Understanding ICT Adoption Determinants among Indonesian SMEs in Fashion Subsector
INTRODUCTION Information and communication technology (ICT) refers to a wide range of computerized technologies that enable communication to capture, process and transmit information. They include products and services such as desktop computers, laptops, handled devices, wired or wireless intranet, software, data storage, network security and so forth (Ashrafi and Mirtaza, 2008) A number of empirical studies on ICT adoption at the organizational level reveals that ICT adoption Vol. 8 No. 1 ISSN: 2089 6271 Understanding ICT Adoption Determinants among Indonesian SMEs in Fashion Subsector 8 1.indd 47 5/26/16 10:12 AM 48 International Research Journal of Business Studies vol. VIII no. 01 (2015) provide strong support for institution based variables as predictors of adoption intention to provide inter organizational linkage (Teo et al. 2003).Premkumar and Roberts (1999) note that relative advantage, top management support, organizational size, external pressure, and competitive pressure are important determinants of ICT adoption. SMEs and ICT Adoption The definition of SMEs varies from one country to another, however the most common measurements used to classify the different sizes of business establishmentsare total assets,annual sales and number of workers employed by the business. Based on Government Decree No. 20, 2008, SMEs in Indonesia are divided into three categories; 1) Micro Scaled Businesses: businesses with total net assets less than or equal to IDR 50,000,000 (lands and buildings are excluded) or with annual sales of less than or equal to IDR 300,000,000; 2) Small Scaled Businesses: businesses with total net assets between IDR 50,000,000 and 500,000,000 (lands and buildings are excluded) or with annual sales between IDR300,000,000 and 2,500,000,000; 3) Medium Scaled Businesses: businesses with total net assets between IDR 500,000,000 and IDR 10,000,000,000 (lands and buildings are excluded) or with annual sales between IDR 2,500,000,000 and IDR 50,000,000,000. In 2011, the number of SMEs in Indonesia grew 2.57% to reach 55.5 million businesses. Between 2006 and 2011 the total number of SMEs rose by around12.6% Also, in 2011 small scaled businesses held the highest growth rate of 4.98% followed by medium scaled businesses with 3.87% growth rate. SMEs also have an important role in the share of employment by providing jobs that can drive Indonesia's economy. SMEs provided jobs for almost 97.3% of the country's workforce in 2011, about 101.7 million people, and an increase of 3.55% from the 2010 figure of 99.4 million people. The information and communication technology has changed the way various organizations conduct their business. The use of ICT provides the opportunity for organizations to reach their customers anytime and anywhere, and may enable a firm to gain a competitive advantage over its competitors (Li, 2008) Previous studies on SMEs stated that the most prevalent benefits of Internet and ICT adoption in SMEs included improved company image, more effectiveness in collecting information on customers, increased productivity (Walczuch R. Braven, G.V. Lundgren, 2000 in Tan et al. 2010) Regardless of the benefits of ICT to a firm's performance, the ICT adoption of SMEs in Indonesia is still considerably slow. The majority of SMEs still have no presence or only static Internet presence. According a survey conducted by PT MARS Indonesia in 2011 among 1718 SMEs in eight major cities in Indonesia, namely Jabodetabek (Jakarta, Bogor Depok, Tangerang and Bekasi) Bandung, Semarang, Yogyakarta, Solo, Surabaya, Medan, and Makasar, 67% of SMEs use email for their business activities whereas 33% of them do not use email at all. Regarding the use of websites, 70% of SMEs have them and only 29.5% do not. Moreover, most of the payments are not conducted on the firms' websites, meaning that mostly their websites do not have a fully integrated transaction mechanism since most of the payments are through bank transfer/ATM (54.5% and/or through cash on delivery mechanism (47.3% Only 8.9% of the transactions use credit card payment. Several studies have been conducted to examine the factors contributing to the slow rate of ICT adoption in SMEs, and the results have highlighted various adoption barriers. Among the most widely cited barriers include a lack of knowledge and understanding of the benefits of ICT, concerns about security and privacy, lack of skilled workers, computer technology not being widely used in the business operation, cultural barriers, and lack of financial resources (Khatibi et al. 2003) In addition, Hadjimanolis, A. (1999)points out external barriers in Internet and e commerce adoption is 8 1.indd 48 5/26/16 10:12 AM 49 Rini Setiowati, Hartoyo, Heny K. Daryanto, Bustanil Arifin Understanding ICT Adoption Determinants among Indonesian SMEs in Fashion Subsector 47 57 categorized into supply barriers (the difficulties of getting financial and technical information) demand barriers (perceived usefulness of Internet for SME businesses) and environmental barriers (related to security issues) Internal barriers are divided into resource barriers (technical and managerial capabilities) and system barriers (the new system does not fit with the current system) The above discussion indicates that SMEs have become a major driving force in Indonesia's economic development. But its vital contributions are hindered by several challenges in relation to the creation of increased market access, given the limited resources. ICT presence provides a solution to SMEs as it opens up new markets and opportunities.However, ICT adoption in Indonesia still considered relatively low. Therefore, this study aims to identify the important determinants that motivate SMEs to adopt ICT for their businesses by examining SMEs in fashion subsector. The Ministry of Trade Republic of Indonesia (2008) defines fashion subsector as all creative activities related to the creation of clothing design, footwear, other fashion accessories, fashion apparel and accessories production, and the distribution of fashion products. Fashion subsector is also divided into fashion companies, fashion and distribution channels, and most of the companies follow mass production, distro, ready to wear and haute couture type of business models. The fashion subsector is an important sub sector in Indonesia's creative industry. In 2010 2013, total number of firms in this industry reached 3.8 million firms. In addition, in the period between 2010 and 2013, fashion industry contributed to IDR 182 trillion (or equal to USD 13 billions)of Gross Value Added (GVA) with the growth rate of 6.44% (The Ministry of Tourism and Creative Industry of the Republic of Indonesia, 2014) Literature Review Nowadays, Information Technology (IT) is regarded as an important tool in enhancing productivity of firms (Oliveira and Martins, 2011) Technologies (ICTs) particularly the use of Internet to conduct business have changed the way people do business. For SMEs, Internet is believed to be the most cost efficient tool to help companies gain bigger markets and compete with larger companies in attracting their products, services, and information (Tan, et al. 2009) Adoption of technology or innovation theories and models have been evolved over the years, at the individual level, the psychological contribution has resulted in the development of the Theory of Reasoned Action/TRA (Ajzen and Fishbein, 1980) which later has been extended into the Theory of Planned Behavior/TPB (Ajzen, 1985) These two theories are considered as the most used theories on technology adoption. Furthermore, at the firm level, Rogers introduces the model of Diffusion of Innovation in 1962, and then refined in 1971, 1983, and 2005, where the latest model incorporated the phenomena of Internet that change the nature of diffusion process. In addition, the Technology Organization and Environment/TOE framework was developed in 1990 (Tornatzky and Fleischer 1990) that identifies three aspects of an enterprise's context that influence the process by which it adopts and implements a technological innovation. The theory dedicates the adoption process at firm level and is an aggregation of other models including DOI. Technology, Organization, Environment Framework The Technology, Organization, Environment (TOE) framework was developed in 1990 (Tornatzky and Fleischer, 1990) It identifies three factors that influence the process by which an organization adopts and implements a technological innovation. The three factors fall within each of the following contexts: technological context, organizational context, and environmental context.Technological context describes internal and external technologies that are relevant to the firm. It includes current practices and 8 1.indd 49 5/26/16 10:12 AM 50 International Research Journal of Business Studies vol. VIII no. 01 (2015) equipment internal to the firm and the set of available technologies external to the firm (Hage, 1980) Meanwhile, organizational context refers to descriptive measures about firm such as the scope of the firm, size, and managerial structure. Finally, environmental context refers to arena in which a firm conducts its business, it includes industry where a firm operating, competitors, and government (Tornatzky and Fleischer, 1990) The TOE framework later was adopted in IT adoption studies, provides a useful analytical framework that can be used for studying adoption and assimilation of different types of innovation. Also, It has a solid theoretical basis, consistent empirical support, and potential application across different studies (Oliveira and Martins, 2011) In SMEs context, several studies have used TOE framework to analyze factors that contribute to the adoption of e commerce or IT and Internet commerce in SMEs. Ghobakhloo,Aranda, and Amando (2011) note that e commerce adoption within SMEs in Iran is affected by per