The

fantastic growth of broadband and ICT adoption in Atlantic Canada Dr. Gregory J. Fleet Associate Professor Faculty of Business University of New Brunswick Saint John 100 Tucker Park Road Saint John, New Brunswick Canada E2L 4L5 +1 (506) 648 5856 fleet@unbsj.ca http://www.unb.ca Daniel Doiron Senior Teaching Associate and Director Electronic Commerce Research and Training Center Faculty of Business University of New Brunswick Saint John 100 Tucker Park Road Saint John, New Brunswick Canada E2L 4L5 +1 (506) 648 5744 fleet@unbsj.ca http://www.unb.ca Micah Williamson Lead Research Assistant Faculty of Computer Science University of New Brunswick Fredericton P.O. Box 4400 Fredericton, New Brunswick Canada E3B 5A3 +1 (506) 646-8321 k678b@unb.ca http://www.unb.ca Keywords SME ICT ADOPTION BROADBAND CANADA RURAL

ABSTRACT Objectives: In early 2010, a survey of over 400 businesses benchmarked ICT adoption by SMEs in Atlantic Canada documenting the role of marketing and export on ICT usage in helping to create growing and sustainable business opportunities. Approach: Over 11,000 SMEs across four Canadian provinces were invited to complete a web-based survey. The more than 40 questions covered a variety of topics including general questions about their business and their Internet use, and more specific questions about the role and impact of the Internet and eBusiness on their business. Results: Despite Atlantic Canadas low population base and distance to major population centres, SMEs in the region show an impressive level adoption of various ICT products and services. Broadband is nearing ubiquitous use (e.g., over 90% of SMEs have DSL, cable modem or satellite access). Website adoption similarly shows impressive growth with 94% of SMEs with less than 5 employees having websites. Adoption increases (over previous surveys) were also noted for online purchasing (now 96%), and online sales (61%). Questions about various new social networking services, such as web analytics, search engine optimization, and the use of Twitter found that many of these services, despite being new, are being adopted by as many of 44% of the SMEs. These adoption rates will be compared with our previous studies to document the historical growth within Atlantic Canada, as well as compare these baseline measures to other regions within Canada, as well as studies of comparable regions worldwide. Implications: In a mostly rural part of Canada, this growth in adoption has many implications: for example, to help better focus education and training of SMEs, to help SMEs understand their competitive environment, and for the planning by government and policy makers. Value: An understanding of which technologies and services are growing quickly and which are growing slowly helps better understand models of adoption including isolating specific enablers and barriers for SMEs. INTRODUCTION Positive growth of the Atlantic Canadian economy is next to impossible without growth at the small and medium enterprise (SME) level, where, like most regions of the world, these smaller companies make up over 99% of all businesses (Statistics Canada, 2008). Therefore, researchers have been tracking the performance of these organizations looking for ways to encourage their growth and thereby stimulate local economies. Much of the recent focus of this research has been on the adoption of Information and Communication Technologies (ICT) for SMEs (e.g., Gafoor & Iqbbal, 2007; Gray, 2009; Hansen, Rand & Tarp, 2004; Kollmann et al., 2009; Levy & Powell, 2005; Simmons, et. al., 2008). This is due in large part to the early work of Porter (2001), who showed that the Internet and advanced ICT can improve operations and enhance market reach. The realization of these business improvements for many SMEs is constrained by basic resource issues of time, money, and knowledgeable personnel. In fact, some have found that SMEs are generally slower at adopting ICT than their larger counterparts (Burke, 2005). This has lead to the combined effort, over the past 10 years by governments, universities, and regional development agencies, to seek opportunities to research and train these SMEs to incorporate more ICT into their operations. Within Atlantic Canada, the Electronic Commerce Research and Training Centre (ECRTC) at the University of New Brunswick has been working with local, provincial and national government organizations to understand and enhance SMEs use of ICT. This research and training agenda began over 10 years ago. In 2004, the Centre began the first of it's SME surveys, that for the past 6 years, have recorded the adoption and use of ICT by Atlantic Canadian businesses. With the latest completed in early 2010, there are now three region-wide studies of ICT adoption by SMEs over a five year period.

This is quite unprecedented. Similar historic views of SME behaviour have relied on cross-study comparisons from different researchers and different institutions. Still, much research on ICT adoption by SMEs spans the past decade. Many of these studies focus their research on rural and less-developed regions, where ICT is perceived to help level the playing field for competition against larger enterprises as well as against global businesses (Arendt, 2008; Chen & Wellman, 2003; Wielicki &Cavalcanti, 2006; van Dijk & Hacker, 2003). MacGregor et. al., (2007, 2010) have looked specifically at adoption within developed versus developing regions of the far east and Europe, finding that SMEs in developed regions were more likely to highlight technology barriers, while developing region SMEs identified organization barriers as primary. Gilmore et al. (2007) looked at European SMEs and the use of eMarketing by Irish companies between 2000 and 2004. First of all, they grouped reasons for pursuing eMarketing into proactive reasons (e.g., eliminate disadvantages of SMEs) and reactive reasons (e.g., competitive pressures). Then, like the work of MacGregor, they looked at barriers to ICT generally, and eMarketing specifically, grouping into three broad categories: barriers due to general characteristics of SMEs (lack of skills, financial support), practical implementation and maintenance issues (lack of focus on customer, lack of sophisticated websites), and more organizational barriers (partners, suppliers not up-to-date with technology). Simmons et al. (2008) also took a more marketing focus, looking at determinants for SME website adoption. They argue that website adoption within SMEs is unique, and cannot be informed by adoption of larger organizations or current marketing models. Proposing a new model, they suggest that the determinants can be grouped into individual factors (such as the SMEs owners or managers), and external, industry and business factors. Kollmann et al. (2009) surveyed the literature on more than 14,000 businesses from 10 industry sectors and 29 European countries to examine eight determinants thought to be factors in ICT adoption (from compatibility to organizational support to perceived usefulness). From the secondary research and a linear regression analysis of the data, they found organizational readiness (the organizations financial and technological resources) as a dominant predictor. In order to understand these differences further, the authors chose Hofstedes (2001) seminal work in cultures, and found that three cultural dimensions (power distance, masculinity and uncertainty avoidance) were significant modifiers of organizational readiness. Closer to home, the work of Rosson has examined the role of the Internet for exporting SMEs in Atlantic Canada over the years(Rosson, 2000; Donovan & Rosson, 2001; Chrysostome & Rosson, 2004 and 2009), but the ECRTC work is the first long-term research to gather and maintain a consistent (repeated) survey over a long period of time. METHOD Each of the three Atlantic Canada studies were conducted using a secure, password-controlled web- based survey. Unique email invitations were sent to thousands of SMEs across the region inviting their participation by completing a 40-plus item questionnaire. The email addresses were culled from a range of local and federal government and business sources. The most recent 2010 study, for example, created an email database of over 11,000 businesses. The survey was available for completion for a period of 3 to 4 months. Regular reminders were sent to those businesses who had yet to participate. Early participation prizes were used as incentives, as were small denomination gift cards and larger technology offerings (e.g., iPod touch, Netbooks). The questions in the survey requested information on Internet use, perceived enablers and barriers to ICT adoption, marketing and export factors, and general business details.

The purpose of each of these surveys was to provide a benchmark of technology adoption to help frame a series of subsequent training initiatives. As such, the questions surveyed this range of issues mostly using nominal and ordinal `rating scales and response types. In order to ensure comparability between studies, the large majority of questions remained unchanged in the second and third studies. Some small changes did occur. Additional questions were added to explore the role of Internet marketing, and most recently (in the 2010 study) questions were asked about export and the use or planned use of social media. To accommodate these additional questions, some questions from the original surveys were removed in order to keep the completion duration similar to past surveys and more feasible for busy participants. RESULTS Participants: Participation varied from study to study. The initial survey garnered the highest response rates with 776 SMEs completing the survey. The subsequent surveys resulted in a smaller yet respectable rates of 400 and 432, respectively. It is important to note two key elements of these participants. First of all, the sample was a non- random, self-selected group of internet users. As such, we cannot directly assume representativeness for all Atlantic Canadian SMEs without verification that the socio-demographics of these samples mirror the characteristics of the regional population. Second, given that the participants needed an email account and access to a web-based terminal to complete the survey, we can be sure that our sample has underestimated those businesses currently without Internet services. This last issue was considered low risk from the point of view of training, since the goal of the SME education was to reach and better the operations of those SMEs already using the Internet. The representativeness of our samples, on the other hand, was appraised by comparing a number of socio-demographic properties. Of the four Atlantic Canadian provinces, the home province of the research university was slightly over-represented proportionally, while the other three provinces were typically slightly under-estimated in participation. This is not surprising given the higher brand recognition and local pride in the New Brunswick university. Industry sector participation was both broad and varied, with strong representation from all 20 sectors that "distinguish the structure of the Canadian economy" (Industry Canada, 2007). Probably the most dramatic difference between our data sample and the population was with respect to the size of the SME. Statistics Canada (2008) indicates that nearly 80% of all SMEs in Canada have 4 employees or less. Our sample, on the other hand, was made up of just over half this number of micro-enterprises. As would be expected, the larger-sized SMEs were similarly over-represented. Despite these differences, there are two important facts to consider. First, these differences can be considered when summarizing the results, and appropriate weights assigned to better reflect to the population. Second, the data gathered in each of the three surveys were exceptionally consistent one to the next, suggesting that inter-test reliability was very high, and that with careful weighting, our results could truly minimize the demographic biases in the sample. Adoption of ICT: As our title suggests, one of the more dramatic results from the past 6 years of research on SMEs in Atlantic Canada is the adoption of broadband internet. This adoption is clearly seem in the drop in numbers of those connecting to the Internet using traditional narrowband dial- up service. In 2005, this number was 31%. In 2007, it dropped to 14%, while this year the numbers are as low as 5%. Less substantial, though nonetheless interesting, are other increases in ICT adoption. Website adoption has risen from 71% in 2005, to 80% in 2007 and 84% in 2010. If we isolate only those businesses who export products or services (approximately 30% of our sample), then we find that 90% of exporting SMEs have websites. Similarly, if we look only at micro SMEs (4 employees or less), a full 94% of the sample have websites. So, given the under-representation of micro-enterprises in

our sample, our latest 2010 measure of 84% adoption of websites clearly underestimate the broader pattern. In each survey we asked businesses what technologies and services they currently use. Table 1 shows how 17 technologies and services ranked year over year. This table reveals that SMEs have ubiquitously adopted basic technolgy and Internet behaviour (PC worksations, Web site and email use). The remaining 14 services, on the other hand, saw adoption rates from 1% to 94%.

Table 1. The percentage of Atlantic Canadian SMEs that currently use a variety of technologies and services for their business (from studies in 2005, 2007 and 2010).

When asked whether they used the Internet (email and/or website) for selling goods and services, we see strong year-over-year growth from 46% in 2005, to 53% in 2007 and most recently 61% in 2010. Exporters: The first study in 2005 isolated export as a key characteristic of those SMEs shown to be higher adopters of ICT. Therefore, in 2007 we added some additional questions about export behaviours. On the one hand, there was no growth in the number of SMEs who export good and/or services, yet at the same time, there was a huge increase in the number of SMEs indicating they see the global market as realistic for their businesses, and many more see the North American and global markets as the context for their eBusiness offerings (e.g., 82% said they see the Internet as key to reaching beyond local markets, a number that was only 40% in 2007). This finding was supported by other data. When asked to choose from a variety of factors that played a role in their export business, the Internet, as a factor, has consistently been rated as high as 30%, while the role of individuals (personal contacts and contact with agents or distributors) has been noted for a similarly strong role in their export business. Future technology adoption: Finally, we also see some considerable changes in opinion about what technologies and services SMEs plan to use. When comparing the current survey results with the previous two surveys (see Table 2), it can be noted that interest in many of these 14 services has doubled since the 2007 survey. While website design interest only grew 6% between 2005 and 2007, it jumped to 12% between 2007 and 2010). In fact, three services (website development,

promotional/Internet marketing services, and customer support) grew by 14% and 15% after showing only a 3% to 5% interest previously. This growth in optimism is mirrored by the answer to the question option 'I have no plans in this regard'. In 2005 over 1/3 of the sample failed to see these technologies as part of their companies near-term plans; but this year, only 13% voted this way.

Table 2. The percentage of Atlantic Canadian SMEs that indicated they plan, in the near future, to use a variety of technologies and services for their business (from studies in 2005, 2007 and 2010).

DISCUSSION AND IMPLEMENTATION As stated earlier, this study is quite unique, providing a view of ICT adoption by SMEs across Atlantic Canada over the past 5 years. The re-use of the survey each year, and the high degree of inter-test reliability provide a unique look at the changing landscape of this part of (mainly rural) Eastern Canada. One of the most dramatic findings in our study is the adoption of broaband Internet. Because of the way we asked our question concerning how they connect to the Internet, the most direct way to demonstrate the growth in broadband is to look at the decrease in traditional dial-up (narrowband) access. In 2005, over 3 of 10 in our sample were still using dial-up Internet access. This past January (2010), our Atlantic Canadian sample indicated that number was now only 1 in 20. In parallel with this growth in broandband adoption, has been the continued effort of governments and service provides to reach 100% broadband penetration for all residents of this region. And only 12 months ago, the government of one of the four provinces announced that by July 2010 'all New Brunswick residents will have high-speed Internet access' (Business New Brunswick, 2009). Certainly our sample mirrors this growth. Our data also demonstrates some other areas of considerable growth in adoption: use of business websites, wireless Internet (WiFi), secure online customer transactions, as well as a number of operational areas (intranets, remote data storage, hosted software, video conferencing), each showing from 12% to 14% growth in the past two years (Table 1).

Similarly, patterns around those technologies and services SMEs plan to adopt in the near future reveal areas of notable interest: the focus on more website development and design, on Internet marketing services and customer support all saw growth of 12% to 15% since 2007 (Table 2). On the other hand, we can also examine the absolute numbers for adoption and use of these technologies and services. First, let us look at a comparison of these numbers with other regions. Across Canada, Industry Canada and Statistics Canada has been making similar measurements. Neogi & Brocca (2007) summarized the growth over the first six years since 2000 of Canadian businesses large to small. Despite differences in definitions of firm size, our data often present a more positive or optimistic view of ICT adoption, with Atlantic Canadian companies in our sample indicating higher use and employment of technologies and services than our Canadian counterparts. While analysis is still ongoing, these differences are likely the result of two factors: (i) sampling, methodology and analysis differences between the studies; but also (ii) real regional differences that in the national study may be masked by their sample, and possibly over-estimated by our sample. Unfortunately for Canada, the SECT (Survey of Electronic Commerce and Technology) survey has not been conducted since 2007, so our comparison with national data is lacking up-to-date numbers. Comparisons with other regions worldwide can be equally difficult given similar issues as well as country, cultural and enterprise factors. All the same, when comparing our Atlantic Canada data with those in other regions, it isn't surprising to see slightly higher levels of adoption again in our findings than has been reported by others (Gray, 2009; Harindranath et. al., 2008; ). We might also explore the differences in the growth trends of our data set; for example, how fast or slow adoption is occurring year-over-year, or in our case, from study to study. Tables 1 and 2 show some interesting trends. There are a few of technologies and services that demonstrate a steady growth over the fives years of our studies, but the majority of ICT adoption shows either fast growth between 2005 and 2007, and slower growth since, or one of the other three combinations (fast-fast, slow-fast, slow-slow). Seeing or analyzing the pattern in these results has not been successful as yet. We have been exploring whether these numbers support models such as proposed by Gray (2009), who uses Roger's (1995) diffusion of innovations framework and Venkatraman's (1994) business strategy/transformation approach. Gray suggests that while many of the mass market or commodity ICT services within SMEs (e.g., broadband Internet, website adoption) maybe be explained by social, imitative or deterministic behaviour, the adoption of more complex ICT (an adoption that produces higher business benefits and more significant business transformation) requires a deliberate, intentional, and often strategic decision on the part of the SME. Gray suggests this helps explain the much slower (and in some cases) stalled growth of E-Commerce and E-Business. In Figures 1 and 2 we have plotted the data found in Tables 1 and 2 in order to look at both trends (slopes) and groupings or clusters. All data curves have been fit with 2nd order polynomial equations. In Figure 1, we can clearly see how wide the range of adoption is for the 17 Internet technologies and services. In addition, it seems to show that these services fall into groups of services that have similar growth curves and absolute adoption levels. At the highest level is PCs, email and web surfing, which all have reached nearly 100% adoption since 2007. The next group, security and functional software have growth to near or over 90% adoption. In total, this group of 17 technologies visually seems to fall into 6 groups with adoption ranging from 5% to 100%. Growth within these groups is, at present, difficult to determine. Growth is a mixture of fast-slow or slow-fast, even within the six groups. Figure 2 plots those technologies that SMEs plan to adopt in the near future. (Note: the y-axis is now show only 0% to 50%. Presented in this way, the data from Table 2 might be seen as falling into two groups of technologies: the top five (website design, website content development, marketing, payment and customer support) with strong adoption interest, and the bottom eight (hosting, shopping cart, consulting, order-delivery, security management, business processes, and catalogue management) showing a moderate adoption interest. And one might argue the difference between

these two broad groups may be reflection of the ease with which these technologies can be integrated within the organization (using easy-to-use and/or inexpensive software, the availability of internal and external expertise, or the ease of operational or organizational integration). It is this

Figure 1. The percentage of Atlantic Canadian SMEs that currently use a variety of technologies and services for their business (from studies in 2005, 2007 and 2010) see data in Table 1.

Figure 2. The percentage of Atlantic Canadian SMEs that indicated they plan, in the near future, to use a variety of technologies and services for their business (from studies in 2005, 2007 and 2010) see data in Table 2.

last point that brings researchers such as Arendt (Arendt, 2008; Wielicki & Arendt, 2010) to argue the following: "... the allocation of government resources to eliminate the business digital divide in less advanced countries should not evolve around merely providing SMEs with more access to technology, but rather concentrate on providing access to training, education and creation of organizational knowledge among SMEs".

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