«Drivers and challenges of ICT adoption by SMES in Accra metropolis, Ghana Dennis K. Agboh Morgan State University ABSTRACT: The purpose of this study ...»
Journal of Technology Research, Volume 6 – January, 2015
Drivers and challenges of ICT adoption by SMES in Accra
Dennis K. Agboh
Morgan State University
The purpose of this study is to explore the key drivers and challenges of Information and
Communication Technologies (ICTs) adoption by Small and Medium Sized Enterprises (SMEs)
in the Accra Metropolis of Ghana. SMEs play a major role in developing and developed
economies in job creation and diversification of economic activities. The literature shows that while there are many drivers of ICTs adoption by SMEs, there are equally many challenges from various factors. SMEs that effectively utilize ICTs can compete efficiently in both domestic and global arenas. Understanding the drivers, and challenges to ICT adoption by SMEs especially in the less developed countries, and in the Accra metropolis of Ghana in particular have not been addressed adequately. This paper attempts to address this gap. A survey questionnaire was used to collect data from 189 working MBA students from different SMEs in Accra, Ghana.
Quantitative approaches were used for data analyses. The study identified the key challenges to ICT adoption as lack of internal capabilities, high cost of ICTs, poor infrastructure, financial constraints, and lack of information about suitable ICT solutions and lack of time to implement.
The study also identified the key drivers of ICT adoption as the desire to increase customer service and responsiveness, increase ability to compete, improve overall communication, increase sales and profit, and to have better access to information. The result of the study will be beneficial to current and future SMEs in the Accra metropolis.
Keywords: ICTS, SMES, Challenges, Drivers, Ghana, Adoption.
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INTRODUCTIONThe use of Information and communication technologies (ICTs) is very widespread among businesses of all sizes. Many Small and Medium Sized Enterprises (SMEs) are increasingly adopting ICTs in both developed and developing countries. The perceived benefits and firm and sector-specific strategies seem to drive the adoption and use of ICTs. The object of this study is to investigate the drivers and challenges of ICT adoption by SMEs in the Accra metropolis of Ghana.
The literature shows that the desire for lower costs, improved productivity, higher product quality, higher customer satisfaction, and ability to focus on core areas are some of the key drivers of ICT adoption. The literature further shows that research in the adoption of ICTs by SMEs is growing. The advancement in ICTs has a major influence on globalization, and rapid revolutions in information and knowledge base (Kaynak et al., 2005; Pavic et al., 2007). The global proliferation of the use application of ICTs by organizations is not only for cost cutting and improving efficiency, but additionally for providing better customer services.
SMEs are also driven to adopt appropriate ICTs for the purpose of improving their internal processes, improving their product through faster communication with their customers, and better promoting and distributing their goods and services through online presence. Besides, governments around the world are adopting ICTs for the purpose of providing better services to their citizens. Invariably, the adoption of ICT by organizations requires a business environment encouraging open competition, trust and security, interoperability and standardization and the availability of finance for ICTs (UNCTAD 2004).
Despite these aforementioned drivers, there are an abundance of challenges to ICT adoption by SMEs worldwide stemming from both internal and external factors. Lack of internal capabilities, high cost of ICT acquisition, and lack of information about suitable ICT solutions and implementation are some of the factors. In many less developed countries, majority of SME customers tend to be local and may not ask for or require technology to do business. Besides, among other issues, SMEs markets also tend to need a high degree of human interaction. Other challenges in the literature will be visited in the literature review.
Information and Communications Technologies (ICTs)
Information and communications technologies (ICTs) is a term that includes any communication device or application, including radio, television, mobile phones, computer and network hardware and software, satellite systems and so on, as well as other associated various services and applications, such as videoconferencing and e-learning. ICT is basically any technology that is utilized to support information gathering, processing, distribution and use (Beckinkinsale and Ram, 2006).
Small and Medium Sized Enterprises (SMEs) SMEs play very essential role in the general economy of any country, especially in the developing ones because of job creation and development of the social economy for the region (Barba-Sanchez et. al, 2007). SMEs are often the main driver for a country’s economic growth. It is estimated that more than 95% of enterprises across the world are SMEs, accounting for approximately 60% of private sector employment (Ayyagari et al. 2011). In Ghana, SMEs are even more prominent in the local economy, representing about 92% of Ghanaian businesses and contributing about 70% to Ghana’s GDP (Abor and Quartey, 2010). Besides, SMEs in Ghana provide over 80% of total employment (Abor and Quartey, 2010).
Although there is no universally agreed definition of SMEs, some define it in terms of the number of employees, annual turnover, capital employed or size of the organization. The definition of an SME maybe regional or country-specific. For developing countries, the definition can be based on economic context or as defined by the national government. By the Formula proposed by Brookings Global Economy Development Agency, an SME in Ghana would be defined as having annual turnover of between $23,700 and $2,370,000. (Gibson and van der Vaart, 2008). The national government of Ghana defines an SME as any enterprise with maximum of 100 employees. (Kayanula, D., & Quartey, P., May 2000).
Ghana is a developing country in Africa with Accra as the capital and largest city. The categories of SMEs in Ghana range from urban to rural enterprises. Their main activities include soap and detergent making; fabric weaving; cloth designing and tailoring; textiles and leather production; village blacksmithing; firing ceramics; timber production and mining; bricks and cement making; brewing beverages; baking and food processing; creating wooden furniture;
electronic products assembly; agro-processing; production of chemical based items; mechanical activities (Kayanula and Quartey, 2000). These are very clear indications that SMEs in Accra may have a significant impact on the economic growth, income and employment of the metropolis. Besides, the recent oil discovery in Ghana has made her one of the fastest growing economies in the world. The International Monetary Fund (IMF) has predicted that Ghana's economy will be the fastest growing in the world in 2011.
Many studies exist on the drivers and challenges of ICT adoption by SMEs in advanced and developed regions of the world such as Europe, Asia, and North America; however, a comprehensive review of the existing literature reveals that relatively few number of studies of this type have been conducted in the less developed countries Sub Saharan African cities on the drivers, and challenges to ICT adoption by SMEs, and in the Accra metropolis of Ghana in particular. This paper attempts to address this gap. Thus, this study attempts to identify the drivers and challenges of ICT adoption by SMEs in the Accra metropolis of Ghana. Information from this study could assist other organizations in this location and other similar metropolis to make informed decisions on ICT adoption.
This paper is organized as follows. Section 1 presents the introduction. In section 2, the literature review of the drivers and challenges of ICT adoption in SMEs in developing countries are presented. Next, in section 3, the research methodology is presented. Data and results follow in section 4. Finally, in section 5, the summary and conclusions are presented.
Researchers in several studies have identified the drivers and challenges of ICT adoption by SMEs in developing countries. SMEs are broadly known to play a very important role in the economy of a country. Studies have revealed that large organizations generally have the resources to adopt ICTs whereas the SMEs that are desirous to adopt are handicapped by financial and human resources. Although ICTs are much cheaper than before, they still represent a considerable investment for SMEs that usually lack such funds. Besides, SMEs usually do not have the appropriate skills available in-house and thus have to train existing staff or outsource most ICT functions of the organization.
Drivers of ICT adoption
A majority of the SMEs in the literature have reported a positive performance and other benefits by utilizing ICTs in their businesses. Overall, the following main drivers have repeatedly appear in the literature in both developing and developed nations: perceived benefits and increased sale (Dubelaar et al., 2005; Scupola, 2009), and improved customer services (Scupola 2009; Osmonbekov, 2010; Tan et al., 2010). In their study, (Esselaar et al., 2007), presented ICT usage and its impact on profitability of SMEs in 13 African Countries.
A study by Akomea-Bonsu and Sampong (2012) on the impact of ICTs on SMEs in the Kumasi Metropolis in Ghana, found that most of the SMEs in Kumasi reported a positive performance and other benefits of ICT adoption. A literature survey by (Barba-Sanchez, et aTheir study however did not include any reference to ICT adoption in any African country.
Overall, existing literature indicate that many SMEs are aware of the benefits derived from the adoption of ICT but are faced with numerous challenges. While SMEs in developing countries are driven to adopt ICTs due to their many potential benefits (Irefin ET. Al, 2012), the study reveals that many SMEs are yet to reap these benefits due to the challenges discussed in the following section..
Generally, ICTs provides numerous benefits across a wide range of intra-firm and interfirm business operations and transactions. SMEs are slowly realizing the positive impact that ICTs, which include increased sales due to web presence, better communication via e-mail and effective processes due to their utilization in their organizations. With ICT use, businesses can interact more efficiently and become digitally networked (Buhalis, 2003). Spanos et. al (2002) stated that ICT eliminates distance and time constraints in accessing required information flows and hence improves coordination of activities within organizational boundaries.
It is therefore now common find small firms, including some with fewer than ten employees, to have at least one computer terminal and with Internet access. The application of various types of business software can improve information and knowledge management within and outside the firm, leading to more efficient business processes and productivity.
Challenge to adoption of ICTs
Existing literature reveals that SMEs face numerous challenges to the adoption and use of ICTs. Challenges of ICT adoption are common among SMEs in both the developed and developing countries, but developing countries are largely faced with more challenges. In the literature, the most frequently cited challenges are poor telecommunications infrastructure, lack of skilled or limited ICT personnel, ineffective integration ICT into business processes, high costs of ICT equipment, and government regulations for e-commerce (Tan, et al., 2010). Other Drivers and challenges, Page 4 Journal of Technology Research, Volume 6 – January, 2015 studies have determined that technology constraints due to unskilled technicians, including ignorance on the worth of ICTs and return on investment have been the major reasons for lower rate of adoption (Duan et al., 2002; Fulantelli and Allegra, 2003; Hashim, 2007; Jones et al., 2003; Khatibi et al., 2003; Kogilah et al., 2008). Other challenges include nongovernmental support, expensive initiative, risk, complex procedure, managerial leadership, costs and benefits, security, legal issues, business complexity, human capital deficiency, turnover of technical staff, and customer services (Chong et al., 2001; Fink and Disterer, 2006; Jones et al., 2003; Khatibi et al., 2003; Tan and Teo, 2000; Yeung et al., 2003).
In a study by Debrick and Kraemer (2001), they state that the major challenges to ICT adoption by SMEs include inadequate transportation and delivery, limited diffusion of computers, lack of online payment processes, limited availability of banking services and uncertain taxation rules. Looi (2003) states that lack of external pressure from suppliers and customers inhibit e-commerce adoption.
The literature indicates that many of these challenges can be successfully addressed by large organizations due to their resources and skilled personnel. As SMEs suffer from severe scarcity of resources (Riquelme, 2002), the perceived challenges of ICT adoption by SMEs may differ considerably from those of large organizations. As such, some researchers (e.g. Heung, 2003; Tan, Tyler and Manica, 2007; Tan et al., 2009; Tan et al., 2010; Johnson, 2010) examined the perceived challenges to ICT adoption by SMEs. The study by Tan (2007), find a lack of management willingness to utilize ICT to be a major inhibitor for SMEs.