Academic journal article International Journal of Business and Information

An Empirical Study of Customer Adoption of E-Commerce: A Customer Trust Model to Support the Adoption of E-Commerce among Small- and Medium-Sized Enterprises in Sri Lanka

Academic journal article International Journal of Business and Information

An Empirical Study of Customer Adoption of E-Commerce: A Customer Trust Model to Support the Adoption of E-Commerce among Small- and Medium-Sized Enterprises in Sri Lanka

Article excerpt

1. INTRODUCTION

With the end of the 30-year civil war in Sri Lanka, the government of that country is seeking means to recover from the severe economic impact that the war has had on the country. In this endeavor, the Sri Lankan government recognizes that small- and medium-sized enterprises (SMEs) can play a crucial role in the country's development [World Bank Group, 2011]. The Sri Lanka Department of National Planning [2010], in particular, has recognized the importance of ecommerce in providing job and business opportunities and encouraging start-ups. An extensive framework for infrastructure development has therefore been developed by the government.

Though often underestimated, SMEs are the backbone of a country's economy and a crucial part of economic growth. Berry [2007] states that SMEs are a driving force in any global economy. For a post-war developing country like Sri Lanka, investing in the development of SMEs is critical. A survey conducted by the Sri Lanka Ministry of Finance and Planning [2010] revealed that SMEs comprise 80% to 90% of local establishments in the country and account for 70% of employment in the business sector and 35% [Ishii, 2008] of employment in the country overall.

Because SMEs have a particularly significant impact in developing countries, they can be considered a "nursery for larger firms in the future" [Berry, 2007]. Others have described them as the "economic growth engine" of a country [Brouthers, 1998, cited by Kapurubandara and Lawson, 2006; U.N. Conference on Trade and Development (UNCTAD), 2001, cited by Kapurubandara, 2007; and Gunawardana, 2006].

Considering the competitive nature of larger enterprises, SMEs are often at a disadvantage. They lack the infrastructure, knowledge, acceptance, and recognition that many of their larger competitors possess. E-commerce enables SMEs to enter and compete in the market with a significant reduction of overhead and minimal resource requirements. In this regard, SMEs can benefit greatly by incorporating information and communications technology (ICT) into their businesses [United Nations Development Program (UNDP), 2005], but it has been found that, although SMEs increasingly invest in e-commerce, consumers are slow to adopt the technology [Kapurubandara, 2007; Sri Lanka Business Development Centre (SLBDC), 2002].

A survey by SLBDC [2002] found that 84% of SMEs in Sri Lanka use the Internet for business purposes, that 51% of SMEs have their own website, and that 70% of SMEs prefer to sell goods and services through their own website [SLBDC, 2002]. Clearly, there has been vast growth in the e-readiness of companies in Sri Lanka [The Economist, 2008]. Sri Lankan organizations are actively making investments in e-commerce [Laisuzzaman et al., 2010]. It is also evident that, in recent years, various telecommunication companies have developed a supportive infrastructure for e-commerce within the country [Klein, 2011]. Yet, when one considers the volume of sales conducted via the e-commerce websites of Sri Lankan SMEs, one finds that the majority has a volume of 10% or less [SLBDC, (2002]. This figure is considerably low, compared with the investment made by these companies in establishing and maintaining their e-commerce websites. The bottom line is that these e-commerce initiatives often lack return on investment.

Further investigation of the causes for the low level of e-commerce adoption in Sri Lanka reveals that the major factors are:

* The increasing number of credit card frauds and poor security measures to protect transactions [Gunawardena. 2006, cited by Sri Lankan newspapers, 2001; privacy clearing house, 2011; Business Times, 2011; LUK, 2011; Nielson, 2007; and Mudalige, 2001]

* The decline in the use of credit cards [E-Biz Sri Lanka, 2011]

* The lack of online legal infrastructure [Parliament of the Democratic Socialist Republic of Sri Lanka, 2006; Kapurubandara, 2007]

These factors can have a negative impact on the growth of e-commerce among SMEs, which often lack the brand identity, infrastructure, technical know-how, and even the reputation that most major companies have. …

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