Strategic use of the Internet by small- and medium-sized companies: an exploratory study

Abstract

The paper investigates the extent to which the adoption of Internet software and services in small- and medium-sized enterprises (SMEs) has been strategic, i.e. based upon the exploitation of the network characteristics of the new technology. Within SMEs, it seems that opportunistic motivations towards the adoption of the Internet, i.e. until cost-effectiveness of adoption becomes apparent to managers, are predominate. In applying a modified strategic use model, the paper considers strategic use as the ability of business users to recognize the strategic elements in the usage of the Internet and to relate them to network formation in the specific user environment. The extent of strategic use is linked to communication requirements, competitive pressure and the support and incentives in the adoption process of the Internet by SMEs. The empirical analysis employs a large data set on 264 Dutch SMEs that provided detailed information on their adoption of Internet services and software. The research shows that the communication requirements have been a motivating factor of Internet adoption by SMEs. Other strategic determinants derived from the diffusion literature such as competitive pressure or support and incentives for adoption hardly stimulate SMEs to adopt the Internet.

Introduction

Despite the widespread acceptance of Internet use in corporate environments, the extent of Internet use continues to vary widely among small- and medium-sized enterprises (SMEs). Whereas some SMEs benefit from rapid Internet growth, selling over the Internet or experimenting with new business models, others are barely interested in the medium. Existing explanations of these differences rely on firm or market characteristics as is common in innovation diffusion models (see NERA, 1998 and Forrester Research, 1998). Such models, however, do not adequately consider the nature of the innovation and how it affects firms’ motivations for adoption. In the realm of information and communication technology (ICT) adoption, this gap has been addressed through the concept of strategic use, which incorporates factors from diffusion models with those related to the network characteristics (see Antonelli, 1989) of information and communication technologies (Preissl, 1995).

The goal of the research described here is to provide a more clear understanding of the motivations for adoption and use of the Internet by SMEs. To this end, the model of strategic use is slightly modified for the context of the Internet and is used to generate hypotheses which are subsequently tested using a sample of 264 SMEs in the Netherlands.¹ This analysis is thus an exploration of the usefulness of the strategic use concept, particularly in its ability to help identify determinants of Internet adoption and use by SMEs.