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E-commerce adoptionsupport and advice forUK SMEs
Mike Simpson and
Anthony J. Docherty
The authors
Mike Simpson is a Lecturer in Business Studies at SheffieldUniversity Management School, Sheffield, UK.Anthony J. Docherty is Head of Continuum Consulting,York, UK.
Keywords
Electronic commerce, Small to medium-sized enterprises,United Kingdom
Abstract
The small business sector of the UK economy is extremelyimportant and the government expends considerable resourcesin providing support services for this sector. This paperinvestigated the reasons why SMEs move from traditionalcommerce to e-commerce, the efficacy of the support servicesand the barriers encountered by SMEs adopting e-commerce.The research methodology involved literature review andinterviews with SMEs’ owner-managers and a UK Onlinebusiness adviser. It was found that at least two “e-commercestars” used by the government to promote its support serviceshad in fact not used those services. The historical relationshipproblems between Business Link and SMEs were still causingproblems. Cost was not seen as an inhibitor to adoptinge-commerce. Some evidence was emerging that e-commercemay be able to save failing or struggling businesses. Otherunexpected outcomes were that e-commerce had social benefitsfor SMEs’ owners in reducing working hours yet still increasedsales.
Electronic access
The Emerald Research Register for this journal isavailable atwww.emeraldinsight.com/researchregister
The current issue and full text archive of this journal isavailable atwww.emeraldinsight.com/1462-6004.htm
Introduction
Electronic business and electronic commerce
present many opportunities for businesses to
improve their performance (Tetteh and Burn,
2001). While there are now some two thirds of
businesses online and further growth is forecast
(UK Online, 2002) it is the larger companies who
are the most active with almost twice as many
e-commerce activities as small and medium-sized
enterprises (SMEs) (Haig, 2002). The UK
government acknowledges that there is a slow take-
up of e-commerce amongst SMEs, particularly
amongst micro-businesses (UK Online, 2002).
The main reasons cited are ignorance about
e-commerce benefits and a shortage of the
appropriate skills (DTI, 2002a). Many UK SMEs
may be left behind while the larger companies
advance and dominate in the e-commerce world.
The work reported here was considered timely in
that it set out to reach an understanding about how
UK SMEs prepare for e-commerce. In addition,
the advice and support that is available to SMEs
was examined in order to establish what further
assistance, if any, was required.
It should be noted that there is a difference
between e-commerce and e-business in terms of
business benefits, extent of organisational change
and sophistication in that e-commerce is part of
e-business (Searle, 2001). Searle (2001) also
shows that in the e-adoption ladder model
(originally suggested by Cisco Led Information
Age Partnership) e-commerce is firmly positioned
as less sophisticated than e-business (see also
Martin and Matlay, 2001). Thus e-commerce is
the buying and selling of goods and services on the
Internet and provides the ability to perform
transactions involving the exchange of goods or
services between two or more parties using
electronic tools and techniques. In addition,
e-commerce is a means of trading involving the use
of electronics, principally through the Internet, for
the buying/selling process, including advertising,
invitations to treat and the negotiation and
conclusion of contracts and performance (DTI,
2001a).
Whereas e-business has a much wider
integrative purpose within an organisation, linking
business systems together and is more
sophisticated than e-commerce (DTI, 2001a).
According to the DTI (2001a) e-business
describes a greater degree of integration of
communications technologies with business
processes and management practices, often
conducted via the Internet. It has implications that
are inward as well as outward facing. Often
e-business involves the use of the Web (Internet,
Intranet and Extranet) to conduct business,
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · pp. 315-328
q Emerald Group Publishing Limited · ISSN 1462-6004
DOI 10.1108/14626000410551573
315
including buying and selling, connects key players
to critical business systems and allows access to the
information they need. According to the DTI
(2001a) business transactions over the Web can be
divided into two categories: business to consumer
(B2C) which is mainly on-line transactions with
consumers such as retailing and business to
business (B2B) which refers to transactions
between businesses. B2B solutions increase the
support between businesses while reducing the
need for telephone calls and faxes. Daniel (2003)
also points out that there is a hierarchy of
e-commerce integration and that the benefits to
the firm increased with advanced integration.
However, it could be argued that at the higher
levels of integration this is more like e-business as
defined by the DTI (2001a) than e-commerce.
Other researchers use the terms e-commerce and
e-business interchangeably (e.g. Ramsey et al.,
2003). In practice e-business may link to or
incorporate other systems such as Enterprise
Resource Planning (ERP) or Customer
Relationship Management (CRM) systems.
Whereas e-commerce may only log and track
transactions which then have to be dealt with
manually.
It is widely recognised that there are major
hurdles and problems facing SMEs wishing to
adopt e-commerce and many reviews tackle these
areas. However, some of the major issues involve
SMEs’ owner-managers appreciation (or lack of it)
of business strategy, marketing and
internationalisation (Ramsey et al., 2003). This is
not helped by the almost missionary approach
taken by the UK government in trying to get SMEs
to go online (UKGovernment, 2001; DTI, 2002b,
c). This research aimed to take a more rational
approach in determining the reasons why SMEs
adopt e-commerce (e-business is likely to be the
next stage), where SMEs obtain advice and to
ascertain the critical success factors for
e-commerce adoption. The issue of e-business
adoption by SMEs was not tackled as this was
thought to require a greater degree of
sophistication on the part of SMEs. However,
much of the literature seems to cover and confuse
the adoption of information and communication
technology (ICT) with e-commerce and
e-business. This confusion has made it more
difficult to obtain meaningful results.
Aims and objectives
The aims and objectives of this study were to:. Determine why some SMEs move from
traditional commerce to e-commerce.. Determine the barriers facing SMEs adopting
e-commerce.
. Determine where SMEs obtain e-commerce
advice and support and whether this advice is
appropriate to their needs. The objective was
to discover the efficacy of public sector
business support agencies such as Business
Link and UK Online for Business.. Determine the critical success factors for
e-commerce adoption. The objective being to
ascertain the extent to which any theoretical
e-commerce frameworks can be practicable
for SMEs.
This study aimed to examine areas previously
overlooked by other researchers. These areas were
intended to form the basis for further exploratory
study.
Methodology
This work is based on an exploratory research
project and used data triangulation to augment an
initially qualitative and inductive approach. The
views of e-commerce practitioners, e-business
advisers for small firms and academics were
sought. Primary data were obtained via interviews
with e-commerce practitioners and e-business
advisors and secondary data from literature review,
government statistics and independent surveys.
This paper is largely based on a literature review
and a few in-depth interviews. Government
literature identified a number of government
e-commerce stars, that is companies that were
used as part of the UK Online for Business
campaign to encourage more SMEs to carry out
business online. Two of these companies (The
Classic Car Group and Jack Scaife Butchers Ltd)
were from the Yorkshire region (DTI, 2002d) and
agreed to be interviewed. A third interview was
arranged with a South Yorkshire UK Online for
Business Adviser.
Literature review
The Internet is a force for change, creating new
business economies (Lambert, 2002) and altering
considerably the world’s economies (Rayport and
Jaworski, 2001). The UK government literature
stresses the importance of such new technologies
to the economy as a whole and to SMEs in
particular. Although, Martin and Matlay (2001)
contend that such wide-ranging beliefs over the
Internet have yet to be supported by any empirical
evidence. Tidd et al. (2001) consider the Internet
to be one of the “defining symbols” of twenty-first
century innovation that has transformed our
conceptual notions of how we value knowledge to
E-commerce adoption support and advice for UK SMEs
Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · 315-328
316
create a new e-economy. This is a departure from
the post-industrial business age that is typified by
physical goods, towards a knowledge led economy
where service, information and intelligence are the
main currencies (Rayport and Jaworski, 2001).
There have always been “new economies”
(Clayton, 2002). What makes this innovation
different are four distinct characteristics:
immediate access to world-wide markets of
information; better speed to market; the
transformation of business processes; and the shift
in the balance of power between suppliers and
customers as information becomes more widely
available.
The new e-economy
Booz Allen Hamilton (2002) define the new
e-economy as a dynamic system of interactions
between a nation’s citizens, businesses and
government that capitalise upon online technology
to achieve a social or economic good (Booz Allen
Hamilton, 2002). Thus e-commerce is often
categorised as either business-to-business (B2B), a
paper free swapping of business information over
the Internet, or as business-to-consumer (B2C)
where businesses sell products or services online
(Lim, 2001). Rayport and Jaworski (2001) suggest
two other categories, that of Consumer-to-
Consumer (C2C) and Consumer-to-Business
(C2B). Lambert (2002) delineates e-business from
e-commerce by defining e-business as all aspects of
a business where technology is important.
Timmers (1999) along with Rayport and Jaworski
(2001) see e-commerce as either the undertaking
of business electronically or as an electronic go-
between trading partners. Denby (2001) however,
states that the terms e-business and e-commerce
are nothing more than business and commerce
with an “e” on the front. An examination of the
UK government’s promotional literature accepts
that there are many ways to define e-commerce but
offers two definitions of its own. The first is a broad
definition to include e-mail and fax services and
defines e-commerce as the exchange of
information across electronic networks (DTI,
2001a). The second definition uses the narrower
“transactional” definition to incorporate online
trading and specifically the buying and selling of
goods and services over electronic networks,
whether between businesses or between businesses
and consumers (DTI, 2002e).
Rayport and Jaworski (2001) suggest the
concept of the “twenty-four-seven” store to denote
the continuous availability (and access) to the
virtual store. Kalakota and Robinson (2001)
discuss how the digital revolution has emancipated
information from the conventional confinements
of information asymmetry (Cunningham, 2000).
Kalakota and Robinson (2001) comment on the
impact the Internet has had on the value chain and
the emergence of new distribution channels.
Lambert (2002) questions whether we should see
e-commerce differently claiming that in spite of its
modernity it preserves many of the old rules of
business. Denby (2001) supports that claim by
adding that the business does not have to sacrifice
its traditional qualities or working practices since
e-commerce can only add to these. New business
models are being considered that make shopping a
more convenient and comfortable experience with
lower prices, customised products and integrated
offerings, something that traditional commerce
cannot hope to compete against (Harpin, 2000).
The UK government has ambitions tomake UK
SMEs leaders within the G7 group of countries
where e-commerce is concerned and to create an
environment within the UK that is the most
favourable in the world for electronic trading
(DoH, 2000). Such ambitions are common
amongst governments who often act as role models
for their citizens by becoming early adopters of the
new technology and by setting deadlines when they
anticipate most of their services will be online
(Bodorick et al., 2002). So far 1.9 million small
businesses are connected to the Internet
(surpassing the government’s original 2002 goal of
1.5 million) (DTI, 2002f). Some 30 per cent of
businesses are selling online and there are plans for
all government services to be electronically
available by 2005 (UK Online, 2002). During the
past three years the UK Government has spent
more than any other country (£67 million) on a
comprehensive programme to get UK businesses
online with the added aim of increasing the
e-business readiness of SMEs (Booz Allen
Hamilton, 2002). UK government support is
provided by way of information, advice or training
with few financial incentives, although the UK
government are one of the few countries that do
provide tax incentives for the purchase of ICT
equipment (Booz Allen Hamilton, 2002).
UK Online for Business
In September 2000 the government launched the
UK Online for Business initiative with the aim of
developing the UK as a world leader in e-business.
The UK Online for business service adopts a
multi-channel approach in that it has over one
hundred walk-in centres around the UK, provides
a telephone helpline and offers a Web site with
access to “virtual advisers”. The initiative has been
considered a success for two reasons. It can be
considered a marketing success (it has been heavily
promoted through TV advertising) with almost
half of all UK businesses now aware of a support
service for getting businesses online (UK Online,
E-commerce adoption support and advice for UK SMEs
Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · 315-328
317
2002) with brand awareness among SMEs
considered high (Booz Allen Hamilton, 2002) and
it appears to meet a practical need for help.
According to government statistics the service has
helped more than 160,000 businesses, answered
38,000 helpline calls, attracted 225,000 unique
users to its Web site and through the “virtual
advisers” network provided on demand advice to
1,000 businesses (Booz Allen Hamilton, 2002).
However, despite UK Online’s marketing
successes, independent studies suggest that it may
be failing SMEs in a number of areas. Firstly,
government has set a target of one million SMEs to
be trading online by the end of 2002 (DTI, 2001b)
however indications show that this target was not
met. While recent figures show a 20 per cent
increase in the number of SMEs actually trading
online, equivalent to an increase of 90,000 it still
falls almost half a million short of the predicted
figure (UK Online, 2002). Secondly, the UK’s
personal computer (PC) penetration rate,
considered a standard metric for measuring
e-commerce readiness, at forty six percent is low in
comparison with most other countries who are
achieving well over fifty per cent (Booz Allen
Hamilton, 2002). However, Martin and Matlay
(2001) recommend caution where reports show a
considerable increase in ownership of equipment
claiming that all that the data is measuring is
hardware purchases not the actual use of ICT
amongst SMEs. Although Martin and Matlay
(2001) accept that it does allow international
comparisons to be made. Thirdly, two common
faults of most government e-policies are: not
heightening the awareness of Internet benefits
among its SMEs but rather that brand recognition
for its services is developed and not having any
effective methods in place to measure the impact of
their e-policies (Booz Allen Hamilton, 2002).
SMEs’ contribution to the new economy
SMEs have an important role to play in a country’s
economy (Beaver, 2002) and that globally they
contribute eighty per cent to a country’s economic
growth (Bodorick et al., 2002). Of the 3.7 million
businesses in the UK 99.2 per cent are defined as
small businesses (Denby, 2001) employing fifty
seven per cent of the workforce (Yeo, 2002). The
growth in Internet access has been spearheaded by
SMEs (NOP/BT, 2002) and almost two thirds of
businesses operating e-commerce sites claim them
to be profitable (Actinic, 2002). However, some
researchers are more sceptical (Martin andMatlay,
2001; Beaver, 2002) claiming that such optimism
is somewhat misguided, arguing instead that such
reports need to be balanced against the dot-coms
that have yet to realise a profit and warning that the
number of commercial successes is likely to be
beaten by the number of failures.
Defining SMEs in the new economy
Martin and Matlay (2001) suggest SMEs are a
“heterogeneous and complex mix of economically
active units”. Most working definitions of SMEs
emanate from the Bolton Committee report of
1971, which defines a small firm as independent,
owner managed and with a small market share.
The Bolton report offered a variety of statistical
definitions, namely that the size of the firm was
relevant to the sector it was in and that in certain
sectors it was more suitable to classify the size of
the firm by the number of employees. The use of so
many definitions has its critics who argue that it
impedes statistical analysis. Such criticism is often
dismissed by claiming that these definitions all
have their different uses (Beaver, 2002). For the
purpose of this study SMEs were defined as
companies with a work force of between 1 and 250
employees (Business Link, 2002).
The reasons for the adoption of e-commerce
by SMEs
The academic literature gives very little
information on why SMEs adopt e-commerce.
However, rather more information can be found
on the broader aspects of information and
communication technology (ICT) adoption and
the use of the Internet in general. Thus, the
reasons for ICT, Internet and e-commerce
adoption by SMEs are complex and often
interrelated. The use of ICT to improve business
competitiveness is recognised in the literature
(Chapman et al., 2000) and indeed SMEs have
been in the vanguard, testing new e-commerce
models in spite of their limited resources (Dongen
et al., 2002). It is thought that much of this early
adoption of the Internet was motivated by a
mixture of management eagerness, the need for
better communications and that for most
businesses it presented an affordable admission
price to world markets prior to establishing more
important business relationships (Chappell et al.,
2002). Although Dixon et al. (2002) found a lack
of any empirical research on the effect of ICTon
SMEs and of the modest amount that there was
much of it involved cross-sectional studies rather
than longitudinal comparisons. The comparative
wealth of research in the area of ICT adoption
(compared to e-commerce) suggests that an
SME’s inherent qualities of size and flatter
organisational structure make them more
predisposed to facilitating innovation (Bodorick
et al., 2002).
According to Tidd et al. (2001) the major
factors for successful innovation are a mixture of
E-commerce adoption support and advice for UK SMEs
Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · 315-328
318
having a dedicated and motivated individual,
usually the Chief Executive Officer (CEO) and
paying attention to a multitude of good
management activities and attitudes. This includes
the ability to predict and respond to the business
environment and industry changes. In part this
concurs with Cragg et al.’s (2001) view that SMEs
with a CEO with a penchant for Information
Technology (IT) and innovation would be more
likely to adopt IT. Cragg et al. (2001) concluded
that three issues that were likely to have an effect
on the take up of the Internet by SMEs was the
perceived benefits, organisational readiness and
external pressures. However, Dongen et al. (2002)
argue that much of the literature supposes that
ICT adoption is for opportunistic reasons, based
on cost, rather than for strategic reasons. Recent
surveys suggest that the main reason for
e-commerce adoption amongst UK SMEs is to
increase sales (Actinic, 2002) while others
suggest more illusory motivations for adopting
e-commerce:
It may sound obvious but having a web site doesgive people the impression that you are a forwardthinking business (Bradshaw, 2001, p. 23).
Van Beveren and Thomson (2002) point out that
the most cited reasons for e-commerce adoption
tend to be those based upon the company’s size
and their perceived importance of e-commerce to
their business purpose. While Daniel and Myers
(2000) found that as a company grows in size it
becomes more difficult to communicate with
customers and this leads to the adoption of
e-commerce. Further evidence for company size as
a reason for e-commerce adoption can also be
found in recent surveys that indicate a divide
between large and small companies in the adoption
of e-commerce (Actinic, 2002; UKOnline, 2002).
Although the work of Bodorick et al. (2002) did
not focus specifically on SMEs they suggest that
e-commerce readiness and adoption are likely to
vary by industry sector. Martin and Matlay (2001)
found that micro-businesses that focus on
providing business services were more likely to
adopt ICT than similar sized manufacturing firms
while Daniel and Myers (2000) found that the
older the SME the less likely they were to use
e-commerce. Kalakota and Robinson (2001) see
the adoption of e-commerce as more of an external
pressure brought about by a new type of customer
value proposition of what they want, when and
how they want it and at the lowest cost. Daniel
and Myers (2000) and Dongen et al. (2002) found
that responding to competitors was also likely to be
an important driver towards the adoption of
e-commerce.
Timmers (1999) uses Michael Porter’s five
forces model to argue that e-commerce creates
almost perfect competition as barriers to entry are
reduced, transaction costs lowered, customers are
able to obtain better access to information,
customer driven pricing is possible and all with the
minimum of legislation and regulation. In
addition, low entry costs leading to an early return
on investment whilst safeguarding such investment
was seen as a major attraction of e-commerce
(Timmers, 1999). Daniel andMyers (2000) found
that the overall reason for the adoption of
e-commerce by SMEs was to enhance customer
relationships either through improving customer
services, developing the brand, seeking out new
customers or to allow for discourse with
customers. The notion was that these businesses
better understand how competitive differentiation
can be achieved by developing superior customer
relationships. Kalakota and Robinson (2001) have
similar views claiming that through the use of
e-commerce companies can become the best, most
recognisable and also the cheapest. That is,
e-commerce can create opportunities for a
combination of differentiation and cost leadership
strategies to be employed (Campbell-Hunt, 2000).
Cragg et al. (2001) found three types of perceived
benefits namely, relative advantage,
communication (over more traditional methods
such as the telephone) and as a business tool i.e.
something that is a part of everyday business.
UK Online promotes the potential benefits of
e-commerce to businesses on the promise of larger
market penetration, sensitivity to customer needs,
added flexibility and reduced costs. Part of the
promotional push appears to be reminding
businesses of the practical benefits rather than
perceived benefits of e-commerce. For example,
advertising costs can be reduced by having a Web
presence (DTI, 2001b). Cragg et al. (2001, p. 172)
argue that: “Those that have not adopted the
Internet must seek a business benefit, for example
they may pursue advantages over traditional
methods of advertising.”
More pragmatic advice can be found in the
literature targeted at small businesses and which
praises the benefits of e-commerce from both the
business and customer perspectives (Bradshaw,
2001). For example, e-commerce allows
businesses to trade and receive payments online
non-stop and leaves customers satisfied because
the business is always open. In addition,
e-commerce has other benefits such as lowering
the running costs of the business, allowing access
to a wider market and saves time for the customer
who will also feel in control (Bradshaw, 2001). It
has been suggested that some small businesses
only exist because of moving onto the Internet and
the notion of the Internet as a salvation for some
businesses appears to be a relatively new idea
E-commerce adoption support and advice for UK SMEs
Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · 315-328
319
(Wroe, 2002). Access may be dependent on
location with London SMEs twice as likely to have
a Web site as Yorkshire SMEs (Haig, 2002) due to
having access to Internet links (Martin andMatlay,
2001). However, Daniel et al. (2002) found that
the adoption of e-commerce was similar across
different regions in the UK but that London
companies were realising greater benefits for
particular activities. Table I summarises the
reasons for and barriers to SMEs adopting
e-commerce.
Barriers to e-commerce adoption
The main barriers to e-commerce adoption appear
to be the unwillingness of managers to be
responsible for technological change (Kalakota
and Robinson, 2001). Most businesses do not
want to use the Internet for online trading,
preferring instead to use ICT to augment changes
in how they connect with their customers and
reduce costs through more efficient management
of their internal processes (UK Online, 2002,
p. 14). Ignorance surrounding the technology is
fuelling concerns about security, costs, legislation
and interoperability (Timmers, 1999). There are
also concerns about the complexity of available
e-commerce services (Bodorick et al., 2002;
Dongen et al., 2002). While Bodorick et al. (2002)
identified limited resources as a distinctive
characteristic of SMEs and therefore a barrier for
them to compete in the global e-commerce market,
Cragg et al. (2001) found that a lack of financial
resources was not delaying Internet adoption.
Dongen et al. (2002) reminds us that Internet
adoption does not require high investment costs or
an advanced pre-existing telecommunications
infrastructure. Although, other research suggests
that managers in SMEs did acknowledge that the
valuable resources of time and effort to incorporate
such telecommunications were principal barriers
to the adoption of IT (Chappell and Feindt, 2000,
cited in Dongen et al., 2002)
Darch and Lucas (2002) found several
perceived barriers to the adoption of e-commerce
in Australian SMEs including costs, lack of
awareness of what e-commerce involves, lack of
e-commerce skills, lack of knowledge, lack of help
and lack of time. Secondary issues were inadequate
telecommunications infrastructure, lack of trust
and the relevance of e-commerce to their
particular industry sector. Chappell et al. (2002)
state that a lack of SME bespoke information is
why many SMEs are not taking advantage of the
Internet. Lawson et al. (2003) suggest that the
barriers can be categorised as either technical or
social factors and provides further evidence in
Australian SMEs for lack of skills, knowledge and
poorly trained staff. Most of the barriers identified
by Lawson et al. (2003) were non-technical and
they suggested some ways in which these barriers
may be overcome such as government and industry
associations providing information to raise
Table I A summary of the reasons for and barriers to SMEs adopting e-commerce (not in any particular order)
Reasons for adopting e-commerce Barriers to adopting e-commerce
To improve business competitiveness
To try out new e-commerce models
Management eagerness/motivated CEO
The need for better communications
Admission to world markets
Greater opportunities for innovation in SMEs due to SMEs’ smaller size and flatter
organisational structure
Perceived benefits
Organisational readiness and external pressures
Opportunistic and based on cost
To increase sales
Impression management
Advertising costs can be reduced
Company size and perceived importance of e-commerce to business purpose
To improve communications with customers
External pressures from a new type of customer value proposition
Responding to competitors
Low entry costs
To enhance customer relationships
The Internet as a “lifesaver” for ailing businesses
May reduce working hours for owner-managers in some businesses
The unwillingness of managers to be responsible for technological change
Use of ICT to reduce costs and improve efficiency rather than for trading online
Fear of entry into global markets
Readiness and adoption rates vary by industry sector
The older the SME, the less likely they were to use e-commerce
Integration of legacy systems is difficult
Executive understanding is poor
Ignorance surrounds the technology, fuelling concerns about security, costs,
legislation and interoperability
Lack of profitable business models
Lack of qualified employees
Complexity of available e-commerce services
Limited resources
Costs
Lack of awareness of what is involved
Lack of skills
Lack of knowledge
Lack of help
Lack of time
Inadequate telecommunications infrastructure
Lack of trust
Lack of relevance to their particular industry sector
Lack of SME bespoke information
Wrong type of product or service for e-commerce
E-commerce adoption support and advice for UK SMEs
Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
Volume 11 · Number 3 · 2004 · 315-328
320
awareness, training, participation in the diffusion
process and working with good quality
consultants. It could be argued that this is exactly
what is happening in the UK but still appears to be
insufficient.
Studies have found that the barriers to
e-commerce adoption can vary between large and
small companies and between continents with
large companies in the USA citing integration of
legacy systems and executive understanding as
obstructions while in Europe large companies
perceived the barriers to be trust and security
(Timmers, 1999). SMEs on both sides of the
Atlantic were in agreement about the lack of
profitable business models and while US SMEs
expressed concern about a lack of qualified
employees, European SMEs were more concerned
about the complexities of e-commerce (Timmers,
1999).While the benefits of the Internet are largely
seen as being able to access global markets
Cunningham (2000) states that this inherent
quality can, in itself, act as a barrier preventing
firms from moving over to international
commerce.
Fillis et al. (2003) have devised a conceptual
model of e-business development for SMEs which
appears to incorporate many of the factors
outlined in this paper and which are summarised in
Table I. However, they do point out that SMEs still
have major shortcomings in the area of marketing
(see also Huang and Brown, 1999; O’Brien, 1998;
Simpson and Taylor, 2002).
SMEs’ need for support
The lack of technical skills amongst owner-
managers of SMEs places a heavy reliance on
external advice and support, however, such
support and advice does not necessarily have to be
from experts (Darch and Lucas, 2002). Mole
(2002) suggested that advice users fall into one of
three groups: those who use only one source (for
example accountants); those who use five or more
different suppliers and; those who use a handful of
private clients including Business Link. A major
factor in determining whether external advice will
be sought is the size of the firm, with the smallest
firms the least likely to seek external advice
(Bennett and Robson, 1999; Mole, 2002). The
profitability of the firm is also likely to be an
important indicator as to the type of external
advice the firm is likely to seek with the most
profitable firms seeking private sector advice and
the least profitable using public sector advice
(Mole, 2002). The ability of SMEs to buy-in
external advice is far greater than that of larger
firms but they have a greater unwillingness to do so
(Bennett and Robson, 1999; Chaston and Baker,
1998). Many owners have fervent beliefs about the
uniqueness of their business which leads them to
become doubtful about new advice (Mole, 2002).
Government’s failure to support SMEs
Given the economic importance of SMEs,
government policy is to provide support to SMEs
(Bennett et al., 2001). The challenge for
government is to convince generally reluctant
SME owner-managers of the need to take external
advice and persuade them to actually take that
advice (Hankinson et al., 1997; Hankinson, 2000).
Several government initiatives (support agencies,
advice centres) have been devised to encourage
SMEs to seek advice and stimulate demand for
advice (Bennett and Robson, 1999). These
initiatives are believed to increase the chance of
business success (Beaver, 2002).
The most notable of these UK government
initiatives is Business Link (BL) a support agency
that was developed in 1992 to provide SMEs with
a network of local business advice centres (Bennett
et al., 2001). Although Beaver (2002) criticises this
“one-size-fits all” approach, claiming it does not
consider the differences between firms. To date BL
has rapidly attained a high degree of brand
awareness and usage by SMEs (Bennett et al.,
2001). Essentially not for profit organisations BLs
are expected to seek a commercial direction in
order to be self financing, although funding was
provided primarily by the DTI and the
Department for Employment and Education
(DfEE).
Whilst Beaver (2002) warns that there is strong
evidence that governments are not engaging in
policies that help SMEs, BL is seen as one of most
successful government initiatives of the past
twenty years (Bennett et al., 2001). However, BL
may not be serving the overall needs of SMEs, and
may be the underlying reason why the take up of
BL services by small businesses is so low.While the
reputation of BL is enhanced because of
government assistance, both financial and
regulatory, it suffers from the historic perception
that SME owner-managers hold about public
sector interference. This in turn may persuade
clients to use BLs principally to gain access to
business funding or as their only remaining option
(Bennett and Robson, 1999). Bennett et al. (2001)
mention that although BL has comparable impact
levels to that of other public sector suppliers it lags
significantly behind private sector suppliers. The
government’s continued emphasis on charging fees
was felt to be a strong negative influence on client
satisfaction as clients expect government services
to be either low cost or free (Bennett et al., 2001).
Mole (2002) argues that the charging of such fees
acts as a quality control mechanism.
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Lean (1998) concluded that support for small
businesses has had limited success in affecting
their growth and that there was a need for Business
Links’ approach to be less “dogmatic” in relation
to micro-businesses. Mole (2002) highlighted
further differences about why the take up for BL
services should be so low amongst SMEs by
contradicting some of the findings of Curran and
Blackburn (2000, cited in Mole, 2002) who had
suggested five reasons as to why the take up of BL
services was low. SMEs were not aware of the
service whereas Mole (2002) found evidence to
suggest that awareness of BL amongst SMEs was
high. BL services were expensive and yet Mole
(2002) maintained that most services were free.
There appeared to be poor service delivery but
Mole (2002) suggested that SMEs were unlikely to
be candid about such levels of dissatisfaction in a
survey. However, there was agreement on supplier
distrust and the inability of government agencies to
match SME needs. SME owners distrust
government, often declaring that the government
lacks the skills and experience to give advice about
running their business. SME owner-managers
claim that external agencies fail to understand
their business, although Mole (2002) added that
this last reason may be a deep seated characteristic
of the owner-manager with a psychological need
for autonomy (see also Chaston and Baker, 1998).
SMEs were more likely to use BL if they were an
exporting firm (seeking export advice) or if the
firm had introduced a process innovation that was
both new to the business and to the industry as a
whole, or if they simply had the ability to finance
external resources (Bennett et al., 2001). SMEs
with a higher skilled workforce were more
predisposed to identifying needs and seeking
external assistance although paradoxically firms
with a low skilled workforce may require greater
levels of external advice and help (Bennett et al.,
2001).
The role of personal business advisers
Mole (2002) offers many reasons as to why
Personal Business Advisers (PBAs) may not be as
effective as other private sector advisors. PBAs
were expected to develop long term relationships
with clients yet they lacked the time to develop
such relationships. The nature of their knowledge
and advice was generalist, not sector specific and
while they may have a background in marketing or
finance they could never equal the knowledge the
owner-manager had of their market and industry.
The Business Link PBAs were expected to be
independent but this role is often compromised by
the transactional nature of the relationship i.e.
pushing BL services to the client. The self-funding
targets imposed on BL introduced the issue of
moral hazard into the relationship where the PBA
was able to provide support but either lacked the
time or resources to do so properly. In the pursuit
of such targets PBAs were likely to be distracted
from servicing their clients businesses properly.
Mole (2002) also saw difficulties with the
payment structure of the PBAs. Some were
appointed on a self-employed basis while others
were paid on a salaried basis with performance
indicators. This led to the self-employed PBA
targeting the most prosperous firms while the
salaried PBA, on performance indicators, targeted
the firms needed to substantiate their salary, which
were often the high growth firms.
Bennett and Robson (1999) investigated how
advice differed between government agencies and
the market in general and they concluded that two
factors could generate higher impact levels for
SMEs. First, interaction through site visits – “the
stronger intensity of interaction increases the
tailoring of a service to SME needs therefore
improving its quality and potential impact”
(Bennett and Robson, 1999, p. 365). Second, by
SMEs holding greater levels of control either
through a contract or written brief. Bennett et al.
(2001) found that there were three important
components of the BL design that were impairing
its performance. Namely, the local inconsistency of
its management structure; its tendency to focus on
established growth companies (managers are
encouraged to generate repeat business in this
group); and its wide-ranging advice remit (the
concept of a one-stop-shop) based on an apparent
need to simplify the delivery of local business
support services.
Martin and Matlay (2001) are critical of
government small firm support policies in relation
to ICT claiming that they will have limited success
since they do not take into account the
heterogeneous nature of SMEs. Martin and
Matlay (2001) argue that such initiatives are a
blunt instrument and that what is required is much
more sector specific advice and support. They
point to surveys that show a restriction on access to
ICT advice depending on the businesses location.
Businesses in rural areas were less likely to have
access to such advice and more importantly the
specialist support needed to adopt and implement
it. With many rural businesses forced to rely on
their hardware suppliers the inference is that bias
and partial advice creep in.
Darch and Lucas (2002) found that SMEs
looked to government and industry groups for
specialist expert advice on e-commerce. However,
the few that approached government sources
expressed disappointment over the lack of
e-commerce knowledge personnel had. With small
business owners acknowledging that their level of
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technical skill was low Darch and Lucas (2002)
suggest that local intermediaries such as the
Chambers of Commerce or BL are best placed to
influence the take up of e-commerce by SMEs as
often they have daily contact with them. Bennett
et al. (2001) also believed there to be higher levels
of use of BL for non-innovating firms because they
needed it to catch up with more innovative firms.
Mentoring and network services
A notion that appears to be gaining interest among
owner-managers of SMEs is that of having a
network of people or a mentor to whom the owner-
manager can turn to for advice. Many small
business owner-managers often have feelings of
being alone and isolated, even in firms where
husband and wife partnerships are prevalent.
Having a small group of mentors as advisers can be
useful for bringing external experience into the
firm and for providing impartial advice and an
understanding of the market. Thus avoiding
common business mistakes and proving to be more
valuable than local Business Links (Stone, 2002).
Academic approaches to successful
e-commerce
It is unlikely that such advice would be studied by
owner-managers of SMEs given their sceptical
nature (Mole, 2002).
E-commerce approaches and business models
Traditional business models are based around
more tangible properties whereas the business
models of the future are considered to be virtual
and their properties intangible (Kalakota and
Robinson, 2001). In the past many Internet
businesses rushed to market and were
disappointed to learn that simply having an
Internet presence was no guarantee of success
(Kalakota and Robinson, 2001). Themistake most
firms make is to think about the technology first
and then figure out how it is all going to work. To
avoid such pitfalls it is suggested that the firmmust
decide how much outside help is needed to
negotiate the hybrid mix of business, technology,
change processes and the position of the company
and its competitors in the market place
(Cunningham, 2000;Denby, 2001; Chappell et al.,
2002).
Timmers (1999) suggests that eleven business
models exist all of which can be found operating on
the Internet today, including e-shops and e-malls,
and that these models revolve around a number of
common principles indigenous to e-commerce.
These principles include the collection of money;
productivity improvements in business processes;
development and support for new automated
procedures; and altering how you interact with
existing and potential customers.
Strategy and tactics
According to De Kare-Silver (2001) developing a
long term strategic plan is the first step towards
meeting the e-commerce challenge. This view is
endorsed by the UK government who believe that
a well-developed strategy is crucial to growth for
most businesses and that e-commerce businesses
are no exception (DTI, 2002e). However,
according to Chappell et al. (2002) most small
businesses are not able to formally define or
understand their competitive strategy and that
e-commerce can only exacerbate this problem.
Denby (2001) warns owner-managers, that
e-commerce strategies when not managed
properly can either languish, through constraints
on the owner-managers time, or the other extreme
ensues, where strategies expand to fill their time
often at the expense of other business projects.
According to Timmers (1999) the reason why so
much strategic choice is now afforded is down to
the Internet’s characteristics of “openness and
connectivity”, although paradoxically the same
characteristics can also make hiding such
competitive models from competitors almost
impossible. Cunningham (2000) claims the
starting point for the development of a strategy for
e-commerce often rotates around money, whether
that is creating additional revenues, cost
reductions, improved margins or simply remaining
competitive.
Marketing and competition
According to companies already enjoying success
on the Internet, gains were only made once they
had recognised that the world of e-commerce
presents harder marketing challenges (De Kare-
Silver, 2001). While Timmers (1999) suggests that
we can make use of the marketing theory and
business economics that exists today Cunningham
(2000) is not so certain believing that conventional
marketing strategies do not work every time. In
addition, SMEs have problems with both
implementing and understanding marketing
(O’Brien, 1998; Huang and Brown, 1999).
Managing people and processes
The Internet is an agent of change and it impacts
on people and work processes. Cunningham
(2000) sees Internet start up firms as the epitome
of change, free of the restrictive practices of
more traditional business models and asks that
e-commerce organisations look at issues like the
internal culture and howmuch change the firm can
handle. For others e-commerce is about taking
advantage of the technology to transform business
processes where disintermediation (cutting out the
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Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
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323
middleman) and re-intermediation (the firm
becomes the middleman) are competitive tools to
make the value chain more efficient (Bradshaw,
2001).
Technologies
There appears to be a scarcity of technology
knowledge amongst SMEs. According to Kalakota
and Robinson (2001) the same dilemma exists in
the larger corporations with most executives
remaining oblivious to emergent technologies
when such knowledge should be critical for their
firms’ survival (see also Cragg et al., 2001).
According to Kalakota and Robinson (2001)
managers should determine how they can use the
new technology to create new value propositions
for the customer and this is seen as an important
factor for success in entering the world of
e-commerce. Cunningham (2000) states that firms
should not become besotted with the technology
alone but that there should be a sound business
case for using it preferably with a technology plan
incorporated into the business plan.
Implementation
De Kare-Silver (2001) emphasises that whatever
strategy is selected the important thing is to ensure
its implementation is thorough, determined and
well funded.
Evaluation
Chappell et al. (2002) recommends that SMEs
involved in e-commerce continually assess their
own strengths and weaknesses using
benchmarking to make comparisons with
competitors. In a study of successful SMEs,
Chappell et al. (2002) found that a common set of
best practices in e-commerce were present, the
implication being that the deployment of these best
practices can greatly improve the success of
e-commerce in SMEs. E-commerce can provide
high returns on investment (Cunningham, 2000)
and “hard” benefits should be measured in terms
of financial impact while other “soft” benefits such
as the effect e-commerce can have on an
organisation cannot be measured in such fiscal
ways.
Strategic partnerships
Denby (2001) states that, no business can exist in a
vacuum especially Internet businesses and that
through the development of partnerships (from the
basic buyer/seller relationship through to more
complex suppliers/logistics partnerships) can the
foundations for commercial success be laid.
Rayport and Jaworski (2001) consider it is
unrealistic for any company to have all the
resources needed to provide value to its target
market and state that a firm should be sensible
about what its capabilities are and more
importantly where they are deficient, for only then
will they be able to identify where partnership help
is needed.
Results and discussion
The reasons for adopting e-commerce in the
Classic Car Group and Jack Scaife Butchers Ltd
were different. Jack Scaife’s Chris Battle reported
that traditional advertising was expensive and
inefficient and that his two young daughters were
aware of the Internet and provided an internal
pressure for adoption. This contrasts with the
literature where external pressure is thought to be
more prevalent (Kalakota and Robinson, 2001).
Cost savings could be made and was a clear
motivator for adopting e-commerce (Dongen et al.,
2002). The Classic Car Group gave a similar
reason with internal pressure coming from the
managing director’s son. However, their
motivation was seen as an extension of their
marketing and as a way of marketing the business
(see Van Beveren and Thomson, 2002).
Perceived benefits and barriers for
e-commerce adoption
The market for Jack Scaife’s products had become
global as a consequence of adopting e-commerce
but there was no way to predict this in the
beginning. However, the Classic Car Group were
somewhat optimistic: “We were expecting
hundreds of emails on that first Monday only it
didn’t happen.” The company had to learn about
search engines and establishing the company name
with them and then reach more people for a lower
cost. It took 18months for Jack Scaife to realise the
benefits but further intervention was needed and
they re-examined and redesigned their Web site.
The unexpected social benefit was a change in
working hours from early mornings (5.00am) and
long days (until 7.00pm) to a return to more
normal hours of work.
The barriers to Internet adoption are thought to
be ignorance about the technology (Timmers,
1999) and limited resources (Bodorick et al.,
2002). There was no evidence that these or any
other barriers were present or were holding these
companies back and both companies were well
aware of their shortcomings in relation to the
technology and these were overcome by using
internal family contacts. Cost was not seen as an
inhibitor since both companies were already
spending large sums of money on advertising and
establishing the Web site was no more than one
month’s advertising spend.
The reasons why some SMEs are more
successful than others were suggested by the
e-Business Adviser as: individual circumstances,
individual motivations, commitment to the
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Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
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technology and that some people have the
appropriate business for it. It was suggested that
some businesses fitted well with e-commerce,
particularly personal services, foods, certain
manufacturers and crafts, whereas in other
businesses e-commerce does not fit well. Hughes
et al. (2003) supports the view that suitability of
the product for sale was seen by SMEs as a major
characteristic contributing to success.
E-commerce advice and support
The lack of technical skills in SMEs means that
more reliance is placed on external advice and
support although not necessarily from experts
(Darch and Lucas, 2002). In both the companies
investigated technical skills were deficient but they
were overcome by using internal support from
family or friends. Jack Scaife did it themselves with
only a little help on the hardware required.
Whereas The Classic Car Group used an outside
company for the technical work and the strategy
was developed within the company. Yet both these
companies were used in the government literature
as “e-commerce stars” and used in the government
campaigns to encourage take up of the service
provided through Business Link (DTI, 2002d).
This would imply that they have had some external
advice from government sources and this was
clearly not the case. In addition, The Classic Car
Group did have some visits from Business Link
about e-commerce but the company felt they did
not need them and thought they were “. . . one step
ahead of them already”. Diane Smith, MD, The
Classic Car Group.
Both companies were aware of the services
offered by Business Link but had not felt the need
to use these services and were only going to use the
services for activities unrelated to e-commerce
such as moving into new premises. However, help
would have been very useful in the beginning:
“Yes, the first few years were wasted”. Chris Battle,
MD, Jack Scaife Butcher Ltd. However, the UK
online business advisor suggested that the gulf
between SMEs and Business Link was due largely
to lack of time to form client relationships and
produce tailored solutions to a large potential
market of ten thousand small companies. In
addition, the notion that these business advisors
lacked the skills was justified to some extent in that
many e-business/e-commerce advisors for UK
Online were simply former Personal Business
Advisers for Business Link. These criticisms are
also supported by the academic literature (Bennett
and Robson, 1999; Bennett et al., 2001; Martin
and Matlay, 2001). It was pointed out that a lot of
general matters could be dealt with via paper
leaflets or via the Web and this accounts for the
large amount of literature produced by the DTI
regarding e-commerce and the success of the Web
portal. However, the UK Online Advisor
suggested that busy SMEs’ owner-managers did
not have the time or the inclination to read reports
on Web sites and that SMEs were often managed
by practical people who want instant answers to
their problems.
The case study companies also commented
upon the funding of support services. Both felt that
the way they were funded was dysfunctional and
that the services offered were expensive. There
were conflicting targets within these support
services such as income generation or number of
companies seen, or depth of support targets and
these conflicts were known by the SMEs. Yet
according to our interview with a UK Online
Business Advisor the market tends to be lots of
quick enquiries and then a few requiring deep
assistance over a day and a half or more and then
the time has to be charged at a subsidised rate.
However, in areas with Objective One status (such
as South Yorkshire) companies question the need
to charge when there is so much grant money
available. The reason given for this approach was
that it was partly to do with the perceived value of
the work and the perception of the value of time to
the company being different to the perception of
the value of time by the support agency.
Academic approaches to e-commerce
The practical relevance of the academic
literature to SMEs was found to be negligible and
showed a lack of knowledge about technology and
e-commerce among SMEs. The time SMEs’
owner-managers spent reading business books was
small. The e-commerce interviewees spent more
time analysing their own data from hits on their
web sites or simply devising their own ideas on how
to be more effective with their e-commerce
activities. The SMEs were unable to describe their
e-commerce strategy other than to say they wanted
to make more money via the Web site and this is in
general agreement with the literature (Chappell
et al., 2002; Denby, 2001). The SMEs did feel that
e-commerce had given them greater opportunities
than they would have had. In fact it would appear
that both companies would have had a difficult
time surviving and the Internet probably gave
them an opportunity to turn a failing business
around (Wroe, 2002). However, the business
advisor was less than convinced by this argument
and suggested that other, entrepreneurial
characteristics of the own-managers were more
important in determining the success of the
business.
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Conclusions
The reasons why SMEs adopt e-commerce appear
to be numerous (see Table I). Most of the reasons
outlined in this paper appear to involve financial
benefits for the SMEs albeit described under
various headings. During this study a number of
other reasons emerged but they did not appear in
the literature. In addition, there was a lack of
evidence of the impact of government support
services despite the high levels of awareness
created by the huge amount spent on these
initiatives. The case studies revealed that internal
pressure from family (particularly from children)
and friends rather than external competitive
pressures were a major factor in adopting
e-commerce. E-commerce adoption appeared to
be able to rescue struggling businesses (Wroe,
2002). Social benefits, through reduced working
hours for owner-managers, may in some cases be
considered a real business benefit as it could
reduce the workload of SME owner-managers and
allow more time for reflective thought. This was a
new finding.
The literature in this area presumes that most
firms are embarking on e-commerce and does not
seem to consider those firms who either have no
intention of adopting e-commerce or have yet to
discover the Internet. Some firms may have
products that are unsuitable for selling via the
Internet (Hughes et al., 2003). This situation
may be presenting a one-sided argument for
e-commerce adoption and we believe that a more
balanced view should be adopted taking account of
the suitability of products and services for sale
using e-commerce.
The effectiveness of public sector e-commerce
support services for SMEs appeared to suffer from
historical relationship problems associated with
Business Link and SMEs such as distrust and
scepticism. This may well be plaguing the
government’s new initiative UK Online for
Business and we conclude that the stand-off
between SMEs and government business support
agencies may encourage other third party vendors
to exploit SMEs’ ignorance about the technology.
This may expose SMEs to risks both legal and
financial. The UK government’s policy of driving
SMEs towards the Internet without the long-term
consideration for their survival may actually
increase the number of business failures especially
if the products and services offered are unsuitable
for sale using e-commerce (Hughes et al., 2003).
SMEs are exploring new ways of being supported
such as mentoring services (Stone, 2002) and
these initiatives may be the result of frustration
with the public sector advisory services. The UK
Online for Business initiative may be seen as no
more than a marketing campaign to raise the
awareness of ICT amongst SMEs rather than an
e-commerce advisory support service and may be
missing its target market. SMEs were found to be
in need of support and advice for e-commerce and
government has an opportunity to exploit this
demand but might be reluctant to do so or may be
burdened by the bureaucracy of the old Business
Link formula.
Academic theory for e-commerce was found to
be generally of little practical value to SMEs’
owner-managers. SME owner-managers tend to
be more practical and do not acknowledge formal
business strategies preferring instead to place
reliance on their instincts or intuition. The
majority of the academic work, whilst useful for
corporations, institutions and academics, is
unlikely to have any relevance for SME owner-
managers. The more practical business “recipe”
books may prove useful for stimulating interest in
the technology and in answering some of the more
basic questions but the constraints on the owner-
managers’ time would suggest that many of these
books will not be read. Interestingly, in the USA it
would appear that the popularity of university level
e-commerce courses has declined dramatically
following the collapse of a number of dot-com
businesses (Foster, 2004). At this stage it is unclear
if such a trend will extend to UK university courses
but it would be an interesting area to research.
Matlay and Addis (2003) identified the crucial role
that UK higher education institutions (HEIs) play
in providing consultancy to SMEs and suggested
that post-1992 universities were more likely to be
providers of consultancy to SMEs than
“traditional” and established universities.
White and Daniel (2002) questioned the
success of new Internet start-ups versus large
incumbent conventional retailers simply starting
their own Internet activities as separate “bolt-on”
businesses. However, it does seem likely that
purely e-commerce business models will be less
popular in UK SMEs since these SMEs are often
extending their existing business onto the Internet
rather than starting a business directly on the
Internet purely as a dot-com.
This study concludes that the effectiveness of
e-commerce advice and support for UK SMEs is
poor and may be dangerous in that it may lead to
increased numbers of business failures. Conversely
some evidence exists that suggests that the Internet
might be able to save failing small businesses (with
the right product) (Wroe, 2002) but much more
research needs to be done in this area. The
overlapping issues of ICT adoption, poor or
overlapping definitions of e-commerce and
e-business and the use of these terms
interchangeably in the literature generally confuses
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Mike Simpson and Anthony J. Docherty
Journal of Small Business and Enterprise Development
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the area of e-commerce adoption. Despite this
factor the reasons for and barriers to adopting
e-commerce have been extracted and discussed in
the context of SMEs.
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