IT service models are increas-
ing the significance of this variable. The ability to provide some IT services over
the Web through application service providers may make outsourcing a com-
pelling alternative.
The lack of research on environmental variables does not necessarily indicate
that they are not relevant for small businesses. Factors such as competition,
power, and interfirm dependence have been researched in the last 10 years in the
context of IOS and have been found to be significant in influencing IOS adoption
[21, 24]. Anecdotal evidence in the trade press has documented the pressure
exerted by large firms on small trading partners to adopt new communication
technologies such as electronic data interchange (EDI). The lack of studies spe-
cific to small businesses may have resulted in many of the empty cells in this cat-
egory. Perhaps the initial focus on development of internal information systems
may have motivated users and researchers to ignore the external factors, which
come into greater prominence with systems focused on external constituents
such as suppliers and customers. This is an area that has great potential for future
research.

4.2 Organization

The variables in the organizational domain seem to be the primary focus of many
studies in small business. Among the organizational factors in Table 3 we notice
that centralization, formalization, and product championing have not been
researched in small businesses. The first two are not very relevant for small busi-
nesses because most decision making is centralized in a few senior people and
small firms do not normally have very rigid rules and procedures. The concept of
product champion may be more relevant in large organizations, where a number
of people have to be sold on the technology before the adoption decision. Decision
making in small firms is less complex and more centralized, and therefore may not
require extensive championing within the organization.
There are a few variables that are more popular in small business research
compared to IS implementation research. They are IS expertise/experience, age
of business, rank of IS executive, resources, and level of IS support. It is surpris-
ing that the rank of the IS executive is a common research variable. Given that
small businesses tend to have a flatter organizational structure, one would not
expect the rank of the IS executive to be a major variable. Perhaps this signifies
the existence and significance of a separate IS department and thereby indirectly
indicates the sophistication of the IS function. Many small businesses start with
paper-based systems or a simple computer system and therefore may not have a
formal IS department. Hence, they may feel constrained in terms of internal IS
expertise when it comes to evaluating and adopting new technologies. Hence,
they are more likely to get these services from external vendors rather than devel-
oping in-house expertise. The importance of “vendor support” confirms that
trend.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 105

4.3 Technology

Very few studies have examined the impact of technology innovation characteris-
tics on IT in small business. The variables in this category are primarily derived
from the IT adoption literature. Unfortunately, there have not been many studies
that have examined IT adoption in the specific context of small business and per-
haps this may be a reason for the empty cells in this category. The closest study to
IT adoption is by Harrison et al. [46], who examined the impact of attitudes (or
behavioral beliefs), subjective norms (or normative beliefs), and perceived
controls on intention to adopt IT. The category of behavioral beliefs of what the
technology can do to the organization is very similar to “perceptions of relative
advantage,” a variable that is found in IT adoption literature to be a predominant
determinant of adoption. Various studies using TAM have found “perceived use-
fulness” to be a significant variable influencing IT adoption [35, 37].
Compatibility and complexity are two critical variables in IT adoption that need
to be studied in more depth in the small business area. Small firms, due to lack of
a formal structure and greater flexibility, may have fewer organizational compati-
bility problems with new technologies. On the other hand, lack of in-house IS
expertise and large IS staff may make new ITs seem more complex and difficult to
implement, thereby inhibiting adoption. TAM models employ ease of use, which is
very similar to complexity, in the specific context of system interface. Igbaria et al.
[44] found it to be a significant variable. Another important factor is the cost of
innovation, since typically small firms have very limited budgets. Trialability and
observability have had mixed results in IT adoption and it is not clear whether the
results would be any different in the small sector.

4.4 Individual

Among the individual factors, education and user training have been found to be
related to IS implementation. Some of the variables such as user involvement and
IS expertise can be considered in either the organizational or the individual cate-
gory, depending on the measurement context. They can be considered as organi-
zational variables if IS expertise is measured as a variable based on overall
assessment of expertise within the organization. It is an individual variable if it is
used to measure an individual’s IS expertise and relate it to his or her satisfaction
or usage.
Researchers studying organizational-level IS implementation normally use a
single respondent from a firm to answer questions about organizational-level
variables, and therefore do not analyze in depth the individual variables and their
effect on usage. The respondent, normally a senior IS executive, reflects the orga-
nizational perspective on IS implementation by aggregating the various charac-
teristics of the organization. If however, one needs to do a microlevel study (e.g.,
study system usage in depth), one needs to study individual organizations with
multiple respondents within the same firm (to control for organizational and envi-
ronmental factors). Some studies do not differentiate between organizational- and
individual-level adoption.
106 PREMKUMAR

4.5 Task

Task characteristics have not been extensively researched in the small business
area. The primary research stream that contributed much of the findings in this
area is the research on decision support systems, an area which has not been
extensively researched in the small business field. The focus on organizational-
level analysis in most studies has reduced the emphasis on individual and task
characteristics.
In summary, based on the analysis of research in small business and comparing
it with studies in IS implementation, we can infer the following. There has been
very limited research on adoption of IT. From Table 3 we notice that very little
research has been done on the impact of technology factors on IT adoption. This
area has great potential as evidenced by the number of studies in the traditional
IT literature on IT adoption. Similarly, research on the impact of environmental
characteristics has also been limited. The need for interconnectivity with sup-
pliers, customers, and other trading partners brings a new dimension to the
influence of external forces on IT adoption. Hence, research on the influence of
external forces on IT adoption will bring some new insights to the process of IT
adoption in small business.

5. EMPIRICAL STUDY

The extensive analysis of past research on IT implementation identified some of the

research gaps in the small business area. This empirical study addresses one of the
many research gaps identified in the analysis. Because IT adoption in small busi-
ness has not been extensively studied, this empirical study focuses on IT adoption.
Although the impact of innovation characteristics has been widely studied in tra-
ditional IT adoption/diffusion studies, the reviews of past studies reveal that such
research is surprisingly limited in the small business context. Hence, this study
proposes to examine the impact of innovation characteristics on IT adoption.
Widespread adoption of computer-mediated communication technologies by large
firms motivated us to study its adoption in small businesses.

5.1 Computer-Mediated Communication Technologies

The dramatic growth of the Internet has created a shift from using computers as a
pure computing device to using them as a combination of communication and
computing devices. The proportion of time an end-user spends in using the com-
puter to communicate or receive information has steadily increased in the last
5 years and in some cases exceeds the time spent on computing. Although com-
puters have been adopted extensively in large firms to better manage complex
operations and facilitate communication, their use in small businesses has yet to
be empirically examined. Hence, this study provides an opportunity for under-
standing the changing nature of computing devices and the factors influencing
their adoption.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 107

The characteristics of communication among firms vary along many dimen-

sions including the richness of the medium [56], the type of information com-
municated, the mode of communication (synchronous or asynchronous), the
need for further processing of communicated information, and the geographic
location of the parties [57]. A variety of communication channels are available
including face to face, telephone, fax, U.S. mail, online data access, e-mail, EDI,
and Internet access. The last four communication technologies can be termed
computer-mediated communication technologies. EDI provides computer-to-
computer communication of business transaction communications without any
human intervention. It may use a direct line or a value-added network for
communication. Typically, it is used for communicating standard business
transactions such as purchase orders, sales invoices, and so on, using prede-
fined format standards. E-mail enables communication of both structured and
unstructured information, and is normally between two end-users. Whereas
e-mail and EDI are asynchronous in their communication characteristics, online
data access enables a user to directly retrieve and enter information in another
firm’s computer, normally using a direct line for communication. Such systems
are common among firms that are tightly linked with a common IS and are
often seen in parent–subsidiary or franchiser–franchisee links. However, this is
typically limited to only a few proprietary applications. Internet access pro-
vides the opportunity for two firms to communicate using open standards.
Although primarily focused on information dissemination, the growth in
e-commerce has triggered the use of the Internet for a wide variety of commu-
nication requirements. Each channel has its own advantages and disadvan-
tages. For example, whereas a face-to-face communication would be appropri-
ate for rich unstructured communication, EDI would be a better choice for
structured communication that needs to be further processed in a computer
(e.g., a sales invoice). E-mail is very useful for asynchronous communication.
Internet access using the Web provides a richer channel for disseminating a
wide variety of information.

5.2 Research Model

The research model examines the influence of seven variables on the use of com-
puter-mediated communication technologies. The innovation factors that have
been found to have a major impact on adoption of innovation are perceived use-
fulness, compatibility, ease of use, cost, trialability, and observability [32, 35, 57,
58]. The last two variables, trialability and observability, have exhibited inconsis-
tent results [32, 58], and therefore are not included in this study. Studies on diffu-
sion of innovation [31] and IT adoption [58] have found perceived usefulness to
be a significant determinant of innovation adoption. In the context of small busi-
ness, Harrison et al. [46] and Igbaria et al. [44] found that belief about the useful-
ness of the technology influences the intention to adopt. Some small firms
embrace these technologies as a strategy to automate their operations and reduce
dependence on labor, which is a scarce and expensive resource for small busi-
nesses. Hence, we can expect that firms with greater perceived usefulness for
108 PREMKUMAR

these technologies are more likely to use it. Compatibility is another factor that is
found to consistently influence adoption of innovations. Studies on EDI adoption
have found that small trading partners resist adoption of communication technolo-
gies such as EDI because it is not compatible with their paper-based systems [33].
Many small businesses that use a paper-based process or a simple computer-based
system may find that computer-mediated communications technologies create sig-
nificant changes in processes and are incompatible with their business practices and
value systems. In general, firms that perceive compatibility of these technologies
with their value systems and business processes are more likely to use them.
Ease of use of technology has been found to be a significant factor influencing
adoption of innovation [32, 33, 35, 58]. Small businesses are often concerned about
implementing complex technologies [44]. They normally do not have extensive in-
house IS expertise for experimenting with new technologies or training their
employees in these technologies. Hence, ease of use can have a positive influence
on a small business’s decision to adopt the technology. The cost of an innovation
has been found to be a significant deterrent to adoption [12]. However, some
researchers have also found, especially in the context of computers, that cost is not
a significant factor [53]. In many cases, it can be expected that small businesses,
normally constrained in financial resources, find cost to have a significant nega-
tive influence on adoption of new technologies.
Studying the use of new technologies without considering the organizational
and the environmental context does not provide a complete understanding of the
decision process. Hence, we included a select set of environmental and organiza-
tional factors in the research model to better describe the adoption of IT. The
research model includes two organizational variables, organizational size and top
management support, and one environmental variable, competitive advantage,
which have been found to be important in prior research. Top management sup-
port has been found to be a significant factor in most studies on IT adoption [21].
In small firms it becomes more important because decision making is mostly cen-
tralized in a few key persons in the organization [50]. Their vision on the use of IT
influences what innovations are adopted. Many studies in small businesses [50,
52, 55] have found top management support to be critical for IT implementation.
Organizational size is another important variable that has been extensively
researched in IT adoption/diffusion. Although our studies only focused on small
firms, we wanted to determine whether size is still an important determinant
among small firms. Results from prior studies on the impact of organizational size
have been mixed. Whereas Raymond [47] and Palvia et al. [53] found it to be a sig-
nificant variable, Lai [54] did not find it to be an important variable. It can be
argued that small firms have relatively simple operations, which may not require
extensive use of IT. On the other hand, they are nimble at trying new technologies
and may not face the same level of resistance to change that is faced by large firms.
However, within the small business sector it is not clear whether size will be a
major issue. We believe that larger firms within the small business sector are more
likely to implement new technologies. Recent studies on IT implementation in
large firms have highlighted the significance of competitive advantage, particular-
ly in the context of communication technologies that facilitate IOS [21, 24]. Even
small firms may use these technologies if they are suppliers to large firms who
insist on using these technologies for doing business with them [59]. Firms that
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 109

perceive the possibility of gaining competitive advantage from using these tech-
nologies are more likely to adopt them.

5.3 Measurement

The variables were measured using multi-item indicators. All the items, except
size, were measured using a 5-point Likert-type scale ranging from strongly dis-
agree to strongly agree. A single item was used to determine whether the respon-
dents adopted one of the four communications technologies, online data access,
e-mail, Internet access, or EDI.
Perceived usefulness was measured using three items, adapted from
Premkumar et al. [33], that assessed the perceived benefits of these communica-
tions technologies to the firm. Ease of use had to be dropped from the research
model due to measurement problems. Process compatibility was assessed by two
items that determined whether these technologies were compatible with the firm’s
beliefs, value systems, and work practices. Cost was measured by two items that
determined the cost of implementing the technology relative to its benefits. Top
management support was assessed using three items that determined the level of
support for the technology. Competitive advantage was measured by three items
that assessed the strategic necessity of these technologies for competing in the mar-
ket. Size of the firm was determined by the logarithm of its sales revenue.

5.4 Data Collection

The data were collected from 207 small business firms. This study used a tele-
phone survey to collect information from the owner or a senior officer in the com-
pany. Telephone survey, although more expensive and time-consuming, is very
effective in eliciting information from the respondents because the data collection
process is interactive and there are opportunities for both sides to clarify any
doubts. The richer communication medium helps to collect more reliable data.
However, telephone interviews are constrained by time and therefore questions
have to be carefully crafted with minimum redundancy to reduce the burden on
the interviewee. In our study each interview lasted 20 to 30 min. The respondents
were informed that their participation was voluntary and the information they
provided was confidential. The multi-indicator items for each construct were
framed into questions and structured along with other questions into a single sur-
vey that blended various aspects of our study. The questions were pilot-tested
with a few small businesses. The questions were modified to remove ambiguities
and restructured to provide continuity in the telephone conversation. The inter-
viewers were experienced personnel who had been trained in telephone survey
and had done many similar surveys. The researchers discussed in detail with
them the questions in the survey.
A random sample of 311 small business firms was chosen in the midwest
region. We considered firms with fewer than 100 employees as small businesses.
A letter was mailed to each firm informing them of the study and asking for their
participation. Then these firms were contacted over the telephone. Firms were
110 PREMKUMAR

unreachable if they could not be contacted after trying multiple times on different
dates. Of the 311 firms, more than 50 were not reachable due to various reasons
including not answering the phone or business closure or wrong phone number.
The telephone interview was completed with 207 firms, resulting in a response
rate of 81% for firms that were reached by phone.

5.5 Sample Characteristics

The characteristics of the sample are shown in Table 4. The sample included firms
of varying sizes and from several industry sectors.

5.6 Validity and Reliability

The constructs were tested for two psychometric properties, validity and reliabil-
ity, to ensure that the measurement was accurate and sound. Whereas validity
assesses the degree to which the items measure the theoretical construct, reliabil-
ity assesses the stability of the scale based on an assessment of the internal con-
sistency of the items measuring the construct [60]. Validity was assessed through
content, convergent, and discriminant validity. Content validity assesses whether
the measurement covers the complete domain of the construct; convergent valid-
ity evaluates whether all the items measuring the construct cluster together to
form a single construct; and discriminant validity measures the degree to which a
concept differs from other concepts and is indicated by a measure not correlating
very highly with other measures from which it should theoretically differ [60].
Content validity was established through the extensive process of item selec-
tion and refinement in the development of the instrument. Convergent and dis-
criminant validity were evaluated using confirmatory factor analysis available
through the CALIS procedure in the SAS program. Convergent validity is
assessed using the measurement model shown in Figure 2. The significance of the
Table 4
Sample Characteristicsa

Number of Firms Percent

Industry
Manufacturing and construction 21 10.0
Retail sales and wholesale trade 62 31.0
Service 54 26.0
Professional 34 16.0
Finance, insurance, or real estate 23 11.0
Other 13 6.0
Annual sales revenue
Less than $0.5 million 94 45.4
$0.5 to $1 million 83 40.0
Greater than $1 million 30 14.6

aN = 207.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 111

Pu1

Perceived
Pu2 Usefulness

Pu3

Cst1 Cost

Cst2

Co1 Compat
ibility
Co2

Mgt1

Mgmt.
Mgt2 support

Mgt3

com1

Competitve
com2 Advantage

Figure 2. Confirmatory factor com3

analysis.

overall model ensures that the measures load on a priori-defined constructs. It is

also useful to check whether the individual factor loadings of the measures are
significant. The results of the measurement model are shown in Table 5.
The results indicate that the overall fit of the model is very good. Because the
chi-square value is dependent on sample size, the ratio of chi-square to degrees of
freedom is normally used and a value below 2 is considered as a good fit. In our
case the chi-square value was below 2. The probability level associated with the
chi-square statistic indicates the probability p of attaining a large chi-square value
given that the hypothesized model is supported. The higher the value of p, the bet-
ter is the fit and a value of p
.1 is considered an indication of satisfactory fit [61].
Exclusive reliance on chi-square can be problematic [62]. Therefore, other fit
indexes are considered to evaluate the model fit. The goodness-of-fit index was
above .9 and the root mean square residual was very low. The Bentler and Bonnet
index, another fit index, is normally expected to be above .9 [63]. In our case it was
.92, indicating that the model is a good fit. Factor loading is another indicator of
convergent validity. All the factor loadings are significant at p  .001, indicating
the items are significantly loading on the construct.
Discriminant validity, which assesses whether the measures of different con-
structs are different from each other, is tested by evaluating whether the correlation
112 PREMKUMAR

Table 5
Convergent Validity

Variable M SD ML Estimate T value

PU1 2.24 0.82 0.56 8.8*

PU2 2.76 0.98 0.66 8.5*
PU3 2.17 0.86 0.56 8.26*
Cst1 3.03 1.03 0.89 9.09*
Cst2 2.85 0.98 0.54 6.36*
CO1 3.12 1.04 0.73 9.48*
CO2 3.36 0.98 0.83 11.56*
Mgt1 2.50 0.81 0.59 9.52*
Mgt2 3.03 0.95 0.54 7.07*
Mgt3 2.63 0.98 0.65 8.51*
Com1 3.11 1.11 0.90 11.79*
Com2 2.83 1.06 0.98 14.32*
Com3 3.58 0.87 0.43 6.49*

Note. Goodness of fit  0.921; root mean square residual  0.04; 2 (55)  93.66, Bentler index  .92.
*p  .001.

between any two constructs is significantly different from unity [64]. This can be
tested by comparing two models, an unconstrained model where the correlation is
free and a constrained model where the correlation is fixed to one. The difference
in chi-square between these two models is also a chi-square variate with degrees
of freedom equal to one [61, 65]. A significant chi-square difference implies that the
unconstrained model is a better fit for the data, supporting the existence of dis-
criminant validity between the two constructs [66]. Table 6 presents the results of
pairwise testing of discriminant validity of the five constructs. Each construct is
compared with every other construct, resulting in 10 unique comparisons. The
results indicate that the chi-square difference is significant for all the comparison
tests, thereby providing support for the discriminant validity of the constructs.
The reliability of the constructs was assessed using Cronbach’s alpha. The
results in Table 7 indicate that four of the five variables have alpha values greater
than the cutoff value of 0.7 suggested by Nunnally [67]. The value for cost is .64.
The slightly lower value can be attributed to the fact that Cronbach’s alpha tends
to be lower for constructs with few items. Because Cronbach’s alpha is based
on the restricted assumption of equal importance of all indicators, researchers
have used other measures of reliability such as composite reliability [68, 69].
Composite reliability considers the ratio of nonrandom variation associated with
all measures of a subscale to total variation in all these measures.

(Li)2
composite reliability  –––––––––––––––––
(Li)2 +  (1  Li2)
Normally a value above .6 is considered acceptable [68]. The composite relia-
bility for all our constructs were above .6, thereby indicating that our measures
exhibit adequate reliability.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 113

Table 6
Discriminant Validity

Constrained Unconstrained
Model Model

Test 2 df 2 df Difference p

Perceived usefulness with cost 28.46 5 4.57 4 23.89 .001

Perceived usefulness with compatibility 34.5 5 0.91 4 33.5 .001
Perceived usefulness with management support 49.32 9 18.72 8 30.6 .001
Perceived usefulness with competitive advantage 72.97 9 13.49 8 59.48 .001
Cost with compatibility 11.93 2 1.84 1 10.09 .001
Cost with management support 35.35 5 13.51 4 21.84 .001
Cost with competitive advantage 35.81 5 4.99 4 30.82 .001
Compatibility with management support 35.20 5 8.4 4 26.8 .001
Compatibility with competitive advantage 55.30 5 3.31 4 51.99 .001
Management support with competitive advantage 42.10 9 9.69 8 32.41 .001

Table 7
Variable Statistics

Variable M SD Reliability  Composite Reliability

Perceived usefulness 2.388 0.73 .71 .62

Cost 3.171 0.90 .75 .69
Compatibility 3.212 0.85 .78 .75
Management support 2.731 0.73 .70 .62
Competitive advantage 2.918 0.88 .64 .83

6. RESULTS AND DISCUSSION

Because the research model uses a dichotomous dependent variable and continu-
ous independent variables, we decided to use a logit model to empirically validate
the research model. Logit analysis is a preferred technique because it does not
assume equal variance–covariance matrices across groups and multivariate nor-
mality of the variables [70]. Also, the output from the analysis is very similar to
regression and is therefore easier to draw inferences. Logit uses a binomial prob-
ability function for the dichotomous dependent variable and estimates whether it
is one way or the other using an odds ratio. Unlike regression, where we try to
minimize the squared deviations, in logit we maximize the likelihood of a firm
adopting the innovation. We can also assess the model’s predictive power using a
classification table, which is very similar to a classification table in discriminant
analysis. It determines the number of cases correctly and incorrectly classified
using the logit model. The significance of the independent variables is assessed
using the Wald statistic (similar to the t statistic in regression).
The results of the logit analysis are shown in Table 8. The results indicate that
the goodness of fit of the overall model is very good. The Cox and Snell R2 value
is also sufficiently large, indicating that the overall model is significant. Among
the independent variables top management support, size, competitive advantage,
and compatibility are significant determinants of adoption of computer-mediated
114 PREMKUMAR

Table 8
Logistic Regression Resultsa

Variable Regression Coefficient Standard Error Wald Statistic Significance

Perceived usefulness 0.0016 0.338 0.00 .996

Cost 0.075 0.230 0.10 .743
Compatibility 0.428 0.253 2.85 .091
Management support 0.701 0.333 4.42 .035
Competitive advantage 1.15 0.284 16.39 .0001
Size 0.232 0.097 5.65 .017

Classification Table

Predicted

Observed Adoption  No Adoption  Yes Percent Correct

Adoption  no 119 13 90.15

Adoption  yes 26 40 60.61
Overall 80.30

aModel: 2(6)  97.13, p  .0001, Cox and Snell R2  .388. Hosmer and Lemeshow goodness-of-fit:
2(8)  6.745, p  .564.

communication technologies. The classification table, a measure of predictive

power of the model, shows that the predicted frequency is very good with an
overall accuracy of 80.3%.

6.1 Discussion

The most significant variable was competitive advantage. Communication tech-

nologies, unlike other innovations, are interdependent innovations, which require
a firm’s business partners to also adopt the innovation. The utility of the innova-
tion increases as more people adopt it. For example, the utility of e-mail increases
when one has more people to interact with using e-mail. Hence, there is some
incentive for the early adopter to market the innovation among its trading part-
ners to increase the value of the innovation they adopted. Very soon it becomes a
strategic necessity to have the innovation in order to compete in the marketplace.
Whereas large firms realized the potential of communication technologies some
years ago, smaller firms are now realizing the strategic necessity of adopting these
technologies to survive in their business. The electronic integration driven by sup-
ply chain and similar initiatives is making it imperative for even small firms to
adopt these technologies to participate in the chain. For example, a small trucking
firm with very limited need for computer-mediated communications support
installed EDI to continue their business with a large shipper.
Another important factor in this study, which is consistently found to be critical
in IS implementation research, is top management support. In very small firms, the
primary decision maker is the owner of the business, and his or her vision for
the use of these technologies determines the level of support for adoption of the
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 115

innovation. For example, we came across two large farming operations on two
extreme ends of IS sophistication. One owner did not see any benefit from the
technology, considered it as a nuisance, provided little support for IT, and there-
fore used it primarily for simple accounting. The other firm was totally automat-
ed with computers being used to measure the feed, the weight gain of herds, and
sophisticated forecasting techniques to forecast the herd output on a daily basis.
They had electronic links with their customers to receive orders electronically and
used the Internet to monitor prices. The owner claimed that IT has helped them to
be 10% to 20% more profitable than their competitors.
The results indicate that size still plays an important role and larger firms in the
small business category have a greater propensity to adopt communication tech-
nologies. In our study we had some really small firms who did not perceive much
benefit from these technologies.
Process compatibility was only marginally significant at the .09 level. The
incompatibilities in terms of business processes can be a significant deterrent to
adoption. Cost was not a major factor in determining adoption. Probably the low
cost of hardware and software has reduced the impact of this variable. The price of
hardware has been declining for many years, and in recent years the price of soft-
ware has also declined considerably to make it very affordable. Further, the cost of
establishing communication links through a service provider has also come down
due to competition in the telecommunications industry. However, it should be
noted that firms still face many hidden costs, as in the case of EDI, where costs
increase significantly if EDI has to be integrated with other internal IS applications.
It was surprising that perceived usefulness was not a significant factor in pre-
dicting adoption. Most prior studies on IS implementation had found it to be
significant. One possible explanation for the lack of significance is the overwhelm-
ing influence of the competitive advantage variable. Some small firms are adopt-
ing communications technologies because it has become a strategic necessity for
surviving in the business rather than because they perceive any direct benefit
from using the technology. We can argue that the technology required to survive
in the business is in itself a key market benefit of adoption. An examination of the
mean values of these variables in the two categories indicates that it is higher in
the adopter category. Although stories in the trade press and studies on IOS have
found these variables to be critical, we have not seen any study specifically in the
small business sector.

6.2 Future Research Directions

The review of prior research identified many new factors that need to be studied.
In the environmental domain researchers can examine the impact of power of trad-
ing partners and economic dependence on them on adoption of IT. The growth in
supply chain management and IOS that tightly integrate a small firm’s operations
with a larger supplier–customer makes this a critical variable influencing adoption
and diffusion of IT. Another interesting variable in the environmental domain is
the external support for adopting these technologies. Whereas studies in 1980s
indicated that vendor support was not related to IS use or satisfaction, more recent
116 PREMKUMAR

studies [44, 55] indicated that external support is a significant variable. The short-
age of IT personnel in the marketplace and the popularity of outsourcing are
prompting many small firms to outsource their IS operations. We need to empiri-
cally examine whether this is a significant factor. Literature on outsourcing in large
firms has been inconclusive on the benefits of outsourcing [71]. Future studies could
examine outsourcing in the context of small businesses.
It is surprising that some of the innovation factors were not significant in this
study. More research has to be conducted because these results are inconsistent
with some of the traditional IS research. One major reason for the lack of signifi-
cance may be due to our focus on communication technologies. Small businesses,
being more reactive, are forced to adopt these technologies by the early adopters,
who may be bigger and have greater power. Therefore, traditional notions of eval-
uating the benefits of these technologies and their compatibility with existing sys-
tems may not be relevant in these contexts.
The review identified many research opportunities in the individual and task
domains. Future studies could examine the impact of many of these factors in the
context of both individual- and organizational-level IS implementation.
This study examined only the adoption stage. Future studies could examine the
diffusion of these technologies within the organization. Given that the impetus for
adoption was from outside, it would be interesting to examine whether these tech-
nologies diffuse into newer applications. Studies on EDI adoption have found that
many small firms use a PC just as a window or a post box to link with their trad-
ing partners without integrating the data in their internal applications. However,
we have also noticed that the increasing demand and sophistication of these IOS
makes it necessary for small firms to integrate the IOS data in their internal appli-
cations. The order data has to be linked up with the invoice and payment data for
these IOS systems to integrate the order-processing cycle across two partners.

7. CONCLUSION

One of the primary objectives of this study was to review the research literature on
IS adoption and implementation in small business, examine the commonalities and
differences with the traditional IS literature, and identify research gaps in the small
business area. A research framework, adapted from an organizational model, was
used to identify five major domains that influence IT adoption and use in organi-
zations. The research on IS implementation was reviewed and the studies mapped
to the research framework. A similar analysis was conducted for studies in the
small business sector. A comparison of the studies in the two areas revealed the
gaps in small business research and potential opportunities for future research.
Most studies focused on factors having an impact on system usage or satisfaction.
Very few studies examined the adoption of IT in small businesses and many fac-
tors in the technology domain were not studied.
A research model was developed to explore the factors influencing the adoption
of computer-mediated communication technologies in small business. It incorpo-
rated some of the innovation factors that were identified as potential gaps in our
earlier analysis. The research model evaluated the impact of six factors—perceived
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 117

usefulness, cost, compatibility, top management support, competitive advantage,

and size—on the adoption of computer-mediated communications technologies.
The variables were measured using multi-item indicators and the data were collect-
ed using a large-scale field study. A telephone interview was used to collect data
from 207 firms on various aspects of their organization, their use of communications
technologies, and the factors influencing their adoption of these technologies. The
results of statistical analysis of the data reveal that competitive advantage, top man-
agement support, and size were important determinants of adoption of communi-
cation technologies.

REFERENCES

[1] J. A. Welsh and J. F. White, “A small business is not a little big business,” Harvard Business Review,
vol. 59, no. 4, pp. 18–32, 1981.
[2] T. C. Dandridge, “Children are not little ‘grown-ups’: Small business needs its own organiza-
tional theory,” Journal of Small Business Management, vol. 17, no. 2, pp. 53–57, 1979.
[3] F. Farhoomand and G. P. Hrycyk, “The feasibility of computers in the small business environ-
ment,” American Journal of Small Business, vol. 9, no. 4, pp. 15–22, 1985.
[4] L. Raymond, “Organizational characteristics and MIS success in the context of small business,”
MIS Quarterly, vol. 9, no. 1, pp. 37–52, 1985.
[5] L. Raymond, “The impact of computer training on the attitudes and usage behavior of small
business managers,” Journal of Small Business Management, vol. 26, no. 3, pp. 9–13, 1985.
[6] J. Eckhouse, “Technology gives edge to smaller businesses,” Information Week, pp. 2SR–4SR, 1998.
[7] R. B. Handfield and E. L. Nichols, Supply Chain Management. Upper Saddle River, NJ: Prentice
Hall, 1998.
[8] T. H. Kwon and R. W. Zmud, “Unifying the fragmented models of information systems imple-
mentation,” in Critical Issues in Information Systems Research, R. J. Borland and R. A Hirschhiem,
Eds. New York: Wiley, 1987, pp. 252–257.
[9] R. G. Fichman, “Information technology diffusion: A review of empirical research,” in Proceedings
of the 13th International Conference on Information Systems, J. I. Gross, J. D. Becker, and J. J. Elam,
Eds. Dallas, TX, 1992, pp. 195–206.
[10] M. Alavi and E. A. Joachimsthaler, “Revisiting DSS implementation: A meta-analysis of the liter-
ature and suggestions for researchers,” MIS Quarterly, vol. 16, no. 1, pp. 95–114, 1992.
[11] B. E. Swanson, “Information systems innovation among organizations,” Management Science,
vol. 40, no. 9, pp. 1069–1092, 1994.
[12] E. M. Rogers, Diffusion of Innovations, 4th ed. New York: Free Press, 1995.
[13] R. B. Cooper and R. W. Zmud, “Information technology implementation research: A technologi-
cal diffusion approach,” Management Science, vol. 36, no. 2, pp. 123–139, 1990.
[14] L. M. Markus, “Power, politics, and MIS implementation,” Communications of the ACM, vol. 26,
no. 6, pp. 430–444, 1983.
[15] M. J. Ginzberg, “Key recurrent issues in the MIS implementation process,” MIS Quarterly, vol. 5,
pp. 47–59, 1981.
[16] W. J. Orlikowski, “CASE tools as organizational change: Investigating increment,” MIS Quarterly,
vol. 17, no. 3, pp. 309–340, 1993.
[17] H. J. Leavitt, “Applied organizational change in industry: Structural, technological, and human-
istic approach,”in Handbook of Organizations, J. March Ed. Chicago: Rand McNally, 1965,
pp. 1144–1170.
[18] K. Ramamurthy, W. R. King, and G. Premkumar, “User characteristics–DSS Effectiveness link-
age: An empirical assessment,” International Journal of Man Machine Studies, vol. 36,
pp. 469–505, 1992.
[19] M. S. Scott Morton, The Corporation of the 1990s—Information Technology and Organizational
Transformation. New york: Oxford University Press, 1991.
118 PREMKUMAR

[20] T. Guimaraes, M. Igbaria, and Ming-te Lu, “The determinants of DSS success: An integrated
model,” Decision Sciences, vol. 23, pp. 409–429, 1992.
[21] V. Grover, “Empirically derived model for the adoption of customer-based inter-organizational
systems,” Decision Sciences, vol. 24, no. 3, pp. 603–639, 1993.
[22] V. Choudhury, “Strategic choices in the development of interorganizational information sys-
tems,” Information Systems Research, vol. 8, no. 1, pp. 1–24, 1997.
[23] C. S. Saunders and S. Clark, “EDI adoption and implementation: A focus on interorganizational
linkages,” Information Resources Management Journal, vol. 5, no. 1, pp. 9–19, 1992.
[24] G. Premkumar and K. Ramamurthy, “The role of inter-organizational and organizational factors
on the decision mode for adoption of inter-organizational systems,” Decision Sciences, vol. 26,
no. 3, pp. 303–336, 1995.
[25] H. Gatignon and T. S. Robertson, “Technology diffusion: An empirical test of competitive
effects,” Journal of Marketing, vol. 53, no. 1, pp. 35–49, 1989.
[26] C. M. Beath, “Supporting the information technology champion,” MIS Quarterly, vol. 15, no. 3,
pp. 355–374, 1991.
[27] J. A. Lehman, “Organizational size and information system sophistication,” Journal of
Management Information Systems, vol. 2, no. 3, pp. 78–86, 1985.
[28] J. Brancheau and J. C. Wetherbe, “The adoption of spreadsheet software: Testing innovation dif-
fusion theory in the context of end-user computing,” Information Systems Research, vol. 1, no. 2,
pp. 115–143, 1990.
[29] R. W. Zmud, “Diffusion of modern software practices: Influence of centralization and formaliza-
tion,” Management Science, vol. 28, no. 12, pp. 1421–1431, 1982.
[30] J. R. Kimberly and M. J. Evanisko, “Organizational innovation: The influence of individual, orga-
nizational, and contextual factors on hospital adoption of technological and administrative inno-
vations,” Academy of Management Journal, vol. 24, pp. 689–713, 1981.
[31] L. G. Tornatzky and K. J. Klein, “Innovation characteristics and innovation adoption–
implementation: A meta-analysis of findings,” IEEE Transactions on Engineering Management,
vol. 29, no. 11, pp. 28–45, 1982.
[32] G. C. Moore and I. Benbasat, “Development of an instrument to measure the perceptions of
adopting an information technology innovation,” Information Systems Research, vol. 2, no. 3,
pp. 192–222, 1991.
[33] G. Premkumar, K. Ramamurthy, and S. Nilakanta, “Implementation of electronic data inter-
change: An innovation diffusion perspective,” Journal of Management Information Systems, vol. 11,
no. 2, pp. 157–186, 1994.
[34] E. M. Rogers and F. F. Shoemaker, Communication of Innovations. New York: Free Press, 1971.
[35] F. Davis, R. Bagozzi, and P. Warshaw, “User acceptance of computer technology: A comparison
of two theoretical models,” Management Science, vol. 35, no. 8, pp. 982–1003, 1989.
[36] S. Taylor and P. A. Todd, “Understanding information technology usage: A test of competing
models,” Information Systems Research, vol. 6, no. 2, pp. 144–176, 1995.
[37] V. Venkatesh and F. D. Davis, “A theoretical extension of the technology acceptance model: Four
longitudinal field studies,” Management Science, vol. 46, no. 2, pp. 186–204, 2000.
[38] R. W. Zmud, “Individual differences and MIS success: A review of the empirical literature,”
Management Science, vol. 25, no. 10, pp. 966–979, 1979.
[39] H. C. Lucas, “Empirical evidence for a descriptive model of implementation,” MIS Quarterly,
vol. 2, no. 2, pp. 47–59, 1978.
[40] G. L. Sanders and J. F. Courtney, “A field study of organizational factors influencing DSS
success,” MIS Quarterly, vol. 9, no. 1, pp. 77–93, 1985.
[41] B. Ives and M. H. Olson, “User involvement and MIS success: A review of research,” Management
Science, vol. 1984, pp. 586–603, 1984.
[42] W. L. Fuerst and P. H. Cheney, “Factors affecting the perceived utilization of computer based
decision support system in the oil industry,” Decision Sciences, vol. 13, pp. 554–569, 1982.
[43] M. Igbaria, “End-user computing effectiveness—A structural equation model,” Omega, vol. 18,
no. 6, pp. 637–652, 1990.
[44] M. Igbaria, N. Zinatelli, P. Cragg, and A. Cavaye, “Personal computing acceptance factors
in small firms: A structural equation model,” MIS Quarterly, vol. 21, no. 3, pp. 279–305,
1997.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 119

[45] D. L. Goodhue and R. L. Thompson, “Task–Technology fit and individual performance,” MIS
Quarterly, vol. 19, no. 2, pp. 13–34, 1995.
[46] D. A. Harrison, P. P. Mykytyn, and C. K. Riemenschneider, “Executive decisions about adoption
of information technology in small business: Theory and empirical tests,” Information Systems
Research, vol. 8, no. 2, pp. 171–195, 1997.
[47] L. Raymond, “Organizational context and information system success: A contingency
approach,” Journal of Management Information Systems, vol. 6, no. 4, pp. 5–20, 1990.
[48] A. R. Montazemi, “Factors affecting information satisfaction in the context of small business
environment,” MIS Quarterly, vol. 12, no. 2, pp. 239–256, 1988.
[49] W. H. Delone, “Determinants of success for computer usage in small business,” MIS Quarterly,
vol. 12, no. 1, pp. 51–61, 1988.
[50] C. S. Yap, C. P. P. Soh, and K. S. Raman, “Information systems success factors in small business,”
Omega, vol. 20, nos. 5/6, pp. 597–609, 1992.
[51] L. Raymond and F. Bergeron, “Personal DSS success in small enterprises,” Information and
Management, vol. 22, pp. 301–308, 1992.
[52] P. B. Cragg and M. King, “Small firm computing: Motivators and inhibitors,” MIS Quarterly,
vol. 17, no. 1, pp. 47–60, 1993.
[53] P. Palvia, D. B. Means, and W. M. Jackson, “Determinants of computing in very small businesses,”
Information and Management, vol. 27, pp. 161–174, 1994.
[54] V. S. Lai, “A survey of rural small business computer use: Success factors and decision support,”
Information and Management, vol. 26, pp. 297–304, 1994.
[55] J. Y. L. Thong, C. Yap, and K. S. Raman, “Top management support, external expertise, and
information systems implementation in small business,” Information Systems Research, vol. 7,
no. 2, pp. 248–267, 1996.
[56] R. W. Zmud, M. R. Lind, and F. W. Young, “An attribute space for organizational communication
channels,” Information Systems Research, vol. 1, no. 4, pp. 440–457, 1990.
[57] P. G. W. Keen, Competing in Time: Using Telecommunications for Competitive Advantage, 2nd ed.
Cambridge, MA: Ballinger Press, 1988.
[58] E. Karahanna, D. W. Straub, and N. L. Chervany, “Information technology adoption across time:
A cross-sectional comparison of pre-adoption and post-adoption beliefs,” MIS Quarterly, vol. 23,
no. 2, pp. 183–214, 1999.
[59] P. J. Hart and C. S. Saunder, “Emerging electronic partnerships: Antecedents and dimensions of
EDI use from the suppliers perspective,” Journal of Management Information Systems, vol. 14, no. 4,
pp. 87–111, 1998.
[60] G. A. Churchill, Jr., “A paradigm for developing better measures of marketing constructs,”
Journal of Marketing Research, vol. 25, no. 1, pp. 170–184, 1979.
[61] N. Venkatraman, “Strategic orientation of business enterprises: The construct, dimensionality,
and measurement,” Management Science, vol. 35, no. 8, pp. 942–962, 1989.
[62] C. Fornell and D. F. Lacker, “Evaluating structural equation models with unobservable variables
and measurement error,” Journal of Marketing Research, vol. 18, pp. 39–50, 1981.
[63] P. M. Bentler and D. G. Bonett, “Significance tests and goodness of fit in the analysis of covari-
ance structures,” Psychological Bulletin, vol. 88, pp. 588–606, 1980.
[64] R. P. Bagozzi, Y. Yi, and L. W. Phillips, “Assessing construct validity in organizational research,”
Administrative Science Quarterly, vol. 26, pp. 421–458, 1991.
[65] A. H. Segars and V. Grover, “Strategic information systems planning success: An investigation of
the construct and its measurement,” MIS Quarterly, vol. 22, no. 2, pp. 139–163, 1998.
[66] K. G. Joreskog, “Statistical analysis of congeneric tests,” Psychometrica, vol. 36, pp. 109–113, 1971.
[67] J. Nunnally, Psychometric Theory. New York: McGraw-Hill, 1978.
[68] R. P. Bagozzi and Y. Yi, “On the evaluation of structural equation models,” Journal of Academy of
Marketing Science, vol. 16, pp. 23–35, 1988.
[69] J. H. Smith and S. J. Millberg, “Information privacy: Measuring individuals’ concerns about
organizational practices,” MIS Quarterly, vol. 20, no. 2, pp. 167–196, 1996.
[70] J. F. Hair, R. E. Anderson, R. L. Tatham, and B. J. Grablowsky, Multivariate Data Analysis. Tulsa,
OK: PPC Books, 1983.
[71] M. Lacity and R. Hirchsheim, Information Systems Outsourcing: Myths, Metaphors, and Realities.
Chichester, England: Wiley, 1993.
120 PREMKUMAR

[72] R. O’Callaghan, P. J. Kaufmann, and B. R. Konsynski, “Adoption correlates and share effects of elec-
tronic data interchange systems in marketing channels,” Journal of Marketing, vol. 56, pp. 45–56, 1992.
[73] R.W. Zmud, “An examination of push–pull theory applied to process innovation in knowledge
work,” Management Science, vol. 30, no. 6, pp. 727–738, 1984.
[74] M. A. Maidique, “Entrepreneurs, champions, and technological innovation,” Sloan Management
Review, vol. 22, no. 2, pp. 59–76, 1980.
[75] W. H. Delone, “Firm size and characteristics of computer use,” MIS Quarterly, vol. 5, no. 4, pp. 65–77,
1981.
[76] S. Nilakanta and R. W. Scamell, “The effect of information sources and communication channels
on the diffusion of innovation in a data base development environment,” Management Science,
vol. 36, no. 1, pp. 24–40, 1990.
[77] R. Agarwal and J. Prasad, “Role of innovation characteristics and perceived voluntariness in the
acceptance of information technologies,” Decision Sciences, vol. 28, no. 3, pp. 557–582, 1997.
[78] I. Benbasat and R. N. Taylor, “The impact of cognitive styles on information systems design,”
MIS Quarterly, vol. 1, no. 1, pp. 37–50, 1978.
[79] J. C. Henderson and P. C. Nutt, “The influence of decision style on decision making behavior,”
Management Science, vol. 26, no. 4, pp. 371–386, 1980.
[80] D. Compeau and C. A. Higgins, “Computer self efficacy—Development of a measure and initial
test,” MIS Quarterly, vol. 19, no. 2, pp. 189–211, 1995.
[81] D. Compeau, C. A. Higgins, and S. Huff, “Social cognitive theory and individual reactions to
computing technology: A longitudinal study,” MIS Quarterly, vol. 23, no. 2, pp. 145–158, 1999.
[82] C. P. P. Soh, C. S. Yap, and K. S. Raman, “Impact of consultants on computerization success in
small businesses,” Information and Management, vol. 22, pp. 309–319, 1992.
[83] G. G. Gable, “Consultant engagement for computer system selection,” Information and
Management, vol. 20, pp. 83–93, 1991.

APPENDIX:
Measurement Items

All scales are 7 point Likert-type scales ranging from strongly agree to strongly
disagree.

Perceived usefulness:

• These information technologies allow us to better communicate with our

customers and suppliers.
• These information technologies help us cut costs in our operations.
• These information technologies provide timely information for decision
making.

Cost:

• The cost of adopting these technologies is far greater than the benefits.
• Amount of money and time invested in training employees in these tech-
nologies is very high.

Compatibility:

• Integrating these technologies into our current procedures would be very

difficult.
 INFORMATION TECHNOLOGY IN SMALL BUSINESS 121

• Implementing changes due to the new technologies is not compatible with

our firm’s values.

Management:

• Management enthusiastically supports the adoption of these technologies.

• Management has allocated enough resources for adoption of these technologies.
• Management actively encourages employees to use the new technologies in
their daily tasks.

Competitive advantage:

• We will lose customers to our competitors if we do not adopt these new

technologies.
• It is a strategic necessity to use these information technologies to compete in
the marketplace.
• Our customers require the use of these technologies for doing business with
them.