The Moderating Effect of Culture on the Influence of Organization in Saudi Arabia - Thesis Proposal Example

THE MODERATING EFFECT OF CULTURE ON THE INFLUENCE OF ORGANIZATION, TECHNOLOGY AND ENVIRONMENT ON THE E-COMMERCE ADOPTION AMONG SMEs IN SAUDI ARABIA Chapter 3: Missing Parts Organisational Context Organization Size The size of the firm or the size of an organisation is one of the key adoption factors. Previous researches on the subject suggest that smaller firms may have reduced chances of adopting E-Commerce. However, as for those small firms that do adopt information technology, certain individual factors have been identified as the key elements that drive adoption of technological innovation. These individual factors include alignment of the technology with the business strategy, the perceived benefits, relative advantages, compatibility, complexity, proactivity towards technology, trialability, financial and organisational support etc. The size of a firm not only influences a firm’s ability and readiness to adopt E-Commerce but also the extent to which technology will be adopted by the firm. This simply means that larger firms tend to adopt technology at higher levels while the smaller firms are inclined to adopt technology at the lower levels (Cragg B. P. & Mills M.A., 2009) A firm’s prior usage of technology in the form of PCs with modems and an affinity towards the internet and e-mails will also affect the diffusion of the new innovation. An organisation with a large amount of transactions and data is more likely to adopt E-Commerce as this can be of great assistance in streamlining operations and as well as in offering process efficiency within the organisation (Thong J. and Yap C, 1995). Owners Attitude The adoption of E-Commerce by the SMEs relies heavily on the acceptance of the technology of e-commerce by the business owners. If the owner does not identify with the usefulness of technology nor has an understanding of its potential, then naturally the owner will be reluctant to adopt E-commerce. However, on the other hand if the attitude of the owner is positive, that is, if he is well aware of the intricacies of computers and has some knowledge on technology and how ways to reap benefits from it, then the business is likely to adopt e-commerce (Lubbe S. et. al. 2003). Another case where an owner is likely to adopt E-Commerce for his business is on the recommendation of experienced people. Before investing on the adoption E-Commerce the owners also considers the return he will be getting for his investment. This concern for the returns on the investments made often leads to the small and medium sized firms being more anxious on their mid-term survival rather than on the long-term viability (Lubbe S. et. al. 2003). Henceforth, the most of the small and medium sized business owners are often hesitant on making investments when short or medium-term returns are not guaranteed. In case of the adoption and implementation of the E-Commerce within the business mechanism of SMEs, the need for the owner’s or the top management’s commitment and support during the process of assessment of the innovation or the technology is of the utmost importance. Support and commitment on part of the owner or the top management ensures that there is an obligation within the resources, which in turn will create a conducive environment within the organisation for the adoption process of the technology. Hypothesis- the more positive the attitude of the owner and the greater the extent of support, the more likely the SME will adopt the E-Commerce technology. Owners Innovativeness Lee and Runge indentified three precursor factors in the IT adoption among small and medium sized retailers. The perception of the owner on the relative advantage of using IT. The social expectations on the usage of IT and The owner’s innovativeness in managing his business. The study found out that among the four antecedent factors, the owner’s innovativeness being the strongest determinant for the adoption of the information systems (Lee J.W. & Runge J., 2001). An innovative owner will definitely indentify the advantages of incorporating E-Commerce in his business and accordingly be able to create new benefits for the business through an innovative uitlisation of E-commerce technology. Hypothesis- the more innovative the owner, the more likely for the firm to adopt the E-commerce technology. Owner’s Technological Knowledge An owner’s technological knowledge is another significant factor that influences the adoption of E-Commerce. If the owner is well versed with the global technological developments and the benefits that can be harnessed from these technological advancements, then he is more likely to adopt technology in the form of E-commerce. Lack of technological knowledge on the owner’s part will inhibit the adoption. Hypothesis- the more technological knowledge the owner possesses, the more likely for his firm to adopt E- Commerce technology. Technological Context Relative Advantage Relative advantage is the extent to which the potential adopters and the customers perceive the new idea or innovation as superior to the current and existing conditions. According to Kwon and Zmud, “relative advantage is the degree to which adopting an innovation is perceived as providing greater organizational benefits than maintaining the status quo” (Kwon T.H. & Zmud R.W., 1987) In simpler terms relative advantage describes the amount of benefits and detriments an organisation will experience for adopting or rejecting a new innovation or technology, respectively. The extent of relative advantage is generally measured in terms of saving and time and effort, the economic profitability, the reduction on cost and the increase in production. Economists world-wide agree that relative advantage is one of the best of an innovation diffusion or adoption rate. Roger’s classical theory on diffusion on innovations which has been widely used in the literatures of the past highlights five of the identified elements of an innovation which are the main determinants explaining 49% to 87% of the discrepancy in the rate of E-Commerce adoption (Hussin H & Noor M.R., 2002). On the basis Roger’s “Diffusion and Innovation Model”, these five aspects under identified characteristics of innovation were adopted in order to test the perception of SMEs en route to the adoption of E-Commerce Technology. One of the five identified characteristics of innovation of E-Commerce was Relative Advantage. Relative advantage implies to the perceived benefits that can be reaped by the SMEs through the adoption of E-Commerce to facilitate a particular enterprises’ business activities as measured by wider market exposure, lower business costs, business process efficiency etc (Rogers E.M., 1983). Hypothesis- If the perceived relative advantage of E-Commerce is more, and then it is more likely for a SME to adopt E-commerce. Compatibility The second of the five essential characteristics identified by Everett Rogers that plays a critical role in enhancing the rate and the effectiveness of diffusion of an idea within an enterprise, a business firm or an industry is the compatibility factor. This second characteristic of compatibility is concerned in gauging the compatibility of the idea, in this context adoption of E-Commerce by the SMEs of Saudi Arabia, with the past experiences and needs of the SMEs and the existing values (Vanderslice S., n.d.). Organisations generally tend to adopt technologies that are in league with certain internal experiences and values. Technology that is consistent, within the limits of the organisation and with those technologies that will become available in the future. If the organisation has to make minimal changes or adjustments for the new innovation, then there naturally will be less resistance to the adoption. In addition, the compatibility of the new innovation with the mechanism of the organisation will ensure greater security and minimal risk to the prospective adopter and overall making the idea of new innovation more meaningful and useful for the organisation (Thomson S.H., Tan M., Buk K.W., 1997). Another widely investigated aspect of the compatibility of the innovation with an organisation has been how will the new technology fit in with the experiences with the potential adopters and enhance their tasks as well. The resistance to change is one of the common elements faced by most of the organisations and SMEs when it comes to adoption of new ideas and technologies. Hence if the adoption of any new technology that requires minimal changes within the organisation, its values culture, working processes and infrastructure, then it is more likely for an organisation to adopt the new technology. However, the compatibility factor may not always guarantee a successful E-Commerce innovation within the SMEs, but its presence or absence does affect the rate at which E-Commerce technology gets adopted, to a great extent. The compatibility factor delves on queries like how will E-commerce fit in with the cultural perspectives of the region? Will the technology be able acclimatise with the population’s past experiences and satisfy their present needs as well? If at any moment the members of the culture feel that they have to become different in order to adopt the technology or to utilize it, then naturally they will resist to the adoption. But among these, the most important issue is whether the E-commerce technology will be compatible and advantageous to the current business dynamics of the particular SME. Hypothesis- If the perceived compatibility of E-Commerce is more, and then it is more likely for a SME to adopt E-Commerce. Complexity This third characteristic out of Everett Rogers’ five essential elements from his theory of diffusion of innovation, which is being used as a reference model to understand the adoption of E-commerce technology by the SMEs in Saudi Arabia in the technological context, relates to the to the level of ease or complexity with which the E-commerce technology can be understood by the SMEs (Vanderslice S., n.d.). Henceforth, the adoption or the adoption process of the innovation as in E-Commerce technology depends upon the time the SMEs take to understand the intricacies of E-Commerce technology mechanism, its application and the advantages and benefits that can be harvested through its proper utilisation in their individual businesses- the easier to understand the technology and its application the faster and immediate the adoption process and vice-versa. Complexity in the adoption of an innovation also refers to the degree a member of an organisation or the organisation as a whole possess a comparatively a higher level of knowledge and expertise. This is usually measured by the member’s or the organisation’s array of occupational expertise and their professionalism that is expressed by formal training. A complexity in expertise and specializations encourages organisations to adopt new innovations and ideas. Hypothesis- If the perceived complexity of E-commerce is more, and then it is less likely for a SME to adopt E-Commerce. Environmental Context Information Intensity The rapid advancements made by information technology have changed the way the companies conduct their business, the way they sell their products and services. Today most of the products and services come with information regarding the characteristics, nature and the method of usage. Per se, the more complex the product, the more information is required to describe the product and services (Malone T.W.; Yates J.; & Benjamin R.I., 1987). SMEs in a more information-intensive environment are more likely to adopt E-Commerce technology. For instance, SMEs in service-oriented industries are likely to have higher information content in their products and services in comparison to SMEs in manufacturing-oriented services. Hence, SMEs that are oriented to service industries are more likely to adopt E-commerce technology (Thomson S.H., Tan M., Buk K.W., 1997). Hypothesis- If the information intensity is more, and then it is more likely for a SME to adopt E-Commerce. Competition Intensity The general view held by all economists is that competition increases the chances of adoption of an innovation. Porter in his Harvard Business Review article, “The Five Competitive Forces that Shape Strategy” published in 1979, identified with five competitive forces as in- new entrants, threat of substitute, bargaining power of customers, bargaining power of suppliers, and rivalry among current competitors that shape the competitive business strategy of a firm. It was further suggested that the adoption of IT will change the competition environment in three ways, viz. by changing the structure of the industry, changing the rules of competition and giving business new methods to gain competitive advantage over their competitors (Porter E. M., 1979). In the context of SMEs in Saudi Arabia, the market of this Middle East nation is comparatively very small, therefore in E-Commerce the SMEs of Saudi Arabia will have a low-cost alternative to advertise their services and products on a global scale and as well as find suitable business partners from around the globe. Hypothesis- If the intensity of competition is more, and then it is more likely for a SME to adopt E-Commerce technology. Cultural Context Power Distance Power distance refers to the “extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally" (Hofstede, G., 1991). In simple terms power distance is a dimension of culture which focuses on the orientation of authority that is the inequality of the distribution of power within an organisation or a country. Power distance may also be defined as the extent to which a member of an organisation or an institution within a country accepts that the distribution of power is unequal. In countries like Austria and Israel, which are characterised by low power distance, it is generally believed that inequalities among the population should be minimised, while in the high power distance countries like Malaysia and Guatemala, the inequalities are more or less expected and desired (Maitland C., n.d). In an organisation the division of power is mirrored in the hierarchy. Therefore the authority and the usage of prescribed rule and centralised decision structures are often the characteristics that define organisations in nations with higher power distance. Such organisations are usually associated with lower rates of adoption of innovations. Cultures that are defined with a high power distance usually are expected to be less open and less enthusiastic to new ideas and innovations as this involves making decisions on matters where there is limited information or hardly any historical trends (Erumban A.A. & Jong de B.S., 2004). Hypothesis- Organisations with a high power distance are less likely to adopt E-Commerce technology. Uncertainty Avoidance Uncertainty avoidance is defined as, “the extent to which the members of a culture feel threatened by uncertain or unknown situations” (Hofstede G., 1991). The quintessence of uncertainty is that it is derived from more of a subjective experience. However according to Hofstede, the feelings of uncertainty are not always personal, the feeling of uncertainty may also be shared among the other members of a culture, more so if the society and the culture of a nation is a close knitted one (Hofstede G., 1991). Risk taking, which is more often associated with an entrepreneurial activity, is an important factor when adopting a new idea or an innovation as there is always an element of doubt and uncertainty. The adoption of a new technology which is a form of a new idea or an innovation certainly involves uncertainty and related risks. The incorporation of a new idea or the adoption of a new technology is as same as making an investment under the dark clouds of uncertainty. As the main concern of adopting a new technology is to do something new, the greater is the uncertainty attached to it. On the assumption that technology works, a question will arise on whether it can used in profitable way, hence the risk that comes through is largely an economic risk. Therefore adoption of a new technology for the first time is usually associated with ambiguity and uncertainty and hence organisations with a high tally on uncertainty avoidance tend to be more adverse to taking risks and making changes (Erumban A.A. & Jong de B.S., 2004). Countries that have low uncertainty avoidance like Denmark and Jamaica, it is a known fact that motivation comes from achievement, belongingness and one’s esteem. In these countries with low uncertainty avoidance there is generally a high tolerance for out of the ordinary behaviours or new innovative ideas. While in countries like Greece and Portugal that have strong uncertainty avoidance, the motivation for work comes from security together with esteem and belongingness. In these countries with high uncertainty avoidance, generally there is resistance to the adoption of new ideas and innovations. These implications of uncertainty avoidance of countries make the adoption and diffusion of innovations clear. Nations characterised by low uncertainty avoidance cultures are more enthusiastic on adopting new innovations than the nations with high uncertainty avoidance cultures. Hypothesis- Organisations with higher uncertainty avoidance are less likely to adopt E-Commerce technology Individualism The dimension of individualism refers to the relation of an individual and the organisation to which he belongs. People in individualistic nations are prone to make their own decisions and choices than people in nations believe in collectivism. Since adoption of a new innovation is contrary to the prevailing notion of collectivism, nations and organisations that emphasise more on group values and norms are less enthusiastic towards the adoption of new technology or innovation. While on the other hand people in individualistic nations and organisations feel freer towards expressing their individual thoughts and views and hence are more apt to the adoption of new ideas and innovations (Erumban A.A. & Jong de B.S., 2004). However, these traits of collectivism and individualism fail to directly address the issues of technological adoptions. The conclusions that are based on Hofstede’s descriptions and analysis advocate two contradictory hypotheses about the role of this collectivism and individualism cultural factor that affects the diffusion of an innovation. According to the first hypothesis the individualism paradigm is driven by GDP, this construct assumes the positive correlation between individualism and the adoption of new ideas. While on the other hand, in collectivist countries the first preference may be given to the need of communicating and providing services and products within the “group” first, which may create greater demands for E-Commerce technology (Maitland C., n.d). But taking into account overall scenario of diffusion of innovations and adoption of new ideas, it is found that the individualistic countries are more inclined towards the adoptions of new ideas and it is in these countries diffusion of these ideas take comparatively less time, the United States of America can be cited as an example. Hypothesis- The more individualistic the nation or an organisation is, the more chances of adoption of E-Commerce technology. Masculinity A country having a masculine culture is characterised by ambition, a zest for competition, material values and a focus on performance. Organisations rooted to masculine cultures put more emphasis on recognition of performance, rewards, training and the overall improvement of an individual. These characteristics are also to be found in innovative organisations. Hence one may expect countries with a higher masculinity to have a higher rate of adoption of new ideas and innovations than countries with low masculinity (Erumban A.A. & Jong de B.S., 2004). Hypothesis- SMEs of countries with a high masculinity are more likely to adopt E-Commerce technology. References: Cragg B. 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