Adoption of Cloud Computing by South African Firms: The
Role of Institutional Forces, Absorptive Capacity, and Top
Management
Jason F Cohen Jian Mou
Wits University Wits University
Private Bag X3 Private Bag X3
WITS, 2050, South Africa WITS, 2050, South Africa
+27 11 717 8164 +27 11 717 8160
jason.cohen@wits.ac.za jian.mou@wits.ac.za
ABSTRACT
Cloud computing offers a number of advantages for organisations
looking to rent on-demand IT resources as a service. However,
there are also uncertainties and challenges to cloud computing use
that are tempering the rate of adoption. This paper contributes to
our understanding of cloud computing adoption within South
African firms by developing and testing a research model. Our
model hypothesizes mimetic and normative institutional
pressures, top management support, and the absorptive capacity
of the firm as factors influencing cloud computing adoption. Data
collected from 87 South African firms confirmed most
hypothesized relationships, and supported institutional and
absorptive capacity theories as explanations for adoption
behavior. Top management support was found to be the most
important factor influencing adoption and also partially mediated
the effects of institutional pressures.
Categories and Subject Descriptors
K.6.0 [Management of Computing and Information Systems]:
General
General Terms
Management, Theory.
Keywords
Cloud computing, technology adoption, institutional theory,
absorptive capacity, top management.
1. INTRODUCTION
Cloud computing has emerged as a high-potential IT innovation
that replaces the need for organisationally owned IT assets with
on-demand and rapidly scalable alternatives delivered as services
over the Internet. There are three delivery models for cloud
computing services: Software-as-a-service (SaaS), Platform-as-a-
service (PaaS) and Infrastructure-as-a-service (IaaS). Together,
Permission to make digital or hard copies of all or part of this work for
personal or classroom use is granted without fee provided that copies are
not made or distributed for profit or commercial advantage and that
copies bear this notice and the full citation on the first page. Copyrights
for components of this work owned by others than ACM must be honored.
Abstracting with credit is permitted. To copy otherwise, or republish, to
post on servers or to redistribute to lists, requires prior specific
permission and/or a fee. Request permissions from
Permissions@acm.org.
SAICSIT2104, September 29 - October 01 2014, Centurion, South Africa
Copyright 2014 ACM 978-1-4503-3246-0/14/09…$15.00
http://dx.doi.org/10.1145/2664591.2664604n
Jonathan Trope
Wits University
Private Bag X3
WITS, 2050, South Africa
+27 11 717 8160
jtrope@gmail.com
these cloud services enable individuals and organisations to
rapidly connect to data, provision IT infrastructure, and access
sophisticated applications [1].
Cloud computing can make the latest software and hardware
readily available to organisations that may previously not have
had the resources to own or manage their own IT assets [2]. By
providing for access to remote IT resources on a pay-by-use basis,
cloud computing can also lead to capital cost reductions and
eliminate barriers to entry associated with the purchase of
expensive IT resources [3, 4]. Cloud computing also allows for
rapid provisioning of IT services within flexible timeframes [5].
For example, an organisation that has an urgent requirement for
additional back-up storage capacity could be provided this
capacity via a cloud service without the need to physically
acquire and install the storage technology. Cloud computing also
offers scalability, which allows for IT resources to be ramped up
or down dynamically based on requirements. For example, if
transaction volumes are exceeding a server’s capacity then
additional computing capacity can be dynamically allocated to the
server. Cloud computing also makes vast IT resources available
for processing-intensive applications by allowing for additional
processing power to be utilised when required [6]. Further
benefits of cloud computing include the availability of backup
systems, disaster recovery, and resiliency to infrastructure failures
which are available from the cloud service provider [2].
Furthermore, cloud computing offers an alternative for
organisations wanting to outsource their non-core or
commoditised IT operations [4]. For example, an organisation
may choose to move to a SaaS model for office productivity tools
and hosted email. Cloud service offerings are thus said to
introduce efficiencies that are often difficult to replicate in-house
[7], and are particularly promising for those organisations
struggling to keep up with high rates of technlology change and
who are under financial pressures from continued investment in
in-house software and hardware [8].
Cloud computing is not however without its challenges. Lin and
Chen [9] identify the lack of formalised standards across cloud
providers as a major concern because of the implications for
interoperability and portability of data when moving between
providers. It is also possible that some systems within an
organisation might not be compatible with a cloud computing
model but might nevertheless need to integrate with other cloud-
based systems, making these interactions and management thereof
technologically complex [6]. Given that cloud computing allows
for IT resources to be distributed, the IT skills and knowledge
30
required to effectively manage and control these distributed IT
resources may not exist within an organisation [10]. Another often
cited concern relates to data security where monitoring and
enforcement of data security on multi-tenant IT infrastructure is
far more challenging than in an in-house computing environment
[11]. For an organisation using cloud based systems, e.g. SaaS, a
mobile device such as a laptop or smartphone can act as a
gateway to those systems and increase the risk of unintended
access to sensitive corporate data [5]. Organisations must also
weigh-up cloud adoption in relation to existing hardware and
software investments and the long-term consequences of
discontinuing their direct ownership of IT assets.
With the advantages and benefits that cloud computing
introduces, it is a technology that could hold much promise for
firms yet there are clear obstacles to more widespread adoption [9,
10, 12]. Prior empirical research has been undertaken in an effort
to better understand adoption of cloud computing (e.g. [6, 8, 13]).
However such studies have not specifically focused on
developing countries such as South Africa where cloud computing
is still in its infancy in terms of awareness and adoption [11].
Moreover, prior studies have often not been underpinned by
theory, and have not sufficiently considered how adoption might
be affected by inter-relationships amongst external institutional
influences arising from the organisation’s social context, internal
organisational factors such as absorptive capacity and top
management support, and technological factors including the
complexity of the innovation. Understanding how such factors
interact and combine to influence adoption of new technologies
remains of continued theoretical and practical significance.
The purpose of our study is to address this gap. We extend the
work of [14, 15, 16] into adoption of IT innovations by drawing
inter-alia on Institutional Theory and Absorptive Capacity Theory
as theoretical lenses from which to develop a research model of
cloud computing adoption by South African organisations. We
collected data using a questionnaire instrument administered to IT
decision makers within a sample of South African firms. The
model is tested using the partial least squares (PLS) approach to
structural equation modelling (SEM).
Results have important implications for organisations wishing to
understand the factors promoting the adoption of cloud
computing. We demonstrate the important role played by the
social context of the organization and how external pressures and
a need for legitimacy influences organizational adoption
behaviours. We also provide important evidence for top managers
on the role they play in responding to external pressures in the
process of adopting technology innovations. Moreover, we
highlight the importance of the prior knowledge and abilities of
employees which provide the absorptive capacity organisations
require to recognise and appreciate the potential opportunity or
threat that new innovations present.
2. THEORETICAL BACKGROUND AND
RESEARCH MODEL
2.1 Institutional Theory
Institutional Theory suggests that organisational changes, whether
structural or behavioural, are driven by pressure on organisations
to conform. The major sources of such pressure are other
organisations. Institutional theory thus moves beyond the simple
economic or rationale perspective on organisational behaviours
and instead accounts for the influence of the social context of the
organisation [17]. The motivation to conform is driven by the
need to acquire legitimacy, without which organisations may
struggle to secure status, resources and other forms of support [18,
19]. Dimaggioand and Powell [18] propose three pressures
through which conformity occurs: mimetic, coercive and
normative. Mimetic pressures lead an organisation to change over
time in order to become more like other organisations in its
environment [20]. The actions of competitors are a particularly
relevant source of mimetic pressure. Coercive pressures to
conform originate from environmental sources such as from a
dominant customer or supplier, or from government regulations.
Normative pressures result from the presence of dyadic
relationships amongst members of a network that leads to
consensus and the development of norms and rules that become
entrenched amongst members of a network.
Institutional theory is a promising theoretical lens from which to
understand the adoption and diffusion of IT in organisational
contexts [15, 21]. In the context of IT adoption, mimetic pressures
have are seen to influence organisations to imitate the adoption
behaviours of leading peers as a response to uncertainty regarding
the promise of an IT innovation. Coercive pressures to adopt
technologies include compliance pressures exerted on firms by
government regulation and/or by other dominant organisations
(e.g. a dominant customer) on which they are dependent. Lastly,
normative pressures influence adoption by establishing
professional norms and widespread agreement on new
technologies that are shared between organisations in a relational
network (see for example [20]). Empirical results from past IT
adoption studies suggest that mimetic, coercive and normative
pressures are generally important to organisational adoption [21].
However, the relative effects of these pressures are likely to differ
across different technology adoption contexts. For example,
Khalifa and Davison [22] showed coercive pressures to be
important in the context of Electronic Trading Systems adoption,
but Bharati et al. [23] could not show such pressures important in
the context of organisational social media adoption. Similarly,
Teo et al. [20] showed mimetic pressures important in the context
of financial electronic data interchange adoption, but Liu et al.
[24] could not show mimetic pressures important in the context of
Internet-enabled supply chain management systems adoption.
Therefore, when drawing on institutional theory, it’s necessary to
consider which of the three pressures are likely to be more
prevalent in a specific adoption context. This study focuses on
mimetic and normative institutional pressures. Coercive pressures
are less likely to be important to adoption for technologies not
subject to strong government regulation, or technologies not
specifically enabling inter-organisational operability (e.g. [20,
22]). We therefore omit coercive pressures and focus our attention
on the influence on mimetic and normative pressures.
2.2 Top Management Support
The influence of institutional pressure on an organisation is likely
to be mediated by top management. Top managers - as
organisational decision makers - provide the link between the
external environment and organisational behaviors i.e.
institutional pressures are first interpreted by top managers before
they are acted upon [14]. Top managers with different beliefs in
the relative advantages and organisational changes needed to
accommodate institutional pressures are likely to adopt different
behaviours [25].
31
In the IT context, the role of top management in the successful
adoption and diffusion of IT has long been recognized [26]. Top
management with strong beliefs regarding benefits will support IT
efforts by creating a positive environment for implementation
including active participation and provision of resources [14]. The
adoption of new IT innovations is less likely to occur in those
organisational contexts where top managers have a muted
response to institutional pressures and fail to believe in the
adoption effort.
2.3 Absorptive Capacity Theory
Absorptive capacity is a firm’s ability to identify, assimilate and
apply external knowledge to its advantage [27]. Absorptive
capacity builds on existing knowledge and abilities of employees
available within the organisation and is further developed through
training, internal research and development programmes, and
repetitive application of internalized knowledge [27, 28]. Without
developing absorptive capacity, firm’s constrain their potential to
assimilate knowledge about innovations and may even resist
knowledge about new innovations entering the firm. On the other
hand a firm with stronger absorptive capacity is able to recognise
and appreciate the potential opportunity or threat that new
innovations present [27, 29]. Absorptive capacity thus lowers the
knowledge barriers surrounding complex technologies and
enables firms to more successfully deploy them [30]. Prior IS
research has found absorptive capacity important to strategic IT
assimilation [31], and organisational adoption of innovations such
as enterprise systems [14], social media [23], and business
intelligence [32].
2.4 Research Model and Hypotheses
Drawing on the above theoretical perspectives, Figure 1 depicts
the study’s research model. Our dependent variable is adoption of
cloud computing, which we conceptualize as the extent to which
cloud services have been adopted by an organisation as a means
to replace legacy technologies and underpin key operational and
management information systems. The model depicts the effects
of two sources of mimetic pressure, and three sources of
normative pressure. These institutional pressures are theorized to
influence adoption both directly and via top management.
Absorptive capacity is also depicted as influencing adoption. Our
research model controls for the effects of two variables identified
from diffusion of innovation theory, namely compatibility and
complexity. We also control for organization size (number of
employees and IT staff). The model’s constructs are described in
more detail below and associated hypotheses are developed.
Figure 1. Research model
2.4.1 The effects of institutional pressures
To reflect both the general pressures to conform to peer
organisations and imitate their actions, as well as the pressure to
observe and imitate the behaviours of organisations that are
perceived to be especially successful, two first-order factors,
namely adoption of cloud computing by competitors and
perceived competitor success with cloud computing are depicted
in our research model.
When technologies are poorly understood or when there is
uncertainty regarding returns from an initiative, organisations will
model their response to these technologies on other organisations
they perceived to be legitimate and successful [18, 19]. If there
are enough similar organisations that function and behave in a
certain manner to the extent that functioning in that manner
becomes a legitimate way to function, then others will likely
follow so as to avoid being identified as being less innovative or
unresponsive [20]. The behaviours of successful organisations
may be considered especially legitimate. Organisations can learn
about these behaviours through observation and imitate those
organisational behaviours and practice, or even avoid practices,
according to their perceived impact or outcomes on the observed
organisation [33]. Therefore organisations are more likely to
adopt cloud computing if they perceive adoption as legitimate and
as a contributing factor to peer organisation success. Thus:
H1: Greater mimetic pressures will lead to greater adoption of
cloud computing.
Once an IT innovation is available to an industry, members in a
relational network collectively evaluate and may promote the
features of the innovation. This evaluation and promotion in-turn
shapes the institutional norms regarding adoption of the
innovation [14]. Adoption can thus be influenced by the extent
that an organisation’s trading partners have adopted the
innovation and communicated their reasons for doing so.
Therefore, as an organisation perceives more of its relational
partners adopting an innovation, adoption of the IT innovation
may come to be deemed normatively appropriate for the
organisation [20]. Therefore, organisations that may be
considering adoption of cloud computing may be influenced by
the extent of adoption among their suppliers and customers with
which the organisation has direct ties.
Dyadic relationships are not however the only mechanism
through which norms are shared and communicated from
organisation to organization. There are some key institutions that
exert influence on organisational behaviours with respect to IT
innovation adoption, these include standards bodies, and
professional and industry associations [20]. Furthermore,
professional affiliations, conferences and the networking of top
managers is another important avenue through which normative
influences can permeate [14]. The latter in particular may be a
further source of normative pressure in the cloud computing
adoption context. If professional bodies with which organisational
decision-makers participate are active in promoting and
disseminating information regarding cloud computing, the
normative influences are likely to be particularly strong and will
lead such organisations to be more inclined towards adoption.
Taken together, it is hypothesized that:
H2: Greater normative pressures will lead to greater adoption of
cloud computing.
32
2.4.2 The effects of top management
Top management support starts by creating a positive
environment for implementation through their beliefs in the
potential of the IT innovation to benefit the organization [14]. Top
management support sends strong signals throughout the
organization and reduces political roadblocks to adoption and
implementation efforts [34]. Without top management support it
would be difficult to secure necessary resources and the support
for organisational changes required by technology adoption [35].
Previous meta-analytics studies have confirmed top management
support as a highly significant factor influencing organisational IT
adoption [36]. It can therefore be hypothesized that:
H3: Greater top management support will lead to greater
adoption of cloud computing
Prior empirical studies also support the mediating influence of top
management support on the effects of institutional pressures on
various organisational behaviours [14, 23, 37, 38]. Top managers
are considered to be the organisation’s boundary spanners, and
are thus the focal point for external pressures. It is top managers
who respond to the institutional pressures and translate them into
an organisational response. Institutional pressures must therefore
first influence top management’s beliefs in the relative advantages
offered by the technology before changes are accommodated
internally [25]. We therefore hypothesize that:
H4: Top management support for the adoption of cloud
computing will increase in response to mimetic pressures
H5: Top management support for the adoption of cloud
computing will increase in response normative pressures
2.4.3 The effects of absorptive capacity
Absorptive capacity provides firms with an innovation capability
[27]. Firms with higher levels of absorptive capacity are more
able to track external changes, reconfigure their resources, and
capitalize on new innovations at the opportune time [23, 39].
Differences in absorptive capacity have been used as a means of
explaining variations in IT adoption across firms [14]. Thus firms
with greater existing knowledge and abilities related to cloud
computing and who train employees on cloud computing
technologies will have a greater absorptive capacity to exploit
cloud computing to meet its needs. It is therefore hypothesized
that:
H6: Greater absorptive capacity will lead to greater adoption of
cloud computing.
2.4.4 Controls
We also control for the possible effects on adoption of:
compatibility and complexity of the innovation, and
organisationsize (number of employees and IT staff).
The complexity of an innovation refers to how difficult it is
perceived to be to understand and use [40]. The greater the
perceived complexity, the less likely an organization will adopt
cloud computing. Moreover, when an innovation is recognised as
being compatible with an organisation’s existing IT, it may be
more likely to be adopted [13]. Cloud computing services might
not be easily adopted in conjunction with existing infrastructure
and/or applications [9].
Small organisations are considered less likely to withstand cloud
computing adoption hurdles [14]. Larger organisations have more
resources to inter-alia purchase innovations and withstand
potential risks such as operational failures resulting from
technology failure. Number of organizational employees and IT
employees are used as proxy measures for organisation size.
3. RESEARCH METHODOLOGY
McGregor’s Who Owns Whom Directory (2013) was used to
construct a sampling frame of South African organisations. The
directory includes details of both publically listed and private
companies as well as state holding companies and subsidiaries
within South Africa. A total of 980 South African organisations
were identified from the directory where details of relevant IT
decision makers and executives were provided. IT decision
makers and executives were considered the most appropriate key
informants regarding cloud computing adoption. They are well
positioned to understand their organisation’s IT resources and
technological environment and to report on the organisation’s
current and future plans regarding IT resources.
The identified IT executives within the 980 sampled organisations
were invited to participate in the study by completing a structured
questionnaire. The questionnaire was administered via an online
survey site.
3.1 Measurement
Constructs were operationalized based on previously validated
instruments. Cloud computing adoption was measured using three
items adapted from [14] reflecting the extent to which cloud
computing was replacing legacy systems and being used to
deliver the technologies that support business operations and
decision making. Items were on a five-point scale from 1=very
low to 5=very high. Top management support was measured
using a 3-item Likert-scale adopted from [14] reflecting top
management’s belief in the value and importance of using cloud
computing. Absorptive capacity is usually measured through
proxies such as R&D activity or stock of existing knowledge [23,
27]. We adopted a 4-item Likert scale adopted from [14] to reflect
the organisation’s existing stock of knowledge about cloud
computing. One item was however dropped during an initial
principal components analysis.
Mimetic pressure was conceptualized as a second-order construct
formed from two first-order constructs. These were the extent of
adoption by competitors (1 item) and the perceived success
enjoyed by competitors from adoption (factor score of 4 items).
The items were adopted from [20] and measured on a 5-point
Likert scale.
Normative pressure was also modeled as a formative second-order
construct with three first-order constructs. The first two captured
the extent of cloud computing adoption by suppliers (1 item) and
the extent of cloud computing adoption by customers (1 item)
each measured on a 5-point scale (1=none to 5=all have adopted).
The third normative pressure for cloud adoption was those arising
from professional and industry bodies (factor score of 3 items).
Items were adopted from [20] and [41].
Compatibility and complexity control variables were measured
using 3 scale items and 4-scale items respectively [13]. Size was
measured as number of organizational employees and number of
IT employees. The instrument was pre-tested and pilot tested with
12 IT managers prior to distribution. Example items are presented
in Table 1.
33
 Table 1. Questionnaire items Organisations of varying sizes were all represented in the sample
with companies having more than 2000 employees being the most
Constructs Operationalization Example items
represented at 38% and smaller organisations with fewer than 100
2nd-order construct Our main competitors
employees, comprising 22% of the total responses. Organisations
with two formative that have adopted
Mimetice with less than 30 IT staff represent just over half of the total at
first-order constructs cloud computing are
Pressures 53%, with organisations having more than 200 IT staff
[20]. perceived favourably
(MIM) representing 24% of the sample.
by others in the same
industry. Table 2. Respondents’ characteristics
2nd-order construct There is a very strong
Demogra- Cate- %
with three formative message in companies
Normative phics gory
first-order constructs that you can’t stay in
Pressures IT Executive 21 24%
[20, 41]. business nowadays if
(NOR) Other (e.g. finance director) 14 16%
you do not adopt cloud
computing. IT Manager 14 16%
3- item scale [14]. The senior CIO 12 14%
management in your Job Titles Technology Executive 7 8%
Top Technology Manager 6 7%
firm believe that cloud
Management General Manager 6 7%
computing has the
Support Operations Executive 4 5%
potential to provide
(TMS) Operations Manager 3 3%
significant business
benefits to the firm. More than 8 37 42%
4- item [14]. 1 item Our company provides 4 to 8 18 21%
Absorptive Years
dropped following regular cloud 2 to 4 18 21%
capacity Employed
PCA. computing training to 1 to 2 9 10%
(ABC)
its IT employees. Less than 1 5 6%
3-item scale adapted Cloud computing is Technology 23 26%
Compatibility from [13]. compatible with my Financial 20 23%
(COM) company’s existing Others 15 17%
hardware and software. Industry Manufacturing 8 9%
4-item scale adapted My company believes type Telecommunications 6 7%
Complexity from [13]. that cloud computing Retail 6 7%
(COP) implementation is a Healthcare 4 5%
complex process. Automotive 4 5%
3-item scale adapted To what extent are More than 30 28 32%
from [14]. cloud computing 20 to 30 12 14%
solutions replacing Company
Adoption 10 to 20 28 32%
legacy technologies Age
5 to 10 12 14%
within your
Less than 5 7 8%
organization?
More than 2000 33 38%
1000 to 2000 6 7%
Number of 500 to 1000 14 16%
4. EMPIRICAL RESULTS Employees 300 to 500 7 8%
100 to 300 8 9%
4.1 Participants Less than 100 19 22%
One hundred and twenty (120) organisations agreed to participate More than 200 21 24%
in the study and completed the survey. However, after removing
100 to 200 3 4%
responses with large amount of missing data, 87 usable responses
Number of 50 to 100 9 10%
remained. Table 2 presents the respondent profiles according to
IT Staff 30 to 50 8 9%
job title, years employed at the organisation, industry type,
10 to 30 18 21%
company age, number of employees, and number of IT staff. The
respondents were all appropriately positioned decision-makers Less than 10 28 32%
with IT responsibilities in their firm.
Respondents with an excess of four year’s employment are very Across the sample it was observed that SaaS is the most diffused
well represented, comprising 63% of the total sample. There was cloud computing service model with 50.6% of the sampled
representation across industry types, with very high representation organisations reporting adoption. IaaS has been adopted by 44.8%
across financial services (23%) and technology industries (26%) of the responding organisations. PaaS is the least adopted cloud
respectively. Companies of various ages are represented in the service model across industries (29.9%). Just under one third of
sample with the vast majority (78%) being well established respondents (28.7%) reported that they have not yet adopted any
organisations at least 10 years or older and 32% being older than of the cloud computing services (Figure 2). We next test our
30 years. research model aimed at explaining the variations in cloud
adoption.

34
 (β=0.381, p<0.001) have significant effects on top management
support, which in turn has a significant positive effect on adoption
of could computing (β=0.360, p<0.001). These results confirmed
H1, H3, H4 and H5. However, we cannot confirm the direct
effects of normative pressures on adoption. Thus, H2 is rejected
and the effects of normative pressures are considered fully
mediated by top management. The effect of mimetic pressure on
adoption is partially mediated by top management. Top
management is thus confirmed to playing an important role in
mediating the effects of external pressures on organizational
adoption behaviours. Absorptive capacity also has a significant
effect on adoption (β=0.242, p<0.05). Therefore, H6 is supported.
The control variables were not significant. However, size (number
Figure 2. Cloud Computing Adoption of employees) has a moderate, albeit insignificant, negative effect
on adoption (β=-0.137) suggesting smaller South African firms
4.2 Reliability and Validity are more likely to adopt than larger firms. Perceived complexity
A confirmatory factor analysis using PLS modeling was carried of the technology also had a non-significant negative effect (β=-
out to confirm reliability and validity of the measures. The 0.143) which was in the expected direction. The results are
measurement items all loaded highly onto their expected depicted in Figure 2 and summarized in Table 4.
theoretical constructs. The standardized loadings of the Table 4. Summary of results (* p<.05; ** p<.01; *** p<.001)
measurement items, average variance extracted (AVE), composite
reliability (CR) and Cronbach’s alpha value are reported in Table Hypothesis Path t-value Supported
3. The values of the loadings range from .705 to .923, which are H1 0.251 2.003* Yes
above the recommended value of .70. The values of composite H2 0.016 0.137 No
reliability are above the acceptable value of .70. The AVE value H3 0.360 3.493*** Yes
is above the recommend threshold of .50, thus, the convergent H4 0.270 2.487** Yes
validity is confirmed. H5 0.381 3.958*** Yes
Table 3. Results of reliability and validity analysis H6 0.242 2.356* Yes
Standard Alpha
Factor Item AVEa CR
loading Value
Top TMS1 0.923
Managemen TMS2 0.922 0.848 0.944 0.910
t Support TMS3 0.918
ABC2 0.852
Absorptive
ABC3 0.886 0.750 0.900 0.838
capacity
ABC4 0.860
COM1 0.837
Compati- COM2 0.852
bility 0.731 0.916 0.878
COM3 0.865
(COM)
COM4 0.865
COP1 0.843
Complexity
COP2 0.797 0.759 0.904 0.864
(COP)
COP3 0.966 Figure 3. PLS test of research model (non-significant controls
Adopt1 0.900 omitted to improve readability).
Adoption Adopt2 0.943 0.843 0.942 0.907
Adopt3 0.911 5. DISCUSSION
a
AVE and reliability coefficients are only relevant for reflective This paper developed a research model aimed at understanding
constructs the combined and relative effects of institutional pressures, top
management support, and the absorptive capacity of the firm on
cloud computing adoption. The model was tested within the South
4.3 Hypothesis Testing African context using a survey methodology.
PLS was then used to test the structural model of hypothesized
relationships. The PLS results are reported in Figure 3. The R2 We found support for institutional theory as a theoretical
value for adoption of cloud computing is .607, which means the perspective. Specifically, by confirming hypothesis 1, we show
model explains 60.7% of variance.. Mimetic pressure has a that organisations are modeling their response to cloud computing
significant positive effect on adoption (β=0.251, p<0.01) with the on other organisations they perceived to be legitimate and
two first-order constructs both significant sources of mimetic successful [18, 19]. If there are enough similar organisations that
pressure. Extent of cloud adoption among customers and behave in a certain manner then functioning in that manner
pressures from professional and industry bodies were significant becomes important to confer legitimacy and avoid being
normative pressures whilst extent of adoption by suppliers was identified as less innovative [20]. The social context of South
not. Both mimetic (β=0.270, p<0.05) and normative pressures

35
African firms has important implications for their IT adoption
behaviors.
We also confirm hypotheses 3, 4 and 5. Top management support
has the strongest direct effect on adoption and our results thus
confirm the important role played by top managers in creating a
positive environment for IT innovation adoption [14, 34]. The
finding that top management championship is an important
mediating variable in the effects of both mimetic and normative
institutional pressures also confirms that top managers play an
important boundary spanning role, and are thus the focal point for
external pressure [14]. Institutional pressures influence
organisational action through their effects on top management’s
beliefs in the relative advantages offered by the technology [25].
This is particularly the case for normative pressures, which were
fully mediated by top management. This suggests that
institutional norms regarding the adoption of an IT innovation can
influence organizational action but must first be interpreted by top
managers before they are acted upon [14]. Other factors capable
of moderating top managements’ beliefs in the relative advantages
of an innovation are therefore capable of diluting the effects of
normative pressures to conform. The effects of mimetic pressures
on adoption are only partially mediated by top management and
thus future research should consider whether other internal factors
translate mimetic pressures into adoption behaviour.
Results also confirmed hypothesis 6. We show that firms with
greater existing knowledge and abilities related to cloud
computing and who train employees on cloud computing
technologies have a greater absorptive capacity to adopt cloud
computing. We thus confirm that absorptive capacity of South
African firms is important to lowering the knowledge barriers
surrounding new IT and enabling these firms to more rapidly
adopt [30]. Without developing absorptive capacity, firms
constrain their potential and cannot easily recognise and
appreciate the opportunities or threats surrounding new
innovations.
It is important to note some limitations of our study. The study
was conducted in South Africa and results may not be fully
generalisable to firms in other countries. Our sample size (87) is
also fairly small and non-response bias may further limit the
external validity of our findings. Our study is cross-sectional and
therefore causal inferences are only made with respect to theory.
Future studies may wish to adopt longitudinal designs to
strengthen causal inferences. Future studies may also consider
other factors e.g. regulatory environment that may be important in
certain industry contexts, as well as other internal organisational
factors such as the track record of the in-house IS function that
might influence cloud adoption.
6. CONCLUSION
Cloud computing is a technology that holds much promise for
South African organisations, yet there are a number of concerns
and uncertainties surrounding it. This study contributed by
developing and testing a research model aimed at understanding
organisational adoption of cloud computing. Data from 87 South
African firms was used to test hypothesized relationships. Results
have confirmed the utility of institutional and absorptive capacity
theories as explanations for cloud computing adoption, and we
highlight the relative importance of top management support.
Through our study, we have thus offered useful insights into the
influence of both external and internal factors driving cloud
computing adoption.
7. REFERENCES
[1] Greengard, S. 2010. Cloud computing and developing
nations. Communications of the ACM 53, 5, 18-20.
[2] Misra, S. C., and Mondal, A. 2011. Identification of a
company’s suitability for the adoption of cloud computing
and modelling its corresponding Return on Investment.
Mathematical and Computer Modelling 53, 504-521.
[3] Rivard, S., Raymond, L., and Verreault, D. 2006. Resource-
based view and competitive strategy: An integrated model of
the contribution of information technology to firm
performance. Journal of Strategic Information Systems 15,
29-50.
[4] Dhar, S. 2012. From outsourcing to Cloud computing:
evolution of IT services. Management Research Review 35,
8, 664 – 675.
[5] Wilson, P. 2011. Positive perspectives on cloud security.
Information Security Technical Report 16, 97-101.
[6] Marston, S., Li, Z., Bandyopadhyay, S., Zhang, J., and
Ghalsasi, A. 2011. Cloud Computing – The Business
Perspective. Decision Support Systems 51, 176-189.
[7] Babcock, C. 2012. Cloud's Thorniest Question: Does it Pay
Off? InformationWeek, 4 June, 1-6.
[8] Sultan, N. A. 2011. Reaching for the Cloud: How SMEs Can
Manage. International Journal of Information Management
31, 272-278.
[9] Lin, A. and Chen, N.C. 2012. Cloud computing as an
innovation: Perception, attitude, and adoption. International
Journal of Information Management 51, 176-189.
[10] Geczy, P., Izumi, N., and Hasida, K. 2012. Cloudsourcing:
Managing Cloud Adoption. Global Journal of Business
Research 6, 2, 57-70.
[11] Kshetri, N. 2010. Cloud Computing in Developing
Economies. Computer 43, 10, 47-55.
[12] Burns, C. 2012. Infrastructure as a Service: Overview.
Enterprise Cloud Services, April, 27-29.
[13] Low, C., Chen, Y., and Wu, M. 2011. Understanding the
Determinants of Cloud Computing Adoption. Industrial
Management and Data Systems 111, 7, 1006-1023.
[14] Liang, H., Saraf, N., Hu, Q., and Xue, Y. 2007. Assimilation
of Enterprise Systems: The effect of Institutional Pressures
and the Mediating Role of Top Management. MIS Quarterly
31, 1, 59-87.
[15] Oliveira, T. and Martins, M. F. 2011. Literature Review of
Information Technology Adoption Models at Firm Level.
The Electronic Journal Information Systems Evaluation 14,
1, 110-121.
[16] Li, Y.H. 2008. An empirical investigation on the
determinants of e-procurement adoption in Chinese
manufacturing enterprises. 15th International Conference on
Management Science & Engineering, California, USA, Vols
I and II, Conference Proceedings, 32-37.
36
[17] Scott, W.R. 1995. Institutions and Organizations, Sage
Publications, Thousand Oaks, CA.
[18] DiMaggio, P. J., and Powell, W. W. 1983. The Iron Cage
Revisited: Institutional Isomorphism and Collective
Rationality in Organizational Fields. American Sociological
Review 48, 2, 147-160.
[19] Ravichandran, T., Han, S., and Hasan, I. 2009. Effects of
Institutional Pressures on Information Technology
Investments: An Empirical Investigation. IEEE Transactions
on Engineering Management 56, 4, 677-691.
[20] Teo, H. H., Wei, K. K., and Benbasat, I. 2003. Predicting
Intention to Adopt Interorganizational Linkages: An
Institutional Perspective. MIS Quarterly 27, 1, 19-49.
[21] Weerakkody, V., Dwivedi, K.Y., and Irani, Z. 2009. The
Diffusion and Use of Institutional Theory: A Cross-
disciplinary longitudinal Literature Survey. Journal of
Information Technology 24, 354-368.
[22] Khalifa, M. and Davison, R.M. 2006. SME adoption of IT:
The case of electronic trading systems. IEEE Transactions on
Engineering Management 53, 2, 275-284.
[23] Bharati, P., Zhang, C., and Chaudhury, A. 2014. Social
media assimilation in firms: Investigating the roles of
absorptive capacity and institutional pressures. Information
system frontiers 16, 257-272.
[24] Liu, H., Ke, W., Wei, K.K., Gu, J., and Chen, H. 2010. The
role of institutional pressures and organizational culture in
the firm’s intention to adopt internet-enabled supply chain
management systems. Journal of Operations Management 28,
372-384.
[25] Pahlke, I., Beck, R., and Vykoukal, J. 2011. Follow the pack
or make an independent decision? How environmental
turbulence affects ICT sourcing decisions. In Proceedings of
ICIS, Paper 10.
[26] Cooper, B. R., and Zmud, W. R. 1990. Information
Technology Implementation Research: A Technological
Diffusion Approach. Management Science 36, 2, 123-139.
[27] Cohen, W.M. and Levinthal, D.A. 1990. Absorptive
capacity: A new perspective on learning and innovation.
Administrative Science Quarterly 35, 1, 128-152.
[28] Liao, S.H., Wu, C.C., Hu, D.C., and Tsuei, G.A. 2009.
Knowledge acquisition, absorptive capacity and innovation
capability: An empirical study of Taiwan’s knowledge-
intensive industries. World Academy of Science Engineering
and Technology, 53, 160-166.
[29] Corrales M. (2010). From Absorptive Capacity to Best
Practices to Mobilize Knowledge and Open Innovation.
Proceedings of Melbourne 2010 Knowledge Cities World
Summit. Melbourne, 16-19 Nov 2010.
[30] Roberts, N., Galluch, P.S., Dinger, M., and Grover, V. 2012.
Absorptive capacity and information systems research:
Review, synthesis, and directions for future research. MIS
Quarterly 36, 2, 625-648.
[31] Armstrong, C. P. and Sambamurthy, V. 1999. Information
Technology Assimilation in Firms: The Influence of Senior
Leaders and IT Infrastructures. Information Systems
Research 10, 4, 304-327.
[32] Elbashir, M.Z., Collier, P.A., and Sutton, S.G. 2011. The role
of organizational absorptive capacity in strategic use of
business intelligence to support integrated management
control systems. The Accounting Review 86, 1, 155-184.
[33] Soares-Aguiar, A. and Palma-Dos-Reis, A. 2008. Why do
firms adopt e-procurement systems? Using logistic
regression to empirically test a conceptual model. IEEE
Transactions on Engineering Management 55, 1, 120-133.
[34] Premkumar, G. 2003. A meta-analysis of research on
information technology implementation in small business.
Journal of Organizational Computing an Electronic
Commerce 13, 2, 91-121.
[35] Enns, H.G., Huff, S.L., Golden B.R. 2001. How CIOs obtain
peer commitment to strategic IS proposals: barriers and
facilitators. Journal of Strategic Information Systems 10, 3-
14.
[36] Jeyaraj, A., Rottman, J.W., Lacity, M.C. 2006. A review of
predictors, linkages, and biases in IT innovation adoption.
Journal of Information Technology 21, 1–23.
[37] Ye, F., Zhao, X., Prahinski, C., and Li, Y. 2013. The impact
of institutional pressures, top managers’ posture and perverse
logistics on performance-Evidence from China. International
Journal of Production Economics 143, 132-143.
[38] Zheng, D., Chen, J., Huang, L., and Zhang, C. 2013. E-
government adoption in public administration organizations:
Integrating institutional theory perspective and resource-
based view. European Journal of Information Systems 22,
221-234.
[39] Zahra, S.A., and George, G. 2002. Absorptive Capacity: A
review, reconceptualization, and extension. The Academy of
Management Review 27, 2, 185-203.
[40] Tornatzky, L.G., and Klein, K..J. 1982. Innovation
characteristics and innovation adoption implementation: a
meta-analysis of findings. IEEE Transactions on Engineering
Management 29, 1, 28-45.
[41] Kostova, T., and Roth, K. 2002. Adoption of an
organizational practice by subsidiaries of multinational
corporations: Institutional and relational effects. The
Academy of Management Journal 45, 1, 215-233.
37