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Impact of the Internet for SMEs in Malaysia

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The Internet

According to Hamil (1997) stated that the efficiency and effectively medium used for accessing, organizing, and communicating information is representing the Internet. The presence on the Internet in the advanced economies is establishing from multinational or domestic whether it's large or small (Duffy & Dale, 2000).

There are 888 million users of Internet for worldwide in 2004 and it is expected to growth until 1.35 billion by 2007 (eTForecast, 2004 &Internet World Stats, 2005). In the global online population, Asia rank the highest percentage followed by Europe and then North America with Asia is 34, Europe is 29.2 and North America is 24.9 (Internet World Stats, 2005). English is the main medium of instruction for the Internet and the online population is declining for its dominance in the Web while the Chinese and Spanish speaking users are lesser extent but the Japanese users are on the rise (Glreach.com, 2004). The world most populous and developing nations such as China, India, Indonesia, and Brazil has forecasted that there will be a little growth of the internet users (eTForecasts, 2004). Internet use and access is uneven across countries due to global reach as the population of internet users in South Korea is 63.3 per cent, Malaysia is 35.9 per cent, and Thailand is 12.8 per cent. The overall population internet users of these 3 countries just make up only 3.6 per cent of India population (World States, 2005).

According to Peterson et al (1997), the accessing to online market surveys, newspapers and journals, country and industry market research, trade lists of suppliers, agents, distributors, and government contacts in a large number of countries are the reasons of the firms' access to Internet. Internet can play a role as intermediaries between producer and users that mainly in collection, collation, interpretation, and distribution of information (Liang et al, 2004 & Quelch & Klein, 1996). Internet provides a flexible, reliable, and low-cost method if compared to other means of communication such as telephone, fax, and post (Poon & Jevons, 1997).

In the existing marketing activity, Internet is playing a supporting role (Hazel, 1996). The traditional dominance of fixed location stores will be replaced by a new retail format which is provided by Internet (Evans, 1996 & Van Tassel & Weitz, 1997). Internet is the means of communicating information about retail organization, products, and services (Bruno, 1997). In the US, retailer view the Internet as an emergence marketing communication tools that used to attracting new customers, penetrating new markets, promoting company's brand, and improving customer retention (Ernst & Young, 1997).

Small Business Enterprise (SME) and the Internet

Small business enterprise is independently owned and operated where it is not dominant in its field, and doesn't engage in new or innovative practices. Neighborhoods grocery stores, fast-food restaurant, hair stylists, dry cleaners, video or record shops, and the veterinarian are an examples of small businesses. Qualitative factors are also important in describing the small businesses. To be classified as 'small', a small business must have at least two of the following features that are management is dependent, since the manager usually owns the business; capital is supplied and ownership is held by an individual or a few individuals; the area of operations is primarily local, although the market isn't necessarily local; the business is small in comparison with larger competitors in the industry (Washington DC: Small Business Administration, 1985).

Perhaps the best definition of small business is the one used by Congress in the Small Business Act of 1953, which states that a small is one that independently owned and operated and is not dominant in its field of operation. The act also authorized the Small Business Administration (SBA) to develop more detailed definition that takes into account such criteria as sales volume and the number of employees in the firm. Incorporating these criteria into workable guidelines for use in determining loans, the SBA has established the upper limits for small firms in this manner (Washington DC: Small Business Administration, 1985).

As the global online users growing rapidly, SMEs have discovered unparallel new opportunities in the Internet that are entrepreneurial enough to recognize and take advantage of highly profitable niche markets (Forster, 2000 & Poon & Swatman, 1997). The researchers found that SMEs in the UK has been characterizes as dynamic, enterprising and ambitious as key role in entrepreneurship and innovation by DTI (DTI, 2000). McCalman (1999), states that the entrepreneurial character of the owner, individual managers or operational teams often associated with the fast growing of the new venture and the high growth and high technology firms appear to be more able and more willing to seize the opportunities afforded by the Internet. The Internet has changed the landscape of the firms in the worldwide and globalization is a key driven role for Internet usage by small firms to expand their operations to other nations.

The main strategic factors that associated with successful information, communications, and technology (ICT) is often viewed by the organization learning, entrepreneurship, innovative workplace cultures, and knowledge management enhancement context. The Internet virtually has relevance either directly or indirectly for entrepreneurship management in every aspect of organizational learning (Matlay, 2001 & Leitch & Harrison, 1999).

In the marketing context, Noh and Fitzsimmons (1999) have described "complex, creative, and innovation relationship" is a significant relationship found between Internet usage and the marketing functions where ICT and entrepreneurial activity strategically linked. The ICT opportunities that the marketing function can respond is depend on sustainable competitive advantage of the organizational changes which is the key to organizational survival (Brady et al, 1999 & Komenar, 1997). In order to attract and retain customers, the SMEs have to derive customer service advantages and marketing performance gains by adopted "transformative" use of ICT (Brady et al, 1999). According to Martin and Matlay (2001), the relationship between marketing functions and ICT adoption in SME would make the firms need to make creative and innovative changes in ordeal to deal effectively with actual and perceived ICT related marketing opportunities due to less attention on strategic SME operations and emphasis more on managerial capacity and marketing opportunities. "online marketing" only the step two in a five stages sequential progress to e-commerce and full ICT integration by a company identifies by DTI adoption ladder. Market analysis and related responses or strategies might be seen as sophistication function for e-use in SMEs (Martin & Matlay, 2001). Despite its high level of connectivity and basic e-commerce applications, business appear reluctant to move up the adoption ladder but the DTI adoption ladder model is heavily emphasis on financial based transaction (UK Online, 2000).

In the UK, 80 per cent of the SMEs have accessed to the Internet and another much smaller proportion also able to implement and embed new technologies for strategic purposes based on the figures of Internet adoption (UK Online, 2001). The adoption of ICT in the smaller firms has made the impact on SME profitability largely due to high connectivity according to the number of recent benchmarking surveys (UK Online, 2000). The UK government has initiative to promote the use of ICT and has ambitious target for Internet adoption, some has been already achieved (UK Online, 2000). In 2002, the digital marketplace there was 1.5 million SMEs expected to be 'wired up' since 1.7 million businesses already connected and 81 per cent of all firms in one form or another. The national e-economy development had shown the successful outcome of the achievements and impressive of Internet adoption (UK Online, 2000).

Information technology is implemented in SME can described as multidimensional change process (Martinsons & Chong, 1999 & Butter & Fitzgerald, 2001). Information technology is playing an important role for training in SME. According to Coates (2000), information technologies represent the drivers of change of all aspect of life. A new corporate culture and management change will form when the electronic commerce fit into organization operations (Fadden, 2000 & Hard & Knie, 2001). The most important element of implementation of information technology is human resources (Greene et al, 1997). Westhead and Storey (1996) describe that the implementation of information technology can intervene on training aid for change in developing human resources and human capabilities of the organization. Decision making has played a dominant role for owner-manager in SME sector (Jennings & Banfield, 1993 & Jennings & Beaver, 1995). The owner-manager has acted as principal driving force for implementation and adoption of electronic commerce. The role of a person characterized is in conjunction with the nature of managerial activity (Jennings & Beaver, 1995). The owner-manager has total control on training. So, Jennings and Beaver (1995) have stated that the extension of the owner-manager role is the provision of organization training. SMEs are operated under uncertain condition (Nooteboom, 1994 & Storey, 1994 & Acs et al, 1997). Skills and ability of SMEs have change in uncertain environment and SME has adopted (Hendry, 1995 & Acs et al, 1997). Recognition of change has relation with the implementation of new technologies (Martinsons & Chong, 1999 & Coates, 2000 & Buttler & Fitzgerald, 2001).

The Internet adoption in the SME has make SME staff learning through online collaboration. According to Flexwork (2004), a project supported by CEC FP5 IST Programme is a place where EU SME teleworking is gathering at Flexwork. Lawless (2004) stated that both virtual working and face to face contact are still needed as well as those frequent working online also have some face to face contact. The relationship forming through work online has to be considered to maintain well fairly (Walther, 1992). SME has practice team working and it is a most used method currently (Institute of Work Psychology, 1999). Computer World and British Telecom (2003) has stated that beneficiary from the process working online with others is SMEs wish and it must be properly conducted and resourced since there is over 50 per cent of SMEs has no formal IT strategy. ICT based environment is important for future networking platform and it is crucial for SME to cope with it (Ulbrich, 2000) and the need for change in SME has to take consideration on collaboration learning through ICT whether it is formal or informal (Fulantelli & Allegra, 2003 & Williamson et al, 2001). It is an ideal to have online collaborative training or learn cluster (Geer & Au, 2002). Collaboration is required for supply chain and SME is a part of the supply chain especially in motor and technologies industry. The trial has been conducted in Athabasca University in Canada to simulate SME members (Athabasca, 2002). Some EU training organization has proposed online collaborative learning systems using virtual classrooms, network or similar (AutoTrainProject, 2000). The individuals in the same SME or separate SME can form the collaboration learning. The increase used of ICTs especially email for internal communication has become a crucial feature of innovativeness of SMEs as well as collaboration between individuals in same or separate SME (Andrew Pettigrew, 1997). Another increased capacity for innovation in SMEs are external networking (Gray & Allan, 2000).

SMEs and the Internet in Malaysia

Small and Medium Industries Development Corporation (SMIDEC) was established on 2nd May 1996 which is an agency under Ministry of International Trade and Industry to promote and coordinate the development of SMEs in Malaysia through specific programs, provide technical support and management counseling services with the cooperation with other agencies, forge linkage industries between SMEs and large companies or multinational companies, and collaborate with other agencies locally and internationally to develop the SMEs (Small and Medium Industries Development Corporation Malaysia, 2008).

Malaysia adopted a common definition of SMEs to facilitate the identification of SMEs in the various sectors and subsectors. It has facilitated the government to formulate effective development policies, support programs as well as the provision of technical and financial assistance (Small and Medium Industries Development Corporation Malaysia, 2008).

The categories of SMEs in Malaysia consist of manufacturing, manufacturing related services and agro-based industries and another category is services, primary agriculture and information and communication technology (ICT). The enterprise in SMEs in Malaysia varies from micro enterprise, small enterprise, and medium enterprise (Small and Medium Industries Development Corporation Malaysia, 2008).

The Malaysia government has recognized that ICT would serve as a foundation to transform Malaysia from a P-based economy to K-based economy. ICT was emphasized as an enabler mainly in manufacturing sector and National Information and Technology Council (NITC) was established and its primary function is to ensure that ICT well integrated in the socio-economic fabric of the nation (Ministry of Science, Technology, and Innovation Malaysia, 2007)

In the 9th Malaysia Plan, the strategic plans for Malaysia ICT including the implementation of Digital Content Development, E-Commerce, SSO, Bioinformatics, MyICMS 886 which consist of Content Development, ICT Education Hub, Digital Multimedia Receivers, Communication Devices, Embedded Components and Foreign Ventures. It also includes the launching of MSC Phase II and increasing the number of MSC status companies from 973 to 1236 (Ministry of Science, Technology, and Innovation Malaysia, 2007).

According to Ministry of Science, Technology, and Innovation Malaysia facts and figures 2008, the number of main lines subscribers is 588 per 1000 inibitants, number of internet users is 714.3 per 1000 inhibitants, number of broadband subscribers is 96.13 per inhibitants, and number of computer subscribers is 805 per 1000 people in 2007 (Ministry of Science, Technology, and Innovation Malaysia, 2008).

The government has embarked on a concerted effort to improve the development of the SME sector. The government has integrated 14 ministries and 60 agencies as a model to approaches the SME to source of information of their businesses and stage of development. The Small and Medium Enterprise Development Council endorsed and launched the SMEinfo Portal as an integration of the Internet adoption and SMEs in Malaysia and a mechanism to enhance the efficiency and effectiveness of dissemination of information to SMEs. It's a one stop online information resource SMEs across all sectors of the economy (SMEinfo, 2008).

The SMEinfo Portal is portals that can comprehensive access to information and is a multilingual information portal outreach to wider SMEs as the function as sources of financing and types of financial support by financial institutions, business support programs by ministries and government agencies, training and advisory services, SME Business Adviser Network, managing counseling services, and relevant tools such as financial tools as well as events by ministries and government agencies (SMEinfo, 2008).

The important features of the SMEinfo Portal is the SME Business Directory where SMEs can advertise products and services to large potential customers worldwide, sources of raw materials and relevant services by contracting suppliers, and identify potential customers to venture into new market for their products and services (SMEinfo, 2008).

Problem Statement

According to Ministry of Science, Technology, and Innovation Malaysia facts and figures 2008, the number of main lines subscribers is 588 per 1000 inibitants, number of internet users is 714.3 per 1000 inhibitants, number of broadband subscribers is 96.13 per inhibitants, and number of computer subscribers is 805 per 1000 people in 2007. In UK, there are 80 per cent of SMEs have adopted Internet and another smaller proportion of small businesses also able to implement and embed new technologies for the strategic purpose. The small businesses in Malaysia have less adoption of Internet in business if compare to other countries such as UK and USA. So, the Internet adoptions in small businesses in Malaysia have another prospective such as some are using for information accessed. The Internet adoption for small businesses in UK and USA has been a long history in the industry. The early adopters for the Internet has used for the range of functions such as marketing and advertising, information gathering, customer support and service and electronic transaction. There are several model to conduct the research on the Internet adoption for small businesses such as Rogers model of perceived attributes of the Internet. The firms has asked to rate their perceptions of Internet use for the business. From the previous research, Rogers, (1995) has listed the perceived attributes of the Internet as a strong influence exert on business use as:

"To what perceptions of innovation attributes for the research contribute to internet adoption for small businesses in Malaysia"

Research Objectives

In this changing technology era, the internet has become more important for everyone to access for information, shopping and communications especially in the business use. So, the purpose of the research for the impact of the internet adoption for small businesses in Malaysia is:

  1. To investigate the relationship between innovation attributes and the internet adoption for small businesses in Malaysia.
  2. To identify the relationship between relative advantage of internet adoption and small businesses in Malaysia.
  3. To identify the relationship between compatibility of internet adoption and small businesses functions in Malaysia.
  4. To identify the relationship between complexity of internet adoption and small businesses in Malaysia.
  5. To identify the relationship between trialability of internet adoption and small businesses in Malaysia.
  6. To identify the relationship between observability of internet adoption and small businesses in Malaysia.

Importance of the Study

The importance of the study of research project titled "The Factors Contribute to Internet Adoption for Small Businesses in Malaysia" can be contributed to the industry, education and society. The study of this research can make an impact on industry, education, and society for different reasons.

The impact of the study of this research on industry is identification of the potential business growth by small businesses in Malaysia with the Internet adoption. Business of the firm can growth by penetrating different market segments and coverage more geographical areas with using Internet as a marketing tool. Another impact of the study is can make the firm adopt process innovation and product innovation to reduce the cost of the production and capture the value of the customers with the quality products. The entrepreneurial opportunity also could discover on the study of this research. Youth could create entrepreneurial opportunity with the Internet adoption for developing own Electronic Business with the low cost, easy, and convenience method. The study of this research could create job opportunity in the industry especially from IT fields and entrepreneurship field.

Besides, the importance of this study also contributes to the education. In education, undergraduates can have an improvement process of acquiring knowledge and information with the Internet adoption on academic. Universities and colleges can provide entrepreneurial skills and knowledge for undergraduates on students' entrepreneurship development programs, academics and students' organization on free enterprise. It also could increase the understanding of the technology in terms of information system and web development.

Lastly, the importance of this study also contributes to the society. The study of this research can make an impact on society by reducing the employment rate for the country with the job creation by small businesses. It could increase the quality living of the society with the easy and conveniences services provide by small businesses on the adoption of the Internet. Foreign relation between people and people or government and government can be improving with the development of the Internet on the small businesses. The economies of the country can growth with the expansion and development of small businesses industry and small businesses can penetrate to another countries using Internet as well as increasing exports business of the country.

Organization of Research Project

The organization of the research project titled "The Factors Contribute to Internet Adoption for Small Businesses in Malaysia" overall consist of five chapters with each chapter has different aspects ranging from the different explanation of internet adoption and small businesses from different authors of journals to statistical analysis of the research study.

In the chapter one, the definition and explanation of the internet extracted from different authors quote in different journals. The subtopics consist of the Internet, the SMEs and the Internet, and the SMEs and the Internet in Malaysia.

In the chapter two, the literature review will extracted the quote from different authors in the journals to organize as a study of the internet adoption contribute to the small businesses in Malaysia. The other reviews of the literature are the relative advantage, compatibility, complexity, trialability, and observability of the Internet adoption in any fields.

In the chapter three, the methodology of the research will explain the sources of data collection from primary and secondary data. The hypothesis of the study and the procedures for collecting the samples will be explained here.

In the chapter four, the discussions and results will based on the geographic profiles of the small businesses. The chi-square analysis will analyze differentiates of E-Commerce and Small Businesses, differentiates virtual consumer behavior from retail consumer behavior, and the level of understanding of small businesses. The multiple regressions will focus on the entrepreneur's interest in virtual store strategic management.

Finally, the chapter five will describe the summary and conclusion of the research. The research will recommend the solutions for the problems of the study.

Literature Review

Internet Adoption

Theory of reasoned action (TRA) (Fishbein & Ajzen, 1975), technology acceptance model (TAM) (Davis, 1989), and theory of planned behavior (TPB) (Azjen, 1991) reported as a number of studies of IT adoption. Adam et al (1992) stated that the fundamental determinants of acceptance of IT adoption consist of perceived usefulness and perceived ease of use and it can be widely used in the IT adoption. Perceived usefulness is a major determinant of people's intention to use computers while perceived ease of use is a significant secondary determinant of people's intention to use computers by competing two competing models of computer technology usage, TAM and TRA. It can conclude as people's use of computer technology can be predicted reasonably well from their intentions. The TAM has been selected as a useful basis for starting build a model of adoption of the Internet since TAM is slightly better from an empirical point of view in the comparison of TAM and TPB (Mathieson, 1991). The researchers found that technology acceptance; reasons of using IT and behavior of using IT can derive the definition of the Internet adoption.

Besides, the researchers also found the definition of Internet adoption in other context such as supply chain management. Italian firm has made adoption modalities of IT to integrate into supply chain management to make their business growth. According to Chandrashekar and Schary (1999), in order to fit the customer request, the Internet can act as an enabler in depicting the firms. The efficacy and effectiveness of reaching higher level of performance is the integration and information technology (IT) and it can be regard as the most competitive and imitable weapons (Tan, 2001). Porter (2001) stated that modification of supply chain (SC) relationships, boundaries, and mutual influence is an integral part of the Internet in firm's strategy.

In the former Central and Eastern European, innovation of technology has been introduced into commercial. Famous researchers such as Rogers have been workout to derive the definition of the Internet adoption from the technology innovativeness context. Everett M. Rogers (1995) was formulated the innovation adoption theory. The innovation adoption theory has been widely used in analyzing the adoption of the Internet (Wolcott et al, 2001), various Internet related applications (Black et al, 2001 & Polatoglu & Ekin, 2001), and software products (Karahanna et al, 1999 & Kautz & Larsen, 2000). Rogers (1995), regards the perceived new unit of adoption of an individual can be defined as an idea, practice, or object in term of innovation. Rogers (1995), also defined the adoption is a process that members of a society can communicated through certain channels over time. Schumpeter (1934, 1939 & 1942) has stated that new application of invention, discovery or new or existing knowledge as an innovation. The innovation also can be defined as the introduction and new development of knowledge derived tools, artifacts, and devices by which people extend and interact with environment (Tornatzky & Fleischer, 1990). The related technologies linked closely and innovation is a cluster of Internet adoption and banking (Rogers, 1995).

The factors influence the Internet adoption because the traditional modes of communication of the firms in the transitional markets of obtaining information on foreign markets, and communicated through business partners, customers, and distributors are costly and time consuming (Nguyen & Nguyen, 2001). According to Rogers (1983), the adoption is an alternative solution where the firm confronted with the problems. The organization's strategies, policies, and actions as well as beliefs, attitudes, and intentions lead to the adoption of IT (Leonard Barton & Deschamps, 1995). The adoption of IT for organization's continuously collecting information about target market needs and competitors capabilities and using it to create superior customer value. It is important and valuable for market orientation of an organization (Slater & Narver, 1995: 63). Organization's innovativeness on IT facilitates the market orientation so that the forming of market orientation firms could gather information on markets and environments (Han et al, 1998 & Jaworski & Kohli, 1993).

Besides, Firm creating and use knowledge influences the organizational factor in learning organization (Sinkula et al, 1997). As learning environment is creates and encourages in learning oriented firms lead to the rise of adoption and implementation of new ideas, process, and products to produce innovative capacity for the firm (Hurley & Hult, 1998). Learning and sharing of knowledge opportunities exist among members of learning oriented firms from individual level to organization level (Nonaka & Takeuchi, 1995). Slater and Naver (1995), explained that how an organization acquire, process, and use market intelligence is a question to the ability in engagement in adapting the generative learning as a key component of organization learning orientation. The leveraging of superior learning environment is the use of all resources including the behaviors that accompany market orientation (Baker & Sinkula, 1999).

As stated by the above definition of Internet adoption in the supply chain management context, there are many factors contribute to affect the relationship of the Internet adoption. An easy and fast way in the process of acquiring and sharing information and the efficiency and effectiveness of improve performance are linked to the aspect of Internet adoption (Deeter-Schmeltz & Norman-Kennedy,2002 & Ronchi, 2003). The mistakes and time reductions and contribution to the order and stock cuts facilitate the better coordination among players of network (Akkermans et al, 2001). The enhancement of business model development providing innovation opportunities and competitive advantages challenge as well as strategic dimensions of SC design are the impact of Internet adoption (Wouters et al, 1999). The cost reductions of product management as well as cheaper and flexible of data exchange and enhancement of data standardization are the impact of IT adoption mechanism in market environment and organization management (Malone et al, 1987). The adoption of web based tools could enhance the integration such as EDI and as impact of product complexity (Garcia-Dastugue & Lambert, 2003). The standardization and behavioral formalization such as tasks repetitiveness and recognizability was influences by the adoption of ICT (Vacca, 1990 & Lomi, 1991 & Lorenzoni, 1992). The standardization of SC players in coordinating and performing activities are the affects of ICT (Becker, 2004). The change and variability sourcing are the improvisational aspect of routine which is including tacit knowledge, incorporate operative and applicatory capabilities (Pentland, 2003). Colombo et al (1997) stated that the transparency of process is the free information and knowledge sharing while Winter and Taylor (1996) stated that the reduction of middle management direct communication as an enabling of ICT.

On the other hand, technology innovativeness has been adopted in European markets to cater the demand of the consumers in many ways. There are many factors of adoption of technology innovativeness to serve the markets in Central and Eastern European nations. Researchers have investigated and identify the factors of commercialization innovativeness to explain the relationship of Internet adoption contributes to commercial in Ukraine and Austria. According to Dickerson and Gentry (1983), a new innovative service firm must offer increased functional performance than its predecessor can be defined as relative advantage. The primary measurement of relative advantage is assessing an innovation's superiority in terms of overall convenience (Polatoglu & Ekin, 2001 & Tan & Teo, 2000). The degree to which an innovation is perceived as relatively difficult understands and use is the definition of complexity (Rogers & Shoemaker, 1971). Tornaztky and Klein (1982) stated that the lower rate of adoption means the complex the innovation is. Rogers (1995) defined the compatibility as the degree to which an innovation is perceived as consistent with existing values, past experiences, and the needs of potential adopters. De Ruyter et al (2001) also stated that compatibility is consistent with existing consumer affect, cognition, and behavior. Some researchers also found that consumer perceived risk post as important factors to the ICT adoption (Eastlick & Lotz, 1999 & Hansen, 2005 & Polatoglu &Ekin, 2001 & Tan & Teo, 2000).

Relative Advantage

Rogers (1995) defined relative advantage as the degree to which an innovation is seen as superior to existing practice. In the competition context, there is another definition for seeing innovation as superior to existing practice. According to Day (1984) and Porter (1987), the competitive advantage can be seen as the objective of the strategy and the result of the competitive advantage is superior performance. The derivations of competitive advantage are from numerous resources and strategize the sources of advantage controlling by the firm will create a competitive advantage (Reed & DeFillipi, 1990).

The factors that can contribute to relate advantage to the firms are the ownership based source of advantage, access based source of advantage and proficiency based source of advantage.The ownership and possession of certain valuable assets such as strong market position, unique resource endowment (Barney, 1991), or reputation (Hall, 1992) will make a firm gaining advantage. Porter (1980) describe that there are three sources of competitive advantage arises from ownership based source of advantage, proficiency based source of advantage and access based source of advantage. The firms can gain superior access to inputs and markets with the opportunity and rights (Lieberman & Montgomery, 1988). Conduct and manage the business by superior knowledge, competence, and capabilities with exclusive relationship with suppliers or distribution channels can secure an advantage (Nonaka, 1991 & Prahalad & Hamel, 1999 & Teece et al, 1997). Wind (1997) termed preemption oriented as the firms can create value by exploiting advantages of focal firms with capabilities of eliminating or reducing rival's option space and reducing, eliminating, and neutralizing other players' options. A consistent pattern in flow of resources required since the changes of stock level is difficult while the flow is relatively easy to adjust instantaneously (Dierickx & Cool, 1989). The era of people's attention's span is getting increasingly shorter and narrower, it is important to have a possession of good reputation (Morris, 1996). Ghemawat (1991) stated that Wal-Mart's rural town focused strategy helped achieve growth in the 1970s and 1980s and avoid direct competition from rivals such as Kmart and Target. It is an in acquiring valuable assets or positions by sabotage or constraints rival options for gaining advantage.

Superior access to the factor markets such as resource input (Barney, 1986) or product markets such as customers (Porter, 1980) with the possibility of a firm enjoy a competitive advantage is defined by access based source of advantage. Firm's abilities such as ability to tap resources, skills, knowledge and expertise, market reach as well as power and authority of other business or non business entities to access factor markets and product markets (Ghemawat, 1986 & Bailey, 1997). Knowledge accumulation and dissemination of in advising business firms be a frontier of the competition is caused by an assurance of superior access to talents (O'Shea & Madigan, 1997). Gaining economic fortune and power advantage can access to western technology and world markets (Vogel, 1985). Deny rival access to particular potential valuable resources for gaining advantage (Brandenberg & Nalebuff, 1996 & Wind, 1997). A firm can enjoy competitive advantage by constant learns, accumulates and expand knowledge base or intellectual capital (Stewart, 1997). Sharing other firm's office automation businesses such as laser with knowledge and capabilities can gain competitive advantage (Prahalad & Hamel, 1990).

Besides, concentric diversifications that develop in the framework can sustain advantage from the factors of internal and external environment. Porter (1987) stated that raising the barrier to prevent imitation by competitors or resist erosion by competitor behavior can achieve sustainable competitive advantage. Competitive advantage can be achieved by building strong and differentiated core business. It couldn't be achieved and difficult to gain advantage without at least one strong and differentiated core business (Zook & Allen, 2001). Numerous activities in the firm also can be the source of competitive advantage (Reed & DeFillippi, 1990). The company's ability to consolidate technologies and production skills into competencies that empower businesses to adapt quickly to changing environment in achieving advantage in competition such as Western and Japanese companies converging on similar formidable standard of product cost and quality (Prahalad & Hamel, 1990). Ghemawat (1986) and Barney (1991) stated that independent of its size that access to resources and customers can create advantage on the firms. The activities that a firm fit and reinforce each other which are strategic fit can achieve advantage (Campbell & Goold, 1995 & Porter, 1996). Kanter (1990) argues that sources of human capital also is a factor that can make an organization to achieve advantage such as organizational classes, knowledge management, culture, openness to ideas, leadership culture, and teamwork as the driving forces of human capital factors.

The researchers also found some findings from the pioneer brand advantage in UK. There are two types of brand advantages in UK which are producer based pioneer advantage and consumer based pioneer advantage. Robinson and Farnell (1985) explained that market pioneer usually have higher market share if compare to later entrants because it could derive from direct cost savings, increased marketing mix spend and consumer information advantages. Advantage could be achieved by the length of time in market and time before second entry (Brown & Lambkin, 1994). Product hierarchy and brand extension the market pioneer can be strategize to achieve advantage than later entrants (Kerin et al, 1996). Late entrants can adopt innovative to create sustainable advantage with faster growth and repeat purchase than pioneer which has less innovative (Venkatesh et al, 1998). Consumer learning and formation of preferences are the advantages for the pioneer and the pioneer can become standard by influence the process of how category attributes valued (Carpenter & Nakamoto, 1989). Consumers found to have positive towards and perceptions of pioneer brands because consumer able to recall and retrieve pioneer brands and communicate with pioneer status (Alpert & Kamins, 1995).


Rogers (1995) defined compatibility as the degree to which an innovation is perceived as consistent with the existing socio-cultural values, past experiences, and previously introduced ideas and needs of potential adopters. The adoption behavior affect by the compatibility or congruence (Eastlick, 1996 & Dabholkar, 1992 & Dickerson & Gentry, 1983 & Tornatzky & Klein, 1982 &Turnbull & meenaghan, 1980 & Brandner & Kearl, 1964). Lifestyle also can be related to compatibility (Eastlick, 1996 & Holak, 1998).

Besides that, knowledge on the consumers' adoption of technological innovativeness affects the relationship. That is knowledge and compatibility. It is an approach for segmenting consumers. Confident (Prasuraman & Colby, 2001), self sufficient, and novices (Mitchell & Dacin, 1996) are not greater than a more general dimension, extensive technical for innovativeness construct since it is likely consumers knowledgeable are more interest in acquiring technology knowledge. Consumer knowledge has been proposed into two elements which are familiarity and expertise. Familiarity is the product related experiences that has been accumulated by the consumer while expertise is ability to perform product related task successfully (Alba & Hutchinson, 1997).Individual learns of an innovation existence and gain some understanding of how it functions means knowledge has occur (Rogers, 1995). Knowledge alone cannot determine the basis for the adoption and knowledge about an innovation is quite different from using it (Rogers, 1995). Technological consumer durable is found has impact on consumer purchase intention which consumers are more concerned with physical space or lifestyle (Holak, 1988). Holak and Lehmann (1990) stated that more specific information about its operating features or benefits related to perceived advantage must be compatible with the new items that consumers are more concerned.

In the ERP adoption, it is a technological approach on the task. The task has compatible on technological approach for the contributing on both task and technology compatibility factors. The Capacity Requirement Planning (CRP) module in Material Requirement Planning (MRP), Manufacturing Resource Planning (MRPII) and Enterprise Resource Planning (ERP) must be accurate, complete and up-to-date because CRP shows work standard in manufacturing on its context (Possl, 1994). Task and technology can create successful innovation if it is compatible (Cooper & Zmud, 1990). The closed loop MRPII standard system consists of MRPII, Bill of Materials (BOM), and CRP (Scott & Wight, 1981). Customer order and demand forecast are not fully integrated into Master Production Schedule module (Wight, 1981). ERP encompasses MRPII modules with enhanced functionality and a high degree of integration could occur with interoperation of the application module in the ERP context (Gumaer, 1996 & Yusuf & Little, 1998).

An organization also is factors contribute to the relationship with compatibility. Destabilizing and organizational flux influence the employee identity. In the organization context, there has compatibility between the work and the individual. The complete immersion in activity, a clear and compatible set of goals and the requirement of situation specific responses refers to the possibility of synchronized and congruent contents of experience as flow and provides its characters. The flow of experiences produced with the kinds of activities. The involvement of a fine balance between one's ability to act and the availability of opportunities for action is related to optimal experiences. It is tending to occur when a person's skills overcome challenge as well as it is manageable (Csikszentmihalyi, 1997). The employer need to consider the interrelatedness of organizational change, professional disengagement, and personal crises is relate to the importance of identity and organization affiliation (Pierce et al, 2001). The emergent dynamics which are including insight and coming to consciousness are related to translation of meaning to appropriate behavior (Hoare, 2002). Shaw et al (1999) stated that the perception of fairness as an indication organizational community members dispositional antecedents to separation and it is suggest to the pay satisfaction in organization. The reciprocal responsive are view in the individual and organization (Dutton et al, 1994). The emergence in organizational change arises from the process continues, trust and commitment since there are ideological and functional differences (Costigen et al, 1998 & Morris & Feldman, 1996).

In the education and training context, competency and reflective practice are fostering a conjoint approach. Competency based practice and reflective practice has compatibility among them as factors contribution to education and training .The achievement by using both competencies based and reflective practice with identify the following characteristics of the profession, the education, and the training (Mayfield, 1985). Pithers (1998) stated that the ability to respond to the problems and it should not be unplanned peripheral outcome of training. He also said in a statement with 'learner must be taught to reflect, think, and plan as well as to respond routinely'. Generic in character where it is approach to learning is exist altogether different level with computer based training (CBT) as reflective practice cannot be reduced to another competency to be learned (Newman, 1999). According to Smith and Keating (1997), the process time is less importance for CBT and the competency for CBT is a matter of skillfully completing a task to a given standard. The experience of education and training has shown significance in learner's perspective (Merrian, 1993a).In the learning environment, the educators engage learners in conversation, promote reflection, and accept responsibility for their own learning (Hiemstra, 1993).


Rogers (1995) defined complexity as the degree to which an innovation is perceived as relatively difficult to comprehend and use. It is unlike the other attributes, perception of increased complexity is negatively related to the rate of adoption. Business administration (Stacey et al, 200) and other field of sciences such as philosophy (Maizer, 1997), mathematics (Mandelbrot, 1977), information science (Sivadasan et al, 2002 & Chaitin, 1974), cybernetics (Ashby, 1956), and biology (Richard, 1999 & Holland, 1992) can form the definition of complexity. Senge (1990) and Sterman (2000) explained that complexity consist of detail complexity and dynamic complexity. Number of elements in a system, number of connection between elements, and types of functional relations between elements are the subcomponents of the detail complexity (Milling, 2002). There are two types of complexity which is including external complexity and internal complexity. The external driver forces influence the forces of organization to internally build up complexity and it is the bi-directional influence between the two types of complexity (Bourgeious & Astley, 1979). The level of complexity and how the organization structured can is shape its complexity and the environment (Milling, 1991 & Child, 1992). Variety absorb variety is relate to the concept of the law of requisite variety as introduced by Ashby (1956). The matter of management decision laying the amount of complexity absorb by the company which is the exact borderline between the internal and external complexity (Moldoveanu & Baner, 2004).

Besides, thinking can create cultural problematic in organization. The factors that affect the cultural problematic organization is complexity thinking.According to Genelot (1998), a part of a company form is from the distinction of the individuals and their personalities, accompanied by a conjunction and setting in synergy with these elements from another logic which explained the dialogue principle. People are carrying a culture when they arrive in a company since the culture works them and it is the concept of the principle of recursivity. Larrasquet (1999) explained that advancement made in strategy of an organization doesn't exist. The principle of complex thinking only can dictate a strategy but cannot dictate a knowledge program (Berkirane, 2003). A guide to uncertainty and adapted to objective instead of universal method. It remains a work for researchers to adopt strategy in the principle of complex thinking (Morin & Le Moigne, 1999).

Organization performance has an effect on the complexity. The factors that contribute to organizational performance are self-organize and co-evolve. Continuously self-organize and co-evolve in all organizations with complex adaptive systems were suggested by complexity theory model (Capra, 1996 & Stacey, 1995 & Wheatley, 1992). Complex adaptive system made up of multiple interacting agents that exhibit complex, adaptive, and emergent behaviors (Brown & Eisenhardt, 1997). The organizations use information collect from the surroundings, themselves, and their own behavior for adapting to and co-evolving with the environments (Kauffman, 1995). The leading to adaptability of complex theory of organizations consist of large number of ties or connections, widely distributed are more capable of variety in their behavior (McDaniel & Walls, 1997 & Stacey, 1995 & Granovetter, 1973). The organizations will miss important data points, will oversimplified their view of what is happening in the environment, and unable to respond to the high level of variations without such variety (Weick, 1979). Organizations hold multiple and sometimes conflict representations of environment variety and retaining in their behavioral repertoire a range of responses which each of which operates at lower level of specificity (Boisot & Child, 1999). The agents figure out themselves on how to organize change in a complex adaptive system which they are self-organize. Self organize refer to the ability to reconfigure connections and activities. The enhancement of the system capacity to self-organize is derived from the connection that helps interpret externalities and enhance successful co-evolutionary (Brown & Eisenhardt, 1997).

The organizational performances also involve the goals of the performance. Two tiered advice process in which experts help decision makers process information and consider multiple alternatives simultaneously which is identified as one way of absorbing complexity (Eisenhardt, 1989). An internal structure that encourages information exchange across internal organization boundaries (Ashmos et al, 1996) and sense making and interpretation (Thomas & McDaniel, 1990) are the other complexity absorption responses. Participants can get identification and motivation and prioritization among alternatives action are the management prescription that advice organization to adopt clear and limited goals (Scott, 1981 & Simon, 1976). Organizations could disarm competitors from embarking on direct assault on any goals by pursuing multiple goals (Barney, 1995 & Hart & Banbury, 1994 & Wernerfelt, 1984).


Rogers (1995) defined trialability as the degree to which an innovation maybe experimented on a limited basis. In the training context, there are some definitions which are consistent with trialability. According to Manpower Service Comission (1981), the training system, training course or program in social as well as financial terms is the total value of the assessment for the training evaluation. Continuous monitoring of the program or of the training function as a whole will be used as general judgmental sense (McDougall, 1990).

In the training context, there is an evaluation for training elements for the factors contributing to trailability on reasons for conducting the training. According to Kearns and Miller (1996), evaluation has become important task for the organization and it has to put more effort on it. The reasons for training evaluation are provides basis for maximizing return on investment, helps the training by the types of return will get from the investment, building credibility and a solid foundation for training and development decisions. Besides, it also could ensures buy in and commitment at all levels, automatically link training and development with strategic and operational business objectives, great reinforcer of learning and further motivate individuals to develop themselves as well as getting the right person to lead for building up the training function. Magdy (1999) stated that most of the organizations in the US based on his research are spending 10 percent of the expenditure to evaluation while 30 percent to the training programs annually. Employment standardized, commercially available and evaluation instruments as conducted by trainers and designers are a result of budgetary and other constraints. It offers little assistance for long term effects and one size fits all as well as not focused (McClelland, 1994).

A systematic process of collecting and analyzing information and about a training program can be used for effectiveness, relevance, and impact of assessing various training components can be evaluate the training (Raab et al, 1991). Training institutions play an important role in evaluating the purpose of maintaining training (Smith & Piper, 1990). Evaluations have come to criticism than action in training (Philips, 1991). Unsystematic and simple means in the practice of evaluation in training is demonstrated (Smith, 1990 & Davidove & Schroeder, 1992 &Shelton & Alliger, 1993 & Shamsudin, 1995). There is a little demand or no demand on the part of the organization to evaluate a training program seriously and there is low need for conducting it (Gutek, 1988). Barron (1996) explained that client's basic belief is a well trained employee is a productive employee and no demand for evaluation. Knowledge is not fully utilized in program evaluation practice (Chen & Rossi, 1992). Reaction information such as 'smile sheet' and 'happiness sheet' for evaluation can be obtained through participatory questionnaire at the end of training program (Smith, 1990). The training program has attained the goals by one preferred set of methodological principles and procedures (Greene & McClintok, 1991).

A more systematic on recruitment and selection and longitudinal survey on its use relate with main issues of performance evaluation (Storey, 1995). Performance evaluation has cleaned, accurate, and merit based ratings but has to confront with complex creativity with well meaning appetizer (Ghorpade et al, 1995).Total Quality Management (TQM) and performance evaluation have to be evaluate. Randell (1994) stated that if the performance level has a reason to add performance appraisal as a process of observing current job performance. Scholtes (1993) has pointed out that incompatible has occur between HR performance evaluation and TQM because the fundamental TQM requirement has contradict with the basic elements of performance evaluation. Cardy (1998) assets that judgment of performance are needed if performance contingent decision, ranging from termination to pay increase and promotion to have any sort of rational basis for conducting a comprehensive review pertaining to performance evaluation. The performance evaluation on productivity and quality has some positivef effect due to some form of performance evaluation and evidence is supported (Shadur et al, 1994). Peak organization performance will be achieved if a firm's HRM activities fit with each other and support other management programs (Baird & Meshoulam, 1988). The higher performance came from the enhancing of employee commitment (Arthur, 1994). The basis for indirectly rejecting employee performance measurement since establish of new philosophy in the principle heart of TQM (Scholtes, 1993). There are four changes keep recurring on Ghorpade et al (1995) discussions are promote worker behavior that compromise quality, create a band of discourage worker who cease trying to excel, rob the workers of their pride in workmanship, and workers are responsible for the errors or faults within the system and it is unfair for the workers.


Rogers (1995) defined observability as the degree to which an innovation of the relativeadvantage is visible to others. Pras and Tarondeau (1979) explained that isolated variable and studies of behavior that clearly identified based on the capability. It is a situation context that they themselves have created and where they are in control of random factors. Experimentalists have lack sufficient accuracy in direct observation where variables overlap and interfere with each other (Chanlat, 1998 & Aktouf, 1987). Investigation of management situation is a sole mean of direct observation (Wacheux, 1998 & Girin, 1990). Daily social interactions can be studies as a pertinence of the method of direct observation (Castel et al, 1990 & Goffman, 1974). Besides, information detailing what people do, skills deficit, and behavioral sequences which observation studies on specific behavior can provide (McKenzie-Mohr, 1999). Evaluating behavioral compliance such as behaviors where people are being asked to learn and maintain new skills can be useful by using observation technique (McKenzie-Mohr & Smith, 1999).

Food safety practice has made evaluation on how the food handlers implement food safety programs. Several factors have caused the observation of the food safety practice. Self-reported practice and knowledge evaluation can be used to the effectiveness of food safety training (Ehiri & Morris, 1966 & Mederious et al, 2001). Recall of campaign messages and result of behavioral changes can be related to self-administered questionnaires (Simmons et al, 2001). Nationwide food safety educational campaign consist of periodic reviewing of epistemological data, implementation of consumer food safety surveys, assessment of industry data and specific market surveys was being used in evaluation technique at United States (Conely, 2002). Consumer oriented and data driven social marketing approach are developed using extensive quantitative and qualitative formative research of the target audience, application of marketing mix and substantial evaluation and re-evaluation of intervention materials on the evaluation of small scale food safety initiative (Redmond & Griffith, 2002).

Commercial food handlers must undertake food safety practice using knowledge, attitudes and self-reported practice in questionnaire examination (Angelillo et al, 2000, 2001 & Clayton et al, 2003 & Maning, 1994 & Walker et al, 2003). In reality, the good hygiene practices are not always translated by food handler's knowledge of food safety (Howes et al, 1996). Overestimate the frequency when carry out food safety practice often shown by food handler (Howes et al, 1996 & Manning & Snider, 1993 & Oteri & Ekanem, 1989). Assessment of consumers' implementation of hygiene practices is accurate, reliable method, and without limitations is the factor of observation (Redmond & Griffith, 2003a). Food hygiene practices poorly carried out and the potential for cross-contamination is much greater than epistemological data suggested as indicated by observation of consumers' food preparation practices (Jay et al, 1999 & Redmond & Griffith, 2003b & Worsfold & Griffith, 1996). Commercial food handlers' implementation of food safety practices has fewer studies and observation (Manning & Snider, 1993). Checklists Oteri & Ekanem, 1989), standardized inspection, and pro forma to record practices are being monitor in studies (Gillispie et al, 2000 & Kassa et al, 2000 & Morrison et al, 1998).

Research Methodology


In this chapter, the methods are using to test the variables which are conducted such as through primary and secondary data. The report is focus on the factors contribute to Internet adoption for small businesses in Malaysia. The contents that will cover on this chapter are theoretical frameworks, hypothesis development, data source and collection to gather information, sample selection to involve in the survey or interview. Then, data measurement scale, data analysis and a simple conclusion in this chapter. Both primary data and secondary data were collected in the present study. Secondary information was collected from existing research and literature. Next, a simple conclusion will be developing in the end of this chapter.

Theoretical Framework

Figure 1 shows the theoretical framework of this research. The small businesses have some factors to adopted Internet in Malaysia. The factors are relative advantage, compatibility, complexity, trialability, and observability that can contribute for the Internet adoption for small businesses in Malaysia.

Hypothesis Development

From the discussion of the theoretical framework, five hypotheses are formulated to test the relationship between each of the five independent variables and dependent variables. The five hypotheses guiding this study are as follows:

H1a. A small business has relative advantage is significantly positively contribute to Internet adoption in Malaysia.

H1b A small business has relative advantage is not significantly positively contribute to Internet adoption in Malaysia.

H2a A small business has compatibility is significantly positively contribute to Internet adoption in Malaysia.

H2b A small business has compatibility is not significantly positively contribute to Internet adoption in Malaysia.

H3a A small business has complexity is significantly positively contribute to Internet adoption in Malaysia.

H3b A small business has complexity is not significantly positively contribute to Internet adoption in Malaysia.

H3a A small business has complexity is significantly positively contribute to Internet adoption in Malaysia.

H3b A small business has complexity is not significantly positively contribute to Internet adoption in Malaysia.

H4a A small business has trialability is significantly positively contribute to Internet adoption in Malaysia.

H4b A small business has triability is not significantly positively contribute to Internet adoption in Malaysia.

H5a A small business has observability is significantly positively contribute to Internet adoption in Malaysia.

H5b A small business has observability is not significantly positively contribute to Internet adoption in Malaysia.

Data Source and Collection

In a research, there are usually two main sources of information and data, which are primary data and secondary data.

Primary Data

The primary data consist of interview or survey and questionnaires.


The most common primary data is survey. Survey is a method used to query someone in order to collect data for the analysis of some aspect of a group or area. Due to the study seeks to collect information about effect of e-service quality toward online purchase, so respondents will being asked whether they had purchase the goods through online, and once confirm, they will been given a set of questionnaire and being asked to participate in the survey. The interview or survey may take 15 to 20 minutes to answer the questions. Survey is a good and fast method to understand respondents respond and feeling toward a product or service. Moreover, the information or responds of the survey will conduct through face to face interview, telephone, or mail.


Questionnaires is a written or printed form used in gathering information on some subject or subjects, consisting of a set of questions to be submitted to one or more persons. The open-ended question which is the respondent reply in his or her own words and closed-ended question which requires the respondent to make a selection from a list of question are using in questionnaire design.

The first part of the questionnaire focused on demographic data, such as age, occupation, gender, income status, race and so on, while the second part required respondents about the introduction of the Internet adoption. The third part will focus on the respond of the respondent toward the factors of adoption of the Internet for small businesses in Malaysia. A questionnaire also is an important method because it is a paper form which conducts a list of question used during survey or interview.

Secondary data.

The secondary data in this study consists of earlier study or journal which was be done by other researchers, industry analyses offered by the media, newspaper articles, books, and relevant materials found both in library and the Internet. These data is mainly used to support the research idea in the literature review. In this research, the journals act as the most important source of secondary data.

Sample Selection

A total of 100 respondent are selected and made to obtain to completed surveys (n=100). The study is about the Internet adoption for small businesses in Malaysia. So, the respondents who are small business owners are encourage to be selected in this survey. Respondents are ranged from any small business owner from any fields located in Malacca.

Data Measurement Scale

The data measurement scale consists of four basic level of measurement which is nominal level of measurement, ordinal level of measurement, interval level of measurement, and ratio level of measurement. The overall design of the questionnaire is mainly around two type level of measurement, which is nominal and Ordinal. Follow by the research text book, nominal scale is a scale to identify objects, individuals, events or group, determinate of equality or inequality and are most commonly using in the research. Nominal scales are used in the questions which are in the demographic information section such as female or male, buyer or non buyer. Meanwhile, follow by the research text book, or

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