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An Integrated Model of Information
Systems Adoption in Small Businesses
JAMES Y.L. THONG
JAMES Y.L. THONG is an Assistant Professor in the Department of Information and
Systems Management, School of Business and Management, Hong Kong University
of Science and Technology. He received his Ph.D. and M.Sc. in MIS, and B.Sc.(Hons.)
in computer science from the National University of Singapore. His research interests
include small business computer ethics, information technology adoption and im-
plementation, and IS personnel management. His research has been published in
Information Systems Research. Journal of Management Information Systems. Journal
of Organizational Computing and Electronic Commerce. Journal of Information
Technology, Information & Management. Information Processing & Management,
European Journal of Information Systems, and Omega.
ABSTRACT: Based on theories from the technological innovation literature, this study
develops an integrated model of information systems (IS) adoption in small busi-
nesses. The model specifies contextual variables such as decision-maker characteris-
tics, IS characteristics, organizational characteristics, and environmental charac-
teristics as primary determinants of IS adoption in small businesses. A questionnaire
survey was conducted in 166 small businesses. Data analysis shows that small
businesses with certain CEO characteristics (innovativeness and level of IS knowl-
edge), innovation characteristics (relative advantage, compatibility, and complexity
of IS), and organizational characteristics (business size and level of employees' IS
knowledge) are more likely to adopt IS. While CEO and innovation characteristics are
important determinants of the decision to adopt, they do not affect the extent of IS
adoption. The extent of IS adoption is mainly determined by organizational charac-
teristics. Finally, the environmental characteristic of competition has no direct effect
on small business adoption ofIS.
KEy WORDS AND PHRASES: information systems, innovation theories, small business,
technological innovation, technology adoption.
THE ADOPTION OF TECHNOLOGICAL INNOVATIONS MAYBE DEPICTED as a three-stage
sequence of initiation, adoption, and implementation [69, 82]. The initiation stage is
concerned with gathering and evaluating information about the technological innovation.
This is followed by the adoption stage in which a decision is made about adopting the
technological innovation. When the decision is to go ahead with adoption, the implementa-
tion stage involves implementing the technological innovation in the business.
An important and fast growing technological innovation during this century is
computer-based information systems (IS). IS provide an opportunity for businesses to
Journal of Management Information Systems I Spring 1999, Vol. 15, No.4. pp. 1 8 7 ~ 2 1 4
1999 M.E. Sharpe. Inc.
0742-1222/1999 $9.50 +0.00
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188 JAMES Y.L THONG
improve their efficiency and effectiveness, and even to gain competitive advantage
[45, 70]. With decreasing cost and ever more powerful user-friendly personal com-
puters and better software packages, today the benefits ofIS are accessible even to the
smallest business. Yet, while large businesses have been using computers for some
time, small businesses have been slow in adopting these technological innovations
[93]. This slow adoption rate is a critical issue, since small businesses constitute over
90 percent of all businesses in many economies [58].
A review of the published IS literature shows that, to date, the majority of research
on small businesses is concentrated on the implementation stage [15, 20, 35, 53, 63,
75, 76, 83, 84], with little empirical research on the determinants of IS adoption in
small businesses. An exception is the study by Harrison, Mykytyn, and Riemenschnei-
der [42], which examined the process of executive decisions about IS adoption in small
businesses from a broad set of industries considering a variety of IS. They found that
attitude, subjective norms, and perceived control are antecedents of intentions to adopt IS.
Other studies on IS adoption [55,92] tend to examine large businesses, and findings from
these studies are unlikely to be generalizable to small businesses because of various
fundamental differences between large and small businesses [9, 10, 14, 16, 18,80,89].
For instance, small businesses tend to have highly centralized structures, with the
chief executive officers (CEOs) making most of the critical decisions [61]. The central
role ofthe CEO suggests that the characteristics of the CEO are even more critical in
the decision of a small business to adopt IS. Another characteristic of small businesses
is the tendency to employ generalists rather than specialists [10]. Even ifthey wanted
to recruit IS specialists, they face difficulties in attracting and retaining skilled IS staff
because of the limited career paths available in a small business [35]. As a result, there
is a lower level of awareness of the benefits of IS and a lack of IS knowledge and
technical skills in small businesses [20,53,67]. These knowledge deficiencies, in turn,
raise the barrier to IS adoption [3]. In addition, small businesses lack financial
resources and are highly susceptible to short-range planning in response to their highly
competitive environment [89]. Hence, they do not have funds readily available for IS
adoption or tend to adopt the lowest-cost IS, which may be inadequate for their
purposes [84]. Because ofa tendency to adopt a short-term management perspective,
they underestimate the amount of time and effort required for IS implementation,
increasing the risks of IS adoption failure [35]. Further, small businesses typically
have less slack resources with which to absorb the shocks of an unsuccessful invest-
ment in IS adoption.
Because of the unique characteristics of small businesses, there is a need to examine
whether models ofIS adoption developed in the large-business context can be equally
applied to small businesses. While large businesses suffer from many of the same
constraints, the effect on small businesses is more significant. The skills, time, and
staff necessary for planning are not major issues in large businesses, yet these same
issues represent most of the difficulties in small businesses [14]. As such, organiza-
tional theories and practices that are applicable to a large business may not fit a small
business [9, 14, 16,89]. There is a need to examine IS adoption in small businesses
separately rather than in the relational view commonly used.
IS ADOPTION IN SMALL BUSINESSES 189
While technological innovation including information technology (IT) is well
established in developed nations such as the United States, newly industrializing and
developing nations have been creating government interventions to accelerate use of
IT within their borders [51]. From their review of institutional factors in IT innovation,
King et at. [48] concluded that the role of institutions such as governments must be
considered an essential component in IT use. However, they added that the appropriate
role of institutions has yet to be determined and additional research is required to
determine the desirable types of interventions in terms of demonstrated experience.
The current study attempts to contribute to this effort by studying I S adoption in the
context of Singapore, which is very different in many respects from the United States.
The key variables found to be important could then be incorporated into government
initiatives to encourage IS adoption in small businesses.
Singapore is a small city-nation situated in southeast Asia that has seen a rapid
development of its IT industry in recent years, despite the fact that it is among the
world's smaller nations and is considerably different from the United States in many
geographic, cultural, and political respects [25]. As an integral part of its overall
economic planning, Singapore has implemented a series of national IT plans and
programs to encourage diffusion ofIT in both the public and private sectors [39]. The
Singapore experience is a model of very proactive government strategy with the
appointment of the Committee on National Computerization under the leadership of
a minister. A government agency, the National Computer Board (NCB), was set up
with the mission to move Singapore toward an information society. The NCB is
responsible for effecting successful application of IT in the government, building an
IT infrastructure, cultivating an IT culture, facilitating the development of a strong
export-oriented IT industry, and formulating IT human-resource development policies
and plans. In most of these objectives, the NCB has either achieved or surpassed its
goals. By the year 2000, the NCB hopes to transform Singapore into an "intelligent
island" [65]. They are installing a national information infrastructure that intercon-
nects computers in virtually every home, office, school, and factory through a
high-speed broadband network. All households are expected to be connected by cables
to the national information infrastructure by the end of 1999. Presently, various
nationwide electronic networks are being set up to be utilized for business transactions
in various business sectors including trading, legal, health care, finance, real estate,
and retailing. Of these networks, TradeNet and PortNet are fairly well known. More
recent networks include MediNet, which links hospitals, clinics, and other medical
facilities, and LawNet, which links the various courts of justice with the law firms.
The business culture in Singapore is also very different from that in the United States.
Singaporean managers tend to have lower uncertainty avoidance and lower individu-
alism [43,74,88]. Lower uncertainty avoidance refers to the degree to which people
prefer structured to unstructured situations. Singaporean managers tend to be less
structured, to have fewer rules, to employ more generalists, and to be multiform. As
a result, they are more involved in strategy, more person-oriented, flexible in their
style, and more willing to take risks. Singaporean employees are also less individual-
istic than those in the United States and expect their employers to look after them like
190 JAMES y.L. THONG
a family member, while organizational procedures are based on loyalty and a sense of
duty. In the case of small businesses operating in such a culture, authority is heavily
concentrated in the CEOs, reinforcing their importance in decisions to adopt IS. As
research has shown that management theories, concepts, and practice developed in
one culture may not be applicable in other cultures [43] and prior technological
innovation studies tend to have been conducted in the United States, the current study
extends the technological innovation literature by examining IS adoption in a different
culture.
The purpose of this paper is twofold: first, it seeks to fill the void in research on
determinants of IS adoption in small businesses, and second, it seeks to understand
the determinants of IS adoption in small businesses in the specific context of Singa-
pore. The technological innovation literature is used as the theoretical basis for the
research.
Theoretical Background
THE FUNCTIONAL PARRALELS BETWEEN IS ADOPTION and technological innovation
adoption have been suggested by various IS researchers [46, 52, 59]. Since IS can be
considered a technological innovation, it may be fruitful to use technological innova-
tion theories as a reference discipline for empirical studies ofIS adoption. Rogers [78],
an authority on innovation theory, defined an innovation as an idea, practice, or object
that is perceived as new by an individual or other unit of adoption. Thus, not only is
an innovation a renewal by means of technology, but it can also refer to renewal in
terms of thought and action [71]. The innovation itsel f need not be new, as measured
by the time of its discovery or invention. It only has to be perceived as new by the unit
of adoption [94]. This suggests that an innovation is any product or process that has
been put into practice and is nontrivial to the business. The innovation presents
potential adopters with new means of solving problems and exploiting opportunities.
The characteristics of an innovation can be differentiated along four dimensions
[71]. First, there are process innovations and product innovations. Process innovations
are innovations that improve the production process through the introduction of new
methods, machines, or production systems. Process innovations apply not only to the
traditional definition of production but also to data processing, distribution, and
services. IS adoption would fall under this category. Product innovations, on the other
hand, involve the development, production, and dissemination of new consumer and
capital goods and services. Second, innovations can be either radical (shock-like) or
incremental (gradual). Basically, radical innovations are fundamental changes that
represent revolutionary changes in technology, while incremental innovations are
minor improvements or simple changes in current technology [22]. IS are radical
innovations. For a small business with little IS knowledge, embarking on IS adoption
for the first time is nontrivial; it involves a lot of uncertainty and risk. The adoption
of IS is likely to cause changes in work procedures and to increase computer anxiety
among the employees. Third, innovations can occur because of technology-push or
market-pull. Technology-push implies that an innovation is developed and offered in
a matured form on the capital-goods market. Under pressure exerted by the competing
suppliers and the ascribed superiority of the new innovation, the market is required to
absorb the new innovation. In a market-pull, a social need is felt, acknowledged, and
translated into technical demand. In response to this demand, a new technology is
developed. Both technology-push and market-pull have had an effect on adoption of
IS [48]. Finally, a distinction can be made between planned and incidental innovation.
Planned innovations are innovations that are carried out according to plan where the
business aims to control the market through its innovation. Innovations are considered
incidental when they occur as a specific reaction of a business to new market demand.
Both approaches are applicable for the adoption of IS.
The technological innovation literature has identified many variables that are
possible determinants of organizational adoption of an innovation. This large number
of variables suggests that more research is needed to identify the critical ones [79]. In
an agenda for innovation processes research, Eveland, Hetzner, and Tornatzky [29]
contend that a closer consideration of organizational variables with a primary focus
on rigorous empirical studies is warranted. However, some researchers question the
possibility of developing a unifying theory of innovation adoption and diffusion that
can apply to all types of innovations [23, 32,47]. They argue that a unifying theory
might be inappropriate in view of the fundamental differences between types of
innovations. Fichman and Kemerer [32] claim that the variations in innovations (e.g.,
product versus process, administrative versus technical, incremental versus radical)
and the adoption contexts in which they may be applied (e.g., individual versus
organizational adoption, autonomous versus nonautonomous adoption decisions,
competitive versus noncompetitive adoption environments) are simply too great. In a
review of eighteen empirical studies of IS diffusion, Fichman [31] found that IS
innovations may have different levels of knowledge burden and locus of adoption
(individual versus organization), and classical innovation theories need to be tailored
to the adoption context.
In response to the lack of a unifying theory of innovation adoption, it is essential to
include the distinctive characteristics of context in the development of a strong theory
to study innovation adoption [32, 85, 95]. Various researchers have attempted to
identify these contexts. An important context identified by Rogers [78] is character-
istics of the innovation. This is supported by Prescott and Conger [73], who reviewed
seventy IS-related papers and concluded that Rogers's [78] diffusion of innovation
theory appears to be most applicable to innovations with an intraorganizationallocus
of impact. While Rogers's [78] innovation characteristics are an important context, IS
researchers have combined them with other contexts to provide a richer and potentially
more explanatory model [72]. Kimberly and Evanisko [47J identified three other
clusters of predictors of innovation adoption-------characteristics of organizational lead-
ers, characteristics of organizations, and characteristics of environmental context.
Tornatzky and Fleischer [85] conceptualized the context of technological innovation
as consisting of three elements-----<>rganizational context, technological context, and
environmental context--that influence the technological innovation decision. In sum-
mary, four elements of context can be identified in the technological innovation
192 JAMES Y.L. THONG
literature: (1) characteristics of the organizational decision makers; (2) characteristics
of the technological innovation; (3) characteristics of the organization; and (4)
characteristics ofthe environment in which the organization operates.
Research Model
THERE ARE TWO RELATED BUT DISTINCT RESEARCH QUESTIONS: (1) What variables
determine the decision of small businesses to adopt IS? and (2) If the decision is to
adopt IS, what variables detennine the extent of IS adoption? The first research
question is concerned with whether a small business is using IS or not, while the second
research question is concerned with why some small businesses make more use ofIS
than others. Based on the technological innovation literature, an integrated model of
IS adoption specifically for small businesses was developed (see figure 1). Each of
the variables is discussed below.
IS Adoption
The dependent variable is adoption of IS. In this study, adoption of IS is defined as
using computer hardware and software applications to support operations, manage-
ment, and decision making in the business [17]. This implies that the IS are used
productively and are not "white elephants." There are two measures for the dependent
variable. The first measure, likelihood of IS adoption, was operationalized as a
dichotomy: whether the business is or is not computerized. This measure is commonly
used in innovation diffusion research [31, 86]. A dichotomous measure was used
because the first research question ofthis study is to identifY variables that distinguish
a computerized small business from a noncomputerized one. Following the example
of Alpar and Reeves [I], a business is defined as computerized ifit uses at least one
major software application listed in the software application table (see appendix A).
This list excluded word processing packages. The second measure of IS adoption,
extent of IS adoption, was operationalized by the number of personal computers [4,
55] and the number of software applications in use in each business. This measure
indicates the degree to which IS has been adopted. In the case of minicomputers, the
number oftenninals was used to derive an equivalent number of personal computers.
By using the above measurement of IS adoption, this study will include only active
users of IS as adopters and exclude small businesses that have discontinued their IS
usage.
CEO Characteristics
In a small business, the CEO is usually the owner-manager. Since the CEO is the main
decision maker, the characteristics of the CEO are crucial in determining the innova-
tive attitude of the small business [77]. This is because the CEO's qualities are the
detenninants of the overall management style of the business [79]. In fact, the rate at
which a small business changes depends not only on factors such as business size or
CEO Characteristics
CEO's Innovativenesj
Hla
Hlb
CEO's IS KnOWledge)
H2a
H2b
IS Characteristics
Relative Advantage
H3a
ofIS
H3b
( Compatibility of IS
!-lA,
H4b
(
Complexity of IS
H5a
IS Adoption
H5b
1
(
Likelihood of
If f
Extent of
)
Organizational Characteristics IS Adoption adopf \
IS Adoption
(
Business Size
')
H6a
)
Hob
Employees'
H7a
IS Knowledge H7b
Information Intensity
H8a
H8b
Environmental Characteristics
Competition
l H9a
)
H9b
Figure J _ IS Adoption Model for Small Businesses
market forces, but also on the abilities and inclinations of the CEO and the extent to
which he or she is able or prepared to devolve management [8J. It is the role adopted
by the CEO that determines the innovati veness of the business [12]. There is also
evidence in the technological literature that those who allocate organizational re-
sources influence innovation adoption [6,40,90].
CEO's Innovativeness
In his theory of innovativeness, Kirton [49] contends that everyone is located on a
continuum ranging from an ability to do things better to an ability to do things
194 JAMES Y.L THONG
differently. He calls the two extreme ends ofthe continuum adaptors and innovators,
respectively. In the case of a small business, the adaptor CEO would seek solutions
that have already been tried and understood. On the other hand, the innovator CEO
would prefer solutions that change the structure in which the problem is embedded----1n
other words, solutions that have not been tried out and are therefore risky [50]. Unless
the CEO has the will to innovate, there is little that other members of the business can
do to expedite IS adoption or increase the extent of IS adoption.
HI a: Innovativeness of the CEO will be positively related to the likelihood of IS
adoption.
H J b: Innovativeness of the CEO will be positively related to the extent of IS
adoption.
CEO's IS Knowledge
Attewell [3] conceptualizes the diffusion of complex technological innovations in
terms of decreasing knowledge barriers. Because of obstacles with developing the
necessary skills and technical knowledge, many businesses are tempted to postpone
adoption ofthe innovation until the barriers to adoption are lowered or circumvented.
The implication of this theory is that overcoming the lack of knowledge of the
innovation will lead to greater likelihood of adopting the innovation. Ettlie [27] has
also found that CEOs with more knowledge of the technological innovation are
significantly more likely to implement an aggressive technology adoption policy.
Gable and Raman [36] found that CEOs in small businesses tend to lack basic
knowledge and awareness of IS. Many of them reject the notion that IS could be of
any use to their businesses as they have no idea of the potential benefits IS offer. This
seems to imply that, if these CEOs could be educated about the benefits of IS, they
would be more willing to adopt such technology.
H2a: CEO's IS knowledge will be positively related to the likelihood of IS
adoption.
H2b: CEO's IS knowledge will be positively related to the extent of IS adoption.
IS Characteristics
Perception of IS Attributes
Research on innovation has identified characteristics of the innovation as perceived
by the adopting business as having influence on the adoption of innovations [78].
According to Rogers's [78] innovation theory, an individual forms an attitude toward
the innovation, leading to a decision to adopt or reject and, if the decision is to adopt,
to implementation of the innovation. The perception of the potential adopter toward
the IS is the primary determinant of IS adoption. Based on a meta analysis of the
[S ADOPTION [N SMALL BUSINESSES 195
technological innovation literature concerning characteristics of innovations, Tor-
natzky and Klein [86] identified relative advantage, compatibility, and complexity as
innovation characteristics that are salient to the attitude formation. Relative advantage
is the degree to which an innovation is perceived as better than its precursor [78]. The
positive perceptions of the benefits of IS should provide an incentive for the small
business to adopt the innovation. Compatibility is the degree to which an innovation
is perceived as consistent with the existing values, needs, and past experiences of the
potential adopter [78]. If the IS are compatible with existing work practices, the small
business will be more likely to adopt them. Complexity refers to the degree to which
an innovation is perceived as difficult to use [78]. The perceived complexity of the IS
is expected to influence the decision to adopt them negatively.
H3a: Relative advantage of IS will be positively related to the likelihood of IS
adoption.
H3b: Relative advantage of IS will be positively related to the extent of IS
adoption.
H4a: Compatibility of IS will be positively related to the likelihood of IS adoption.
H4b: Compatibility of IS will be positively related to the extent of IS adoption.
H5a: Complexity of IS will be negatively related to the likelihood of IS adoption.
H5b: Complexit}' of IS will be negatively related to the extent of IS adoption.
Organizational Characteristics
Business Size
The technological innovation literature has found that larger businesses have more
resources and infrastructure to facilitate innovation adoption [22, 62, 87]. Small
businesses suffer from a special condition commonly referred to as resource poverty.
Resource poverty results from various conditions unique to small businesses, such as
operating in a highly competitive environment, financial constraints, lack of profes-
sional expertise, and susceptibility to external forces. Because of these unique condi-
tions, small businesses are characterized by severe constraints on financial resources,
a lack of in-house IS expertise, and a short-range management perspective [89].
Consequently, small businesses face substantially more barriers to adoption ofIS and
are less likely to adopt IS than large businesses [24]. Alpar and Reeves [1] argue that,
even among small businesses, the larger the business, the more able it is to hire people
with specialized skills, such as knowledge ofIS. In addition, it would appear reason-
able to suppose that larger businesses have more potential to use IS than smaller
businesses, simply because of their larger scale of operations [6, 55, 62].
H6a: Business size will be positively related to the likelihood of IS adoption.
H6b: Business size will be positively related to the extent of IS adoption.
196 JAMES Y.L THONG
Employees' IS Knowledge
Similarly, Attewell' s [3] technological innovation theory has implications for employ-
ees of small businesses. Typically, small businesses are lacking in specialized IS
knowledge and technical skills [20,35,53]. Neidleman [67] attributes the failure of
European small businesses to utilize IS to lack of IS knowledge. Because of obstacles
with developing the necessary skills and technical knowledge, many businesses are
tempted to postpone adoption of the innovation until they have sufficient internal
expertise. Hence, if employees of small businesses are knowledgeable about IS, the
businesses may be more willing to adopt IS and adopt more IS. Further, there is
empirical evidence that businesses with employees who have more knowledge of the
technological innovation are likely to use more of the innovation [27].
H7a: Employees' IS knowledge will be positively related to the likelihood of /S
adoption.
H7b: Employees' IS knowledge will be related to the extent of /S
adoption.
Information Intensity
The information-processing theory of Galbraith [37] concentrates on the processes
through which the environment influences a business's actions. The degree to which
information is present in the product or service of a business reflects the level of
information intensity of that product or service. Businesses in different sectors have
different information-processing needs, and those in more information-intensive
sectors are more likely to adopt IS than those in less information-intensive sectors
[92]. For instance, travel agencies are more information-intensive, as their main
functions are to process and package tour information. Further, the greater the
information intensity, the greater the potential for strategic uses of IS in a business
[70). Greater information intensity will lead the CEO of a small business to perceive
IS as a major competitive tool and therefore increase the likelihood and extent of IS
adoption.
H8a: Information intensity will be positively related to the likelihood of /S
adoption.
H8b: lriformation intensity will be positively related to the extent of IS adoption.
Environmental Characteristic
Competition
By competition, we mean the business environment in which the business operates. It
is generally believed that competition increases the likelihood of innovation adoption
[47, 56, 87]. It is tough rivalry that pushes businesses to be innovative. Empirically,
studies have shown that more intense competition is associated with higher adoption
rates [38, 54]. Competition leads to environmental uncertainty and increases both the
need for and the rate of innovation adoption [26, 28]. Porter and Millar [70] suggest
that, by adopting IS, businesses will be able to compete in three ways. IS can change
the industry structure and, in so doing, alter the rules of competition. IS can also create
competitive advantage by giving businesses new ways to outperform their rivals.
Finally, IS spawn new businesses, often from within existing operations of the
business. Therefore, a small business in an environment that is more competitive
would feel a greater need to tum to IS to gain a competitive advantage. On the other
hand, a small business in a less competitive environment would not be faced with a
push to be innovative.
H9a: Competition will be positively related to the likelihood of IS adoption.
H9b: Competition will be positively related to the extent of IS adoption.
Research Methodology
Measurement of the Variables
STANDARD INSTRUMENTS WERE USED AS MUCH AS POSSIBLE. CEO innovativeness
was measured by Kirton's [49] Adaption-Innovation Inventory (KAI) instrument. The
KAI is a list of thirty-two items describing the adaption-innovation scale to measure
a person's i nnovati veness. This instrument has been widely used in organization
studies and found to be reliable and valid for measuring cognitive styles [5]. IS
characteristics were measured by items taken from Moore and Benbasat's [64]
instrument, which was designed to measure the various perceptions that an individual
might have of adopting an IS innovation. Business size was measured by number of
employees, a popular measure used by researchers on small businesses [15,20,63,
75,76] and innovation adoption (see [47, 60, 95]). Because the values of size were
highly skewed, they were subjected to a logarithmic transformation to reduce the
variance [47].
The operationalization of the remaining research variables was developed especially
for this study. In some cases, items were adapted from previously used scales. All
perceptual items were measured by five-point Likert scales representing a range from
"strongly disagree" to "strongly agree." Although objective measures would be
desirable, subjective measures could be appropriate surrogates [21].
Two items were used to measure CEOs' IS knowledge. The first item assessed the
respondent's level of understanding of IS as compared with other people in similar
positions. The second item assessed the respondent's types of IS experience. The
various types of IS experience included: (I) attended computer classes; (2) use a
computer at home; (3) use a computer at work; and (4) have formal qualifications in
the use and operation of a computer. The items were adapted from DeLone [19]. A
score of one was assigned when the respondent had no computer experience; otherwise
a score was assigned according to the procedure in appendix B. The rationale for the
198 JAMES V.L. THONG
index of IS knowledge was that the variable is multidimensional. The CEOs were
asked to ascertain their own IS knowledge before IS adoption by the small businesses.
This was to ensure that the CEOs did not inflate their level of IS knowledge with
experience gained after IS adoption.
Employees' IS knowledge was measured by three items. These items included: (I)
my employees were all computer-literate; (2) there was at least one employee who
was a computer expert; and (3) I would rate my employees' understanding of
computers as very good compared with other small companies in the same industry.
Similarly, the CEOs were asked to ascertain their employees' IS knowledge before
adoption ofIS. This was to ensure that the CEOs did not inflate the level of employees'
IS knowledge with experience gained after adoption of IS.
The information intensity of a business's service or product was measured by the
dependence of the business on three attributes of information: currency of information,
reliability of information, and timeliness of information [11].
Competition was measured by three items, based on Porter and Millar's [70] concept
of competitive forces: ease for a customer to switch to a competitor, level of rivalry
among businesses in the same industry, and effect of substitutable products and
services.
Data Collection Procedure
Data collection was conducted in two phases: a pilot study phase and a questionnaire
survey phase. One questionnaire was designed for data collection. The CEO of the
small business was chosen to be the key informant in this study. Since the CEO is
typically the owner-manager in a small business, it is reasonable to assume that the
current CEO is the same CEO who decided on IS adoption. In the pilot-study phase,
five small businesses were randomly chosen from a small business database to pretest
the questionnaires. Five CEOs completed the questionnaires. Next, interviews were
conducted with these CEOs to determine whether there were any problems with the
questionnaire. Based on feedback from these CEOs, very minor modifications were
made to the questionnaire for the next phase of data collection. Responses from these
five pilot-study businesses were not included in the final sample.
In the questionnaire survey phase, a package was mailed to the CEO of each of the
small businesses in the survey sample. The package contained three items: a covering
letter, one CEO questionnaire, and a prepaid reply envelope. The cover letter explained
the purpose of the survey and asked the CEO to return the completed questionnaire
within three weeks in a prepaid reply envelope. The respondents were assured of the
confidentiality of their responses.
The Sample
There is no generally accepted definition of a small business. Three commonly used
criteria for defining a small business were number of employees, annual sales, and
fixed assets. In this study, the criteria for defining a small business were adopted from
the Association of Small and Medium Enterprises (ASME) in Singapore. A small
business is one that satisfies at least two of the following criteria: (I) the number of
employees in the business should not exceed 100; (2) the fixed assets of the business
should not exceed US$7.2 million; and (3) the annual sales of the business should not
exceed US$9 million.
The names and addresses of 800 small businesses that meet the ASME criteria were
obtained from a small business database provided by the National Computer Board
(NCB) in Singapore. The NCB is the government agency overseeing the promotion
of IT to improve productivity and competitiveness in all sectors of the Singapore
economy. Although the number of businesses supplied by the NCB was large, the
database was not current and some businesses might have moved or gone out of
business. Hence, an additional 400 businesses were selected at random from the
telephone directory. Of the 1,200 questionnaires mailed out, 294 were returned.
However, 122 questionnaires were returned uncompleted because businesses had
changed their addresses or were no longer in operation. Responses from six businesses
were excluded from the final sample because those firms did not meet the criteria of
a small business, resulting in 166 usable questionnaires.
Small businesses are known to have a high mortality rate [81]. They are also highly
mobile, depending on the rental of their premises and whether their businesses are
expanding or contracting. Since the survey database was outdated, there was a high
probability that a significant number was either defunct or had moved, making
them uncontactable for this survey. To check for this possibility, we obtained the
new telephone directory that was published just after the data-collection time frame.
According to the updated directory, 433 businesses were no longer listed and 352
businesses had changed address. This list was cross-checked against the Registry of
Companies and Business's (RCB) database. In Singapore, all businesses are required
to file their annual reports with the RCB. Hence, the effective sampling frame consisted
of 409 businesses (1,200-433-352--6), and the effective response rate was 40.6
percent (166/409). This response rate was considered very good notwithstanding
that the survey was unsolicited, without any prior knowledge on the part of
respondents.
To check that these responses were representative of the larger popUlation, non-
response bias was assessed by comparing early respondents with late respondents in
terms of three key organizational characteristics of the sample [2]. The rationale for
this test was that late respondents were likely to have similar characteristics to
nonrespondents. The three characteristics were number of employees, fixed assets,
and sales turnover. T-tests showed no significant difference between the two groups
of respondents in terms of number of employees (I = 1.23; P = 0.228), fixed assets
(t = 1.29; P = 0.208), and sales turnover (t = 0.64; p = 0.528) at the 5 percent
significance level, suggesting that nonresponse bias was not a problem.
Nonresponse bias was also assessed using an alternative approach of comparing the
profile of this study's sample with other available data on IS adoption [34]. Of the
responding sample, 120 small businesses (72 percent) had adopted IS. This figure
corresponded closely with the national average of 68 percent for small businesses,
Table 1. Descriptive Statistics
Variable
CEO's innovativeness
CEO's IS knowledge
Relative advantage of IS
Compatibility of IS
Complexity of IS
a
Business size
b
Employees' IS knowledge
Information intensity
Competition
Adopter
(n = 120)
Mean Std dev
3.01 0.38
2.86 1.01
4.17 0.57
4.09 0.75
3.45 0.91
1.37 0.48
2.81 0.98
3.79 0.99
3.65 0.95
Nonadopter
(n =46)
Mean Std dev
2.86 0.41
2.15 1.08
3.71 1.13
3.45 1.22
3.01 1.03
0.99 0.40
2.07 1.07
3.53 1.15
3.84 0.88
Cronbach
alpha
0.82
0.64
0.90
0.78
0.86
NA
0.75
0.89
0.70
a A low score means high complexity.
b Measured as log(number of employees). Remaining variables measured on 1 to 5 scale.
giving further confidence about the representativeness ofthe sample [66]. Forty-nine
of the businesses sampled were in manufacturing (29.5 percent), forty-six in com-
merce (27.7 percent), and seventy-one in service (42.8 percent) sectors. The distribu-
tion of business sectors was a reflection of the profile of small businesses in Singapore,
providing further evidence of the generalizability of the sample.
Instrument Validation
The psychometric properties of the research variables were examined. Measure-
ment of a variable must be reliable to be useful and yield stable results. For each
composite research variable, the reliability or internal consistency was assessed
by calculating the Cronbach alpha coefficient. Table 1 presents the standardized
Cronbach alpha coefficients for the research variables. All the reliability coeffi-
cients, except for CEO's IS knowledge, met the generally accepted guideline of
0.70 and above to qualify as reliable measures [41]. The lower reliability of CEO's
IS knowledge may be due to the use of only two items, since the Cronbach alpha
coefficient tends to increase with the number of items. Further tests of the
reliability of the variables are discussed below.
Besides being reliable, measurement of a variable must be valid, that is, it must
measure what it is intended to measure. Construct validity is the extent to which a
particular item relates to other items consistent with theoretically derived hypotheses
concerning the variables that are being measured. The construct validity of the
specially developed research variables was examined using factor analysis. Table 2
presents the results. The factor analysis indicated that all the factor loadings were
Table 2. Factor Analysis of Research Variables
Items Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6
CEO_Know1 0.876
CEO_Know2 0.734
ReLAdv1 0.829
Rel.....Adv2 0.772
ReLAdv3 0.778
ReLAdv4 0.833
Rel.....Adv5 0.831
Compatibility1 0.719
Compatibility2 0.661
Complexity1 0.897
Complexity2 0.840
Emp_Know1 0.614
Emp_Know2 0.607
Emp_Know3 0.825
Info_lntensity1 0.839
Competition1 0.786
Competition2 0.753
Competition3 0.736
Note: Figures are factor loadings.
greater than the cutoff point of 0.50, as recommended by Nunnally [68]. Except for
two measures ofIS attributes, the items loaded on their hypothesized variables. In the
case of relative advantage and compatibility, the items loaded on the same factor. Both
Moore and Benbasat [64] and Benham and Raymond [7] had similar experience in
empirical testing of these scales. Although there may be a conceptual difference
between relative advantage and compatibility, they are being viewed identically by
respondents, or there is a causal relationship between them [64]. Moore and Benbasat
[64] give as an example the unlikelihood that respondents would perceive the various
advantages of using IS if their use were in fact not compatible with the respondents'
experience or work style. In this study, we combined the items measuring these two
closely related variables into a single variable. For subsequent statistical analysis, the
score for each composite research variable was the aggregate ofa respondent's scores
for items defined to measure that variable.
202 JAMES Y.L THONG
Data Analysis
Correlation Matrices
THE PEARSON CORRELA TION MATRIX FOR LIKELIHOOD OF IS ADOPTION was examined
for the extent of multicollinearity problems (see Table 3). The highest squared
correlation among the independent variables was 0.19 between the aggregated mea-
sure of relative advantage/compatibility of IS and complexity of IS. None of the
squared correlations was close to 0.80 to suggest a problem with multicollinearity
among the research variables [41]. Similarly, the Pearson correlation matrix for extent
of IS adoption was examined (see Table 4). The highest squared correlation among
the independent variables was 0.23, between the aggregated measure of relative
advantage/compatibility ofIS and complexity ofIS. Again, there was no evidence of
significant multicollinearity among the research variables.
Hypotheses Testing
The individual hypotheses with regard to the decision to adopt IS were tested by using
discriminant analysis. Discriminant analysis is a technique to study the differences
between two groups with respect to two or more independent variables simulta-
neously. It is the appropriate statistical technique when the dependent variable is
categorical (e.g., adopters or nonadopters) and the independent variables are interval
data [41].
The results of the discriminant analysis are presented in Table 5. According to the
Wilks' lambda of 0.72 (l = 43.36, df = 8, p = 0.0000), the overall model was
significant. A further indicator of the effectiveness of the discriminant function is the
degree of predictive accuracy measured by the percentages of cases (or businesses)
classified correctly. The discriminant function correctly classified 75.4 percent of the
businesses in the sample, which exceeded the hit ratio of 59.9 percent that would be
expected due to chance [41]. The individual correct classification rates for adopters
and nonadopters were 78.4 percent and 68.3 percent, respectively. The probabilities
for theF-statistics identify the independent variables that are significant discriminators
between the two groups. The discriminant loadings or structure correlations show how
closely a variable and the discriminant function are related. The discriminant loadings
reflect the variance that the independent variables share with the discriminant function
and can be used to assess the relative contribution of each independent variable to the
discriminant function. Generally, any variables exhibiting discriminant loadings
greater than or equal to 0.30 are considered significant [41].
The results supported hypotheses la, 2a, 3a, 4a, Sa, 6a, and 7a. The likelihood ofIS
adoption was significantly associated with CEO characteristics (CEO's innovative-
ness and CEO's IS knowledge), IS characteristics (relative advantage, compatibil-
ity, and complexity of IS), and two attributes of organizational characteristics
(business size and employees' IS knowledge). One organizational characteristic
(information intensity) and the environmental characteristic (competition) were
Table 3. Correlation Matrix for Likelihood ofIS Adoption
Variable (1) (2) (3) (4) (5) (6) (7) (8) (9)
(1 ) CEO's 1.000
innovativeness
(2) CEO's IS 0.080 1.000
knowledge
(3) ReI. adv.l -0.081 0.233**1.000
compatibility
(4) Complexity -0.012 0.117 0.439**1.000
(5) Business size 0.114 0.303**0.106 0.052 1.000
(6) Employees' IS 0.101 0.386**0.376**0.383"0.367**1.000
knowledge
(7) Information -0.055 0.118 0.390**0.154* 0.033 0.257**1.000
intensity
(8) Competition -0.003 0.117 0.175* 0.036-0.104 0.002 0.284**1.000
(9) Likelihood of IS 0.212**0.295**0.299**0.209*0.364*0.286**0.134 -0.091 1.000
adoption
* p < 0.05; ** p < 0.01.
not significantly related to the decision to adopt IS (see Table 5).
The hypotheses relating to the extent of IS adoption were tested by partial least
squares (PLS), a structural equation modeling technique (see Table 6). This technique
is appropriate when the dependent variable is of interval scale [91]. PLS allows
simultaneous evaluations of both the measurement model (reliability and validity of
variables) and the structural model involving the variables. In this study, we used
Lohmoller's [57] PLS program to analyze the data. Jackknifing was used to produce
parameter estimates, standard errors, and t-values. A 5 percent level of significance
was used for all the statistical tests.
In PLS analysis, the reliability of a variable is evaluated by computing composite
reliability while convergent validity is evaluated by the average variance extracted
[33]. Acceptable values for composite reliability and average variance extracted are
0.7 and 0.5, respectively [13]. From Table 6, all the variables were reliable and met
the condition for convergent validity. Discriminant validity of the variables was
evaluated by comparing the average variance extracted for the variable with the
squared correlations between it and the other variables. In all cases, the average
variance extracted was greater than the squared correlations between variables,
indicating that all the variables in the model exhibited discriminant validity.
Once the reliability and validity of the variables were established, the structural
model could be assessed to see if it supported the hypotheses. The percentage of
variance explained (R 2) was 43 percent, implying a satisfactory and substantive model
[30]. Three of the standardized path coefficients were significant at the 5 percent level.
The results supported hypotheses 6b, 7b, and 8b. The extent of IS adoption was
significantly associated with all three organizational characteristics (business size,
204 JAMES Y.L THONG
Table 4. Correlation Matrix for Extent of IS Adoption (Adopters Only)
Variable (I) (2) (3) (4) (5) (6) (7) (8) (9)
(1 ) CEO's 1.000
innovativeness
(2) CEO's IS 0.154 1.000
knowledge
(3) ReI. adv.l -0.010-0.171 1.000
compatibility
(4) Complexity -0.009 0.006 0.480**1.000
(5) Business size 0.155 0.083 -0.153 -0.024 1.000
(6) Employees' IS 0.010 0.167 0.130 0.315**0.116 1.000
knowledge
(7) Information 0.111 -0.003 0.128 0.009 -0.033 0.184 1.000
intensity
(8) Competition 0.043 0.020 0.235*-0.068 -0.088 -0.126 0.244* 1.000
(9) Extent of IS 0.167 0.041 0.073 0.076 0.472**0.398*'0.273*-0.056 1.000
adoption
* p < 0.05; ** P < 0.01.
Table 5. Discriminant Analysis for Likelihood of IS Adoption
Discriminant
Variables F-value Significance loadings
CEO characteristics
CEO's innovativeness 6.38 0.013* 0.347
CEO's IS knowledge 12.92 0.001*' 0.494
IS characteristics
Relative advantage/ 13.31 0.000** 0.502
compatibility
Complexity 6.24 0.014' 0.343
Organizational characteristics
Business size 20.73 0.000** 0.626
Employees' IS knowledge 12.13 0.001** 0.479
Information intensity 2.48 0.118 0.216
Environmental characteristic
Competition 1.12 0.291 -0.146
* P < 0.05; ** P < 0.01.
[S ADOPTION IN SMALL BUSINESSES 205
Table 6. PLS Analysis for Extent of IS Adoption (Adopters Only)
Measurement model Structural model
Average
Composite variance
reliability extracted Path coefficient
CEO characteristics
CEO's innovativeness 1.00 1.00 -0.018
CEO's IS knowledge 0.83 0.72 0.073
IS characteristics
Relative advantage/compatibility 0.94 0.69 0.078
Complexity 0.93 0.86 -0.008
Organizational characteristics
Business size 1.00 1.00 0.430
Employees' IS knowledge 0.86 0.66 0.334**
Information intensity 0.92 0.80 0.138
Environmental characteristics
Competition 0.82 0.60 -0.014
2
* P < 0.05; ** p < 0.01; R = 0.43.
employees' IS knowledge, and information intensity). CEO characteristics, IS char-
acteristics, and environmental characteristics were not significantly related to the
extent of IS adoption.
Discussion
Likelihood of IS Adoption
THE DATA ANALYSIS SHOWS THAT IS CHARACTERISTICS have a major effect on the
decision to adopt. Small businesses with more positive attitude toward IS character-
istics are more likely to adopt IS. This result provides support for Rogers's [78]
innovation theory in the small business context. Three essential attributes of the
innovation that affect the formation of attitude are relative advantage, compatibility,
and complexity. I fthe innovation is viewed as better than the existing manual system,
is consistent with the needs of the adopting business, and is easy to use and understand,
then there is a greater chance that a favorable attitude toward the innovation will be
formed. In the context ofIS adoption by small businesses, those businesses with CEOs
who perceive ofIS as beneficial, compatible, and relatively easy to use will be more
likely to adopt them.
Another major group of factors affecting the decision to adopt IS consists of the
206 JAMES Y.L THONG
characteristics ofthe decision maker. The decision maker's characteristics, specific-
ally CEO's innovativeness and CEO's IS knowledge, are positively associated with
the decision to adopt IS in small businesses. IS are complex technological innovations
that require large outlays of financial resources for a small business with scarce
resources. If the IS implementation is not successful, a small business that is heavily
dependent on the IS can suffer irreparable damages from which it may not be able to
recover. Hence, IS adoption that involves a substantial investment is a risky
venture for a small business, and only a small business with an innovative CEO
will be willing to take the risk. Risk taking is an important characteristic of a
technology champion [44].
In addition, small businesses with CEOs and employees who are more knowl-
edgeable about IS are more likely to adopt them. This finding is consistent with
Attewell's [3] theory oflowering knowledge barriers. To the extent that the small
business can lower its knowledge inadequacies, it will facilitate the path to IS
adoption. Dewar and Dutton [22] found that extensive knowledge of the innovation
is important for the adoption of technical process innovation. Lack of knowledge
of the IS adoption process and insufficient awareness of the potential benefits may
inhibit small businesses from adopting IS [80]. To address this, small businesses
may supplement their inadequate IS knowledge by engaging external IS experts
such as consulting firms and IT vendors [83]. The external IT experts can act as
Attewell's [3] "supply-side organizations," helping to lower the innovation risk of
the small businesses.
Not surprisingly, business organizational characteristic---is the most
significant discriminator between adopters and nonadopters of IS among small busi-
nesses. Even among small businesses with limited resources, businesses that are bigger
are more likely to adopt IS. As small businesses are characterized by severe constraints
on resources such as finance and in-house technical expertise, adoption of IS repre-
sents a disproportionately large financial risk [14, 16, 89]. Only those businesses that
have adequate financial and organizational resources would consider adoption of IS
a viable undertaking. Hence, having adequate resourct"s is a necessary first step toward
the decision to adopt IS. This is consistent with findings from other studies in the
technological innovation literature (e.g., [47, 56]).
Finally, the remaining organizational characteristic of information intensity and
the environmental characteristic of competition do not have any significant direct
effect on the decision of small businesses to adopt IS. This suggests that businesses
that adopt IS do not do so because of their environment. The competitiveness of
environment does not really provide any direct "push" for small businesses to
adopt IS. However, there is some evidence that information intensity and compe-
tition may have indirect effects on IS adoption through the characteristics of IS.
Both information intensity and competition are positively correlated with relative
advantage and compatibility of IS. Thus, information intensity and competition
may influence the perception of small businesses toward the IS characteristics,
resulting in the decision to adopt IS. Additional research needs to be conducted
before more concrete conclusions can be drawn.
Extent of IS adoption
The main result here is that, of the four types of characteristics, only organizational
characteristics have significant effects on the extent of IS adoption. The most signif-
icant organizational characteristic that determines the extent ofIS adoption is business
size. This is not surprising, as larger businesses tend to adopt more IS than smaller
businesses owing to their needs. Larger businesses also have more resources available.
Interestingly, business size is not correlated with any of the other independent
variables.
After controlling for the effect of business size, the next most significant organiza-
tional characteristic that determines the extent of IS adoption is employees' IS
knowledge. Small businesses that have employees with greater IS knowledge are
likely to use IS more extensively. This finding is again consistent with Attewe1l's [3]
conceptualization of innovation diffusion as a process oflowering knowledge barriers.
Since most small businesses do not have a formal internal IT department, they usually
computerize with the aid of external IT experts such as consultants or IT vendors.
Attewell [3] suggests that the relationship between the innovation suppliers and the
adopting businesses will go beyond selling and will become structured around the task
of reducing knowledge hurdles. When the small business accumulates more IS
knowledge through learning by using, it will lower its IS knowledge barriers and be
more confident in adopting other IS. Widespread, routinized, and effective use of the
technological innovation is needed before additional adoption takes place [32].
The third organizational characteristic that affects the extent of IS adoption is
information intensity. The greater the information intensity of the product or service
that the small business is involved in, the greater the extent of IS adoption. This
provides some support for the information-processing theory. Galbraith [37] found
that, when businesses take on uncertain tasks, such as scanning and processing
complex information about new innovations, they have to manage the increase in
information load with various design strategies. Similarly, a small business dealing
with a product or service with high information intensity can make more extensive
use of IS to meet its information-processing needs.
Contrary to the hypotheses, characteristics ofthe decision maker (CEO innovative-
ness and CEO's IS knowledge), the IS innovation (relative advantage, compatibility,
and complexity), and the environment (competition) have no significant effect on the
extent of IS adoption in small businesses. While CEO characteristics and IS charac-
teristics may influence the initial decision to adopt IS, they do not affect the extent of
IS adoption SUbsequently. This suggests that Attewell's [3] theory of lowering
knowledge barriers takes precedence over the decision maker's characteristics and
perception of the IS characteristics after the initial decision to adopt IS. In the case of
competition, it appears to have no direct "push" for small businesses to increase the
extent ons adoption. However, competition may have an indirect effect on the extent
ofIS adoption through information intensity. Competition is positively correlated with
information intensity. Further study of this relationship is needed.
208 JAMES YL THONG
Conclusion
USING THEORIES FROM THE TECHNOLOGICAL INNOVATION LITERATURE, this paper
developed and tested an integrated model of IS adoption in small businesses. In
general, the results provide support for the model. Of the four contexts identified in
the model, three (CEO characteristics, IS characteristics, and organizational charac-
teristics) are of primary importance in determining the decision to adopt IS. Small
businesses that possess (1) innovative and IS knowledgeable CEOs, (2) positive
attitude toward the relative advantage, compatibility, and complexity of the IS, and
(3) larger businesses and businesses with more IS knowledgeable employees are more
likely to adopt IS. While information intensity and competition have no direct effects
on the decision to adopt IS, they may have indirect effects on the decision to adopt IS
through their effects on perceived characteristics ofIS. However, of the four contexts,
only organizational characteristics (specifically business size, employees' IS knowl-
edge, and information intensity) have been shown to be determinants of the extent of
IS adoption.
The results of this study have implications for IS adoption in small businesses. First,
the study highlights the importance of having innovative and IS-knowledgeable CEOs.
A small business managed by a CEO who understands the benefits of I S adoption and
is willing to invest scarce resources in the IS project will be able to take advantage of
the promised benefits of IS adoption, including improved organizational efficiency
and effectiveness. Second, the IS must offer a better alternative to existing practices
in the small business. If the IS are not perceived as beneficial to the small business,
there is no reason to adopt them. The IS must also be compatible with existing norms
and needs of the potential adopter; otherwise it will be difficult to integrate the use of
the IS into the business or there is no reason to use the IS. Further, the IS must be easy
to use and to understand. If the IS are too complicated and difficult to comprehend,
even if they are adopted, they will discourage the employees of the small businesses
and fall into disuse. Third, the small businesses must possess adequate financial
resources and IS-knowledgeable employees to effect a successful IS adoption. Even
among small businesses, the larger businesses will tend to have more resources and
slack capacity. A small business that has IS knowledgeable employees will lower the
knowledge barrier in understanding and using the IS. Hence, small businesses that
have more resources will have better chances of succeeding in IS adoption. Finally,
among the IS adopters, those small businesses that have greater information-process-
ing needs will tend to adopt more IS. This greater need for information processing will
have to be supplemented by adequate resources and IS-knowledgeable employees that
are more likely to be available in larger businesses.
This study has implications for research as well. To the best of our knowledge, this
is one ofthe first rigorous studies that examined IS adoption in small business from a
theoretical and empirical perspective. The model was developed out of an integration
of various perspectives using the technological innovation literature as a reference
discipline. The model was then empirically tested using multivariate statistical tech-
niques compared with the majority of previous research on small businesses using
bivariate correlation analysis. Future research can build on and extend the proposed
integrated model ofIS adoption in small businesses by including other potential variables
from the different contexts. The effect of competition on IS adoption in small businesses
is another area that needs further research. This study has found that competition has no
direct effect but may have an indirect effect on IS adoption. More research is needed to
elucidate the relationship between competition and IS adoption in small businesses.
Finally, let us discuss some limitations ofthis study. First, it is not possible to directly
measure the perception of the CEO at the time ofIS adoption. This is ameliorated to
some extent by asking the CEO for his or her perceptions prior to IS adoption.
However, we cannot be completely certain that the respondent can backtrack in his or
her mind without being influenced by the experience ofIS adoption to the state of the
tim) before adoption. Second, because of the cross-sectional nature of the study,
direction of causality can only be inferred. Longitudinal studies need to be conducted
to determine the causal links more explicitly. Third, operationalization of extent ofIS
adoption could have been strengthened i fthe amount ofIS investment were measured.
Finally, this study has investigated a subset of the variables found to be important in
the technological innovation literature, albeit those that are more pertinent to the
context of small businesses. Other variables that may be potential determinants of IS
adoption in small businesses include other characteristics of the innovation such as
peer influence and trialability. Future research can examine these possibilities. Not-
withstanding these limitations, this study has proposed and tested an integrated model
of IS adoption in small businesses based on the technological innovation literature and
identified some important determinants of IS adoption in small businesses.
Acknowledgment: This study was part of my Ph.D. research supervised by Chee-Sing Yap.
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ApPENDIX A: Software Application Table
For each computer applications in use in your company, please put a tick against the
application.
Application
Accounting
Inventory control
Sales
Purchasing
Personnel and payroll
CAD/CAM
EDI
MRP
Others (please specify)
In use
ApPENDIX B: Scoring Procedure for CEO's IS Knowledge
Types of experience
v
ii
Score
1
2
2
iii
iv
i, ii
i, iii
ii, iii
i, ii, iii
i, iv
ii, iv
iii, iv
i, ii, iv
i, iii, iv
ii, iii, iv
i, ii, iii, iv
2
3
3
3
3
4
4
4
4
5
5
5
5
(i) Attended computer classes; (ii) use a computer at home; (iii) use a computer at work;
(iv) have formal qualifications in the use and operation of a computer; (v) none.

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