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“Information and communications technologies have considerable potential to promote development and economic growth. In the hands of developing countries, and especially small- and medium-sized enterprises (SMEs), the use of ICTs can bring impressive gains in employment, gender equality and standards of living" -Kofi A. Annan-
The role of ICT and e-commerce / e-business in supporting socio-economic and sustainable development in developing countries has been emphasized since the last decade of the millennium, especially by international institutions, including the United Nations, OECD (Organization for Economic Co-operation and Development), and other organizations in different scales.
Comparing to researches studying the adoption and implications of e-business in developed countries, small number of researches is covering the same topic for developing countries (Travica, 2002). Among those, even fewer researches concentrated on small- and medium-sized enterprises' (SMEs) adoption of e-business, and the role local business support centres can play in promoting e-business in developing countries (UNCTAD, 2004).
The presented study is trying to fill this gap, and aims at assessing the factors affecting SMEs' use of internet for business and the willingness of local business support centres to offer business related web based services. What the author means by business support centres in this study is any organization working on supporting entrepreneurship or SMEs business in developing countries. This definition can be applied on different types of organizations including NGOs, governmental authorities, development foundations, private initiatives and others.
Due to those different types, and as the study will concentrate on e-business opportunities for SMEs, business support centres will be named as "SMEs Centres" through the study from now on.
1.1 The company and the project
The study will be based on a proposed project by "BiD Network", a Dutch non- profit organization working on linking SMEs and entrepreneurs in developing countries with investors all over the world, to stimulate entrepreneurship and economic growth in emerging markets. The company goal is to help with poverty reduction through supporting SMEs and entrepreneurs in developing countries by offering different services including: coaching, business plans competition and matchmaking with investors interested in emerging markets.
The company is sponsored by 4 main partners supporting its activities: NCDO
(National Committee for International Cooperation and Sustainable Development), ICCO, Dutch Postcode Lottery and Dutch Ministry of Foreign Affairs. At the same time, BiD Network has 11 national partners (SMEs Centres) active in various developing countries (Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru, Jordan, Kenya, Uganda, Rwanda, Tanzania, and the Philippines).
The main services offered by BiD Network, targeting SMEs and entrepreneurs in developing countries, are business plan assessment, business coaching, business plan competitions and matchmaking with investors. The company is also offering investment services to interested investors.
For the time being, BiD Network has its own online platform, where all above mentioned services are offered. In addition to the mentioned services, the platform contains an online community, where almost 25000 entrepreneurs from all over the world are registered. Through the online community, the entrepreneurs have the possibility to (i) submit their business plans for Business Plans Competitions or investors matchmaking service, (ii) get online coaching, with access to international coaches, and (iii) contact each other as an online social network. For the time being, entrepreneurs are registering on BiD Network online community and getting all those services for free.
The online community has also other types of members, including over 400 coaches, who coach the entrepreneurs for business plans writing, and about 100 investors, who have access to check approved business plans for new business opportunities.
BiD Network is considering now a new business model with new web based services. The proposed project is to expand the current online community to a global entrepreneurship network, where SMEs Centres from various developing countries are connected.
In the proposed project, each SMEs Centre will be registered on BiD Network online community, has the right to use BiD Network services and to promote those services to the centres' members. At the same time, and on BiD Network platform, each SMEs Centre will have its own online community including its local members of SMEs, coaches, investors and concerned institutions.
At the end, the multiple networks will be connected to each other on BiD
Network platform, creating a global social network for SMEs, entrepreneurs, and SMEs Centre from developing countries, in addition to concerned investors, coaches and institutions from the whole world.
Though SMEs and entrepreneurs are using the current online community as free of charge, BiD Network is considering changing its business model and would like to assess the ability of SMEs Centres to pay a subscription fee to become a member in the proposed global online network and use the proposed web based services.
1.2 Project Objectives
As the proposed project by BiD Network is an innovative project, which is to be applied for the first time within the development industry, this exploratory study is trying to answer different questions related to SMEs' and SMEs Centres' attitude towards web based services, and in particular the ones proposed by BiD Network.
As assessing the online behaviour of SMEs and SMEs Centres in all developing countries requires a lot of resources and time beyond the scope of this project, therefore the study scope has been identified by 10 developing countries, with concentration on Africa, Middle East and Asia. (More details about this are provided under the methodology section).
The study will try to assess the notion of using e-business in developing countries using 3 levels, SMEs, SMEs Centres and Country e-readiness.
The Study objectives will be as follows:
• Assessing SMEs Centres' attitude towards web based services, including their current offered web based services, and their interest in BiD Network proposed services.
• Assessing SMEs interest and readiness for using web based services and factors affecting their adoption of e-business
2 Literature review
In this chapter we will try to explore the background and prior researches related to the discussed topics in the presented study. This exploration will be a path to understanding and analyzing the collected primary data. Very limited researches were found covering the role of SMEs Centres with e-business promotion in developing countries, while relatively more were found covering factors affecting SMEs adoption of e-business. As the presented study is aiming to analyze the specified objectives using the three levels: SMEs Centres, SMEs and Country e-readiness, the following topics will be covered in the literature review: e-business and development, e-business and SMEs, and e-readiness.
2.1 E- Business and Development
2.1.1 What is e-business?
While proposing a name for this study, the author faced the eternal question of: should it be named e-business or e-commerce? Actually, though the need of distinction, both terms have no one definitive meaning that is universally established, and are often used interchangeably in practice (Tassabehji, 2003). In the context of development, Payne (2002) suggests a broad definition for ecommerce as: "Any use of information and communications technology (ICT) by a business that helps it improving its interactions with customers or suppliers"
Though this definition suits the presented study in a part, it does not refer to the strategic side of BiD Network proposed project, and does not put emphasis on doing business over the internet. Checking e-business term's definitions and usages, the author thinks that the term e-business would fit better with the proposed study. In the presented study e-business will refer to a broader definition of e-commerce that also includes collaborating with business partners and conducting electronic transactions within an organization (Turban, 2008). And where the term itself is used as an applied concept to strategy, operations and business which mainly is operating online (Chaffey, 2007).
2.1.2 Development and developing countries
The term "Development” refers simply to the body of activities focusing on developing low developing countries (LDCs). The Development theory has evolved starting 1950s when solutions were sought to help transforming countries from Africa, Latin America and Asia into western-type societies (Akpan, 2003). Klein and Nason (2001 p. 263), argue that:
“The concept of development covers expanded economic opportunities and improved outcomes in domestic and/or export markets, employment, standard of living, and (by implication ) social conditions commonly included under the concept of quality of health care, education, cultural opportunities and civic freedom and harmony”
In other words, the development concept is concerned with the activities leading to economic improvement and consequently social improvement. Though economic development is also concerned with non-economic goals (e.g. gender equity, democracy practices, etc.), we will be more concerned in our research with the economic development in developing countries.
The most used way to define developing Countries is by income per capita, where several international organizations (e.g. World Bank, OECD, etc.) offer classifications of countries by their economic status (Todaro and Smith, 2008). In this research, we will use the “List of Recipients of Official Development Assistance (ODA)” developed by the organization for economic co-operation and development (OECD, 2008), as it goes along with “BiD Network” criteria. (See Appendix B for the full list).
2.1.3 E-Business and economic development
"The most recent of development strategies has been the efforts to theorize about the prospects of ICTs as tools for economic development in poor countries” (Akpan, 2003)
The use of ICT and e-business applications has been promoted by many researchers and international development institutions as a supportive development tool helping with improving business process efficiency, generating new products and services, and developing new business opportunities and markets (Chiware and Dick, 2008) , (UNDP et al., 2001).
Sharing solutions and knowledge among communities is one of the main features of ICT, where practical information can be provided in easier way. Stienen et al. (2007) argue how ICT can help with enhancing agricultural production by sharing knowledge related to crop status, erosion, pests and other faced uncertainties.
Accascina (2002) expand this concept, arguing how ICT can empower rural communities, trough giving farmers the opportunity to be always updated with market prices and to access new markets in a direct way, instead of being forced to accept the middle-man's offer. Today, many examples are already established representing this approach.
In India for instance, the private sectorled Agriwatch (www.agriwatch.com), eChoupal programme (www.itcportal.com/ruraldevp_philosophy/echoupal.htm), and others are supporting several million farmers with price information, tender and transaction facilities. Also in Senegal, Benin, Zambia and other developing countries, rural communities and farmer organizations are using ICT to strengthen their capacities and pricing negotiating inputs and to keep awareness of up-to-date market information (Stienen et al., 2007). E-business is also providing access to various financing resources, willing to invest in development and SMEs in developing countries. MyC4 (www.myc4.com), KIVA (www.kiva.org), and others are web based market places and micro-lending websites, connecting people willing to invest worldwide with entrepreneur in most of developing countries.
Though it cannot be denied that all those connections and networks are providing unprecedented flow of information and opportunities for developing countries, literatures still lack empirical evidences representing the link between e-business and socio-economic development. (Akpan, 2003).
However, the relationship between ICT and economic growth is well documented; there are very few studies in the case of developing countries. The evidence of real benefits is still scattered and anecdotal, though ecommerce does present real opportunities to SMEs in developing countries. (Goldstein and O'Connor, 2000), (UNCTAD, 2008)
2.1.4 E-Business and SMEs
The role SMEs are playing in developing economies has been always considered as a core of any economic development strategy, representing a main way to job creation and poverty reduction (Chiware and Dick, 2008), generated through relatively small initial investments.
ICT and e-business promotion plans for developing countries always focus on the SMEs Sector. Payne (2002) suggests two reasons for this focus on SMEs. Firstly, SMEs is extremely importance for developing economies, representing 60 to 70 percent of all employment in developing countries, as per the United Nations Conference on Trade and Development (UNCTAD). Secondly, because of their relatively small size and simple hierarchy, SMEs show higher flexibility and ability to adopt new technologies than larger enterprises.
Different classifications are controlling the reasons why SMEs adopt ICT applications. In the 90s, Neergaard (1992) -in Fathian et al.(2008)- argued that there are four main reasons for the IT acquisition by SMEs, with a clear concentration on the operational side: Increased productivity, streamlining work procedures, better client service, and better record keeping.
Ten years later, and after the internet business booming, Payne (2002) was summarizing e-commerce potentials for SMEs in developing countries in (i) finding new customer (ii) improving services for current and new customer (iii) improving business process efficiency and (iv) offering new services and products, with a concentration on marketing side and representing the power of e-commerce, which we will try to assess in a later section through this study.
2.1.5 Assessing E-business in developing countries
Most of the existing researches about the use of e-business, and its impact on business performance in the developing world, are based on anecdotal and case study evidence, whereas little statistical data are available. We will try here to review some researches done over e-business adoption in developing countries, especially in Asia and Africa, aiming to extract similarities and differences.
In a survey based study done by UNCTAD (2004), for SMEs in 4 countries in Asia (Indonesia, the Philippines, Sri Lanka and Thailand), SMEs were divided into 3 types:
Internet users: advanced in areas such as production management and capacity or English-language skills. The owners of these companies have advanced degrees or long-term experience
Prospective Internet users: working to improve their management standards, but still have internal challenges such as credit issues or obtaining short-term loans. But they were aware of the importance of reaching out to customers.
Traditional companies (non-users): have a passive approach to doing business in general with focus on production, and not on market outreach. They are characterized by a lack of awareness about the potential of e-business.
As stated before, like most of related researches, the UNCTAD study had no statistical data about each category, but we could understand from it that lack of awareness and finance are the major challenges faced by SMEs in the surveyed countries to adopt e-business. Though finance may sound as the most problematic issue, the study reveals that it is not true. In the surveyed countries, if SMEs experience a positive impact on their business, they will invest in hardware and connectivity. In other words, the readiness of SMEs to invest in e-business is not necessarily a cost factor.
Though those similarities are noted in South East Asia, another Asian-Middle
Eastern country “Iran” shows other characteristics. In another Study, Fathian et al (2008) apply a statistical approach based on factor analysis to assess the e-readiness of SMEs. The study raises another problem concluding that the assessed SMEs do not have many problems with being ready to use the internet for business, but need much greater infrastructural support in order to reap ICT benefits.
Moving to Africa, more differences can be found, especially related to barriers found in each country. On hand there is Ethiopia, where the government's monopoly has affected the possibilities to improve the infrastructure by any private initiatives, while on the other hand Senegal, where the business owners' lack of awareness about internet business benefits hold them from investing in e-business, especially that “profitability” or commercial usefulness and immediate returns for the investment in ICT are not clear.
In Egypt, a clear relationship was found between companies' size and their e-readiness. Though almost 100% of SMEs are connected to the internet, most of their owners lack the awareness of internet business benefits. Though Internet is used commonly for communication with external customers and suppliers via e-mail, it is not used for research or marketing (UNCTAD, 2004)
In another study concerned with Namibian SMEs, Chiware and Dick (2008) ran one of the few surveys assessing both SMEs and SMEs Centres at the same time, revealing that though SMEs have very low level of ICT utilization, due to the infrastructure problems and lack of awareness, SMEs Centres (who are normally supported by the government or international institutions) have relatively high level of ICT adoption, which seems to be unutilized due to supported SMEs' low connectivity to the internet, and to their lack of awareness of Internet business benefits.
Checking the whole picture in Asia and Africa, it can be argued that though large number of SMEs is connected to the internet, the adoption of e-business is quiet low, where the main use of internet is e-mailing and information search, but website presence and online ordering/selling are growing much more slowly, due to lack of good connectivity in some countries, and lack of awareness in most of surveyed countries. On the other hand, though the connectivity and ICT infrastructure level also vary through different countries, different studies agree that governments should concentrate on the regulations and legal side of e-business, where almost no legal context exists so far (UNCTAD, 2004)
At the end, it can be argued that despite the increasingly evident advantages of e-business for business, the adoption by developing country enterprises for e-business is still limited, where lack of awareness and investment costs are the main constraints for adopting e-business and other ICT application. (UNCTAD, 2008)
The term E-readiness can refer to SMEs e-readiness, represented in its readiness to use ICT, and Country e-readiness, represented in its infrastructure and regulations allowing using ICT. In this study, the term will be used to represent the country e-readiness.
As the presented study will assess factors affecting SMEs attitude towards e-readiness, country e-readiness is an important factor that should be considered.
There are different perspectives and definitions for countries e-readiness. The Economist Intelligence Unit defines e-readiness in its last report for 2009 as:
“a measure of the quality of country's ICT infrastructure and the ability of its consumers, Businesses and governments to use ICT to their benefits” (EIU, 2009)
Another perspective of e-readiness defines it as the degree to which a community is prepared to participate in the Networked World, which is gauged by assessing a community's relative advancement in the areas that are most critical for ICT adoption and ICT important applications (CID, 2006) Though many other definitions are also proposed for the term, they all share the same concept, of assessing countries' or communities' readiness for ICT and e-business.
In this study we will use the definitions proposed by the Economist Intelligence Unit (EIU). Though most of definitions have the same concept, different methodologies are used to assess the countries e-readiness. EIU is assessing countries e-readiness based on a combination of criteria including: connectivity and technology infrastructure, Business, social, cultural and legal environment, government policy and division, and Consumer and business adaption (EIU, 2009). Other institutions are assessing e-readiness as indices based on simple measurements, like number of telephone lines per 100 people or the GDP percentage spent on IT infrastructure (Dada, 2006)
2.2.1 E-Readiness and economic development
As an indicator of countries' readiness to adopt e-business, e-readiness rankings show close connection to development activities and governments' willingness to improve their development progress.
In the light of the discussed ICT role with development, Chiware and Dick (2008) argue that it is quite obvious how e-business -as a sector with significant potential- became a focus in many countries, pushing governments to be more active with promoting their e-readiness in various sectors.
Shih et al.(2007) argue that countries tend to develop and promote “ereadiness” aiming to accelerate their economic growth, where higher levels of ereadiness increase the competitiveness of national economies and enterprises, which leads to jobs creation, local communities' empowerment, and poverty reduction (Dada, 2006)
At the same time, governments can directly encourage e-commerce in their economies, particularly among SMEs. In India, for example, the government is planning to launch an electronic auction for fruits, where farmers with small sized business can set prices for their crops and sell them even before its physical transportation. Also in Tunisia the government has an objective, that ecommerce generate 2 per cent of all exports revenues by 2011 (UNCTAD, 2008)
Though the importance of countries' e-readiness in supporting SMEs adoption of e-business, many literatures criticise the relation between them and argue that having an e-ready country doesn't mean having e-ready companies. This point of view, in addition to e-readiness assessment methodologies, can be considered as the main limitations discussed in the reviewed literature criticising e-readiness concept reliability. In other word, limitations of E-readiness can be divided in two categories: critics on e-readiness assessment frameworks and critics on the idea that higher e-readiness must lead to higher e-business adoption, which we will try to clarify here.
Several E-readiness assessment frameworks have been proposed by several NGOs and international organizations to help assessing countries' e-readiness using a theoretical insight from developmental and institutional economies. In a recent study, Boyer-wright and Kottemann (2009) argue that there is lack of enough empirical evidences on the relation between frameworks used for assessing e-readiness and the actual level of e-business, which may lead to e-readiness rankings that do not reflect the reality. Also many different types of e-readiness measurements are being used, with lack of standardization, and are fraught of uncertainty (Dada, 2006)
A report prepared for InfoDev -a global development financing program, with interest in using ICT for development-, mentions that e-readiness rankings and reports state facts and recommendations (e.g. need of regulations and better ICT infrastructure) that anyone working in ICT and development in the assessed developing country knows, and that e-readiness rankings need to become more focused and action-oriented to remain useful as a tool (Bridges.org, 2005). On the other hand, Paré (2002) argue that establishing e-readiness environment cannot guarantee higher e-business adoption or meeting development goals, especially when SMEs and entrepreneurs are not e-ready to use e-business. A sample for this is the case of Hong Kong, where environmental and labour organizations could not adopt the information technology in a successful way, in spite of Hong Kong high e-readiness. In other words “The fact that a society rates highly in e-readiness does not automatically mean that organizations within that society will adopt ICTs to gain advantage” (Dada, 2006).
With the raised limitations, the author is not trying to state that the applications of e-readiness are useless, but to consider e-readiness as a factor affecting SMEs' adoption of e-business, and to assess if country e-readiness is sufficient alone as an indicator of the ability of developing countries and their SMEs to adopt e-business, which we will try to do through the presented study.
2.2.2 E-Readiness in Developing countries
The lack of strong IT infrastructure or set of skills is a known issue by many developing countries, accordingly when e-readiness reports mention this; they are simply stating the obvious (Dada, 2006)
A report from (UNCTAD, 2004), showed that though the increasing numbers of SMEs using the internet and maintaining web presence (in Thailand, Ghana, South Africa, Morocco, Nigeria, Senegal and Uganda), a very low percentage of e-business adoption has been noticed. Chiware and Dick (2008) argue that this can be justified by the challenges faced by developing countries in terms of infrastructure, economical, social and cultural environment, which indicate poor state of e-readiness, comparing to developed countries.
Aiming to explore the e-readiness of developing countries, the Economist Intelligence Unit e-readiness rankings, which is the most commonly used in the media, have been reviewed for the years 2005 till 2009. The annual report of EIU includes only the first 70 ranked countries worldwide. The remaining countries are simply unranked or have no e-readiness index.(See Appendix C for EIU e-readiness ranking 2009)
It can be argued that despite developing countries' efforts, regions of Africa and Latin America “containing most of developing countries” were always the least developed on e-readiness rankings comparing to the other regions over the last five years. For instance, 01 illustrates the e-readiness ranking for 2008 per region.
Through the last five years the percentage of ranked developing countries from the DAC list of ODA recipient (Appendix B) was always between 35% (in the year 2005) and 40% (in the year 2009), and the highest rank of any developing country from DAC list was always between the 35th (In the year 2007) to the 30th (In the year 2007).
Taking into consideration that DAC list includes about 150 countries, representing more than 75% of countries registered by the UN, the percentage of developing countries ranked in EIU e-readiness rankings can be a good indicator to the digital divide phenomenon, representing the gap between developed and developing countries in using information technology applications (Mansell, 2002)
Though the indicated gap between developed and developing countries, obviously efforts are being paid to narrow it. The most updated ranking, EIU (2009) indicates that emerging markets continue to rack up the biggest advances in being connected to communications networks. This goes along with other incidents indicating that developing countries are closing the internet gap with developed countries, though they are closing it slowly (UNCTAD, 2008)
Research Design and Methodology
This chapter identifies the methodologies used in this research. Section 3.2 will cover the research design and methodology including research settings, study sample, questionnaire and the response rate. Section 3.3 will outline the structure of telephone interviews conducted with respondents with complete responses on the questionnaire.
3.2 Research Design and Methodology
The aim of this exploratory research is to assess the current level of offering web based services by SMEs Centres in developing countries, the SMEs' willingness to use them and the factors affecting this usage. Due to the initial scope of assessing 10 countries, the use of case studies as a data collection methodology -though it can provide deeper information- sounded as an unrealistic choice. Noting the project time constraints, taking the case of each of the 10 countries was to require more resources and time beyond the scope of this project. Instead, a decision was made to use questionnaire methodology to collect the needed primary data.
The questionnaire was helpful with identifying the main business characteristics of SMEs and SMEs Centres in the surveyed countries, in addition to their IT profiles, services required by SMEs and services offered by SMEs Centres. Beside the questionnaire, and to get more in depth information about the factors affecting SMEs and SMEs Centres attitude towards using web based services, depth non-standardised telephone interviews have been conducted with the respondents with complete responses on the questionnaire
A mixed research methodology has been followed to ensure having a complete picture about the surveyed topic. The data generated through both methodologies have been analyzed qualitatively. Accordingly the research philosophy can be defined as Multiple method qualitative study (Saunders et al., 2007)
3.2.2 Research Settings and Study Sample
Assessing the online behaviour of SMEs and SMEs Centres in all developing countries requires a lot of resources and time beyond the scope of this project.
The research scope has been identified by assessing SMEs Centres, with proper Internet presence, in 10 developing countries. By proper internet presence, we mean having at least an established website. At the same time, SMEs Centres are used in this study as a source of valuable information about SMEs and their online preferences.
Taking into consideration that 152 developing countries exist in our current world (Listed in DAC list), the process of identifying representative countries with interest towards e-business, and SMEs Centres within those countries with interest towards web technology, required using a mix of purposive and multi stage sampling techniques, to identify a proper sample for this project.
From the research beginning, the following countries have been excluded, based on the researched company "BiD Network" request:
• BRICs countries (Brazil, Russia, India and China) and South Africa: those countries are already mature with online services, and BiD Network is not interested in targeting them for the time being.
• East European Countries: they are not representing an urgent target market for BiD Network.
• Latin American countries: BiD Network has already a lot of contacts and established data sources in Latin America.
Accordingly the research concentration was on Africa, Middle East and Asia.
As requested by the researched company, a special ranking for SMEs and entrepreneurs business' opportunities, prepared by BiD Network itself, has been used to identify the sample frame including 33 countries. The 33 countries (See Appendix D) have been identified as the most 33 promising developing countries on “BiD Network” ranking, which is an average of 3 international rankings:
1. Ease of Doing Business: based on “Doing Business” 2009 Report (World Bank, 2008a)
2. Access to Finance: based on World Bank paper “Access and Use of Financial Services” 2006, and “Doing Business” 2009 Report (World Bank, 2008a)
3. Entrepreneurship ranking: based on World Bank Entrepreneurship Survey 2008 (World Bank, 2008b), and GEM Report 2008 (Global Entrepreneurship Monitor, 2008)
Though BiD Network ranking is not taking e-business adoption into consideration, the author has no problem with using it, especially after comparing the identified 33 countries with the EIU e-readiness ranking for 2009 (EIU, 2009), and ensuring that all developing countries from Africa, Middle East and Asia listed in EIU e-readiness ranking for 2009 (16 countries according to the mentioned selection criteria) are included in the sample frame (See Appendix D for the 33 countries and Appendix C for EIU E-readiness ranking).
Though all discussed limitations of e-readiness rankings, it was used as a reference because it is the only available ranking relevant to this project. Unfortunately, we still lack any other rankings for developing countries based on their adoption and use of e-business or web based services.
As numerous numbers of SMEs Centres are active in the specified 33 developing countries, a primary online research was required to identify SMEs Centres with proper web presence (at least having a website) and established members of SMEs, where relevant information to this project can be acquired. A preference has been raised by BiD Network to avoid governmental institutions and concentrate on private sector organizations, which are usually more flexible and innovative. By the end of the online research, 72 SMEs Centres with proper online presence have been identified in 31 countries.
As no contact was previously established with the identified SMEs Centres, a phase of pre-survey contact was needed (Saunders et al., 2007). Preliminary phone calls were made with the identified 72 Centres to promote the survey and identify the proper contacts in each Centre. This phase raised some limitations of the research, represented in:
- Incorrect contact information on many Centres' websites
- Lack of proper contact person with adequate English language
- Absence of proper contact person because of annual leave
By the end of this phase only 34 SMEs Centres covering 21 countries have been identified as appropriate to send the questionnaire to (See Appendix D). It should be noted that only 19 out of the 34 contacts were contacted directly by phone before sending the questionnaire. The remaining 15 contacts were not reachable, but have been identified through websites and indirect contacts within the SMEs Centres.
This mix of purposive and multi stage sampling techniques usually have some advantages and disadvantages. While using the purposive sampling helps with having informative sample, the sample cannot be considered to be statistically representative of the whole population (Saunders et al., 2007). On the other hand, though the advantages of multi stage sampling, represented in lower cost and relatively easily available information, the risk of having homogeneous sample with similar attitude exists (Saunders et al., 2007). However, the author does not think that this will affect the sample deeply, as this study is aiming at identifying qualitative reasons and the multi stage technique led at the end to a wide distributed sample.
3.2.3 The questionnaire
After reviewing available literature, specific gaps have been identified related to the project. Though many researches have discussed the barriers and implications of using e-business by SMEs, and the governmental initiatives / projects to promote e-business in developing countries, limited researches have been found covering the following points:
- Actual offered web based services by SMEs Centres in developing countries
- Actual required services by SMEs in developing countries
- How can web based information technology help with providing those required services.
- Which factors are affecting the usage of web based services by SMEs in developing countries.
A gap was also identified related to SMEs Centres' role with evolving e-business in developing countries, challenges they are facing with this role, and the viability of building a business model based on providing web based services to SMEs in developing countries.
All those gaps have been incorporated into the questionnaire, which has been divided into 4 sections, covering:
- SMEs Centres' Demographics, business and IT Profiles
- SMEs' Demographics, business and IT Profiles
- Offered and required Services (web-based / Non web-based)
- Each service web existence or possibility to be used on the web
Different questions have been also added targeting the factors affecting usage of web based services by SMEs.
The questionnaire has been reviewed with practitioners who have experience in the field and also with the academic supervisor. After a number of iterations and changes, the questionnaire was sent to the recipients. A pilot testing was attended to be conducted, but it has been cancelled due the project time constraints. A copy of the sent questionnaire is presented in (Appendix G).
The questionnaire has been conducted as web based questionnaire, offering interactive scenarios based on the respondents answers. In average 10 pages with 40 questions had to be answered to complete the survey. However, the survey has been designed to take no more than 15 to 20 minutes to be completed.
Though the questionnaire is quite detailed, it was developed to answer 4 simple questions:
1. What is the IT profile of SMEs and SMEs Centres?
2. Which factors are affecting SMEs and SMEs Centres adoption of ebusiness?
3. Are SMEs Centres in the surveyed countries interested in BiD Networ proposed online services?
4. Which other services are required by SMEs and SMEs Centres in the surveyed countries?
The length of the questionnaire was a necessity due to the different targeted information, and the limited available information about factors affecting using web based business services by SMEs. This is why, as an example, many questions have been added to identify business sectors, sales' scales, organizations types, and other information, aiming to find a pattern that describe those factors.
It should be noted, that few questions have been duplicated through the questionnaire, aiming to get some in depth information and to reveal confusion by some SMEs Centres regarding their services. Some contradicting answers have been identified and discussed through the telephone interviews. Most of contradicting answers were related to the non standardization of IT terminology within the industry.
3.2.4 Response rate
As previously discussed, the raised limitations with identifying the sample frame had also affected the response rate.
There are different methodologies in calculating response rates. While Neumann (2000) suggests calculating total response rate with excluding ineligible respondents, Saunders et al. (2007) proposes calculating the active response rate, where both ineligible and unreachable are excluded. Due to difficulty that we may face with identifying the ineligible and unreachable parties during this study -In fact, many of them have been excluded through the multi stage sampling-, we would prefer here using a simple response rate calculated as number of responses to total number of contacted sample SMEs Centres).
By the end of August 2009, 14 responses were collected (representing 41% of sent requests) including only 11 complete responses (representing 32% of the sent requests). However, there is no certain of acceptable response rate, 32% can be considered as acceptable rate for this pilot project, taking into consideration the length of the questionnaire and its timing.
Though the limited number of complete responses, the collected responses presented 10 countries (Which was the primary target), with high variety and different characteristics. Most importantly, the respondents presented a distributed sample for countries from Asia, Africa Sub-Sahara, North Africa and the Middle East (which were the targeted regions as discussed above). Also, different organizations' sizes and types have been represented through the responding SMEs Centres. The main SMEs Centres' characteristics are summarized in the presented study under (Appendix E).
3.2.5 Survey validity
With all stated positive aspects of surveys, there is always a possibility to have some pitfalls within any study; the following were faced through the survey: Vague / Bad Questions: The author tried to avoid having bad questions by working in coordination with both: academic supervisor and business colleague within BiD Network. In addition to ensuring the validity of questions, a special attention was given to make the questions understood by the respondents in the same way meant by the author (Foddy, 1994).
Language / Cultural Barriers:
However the survey sample frame included 33 countries with a mix of different languages, a decision was made to set the questionnaire in English language and conduct the telephone interviews with one of the language the Author can speak "English, Arabic, German and little French".
Though it is well known that English is commonly used for business, this is not always the case for developing countries. For example, West and North African countries prefer to use and learn French as a foreign language. BiD Network used to face the same problem in its surveys for Latin America, and the solution was always to design surveys in both languages, English and Spanish. This option was not valid for this project due to its time constraints and different covered regions.
The author tried to reduce the expected misunderstanding problems by phrasing the questions in simple and direct English language. At the same time, the pre-survey contact was a helpful technique to identify the right contact with proper language level and insight information.
Through telephone interviews conducted after completing the questionnaire, the author has ensured that all questions were understood correctly and answered properly.
3.3 Telephone Interviews
To clarify some of the points made on the questionnaires, telephone depth interviews were conducted with several respondents to ensure that a full understanding of their opinions and views was achieved. The interviews were conducted in English and Arabic (based on the respondents' preference), and took on average 40 min per interview.
Though certain questions have been pre-prepared for each participant, based on the questionnaire answers, the questions were planned to take 20% of the interview timing, leaving 80% to the participant to talk freely about his/her understanding about the topic, and giving the interviewer the chance to propose more in-depth questions based on the participant responses.
Though the stated limitations of telephone interviews, including participant less willing to engage in exploratory discussion and losing the opportunity to witness the participant non-verbal behaviour (Saunders et al., 2007), it was the optimum available technique, due to the sample wide geographical distribution. However, the author faced some additional problems, especially with different accents and understanding of the language, the interviews were quite helpful in clarifying and giving more in-depth to the information gathered by the questionnaire. A summary of the interviews is presented in (Appendix F).
Chapter 4 has outlined the methodology used in this research. A multiple method qualitative study has been adopted as main methodology, while a mix of purposive and multi stage sampling techniques have been used to identify the research sample. Responses to the questionnaire represented SMEs Centres in 10 different countries with different characteristics. Follow up telephone interviews were conducted with respondents to the questionnaire to get a more detailed picture about the surveyed topic.
4 Results Analysis
This chapter will focus on presenting and analyzing the completed responses on the questionnaire and the follow up in-depth telephone interviews.\Qualitative analysis techniques were used in this instance to interpret the findings.
As stated by Saunders et al. (2007), there is no standardized approach to the analysis of qualitative data. Inductively-based analytical procedures have been used including data display and analysis (Miles and Huberman, 1994), where collected data has been reduced and summarized, before assembling them into diagrammatic displays.
Also template analysis with predetermined categories have been used, in addition to some discourse analysis approaches (Saunders et al., 2007). The different techniques helped with revealing a clearer picture of the surveyed issues, and identifying the relations between different data categories. Where no interpretation was needed for direct demographic questions, more detailed and in depth analysis was given to the open ended questions to understand the responses and find an inter-connection between different opinions presented in responses to other questions.
The analysis will concentrate on answering the main research question, exploring the current status and opportunities of using web based information technology by SMEs and SMEs Centres in the surveyed countries. Accordingly the findings has concentrated on 4 aspects: (i) current IT profile of SMEs and SMEs Centres, (ii) factors affecting SMEs use of web based information technology, (iii) services being offered to SMEs with its current IT profile, and (iv) future possibilities of using web based information technology (Particularly, the proposed project by BiD Network).
4.2 Key findings
4.2.1 SMEs' and SMEs Centres' IT profiles
In order to understand the e-business opportunities within developing countries, assessment of SMEs and SMEs Centres attitude towards basic adoption of
Information technology is essential.
The questionnaire included multiple questions assessing the IT profile of both
SMEs and SMEs Centres, where the respondents were asked to rate their organizations' and their members' IT Profile ranging from none to sophisticated:
Question 9, Page 3:
Question 6, Page 4:
Due to the purposive sampling technique, where only SMEs Centres with proper online presence were selected, all surveyed SMEs Centres had at least basic IT profile.
Looking at the IT profiles of responded SMEs Centres and the IT profiles of their
SMEs members, it can be argued that on a global base, a clear gap has been identified between SMEs' and SMEs Centres' IT profiles in developing countries.
While reasonable investments have been dedicated to adopt sophisticated IT systems by SMEs Centres, it seems that this is not the same situation for their SMEs members. 03 (IT Profiles of SMEs Centres) and 04 (IT Profiles of SMEs) represent the difference between both profiles, where most of SMEs Centres acquire externally advanced and sophisticated IT systems, but the majority of their members is using basic or no IT applications at all.
At the same time, looking at each country alone and analyzing SMEs Centres as case by case, we can see that the gap also exist between each SMEs Centre IT profile and its own SMEs members IT profiles.
In their study about ICT adoption by Namibian SMEs, Chiware and Dick (2008) indicate the same phenomenon, arguing that though most of SMEs are still reluctant in using the internet as an efficient business tool, Business support centres (e.g. SMEs Centres) have more developed IT profile and willingness to adopt e-business, which can be translated -in relation with BiD Network proposed project- into a business opportunity, where SMEs Centres can be considered, not only as internet services provider, but more importantly as an Infomediary with business information exchange platform. Unfortunately, this opportunity does not seem to exist in most assessed countries, especially where SMEs have no long term vision or interest in penetrating new markets. As an answer on the telephone interview question about the SMEs Centres' efforts to improve their SMEs members' tendency towards using internet for business, the director of responded Indonesian SMEs Centre stated that:
"Though the business model of SMEs in Indonesia does require having reliable e-business system, to help them target international customers instead of waiting for them to come, SMEs in Indonesia still do not realize this fact. The Centre is arranging trainings to promote the awareness of ebusiness and internet, but the ratio of changing SMEs' mentalities towards using internet for business is 1 to 50! SMEs are not interested in personal training, in business modelling or in long term goals and strategy; they are more interested in sales".
The identified problem here is not only that SMEs do not understand the benefits of internet business. But also that they are only concerned with short term goals (e.g. sales), and are not showing any interest in activities with long term objectives, like training on doing business on the internet. This fact deprives SMEs Centres at the end from the business opportunity they may have through their advanced IT profile.
4.2.2 Factors affecting e-business adoption by SMEs
The factors affecting SMEs' use of web based information technology was also explored through different questions in the questionnaire:
22.214.171.124 IT qualified staff and sufficient technical support
Though financial constraints are usually considered as the most major faced challenge regarding the implementation of web based information technology, the respondents raised both IT qualified staff and sufficient technical support as equal difficult challenges to implement web based information technology by SMEs. 06 summarizes the major challenges faced by SMEs regarding the implementation of web based information technology, from SMEs Centres' point of view.
It should be noted that this is not absolute data, but comparative to assess qualitatively the opinions and views regarding the different factors. Within our qualitative analysis, we are not mainly concerned with the average rate each factor scored, but with the stated response that the financial factor is not the only or the first factor affecting the implementation of Web based Information technology. This could give an indication about how mature the idea about e-business is evolving, and its real barriers can be revealed.
From the author's observations and experience with the IT sector in developing countries in the Middle East, qualified IT and technical support resources are available, especially for the web based technologies. However, it seems that the problem is not related to the availability of IT qualified staff, but to the fact that the SMEs are not interested in hiring them. The general manager of Egyptian SMEs Centre, stated through our telephone interview that:
"IT Staff is the most major challenge, not because of lacking good resources, but because it is not a priority for our SMEs members to hire qualified IT staff. The members concentrate on using the internet for e-mail communications, which is a function that any employee can do".
In Indonesia, the same challenge exists but from another perspective. The general manager of the responded Indonesian SMEs Centre argues that in addition to the Indonesian SMEs reluctance to hire IT qualified staff, there is a relatively rareness of IT qualified resources in Indonesia. This situation led to many problems especially that SMEs are outsourcing all their IT needs to unreliable IT resources, which is affecting SMEs cost and operations severely at the end.
126.96.36.199 Knowledge of internet business benefits
The insufficient knowledge about information technology and internet business benefits has been always raised in several researches as a major challenge for implementing web based Information Technology. As stated above “Question 8, Page 4", the respondents were asked to state freely the 3 major factors that should be addressed to enable SMEs to implement web based IT, with ranking them where the first is the most important one.
5 out of the 11 complete responses stated knowledge about IT and internet business technology as the first factor that should be addressed to promote ebusiness among SMEs.
Again, the percentage is not very important in our qualitative analysis, but the first issue respondents are thinking about it as a factor that should be addressed as quite important, and defines the policy most SMEs Centres are following to promote e-business to SMEs, which is the provision of training, not promotion of e-business applications (e.g. BiD Network proposed project).
In a telephone interview with the IT executive director of a respondent SMEs Centre from Egypt, a question was asked about the possibility to finance a web based project "e.g. BiD Network proposed project", using governmental initiatives or international fund. The answer was that in case of getting such a fund, it will be easier to use it for training, in spite of the difficulties SMEs Centres are facing with acquiring people for IT trainings.
This complies with the fact that the most provided service by SMEs Centres to SMEs is the training service. More details about services will be discussed under section 4.2.3.
188.8.131.52 Customers and Trading Partners
The role of customers and trading partners' in urging SMEs adoption of ebusiness is quiet obvious. The more present or possible customers and trading partners are mature with e-business and distributed in different locations (especially out side of the SME country), the more SMEs should be interested in using web based Information to ensure accessing new markets and global business opportunities.
After reviewing the conducted telephone interviews, it seems that this argument cannot be used as a rule especially with the raised issue of having "The opportunity" to access the international market, and having "The initiative" to access it, as explained hereafter. The survey has revealed some contradicting situations. While analyzing the response from Indonesia, where 50% of supported SMEs are from the manufacturing sector, it was clear from the questionnaire answers that customers and trading partners are strongly supporting the notion of using ebusiness by SMEs, especially -as indicated by the SMEs Centre general manager- that their SMEs' manufacturing products have international demand. The problem in this case -as indicated by the same respondent in section 4.2.1- was the lack of "The Initiative" to take a step towards targeting international customers instead of waiting for them, due to the lack of long term strategy and not understanding the internet benefits for business. On the other hand, the case in Jordan is almost the opposite. Where 55% of supported SMEs are working with technology services and show good understanding of internet business benefits, it seems that customers are not supporting the notion of using e-business. The reason -as revealed in the telephone interview with the executive director of Jordanian SMEs Centre- is simply that most of customers are located in Jordan, and SMEs still do not have "The Opportunity" to create an international demand on their services. Both situations have been reflected in each SMEs Centre's answer on the question about major factors that should be addressed, to enable SMEs implementing web based information technology (Question 8, Page 4). While the SMEs Centre in Indonesia indicated "Research on Internet business benefits" as the first factor to be addressed, the Jordanian SMEs Centre stated the first factor as "Cross continental marketing".
184.108.40.206 Culture and Language
In addition to the fact that e-business is usually restricted by issues of trust on the demand side, especially where money transactions are required (UNCTAD, 2008), some cultures do prefer having physical contact while communicating. As stated by the Jordanian SMEs Centre executive director during our telephone interview:
“Though customers -mainly in Jordan- are aware of internet technology and its benefits, they do not tend to use internet a lot for business, simply because of the direct meeting and face to face culture, preferred in the middle east”. On the other hand, language is a critical issue that should be taken into consideration with any global study/project, especially when dealing with developing countries. In addition to the limited knowledge of language because of undeveloped education systems in most of developing countries, it should be noted that the “Business Language" itself varies between developing countries. Where Asia and Middle East countries normally use English as foreign business language, we find that west and North Africa prefer to use French as foreign business language, while Latin America is using Spanish.
This fact creates a language barrier for most countries with other business languages than English, and makes them unable to access most of online business opportunities, usually written in English. Accordingly, any global web based service -e.g. the proposed project by Bid Network- should be promoted in more than one business language.
220.127.116.11 Financial constraints
Financial constrains are the most well known factor affecting e-business adoption. In addition to observing that financial is not the only major factor that needs to be addressed to enable SMEs implementing web based IT, financial constraints have got different types in the questionnaire answers. While it takes the shape of fixed costs related to IT equipments in Egypt, access to early stage risk capital in Jordan (Where both countries are ranked within EIU 2009 ereadiness report), SME Centre in Botswana finds that the cost of internet connection and IT staff are the major financial challenges.
18.104.22.168 Country E-readiness
Though the argued limitations of e-readiness rankings, that they do not really assess e-business adoption per country, it cannot be denied that the country ereadiness (In the form of infrastructure, reliable connectivity, etc...) affect SMEs IT profiles and e-business adoption.
The collected responses showed differences between SMEs' IT profiles in countries with e-readiness index and their counterparts in countries without ereadiness index.
Information technology diffusion and variety of IT profiles in countries with e-readiness index is higher than they are in countries without e-readiness index.
The contention of this research is that the e-readiness index cannot be used as a rule to assess SMEs adoption of IT or e-business, taking into consideration the different factors affecting SMEs IT and e-business adoption. Though the last 2 s showed that e-readiness can be an indicator for IT diffusion, another raised case from the survey indicated that other factors may affect IT diffusion and expose e-readiness reliability for this regard.
Two SMEs Centres have responded to the questionnaire from Egypt (Which was the only country 2 responses have been received from). 9 illustrates the SMEs' IT profiles in both SMEs Centres.
Though both SMEs Centres are active in the same country, their SMEs IT profiles are totally deferent, simply because each one of them is supporting different business sector and different business sizes. While SMEs Centre (A) is supporting 61000 SMEs, who are working in retail business with small size (less than 10000 USD sales per year), SMEs Centre (B) supports agricultural business with high-medium size (50000 to 1000000 USD sales per year). This raises the importance of assessing other factors while using e-readiness rankings, and supports the argument that though the importance of countries e-readiness in promoting e-business, other factors should be taken into consideration while assessing the e-business adoption among SMEs. A section was planned to analyze the relation between e-business adoption, business sector, and business size. Unfortunately the collected data was not detailed enough to identify a pattern controlling the relation between the 3 topics. Most of responded SMEs Centres did not provide detailed information about the exact sector, sales volumes or budgets related to their SMEs members, out of confidentiality. This issue will be mentioned as a limitation in the conclusion section.
4.2.3 Services and web based Services
In our exploration of the current services offered by SMEs Centres and services required by SMEs themselves, we are trying to identify the existence and possibilities of web based services within developing Countries.
22.214.171.124 Web based services offered by SMEs Centres
A whole section in the questionnaire was dedicated to identify current offered services by SMEs Centres. The section started with the following question:
Question 1, Page 5:
The answer choices included the most known services offered by SMEs
Centres, in addition to 2 web based services. 10 illustrates respondents' answers.
As illustrated, and in conjunction with the argument in section 126.96.36.199, Training is the most offered service by most SMEs Centres, while the next most offered services are Advising / Business Consulting and one to one coaching, which are also related to training, though they are normally more concerned with specified cases.
Referring to the web based services; only one SMEs Centre from the respondents is offering online coaching, in Jordan. The following “later” question was asking about having online community:
Question 6, Page 5:
Though three SMEs Centres indicated in their answers on this later question (Question 6, Page 5), that they do run online community, no SMEs Centres stated in the first question (Question 1, Page 5) that they offer online community as a service. The reasons for this are (i) the unawareness of online community as an offered service to SMEs (ii) that SMEs Centres are using online communities as a communication tool with their member, rather than an online platform where SMEs can contact each other and have access to international investors and trading partners.
Accordingly, it can be argued that almost all surveyed SMEs Centres are not offering any online services to their members for the time being. Though this fact does not comply with the sophisticated IT profile SMEs Centres have, but it may suits the SMEs' attitude towards web based service (discussed before) and SMEs service requirements, which will be discussed in the next section.
188.8.131.52 Web based services required by SMEs
Question 2, Page 5:
The above illustrated question asked about the most 3 services required by SMEs, from the SMEs Centres' point of view. The answer choices included the same choices in the last discussed section. As illustrated, from SMEs Centres' point of view, neither online coaching nor online community are among the most required services by SMEs (actually no single SMEs Centre chose them), which can also justify the issue that no web based services are currently offered by SMEs Centres.
184.108.40.206 SMEs Centres willingness to invest in Web based services
Some questions have been included in the questionnaire to assess SMEs