ABSTRACT

Electronic commerce (e-commerce) offers considerable exploitable potential for micro, small, and medium enterprises (MSMEs). The innovation presents vast opportunities for business organisations to infuse efficiencies in their operations and processes in order to serve their customers more efficiently, enter new markets, and rationalise their business processes. Despite the potential, however, there is evidence of slow uptake of e-commerce by MSMEs in developing countries including Kenya. Failure to attain of an adoption level threshold continues to prevent firms from reaping the full benefits inherent in the use of the technology. Additionally, little is known about the e-commerce environment among Kenya’s MSMEs, a situation that is likely to impact negatively on adoption decisions. Further, in spite of the heightened enthusiasm by academics and researchers, many of the studies conducted in the area of e-commerce have been scanty and general in coverage, with some even producing conflicting results.

The objectives of this study were to analyse the e-commerce environment within Kenya’s MSMEs sector; analyse the effect of the determinants of slow e-commerce adoption against organisational, environmental, and technological factors among Kenya’s MSMEs; and explain the interactive effect of the various determinants on the likelihood of e-commerce adoption. The study employed a mixed research design, proportionate stratified random sampling and simple random sampling procedures were used to select a sample of 540 firms from a population of 1,800 firms in Nairobi. Primary data were collected using a predesigned and tested questionnaire. Data were analysed using descriptive statistical techniques, non- parametric methods (chi-square), and logistical regression analysis.

The study established that the MSMEs e-commerce environment was characterised by small, non-manufacturing firms and the ICT capacity of the firms increased with firm size. The firms had relatively younger firm owners/managers with high levels of education and whose perception of innovation characteristics had a significant bearing on e-commerce investment decisions. The study also found that level of education, gender, and age; firm size, sector of operation, market focus, and supply and customer pressure perception of innovation significantly influenced the adoption of e-commerce. Using the logistic regression analysis, the study established that the likelihood of adoption was, either individually or interactively, significantly affected by organisational, technological and environmental factors. The study recommends that decisions regarding the adoption of e-commerce should take into account all critical technological, organisation, and environmental factors with the key objective of addressing the barriers inhibiting enhancement of the likelihood of adoption.

CHAPTER ONE INTRODUCTION

                        Background to the Study

E-commerce

Electronic commerce (e-commerce) has transformed business processes in a number of organisations and will continue to do so in future (Al-Qirim, 2009).A number of scholars hold the view that innovations have positive impact on business operations and bring with them substantial benefits. Some of the benefits widely associated with innovations include the following: improvement in operational efficiency, access to a wider range of markets, greater potential for partnership with suppliers, improved customer services, accessibility and flexibility in administration, and partnership among others (Vaithianathan, 2010). Unfortunately, Micro, Medium and Small Enterprises (MSMEs) in Africa are lagging behind most of the world’s economies in tapping into the possibilities linked to the emerging technologies and have, in effect, failed to realise the full potential benefits of e-commerce.

There is no consensus on the definition of e-commerce, but Turban et al. (2008) have defined e-commerce as the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks including the Internet. Turban et.al. (2008) further distinguish between Internet and non-Internet e-commerce whereby the latter includes buying and paying for services or products using, for example, the smart card through vending machines and/or transactions undertaken via

networks such as local area network (LANs), using intranets or even single computerised machines.

E-commerce has also defined as any economic or business activity that uses applications based on Information and Communication Technology (ICT) to enable the buying and selling of products and services and thus facilitating the transaction of business activities between and among businesses, individuals, governments, or other organisations (Huy and Filiatrault, 2006). McIvor and Humphreys (2004) perceive e-commerce as having two main roles. First, it is the use of ICTs to strengthen a company’s internal operations such as logistics, procurement, and human resource and contracts management; information and data management; and communication functions. Second, e-commerce refers to using ICTs to facilitate the flow of products between businesses and consumers (e.g., marketing, ordering, payment, delivery, and finding suppliers). Some researchers see e-commerce in terms of Internet applications, such as intranet, extranet, website, and email (Drew, 2003). Yet other researchers view e-commerce as a combination of business processes and Internet technologies such as interactions with customers and suppliers. Nevertheless, there is consensus among researchers that the main components of e-commerce include website, email, intranet, extranet, LAN and wireless area network, and Voice over Internet Protocol (VOIP). E-commerce is, therefore, an umbrella concept referring to the integration of a wide range of existing and new applications.

Internet and e-commerce have the capacity to support all types of businesses and provide the capability for tremendous growth within and across borders to a seemingly

unbelievable extent. Despite this potential, there has been little activity in e-commerce especially among the MSMEs in developing countries.