Factors that effecting E-commerce adoption in Malaysian SMEs: The trend of previous studies
Introduction: According to Faster, Faster and MacDonald (2000), Electronic commerce means conducting business which includes exchange of information, product and service as well as payment using E-based technologies over the internet. Syed (2005), reported that by adopting E-commerce company can reduce cost as well as increase market potential and enjoy new business opportunities. This statement is also supported by many other researchers like Grandon and Pearson (2004). For last two decades Electronic commerce been improved and have an increasing effect on business in whole world. According to Daniel (2003), in 2001 the transaction of E-commerce was $474 billion which estimated to increase at a number of $2400 billion by the year 2004. The author also reported that at 2002 the revenue that generated from B2B E-commerce in the world was $823 which increased $1400 billion at the year 2003. This continually increasing figure indicate that now a day's no business whether its multinational or small and medium enterprise cannot survive without a E-commerce adoption.
According to Malaysia's Ministry of Internal Trade and Industry, small and medium enterprise which also called SME is a company with an annual income of not more than RM25 million and with not more than 150 full-time employees. Now a day more than 80% of Malaysian manufacturing companies are identified as SME where 35% of total workforces are employed as a full-time basis. Fong (2002) reported that among the Malaysian SME sector, 20% of traditional sectors of food and beverage. Whether 18% are of fabric metal products, 17% are of wood and wood products and 4% are of metals. Many previous studies in Malaysia shows that SME are the main force of Malaysia's economic development, job creation and competitiveness in both international and domestic market. Although it is very important for SMEs to adopt E-commerce but previous studies identified that in Malaysia E-commerce are more likely used by large firms rather than SMEs. This because SMEs have less resources, manpower and technological abilities than MNCs (Syed 2005),
This academicals research paper is aimed to review the previous studies and elaborate the trends of Malaysian SMEs as well as identify the factors that effecting the adoption of E-commerce in Malaysian SMEs. It is expected that this paper would provide useful information for academicians who want to study on e-commerce usage among SMEs in Malaysian content. This study will highlight on the factors that have effect on e-commerce adoption by SMEs as well as conclude with a set of recommendation that can helpful for both government and SME owners of Malaysia.
Literature review:
E-commerce and its benefits: Compare to large organization, there are few research had been conducted to discover the adoption of e-commerce by small and medium enterprise. According to Daniel (2002) in many SMEs e-commerce is used for communication, research, marketing and business with both supplier and consumers. Whereas in another study Martin and Matlay (2003) emphasized that ecommerce is basically use for marketing purpose where email and websites used for its cost effectiveness and flexibility and advertising, after sales support and servicing is provided for increasing brand value. In Malaysian context Sulaiman (2000) reported that ecommerce is used for electronic marketing and advertisement as well as customer support, ordering and make payment online.
The benefits of using ecommerce cannot be described in a sentence. Subramaniam and Shaw (2002) el at, in a B2B trading the most expenditure occur due to procurement of product and service which is also the most important function of this business. Ecommerce can improve procurement process by using web based technologies. For example, by using ecommerce, companies enjoy more options to select their suppliers from internet. This can increase their bargaining power over their suppliers as well as improve their supply chain management by shortening supply time and better ordering process (Haynes, 1998). Also the buyer can get the real time information such as price and condition of the product which is also better for the business (Stone, 2003). Also this higher bargaining power allow small companies to improve their product by providing better quality and value added service as well as improve cost control. Auger (1997) reported that due to its worldwide access, ecommerce help organization to get better access to a huge range of customers. SMEs can use this opportunity to start their trading on a global scale and enjoy a competitive advantage.
Although ecommerce has many possible usage but previous studies reported that most of the small and medium enterprise use ecommerce as their communication medium by sending or receiving emails (Poon and Swatman, 1997). The authors concluded that the main reasons of not adopting ecommerce in their business are lack of resource and expertise of the SME owners.
Previous researches on international context: For many years researchers have been conducting research on e-commerce adoption many countries and various context. From their findings they identified some specific factors that have an impact on e-commerce adoption. For example in Australia and New Zealand at 2001-2002, Ratnasingam conducted a research where he found that lack of securities, customer readiness as well as organization inertia and lack of knowledge are the main barriers to the adoption of e-commerce. Whereas in another research Mehrtens (2001) reported that perceive benefits, organizational readiness and external pressure from buyers and suppliers have highest effect on e-commerce adoption in New Zealand.
Previous research on Malaysian context: A landmark research was conducted by Tan and Eze (2008) in Malaysia at 2008 where he used Roger's model of innovation diffusion as his framework and identified that relative advantage, compatibilities and trialability have a positive impact on adoption e-commerce by SMEs of Malaysia. The authors argued that the compatibility is the most important factor due to its perception of the e-commerce on business now as well as in the future. Another important factor is trialability because it's positively related with compatibility which indicates the ability of using e-commerce without a high start-up cost. The other variables are observability, complexity, ICT Security or Confidentiality and ICT Costs.
In Malaysian context there are many factors that are responsible for low usage of ecommerce among the SME's (Sulaiman, 2000). According to Hussin and noor (2005) , the main reasons for not choosing ecommerce by SMEs are lack of knowledge, lack of qualified IT professionals, doubts about benefits and security and most of all high implementation cost. This statement is also supported by Mohamad and Ismail (2009) where they mentioned that lack of internet security is the main barrier of adoption ecommerce among SMEs in Malaysia. Compare to large firms SMEs are less concern of internet securities and that is why Malaysian consumers are not interested to buy through internet with their credit card (Hua, Rajesh and Theng, 2009). In an another study Sulaiman (2000) also found that insufficient security, lack of IT skilled professionals and high cost of setting and maintenance are the barriers of adoption ecommerce among Malaysian SMEs. Hua, Rajesh and Theng, (2009) reported that in order to improve productivity and performance, Malaysian SMEs are willing to adopt ecommerce now a day but due to lack of technical expertise and security issue Malaysian SMEs facing problem to implementing ecommerce.
Another landmark research conducted by Mohamad and Ismail (2009) classified the factors that are effecting on Malaysian SMEs in to four categories. They are identified as managerial, organizational, technological and external factors. Our previous researchers emphasized that managerial categories consist of management characteristics, IT expertise and Top management support. As SMEs are owned by a single individual so the owner education level, his characteristics and readiness have a positive impact on adoption e-commerce on his organization (Hussin and Noor, 2005). The organizational factor includes cost of implement, company size, and industry sector as well as organization readiness. As the SMEs have a lack of resource and manpower so they are less willing to adopt ecommerce compare to large organization (Sulaiman, 2000). Technological factor include security, relative advantage, compatibility and perceive usefulness. As we mention earlier due to lack of security compare to large organization, Malaysian customer less likely use ecommerce when doing business with a SME. Especially they are very conservative using their credit card when trading from a SME (Sulaiman, 2000). Finally the external factor which includes government role and trading partner or competitors pressure as well as vendors supports. Malaysian government has taken many initiatives to promote ecommerce in Malaysia. Among them introducing a inter-agency task force on ecommerce in 1997, lunching of a five year IT master plan also known as Myicms 886 and introducing of cyber laws also known as Electronic Commerce Bill 2006 are important (Hussin, Nor and Suhaimi, 2008)
Some selected issues:Â According to Mohamad and Ismail (2009), slow acceptations and progress in ecommerce usage and ecommerce and its Impact on Firm Performance are the primary issues that create from the previous researches. This statement is also supported by Hussin and Noor (2005), where he includes contradictory ecommerce practice among Malaysian SMEs as an important issue.
Conclusion: this paper examines the previous studies on ecommerce practice and adoption among Malaysian SMEs. After going through a large number of research paper and article this academicals paper end with several conclusion. First of all most of the previous research explain the adoption of ecommerce and its usages but few of them investigate of the impact of ecommerce on SMEs performance. A farther research is necessary in this context. Secondly most of the research was formulated by innovation related theories such as Diffusion of innovation (Rogers, E.M. 1983) and Technology acceptance model. A more advanced research such as marketing research as well as entrepreneurial and strategic are needed to get the full advantage of adoption ecommerce among Malaysian SMEs. Thirdly in order to improve our understanding of using ecommerce in a developing country like Malaysia, we need more researchers to come forward and conduct some more explanatory as well as exploring research on this context. Because there is a significant difference between ecommerce usages in developing and developed country and from the finding that we get from the developed countries may not be applicable for developing country like Malaysia and for a better understanding and implementation we need more empirical research on this topic. Finally, from previous research this paper identified some factors that have impact on ecommerce adoption among Malaysian SMEs. Due to time limitation, author do not claim that this review covers all existing research on this specific area but he believes that this study will be useful for those who have a desire to conduct further research on this specific topic as well as policy makers who are working on the development of Malaysian SMEs.
Reference:
Auger, P.& Gallaugher , J. M. 1997, 'Factors affecting the adoption of an Internet-Based sales presence for small businesses.', The Information Society, vol.13, no.1, pp. 55-74.
Daniel, E. & Wilson, H. 2002, ‘Adoption intentions and benefits realized: a study of ecommerce in UK SMEs', Journal of Small Businesses and Enterprise Development , vol.9, no.4, pp. 331-348.
Daniel, E. 2003, ' an exploration of the inside-out model: e-commerce integration in UK SMEs', Journal of Small Businesses and Enterprise Development, vol.10, no.3, pp. 233-249.
Fraser, J., Fraser, N. & McDonald, F. 2000,  'The strategic challenge of electronic commerce', Supply Chain Management: An International Journal, vol. 5, no.1, pp. 7-14.
Fong, C. 2002. Keynote address by the Minister of Human Resources in conjunction with the launching of the seminar for small and medium industry (SMI) employers, May 21, 2002, Hotel Nikko, Kuala Lumpur, Malaysia.
Grandon, E. and J.M Pearson (2004), Electronic Commerce Adoption: an Empirical Study of Small and Medium US businesses, Information & Management (2004) Article in Press, 1-20.
Hussin and Noor (2005), Innovating Business Through E-commerce: Exploring the Willingness of Malaysian SMEs. The Second International Conference on Innovations in IT (IIT'05).
Hussin, Nor and Suhaimi, (2008), Perceived Attributes of E-Commerce and the Adoption Decision: The Case of Malaysian SMEs. Jurnal Teknologi Maklumat & Multimedia 5(2008): 107-125.
Haynes, P. J., Becherer, R. C. & Helms, M.M. 1998, ‘Small and mid-sized businesses and Internet Use: unrealized potential?' Internet Research:  Electronic Networking Applications and Policy, vol.8, no.3, pp. 229-235.
Hua, Rajesh and Theng (2009), Determinants of e-Commerce adoption among small and Medium-sized enterprises in Malaysia. International Journal of E-Adoption, 1(4), 1-18, October-December 2009.
Martin, L. M. & Matlay, H. 2003, ‘Innovative use of Internet in established small firms; the impact of knowledge management and organizational learning in accessing new opportunities', Qualitative Market Research: An International Journal, vol.6, no.1, p.18-26.
Mohamad and Ismail (2009), Electronic Commerce Adoption in SME: The Trend of Prior Studies. Journal of Internet Banking and Commerce, August 2009, vol. 14, no.2.
Mehrtens, J., Cragg, P.B. Mills, A.M. (2001) A Model of Internet Adoption by SMEs, Information & Management 39 (2001) 165-176
Poon, S. & Swatman, P. M. C. 1997, ‘Small business use of the Internet.'  International Marketing Review, vol.14, no.5, pp. 385-402.
Rogers, E.M. (1983) Diffusion of Innovations, 4th ed. New York: Free Press.
Ratnasingam, P. (2001) Electronic Commerce Adoption in Australia and New Zealand, Malaysian Journal of Computer Sciences, Vol. 14(1) June 2001, 1-8.
Sulaiman, A. 2000, ‘The Status of e-commerce applications in Malaysia', Information Technology for Development, vol.9, pp.153-161.
Subramaniam, C. & Shaw, M.J. 2002, ‘A study of the value and Impact of B2B E- commerce: The case of Web-Based Procurement', International Journal of Electronic Commerce, vol. 6, no. 4, pp19-40.
Stone, M. 2003, ‘SME e-business and supplier-customer relations', Journal of Small Business and Enterprise Development, vol. 10, no. 3, pp 345-353.
Syed S.A, Ali, K, Hishamuddin, B.I. and Ismail, A. ‘Perceived Benefits of E-Commerce Adoption in the Electronic Manufacturing Companies in Malaysia,' Journal of Social Sciences (1:3), 2005, pp. 188-193.
Tan and Eze (2008), An Empirical Study of Internet-Based ICT Adoption Among Malaysian SMEs. Communications of the IBIMA Volume 1, 2008.
According to Malaysia's Ministry of Internal Trade and Industry, small and medium enterprise which also called SME is a company with an annual income of not more than RM25 million and with not more than 150 full-time employees. Now a day more than 80% of Malaysian manufacturing companies are identified as SME where 35% of total workforces are employed as a full-time basis. Fong (2002) reported that among the Malaysian SME sector, 20% of traditional sectors of food and beverage. Whether 18% are of fabric metal products, 17% are of wood and wood products and 4% are of metals. Many previous studies in Malaysia shows that SME are the main force of Malaysia's economic development, job creation and competitiveness in both international and domestic market. Although it is very important for SMEs to adopt E-commerce but previous studies identified that in Malaysia E-commerce are more likely used by large firms rather than SMEs. This because SMEs have less resources, manpower and technological abilities than MNCs (Syed 2005),
This academicals research paper is aimed to review the previous studies and elaborate the trends of Malaysian SMEs as well as identify the factors that effecting the adoption of E-commerce in Malaysian SMEs. It is expected that this paper would provide useful information for academicians who want to study on e-commerce usage among SMEs in Malaysian content. This study will highlight on the factors that have effect on e-commerce adoption by SMEs as well as conclude with a set of recommendation that can helpful for both government and SME owners of Malaysia.
Literature review:
E-commerce and its benefits: Compare to large organization, there are few research had been conducted to discover the adoption of e-commerce by small and medium enterprise. According to Daniel (2002) in many SMEs e-commerce is used for communication, research, marketing and business with both supplier and consumers. Whereas in another study Martin and Matlay (2003) emphasized that ecommerce is basically use for marketing purpose where email and websites used for its cost effectiveness and flexibility and advertising, after sales support and servicing is provided for increasing brand value. In Malaysian context Sulaiman (2000) reported that ecommerce is used for electronic marketing and advertisement as well as customer support, ordering and make payment online.
The benefits of using ecommerce cannot be described in a sentence. Subramaniam and Shaw (2002) el at, in a B2B trading the most expenditure occur due to procurement of product and service which is also the most important function of this business. Ecommerce can improve procurement process by using web based technologies. For example, by using ecommerce, companies enjoy more options to select their suppliers from internet. This can increase their bargaining power over their suppliers as well as improve their supply chain management by shortening supply time and better ordering process (Haynes, 1998). Also the buyer can get the real time information such as price and condition of the product which is also better for the business (Stone, 2003). Also this higher bargaining power allow small companies to improve their product by providing better quality and value added service as well as improve cost control. Auger (1997) reported that due to its worldwide access, ecommerce help organization to get better access to a huge range of customers. SMEs can use this opportunity to start their trading on a global scale and enjoy a competitive advantage.
Although ecommerce has many possible usage but previous studies reported that most of the small and medium enterprise use ecommerce as their communication medium by sending or receiving emails (Poon and Swatman, 1997). The authors concluded that the main reasons of not adopting ecommerce in their business are lack of resource and expertise of the SME owners.
Previous researches on international context: For many years researchers have been conducting research on e-commerce adoption many countries and various context. From their findings they identified some specific factors that have an impact on e-commerce adoption. For example in Australia and New Zealand at 2001-2002, Ratnasingam conducted a research where he found that lack of securities, customer readiness as well as organization inertia and lack of knowledge are the main barriers to the adoption of e-commerce. Whereas in another research Mehrtens (2001) reported that perceive benefits, organizational readiness and external pressure from buyers and suppliers have highest effect on e-commerce adoption in New Zealand.
Previous research on Malaysian context: A landmark research was conducted by Tan and Eze (2008) in Malaysia at 2008 where he used Roger's model of innovation diffusion as his framework and identified that relative advantage, compatibilities and trialability have a positive impact on adoption e-commerce by SMEs of Malaysia. The authors argued that the compatibility is the most important factor due to its perception of the e-commerce on business now as well as in the future. Another important factor is trialability because it's positively related with compatibility which indicates the ability of using e-commerce without a high start-up cost. The other variables are observability, complexity, ICT Security or Confidentiality and ICT Costs.
In Malaysian context there are many factors that are responsible for low usage of ecommerce among the SME's (Sulaiman, 2000). According to Hussin and noor (2005) , the main reasons for not choosing ecommerce by SMEs are lack of knowledge, lack of qualified IT professionals, doubts about benefits and security and most of all high implementation cost. This statement is also supported by Mohamad and Ismail (2009) where they mentioned that lack of internet security is the main barrier of adoption ecommerce among SMEs in Malaysia. Compare to large firms SMEs are less concern of internet securities and that is why Malaysian consumers are not interested to buy through internet with their credit card (Hua, Rajesh and Theng, 2009). In an another study Sulaiman (2000) also found that insufficient security, lack of IT skilled professionals and high cost of setting and maintenance are the barriers of adoption ecommerce among Malaysian SMEs. Hua, Rajesh and Theng, (2009) reported that in order to improve productivity and performance, Malaysian SMEs are willing to adopt ecommerce now a day but due to lack of technical expertise and security issue Malaysian SMEs facing problem to implementing ecommerce.
Another landmark research conducted by Mohamad and Ismail (2009) classified the factors that are effecting on Malaysian SMEs in to four categories. They are identified as managerial, organizational, technological and external factors. Our previous researchers emphasized that managerial categories consist of management characteristics, IT expertise and Top management support. As SMEs are owned by a single individual so the owner education level, his characteristics and readiness have a positive impact on adoption e-commerce on his organization (Hussin and Noor, 2005). The organizational factor includes cost of implement, company size, and industry sector as well as organization readiness. As the SMEs have a lack of resource and manpower so they are less willing to adopt ecommerce compare to large organization (Sulaiman, 2000). Technological factor include security, relative advantage, compatibility and perceive usefulness. As we mention earlier due to lack of security compare to large organization, Malaysian customer less likely use ecommerce when doing business with a SME. Especially they are very conservative using their credit card when trading from a SME (Sulaiman, 2000). Finally the external factor which includes government role and trading partner or competitors pressure as well as vendors supports. Malaysian government has taken many initiatives to promote ecommerce in Malaysia. Among them introducing a inter-agency task force on ecommerce in 1997, lunching of a five year IT master plan also known as Myicms 886 and introducing of cyber laws also known as Electronic Commerce Bill 2006 are important (Hussin, Nor and Suhaimi, 2008)
Some selected issues:Â According to Mohamad and Ismail (2009), slow acceptations and progress in ecommerce usage and ecommerce and its Impact on Firm Performance are the primary issues that create from the previous researches. This statement is also supported by Hussin and Noor (2005), where he includes contradictory ecommerce practice among Malaysian SMEs as an important issue.
Conclusion: this paper examines the previous studies on ecommerce practice and adoption among Malaysian SMEs. After going through a large number of research paper and article this academicals paper end with several conclusion. First of all most of the previous research explain the adoption of ecommerce and its usages but few of them investigate of the impact of ecommerce on SMEs performance. A farther research is necessary in this context. Secondly most of the research was formulated by innovation related theories such as Diffusion of innovation (Rogers, E.M. 1983) and Technology acceptance model. A more advanced research such as marketing research as well as entrepreneurial and strategic are needed to get the full advantage of adoption ecommerce among Malaysian SMEs. Thirdly in order to improve our understanding of using ecommerce in a developing country like Malaysia, we need more researchers to come forward and conduct some more explanatory as well as exploring research on this context. Because there is a significant difference between ecommerce usages in developing and developed country and from the finding that we get from the developed countries may not be applicable for developing country like Malaysia and for a better understanding and implementation we need more empirical research on this topic. Finally, from previous research this paper identified some factors that have impact on ecommerce adoption among Malaysian SMEs. Due to time limitation, author do not claim that this review covers all existing research on this specific area but he believes that this study will be useful for those who have a desire to conduct further research on this specific topic as well as policy makers who are working on the development of Malaysian SMEs.
Reference:
Auger, P.& Gallaugher , J. M. 1997, 'Factors affecting the adoption of an Internet-Based sales presence for small businesses.', The Information Society, vol.13, no.1, pp. 55-74.
Daniel, E. & Wilson, H. 2002, ‘Adoption intentions and benefits realized: a study of ecommerce in UK SMEs', Journal of Small Businesses and Enterprise Development , vol.9, no.4, pp. 331-348.
Daniel, E. 2003, ' an exploration of the inside-out model: e-commerce integration in UK SMEs', Journal of Small Businesses and Enterprise Development, vol.10, no.3, pp. 233-249.
Fraser, J., Fraser, N. & McDonald, F. 2000,  'The strategic challenge of electronic commerce', Supply Chain Management: An International Journal, vol. 5, no.1, pp. 7-14.
Fong, C. 2002. Keynote address by the Minister of Human Resources in conjunction with the launching of the seminar for small and medium industry (SMI) employers, May 21, 2002, Hotel Nikko, Kuala Lumpur, Malaysia.
Grandon, E. and J.M Pearson (2004), Electronic Commerce Adoption: an Empirical Study of Small and Medium US businesses, Information & Management (2004) Article in Press, 1-20.
Hussin and Noor (2005), Innovating Business Through E-commerce: Exploring the Willingness of Malaysian SMEs. The Second International Conference on Innovations in IT (IIT'05).
Hussin, Nor and Suhaimi, (2008), Perceived Attributes of E-Commerce and the Adoption Decision: The Case of Malaysian SMEs. Jurnal Teknologi Maklumat & Multimedia 5(2008): 107-125.
Haynes, P. J., Becherer, R. C. & Helms, M.M. 1998, ‘Small and mid-sized businesses and Internet Use: unrealized potential?' Internet Research:  Electronic Networking Applications and Policy, vol.8, no.3, pp. 229-235.
Hua, Rajesh and Theng (2009), Determinants of e-Commerce adoption among small and Medium-sized enterprises in Malaysia. International Journal of E-Adoption, 1(4), 1-18, October-December 2009.
Martin, L. M. & Matlay, H. 2003, ‘Innovative use of Internet in established small firms; the impact of knowledge management and organizational learning in accessing new opportunities', Qualitative Market Research: An International Journal, vol.6, no.1, p.18-26.
Mohamad and Ismail (2009), Electronic Commerce Adoption in SME: The Trend of Prior Studies. Journal of Internet Banking and Commerce, August 2009, vol. 14, no.2.
Mehrtens, J., Cragg, P.B. Mills, A.M. (2001) A Model of Internet Adoption by SMEs, Information & Management 39 (2001) 165-176
Poon, S. & Swatman, P. M. C. 1997, ‘Small business use of the Internet.'  International Marketing Review, vol.14, no.5, pp. 385-402.
Rogers, E.M. (1983) Diffusion of Innovations, 4th ed. New York: Free Press.
Ratnasingam, P. (2001) Electronic Commerce Adoption in Australia and New Zealand, Malaysian Journal of Computer Sciences, Vol. 14(1) June 2001, 1-8.
Sulaiman, A. 2000, ‘The Status of e-commerce applications in Malaysia', Information Technology for Development, vol.9, pp.153-161.
Subramaniam, C. & Shaw, M.J. 2002, ‘A study of the value and Impact of B2B E- commerce: The case of Web-Based Procurement', International Journal of Electronic Commerce, vol. 6, no. 4, pp19-40.
Stone, M. 2003, ‘SME e-business and supplier-customer relations', Journal of Small Business and Enterprise Development, vol. 10, no. 3, pp 345-353.
Syed S.A, Ali, K, Hishamuddin, B.I. and Ismail, A. ‘Perceived Benefits of E-Commerce Adoption in the Electronic Manufacturing Companies in Malaysia,' Journal of Social Sciences (1:3), 2005, pp. 188-193.
Tan and Eze (2008), An Empirical Study of Internet-Based ICT Adoption Among Malaysian SMEs. Communications of the IBIMA Volume 1, 2008.