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JSBED
20,4
754
Journal of Small Business and
Enterprise Development
Vol. 20 No. 4, 2013
pp. 754-787
q Emerald Group Publishing Limited
1462-6004
DOI 10.1108/JSBED-12-2011-0037
The role of owner/manager in
adoption of electronic commerce
in small businesses
The case of developing countries
Morteza Ghobakhloo and Sai Hong Tang
Universiti Putra Malaysia, Serdang, Malaysia
Abstract
Purpose – Based on theories from the innovation diffusion literature, the purpose of this paper is to
develop an integrated model of electronic commerce (EC) adoption in small businesses (SBs) of
developing countries. The research model specifies variables at managerial level as the primary
determinants to EC adoption in SBs.
Design/methodology/approach – A questionnaire-based field survey was conducted to collect
data from 268 owner/managers of SBs in Iran. The data were analysed using factorial analysis.
Subsequently, six hypotheses were derived and tested by hierarchical multiple regression and logistic
regression analysis.
Findings – Perceived benefits, perceived compatibility, perceived risks, perceived costs, and
innovativeness were found to be the significant determinants of decision to adopt EC. Likewise,
discussion on discriminators between adopters and non-adopters of different EC applications has been
provided.
Research limitations/implications – Cross-sectional data of this research tends to have certain
limitations when it comes to explaining the direction of causality of the relationships between the
variables. The study focuses only on the manufacturing SBs of Iran.
Practical implications – The research findings have important implications for practising
managers, information systems experts, and policy-makers. Governments should follow specific
policies to facilitate institutionalisation of EC in SBs. Similarly, EC vendors and technology providers
should collaborate with SBs to enhance the compatibility of different EC applications with specific
characteristics of these businesses.
Originality/value – To the best of the authors’ knowledge, this paper is perhaps one of the first that
examines the adoption of EC by SBs in a developing country context, using a research model which
tests the effects of owner/managers’ attributes on adoption of simple and advanced EC applications.
Keywords Iran, Developing countries, Electronic commerce, Owner/managers, Small businesses,
Top management, Adoption
Paper type Research paper
1. Introduction
As the major source of employment opportunities, development and commercialisation
of innovation, and improvement of marketing competiveness in a globalised economy,
This research was supported by an International Graduate Research Fellowship (IGRF) from
University Putra Malaysia (Ref No: UPM/SPS/GS30834). The authors are grateful to Guest
Editor Dr Paul Jones for going well beyond the call of duty to help substantially improve the
quality of this manuscript. The authors would like to thank all the anonymous reviewers for the
detailed and insightful comments and suggestions, which were invaluable in revising and
improving the manuscript.
small businesses (SBs) are regarded as the engine of economic development and The role of
growth, in particular in developing countries where poverty, uncompetitiveness of owner/manager
economy, and unemployment are still paralysing the society (Cardona et al., 2007;
Radas and Bozic, 2009). For example, SBs are the most important source of job creation
in the US economy as it is reported that nearly 98 percent of all businesses are
classified as SBs (Neumark et al., 2011). Similar to large organizations, competitive
pressure and the need for globalisation as an impetus to economic growth compel SBs 755
to adopt EC and do business electronically (Boeck et al., 2009).
EC presents many opportunities for businesses to improve their performance
(Simpson and Docherty, 2004). It can provide the adopters with cost savings resulting
from reduced paper transactions, reduced buyers’ search, shorter order cycle time, and
the subsequent inventory reduction ( Jennex et al., 2004). EC also increases
opportunities for the effective supplier/buyer partnership through establishment of a
web of business-to-business communication networks (Grandon and Pearson, 2004;
Quayle, 2002). EC can take a variety of forms including Electronic Data Interchange
(EDI), mobile telephone, direct link-ups with suppliers, Internet, intranet, extranet,
electronic catalogue ordering, and e-mail (Ghobakhloo et al., 2011a; Quayle, 2002).
Adoption of technological innovations such as EC applications in organisations is
considered as a multi-stage process. In fact, in the cycle of EC innovation diffusion,
adoption (initiation), implementation, and post-implementation are three discrete
phases (Thong, 1999, Thong, 2001). The primary phase is the adoption phase in which
the information about EC are accumulated and evaluated, and decisions about
adopting EC are made (Ghobakhloo et al., 2011a). The second phase is the
implementation phase in which physical deployment of Information System (IS)tools
into business occurs (Ghobakhloo et al., 2011b). The third phase includes the
assessment of extent of usage, as well as performance evaluation (Thong, 2001; Zhu,
2004). In this phase, the organization assesses the business value of implemented EC/IS
infrastructure and relative applications at the SB level (Ghobakhloo et al., 2011b).
Prior IS literature shows that, to date, the majority of research on EC, particularly in
the context of SBs is concentrated on the implementation stage with little empirical
research on the determinants of EC adoption (in adoption stage) in SBs (Al-Qirim, 2007;
Ghobakhloo et al., 2011a; Oliveira and Martins, 2010). Moreover, findings from studies
on EC adoption on large organisations are unlikely to be generalisable to SBs because
of various fundamental differences between large and SBs. The process of EC adoption
in SBs is directly impacted upon top management where all decisions from daily
functions to future investments are made by them (Bruque and Moyano, 2007;
Ghobakhloo et al., 2011c).
In addition, SBs in developing countries face different challenges compared to SBs
in developed countries and differ greatly in adopting and benefiting from EC
(Ghobakhloo and Tang, 2011: Tan et al., 2007). Due to several contextual differences
(both organisational and environmental) between SBs in developed and developing
countries, generalising the results of prior studies on EC adoption in SBs to the
developing countries context can be of some concern (Molla and Licker, 2005). For
example, and in a corresponding research stream Straub et al. (2002) found that
contextual differences such as specific cultural beliefs in Arab countries (e.g. Jordan,
Egypt, Saudi Arabia, Lebanon, and the Sudan) significantly differentiate the process of
IS and technology transfer compared to Western countries. It is sometimes reported
JSBED that EC does not offer greater returns to SBs in developing countries as it cannot reduce
20,4 transportation and logistics costs effectively (Humphrey et al., 2003). Likewise,
businesses in developing countries usually suffer from an absence of a culture of sharing
data which results in low data quality and lack of reliable and consolidated marketing
(Jennex et al., 2004). Finally, and in their recent study, Ghobakhloo and Tang (2011)
demonstrated that due to specific e-environment of developing countries (e.g. Iran), EC
756 adoption might be more risky and costly for businesses in these countries. Therefore,
this paper investigates the effect of individual characteristics of the owner/managers on
two different phases of EC adoption in the context of SBs in a developing country
(Iranian SBs in this study), a topic that has received little attention to date. Accordingly,
this paper aims to answer the following research questions in the context of Iranian SBs:
RQ1. How different owner/manager’s characteristics influence the decision to adopt
EC?
RQ2. Which owner/manager’s characteristics are the discriminating factors for
adoption and non-adoption of four different EC applications?

2. EC in Iran small business context

As with SBs in developed countries, worldwide competition and growing global market
are pressuring Iranian SBs to adopt more advanced IS-based technologies and take
advantages of their benefits (Ghobakhloo et al., 2011a). Furthermore, the Iran government
is running supportive policies including EC/IS institutionalization across country. Similar
to most developing countries, Iranian SBs seem to be faced with lack of required
infrastructure and culture of e-business. Although International Monetary Fund (IMF-
International Monetary Fund, 2011) report shows that with the gross domestic product of
almost 500 billion US Dollars (USD) in 2011, Iran’s economy stands as one of the top 25
largest economies in the world, however, 2010 Information and Communication
Technologies (ICT) Development Index (ITU-International Telecommunication Union,
2011) shows that Iran is considered as the 87th country regarding ICT development in
2010, which shows relative decline in this ranking compared to 2008 (84th in 2007). This
may suggest that Iran requires more appropriate infrastructure for effective e-business.
Moreover, it should be mentioned that although Iran has experienced radical and
revolutionary improvement in ICT infrastructure between 2009-2012[1], nevertheless,
2010 Digital Economy Rankings reported by the Economist Intelligence Unit (The) (2011)
in 2010 suggests that Iran is the 68th country among countries studied and is behind
many countries such as China, Malaysia, South Africa, and Ukraine within transitioning
economies in term of EC readiness. Although Fathian et al. (2008) demonstrated that as a
result of commencing a very comprehensive economic plan by Iranian government
(which prioritizes widespread use and institutionalization of ICT in the country by
different government departments and ministries in Iran since 2002) the e-readiness of the
most businesses has increased. However, Digital Economy Rankings reveals the relative
inappropriateness of e-business development in Iran.
Prior studies on EC adoption in Iran (e.g. Ghobakhoo et al., 2011a, Ghobakhloo and
Tang, 2011) suggest that although Iranian SBs are suffering from limited EC
infrastructure, lack of culture of sharing data across the industry, and significant
financial constraints, yet, the EC adoption rate is still considerable. This discussion
implies the innate differences of EC adoption within SBs of developed and developing
countries, particularly in terms of environmental and organizational circumstances. The role of
Accordingly, we believe that it would be useful to investigate how individual attributes
identified in the literature would influence EC adoption within Iranian SBs. It would
owner/manager
also be useful to know if there is any difference in the relevancy of prior influencing
factors in the Iranian context.

3. Background and research model 757

The functional parallels between IS adoption and technological innovation adoption
have been suggested by various IS researchers (Al-Gahtani et al., 2007; Riemenschneider
et al., 2003). The literature on IS-based technology adoption by organisations (including
EC) suggests that most research is based on three theoretical backgrounds:
(1) Resource-based theory (Caldeira and Ward, 2002, 2003; Kyobe, 2004).
(2) The Technology-Organisation-Environment framework (Kuan and Chau, 2001;
Pan and Jang, 2008; Zhu et al., 2003; Zhu and Kraemer, 2005).
(3) The diffusion of innovation (Beatty et al., 2001; Mehrtens et al., 2001; Tan et al.,
2009).
The resource-based theory (RBT) is generally concerned with the rate, direction and
performance implications of diversification strategy which are areas of considerable
focus in the strategy field (Mahoney and Pandian, 1992). RBT fits comfortably within
the conversation of organizational economics and provides a theoretical rationale for
predicting superior performance for certain categories of related diversification
(Barney, 1991; Mahoney and Pandian, 1992). In IS and EC context, RBT is usually
employed to analyse how organizations can achieve business value from EC/IS
implementation (Ghobakhloo et al., 2011b). Thus, RBT provides an appropriate
theoretical basis for analysing the third phase of EC/IS adoption, which is the adoption
success and performance evaluation.
The technology-organisation-environment framework (TOE) framework investigates
three aspects of a SB’s context that affect the process by which it adopts and implements
a technological innovation (Pan and Jang, 2008). These three aspects are termed
technological context, organizational context, and environmental context (Zhu and
Kraemer, 2005). Technological context deals with both the internal and external
technologies relevant to the SB. Organizational context however addresses descriptive
measures regarding the organization, such as SB size and scope, managerial structure,
and internal resources. The environmental context refers to the arena in which a firm
conducts its business: its industry, competitors, and dealings with government
(Ghobakhloo and Tang, 2011). Although TOE is a comprehensive theoretical basis to for
investigating determinants of EC adoption in organizations, yet, it does not put emphasis
on individual factors such as employees and managers attributes.
The diffusion of innovation perspective has allowed scholars to examine how new
innovations spread among groups of people (Eastin, 2002). In the background of
diffusion of innovation, Rogers’ (1983) Diffusion of Innovation (DOI) theory is a broad
psychological or sociological theory used to explain the patterns of adoption, and
describes the mechanism, and assists in predicting whether and how a new
technological invention will be successful. DOI is considered as a popular model in the
investigation of the behaviour of users in adopting new technological innovation (Tan
et al., 2009). Many researchers have adopted this model along with its characteristics to
JSBED study innovation diffusion (e.g. Kendall et al., 2001; Tan et al., 2009). DOI defines
20,4 several intrinsic characteristics of innovations (Table I) that influence an individual’s
decision to adopt or reject an innovation.
In addition to the five characteristics introduced by DOI, the technological
innovation literature has identified several managerial characteristics such as users’
perception of and attitude on EC, support and commitment, IS and computer
758 knowledge and experiences, innovativeness, and perceived behavioural control over
IS-based applications as other possible determinants of organisational adoption of IS
applications, in particular for SBs (Al-Qirim, 2007; Ghobakhloo et al., 2011a;
Grandon and Pearson, 2004). Given that this study aims to specify individual
attributes at managerial level as determinants to EC adoption in SBs, the research
model will be primarily built on DOI, likewise, it will also be developed out of an
integration of various perspectives using the innovation literature as a reference
discipline.

3.1 EC adoption
EC can be broken into four main categories, namely: business-to-business (B2B),
business-to-consumer, consumer-to-business, and consumer-to-consumer (Simpson
and Docherty, 2004). Given that SBs mainly use Internet, Extranet/Virtual Private
Network (VPN), Websites, and EDI to conduct transactions with their supply/business
partners, distributors, wholesalers and retailers (e.g. Al-Qirim, 2007; Jennex et al., 2004),
EC in the context of Iranian manufacturing SBs is categorized as B2B EC. Accordingly,
in this study, the dependent variable is adoption of EC which is defined as utilisation of
ICT and applications to support business, operations, management, and decision
making in the business (Thong, 1999). EC adoption was operationalised as the
likelihood of EC adoption (EC adoption decision behaviour). This measure is commonly
used in innovation diffusion research (Tan et al., 2009; Thong, 1999).
This study focuses on six different attributes and perceptions of SBs
owner/managers as potential determinants of EC adoption. One of the issues which
clouds our selection of potential factors is the selective choice of only six independent
variables, given that several factors have been identified as the potential determinants

Factor Definition

Relative advantage How improved an innovation is over the previous generation?

Compatibility The level of compatibility that an innovation has to be assimilated into
an individual’s life
Complexity or simplicity If the innovation is too difficult to use an individual will not likely
adopt it
Trialability How easily an innovation may be experimented with as it is being
adopted. If a user has a hard time using and trying an innovation this
individual will be less likely to adopt it
Observability The extent that an innovation is visible to others. An innovation that
is more visible will drive communication among the individual’s peers
and personal networks and will in turn create more positive or
Table I. negative reactions
Intrinsic characteristics
of innovations Source: Rogers (1983)
of EC/IS diffusion by DOI and innovation diffusion literature. Our reasons of selective The role of
choice of only six independent variables are: (a) It is true that several individuals’ owner/manager
characteristics have been identified by prior literature and existing models and
perspectives (e.g. DOI) as the determinants of IS adoption, however, these individuals
have usually been either end users (or employees) and not top management in the
organizations or user of generic EC/IS in the society (e.g. students or customers of banks).
Owner/managers of SBs are not normal EC/IS users. In SBs, the role of owner/manager is 759
central to the enterprise and their decision influences all activities. Likewise, their
controlling power is more overwhelming compared to top management of large
organizations. As suggested by Eastin (2002) self-efficiency in an important determinant
of EC adoption by the members of societies and users with a high level of self-efficacy
toward a given task, such as the electronic transfer of money, will see themselves more
able to accomplish this task. Self-efficiency, however, may not play such a significant
role is SBs. In a SB, when owner/manager perceives that he/she is not competent enough
to use EC applications, yet, he/she will not reject EC if employees are competent enough.
By the same logic, perceived behavioural control over EC, and some other individual
attributes of SBs owner/managers would not be influential to EC adoption in SB context.
Moreover, a portion of potential factors were also removed from the research model after
we conducted the pilot test (interview with 22 owner/managers) and found that those
factors are not significant determinants. We also removed several other factors from the
model after the final data collection when we observed that their internal consistency
reliability (Cronbach’s alpha) was too low (less than 0.5).
Finally, six different attributes and perceptions of SBs owner/managers were
selected as potential determinants of EC adoption. A brief justification for our selection
and subsequent use of these specific variables followed by six research hypotheses are
presented in what follows.
According to Rogers (1983) DOI theory, individual beliefs such as perceived relative
advantage are the drivers of the decision to adopt a new system. Similarly, Davis (1989)
Technology Acceptance Model (TAM) suggests that perceived usefulness of a system
is one of two direct causal antecedents of new technology adoption and usage
behaviour. In the context of EC, perceived relative advantage can be categorised as
usefulness and benefits of EC for customers of a company (Sutanonpaiboon and
Pearson, 2006) or benefits of EC for the internal users of EC in a company and for the
company itself (Grandon and Pearson, 2004; Pearson and Grandon, 2006). The EC
literature provides significant evidence of direct relationship between EC adoption
benefits and adoption or non-adoption of EC applications within SBs (Al-Qirim, 2007;
Ghobakhloo et al., 2011a; Kapurubandara and Lawson, 2006). In SBs, if the top
management perceives that the benefits of new systems adoption outweigh the risks,
then the business is more likely to adopt them (Thong and Yap, 1995). For example,
Kapurubandara and Lawson (2006) reported that within SBs of developing countries,
owner/managers with a lack of awareness about the advantages of EC applications are
doubtful and reluctant to adopt these technologies:
H1. The greater the perceived benefits of EC, the more likely EC applications will
be adopted by Iranian SBs.
Compatibility is another technological characteristic perceived by individuals which
was suggested by DOI as a driver of the decision to adopt a new system (Rogers, 1983).
JSBED EC compatibility can be defined as the extent to which EC is consistent with the
20,4 existing technology infrastructure, culture, values, and preferred work practices of the
SB (Beatty et al., 2001). Prior studies on EC adoption within SBs found that EC
adoption and usage is significantly affected by EC compatibility (Hong and Zhu, 2006;
Saffu et al., 2008). Similarly, it was found that even within SBs controlling required
financial resources for EC adoption, compatibility is still a significant discriminator
760 between adopters and non-adopters of EC (Sutanonpaiboon and Pearson, 2006). Given
that SBs of developing countries are more vulnerable to EC adoption barriers such as
financial constraints and lack of EC/IS knowledge, the impact of perceived
compatibility over adoption decisions by owner/mangers of Iranian SBs is expected
to be significant. Therefore, it is hypothesised that:
H2. The greater the perceived compatibility of EC, the more likely EC applications
will be adopted by Iranian SBs.
Perceived costs of EC adoption is another important factor hindering EC adoption within
SBs (Molla and Licker, 2005; Tan et al., 2009). According to the Welsh and White (1981)
framework of resource constraints in SBs, these businesses are operating under severe
resource constraints, in particular financial constraints. Limited financial resources
compel owner/managers to be cautious about their investment and capital spending,
thus, only SBs having adequate financial resources would regard adoption of IS as a
feasible project to undertake (Thong, 1999; Thong and Yap, 1995). In addition, it should
be considered that along with the initial cost of computer hardware and software, other
EC/IS implementation expenses including the cost of IS requirement analysis, the costs
of taking expert professionals into service, and EC development and the post deployment
costs should be undertaken by SBs during different phases of EC adoption (Nguyen,
2009). Therefore, EC adoption is also affected by the indirect costs of adoption such as
the costs of human factors (e.g. training) and early cost of temporary loss in firm’s
productivity (Love and Irani, 2004), which may be more significant than the direct costs
(Love et al., 2005). In this regard, when owner/managers of SBs (particularly SBs of
developing countries which usually suffer from severe financial constraints) perceive EC
costly to adopt, they are expected to be less committed to EC adoption. Thus, we believe
that when owner/managers of Iranian SBs perceive that conducting business
transactions electronically is not financially worthwhile and attractive, they will be
less willing to adopt EC applications:
H3. The greater the perceived costs of EC, the less likely EC applications will be
adopted by Iranian SBs.
The distant, impersonal, and integrated nature of the on-line environment and the
implicit uncertainty of using a global open infrastructure for electronic business and
transactions have rendered risk an inevitable element of EC (Pavlou, 2003). Security
issues, uncertainty about how to evaluate potential benefits of EC, capital outlay with
no guarantee of likely returns, possibility of monetary losses, laws and regulations
governing e-commerce, opportunity to disclose private consumer information, and
external business risks related to the communication issues with suppliers are
parameters of perceived risks of EC by SBs (Love et al., 2005; MacGregor and Vrazalic,
2005; Pavlou, 2003). It is suggested that main threats in the use of IS by SBs such as
security problems and hacking could result in drastic setbacks to business and their
trade and subsequently might result in extreme loss of trust in such trade (Kazi, 2007). The role of
Furthermore, Tan et al. (2009) explain that security issues such as sense of insecurity owner/manager
and vulnerability about performing transactions through the Internet, as well as the
risk of information loss and digital thievery about putting information online are some
of the main concerns hindering IS adoption within SBs of developing countries. It is
suggested that for SBs frequently suffering from limited IS competencies and poor
understanding of IS capabilities and the risks involved (Nguyen, 2009), lack of risk 761
identification and risk management have been a major contributing factor to IS project
failure (Baccarini et al., 2004; Love et al., 2005; Premkumar and Roberts, 1999). Under
such circumstances, we similarly believe that SBs in developing countries are
compelled to be cautious about their investment and capital spending. Thus, it is
expected that perceived risks of EC by owner/managers of these businesses negatively
influences the decision to adopt EC:
H4. The greater the perceived risks of EC, the less likely EC applications will be
adopted by Iranian SBs.
Owner/managers’ IS knowledge is another trait affecting IS adoption in SBs (Fink, 1998).
According to the idea of “knowledge barriers” defined by Attewell (1992), users’ skill and
knowledge development can facilitate and speed up the adoption of new technologies
such as IS. As SBs are facing significant risks and problems with their computerisation
regarding their inadequate knowledge of IS (Caldeira and Ward, 2003; Igbaria et al.,
1997), greater knowledge of owner/managers will reduce the degree of uncertainty
entangled with IS-based technology adoption which will result in lower risk of adoption.
Similarly, it seems that if these owner/managers could be educated on the functions and
benefits of EC applications for their businesses they may be more willing to adopt such
technologies. We believe that because of obstacles with developing the necessary IS
skills and technical knowledge of Iranian owner/managers, many Iranian SBs might be
tempted to postpone adoption of EC applications until this knowledge barrier to EC
adoption is lowered or by-passed. Thus, is it hypothesised that:
H5. The greater the level of owner/managers’ IS and computer knowledge, the
more likely EC applications will be adopted by Iranian SBs.
Owner/manager’s innovativeness is another determinant of EC applications adoption
which can be attributed to the owner/managers’ individual characteristics (Lee, 2004).
On the subject of owner/managers’ innovativeness in SBs context, it was found that
movements toward IS adoption in SBs with innovative managers are more likely to
succeed (Fink, 1998). A recent study by Al-Qirim (2007) found that EC adoption in New
Zealand Small and medium-sized enterprises (SMEs) segment is positively affected by
Chief Executive Officer (CEO) innovativeness. Innovative managers would prefer to
apply distinctive and risky solutions such as IS that modify the structure in which the
problems are generated. Thus, owner/manager’s desire to be more innovative will
expedite the process of IS adoption (Thong and Yap, 1995). Similar to other developing
countries, EC adoption is expected to be more risky in Iran compared to developed
countries, which is due to lack of cyber laws and regulations, security issues and
privacy concerns, and limited ICT supports (e.g. Jennex et al., 2004; Molla and Licker,
2005; Tan et al., 2009). We therefore posit that SBs with innovative owner/managers,
even in developing countries would be more willing to consider EC adoption.
JSBED H6. The greater the level of owner/managers’ innovativeness, the more likely EC
20,4 applications will be adopted by Iranian SBs.
Figure 1 shows our proposed research model which has been drawn based on the
theoretical foundations discussed above and relative hypotheses.

762 4. Research methodology

4.1 Instrument development
The research instrument utilized for this study was adopted from validated existing
scales (e.g. Al-Qirim, 2007; Grandon and Pearson, 2004; Igbaria et al., 1997, Thong,
1999, Thong, 2001). For new measures and for those significantly adapted or changed,
we acted on the foundation of guidelines and exemplars in the literature (e.g. Straub,
1989; Sethi and King, 1991). Four well-established IS scholars having high experience
in survey research and expertise in the subject domain were asked to assess the
instrument. The questionnaire and all scales were translated to Persian through
assistance of two native professional English translators. Some native IS scholars
further helped with the process of “back-translation” of items into English to ensure the
validity of the questionnaire. After incorporating suggested changes and in order for
testing and assuring face validity of the questionnaire, we piloted the questionnaire on
22 owner/managers within different provinces and industries through face-to-face
interview. Based on the feedback from the pilot study, some questions were rephrased
to improve the clarity of research instrument. As a result, some minor revisions were
applied to the questionnaire before final data collection.
In this research, initial EC adoption is assessed by a single question measuring how
SBs are decided to adopt four different EC applications namely Internet, extranet/VPN,
website, and EDI. This question employs a five-point Likert scale, which ranges from
(1) ¼ more than four years; (2) ¼ next three-four years; (3) ¼ next two-three years;
(4) ¼ within one year; to (5) ¼ current user. In addition, all variables determining EC
adoption which were derived from the literature (Table II) are interval-scaled. These
six independent variables were asked by a set of 27 questions, applying a five-point
Likert scale ranging from 1 ¼ strongly disagree to 5 ¼ strongly agree. Likewise, some
general questions about the characteristics of businesses (e.g. number of employees)
were also required to be answered by respondents.

4.2 The sampling frame

The sampling frame of this study consists of all manufacturing SBs located in central
region of Iran. According to the Iran Small Industries and Industrial Park Organization
(ISIPO) statement, small business is defined by the number of employees and it refers
to enterprise with fewer than 50 employees. In accordance with this statement, 92.2
percent of Iranian businesses have fewer than 50 employees, and thus, are categorized
as small business (ISIPO, 2008). SBs in Iran account for 44.80 percent of employment
and average investment in each SB is 710 thousand USD with average employment of
17.24 employees at each business (ISIPO, 2008). In this study, we defined
owner/manager as head manager or CEO of SBs who are the main owners or
shareholders in their businesses. Thus, only owner/managers of SBs were targeted as
respondents of this study because in these businesses the IS implementation process is
directly affected by top management where in most cases, owner, chief information
officer (CIO) and CEO are one and the same person (Thong, 1999). In SBs, the role of
 More than Next three- Next two- Within Current Number
Variable four years four years three years one year user of items References

EC adoption (dependent variable) 1 Ghobakhloo et al. (2011a), Tan et al.

Internet 1 2 3 4 5 (2009)
Extranet/VPN 1 2 3 4 5
Website 1 2 3 4 5
EDI 1 2 3 4 5
Perceived benefits 6 Al-Qirim(2007), Grandon and
EC provides timely information for Pearson (2004)
decision making purposes
EC allows us to improve our job
performance
EC increases our profitability
EC provides new opportunities
EC allows for better advertising and
marketing
EC allows us to enhance our productivity
Perceived compatibility 4 Al-Qirim(2007), Pearson and
EC is compatible with our culture and Grandon (2006), Premkumar (2003)
values
EC is compatible with our preferred work
practices
EC legal issues are compatible with us
EC is compatible with our customers
Perceived risks 5 Featherman and Pavlou (2003),
Internet hackers (criminals) might take Pavlou (2003), Salam et al. (2003)
control of our checking account if we used
EC services
The security systems built into the EC
services are not strong enough to protect
our privacy
(continued)
owner/manager

Measurement items of the

study
763

Table II.
The role of
 20,4

764

Table II.
JSBED

More than Next three- Next two- Within Current Number

Variable four years four years three years one year user of items References

EC would lead to a loss of privacy for our

customers/business partners because
their business information would be used
without their knowledge
Using EC exposes us to an overall risk
EC would lead to a loss of privacy for us
because my business information would
be used without my knowledge 5
Perceived costs 4 Al-Qirim(2007), Claycomb et al.
The cost of EC technologies infrastructure (2005)
is high for our company
The amount of money and time of training
for EC applications is high for our
company
The costs of integration of EC system
with existing information systems
infrastructure is high
The maintenance and support fees for EC
applications are high for our company
IS and computer knowledge 4 Igbaria et al. (1997), Thong (2001)
I have had adequate training on operating
systems in my company
I have had adequate training on
spreadsheets in my company
I have had adequate training on
application packages (e.g. accounting,
inventory control, and production
planning) in my company
Overall, I consider myself well qualified
for using EC applications
(continued)
 More than Next three- Next two- Within Current Number
Variable four years four years three years one year user of items References

Innovativeness 4 Al-Qirim(2007), Thong and Yap

I have original ideas (1995), Thong (1999)
I would sooner create something new than
improve something existing
I often risk doing things differently
I often have fresh perspective on old
problems
owner/manager

765

Table II.
The role of
JSBED owner/manager is central since their decision influence all activities, both currently
20,4 and in the future (Fuller-Love, 2006). This also refers to IS adoption decision from the
planning stage to post implementation, maintaining, and system upgrade stages
(Beatty et al., 2001; Fuller and Lewis, 2002; Mirchandani and Motwani, 2001).
Moreover, regarding the specific computing environment of SBs in which in most
cases, there is no management information systems department, the owner/manager
766 also becomes the specialist in various facet of IS, although not appropriately trained or
adept in IS roles (Palvia, 1996). Hence, owner/managers of the manufacturing SBs were
targeted as the key respondents of this research since they own or oversee the entire
operations of their businesses and are responsible and the decision maker for all stages
of IS implementation (Ghobakhloo et al., 2011a). A sample of 1,760 manufacturing SBs
was identified from various sources and through cooperation with provincial
“Administrations of Industries and Mines” and “The Enterprises of Industrial Cities”
in different provinces. We identified the companies’ names, contact persons, and their
e-mail addresses and telephone numbers. Following the procedures previously used in
the IS literature (e.g. Burton-Jones, 2009; Kumar et al., 1993), we controlled for
informants (owner/managers) to have adequate knowledge of EC, understanding of
existing external and government support of EC/IS and their overall conditions, and
knowledge on the way their business partners, customers, buyers, and/or supplier
interact with implemented EC system. Accordingly, the quantitative data collection
procedure was conducted through a one-time electronic survey in which the electronic
questionnaire was sent to the identified respondents. We finally conducted the
follow-up activities by sending some reminders through e-mail and telephone to
encourage potential respondents to participate in the study. Finally, 268 valid
questionnaires were received for a response rate of 15.23 percent. Table III
demonstrates the demographic attributes of the respondents.
Because cross-sectional, self-report surveys are susceptible to common method
variance (CMV) bias, we conducted a test of this potential validity concern. CMV can
cause researchers to find a significant effect in self-reported data, when in fact the true
effect is due to the method employed (Malhotra et al., 2006). In this study, Harman’s
single-factor test was performed to test for the possibility of CMV in the
single-respondent data of the sample (Podsakoff et al., 2003). Harman’s single-factor
test is arguably the most commonly used approach for assessing CMV in a
single-method research design (Malhotra et al., 2006). Based on this test, the threat of
CMV is high if a single factor is obtained or if one factor accounts for a majority of
covariance in the independent and dependent variables (Devaraj et al., 2002). As a
result of performing exploratory factor analysis (EFA) (using SPSS 17.0.0 August 23,
2008) six factors with eigenvalues of 1.00 or higher were extracted (see Appendix,
Table AI). The factor analysis revealed six factors with an Eigenvalue greater than 1.0
that account for 69.32 percent of the total variance. The first extracted factor accounts
for 27.328 percent of the variance. Since EFA did not indicate a single-factor structure
explaining a majority of the covariance, nor a single factor emerging from unrotated
factor solutions, CMV is not of particular concern in our sample (Podsakoff et al., 2003).

Hypotheses testing
Consistent with the objectives of this study, our proposed research model of EC
adoption (Figure 1) aims to investigate which perceptions and characteristics of
 The role of
Frequency Percent Cumulative (%)
owner/manager
Gender
Male 186 69.40 69.40
Female 82 30.60 100.00
CEO age
Below 30 53 19.78 19.78 767
30-40 75 27.98 47.76
40-50 64 23.88 71.64
50-60 48 17.91 89.55
Above 60 28 10.45 100.00
CEO education level
Senior high school (or below) 73 27.24 27.24
undergraduate 103 38.43 65.67
Postgraduate (or above) 92 34.33 100.00
Type of industry
Automotive industry 48 17.91 17.91
Industrial machinery 44 16.42 34.33
Food and beverage 32 11.94 46.27
Petrochemical 29 10.82 57.09
Chemistry 26 9.70 66.79
Textile 19 7.09 73.88
Wood, tissue, and paper products 15 5.60 79.48
Others 55 20.52 100.00
EC applications adoption frequency
Internet 192 71.64 –
Extranet/VPN 113 42.16 – Table III.
Website 145 54.10 – Demographic attributes
EDI 96 35.82 – of the respondents

Figure 1.
Research model

owner/manager, and how they affect EC adoption. Regarding internal consistency

reliability as the most prevalently employed psychometric measure evaluating survey
instruments and scales (Tan et al., 2009), high internal consistency reliability in the
measurement of constructs used in proposed framework of EC adoption has been
JSBED provided since all the variables possess Cronbach a values of more than 0.70 (Table IV),
20,4 which exceeds the minimum standard recommended by prior literature
(Benitez-Amado et al., 2010). Moreover, and to ensure appropriate construct validity,
factor analysis was performed on the questions using principal axis factoring method.
As a result of performing this analysis (using Varimax rotation method with Kaiser
normalisation), six individual factors (characteristics) influencing EC adoption were
768 extracted (see appendix, Table A1). Kaiser’s overall measure of sampling adequacy
0.7118 indicates that these data were appropriate for factor analysis (Benitez-Amado
et al., 2010). The result shows an acceptable and satisfactory level of construct validity
as it explains 69.32 percent of the all independent variables.
At the next step, we analyzed the research data in two phases. First, Pearson
correlation was used for testing the relationships between different variables. The
Pearson correlation matrix is presented in Table V. The correlation matrix did not
indicate any exceptionally correlated variables (the highest correlation among
principal constructs is r ¼ 0.462), given that evidence of common method bias usually
results in very high correlations (r . 0.90) (Pavlou and El Sawy, 2006).
Second, the multivariate analysis techniques, such as hierarchical multiple
regression (HMR) and logistic regression (LR) analysis were used to study the effects of
all independent variables on EC adoption decision, as well as adoption and
non-adoption of different EC applications. To test the relationships between
influencing factors and EC adoption HMR was used in which, in the first stage, the
demographic variables were entered. In the second stage (second block), two different
measures of business size were entered. The reason for separating business size from
demographic variables is that consistent with the literature, we wanted to enter
variables as related sets given that business size is the most signified control variable
in EC/IS adoption background. At the third stage (third block) we added most
interested variables which were independent variables of the study.
Table VI shows that neither the first model (demographic variables alone) nor the
second model (demographics plus business size indicators) predicted scores on the EC
adoption to a statistically significant degree. Moreover, control variables can only
account for 5.5 percent of variance associated with initial EC adoption. The result of
HMR shows that by adding the independent variables of the study to the third model
(Table VI), the scores on the EC adoption is predicted to a statistically significant
degree, and the predictive power added to the model would be increased to 62.9
percent. The result of the variance inflation factor (VIF) analysis (Table VI)
demonstrates that the VIF values for all the variables do not exceed the threshold

Adopters Non-adopters
(n ¼ 203) (n ¼ 65)
Variable Mean SD Mean SD Cronbach’s alpha

Perceived benefits 3.6365 0.8087 3.3397 0.8510 0.8221

Perceived Compatibility 3.5181 0.8434 3.4534 0.8947 0.7500
Perceived risks 3.0325 0.7866 3.0122 0.7933 0.9114
Table IV. Perceived costs 3.2047 0.7512 3.2197 0.7516 0.7498
Coefficient a values of all IS and computer knowledge 3.2512 0.9275 3.3015 0.9111 0.8803
the variables Innovativeness 3.1488 0.8655 3.3302 0.9388 0.7524
 (1) (2) (3) (4) (5) (6) (7) (8)

(1) Perceived benefits 1.000

(2) Perceived compatibility 0.113 1.000
(3) Perceived risks 20.068 0.018 1.000
(4) Perceived costs 20.112 20.164 * 0.222 * 1.000
(5) IS and computer knowledge 0.068 0.216 * 20.209 * 0.117 1.000
(6) Innovativeness 0.303 * * 0.160 * 0.051 0.033 0.345 * * 1.000
(7) Business size (annual sale) 0.105 0.177 * 0.025 20.028 0.253 * 0.081 1.000
(8) EC adoption 0.462 * * 0.226 * 20.377 * * 20.399 * * 0.108 0.275 * * 0.266 * * 1.000
Notes: *p , 0.05; * *p , 0.01
owner/manager

adoption
Table V.

determinants of EC
Correlation matrix for
769
The role of
JSBED generally accepted in the literature with values of 3.3 (e.g. Petter et al., 2007), which
20,4 indicate that no multicollinearity problems exist with the variables. Likewise,
Durbin-Watson value of 1.974 for determinants of EC adoption (Table VI)
demonstrates that there is no auto correlation problems in the data used in this study
(Hair et al., 2006). According to the Table VI, perceived benefit of EC appears to be the
most significant determinant that positively affects EC adoption (decision to adopt EC
770 applications) in Iranian SBs. Owner/managers’ innovativeness and perceived
compatibility are respectively other important factors positively affecting initial EC
adoption in this study. Alternatively, perceived risks and perceived costs of EC are
respectively significant determinants that negatively influence EC adoption in this study.
In addition, logistic regression (LR) has been used to test the effects of different
individual factors on adoption and non-adoption of different EC applications studied in
this research. Table VII summarises the output from the different LR runs across the
sample which only highlights significant factors. For adoption of Internet, perceived
benefit is the dominant factor which discriminates between adopter and non-adopters
of this EC application. However, perceived risk is a significant reason for non-adoption
of Internet. Table VII shows that perceived benefits and perceived compatibility are
factors positively determining EDI adoption, and perceived risk is the only reason for
non-adoption. Table VII also suggests that for website, perceived risks and perceived
costs are two main reasons for non-adoption and owner/manager’s innovativeness in
the only reason for adoption. Finally, and for EDI adoption, result of LR in Table VII
provides support for perceived costs (negative) and owner/manager’s IS and computer
knowledge (positive) as two determinants of adoption of this EC application.

Discussion
Consistent with H1, EC adoption within Iranian SBs was found to be positively
affected by perceived benefits of EC which provides support for Rogers (1983) DOI
model and Davis (1989) TAM. The result of our study suggesting perceived relative
advantage as a significant factor affecting EC adoption confirms and extends the
studies by Igbaria et al. (1997) regarding the factors that influence IT adoption. It also
provides support for the studies by Riemenschneider et al. (2003) concerning the factors
that affect web site adoption, and Grandon and Pearson (2004) concerning the
determinants of EC adoption, all within SMEs. Consistently, the results also revealed
that perceived benefits is the main discriminator between adopter and non-adopters of
Internet and extranet/VPN which means that owner/managers of Iranian SBs
perceiving these applications as beneficial to their businesses. It is evident that to
adopt risky and expensive EC technologies (given the restricted resource of SBs of
developing countries), owner/managers in SBs need to have adequate understanding of
EC technologies, requirements, benefits and advantages, and projection of the future
trends of EC and its impact.
Consistent with H2, EC compatibility was found to be another determinant to EC
adoption within Iranian SBs. EC/IS implementation is SBs may require significant
organisational and structural changes (Levy et al., 2002; Markus and Robey, 1988),
change in existing work practices, and/or in culture of organisations (Nguyen, 2009).
As a result, and with regard to the fact that significant amounts of financial investment
in IS technologies is typically unsupported by existing structural or strategic
initiatives in SBs, organisational restructuring may be needed to enhance the level of
Model

Model summary R R square Adjusted R square Std error of the estimate Durbin-Watson
1 0.155 0.024 2 0.010 0.474
2 0.234 0.055 2 0.002 0.469
3 0.793 0.629 0.571 0.435 1.974
ANOVA Sum of squares df Mean square F Sig.
1 Regression 1.787 4 0.447 0.708 0.550
Residual 19.113 85 0.225
Total 20.900 89
2 Regression 2.572 6 0.429 0.971 0.440
Residual 18.328 83 0.221
Total 20.900 89
3 Regression 6.307 12 0.526 3.073 0.000
Residual 14.593 77 0.190
Total 20.900 89
(continued)
owner/manager

Results of HMR analysis

771

Table VI.
The role of
 20,4

772
JSBED

Table VI.
Model

Coefficients Unstandardized Collinearity

coefficients Standardized coefficients statistics
B Std error Beta t Sig. Tolerance VIF
1 (Constant) 0.936 0.317 2.949 0.004
Gender 2 0.030 0.017 2 0.182 2 1.728 0.088 0.965 1.036
CEO age 0.014 0.011 0.126 1.204 0.232 0.987 1.013
CEO education level 0.011 0.006 0.210 1.981 0.051 0.961 1.040
Type of industry 0.019 0.048 0.042 0.399 0.691 0.970 1.031
2 (Constant) 1.236 0.362 3.414 0.001
Gender 2 0.028 0.017 2 0.170 2 1.615 0.110 0.958 1.044
CEO age 0.011 0.011 0.104 0.999 0.321 0.975 1.026
CEO education level 0.002 0.007 0.044 0.324 0.747 0.660 1.515
Type of industry 2 0.020 0.054 2 0.044 2 0.370 0.712 0.739 1.352
Size (annual sale) 0.023 0.012 0.296 1.857 0.067 0.716 1.397
Size (number of employees) 2 0.012 0.017 2 0.096 2 0.726 0.470 0.600 1.667
3 (Constant) 1.172 0.461 2.543 0.000
Gender 2 0.024 0.017 2 0.147 2 1.412 0.162 0.837 1.195
CEO age 0.016 0.011 0.143 1.390 0.169 0.858 1.165
CEO education level 2 0.001 0.007 2 0.014 2 0.102 0.919 0.580 1.724
Type of industry 2 0.034 0.056 2 0.074 2 0.594 0.554 0.585 1.710
Size (annual sale) 0.028 0.011 0.279 2.288 0.015 0.651 1.536
Size (number of employees) 0.001 0.017 0.007 0.055 0.957 0.543 1.841
Perceived benefits 1.501 0.213 0.377 6.420 0.000 0.886 1.129
Perceived compatibility 0.571 0.176 0.184 2.001 0.022 0.990 1.010
Perceived risks 2 1.285 0.179 2 0.351 2 5.975 0.000 0.876 1.142
Perceived costs 2 1.196 0.214 2 0.319 2 5.468 0.000 0.978 1.022
IS and computer knowledge 0.224 0.195 0.063 0.833 0.324 0.869 1.151
Innovativeness 0.583 0.232 0.193 2.055 0.020 0.874 1.144
 95% C.I. for
EXP(B)
Variable B SE Wald df Sig. Exp(B) Lower Upper CSRS * NRS * * Chi-square Sig.

Internet 0.15(0) 0.19(6) 32.4(31) 0.00(0)

Perceived benefits 0.70 (5) 0.21 (2) 9.87 (2) 1 0.00 (0) 2.21 (0) 1.62 (0) 3.57 (6)
Perceived risk 2 0.4 (40) 0.1 (88) 6.33 (0) 1 0.0 (03) 1.01 (6) 1.24 (7) 2.74 (5)
Extranet/VPN 0.13 (1) 0.17 (2) 28.1 (20) 0.00 (1)
Perceived benefits 0.36 (6) 0.1 (71) 5.03 (5) 1 0.0 (13) 1.47 (7) 1.07 (6) 2.03 (3)
Perceived risks 2 0.2 (25) 0.2 (33) 2.45 (4) 1 0.0 (35) 2.20 (1) 1.12 (4) 2.41 (4)
Perceived compatibility 0.31 (4) 0.1 (67) 3.82 (5) 1 0.0 (22) 1.39 (7) 1.02 (6) 1.82 (3)
Website 0.17 (1) 0.23 (4) 37.9 (20) 0.00 (0)
Perceived risks 2 0.2 (87) 0.2 (52) 6.17 (8) 1 0.0 (26) 1.77 (8) 1.18 (7) 2.06 (7)
Perceived costs 2 0.4 (86) 0.2 (00) 6.81 (5) 1 0.0 (01) 0.61 (4) 0.41 (2) 0.56 (0)
Innovativeness 0.30 (6) 0.1 (97) 4.02 (0) 1 0.0 (18) 1.42 (0) 1.27 (4) 1.84 (7)
EDI
Perceived costs 2 0.3 (96) 0.1 (79) 5.02 (3) 1 0.0 (09) 1.01 (8) 0.90 (3) 1.08 (4) 0.01 (13) 0.14 (9) 23.2 (66) 0.00 (6)
IS and computer knowledge 0.35 (5) 1.1 (74) 4.89 (5) 1 0.0 (12) 1.13 (5) 1.08 (8) 1.27 (1)
Notes: *Cox and Snell R square; * *Nagelkerke R square; Chi-square values also account for insignificant IVs not included to the table
owner/manager

applications adoption in
Predictors of EC

Iranian SBs
Table VII.
773
The role of
JSBED effectiveness and usage of the IS resource (Davenport and Short, 2003). Accordingly,
20,4 SBs’ managers would be concerned about the facts that EC may necessitate significant
enhancement in existing IS infrastructure (Claycomb et al., 2005) and EC/IS created
changes may causes doubts over job security(Bull, 2003). Therefore, managers of SBs
in developing countries perceiving EC more compatible with existing organisational
culture and values, preferred work practices, and IS infrastructure would be more
774 willing to adopt and use EC technologies. In this regard, we found that
owner/managers of Iranian SBs decide on adoption of extranet/VPN, particularly
when they perceive it compatible with their businesses.
Similarly, and consistent with prior literature (e.g. Pavlou, 2003; Salam et al., 2003) we
found that perceived risk of EC is a major barrier to adoption which provides support for
H3. We found that owner/managers of Iranian SBs those whom are non-adopters of
Internet, extranet/VPN, and website perceive these EC applications to be risky to adopt
and use. It is suggested that the large-scale application of IS among SBs has been
associated with several risks within the adoption and development of IS solutions (Kazi,
2007). Therefore, if owner/manager holds a positive attitude toward EC and perceives
that benefits of EC adoption outweigh its risks, adoption of EC in his/her business is
more likely to occur (Thong, 1999). Due to lack of financial resources, any investment
decision in a micro or small business is generally associated with a significant amount of
risk (Johnson, 2010; Mehrtens et al., 2001). Similarly, investment in EC is considerably
associated with risk mainly because of the unpredictable nature of the e-environment
and Internet, which is beyond the full control of the EC system adopter (e.g. adopter of
web site). Owing to the potential threat of third parties compromising the electronic
transaction process, breaches of own firm/customer information, unreliability of online
information transmission, and opportunity for monetary losses, which is more crucial in
developing countries (Sarkar and El Sawy, 2003; Tan et al., 2009), top management of
SBs in developing countries are generally reluctant to adopt and use EC.
The results demonstrate that the EC adoption by manufacturing SBs is significantly
and negatively affected by cost of EC which is consistent with H4. This finding is in
line with majority of prior EC literature suggesting the EC costs as a major barrier to
EC adoption by SBs, particularly in developed countries (e.g. Iacovou et al., 1995, Love
et al., 2005; MacGregor and Vrazalic, 2005). Although SBs often lack financial resources
(Madrid-Guijarro et al., 2009), yet, these businesses have to commit to the significant
capital investments and organisation-wide changes in work practices and attitudes
(Quayle, 2002). Therefore, the future of the SBs may be jeopardised by unsuccessful
investments in costly EC applications because a technical failure in the IS can have a
major negative impact on the SBs that are heavily dependent on those EC/IS
(Ghobakhloo et al., 2011a). In extreme conditions, these setbacks may even result in
business failure (Thong, 2001). Thus, it is expected for SBs to be very cautious when it
comes to deciding on adopting EC applications. This discussion rationalises our
finding showing that Iranian SBs have not adopted website and EDI as their
owner/managers consider these relatively complex EC applications to be costly to
implement. ICT Development Index report by International Telecommunication Union
(ITU-International Telecommunication Union, 2010) suggests that price of ICT
services in developing countries is considerably high compared to developed countries.
For example, Iran is ranked 78th in terms of ICT services price. The ICT Development
Index report also indicates that price of fixed broadband Internet services in Iran is up
to five times higher compared to developed countries such as Canada or Denmark. The role of
Taken together, the above discussions suggest that although Iranian SBs are more owner/manager
restricted financially (compared to SBs of developed countries), yet, they have to invest
more for generic EC applications. Therefore, it is logical to infer that impact of
perceived costs of EC over adoption decision is significantly more salient for SBs of
developing countries.
Contrary to H5, owner/manager’s IS and computer knowledge was not found to be a 775
significant determinant of the decision to adopt EC. The results however revealed that
surveyed SBs which are adopters of EDI have owner/managers with high IS and
computer knowledge.
Finally, we found that EC adoption within Iranian SBs is significantly affected by
owner/manager’s innovativeness. This finding provides support for H6, which implies
that Iranian SBs with more innovative owner/managers have more intention to adopt
EC. In this regard, it was found that SBs with more innovative owner/managers are
adopters of website. This finding supports prior literature on IS adoption suggesting
CEO’s innovativeness as a significant determinant of EC adoption (e.g. Al-Qirim, 2007).
Owing to the specific characteristics of SBs and their organisational structure,
owner/manager has a supreme role in all functions of SBs and all decision and
activities, both in current and in future (Bruque and Moyano, 2007). Regarding this
significant role of owner/managers in determining the innovative attitude of these
businesses, SBs with innovative and risk-averse owner/managers would be more
intended to adopt risky EC applications which may necessitate significant changes in
organisations. The international comparison of prior research on EC adoption in
developing and developed countries suggests that lack of trust, security, and privacy
risks are crucial problems restricting the expansion of EC in developing countries such
as Malaysia, South Africa, and Russia (e.g. Jennex et al., 2004; Molla and Licker, 2005:
Tan et al., 2009). Most developing countries lack the cyber laws and regulations to
protect the e-business environment. SBs of developing countries usually either have no
confidence to do business online or have no idea of their existence in view of their
indifference in the uncertainties of existing EC laws. Therefore, it is not surprising that
for SBs of developing countries, including Iranian SBs, the issue of risk and security is
one of the main considerations that these businesses have to deal with when adopting
EC. In such circumstances, risk-averse owner/managers of Iranian SBs feel more
secure to commit to EC and perform electronic transactions and data interchange.
We found that from all the control variables included in the study, only business
size (in term of annual sale) has a significant effect on EC adoption. The significance of
business size is because of its role as the source of SB capabilities and resources. It is
agreed that business size is a direct indicator of the SB resources including financial
and human capital resources (Mole et al., 2004). Therefore, it is rational to believe that
SBs that are larger is size will have more resources to dedicate to EC adoption.

International comparison
The literature (Table VIII) implies that there are some slight differences in
determinants of EC adoption between developed and developing countries. Table VIII
suggests that factors such as perceived benefits, perceived risk, and perceived costs of
EC are more significant determinants of EC adoption for SBs of developing countries.
However, SBs of developed countries are more concerned with technical issues such as
JSBED
Studies in developed Studies in developing
20,4 countries (1-8) countries (9-16)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Owner-manager/top manager related issues

Perceived costs * * * * * * *
* * * *
776 Perceived risks
* * *
Perceived compatibility
Perceived benefits * * * * * *
Perceived complexity * * *
Perceived obstacle *
Top manager’s EC/IS and computer
knowledge *
Top management innovativeness *
Top management commitment *
Intolerance towards failure *
Technical and organizational issues
Required EC/IS infrastructure * * * * * *
Organizational readiness *
Government support *
Technical suitability * * *
EC/IS expertise and skills * * * * * *
Business partners’ EC readiness *
External experts and consultants * *
Culture of sharing date *
Financial resources * *
User-friendliness *
Security issues * * * * * * *

Notes: 1. Arendt (2008); 2. Bharadwaj and Soni (2007); 3. Hong and Zhu (2006); 4. MacGregor and
Table VIII. Vrazalic (2005); 5. Pearson and Grandon (2006); 6. Lawson et al. (2003); 7. Quayle (2002); 8. Walczuch
International comparision et al. (2000); 9. MacGregor and Kartiwi (2010); 10. Alam (2009); 11. Tan et al. (2009); 12. Tan et al. (2007);
of factors affecting EC 13. Kartiwi and MacGregor (2007); 14. Sutanonpaiboon and Pearson (2006); 15. Kapurubandar and
adoption Lawson (2006); 16. Our study

usability of the EC for their business strategy, and level of EC/IS expertise and skill in
their businesses. The literature also suggests that similar to SBs of developing
countries which are extremely concerned about security issues of EC implementation,
SBs in developed countries are also significantly concerned with security issues when
it comes to adopting EC. This means that although SBs of developed countries are
enjoying a relatively well-developed, accessible and affordable infrastructure for EC,
and governments of developed countries have provided a relatively secure and reliable
e-environment, they are still susceptible to security concerns. This fact can be
rationalized as follow: due to innate limitations of SBs compared (e.g. lack of financial
resources and technical skills) EC is still relatively beyond the full control of SBs in
both developed and developing countries. The finding of our study shows that similar
to most developing countries, EC adoption for Iranian SBs is mainly determined by
owner/manager attributes and perception. In fact, Table VIII suggests that Iranian
owner/managers may have the most salient influence on EC adoption compared to
owner/managers of SBs in other countries. The study finding also demonstrated that
owner/managers’ innovativeness is indeed a significant determinant of EC adoption, The role of
the factor that has received little attention in the EC adoption background. owner/manager
The international comparison shows that EC adoption by SBs of developing countries
is affected by a wide variety of factors, and adoption determinants are not merely limited
to owner/manager characteristics. Taking this comparison into consideration, future
research can effectively design their research model to be robust enough to capture most
of the idiosyncrasies of EC adoption within SBs of developing countries. 777
Conclusions
Theoretical and practical implications
We believe that the suggested model of EC adoption makes a significant contribution
to the research and practice since; this might be one of the first studies that
endeavoured to investigate two stages of EC adoption in a comprehensive manner in
which in addition to studying individual factors (owner/manager attributes) affecting
decision on EC adoption, discriminators for adoption and non-adoption of four different
EC applications have been investigated. Further, due to the demographic profiles of the
respondents, (e.g. owner/managers of SBs in Iran as a developing country), the findings
of this study can serve as a benchmark measure of factors affecting EC adoption in the
similar research context. Our study provides support for the TAM model in the context
of EC finding that perceived relative advantage (usefulness) of EC is a significant
discriminator between adopters and non-adopters of different EC applications.
Moreover, our findings empirically support DOI theory by suggesting perceived
relative advantage of EC and EC compatibility as significant influential factors of
adoption decision behaviour. In addition, Rogers (1983) DOI model was expanded to
include risks and EC cost, and personal characteristics of the owner/managers. The
model was tested and proven to be both valid and reliable as the factor analysis results
confirmed that the responses generally support the theoretical and conceptual
distinctions of the factors in?uencing EC adoption studied in this research.
The findings of this research have several implications for governmental agencies,
EC/IS consultants, and EC applications vendors responsible for entering SBs to the
e-business environment, particularly within developing countries. We found that
perceived cost of EC applications negatively influences the owner/managers’ decision
to adopt EC. This finding signifies that EC is still costly for SBs of developing
countries and these businesses have less financial resources to invest in EC compared
to large or even medium-sized businesses. We particularly found that Iranian SBs have
not adopted Website and EDI because these two EC applications are perceived to be
costly by Iranian owner/managers. Therefore, our finding challenges the recent study
by Ghobakhloo et al. (2011a) which reported that EC adoption cost is not perceived to
be a major barrier to adoption by Iranian SMEs[2]. Our finding also challenges the
contention that nowadays, the prices of hardware and software have noticeably
decreased and generic EC/IS technologies have become affordable for almost all
businesses even in developing countries (Ghobakhloo et al., 2012; Tan et al., 2009). This
contradiction may imply that although e-readiness of Iranian medium-sized and large
businesses has been significantly improved due to government supports[3]
(e.g. Fathian et al., 2008; Ghobakhloo et al., 2011a), however, owner/managers of
Iranian SBs are still concerned about EC adoption costs. This adoption barrier is
attributable to three possible reasons. First, there is a gap between what is really
JSBED required by Iranian SBs and what is actually provided by the Iran government. For
20,4 instance, the government has provided a vast series of ICT/EC workshops and training
for Iranian SMEs, however, most Iranian SBs cannot even afford initial costs of
implementing EC infrastructures, security measures (e.g. antivirus and firewall),
Internet services, and licensing of software and other electronic technology. Likewise,
complex EC applications such as EDI are often embedded in the SBs’ core business
778 processes and aims to integrate suppliers and customers in the value chain. Therefore,
indirect costs such as costs of human factors (e.g. training) and early cost of temporary
loss in SBs’ productivity are also included as the costs of, for example, EDI adoption,
which makes it harder for Iranian SBs to adopt complex EC applications. Accordingly,
Iran government is suggested to change its current encouraging/facilitating policies to
a welfare model in which assistance packages (gratis training, information
requirements analysis, financial aids and incentives, and secure e-environment) are
handed out directly to the SBs. Second, owner/managers of Iranian SBs might be
unaware or are ignorant to the supports and incentives provided by the government
agencies. Therefore, one operative approach is to make it mandatory for Iranian SBs to
attend a relative briefing prior to the renewal or registration of businesses. Third,
although government supports and incentives are available for all Iranian businesses,
these assistances are not easily accessible to the SBs. To encourage owner/managers of
Iranian SBs to decide on adoption of EC, friendly and tangible supports and incentives
ought to be developed specifically for SBs. In particular, financial assistance and
grants ought to be clearly available and accessible to owner/managers of SBs to make
them feel confident about adoption of risky EC.
To enhance the widespread adoption of EC applications, EC vendors are advised to
target their products and services at SBs with innovative owner/managers having
positive attitudes toward the advantages of EC adoption. Likewise, EC vendors and
technology providers are advised to cooperate with SBs to jointly improve the
compatibility of EC applications with the specific characteristics of SBs active in
different industries. The role of perceived compatibility is expected to be more salient
to SBs in developing countries than SBs of developed countries, which is due to the
specific characteristics of developing countries such as severe financial constraints of
SBs, expensive and relatively insecure ICT services, lack of culture of sharing data
(trust), and lack of EC/IS knowledge and skills. For Iran SBs, it is imperative to note
that several domestic IS/ICT firms have designed and developed EC applications,
particularly for Iranian SBs. These applications are reasonably affordable, easy to
operate and easy to modify without any specific programming skills, compatible with
English and Persian language and metrics, and can be adjusted with specific
characteristic of each business. Thus, Iranian SBs need to seize the opportunity to
identify and understand the domestic EC applications available and the compatibility
of the proposed applications with their existing business operations.
Furthermore, assuming adopting EC and entering a global e-business environment
is a necessity for survival of SBs, and concerning owner/managers with less
innovativeness and positive attitudes towards EC adoption benefits, it is suggested
that governmental agencies and EC consultants need to promote the attitude of
owner/managers through improving their awareness toward EC adoption (e.g. by
providing training). In SBs, as the innovativeness and attitude of owner/managers
toward EC adoption become more positive, their receptiveness of EC applications will
be improved. Alternatively, we found that higher level IS and computer knowledge is The role of
significant facilitator of EDI adoption. In such circumstances, governmental agencies owner/manager
can play a significant role in promoting EC in this business type through providing
gratis training programs and workshops particularly designed for and targeted at
employees and owner/managers of SBs. keeping in mind that SBs, particularly in
developing countries are not conducting business on-line as quickly as larger
companies (e.g. Molla and Licker, 2005; Tan et al., 2007), government programs need to 779
focus on raising the awareness and knowledge of SBs owner/managers to the
opportunities offered by EC. Raising EC awareness that can lead to adoption of the new
EC technologies should be a priority of governments. Moreover, governments should
also focus their supportive activities on lowering perceived risks of EC within SBs
through providing more secure and trusty e-environments. In the context of Iranian
SBs, it means that relative public organisations such as the Iran Ministry of
Communications and Information Technology and the Iran Ministry of Commerce,
Industries and Mines need to address discussed issues through commencing some
campaigns aimed at enhancement of owner/managers awareness regarding the
advantages of EC on their businesses.

Limitations
Referring to the limitations of this study, first, it was not possible to assess directly the
perception of the respondents (owner/managers of SBs) at the time of EC adoption in
the study which is a common limitation in survey research, particularly in this specific
context (Al-Qirim, 2007, Thong, 1999). We tried to address this issue through asking
the respondents for their perceptions prior to EC adoption. However, it is expected that
the experiences of the SBs with EC adoption will still affect their responses. Second, the
research uses data provided by one key informant per firm which were
owner/managers of surveyed SBs, which has made the results susceptible to the
method bias. Third, we did not assess the opinions of employees who are also users of
EC applications in businesses. Finally and most importantly, this study has
investigated a subset of the individual characteristics existing in EC literature as
determinants of EC adoption, albeit those factors that are more pertinent to the context
of Iranian SBs. Similarly, the selective choice of independent variables and other innate
methodological shortcomings of the study (e.g. focusing on Iranian SBs) tend to pose
certain limitation to the generalizability of the study.

Future direction
Keeping in mind the limitation of the presented study, the research model of EC adoption
in this research can be the foundation of hypotheses formulation for similar EC adoption
research in the future. The findings of this study can also serve as a benchmark measure
of factors affecting EC adoption for future researchers in which, the same population of
SBs, or others, at different business sections, countries, and times in the future can be
examined. For the future research, it would be interesting to evaluate the opinion of
owner/managers at the time of EC adoption, thus, it is suggested that a longitudinal
study be undertaken to understand the adoption of EC and strengthen the direction of
causality proposed by the model. Moreover, the use of multiple informant technique,
particularly through focusing on both owner/managers and employees of SBs can
significantly alleviate the possibility of method bias. Given that employees are also the
JSBED users of EC applications in SBs, assessing their attributes and perception would allow for
20,4 assessment of influence of employees related factors, which may indeed provide more
predictive power for the study. In addition, it is well agreed that SBs are significantly
susceptible to their business environments. It is rational to believe that willingness and
perception of owner/manager are not the only determinants of EC adoption decision,
rather, the business strategy can also compel SBs to adopt EC. Therefore, an interesting
780 piece of future research would be to further explore impacts of other factors (e.g. factors
in the technological, organisational and technological contexts of a firm) on different
dimensions of EC adoption conceivably not assessed here.

Notes
1. The statistics released from the Ministry of Communications and Information Technology
suggest that in the 2009-2010 period Iran has experienced 35 percent growth in Satellite Data
Transmission Stations, 41 percent growth in High speed Internet ports, and almost 1394
percent growth in use of WiMax (Worldwide Interoperability for Microwave Access)
services. Moreover the wide spread of more than 155,000 km optical fibre cable mostly aimed
at government departments, businesses and non-profit organizations has provided relatively
appropriate infrastructure of business-to-business (B2B) EC in Iran.
2. Iranian medium-sized enterprise (or business) refers to a legal entity with more than 50 and
fewer than 250 employees (Ghobakhloo et al., 2011a).
3. Iran government has provided considerable support and financial incentives and grants for
EC institutionalization within Iranian businesses. For instance, Iran government has
launched a supportive plan termed “TAKFA” since 2002 which prioritizes e-government,
deployment of ICT in training and development of digital skills of human resources, and
development of ICT in economy and commerce (Fathian et al., 2008).

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Appendix

Factor
Label 1 (PBen) 2 (PCom) 3 (PRis) 4 (PCos) 5 (ICK) 6 (Innov)

PBen1 0.879 0.147 0.084 20.109 0.130 2 0.028

PBen2 0.806 2 0.003 0.020 20.053 0.179 0.002
PBen3 0.778 0.119 0.109 20.133 0.154 0.008
PBen4 0.776 2 0.013 0.158 20.070 0.101 0.047
PBen5 0.775 0.111 0.157 0.111 0.102 0.053
PBen6 0.768 2 0.023 0.023 0.065 0.064 0.104
PCom1 0.138 0.851 0.059 0.067 2 0.094 2 0.081
PCom2 0.195 0.819 0.179 0.031 0.172 0.072
PCom3 0.006 0.732 0.162 0.088 0.135 0.068
PCom4 0.124 0.683 0.093 0.112 2 0.102 2 0.089
PRis1 20.145 0.191 0.863 0.049 0.195 0.101
PRis2 0.120 0.122 0.759 0.135 0.123 0.067
PRis3 0.258 0.129 0.709 0.012 0.190 0.263
PRis4 0.199 0.132 0.706 20.022 0.072 0.178
PRis5 0.331 0.101 0.693 20.109 0.109 0.084
PCos1 20.176 2 0.038 0.207 0.880 0.105 0.046
PCos2 0.006 2 0.093 0.122 0.858 0.168 0.127
PCos3 0.273 2 0.108 0.150 0.847 0.070 0.012
PCos4 0.046 2 0.043 0.279 0.794 0.063 0.196
ICK1 20.100 0.017 0.166 20.012 0.891 0.253
ICK2 0.019 0.077 0.054 0.104 0.821 0.139
ICK3 0.028 0.080 0.150 20.090 0.760 0.223
ICK4 20.009 0.066 0.067 20.098 0.714 2 0.099
Innov1 20.002 2 0.062 0.018 0.127 0.060 0.826
Innov2 0.057 0.091 0.059 0.036 2 0.010 0.803
Innov3 0.157 0.029 20.046 20.107 0.100 0.752
Innov4 0.124 0.125 0.033 0.010 2 0.025 0.693
Table AI. Notes: PBen (perceived benefits), PCom (perceived compatibility), PRis (perceived risks), PCos
Rotated factor matrix (perceived costs), ICK (IS and computer knowledge), and Innov (innovativeness). Extraction method:
along with item loadings principal axis factoring method. Rotation method: Varimax with Kaiser normalization
About the authors The role of
Morteza Ghobakhloo is a PhD Candidate in the Department of Mechanical and Manufacturing
Engineering, Universiti Putra Malaysia. He received the MSc degree in Industrial Engineering owner/manager
from Universiti Putra Malaysia in 2010. He has served as IS/IT consultant in different industries.
His researches have been published, or are under consideration, in leading IS and management
journals such as ISF, IM&DS, IJESMA, and IJITDM among others. Morteza Ghobakhloo is the
corresponding author and can be contacted at: morteza_ghobakhloo@yahoo.com
Sai Hong Tang is an Associate Professor in the Department of Mechanical and 787
Manufacturing Engineering, Universiti Putra Malaysia. His academic experience is in the field
of mechanical, manufacturing and systems engineering. His industrial experience is in the field
of construction, M&E, automobile, semiconductor and design. His current research is related to
information technology, operations research and robotics. He has published numerous articles in
a variety of well-known journals.

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