Academic journal article Journal of Small Business Strategy

Small Business Internet Use and Strategic Flexibility

Academic journal article Journal of Small Business Strategy

Small Business Internet Use and Strategic Flexibility

Article excerpt


Research on SME Internet use has focused almost exclusively on factors leading to the adoption of Internet technologies. In this study, we focus on the potentially valuable connection between Internet use and strategic flexibility. Specifically, we propose that Internet use for communications will promote greater strategic flexibility for the small firm, but only in a dynamic environment. The results, based on a sample of 160 small Midwest companies, largely support this hypothesis. Environmental dynamism was found to moderate the relationship between Internet use for communications and strategic flexibility. Use of the Internet for communications was found to be positively and significantly related to strategic flexibility in a dynamic environment. As expected, dynamism did not moderate the relationship between Internet use for transactions and strategic flexibility. These findings hold implications for future research and for managers of small firms attempting to effectively leverage the Internet for competitive advantage.

There is a strong consensus that the holds the potential to change business. The information systems, supply chain, human resource, organizational design, and marketing literatures are replete with examples of firms leveraging the Internet for enhanced competitive advantage. For instance, flexible electronic partnering options, applicant tracking and recruitment and benefits communication, enterprise management (the integration of information, processes, and people), and customer relationship management are a small sample of examples across diverse disciplines of initiatives with the overarching objectives of achieving greater coordination at reduced costs (cf., Chatterjee, Segars, & Watson, 2006; Schram, 2006; Applegate, Austin, & Collins 2005; Kalakota & Robinson, 1999).

Research on Internet applications and related topics has been mainly focused on large organizations. Recently, however, increasing attention related to understanding the effective use of the Internet has shifted to smaller firms. Research on SME Internet use in the entrepreneurship literature has focused almost exclusively on factors leading to the adoption of Internet technologies (cf. BarNir, Gallaugher, & Auger, 2003; Dandridge & Levenburg, 2000; Dholakia & Ksetri, 2004; Lohrke, Franklin, & Frownfelter-Lohrke, 2006; Wright & Ralston, 2002; Zacharakis, Shepherd, & Coombs, 2003). We take a different approach in this paper and focus on the relationship between SME Internet use and strategic flexibility, a potentially important source of competitive advantage for SMEs (Hatch & Zweig, 2001).

The Internet is supposed to be the great equalizer allowing small and medium-sized enterprises (SMEs) to compete on a more equal footing with larger firms (Choudhury & Galletta, 1998; Kleindl, 2000; Pflughoeft, Ramamurthy, Soofi, Yasai-Ardekani, & Zahedi, 2003). As a public resource, the Internet offers all companies, large and small, a greatly expanded body of available information as well as the potential to reach a larger audience and more closely coordinate business activities (Poon & Swatman, 1997). The evidence to date, however, suggests that SMEs (firms with 500 or fewer employees) (cf. Gilley, McGee, & Rasheed, 2004; Kleindl, 2000; Liao, Welsh, & Stocia, 2003) have largely not availed themselves of this opportunity (Bemadas & Verville, 2005; Kleindl, 2000; Robeiro & Love, 2003; Van Beveren & Thomson, 2002). This shortfall has been understudied (Pflugheft et al., 2003) and is disturbing in light of the strategic importance of effective information technology (IT) use in general (Broadbent & Weill, 1997) and Internet use in particular.

SMEs have been labeled by some as technological laggards (Bernadas & Verville, 2005). Several possible reasons have been advanced to explain why SMEs have been slow to adopt Internet technologies. …

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