information communication technology (ict) adoption

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Information Communication Technology (ICT) Adoption Among Bumiputra’s SME Owners in Malaysia Prepared by : NOR ISMAWARNI BT ISMAIL 2010130259

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Page 1: Information Communication Technology (ICT) Adoption

Information Communication Technology (ICT) Adoption Among

Bumiputra’s SME Owners in Malaysia

Prepared by :NOR ISMAWARNI BT ISMAIL

2010130259

Page 2: Information Communication Technology (ICT) Adoption

1.0 INTRODUCTION

• Information and communication technology (ICT) connectivity (PCs and Internet) is very widespread in businesses of all sizes.

• The use of ICT and technology has affected every aspect of business, transforming not only the way that business is conducted but also creating new business sectors and jobs.

• The contributions of ICTs to business development have been enveloping to the extent that it is becoming increasingly difficult for companies to compete effectively in the world market without adequate ICT infrastructures

Page 3: Information Communication Technology (ICT) Adoption

• RM 4 billion of maximum financing is provided under Technology Acquisition Fund (ATF) by the Malaysian Technology Development Corporation (MTDC) for all SME owners.

• Another RM20, 000 of fund given by Ministry of Science, Technology and Innovation (MOSTI) under Enterprise Innovation Fund (EIF).

• Government established the Working Capital Guarantee Scheme totalling 7 billion ringgit and the Industry Restructuring Loan Guarantee Scheme totalling 3 billion ringgit which announced under the Second Economic Stimulus Package. (RMK 10)

Page 4: Information Communication Technology (ICT) Adoption

• Unfortunately, Bumiputra’s SME still left behind in the usage of ICT as compared to Chinese, this is supported by Fakhrul & Wan Norhayate (2011) where their study reveals that Malay entrepreneurship is still lacking behind the Chinese whose domination of the country’s entrepreneurial activities keeps improving

• Faridah (2007) found that 55% of SME ICT adopters is Chinese owner and Malay owner are far behind with only 25.3% adoption of ICT.

Page 5: Information Communication Technology (ICT) Adoption

1.1Problem statement

• The usage of ICT is crucial for SME’s now a day; even the government itself has given a lot of training and grant to increase the level of ICT usage in Malaysia as example Technology Acquisition Fund (ATF) by the Malaysian Technology Development Corporation (MTDC) and Enterprise Innovation Fund (EIF) by Ministry of Science, Technology and Innovation (MOSTI). Sadly, the number of bumiputra’s SME owner using ICT is still low compare to Chinese as proven by Faridah (2007). This study is conducted to find the reason why the adoption of ICT by Bumiputra’s SME owner is low given that a lot of help and support from our government.

Page 6: Information Communication Technology (ICT) Adoption

1.2 Research Objectives

• The purpose of this study is:– To examine the ICT skills characteristics of SME

owners in Malaysia.– To examine the innovation characteristics of SME

owners in Malaysia– To study what is the extent of ICT adoption among

Bumiputra’s SME owner.– To look at the different of ICT adoption by

Bumiputra’s SME owner in rural and urban area.

Page 7: Information Communication Technology (ICT) Adoption

1.3 Research Questions

• What are the ICT skills characteristics of SME owners in Malaysia?

• What are the ICT innovation characteristics of SME owners in Malaysia?

• What is the extent of ICT adoption among Bumiputra’s SME owner?

• What is the different of ICT adoption by Bumiputra’s SME owner in rural and urban area?

Page 8: Information Communication Technology (ICT) Adoption

1.4 Significance of the Study

• The present study differs from previous ones because its unit of analysis is the Bumiputra’s SME owner rather than the overall SME’s owner and firms itself.

• As example, Faridah (2007) have studied the ICT adoption among SME owner. Afzaal, et al., 2007; Lai & Hsieh, 2007; Shiels et al., 2003; Ndubisi & Jantan, 2003 have done a studies focusing on SME firms rather than owners

Page 9: Information Communication Technology (ICT) Adoption

1.5 Limitation of the study

INFORMATIONTI

MEBUDGET

Page 10: Information Communication Technology (ICT) Adoption

2.0 LITERATURE REVIEW

Page 11: Information Communication Technology (ICT) Adoption

Author Definition

Briklin, 2001 information and communication technology (ICT) and e-business applications provide many benefits across a wide range of intra- and inter-firm business processes and transactions.

Tae, Jae and Rob.,2008; Karadag, Cobanoglu and Dickinson., 2009

ICT applications improve information and knowledge management inside the firm and can reduce transaction costs and increase the speed and reliability of transactions for both business-to-business (B2B) and business-to-consumer (B2C) transactions..

Page 12: Information Communication Technology (ICT) Adoption

Author Definition

OECD, 2004 Increasingly sophisticated ICT applications such as KMS (Knowledge Management System) and ERP (Enterprise Resource Planning) allow firms to store, share and use their acquired knowledge and know-how

Faridah (2007), SME owners in Malaysia possess below-average ICT skills and seldom use the Internet at their workplace. Comparable between ethnic shows, Chinese SME owner are the highest to adopt ICT in their business 55.1%, followed by Malay 25.3%, Indian 16.4% and others 3.1%. ..

Page 13: Information Communication Technology (ICT) Adoption

ICT Skills

Author Definition

Shiels et al.(2003) Managerial ICTskills, ICT knowledge, and ICT practices are important determinants of whether IT is adopted or rejected by the SMEs.

Ndubisi and Jantan (2003),

in evaluating information system use among small- and medium-sized firms in Malaysia, find that computing skills and technical backing are strong anchors of the perception of usefulness and also wield direct influence on system use.

Page 14: Information Communication Technology (ICT) Adoption

ICT ResourcesAuthor Definition

(Sahadev and Islam., 2005)

The intensity of ICT usage in an order process can be measured by the percentage of transactions carried out through the company website

Zixiang and O. Wu.,2004 Most SMEs appear still to be at a stage where establishing a Web site or adopting e-commerce is the main issue. Successful integration of external and internal business processes in e-business necessitates organisational and management changes which may entail proportionally greater costs and risks for SMEs

Page 15: Information Communication Technology (ICT) Adoption

Learning barriersAuthor Definition

(Sahadev and Islam., 2005)

The intensity of ICT usage in an order process can be measured by the percentage of transactions carried out through the company website

xiang and O. Wu.,2004 it is not easy for SMEs to implement and operate an on-

line business, as this involves complementary costs for

training and organisational changes as well as direct

costs of investing in hardware and software solutions.

Page 16: Information Communication Technology (ICT) Adoption

ICT Skills

-Basic skill

- E-mail skill

- Internet skill

Resources

-Internet use

-E-mail use

Resources

-Internet use

-E-mail use

Learning Barriers

-Cultural

-Financial

-Awareness

Learning Barriers

-Cultural

-Financial

-Awareness

ICT Adoption Among Bumiputra

SME Owners in Malaysia

ICT Adoption Among Bumiputra

SME Owners in Malaysia

Dependent Variables Independent Variables

Page 17: Information Communication Technology (ICT) Adoption

2.1 Hypothesis Development

• H1: There is a relationship between ICT resources and ICT adoption among Bumiputra SME owner.

• H1 (a): The higher the employer’s basic skill the greater the ICT adoption.

• H1 (b): The higher the employer’s E-mail skill the higher the ICT adoption.

• H1 (c): The higher the employer’s internet skill the higher the ICT adoption.

Page 18: Information Communication Technology (ICT) Adoption

• H2: There is a relationship between ICT skills and ICT adoption among Bumiputra SME owner.

• H2 (a): The higher the internet usage the greater the ICT adoption.

• H2 (b): The higher the e-mail usage the greater the ICT adoption.

• H3: There is a relationship between learning barrier and ICT adoption among Bumiputra SME owner.

• H3 (a): The lower the cultural barriers the greater the ICT adoption.

• H3 (b): The lower the financial barriers the greater the ICT adoption.

• H3 (c): The higher the level of ICT awareness the greater the ICT adoption.

Page 19: Information Communication Technology (ICT) Adoption

3.0 RESEARCH METHODOLOGY

• 3.1 Purpose of the Study

– Exploratory Study will be use since the previous study only focuses on SME firms rather than owners and only one study focuses on the owners but the researcher does not provide enough information why the level of ICT adoption among Bumiputra’s SME owner are low compared to Chinese.

– Thus, extensive preliminary works need to be done to gain familiarity with the phenomena in situation. Broad interviews with many Bumiputra’s SME owner have to be undertaken to get a handle on the situation and understand the phenomenon.

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•3.2 Types of Investigation

- This study is consider as correlational study. The main purpose of this study is to find the main factor or main independent variables (skill, resources and learning barriers) that associated with the problem (ICT adoption).

- Correlational study will be established between the group of independent variables and independent variable.

- The intention to conduct a correlational study is to be able to prove that skill, resources and learning barriers is related with the intention of Bumiputra’s SME owner to adopt ICT in their business.

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•3.3 Study Setting

-Correlational study is invariably conducted in noncontrieved settings. A field study will be conducted, with minimal researcher interference to moderate extent. In order to analyze the relationship between ICT adoption and owner’s intention, this study will try to correlate the two by looking at owners skills, resource and learning barriers.

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•3.4 Unit of Analysis

-The study will use individual as the unit of analysis. Unit of analysis for this research is Bumiputra’s SME owner in Malaysia since the purpose is to focus on the owner themself. Data will be collected from each individual bumiputra’s owner.

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3.5 Time HorizonCross –sectional studies will be used whereby the data will be gathered just once in order to answer the research question. Data collection at one time is sufficient enough to develop findings for this study.

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3.6 Data Collection Method• The basic research design utilized for this study was a survey design.

This study will stress on data obtained through primary data collection.

• The collection of primary data will be accomplished through the use of a mail survey instrument. This instrument is used to collect information from questionnaires answered by the founder/owner/manager of the firms who are qualified to answer all the questions given.

• Multiples Linear Regressions (MLR) analysis will be conducted to test the hypothesis on surveyed firms selected from the list given by MARA (the government agency for Indigenous or Bumiputera SMEs).

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•3.7 Sampling Frame• The population and sample that will be used for hypothesis testing were the

founder/owner/manager of the small and medium enterprises (SMEs) which drawn from the services and manufacturing sectors in Kuala Lumpur/Selangor, Putrajaya, Kedah, Perlis and Kelantan through a postal survey.

• The surveyed firms were selected from the available list by MARA (the government agency for Indigenous or Bumiputera SMEs). The clients must meet the following criteria:

a) The contact person is thefounder/owner/CEO/BOD/manager of the Malay family firm asa unit of analysis in this study.

b) The firms must meet the criteria of the definition of SMEs by SMIDEC.

c) The firm must have been in operation at least for 1 to 3 years to make sure that performance comparisons can be made within the firms as well as between the competitors.

Page 26: Information Communication Technology (ICT) Adoption

3.8 Measurement

In the process of meeting the purpose and gaining reliable findings on the study, questionnaires were designed with proper scaling techniques as follows:

3.9.1 Dichotomous scaleThe first section will (Section A) collect relevant information relating to the demographics of the sample which deal with gender, age, type of business and locations. In this part question asked in the form of category questions. Each and every questions or statement are derived from previous study conducted in relevant area.

3.9.2 Likert ScaleThe questionnaire will include a five-point Likert scale for use by respondents in indicating their response to each of the items asked. Section B will include Part 1, which consists of 10 questions to measure the respondent‘s basic skills, as well as his or her skill in using e-mail, CD-ROM, and the Internet. Part 2 contains 10 questions to measure the resource available in the business, it will be measured regarding the Internet use, CD-ROM use, and e-mail use at the work place. Lastly, Part 3 will consist of 10 questions which are designed to measure learning barriers that consist of cultural, financial, access and provision and awareness.