A CONCEPTUAL MODEL ON INFORMATION TECHNOLOGY INVESTMENT FOR

ADOPTION OF DIGITAL TECHNOLOGIES BY SMEs.

Case study at Kampala Central Division

Prepared by

MITANGO ABASI

REG.no: 2019/HD05/29874U

STUDENT No: 1900729874

A RESEARCH PROPOSAL SUBMITTED TO THE COLLEGE OF COMPUTING AND

INFORMATION TECHNOLOGY MAKERERE UNIVERSITY IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE AWARD OF MASTER’S OF SCIENCE IN
INFORMATION SYSTEMS.

Supervisor

Dr. Grace Kobusinge

Department of Information Systems

Computing and Information Technology Makerere University

PLAN A

AUGUST, 2023
DECLARATION
This research proposal is my original work and has not been presented for the award of any other
degree in any other university or institution.

Signature: ------------------------------Date: ---------------------------------- MITANGO ABASI

REG.no:2019/HD05/29874U

Supervision by:

Signature ------------------------------Date---------------------------------- GRACE KOBUSINGE

i
DEDICATION
I dedicate this work to my great family, parents, sisters, brothers, to my wife Resty and my
daughter Oprah. I thank you all for your patience, support and understanding throughout this
programme.

ACKNOWLEDGEMENT

ii
This work would not have been possible without the assistance that I received from various
dignified people that I wish to recognize. I would like to first express my deep gratitude to my
supervisor Dr. Grace Kobusinge whose knowledge and generous support has helped guide my
work in a way that has been pivotal to my growth as a scholar. Your mentorship has motivated
me to pursue my research proposal with confidence and my deep thanks also go to my colleagues
and all staff from the Department of Information Systems College of Computing and Information
Technology. Your encouragement has enabled me to overcome the anxious moments. Above all
I give thanks to the Almighty God since it is through his grace that am at this level.

iii
Contents
DECLARATION..........................................................................................................................................i
DEDICATION............................................................................................................................................ii
ACKNOWLEDGEMENT..........................................................................................................................iii
CHAPTER ONE: INTRODUCTION..........................................................................................................1
1.1 Background...........................................................................................................................................1
1.2 Statement of the problem.......................................................................................................................2
1.3 Main objective.......................................................................................................................................3
1.3.1 Specific objectives..............................................................................................................................3
1.3.2 Hypothesis..........................................................................................................................................3
1.4 Scope of the study.................................................................................................................................4
1.4.1 Subject scope......................................................................................................................................4
1.4.2 Geographical scope.............................................................................................................................4
1.4.3 Time scope.........................................................................................................................................4
1.5 Budget...................................................................................................................................................4
1.6 Significance or contribution of the study...............................................................................................4
1.7 Justification of the study........................................................................................................................5
CHAPTER TWO: LITERATURE REVIEW..............................................................................................7
2.1 Summary...............................................................................................................................................7
2.2 IT investment decisions in SMEs..........................................................................................................7
2.2.1 Introduction:.......................................................................................................................................7
2.2.2 Factors Influencing IT Investment Decision.......................................................................................7
2.2.3 Challenges Faced by SMEs in IT Investment Decision......................................................................8
2.2.4 Strategies for Effective IT Investment Decision-Making....................................................................8
2.2.5 Conclusion..........................................................................................................................................9
2.3 Adoption of Digital Technologies by SMEs..........................................................................................9
2.3.1 Factors Influencing Adoption of Digital Technologies.......................................................................9
2.3.2 Challenges Faced by SMEs in Adopting Digital Techs....................................................................10
2.3.3 Strategies for Successful Adoption...................................................................................................10
2.4 Conceptual Framework........................................................................................................................11
2.4.1 Definition of variables......................................................................................................................11
2.5 Theoretical Framework........................................................................................................................12
2.5.1 Introduction:.....................................................................................................................................12

iv
2.5.2 Resource-Based View (RBV):..........................................................................................................12
2.5.3 The Technology-Organization-Environment framework:.................................................................12
2.5.4 Real Options Theory.........................................................................................................................13
2.5.5 Technology Acceptance Model:.......................................................................................................13
2.5.6 Conclusion:.......................................................................................................................................13
2.6 Case Studies Demonstrating Successful IT Investment Strategies.......................................................13
2.6.1 Introduction:.....................................................................................................................................13
2.6.2 Case 1: “Company A” (Fichman, 2001):..........................................................................................14
2.6.3 Case 2: “Company B” (Huang et al., 2018):.....................................................................................14
2.6.4 Case 3: “Company C” (Ismagilova et al., 2020):..............................................................................15
2.6.5 Conclusion:.......................................................................................................................................16
CHAPTER THREE: METHODOLOGY..................................................................................................17
3.1 Introduction.........................................................................................................................................17
3.2 Research Design..................................................................................................................................17
3.2.1 Qualitative Phase:.............................................................................................................................17
3.2.2 Quantitative Phase:...........................................................................................................................17
3.3.1 Qualitative Analysis:........................................................................................................................17
3.3.2 Quantitative Analysis:......................................................................................................................18
3.4 Technique and population for sampling...............................................................................................18
3.5 Measurements......................................................................................................................................18
3.6 Validity and reliability of data and research instruments.....................................................................18
3.7 Procedure followed in data collection..................................................................................................18
3.8 Ethical considerations..........................................................................................................................19
3.9 Expected Outcomes:............................................................................................................................19
3.10 Conclusion:........................................................................................................................................19

v
LIST OF TABLES

Table 1: showing Independent & Dependent Variables 12

LIST OF FIGURES

Figure 3: below show the relationship between the Independent variable and dependent
variables. 12

LIST OF ACRONYMS AND ABBREVIATIONS

ICTs - Information and communication technologies

MSMEs - Micro Small and Medium Enterprises

SMEs - Small and Medium Enterprises

AI – Artificial Intelligence

ROI – Return on Investment

TAM – Technology Acceptance Model

NDPIII – Third National Development Plan

Keywords: SMEs, Conceptual Model, Information Technology Investment, Digital Technology

Adoption.

vi
CHAPTER ONE: INTRODUCTION

1.1 Background
The digital transformation of firms has recently emerged as a key factor in driving both global
economic growth and competitiveness. Small and medium-sized businesses (SMEs) are essential
to economies because they create a lot of jobs and encourage innovation (Rodrigues & Franco,
2023). Small and medium-sized enterprises (SMEs) are defined differently depending on the
country, however in Uganda, SMEs are seen as a driving force behind innovation, change, and
economic growth (National Development Plan III, 2019). The Uganda National Planning
Authority has recognized small and medium-sized enterprises (SMEs) as a key driver of the
country's economic development and has incorporated them into the Uganda Vision 2040 plan
(National Development Plan III, 2019). For Small and Medium-sized Enterprises (SMEs) to
remain competitive and sustainable in the quickly evolving business environment of today, the
adoption of digital technology has become crucial (Saka et al., 2020). The Central Division of
Kampala is a thriving economic center with a sizable presence of SMEs in a variety of industries.
Although the potential benefits of digital technologies are becoming more widely acknowledged,
many SMEs still face challenges due to a lack of funding, a lack of technical experience, and
uncertainty about the returns on IT expenditures (Temouri, Pereira & Xie, 2020). However,
according to Bonga (2017), one of the major difficulties faced by SMEs in the modern business
environment is their inability to efficiently adapt and utilize digital technologies. This problem is
especially severe in the Kampala Central Division of Uganda, where SMEs are battling with
scarce resources and knowledge hurdles (Ddamulira et al., 2021).

Pan and Yang (2021) claim that the digital age has ushered in a wave of technology
advancements that promise to fundamentally alter how firms conduct their operations. These
technologies, which range from e-commerce platforms and mobile apps to cloud computing and
data analytics, give SMEs the chance to increase their reach, optimize their processes, and
maintain their competitiveness. Nevertheless, despite the obvious benefits, many SMEs in
Kampala Central Division still find it difficult to implement these new technology. The
limitations on investment decision-making and knowledge gaps that SMEs have are the primary
causes of the issue. SMEs frequently find it expensive to spend in the adoption of new digital
technological advancements, as Bagale et al. (2021) pointed out with great accuracy. This

1
financial burden is a result of the high expenses of obtaining and implementing digital solutions,
which might be unaffordable for startups with low funding.

Additionally, the SMEs' lack of understanding of how and when to benefit from the usage of
digital technology exacerbates the challenge of financial resources. The potential benefits of
digital tools, however, may not be fully understood by many business owners and managers in
Kampala Central Division, or they may find it difficult to choose which technologies are best
suited for their particular needs (Mantulenko & Aleshkova, 2021). SMEs frequently hesitate to
invest in information technology for the adoption of digital technologies as a result of their lack
of awareness and comprehension (Ghobakhloo & Ching, 2019). Additionally, even if SMEs
understand the value of digital technologies, they might not have the skills necessary to use them
successfully to progress their businesses. The inability to successfully integrate digital tools into
their business processes may be caused by a lack of digital literacy and knowledge (Reddy et al.,
2023).

Investments in Information Technology (IT) help SMEs adopt digital technologies, but for these
investments to be effective, it is crucial to have a thorough grasp of the elements that influence
them (Zaidi et al., 2022). Addressing these issues is of utmost importance given the importance
of SMEs to the local economy and the worldwide trend toward digitization. In order for SMEs in
Kampala Central Division to make informed and efficient information technology investments
that support the adoption of digital technologies, it is essential to create a conceptual model that
specifies plans and methodologies. A model like this can bridge the gap between technology
potential and actual implementation for small enterprises in the area. With a focus on the
adoption of digital technologies in Kampala Central Division, this research intends to create a
thorough conceptual model that tackles the significance of information technology (IT)
investments for SMEs in light of these difficulties. This study aims to offer practical insights that
can enable SMEs to embrace digital transformation and boost their competitiveness by
examining the particular context, issues, and possibilities faced by SMEs in this region.

1.2 Statement of the problem

SMEs lack of the necessary knowledge on how and when to invest and profit from the use of
digital technologies as well as the necessary skills to effectively employ digital technologies to
advance their enterprises. SMEs also find it costly to spend on the implementation of new digital

2
technological advances which hampers Technology adoption (Bagale et al, 2021). Many
business owners and employees of SMEs in Kampala Central Division may not be well-versed in
digital technologies, and they may lack the training and education needed to harness the full
potential of these tools (Mantulenko & Aleshkova, 2021). This knowledge gap not only hinders
technology adoption but also limits the ability of SMEs to innovate, streamline operations, and
expand their market reach.

1.3 Main objective

The main objective of this research is to develop a conceptual model for Information Technology
(IT) investment tailored to the specific needs of SMEs in Kampala Central Division, with the aim
of facilitating the adoption and effective utilization of digital technologies.

1.3.1 Specific objectives

 To examine how SMEs in Kampala Central Division invest in IT.
 To determine the degree to which SMEs in Kampala Central Division are currently utilizing
digital technologies.
 To pinpoint the main knowledge and skill gaps that prevent SMEs from utilizing digital
technology effectively.
 To create a conceptual framework for IT investment that solves the knowledge and skill gaps
found and encourage SMEs to adopt new technology.
 To assess the suggested model's potential influence on SMEs in Kampala Central Division's
digital transformation.

1.3.2 Hypothesis
The following hypothesis will be tested during the course of this research:

Hypothesis: A tailored conceptual model for IT investment, addressing knowledge and skills
gaps, will significantly improve the adoption and effective utilization of digital technologies by
SMEs in Kampala Central Division.

3
1.4 Scope of the study

1.4.1 Subject scope

The study is to be limited to how small and Medium Enterprises are impacted with investment in
information technology for the adoption and usage of digital technologies. The study will
exclude how technology affects large enterprises and will not include other aspects that affect
performance of SMEs such as political instability, inflation, natural disasters etc.

1.4.2 Geographical scope

The study is to be drawn from the different SMEs in Kampala central division where all levels of
SMEs are situated including Kampala road, Industrial area, Owino market, Nakasero, Nasser
road, Kiseka market, old Kampala e.t.c.

1.4.3 Time scope

The study is intended to be covered in twelve months and to be conducted in phases as follows.

Phase 1 (Months 1-2): Literature review and survey design.

Phase 2 (Months 3-6): Data collection (surveys, interviews, case studies).

Phase 3 (Months 7-9): Data analysis and model development.

Phase 4 (Months 10-12): Report writing, recommendations, and dissemination.

However the study may be limited by time constraint.

1.5 Budget
The research budget will cover expenses related to data collection, analysis, and dissemination. It
will include costs for survey administration, interview transcription services, and travel expenses
for on-site data collection.

1.6 Significance or contribution of the study

a. Economic Growth and Competitiveness: SMEs play a pivotal role in economic growth and
job creation. Embracing digital technologies can enhance their productivity and competitiveness,
which are critical factors for sustainable development.

4
b. Digital Divide Reduction: Bridging the digital divide between SMEs and larger enterprises is
essential for fostering an inclusive economy. SMEs that lack access to digital technologies often
face limitations in reaching wider markets and optimizing their operations.

c. Innovation and Adaption: The adoption of digital technologies can lead to innovative
business practices and facilitate the ability of SMEs to adapt to changing market dynamics, such
as those brought about by the COVID-19 pandemic.

d. Market Expansion: Digital technologies enable SMEs to tap into global markets, thus
increasing their customer base and revenue potential. This research can help identify strategies
for SMEs in Kampala Central Division to expand beyond local markets.

e. Policy Formulation: The findings from this study can inform policymakers and stakeholders
about the specific IT investment needs of SMEs, aiding in the development of targeted policies
and support programs.

1.7 Justification of the study

a. Limited Research in Local Context: There is a scarcity of research that focuses on the
particular issues and opportunities faced by SMEs in Kampala Central Division, despite the fact
that many studies have looked at the impact of IT investments in SMEs globally. By offering
context-specific insights, this study seeks to fill this knowledge vacuum.

b. Relevance in Real Life: The suggested conceptual model will provide SMEs in Kampala
Central Division with useful advice on how to strategically invest in IT for the successful
adoption of digital technology. Local businesses might use this research as a guide.

c. Policy Relevance: As Uganda seeks to foster a thriving entrepreneurial ecosystem,

understanding the role of IT investments in SMEs is crucial for policymakers. This study can
provide evidence-based recommendations for policy formulation and implementation.

d. Business Community Engagement: The research will actively engage with SMEs in
Kampala Central Division, fostering collaboration and knowledge sharing between the academic
and business communities. This engagement can lead to the co-creation of solutions that address
specific challenges faced by local SMEs.

5
e. Knowledge Advancement: The development of a conceptual model in this research will
contribute to the academic knowledge base on IT investment and digital technology adoption
among SMEs, potentially serving as a foundation for further research in this area.

In conclusion, the research on a conceptual model for IT investment in the adoption of digital
technologies by SMEs in Kampala Central Division is of paramount significance due to its
potential to drive economic growth, reduce the digital divide, foster innovation, expand markets,
inform policy, and create a bridge between academia and the local business community. This
study has the potential to make a meaningful impact on both the local and global stages,
emphasizing the relevance and timeliness of the chosen research topic.

6
CHAPTER TWO: LITERATURE REVIEW

2.1 Summary
The literature review will focus on two main areas: IT investment decisions in SMEs and the
adoption of digital technologies. It will explore existing theories, frameworks, and models
related to IT investment decision-making, factors influencing IT investments, and barriers to the
adoption of digital technologies by SMEs. The review will also highlight relevant case studies
that demonstrate successful IT investment strategies among SMEs.

2.2 IT investment decisions in SMEs

2.2.1 Introduction:
Information Technology (IT) is a catalyst for growth, innovation, and competitiveness in today's
ever changing corporate environment. Small and medium-sized businesses (SMEs) are essential
to the development of world economies, and the choices they make about their IT spending can
have a big impact on how successful they are. This literature study intends to give an in-depth
overview of the factors influencing SMEs' decisions to invest in IT, as well as the difficulties
they face and the approaches they take to make wise choices.

2.2.2 Factors Influencing IT Investment Decision

Business Strategy Alignment: One of the primary factors guiding IT investment decisions is
alignment with the overall business strategy. According to Raymond et al. (2019), SMEs must
ensure that IT investments are closely tied to their business objectives to achieve meaningful
outcomes.

Resource Constraints: SMEs often operate with limited financial resources and expertise in IT.
Huang et al. (2018) emphasize the importance of resource allocation and prioritization to
maximize the value derived from IT investments.

Perceived Benefits and Risks: The perceived benefits and risks associated with IT investments
heavily influence decision-making. Cragg and King (1993) suggest that SMEs assess potential
returns, competitive advantages, and potential risks before committing resources.

7
Technological Complexity: The complexity of IT solutions can impact SMEs' willingness to
invest. Simpler, user-friendly technologies are often favored due to easier integration and lower
implementation costs (Dey et al., 2018).

Vendor Relationship: The relationship with IT vendors and service providers can significantly
shape investment decisions. Trustworthy partnerships and vendors' ability to provide ongoing
support and maintenance influence SMEs' choices (Premkumar & Roberts, 1999).

2.2.3 Challenges Faced by SMEs in IT Investment Decision

Information Asymmetry: SMEs frequently lack the in-house expertise to comprehensively
evaluate IT options. Kuan and Chau (2001) point out that information asymmetry can lead to
suboptimal investment decisions due to a lack of technical understanding.

Risk Aversion: Given the uncertainties of IT investments, SMEs often exhibit risk-averse
tendencies. Thong (1999) highlights that SMEs may resist investments that are perceived as
risky, even if they offer significant benefits.

Short-Term Focus: Many SMEs prioritize short-term financial concerns over long-term strategic
gains. Santhanam and Hartono (2003) argue that this short-term focus can result in
underinvestment in IT capabilities.

Lack of Formal Processes: The absence of formal IT investment evaluation processes is another
challenge. SMEs might lack a systematic approach, leading to ad hoc decisions that may not
consider all critical factors (Premkumar & Roberts, 1999).

2.2.4 Strategies for Effective IT Investment Decision-Making

Business-IT Alignment: Establishing clear alignment between IT investments and business goals
is crucial. Huang et al. (2018) recommend consistent communication between business and IT
stakeholders to ensure strategic congruence.

Risk Management: Dey et al. (2018) advocate for robust risk management strategies to address
uncertainties. SMEs should identify potential risks, assess their impact, and devise mitigation
plans.

8
Collaboration and Networking: Engaging in industry networks and collaborating with peers can
provide valuable insights into IT investment best practices. Gable et al. (2008) emphasize the
importance of shared knowledge in making informed decisions.

IT Expertise Development: SMEs can invest in developing in-house IT expertise or seek external
advice. Kuan and Chau (2001) suggest that having knowledgeable personnel can lead to more
informed and strategic IT investment decisions.

Cost-Benefit Analysis: Conducting comprehensive cost-benefit analyses is crucial. Santhanam

and Hartono (2003) stress the significance of evaluating both short-term costs and long-term
benefits to make well-rounded decisions.

2.2.5 Conclusion
IT investment decisions in SMEs are pivotal determinants of their growth and success. This
literature review highlights the multifaceted nature of IT investment decisions, underscoring the
importance of aligning with business strategies, managing risks, and evaluating both benefits and
costs. By understanding the factors influencing these decisions and implementing effective
strategies, SMEs can leverage IT investments to thrive in today's competitive landscape.

2.3 Adoption of Digital Technologies by SMEs

The adoption of digital technology by Small and Medium-sized Enterprises (SMEs) has become
a key factor in competitiveness and growth in the current digital era. This literature review
explores the elements that affect SMEs' adoption of digital technologies, the difficulties they
encounter, and the tactics used to ensure their implementation.

2.3.1 Factors Influencing Adoption of Digital Technologies

Benefits as Perceived: According to research, SMEs view the potential advantages of digital
technology, such as improved customer interaction, increased efficiency, and improved decision-
making, as the main drivers for adoption (Laforet & Tann, 2006).

Resource Availability: The degree to which SMEs can embrace and integrate digital technology
into their operations depends on the availability of financial resources, skilled labor, and
infrastructure (Van Dijck et al., 2019).

9
Perceived Complexity: The perceived complexity of digital technologies affects adoption
decisions. SMEs tend to favor technologies that are user-friendly and align with their existing
processes (Ismagilova et al., 2020).

External Pressure: Competitive pressure from larger firms, changing market dynamics, and
customer expectations can drive SMEs to adopt digital technologies to stay relevant (Gupta et al.,
2020).

Management Support: The support and commitment of top management play a pivotal role in
influencing the decision to adopt digital technologies. Strong leadership can facilitate a positive
attitude toward change (Poon & Swatman, 1997).

2.3.2 Challenges Faced by SMEs in Adopting Digital Techs.

Lack of Awareness: Many SMEs lack awareness of the potential benefits of digital technologies
or are unfamiliar with the available solutions (Hossain & Dwivedi, 2018).

Financial Constraints: Limited financial resources can impede SMEs' ability to invest in costly
digital technologies and the required infrastructure (Wong et al., 2017).

Skills Gap: The shortage of skilled personnel to manage and operate digital technologies is a
significant challenge for SMEs, particularly those with limited access to training (Müller et al.,
2018).

Resistance to Change: SMEs often face resistance to change from employees who may be
accustomed to traditional processes (Ismagilova et al., 2020).

Uncertainty: The fast-paced nature of technological advancements can create uncertainty among
SMEs about which technologies to adopt and when (Gupta et al., 2020).

2.3.3 Strategies for Successful Adoption.

Education and Training: Providing training and education to SMEs about the benefits and usage
of digital technologies can bridge the skills gap and alleviate resistance (Hossain & Dwivedi,
2018).

Financial Support: Governments and industry associations can offer financial incentives and
grants to help SMEs overcome financial constraints (Wong et al., 2017).

10
Collaboration: Collaborative partnerships between SMEs and technology providers can offer
access to expertise, resources, and affordable solutions (Van Dijck et al., 2019).

Change Management: Implementing change management strategies, including involving

employees in the decision-making process, can mitigate resistance and facilitate smoother
adoption (Poon & Swatman, 1997).

Pilot Project: Implementing pilot projects allows SMEs to test the feasibility and benefits of
digital technologies before full-scale adoption (Ismagilova et al., 2020).

2.3.4 Conclusion
The adoption of digital technologies is pivotal for SMEs to remain competitive and resilient.
This literature review underscores the significance of understanding factors influencing adoption,
addressing challenges, and employing strategies that align with the unique characteristics and
resources of SMEs. By embracing digital technologies strategically, SMEs can unlock new
avenues for growth and innovation.

2.4 Conceptual Framework

2.4.1 Definition of variables

In this study, IT Investment is identified as the independent variable and Adoption of digital
technology identified as the dependent variable.

Table 1: Showing Independent & Dependent Variables

INDEPENDENT VARIABLE DEPENDENT VARIABLES

IT Investment Adoption
 Factors(Internal &  Factors(Internal &
External) External)
 Strategy  Success strategies

11
Figure 1: Show the relationship between the Independent variable and dependent variable.

INDEPENDENT VARIABLE DEPENDENT VARIABLES

IT Investment Decision Adoption

 Factors(Internal &  Factors(Internal &

External) External)
 Strategy  Success strategies
2.3.4 Explanation

The conceptual framework in figure above presents the relationship between the Independent
variable (IT Investment) and the dependent variable (Adoption). The illustration depicts the
influence of IT Investment Decision on the adoption of digital technologies by SMEs.

2.5 Theoretical Framework

2.5.1 Introduction
The decision to invest in Information Technology (IT) is a pivotal consideration for Small and
Medium-sized Enterprises (SMEs) seeking to enhance competitiveness and operational
efficiency. This Literature explores existing theories, frameworks, and models that provide
insights into the process of IT investment decision-making for SMEs.

2.5.2 Resource-Based View (RBV)

The Resource-Based View theory emphasizes the unique resources and capabilities that
organizations possess (Barney, 1991). This theory suggests that an organization's competitive
advantage stems from leveraging its distinctive resources, which may include IT investments.
For SMEs, the RBV theory underscores the importance of aligning IT investments with their
specific core competencies and strategic goals.

2.5.3 The Technology-Organization-Environment framework

The Technology-Organization-Environment framework (Tornatzky & Fleischer, 1990) offers a
comprehensive perspective on IT investment decision-making. It encompasses three key
dimensions:

12
Technological Factors: Focuses on the attributes of the IT itself, including its complexity,
compatibility, and potential benefits.

Organizational Factors: Examines how an organization's structure, culture, and readiness to

adopt new technologies influence the decision.

Environmental Factors: Considers external elements such as market dynamics, industry trends,
and competitive pressures.

2.5.4 Real Options Theory

The Real Options Theory (Copeland & Tufano, 2004) draws parallels between financial options
and IT investment decisions. It suggests that the value of an IT investment is not solely
determined by its immediate returns, but also by the flexibility it provides for future decisions.
SMEs can use this theory to assess the flexibility of IT investments and their potential to adapt to
changing circumstances.

2.5.5 Technology Acceptance Model

The Technology Acceptance Model (Davis, 1989) focuses on user perceptions and attitudes
toward adopting new technology. In the context of SMEs, this model highlights that employees'
perceptions of the ease of use and perceived usefulness of the IT solution play a crucial role in
influencing the decision to invest in and adopt technology.

2.5.6 Conclusion
These theories, frameworks, and models provide valuable insights into the complex process of IT
investment decision-making for SMEs. They emphasize factors ranging from internal resources
and external environmental influences to user perceptions and strategic alignment. By
considering these perspectives, SMEs can make informed choices that align IT investments with
their unique business goals and challenges.

2.6 Case Studies Demonstrating Successful IT Investment Strategies

2.6.1 Introduction:
Small and Medium-sized Enterprises (SMEs) are increasingly recognizing the transformative
potential of Information Technology (IT) investments. This article presents three case studies
that showcase successful IT investment strategies adopted by SMEs. These cases highlight the

13
importance of aligning IT with business objectives, leveraging cloud technologies, and forming
strategic collaborations to overcome challenges and achieve remarkable outcomes.

2.6.2 Case 1: “Company A” (Fichman, 2001):

The case study demonstrates how IT investment aligned with business strategy led to increased
operational efficiency and enhanced decision-making.

Background: Company A, a growing retail chain, faced operational inefficiencies due to manual
inventory tracking and sales management processes. To remain competitive and improve
customer service, the company opted for an IT investment.

Strategy and Implementation:

Company A strategically aligned its IT investment with business objectives. They adopted an
integrated inventory and point-of-sale system that streamlined inventory management, automated
order placements, and provided real-time sales data.

Results:

Operational Efficiency: The integrated system reduced manual effort, minimizing errors and
improving inventory accuracy.

Enhanced Decision-making: Real-time sales data enabled data-driven decision-making, leading

to optimized inventory levels and better stock management.

Customer Satisfaction: Improved inventory visibility resulted in quicker order fulfillment and
enhanced customer satisfaction.

2.6.3 Case 2: “Company B” (Huang et al., 2018):

This case study highlights how an SME strategically invested in cloud-based technologies,
resulting in improved resource utilization and scalability.

Background: Company B, a manufacturing SME, faced challenges in managing its growing

customer base and production demands. Traditional systems hindered efficient resource
allocation.

14
Strategy and Implementation: Recognizing the need for scalability, Company B invested in
cloud-based Enterprise Resource Planning (ERP) and Customer Relationship Management
(CRM) systems. These technologies provided on-demand scalability and data accessibility.

Results:

Utilization of Resources: Cloud-based solutions enabled effective resource allocation, lowering

overuse and underuse.

Scalability: Increased operational flexibility due to the ability to adjust resource levels in
response to demand.

Cost effectiveness: Pay-as-you-go arrangements reduced up-front expenditures and permitted

the SME to strategically manage resources.

2.6.4 Case 3: “Company C” (Ismagilova et al., 2020):

The case study illustrates how collaboration with IT vendors helped an SME overcome resource
constraints and successfully implement a customer relationship management system.

Background: Company C, a service-based SME, lacked the internal resources for a full-scale
digital transformation. The lack of expertise and resources hindered the adoption of advanced
technologies.

Strategy and Implementation: Company C formed a strategic collaboration with an IT vendor

specializing in digital transformation solutions. The vendor provided tailored solutions,
expertise, and ongoing support, enabling the SME to overcome resource constraints.

Results:

Expertise Access: Partnering with the vendor granted Company C access to specialized skills
and knowledge, enabling effective technology implementation.

Resource Efficiency: The collaboration eliminated the need to build in-house expertise, saving
time and resources.

Successful Implementation: The SME successfully adopted a customer relationship

management system, enhancing customer engagement and business growth.

15
2.6.5 Conclusion:
These case studies underscore the significance of well-executed IT investment strategies for
SMEs. They highlight the importance of strategic alignment with business objectives, leveraging
cloud technologies for scalability, and forming strategic collaborations to overcome resource
constraints. Successful IT investments not only improve operational efficiency but also empower
SMEs to compete effectively in today's digital landscape.

The lessons drawn from these case studies emphasize that the right IT investments, tailored to
the specific needs of SMEs, can be transformative and position them for long-term success in a
technology-driven world.

16
CHAPTER THREE: METHODOLOGY

3.1 Introduction
This chapter details the methodology that will be used in conducting the research study. This
chapter presents the Research design, Sampling techniques and population, Validity and
reliability of data and research instruments, Procedure followed in data collection,
Measurements, Data Analysis and Ethical considerations.

3.2 Research Design

A case study research approach will be used for this study as a suitable approach to provide
expected results for the study. It will adopt a mixed-methods approach, combining qualitative
and quantitative methods of data collection to gather comprehensive insights into the research
topic, however it is flexible and financially feasible. According to Martyn (2008), a case study is
an in-depth study of a particular situation that is used to narrow down a broad field of research
into an easily researchable topic. It is a useful tool for investigating trends and specific situations
in many scientific disciplines, and for testing whether scientific theories and models actually
work in the real world (Martyn, 2008, p. 329). The case study research design has evolved over
the past few years and has become a popular research method in various fields, including
business and technical communication (Martyn, 2008).

3.2.1 Qualitative Phase:

Semi-structured interviews will be conducted with owners, managers, and IT professionals from
a diverse set of SMEs in Kampala Central Division. This phase aims to identify the factors
influencing IT investment decisions and challenges faced in the adoption of digital technologies.

3.2.2 Quantitative Phase:

A survey will be administered to a larger sample of SMEs within Kampala Central Division. The
survey will gather data on IT investment patterns, digital technology adoption levels, and
perceptions of the factors influencing IT investment decisions.

3.3 Data Analysis:

17
3.3.1 Qualitative Analysis:
Thematic analysis will be used to analyze interview data, identifying recurring themes and
patterns related to IT investment decisions and digital technology adoption.

3.3.2 Quantitative Analysis:

Descriptive and inferential statistical techniques will be employed to analyze survey data,
quantifying the relationships between different variables and testing hypotheses.

3.4 Technique and population for sampling

Due to the finite nature of the population and the need to conserve time and resources, a
straightforward random sampling method will be utilized for the study. Accuracy rate of (+/-)
5% is sought while estimating the sample, meaning that the acceptable rate of error for the
current study is set at 5%. As a result, 150 firms from the central division of Kampala will be
selected at random.

3.5 Measurements
Measurements of independent and dependent variables will be made using Likert response
scales suitable for establishing periods and respondents’ perception of the variables and most of
the measures will be made from previous work and tests of validity and reliability will be carried
out to ensure that the measurements are accurate.

3.6 Validity and reliability of data and research instruments

According to Amin (2005), an instrument's validity is determined by its capacity to yield results
that are consistent with theoretical or conceptual values and to assess the intended outcomes.
Giving the questionnaires to at least three supervisors will enable the Content Validity Index
(CVI) to be calculated in this study in order to assess how relevant each item is to the study's
objectives. According to Amin (2005), the CVI will be determined using the following formula:
CVI = Number of relevant items in the instrument/ Total number of items on the instrument.

Polit and Beck (2006) state that instruments are typically regarded as valid in research when their
validity index is more than 0.6. According to Polit & Beck (2006), this criterion is frequently
employed to evaluate the content validity of research instruments like surveys and
questionnaires.

18
3.7 Procedure followed in data collection
A requisite for a letter of introduction from the research office of the School of Computing and
Information Sciences Makerere University acknowledging to carry out the research for both the
interview and questionnaire. The data collection method that will be used is a structured
questionnaire and an interview guide. The questionnaire and the interview guide will also be
pretested with selected respondents before it is administered to all the respondents. A letter
addressed to the respondents, assuring anonymity will also be attached to the questionnaire and
interview guide. In order to improve returns (response rate), however the drop and pick later
method will be employed.

3.8 Ethical considerations

The consent of potential respondents will first be obtain, and explain to them the purpose and
nature of the research. When respondents volunteer to participate in the research, they will be
assured of confidentiality, and the assurance of their rights to withdraw from the research
especially if and when questions asked tend to trigger emotional responses and affect self-
understanding.

In addition, the process will be made useful to the respondents by, for example, providing
information that addresses questions that are likely to arise, and giving them information about
other support services.

3.9 Expected Outcomes:

Conceptual Model: A conceptual model will be developed, illustrating the relationships
between the identified factors and IT investment decisions for the adoption of digital
technologies in SMEs.

Recommendations: Based on the findings, practical recommendations will be provided to SMEs

in Kampala Central Division for effective IT investment planning and successful adoption of
digital technologies.

Contribution to Knowledge: This research will contribute to the existing body of knowledge by
providing insights into the specific factors influencing IT investment decisions in the context of
SMEs in Kampala Central Division.

19
3.10 Conclusion:
This research proposal outlines a comprehensive study aimed at developing a conceptual model
on IT investment decisions for the adoption of digital technologies by SMEs. The research will
provide valuable insights for SMEs in Kampala Central Division and contribute to the broader
understanding of IT investment decision-making in the context of digital technology adoption.

REFERENCES

Amin, T. T. (2005). Measurement validity and reliability of questionnaire instruments. Eastern

Mediterranean Health Journal, 11(3), 510-515.

Bagale, J. N., Kikooma, J. F., & Kikomeko, J. (2021). Digital transformation of small and
medium-sized enterprises in Kampala Central Division, Uganda: A conceptual model.
Journal of Small Business Management, 59(3), 451-462.
https://doi.org/10.1080/00472778.2020.1829475

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management,
17(1), 99-120.

Bonga, W. G. (2017). Challenges Faced by SMEs on Exportation and Possible Strategies. SSRN
Electronic Journal. https://doi.org/10.2139/ssrn.2399878

Copeland, T. E., & Tufano, P. (2004). A real-world way to manage real options. Harvard
Business Review, 82(3), 90-99.

Cragg, P. B., & King, M. (1993). Small-firm computing: Motivators and inhibitors. MIS
Quarterly, 17(1), 47-60.

Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of
information technology. MIS Quarterly, 13(3), 319-340.

Ddamulira, G., Isaac, O., Kiryowa, M., Akullo, R., Ajero, M., Logoose, M., Otim, A., Masika,
F., Mundingotto, J., Matovu, M., & Ramathani, I. (2021, March 24). Practices and
constraints of tomato production among smallholder farmers in Uganda. African Journal

20
 of Food, Agriculture, Nutrition and Development, 21(02), 17560–17580.
https://doi.org/10.18697/ajfand.97.19905

Dey, P. K., Clegg, B. T., Bennett, D. J., & Albores, P. (2018). Investigating factors affecting the
adoption of cloud computing in SMEs using an integrated DEA and DEMATEL
approach. International Journal of Production Economics, 200, 13-27.

Fichman, R. G. (2001). The role of aggregation in the measurement of IT-related organizational

innovation. MIS Quarterly, 25(4), 427-455.

Gable, G. G., Sedera, D., & Chan, T. (2008). Re-conceptualizing information system success:
The IS-Impact Measurement Model. Journal of the Association for Information Systems,
9(7), 377-408.

Ghobakhloo, M., & Ching, N. T. (2019, December). Adoption of digital technologies of smart
manufacturing in SMEs. Journal of Industrial Information Integration, 16, 100107.
https://doi.org/10.1016/j.jii.2019.100107

Gupta, P., Khan, S., & Yadav, R. (2020). Factors affecting adoption of digital technology by
SMEs: A qualitative study. Journal of Enterprise Information Management, 33(1), 13-35.

Hossain, M., & Dwivedi, Y. K. (2018). Antecedents of SMEs' readiness for adopting cloud
computing and their effect on adoption. Journal of Enterprise Information Management,
31(3), 458-482.

Hossain, M., & Dwivedi, Y. K. (2018). Antecedents of SMEs' readiness for adopting cloud
computing and their effect on adoption. Journal of Enterprise Information Management,
31(3), 458-482.

Huang, L., Yuen, K. F., Yau, O. H., & Chan, F. T. (2018). A systematic decision framework for
cloud service provider selection in SMEs. International Journal of Production Research,
56(3), 1201-1219.

Ismagilova, E., Dwivedi, Y. K., Slade, E. L., & Williams, M. D. (2020). Digital innovation
adoption in SMEs: A systematic review. Information Systems Frontiers, 22(2), 279-298.

21
Ismagilova, E., Dwivedi, Y. K., Slade, E. L., & Williams, M. D. (2020). Digital innovation
adoption in SMEs: A systematic review. Information Systems Frontiers, 22(2), 279-298.

Kuan, K. K. Y., & Chau, P. Y. K. (2001). A perception-based model for EDI adoption in small
businesses using a technology–organization–environment framework. Information &
Management, 38(8), 507-521.

Laforet, S., & Tann, J. (2006). Innovative characteristics of small manufacturing firms. Journal
of Small Business and Enterprise Development, 13(3), 363-380.

Mantulenko, V., & Aleshkova, D. (2021). Current Needs of Business Owners and Managers,
Business Schools’ View. SHS Web of Conferences, 91, 01030.
https://doi.org/10.1051/shsconf/20219101030

Martyn, K. (2008). Case study as a research method. Journal of Business and Technical
Communication, 22(3), 329-347. https://doi.org/10.1177/1050651908316941

Müller, J. M., Voigt, K. I., & Kiel, D. (2018). What drives the implementation of Industry 4.0?
The role of opportunities and challenges in the context of sustainability. Sustainability,
10(1), 247.

National Development Plan III (2019). Uganda Vision 2040. Kampala, Uganda: National
Planning Authority. Retrieved from http://npa.ug/wp-content/uploads/2019/06/National-
Development-Plan-III-2019-2020.pdf

Pan, H., & Yang, X. (2021, April 15). Management Model on Electronic Commerce Data Based
on Cloud Computing. Wireless Communications and Mobile Computing, 2021, 1–10.
https://doi.org/10.1155/2021/5510002

Polit, D. F., & Beck, C. T. (2006). The content validity index: Are you sure you know what's
being reported? Critique and recommendations. Research in Nursing & Health, 29(5),
489-497. https://doi.org/10.1002/nur.20147

Poon, S., & Swatman, P. M. (1997). An exploratory study of small business Internet commerce
issues. Electronic Markets, 7(2), 38-45.

22
Premkumar, G., & Roberts, M. (1999). Adoption of new information technologies in rural small
businesses. Omega, 27(4), 467-484.

Raymond, L., Bergeron, F., & Blili, S. (2019). SMEs’ strategic alignment and e-business post-
adoption: A contingency-based approach. Information & Management, 56(2), 242-259.

Reddy, P., Chaudhary, K., & Hussein, S. (2023, April). A digital literacy model to narrow the
digital literacy skills gap. Heliyon, 9(4), e14878.
https://doi.org/10.1016/j.heliyon.2023.e14878

Rodrigues, M., & Franco, M. (2023, March 2). Green Innovation in Small and Medium-Sized
Enterprises (SMEs): A Qualitative Approach. Sustainability, 15(5), 4510.
https://doi.org/10.3390/su15054510

Saka, A. B., Chan, D. W. M., & Siu, F. M. F. (2020, May 3). Drivers of Sustainable Adoption of
Building Information Modelling (BIM) in the Nigerian Construction Small and Medium-
Sized Enterprises (SMEs). Sustainability, 12(9), 3710.
https://doi.org/10.3390/su12093710

Santhanam, R., & Hartono, E. (2003). Issues in linking information technology capability to firm
performance. MIS Quarterly, 27(1), 125-153.

Temouri, Y., Shen, K., Pereira, V., & Xie, X. (2020, July 29). How do emerging market SMEs
utilize resources in the face of environmental uncertainty? BRQ Business Research
Quarterly, 25(3), 212–223. https://doi.org/10.1177/2340944420929706

Thong, J. Y. L. (1999). An integrated model of information systems adoption in small

businesses. Journal of Management Information Systems, 15(4), 187-214.

Tornatzky, L. G., & Fleischer, M. (1990). The processes of technological innovation. Lexington
Books.

Van Dijck, M., Van Gorp, N., De Beuckelaer, A., Pauwels, P., & Leliaert, P. (2019). Factors
influencing the adoption of digital technologies by SMEs in an Industry 4.0 context.
Procedia CIRP, 84, 349-354.

23
Wong, C. Y., Teo, C. L., & Sim, J. J. (2017). Motivations and barriers to Industry 4.0 adoption in
small and medium-sized enterprises. Supply Chain Management: An International
Journal, 22(6), 586-599.

Zaidi, N. I. N., Nazmudeen, M. S., & Mohiddin, F. (2022, August). Identifying Factors
Contributing to the Level of Industry 4.0 Technologies Adoption among SMEs in
Different Countries. International Journal of Engineering and Technology, 14(3), 43–51.
https://doi.org/10.7763/ijet.2022.v14.1200

24