Chinese SMES and Information Technology Adoption

Article excerpt

Introduction

SMEs constitute an important economic sector in China because they are significant sources of wealth and employment. Although the individual contribution of a SME to the national economy may appear relatively insignificant when compared to a large corporation, the aggregate contribution of all SMEs can be sizeable. For example, the average main business revenue of a Chinese SME was seven times less than that of a large Chinese enterprise in 2007 but together all SMEs accounted for more than 50% of the country's GDP (Yearbook of China SMEs, 2008). The importance of this economic sector is also highlighted by its growing presence within the newly-emerged market economy. There were about 8 million Chinese SMEs in the late 1990s, and they have now grown to more than 40 million entities, representing over 99% of the total number of enterprises. In addition, these enterprises provided more than 75% of employment in the economy in 2008.

However, SMEs tend to have a higher mortality rate than larger corporations, and researches have variously associated their business failure with insufficient productivity, competitiveness, business and management skills, financing and access to proper advice and information, and with lost export and business development opportunities (Freland & Morris, 1976; Jennings & Beaver, 1997; Koh & Maguire, 2004; Koh & Simpson, 2005; Patterson, Kozmetsky, & Ridgway, 1983; Watson, 2003; Wichmann, 1983). At the same time, these SMEs tend to be slow in adopting and exploiting IT as a means of enhancing their sustainability.

In spite of the information technology productivity paradox not being entirely resolved by way of empirical verification (The IT productivity paradox refers to the failure of the advancement in computer technology and its expected benefits to be fully reflected in the productivity statistics at the firm and national aggregate levels.), there has been increasing evidence of positive contributions from information technology (Brynjolfsson & Hitt, 1995, 1996; Hitt & Brynjolfsson, 1996; Lee & Barua, 1999; Lichtenberg, 1995; Silvius, 2006). In addition, evidence of increasing adoption of IT by firms (ITU, 2009) implies a widespread belief in the business disadvantages of not doing so. Therefore, it appears vital for these SMEs to adopt IT in order to keep up with an IT-based business and market environment.

Businesses have adopted IT to optimize business processes such as planning, control, collaboration and communication, addressing information needs and internal operations and expectations, making timely and informed decisions, and implementing business strategies. Other reasons for adopting IT in business processes include improving financial performance and operational efficiency (Barua, Konana, Whinston, & Yin, 2004; Johnson & Scholes, 1993), attaining flexibility and agility in responding to increased market pressure and changes (Gosain, Malhotra & El Sawy, 2004; Snow, Miles, & Coleman, 1992;), achieving competitive advantage (King, Grover, & Hufnagel, 1989; Monteiro & Macdonald, 1996; Porter & Miller, 1985; Rackoff, Wiseman, & Ulrich, 1985), participating in new forms of alliances enabled by electronic linkages such as virtual organisations, supplier-customer value-chains, company networks, and collaborative networks (Bala & Venkatesh, 2007; Camarinha-Matos & Afsarmanesh, 2005; Davidow & Malone, 1992; Gulati, 1998; Lee, Pak, & Lee, 2003; Mowshowitz, 1997; Walton & Miller, 1995; Wei & Wang, 2010) and participating in new market structures, such as the virtual market or electronic marketplace, to expand business opportunities (Koh & Simpson, 2005; Stockdale & Standing, 2004).

Information technology (IT) has indeed changed the dynamics of running businesses. The proper application of information technology and the use of information systems may offer opportunities for SMEs to overcome some of the aforementioned barriers and to improve their survivability in a competitive environment. …