I n t e r n a t i o n a l J o u r n a l o f M a n a g e m e n t C a s es

INFORMATION TECHNOLOGY AND its

effects IN SME. The case of Albania

Ilir Elmazi
Financial and Economic Director of SIGMA Insurance Company

Helga Vukaj
University of Tirana, Albania

Elsa Gega
University of Tirana, Albania

Liljana Elmazi
University of Tirana, Albania
very fast and fragmented across the different
disciplines, which makes the task of capturing its
Abstract different perspectives a very complex one. In line
with the above implications, the first objective of
The recent years, small to medium-sized this research aims at capturing the different e-
enterprises (SMEs) have been shown to contribute commerce perspectives from the SMEs’ point of
significantly to national economies. It was in the view, and the second objective aims are capturing
1970s that researchers first began to highlight the the e-commerce perspective from the theoretical
critical role of SMEs, not only in maintaining healthy and the methodological point of view.
and dynamic economies within industrialized
nations, but also in introducing inventions and
innovations. Introduction
The recent emergence of the Internet in general, and E-commerce is “the sharing of business
the WWW or Web in particular has revolutionized information, maintaining business relationships,
business activities (Abell & Lim, 1996). This is and conducting business transactions by
generating new products, and is the driving force means of telecommunication network” (Zwass,
behind new production processes, new forms of 1996). Currently, e-commerce pervasively
business organization, new scope for consumers, and dramatically affects the ways firms think,
and new market opportunities. operate, and compete in the market. Many
innovative business models such as supply chain
E-commerce is becoming more and more essential
management, customer relationship management,
as a business tool for organizations in general,
and enterprise resource planning are also enabled
and for SMEs in particular, to gain competitive
by e-commerce. The adoption of e-commerce
advantage and to access global markets. The
has brought new opportunities and challenges to
online economy introduces unique opportunities
business organizations.
to SMEs for open and free trade because it avoids
tariffs and tax, while lessening the impact of The main purpose of this paper is to examine the
geographical distances and time, which can serve factors that influence the variations of e-commerce
to separate SMEs from potential opportunity. . adoption behaviours of small and medium
businesses in Albania. Prior studies found that
There is a need to generate more e-commerce
small businesses are slow in adopting technological
research that could penetrate much deeper
innovations (Yap, Thong, & Raman, 1994). Since
into main impending issues pertaining to the
small and medium businesses constitute almost
SMEs in their potential uptake and use of e-
90% of all businesses in many economies, the
commerce. On the other hand, e-commerce is
slowing rate of innovation adoption is a critical
characterized of being embryonic but growing

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issue needed to be examined. Moreover, small E-Commerce Status in Albania

and medium businesses are different from large
businesses in many aspects. Organizational Albania initiated and implemented a series of
theories that are applicable to large businesses may national plans and activities to promote diffusion
not fit in small and medium business environments of e-commerce in both public and private sectors.
(Wesh & White, 1981). There is a need to examine Several governmental agents have engaged
whether models of IT innovation tested on the in these activities. In the context of small and
large organization context can be similarly applied medium businesses, the Ministry of Industry is in
to small and medium business environments. a leading role in promoting the use of e-commerce
for competitiveness. The Ministry of Economy,
Since this study focuses on e-commerce adoption through the Department of Industrial Promotion,
at an organizational level, individual characteristic has developed a website specifically for promoting
variables, such as individual innovation perceptions, small and medium businesses’ products and
are not considered in this study. The sample frame services. The department also arranges a free
includes small and medium businesses located homepage with URL and e-mail, and provides
in Albania. The research findings from this study seminars and training programs for SMEs.
can help in determining whether the organizational
innovation theory can be generalized across other
settings, particularly in Balkan settings. The key Theoretical Background and
factors found to be crucial from this study could be Development of the Research Model
incorporated in governmental initiatives and could
be used in developing the strategy for promoting Organizational innovation was adopted as a
e-commerce adoption among small and medium theoretical foundation for developing the research
businesses in the region. model. Organizational innovation can be defined
as the development and implementation of
The outline of this chapter is as follows. ideas, systems, products, or technologies that
are new to the organization adopting it (Rogers,
First, the background of small and medium
1983). Innovations are means of changing an
businesses, the e-commerce status in Albania,
organization, either as a response to changes
and the theoretical background are discussed.
in the external environment or as a pre-emptive
Consequently, the hypothesis development, action to influence the environment. The adoption
methodology, and the results of data analysis are of innovation is a process that includes the
explained. generation, development, and implementation of
new ideas or behaviours (Rogers, 1983).
The final section discusses the implications of this
study for research and practice. This study examines the influence of IT emphasis,
reflected by IT investment intensity, on e-commerce
adoption. Second, evidence from the innovation
Small and Medium Businesses in Albania literature recently suggests that the role of a
firm’s ability to absorb new knowledge related to
The definition of small and medium businesses in innovation can play an important role in innovation
Albania has gone through a series of modification adoption (Cohen & Lavinthal, 1990).
and changes (Sevilla & Soonthornthada, 2000).
In the past, many criteria had been used such Small and Medium businesses that are familiar with
as annual sales, net fixed assets, number of IT skills and knowledge might find it easier to acquire
employees, and registered capital (Allal, 1999). additional knowledge necessary for adopting e-
While the size of small and medium businesses, commerce. The IT department is a major source
reflected by the number of employees, has of IT skills and knowledge in organizations, and
mutually been accepted to be fewer than 200, the could be a main unit in acquiring and assimilating
asset value aspect has been periodically changed the knowledge necessary to adopt and implement
to reflect a more current economic condition. e-commerce innovation. Hence, it is conceivable
that the existence of an IT department in small and
medium businesses could promote e-commerce
adoption.

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The second group of variables is technology likely to adopt innovation since they are capable
factors. Specific factors related to innovation of absorbing risk associated with innovation,
characteristics are frequently used as a key and have sufficient resources and infrastructure
determinant of innovation adoption intention. to facilitate the implementation of innovation
Rogers (1983), for example, identified several (Fitchman & Kemerer, 1997).
attributes of an innovation that can influence
innovation acceptance behaviours, such as Small and medium businesses encounter
relative advantage, complexity, compatibility, barriers to innovation adoption by limited financial
and observability. Tornatzky and Klein (1990) resources, insufficient technological expertise, and
identified relative advantage, compatibility, and a shortage of management perspective (Wesh
complexity as innovation characteristics that are & White, 1981). Adoption and implementation
salient to the attitude formation of innovation of e-commerce demand a certain level of
adoption. Though most of these factors are organizational resources. Larger organizations
more pertinent to an individual perception, some should be in a better position to support such
attributes are applicable at an organization level demands. Moreover, larger organizations should
(e.g., Chau & Tam, 1997; Thong, 1999). This have a higher potential to use e-commerce due to
study investigates the effects of two innovation a larger scale of business operations (Lind, Zmud,
characteristics: perceived compatibility and & Fischer, 1989). Therefore, we expect that e-
perceived benefits. Different organizations may commerce adopters would have a larger size than
face different innovation opportunities. Whether prospectors and laggards.
these opportunities can be exploited depends on
the degree of match between the innovation’s Hypothesis 1: The three types of organizations
characteristics and the infrastructure currently significantly differ in their size.
available in the organization (Rogers, 1983). In
addition, not all innovations are relevant to an Top Management Support for E-
organization. The degree of relevance depends on
the potential benefits organizations received. Commerce
The third group of research variables is an It is well accepted that top management plays a
external factor. Past studies have stressed the critical role in acquisition and diffusion of innovation
importance of environments. Environmental (Orlikowski, 1993; Rai & Patnayakuni, 1996; Wesh
contingencies such as environmental uncertainty & White, 1981). Top management can stimulate
and heterogeneity have been found as facilitators change by communicating and reinforcing values
of innovation When organizations face a complex through an articulated vision for the organization
and rapidly changing environment, innovation is (Thong, 1999). Moreover, top management can
both necessary and justified (Pfeffer & Leblebici, ensure that resources and capabilities required
1977). Environmental factors, especially market for adopting and implementing innovation will
factors (i.e., competitiveness), cannot be controlled be readily available when they are needed
by organizations; rather, they affect the way firms (Rai & Patnayakuni, 1996). Empirical studies
conduct their businesses. Thus, it is conceivable in IT innovation suggested a positive effect of
that environmental factors create a need for firms leadership support on innovation adoption. Rai and
to adopt IT-related innovation such as e-commerce. Patnayakuni (1996), for example, found that top
This study examines the effect of competitiveness management support has a positive effect on CASE
on e-commerce adoption. tools adoption behaviour in IS departments.
Adopting and implementing e-commerce requires
Hypotheses Organizational Factors resources extensively that are forthcoming only with
the active support from top management. In addition,
top management support for e-commerce would
Size also send a strong signal to get line management
to actively participate in proposing and developing
Organizational size has been one of the most an e-commerce initiative. Therefore, we expect
frequently examined factors in the study of that e-commerce adopters would have a higher
organizational innovation (e.g., Rai & Patnayakuni, level of top management support for e-commerce
1996; Thong, 1999. Large-size firms are more than prospectors and laggards.

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Hypothesis 2: The three types of organizations to prior knowledge as a key determinant of IT

significantly differ in the extent of topmanagement innovation adoption (Fitchman & Kemerer, 1997).
support for e-commerce.
Adopting and implementing e-commerce innovation
requires organizations to posses a bundle of
IT Emphasis IT-related skills and knowledge and Internet
application environment (i.e., HTML coding, Java
Firms significantly differ in their level of IT technology). Though many small firms may adopt
emphasis. Case studies that highlight strategic an outsourcing strategy for e-commerce operation,
IT applications (e.g., Reich & Benbasat, 1990) they still need some basic knowledge for selecting
also suggest that firms in service industries are appropriated service providers, and, in many
more conductive to the use of IT for their business cases, they need these IT skills and knowledge to
operations. Jarvenpaa and Ives (1991) found that control and monitor the operation of e-commerce.
top management’s interest in IT, as an indirect
measure of the importance of IT, was lower for The IT department can be viewed as a source of IT-
firms in the petroleum industry compared to firms related skills and knowledge within organizations.
in banking. Most small businesses do not have any formal,
or even informal IT department, and routine IT
IT emphasis is defined as the level of importance services are usually performed by accounting or
the firms have placed on IT. In this study, we administrative units. Small businesses that have
use the intensity of IT investment as a surrogate an IT department should be in a better position to
measurement of this variable. Differences in the acquire some IT-related skills and knowledge, which
level of IT emphasis are expected to significantly make it easier for them to acquire new knowledge
influence the adoption action of IT-related for adopting e-commerce. Therefore, we expect
innovation such as e-commerce. Ravichandran that e-commerce adopters are more likely to have
(2000) also found that firms where IS plays a a formal IT department within organizations than
strategic role are more likely to adopt TQM in prospectors and laggards.
information systems development. Based on
these cumulative evidences, we expected that e- Hypothesis 4: The three types of organizations
commerce adopters would have a higher level of significantly differ in the existence of an IT
IT emphasis than prospectors and laggards. This department.
leads to the following hypothesis:
Hypothesis 3: The three types of organizations Technology Factors
significantly differ in the level of IT emphasis.

Perceived Benefits
Existence of IT Department
Perceived benefits refer to the extent of
Absorptive capacity theory (Cohen & Levinthal, management recognition of the relative advantage
1990) asserts that a firm’s ability to appreciate that e-commerce can provide to the firms.
an innovation, to assimilate it, and apply it to new Perceived benefits are regarded as an important
ends is largely a result of the firm’s pre-existing factor in determining adoption of new innovations
knowledge in areas related to the focal innovation. (Iacovou et al., 1995; Rogers, 1983). For example,
This prior related knowledge makes it easier for Iacovou et al. (1995) found that perceived benefits
organizations to acquire and retain new knowledge have a positive effect on the likelihood of EDI
for innovation adoption. Complementary to this adoption in small businesses.
perspective, it was found that the technology
assimilation is best characterized as a process of The higher the level of management understanding
organizational learning, wherein individuals and on the relative advantage of ecommerce, the more
the organization as a whole acquire the knowledge the likelihood of the allocation of the managerial,
and skills necessary to effectively acquire and financial, and technological resources necessary
apply the new technology (Boynton et al., 1994). to adopt and implement e-commerce. This positive
Prior empirical studies in IT innovation also point perception of the benefits of e-commerce should
provide an incentive for the small and medium

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businesses to adopt the innovation. Therefore, we 2000; Thong, 1999. Therefore, firms in a highly
expect that adopters of ecommerce would have competitive environment are pressured to adopt
a higher level of perceived benefits than those of e-commerce to respond to the competition. E-
prospectors and laggards. commerce can be used as a strategic tool to
implement an organization’s chosen strategy and
Hypothesis 5: The three types of organizations to respond to competitors. Therefore, we expect
significantly differ in the extent of perceived that e-commerce adopters would face a higher
benefits. level of competitiveness than prospectors and
laggards.
Perceived Compatibility Hypothesis 7: The three types of organizations
significantly differ in the extent of
Perceived compatibility is defined as the extent to competitiveness.
which an innovation is perceived as being consistent
with the existing needs, values, and technological
infrastructure of potential adopters (Rogers, Research Methodology
1983). Adopting e-commerce entails the selection
and implementation of a suite of technologies (i.e.,
hardware, software, communication networking). Data Collection
If the innovation is compatible with existing work
practices, environments, and overall objectives, Survey was the primary research methodology
firms will be more likely to adopt them. Therefore, of this study. Prior to the full-scale data collection
we expect that adopters of e-commerce would phase, questionnaires were sent to a number of
have a higher level of perceived compatibility than reviewers who were qualified to evaluate the content
that of prospectors and laggards. and appropriateness of the questions. Reviewers
were asked to examine the document for question
Hypothesis 6: The three types of organizations clarity, interest, and mechanical considerations, as
significantly differ in the extent of perceived well as the length of time necessary to complete
compatibility. the questionnaire.
Data for testing the hypotheses were collected
Environmental Factors through a national survey in several major cities
in Albania. Based on the definition generally
accepted in Albania, we define small and medium
Industry Competitiveness businesses as those which have less than 200
full-time employees, Respondents were those
Innovation literature widely recognizes the who influenced or were part of a decision-making
influences of environmental contingencies. The process of e-commerce adoption. Data were
environment creates contingencies to which firms collected through several approaches, such as a
have to respond typically through product and direct-mail-based survey, questionnaire distribution
process of innovation (Duncan, 1972). Moreover, during small and medium-sized enterprise (SME)
firms have to be compatible with their environment, seminars, and individual interviews.
which is essential for their long-term survival and
growth (Thomson, 1967). In total, 1,200 questionnaires were distributed and
452 were returned. Sixty-six questionnaires were
Competitiveness reflects the intensity level of unusable. The total response rate of this study is
competition within the industry where the firms 32%. From the total 386 responses, 108 (28%)
operate. In a competitive environment, businesses were manufacturers, 111 (29%) were firms in the
are pushed to be innovative by the rivalry (Pfeffer service industry, 92 (24%) were retailers, and 75
& Leblebici, 1977). Firms respond to competition (19%) were wholesalers.
by offering innovative services and products.
Past studies in IT innovation suggest that, in a
competitive environment, firms have a greater
need to adopt IT-related innovation for competitive
advantage (Grover & Goslar, 1993; Ravichandran,

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Organization Types Finally, we used a three-item scale to assess

industry competitiveness, measuring the number
Respondent firms were subsequently classified of competitors adopting e-commerce, and the
based on their e-commerce adoption action. The success and failure of the competitors in adopting
questionnaire asked respondents whether their e-commerce.
organizations had already adopted e-commerce.
If respondents answered no, they had to specify
the plan of ecommerce adoption, ranging from Analysis
adoption within three months, six months, one
year, no specific plan, or no intention of adoption. Since the main objective of the hypotheses is to
Firms were classified as adopters if they had test the differences among the three organization
already adopted e-commerce; as prospectors types based on the identified factors, Analysis of
if they had not adopted e-commerce, but had a Variances (ANOVA) was employed to analyze
specific plan to adopt e-commerce within one year; a mean difference among the three groups. A
and as laggards if they neither had a specific plan post-hoc multiple comparison (Scheffee’s) was
nor intended to adopt e-commerce. From the total subsequently employed to perform a pair-wise
386 responses, 107 firms (28%) were classified as comparison of the mean difference among the
adopters, 52 firms (13%) as prospectors, and 227 three organization types. Results from ANOVA
firms (59%) as laggards. analysis supported all of the seven hypotheses.
In particular, analysis results strongly support
hypotheses 2-6 (p < 0.001), support hypothesis 1
Measure (p < 0.01), and moderately support hypothesis 7
(p < 0.05). Table 6 presents the statistical analysis
The target respondents were small and medium results.
businesses in Albania; therefore, all questions
were originally composed in Albanian and English Furthermore, pair-wise analysis was performed to
language. Organization size was determined by determine the mean difference among the three
the number of full-time employees. Respondents organization types (Table 7). The results suggest
were asked to specify the number of employees: that adopters and laggards were significantly
less than 10, 10-30, 31-50, 51-100, and more than different in all variables. However, the results
100. Top management support was measured by of the mean difference between adopters and
a three-item scale assessing top management’s prospectors, and between prospectors and
interests and understanding in e-commerce, laggards are mixed. In particular, adopters and
and perceptions of top management towards e- prospectors are significantly different in size,
commerce. IT emphasis was assessed by using a IT emphasis, and existence of IT department.
surrogate measurement of IT investment intensity. Prospectors and laggards are significantly different
Respondents were asked to specify the proportion in IT emphasis, perceived benefits, and perceived
of IT investment on the total annual budget. compatibility
Answers ranged from no budget for IT investment,
less than 2.5%, 2.5-5%, >5-7.5%, >7.5-10%, to
more than 10%. Existence of an IT department Discussion and Conclusion
was measured by asking respondents whether
It is unarguable that e-commerce is becoming
they formally had an IT department within their
one of the key technologies driving businesses
organization. The answers were coded to “0”for
in the current dynamic environment. A study of e-
having an IT department and “1” for not having an
commerce would expand our understanding on
IT department. A score for each organization type
the rationale underlying the thinking logic of firms
was calculated by dividing the total score with the
in adopting the technology.
number of firms in each type. Therefore, the lower
the average score, the more the organization type Results from our statistical analysis reveal insides
had an IT department. on key factors that influence adoption decision of
small and medium businesses in Albania. Overall,
Perceived compatibility is assessed by a three-
the results strongly support the hypotheses
item scale, perceived benefit by a five-item scale.
reinforcing that key variables identified from the
These two scales were developed based on prior
organization innovation theory are applicable in
studies’ scales .
the context of Balkan settings, and in the context

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of e-commerce innovation. In particular, we found compared with the other two organization types.
that adopters significantly differ from laggards in all This result is consistent with prior studies that
key variables. While prospectors are significantly point to the environmental factors as the key
different from adopters in size, IT emphasis, and factors influencing small and medium businesses’
existence of IT department, they are significantly decision to adopt innovation (e.g., Iacovou et al.,
different from laggards in IT emphasis, perceived 1995). This also implies that small and medium
benefits, and perceived compatibility. businesses operating in a competitive environment
are constantly scanning and implementing new
A number of conclusions can be drawn based on technologies such as e-commerce.
these results.
First, the amount of strategic emphasis firms Implications
give to IT (i.e., IT-related knowledge, resources,
and capabilities) has an impact on e-commerce This study has implications for both research and
adoption intention. Firms that strongly support practice. For research, this study is one among
the use of information technology, by formally a few which empirically test the organizational
establishing an IT department and making a innovation model in the context of Albania. The
significant amount of IT investment, are more results of this study can be used as a guideline
likely to adopt e-commerce earlier than firms with for future research that wishes to examine the
less IT support. Firms that have IT assets readily phenomenon in other Balkan settings. For future
in place should be in a better position to adopt research, while this study incorporates a number
and implement e-commerce than firms that need of key variables identified from the literature,
to build technology knowledge and infrastructure future studies may expand the research model by
required for e-commerce adoption. incorporating a range of variables to cover more
comprehensive aspects of the phenomenon, such
Second, we found that prospectors significantly differ as variables reflecting key aspects of e-commerce,
from laggards in technology factors—perceived variables reflecting small and medium business
benefits and perceived compatibility—whereas context, and variables representing a gap between
there is no difference between prospectors and Balkan and Western cultures.
adopters in the technology factors. These results
imply that technology factors do have an influence In addition, this study examines only one aspect
on attitudes toward e-commerce [i.e., changing from of e-commerce adoption—the extent to which
unfavourable (laggards) to favourable tendency an organization is relatively earlier to adopt e-
(prospectors)], but have no influence on a relative commerce than others. A future study may attempt
earliness of adoption stage (i.e., no change from to test other aspects of e-commerce adoption.
prospectors to adopters). This finding is consistent The diffusion of innovation literature can be used
with the model of the innovation-decision process as a foundation to develop dependent variables.
(Rogers, 1995) on the point that perceived Fitchman (2001), for example, identified a number
characteristics of the innovation play a major role of measures of organizational innovation such as
during the persuasion stage. One explanation to earliness of adoption, infusion, and assimilation.
this phenomenon is the cost- benefits justification. While these variables are widely used specifically in
Due to limited resources, laggards may hesitate the context of information technology, they can be
to invest in new technologies because they are applied in the context of e-commerce. For instance,
uncertain about the benefits of e-commerce, future study may develop a research model to test
and the compatibility of the technology with their the infusion of e-commerce in small and medium
existing culture and business environment. On the businesses (i.e., the extent to which e-commerce
other hand, adopters and prospectors are more is used in a complete and sophisticated way). By
willing to take a risk of e-commerce adoption since adopting a more sophisticated measure, future
they perceive a more perceptible contribution of e- study might apply a more sophisticated technique
commerce to their business, and are more certain in testing the relationships in the research model,
on the compatibility of the technology with their such as linear regression and structural equation
organizations. modelling techniques (i.e., LISREL, PLS).
Third, e-commerce adopters are more likely For practitioners, our study highlights the
to operate in a more competitive environment, importance of IT skills and knowledge in influencing

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e-commerce adoption. This study shows that Fitchman, R. (2001). The role of aggregation in
a knowledge base about IT plays a major role the measurement of IT-related organizational
in influencing a firm’s adoption decision. Small innovation. MIS Quarterly, 25(4).
and medium businesses that strongly support
IT deployment (i.e., high level of IT investment, Grover, V., & Goslar, M. (1993). The
existence of IT department) are more likely to initiation, adoption, and implementation of
adopt e-commerce earlier than those with less IT telecommunications technologies in U.S.
support. organizations. Journal of Management Information
Systems, 10(1), 141-163.
Since e-commerce is a key technology driving
businesses in a current competitive environment, Iacovou, C., Benbasat, I., & Dexter, A.
the earlier the firms adopt e-commerce, the faster (1995). Electronic data interchange and small
the firms can extend their reach to customers and organizations: Adoption and impact technology.
secure their share in the market by using a market MIS Quarterly, (December), 465- 485.
access capability of e-commerce. However,
knowledge-based skills and technologies required Jarvenpaa, S.L., & Ives, B. (1991). Executive
to adopt e-commerce cannot be acquired overnight. involvement and participation in the management
It takes time to accumulate. Hence, small and of information technology. MIS Quarterly, (June),
medium businesses should cultivate and develop 204-227.
their own IT skills and knowledge to be readily in Kimberly, J.R., & Evanisko, M.J. (1981).
place so that they can adopt and implement e- Organizational innovation: The influence of
commerce to respond to competition in a timely individual, organizational, and contextual
manner. factors on hospital adoption of technological
and administrative innovations. Academy of
Management Journal, 24(4), 689-713.
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