Digital Divide Among SMEs In Malaysia: An Exploration Of Factors And Measurement

Understanding the Digital Divide Among SMEs in Malaysia

Discuss about the Digital Divide in Malaysia Case of Small and Medium sized Enterprises.

The advent of information and communication technologies (ICTs) has been attributed to the current increased knowledge and information among those in the society as well as citizens. The access has gone a long way in ensuring that organizations increase how they conduct internal interactions of systems and external interactions with other organizations. The benefits attributed to the citizens and organizations comes from the radical evolution in how people store, acquire, process, and distribute data and information even as ICTs continue to evolve. While it is understandable that such a milestone helps people as well as organizations continue to depend on ICTs to execute different activities within different sectors not only in Malaysia but other countries, it also brings up the dimension of exclusion – The digital divide. Shi (2017) argues that when some people or organizations do not have full access to ICTs, they are likely to face negative effects associated to political, economic, or social development. Furthermore, the failure to access and control ICTs might also affect the type of a skill that one develops and benefit from them (Caruso, 2014). When considered in the case of businesses, this phenomenon causes negative impacts to small and medium-sized enterprises (SMEs) (Batres and Perrett, 2014).

In relation to Malaysia, the phenomenon concerning the digital divide among SMEs related to utilization of ICTs than how they access it. This brings out the issue of second order exclusion. The recent survey shows that 90% of companies now use computers to access internet. However, only 60% use websites to access internet. While another 20% rely on ERP systems when they want to integrate their data into a single operational system (Malaysia: In-depth PESTLE insights, 2017). Sein and Furuholt (2012) showed the importance of ICTs in management of SMEs by pointing out the lack of information systems to study performance of companies as one of the reasons that contributes towards failure in companies. According to the study by Nyahodza and Higgs (2017), is that only 28% of SMEs in Malaysia fail to survive during their first year in operation while slightly 50% reach their fifth birth in operation.

Even though different scholars have focused on the topic of digital divide in relation to countries, companies, communities, and people over the last years (Chen,2013) , it is critical to understand that the issue of digital divide among SMEs in Malaysia forms one of the topic that is underexplored. Besides, this remains an important topic owing to the fact that as products and services, media, and channels continue to rely on ICTs, the level of interaction among those in the supply chain also increases. Consequently, this interconnection grows to become complex and fragmented. Additionally, advancement in technology and knowledge has come to play a key role in determining the type of innovation that SMEs adopt to achieve sustainable competitive advantage.

Contributions to the Enhancement of Knowledge and Industrial Practitioners

This thesis seeks to make key contributions to the enhancement of body of knowledge as well as industrial practitioners. Two spectrums of studies that focus on digital divide covers those that specialize on measuring digital divide and those whose objective is to discover factors associated to the level of exclusion (Philip, et al., 2015). This study seeks to make contribution to these two spectrums. It seeks to make a proposal on the best way to measure digital divide among companies. The second contribution involves using TOE model to show factors that influence digital divide among companies. The third contribution involves the use of a large sample of secondary information that has sample validity as one of the most unusual behaviour among studies focusing in digital divide in businesses (Ban and Popa, 2015). The paper also seeks to present an empirical validation regarding different aspects associated with the second-order digital divide among SMEs as a key contribution to literature.

A study conducted by Skaletsky, Soremekun and Galliers (2014) proposed a model that could guide studies when examining the aspect of digital divide. The study went ahead to partition the model into the first order and second order. The former partition involves impossibilities and complexities that businesses as well as people experience when accessing technology. While on the other hand, the later involves the difficulties experiences while utilizing or using technology and compiling findings from the use to achieve full benefits. …… explain that the adoption refers to the process whose initial stage is to create an innovation, pass it for other systems in a business to access, and have a proper utilization. Besides, several other user-centric models have now come up to explain characteristics associated with adoption such as integrated model Mitrovi? (2015), and Technology Acceptance Model (TAM). Model of diffusion and implementation (McDonald and Wren, 2017), Technology, organisation and environment (Van Deursen and van Dijk, 2015), Tri-Core Model (Napoli and Obar, 2014); and Theory of Innovation Diffusion (Huang and Chen, 2010) are theories that focus on adoption of technology in a business.

This study will use Technology, organisation and environment (TOE) as the underpinning model. The model focuses on organizations and knowledge that several aspects determine how an organization adopts a technological innovation. Such aspects will be treated as technological environment, internal environment, as well as external environment.

As indicated above, the other scholars have also used other models to understand the aspect digital divide among organizations. However, the major difference between the DOI theoretical model and TOE theory is that the latter incorporates external environment. This in itself might mean that the adoption of IT could be determined by opportunities as well as threats found in external environment where SMEs operate. For instance, the Malaysian government might come up with policies and regulations to control how organizations use information technology. While at the same time, the government might design incentives that make it easier to companies to adopt the use of IT for innovation purpose. While on the other hand, the DOI model fails to explain the impact of an external environment in determining the degree at which SMEs adopt IT. For example, the theory fails to recognize the importance of subjective factors, power, or political pressure.

Factors That Influence Digital Divide

Brick (2014) reiterates in their studies that any technological environment should incorporate all company infrastructures. Furthermore, this might extend to available resources in the market that play key roles in enabling companies adopt IT. The context of any organization should also depend on a number of characteristics in terms of the size, formalisation, complexity, and centralization. The TOE model incorporates different factors that make a company adopt ICT. Such factors must lie within the technological capability, organizational capability, and external environment. Innovations in organizations refer to processes, services, and processes that organizations develop internally or outsource from vendors. Industrial level studies have studies the concept of innovation with less focus on examining organizations level impacts. Organizations whether they are SMEs, of international organizations, support initiatives directed towards adoption of new innovations when occurring systems gets replaced to achieve improvements over the current systems (Ban and Popa, 2015). In addition, businesses might seek innovations because of the need to achieve improvement in performance (Badran, 2014). Furthermore, Srinuan and Bohlin (2011) argue that organizations might also look for innovations to create sustainable competitive advantage to compete against other competing firms.

Several models theories and models have been used to examine and determine individual-level acceptance of technologies to bridge the ever growing digital divide. Technology Acceptance model (TAM) was developed by Davis in 1989 to help predict and explore the acceptance behaviour that people develops before accepting any new technology. Other factors that the model explored included independent of the user acceptance and type of innovation being introduced in the market. Even though this theory is important in developing a deeper understanding as to why people accept specific technologies across a number of people, this model remain limited in examining the organizational-level acceptance of technologies.

According to the factors identified above from literature, this study seeks to use the following model that outlines important factors that allow a company to adopt ICT. Furthermore, the list presented in the table will help the study in identifying important variables that forms the dependent as well as the independent variables

Technological context

This variable involves the application as well as an object that organizations apply to use ICTs. Several scholars have confirmed that first and second constructs tend to affect technological context (Huffman, 2018). Huffman explain that the role of internal technology resources such as user time, developer, technological skills and infrastructure, determine the level at which companies can adopt ICT to bridge digital divide. Organisations depend on information systems to conduct their day-to-day operations. Organisations depend on information system databases to manage critical information concerning transactions, processes, suppliers, and customers. Any move to compromise the security of such systems could become too costly to an organization in terms of non-satisfied customers as well as loss in potential litigation, reduction in business, and goodwill (khoma, Dang and De Souza-Daw, 2013).

The Importance of TOE Model

Another concern that relates to security of information is service liability. In one of the studies conducted by Alonso-Almeida and Llach, 2013), they found that perceived liability affects technological innovation and consequent adoption of ICTs. Furthermore, Ban and Popa (2015) argue at that responding to security and issues about reliability remain critical in widespread adoption of ICT among SMEs.

Organizational context

The organisational context involves a number of characteristics that determine how employees make decisions before adopting ICTs. Several authors have focused on understanding organisational parameters as independent variables that determine adoption of ICT to bridge digital divide. For example, Mitrovi? (2015) acknowledged the significance of focusing on organisational characteristics in adoption and acceptance of ICT. Most importantly, the adoption literature recommends that the scope of an organisation play critical role in determining the degree at which management adopts ICT. Apart from the firm size, literature has also outlined that firm scope, technological knowledge as well as perceived benefits serve the role of determining adoption of ICT.

Environmental Concept

Dynamic market that arising from competitive pressure has be found as a motivator in adoption of ICand Ts (Sung Mi, Eojina, Tang and Bosselman, 2015). For example, NapoliObar (2014) conducted a critical analysis of strategic rational as a basis of understanding adoption of IT. Out of their findings, they proposed when a company adopts information system, it because easier to change rules of competition, understand how to affect the industry, and leverage on new ways that could help in outperforming other competitors.

McDonald and Wren (2017) perceive that in case regulatory agencies need to adopt specialised standards, then it would be prudent for firms to experience higher transaction cost to assist them fulfil their objectives. Additionally, Huang and Chen (2010) pointed out that failure for organizations to comply with environment regulations might limit transactional costs and other associated potential legal outcomes.

Context	Factors	measures
Organizational	Alignment of a strategy such as aligning the organization IT with the needs of the company	Alignment Skills Attitude
Aligning skills with ICT. Such skills could come from internet use ad computer use
The attitude of use. This could range from the positive attitude that managers develop towards a given ICT
Technological	This focuses on infrastructures that organizations depend on to accomplish their activities such as network, connection type, internet, and computers	Presence of network Presence of intranet Presence of extranet Dedicated links of connection
External environment	External support away from the company such as support from vendors	External support Market influence CRM ERP External recruitmentPressure following the influence of the market where SMEs operate in Malaysia. Some of the pressure could come from customers, suppliers, partners

 

Researchers use philosophies to gain assumptions on how to view the world around us. This study will use a number of assumptions as the underpinning background for the strategy and the appropriate method to select. According to (), is that every researcher must be aware about a number of existing philosophical commitments we design as part of our research strategies. This ends up affecting not only what we do but also what we try to investigate. Most importantly, the research paradigm that I seek to us in this study will be influenced by practical considerations. Nonetheless, the major influence will be to understand the relationship that exists between the process as well as the knowledge that I will have developed. While there are three types of paradigms; epistemology, ontology, and axiology, this study will rely on axiology.

Organizational Adoption of ICT: Factors and Impacts

The need to adopt this approach will depend on objectivism. Researchers seek to understand the existence of entities independent from the social actors. The study seeks to assume that resources in the companies under study are independent and objective in nature. They make decisions by adopting objective stance to examine a give aspect of either operation or management. In order to differentiate my understanding, I will use the findings from the research to explain drivers for adopting ICTs among different companies. Furthermore, this view will help in placing more emphasis towards structural aspects found within organizations. Every organisation might operate in a different environment; adopt different structures, and resources. Despite differences among organizations, the essence of operation and adoption of ICT to bridge the gaps caused by digital divide might remain same across all the SME under study.

1. Set of hypotheses based on the proposed Research Framework
2. H1: technological environment has characteristics that have positive influence on the use of SMEs in Malaysia
3. H2: organizational environment has characteristics that have positive influence on the use of SMEs in Malaysia
4. H3: : external environment has characteristics that have positive influence on the use of SMEs in Malaysia

The study will collect primary data through quantitative approach. The study will design survey instrument to help collect self-administered questionnaires. All the questionnaires will be designed to have four sections. The first section will collect data to understand the basic information regard the SMEs. Sections 2-4 will focus on technological, organisational, and external environment. I will use the official website of SME corporation in Malaysia to conduct a random selection of 350 samples. Random sampling will help select SMEs where every sample will have an equal opportunity to participate in the study. Furthermore, the website also presents the contact details management from individual companies. I will email the self-administered questionnaires to employees and managers from different departments. I will then allow them a period of two week to fill all the questionnaires and email back filled questionnaires. The two weeks will help increase the response rate among managers with busy schedule.

The study will test the three proposed hypothesis through multiple linear regressions. The analysis approach will require consideration of an index as the degree at which SMEs use ICT as a dependent variable. The study will also select on metric and binary as independent variables. The study will carry out a regression for every individual company whether it is small or medium. The approach will allow comparison of important factors according to the size of a company. The study will also create sector as a variable for every sector where the SMEs operates in Malaysia. Furthermore, I will also consider using stepwise method in statistical package for social sciences (SPSS VS 25) to conduct regression. Besides, the study will consider the significance level of 5% to include variables in the model. Analysis of normality of residues will be conducted to check for the quality of regression model (Ban and Popa, 2015).

Technology Acceptance Models: Individual and Organizational Perspectives

References

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