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THE ADOPTION OF ELECTRONIC COMMERCE BY SMALL AND MEDIUM

ENTERPRISES IN PRETORIA EAST
Ajay K Garg1 Thobeng Choeu
TUT Business School TUT Business School
South Africa South Africa
gargak@tut.ac.za akg20055@yahoo.co.in

ABSTRACT
The objectives of this study were to determine the current level of e-commerce adoption and
factors that motivates the adoption by Small and Medium Enterprises (SMEs) in Pretoria
East. A structured questionnaire survey was distributed to 200 randomly selected small and
medium enterprises and 48 valid responses were obtained. The results indicate that 67
percentage of SMEs in the sample in Pretoria East have somewhat embraced the adoption of
e-commerce. Retail is the largest industry sector in the sample followed by Service industry
with 45.8percentage and 35.4 percentage respectively. The results also indicates that Service
sector was at adoption level 2 followed by Retail and others. The results show that only three
independent factors namely (relative advantage, competitive pressure, IT knowledge) were
statistically significant. Relative advantage emerged as the most important factor influencing
the adoption of e-commerce among SMEs in terms of relative importance. The Chi-square
test indicates that the type of business, occupation level, numbers of employees in the
company and academic qualification did influence the adoption levels amongst SMEs whilst
how long as owner/manager and gender did not influence the adoption level.
Keywords: Adoption, E-commerce, Small and medium enterprise, Pretoria.
1. INTRODUCTION
According to SME Survey (2012), the small and medium enterprises (SME) sector in South
Africa accounts to 40% of GDP and 60% of the workforce in the formal employment. The
World Wide Worx Report indicates that more than R2 billion was spent on online shopping
in South Africa in 2010 but the rate of e-commerce adoption on SME is still rather low.
Electronic Commerce (e-commerce) has been predicted to be a new driver of
economic growth for developing countries (Humphrey et al.2004:31). Adopting e-commerce
has not been easy for SMEs world-wide (Jones et al., 2011) partly because of the ever-
changing field of information systems and the varying needs of local and global business in
general. The adoption of e-commerce in SMEs remains a critical area of investigation in
information systems research (Parker and Castleman, 2009; MacGregor, 2004). Previous
studies of Information and Communication Technology (ICT) and e-commerce adoption
report that SMEs in developing countries generally have not capitalised on the power of the
Internet to extend their business beyond traditional borders (Bai et al., 2008; Molla and
Licker, 2005a; Humphrey et al. 2004) except in the application of simple technologies such
as electronic mail (Mpofu and Watkins-Mathys, 2011). Some of the reasons put forward from
the literature include: cost of acquiring and operating ICT, lack of ICT and e-commerce
knowledge, owner/manager low literacy levels, inability to perceive e-commerce benefits,
unfriendly regulatory policy and requirements, cultural issues and dependence on customer or
supplier preferences. According to Cragg, Caldeira and Ward (2011), a low level of

                                                            
1
 Corresponding author 

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organisational readiness is a key reason for slow adoption or an inability to adopt e-

commerce.
Several e-commerce adoption studies in SMEs have been undertaken in developed
countries as can be represented by Scupola (2009), Chibelushi and Costello (2009) and
Bharati and Chaudhury (2006). Similarly, studies in developing countries can be represented
by Tan et al. (2007), Looi (2005) and Molla and Licker (2005a) although the overall
representation in scholarly publications shows that there are fewer studies in developing
countries. Researchers do agree that a one-size-fits-all model may not be attainable (Molla
and Licker, 2005b). A key area of concern in the previous studies is the lack of detail on how
e-commerce adoption by SMEs is undertaken as most researchers have used exploratory
research methods such as surveys that lack depth and theoretical foundation
(Riemenschneider et al. 2003). In addition, the unequal distribution of ICT infrastructure,
products and services between the developed and developing countries or urban and rural
SMEs also accounts for differences in how e-commerce is valued and applied in
organisations.
Although researchers indicate e-commerce offers viable and practical solution for
organisation to meet challenges of a predominantly changing environment, available studies
related to SMEs in developing countries reveal a delay or failure of SME adopting e-
commerce. This study then became the need to establish the status of the adoption of e-
commerce in South Africa and which factors influences the adoption by SMEs. Accordingly
this study focused on to determine the current level of e-commerce adoption and factors that
motivates this adoption by SMEs in Pretoria East.
2. LITERATURE REVIEW
The origin of e-commerce predates the Internet. Early development of e-commerce began in
the early 1960s, although most applications associated with innovations surfaced around
1970s in form of electronic funds transfer (EFT) (Turban et al. 2008). Later, another
innovation known as Electronic Data Interchange (EDI) was introduced, which allowed
business transactions such as purchase orders or invoices to be passed electronically from one
organisation to another using standard procedures and documents (Turban et al. 2008;
Papazoglou and Ribbers, 2006).The Internet, a network of computer networks, began in 1969
by the US government to facilitate academic and scientific research (Senn, 2004). Over the
years, the number of Internet users has increased enormously as a result facilitating the
exchange of goods and services amongst businesses (known as B2B e-commerce), and
between organisations and individual consumers (B2C e-commerce). However, according to
Humphrey et al. (2004) and Gibbs et al. (2003), the growth of e-commerce has been seen to
be slower than that anticipated earlier with B2B becoming more popular than B2C.
There are numerous definitions of e-commerce in the literature. According to Botha et
al. (2004), e-commerce is online interaction between a business and its customers or a
business and its suppliers for the placement of orders. The internet becomes an important part
of the company. According to Fletcher et al. (2004), e-business/commerce refers to the
application of ICTs to processes within the firm, and possibly to transactions with customers
and suppliers. It is important to note that e-business involves several stakeholders, including
the business that concludes the transactions, its customers and suppliers. Turban et al. (2008)
define e-commerce as the process of buying, selling, transferring or exchanging products,
services and/ or information via computer networks, including the internet. Electronic
commerce enables organisations of all sizes and in all market sectors to improve their
competitiveness. It cuts across geographic boundaries and time zones to save time and costs,

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to open up new market opportunities and enable even the smallest of companies to compete
globally. Electronic commerce spans established processes such as bar code scanning and
electronic data interchange (EDI) as well as newer arrivals, like e-mail, the Internet, the
World Wide Web and mobile electronic commerce. For the purpose of this study, e-
commerce, as stated by Turban et al. (2008), has been adopted because it depicts the overall
process of buying and selling, transferring or exchanging products or services or information
via computer networks and internet.
2.1 E-commerce Adoption in Developing Countries
E-commerce contributes to the advancement of businesses in developing countries. It is
driven by the perceived potential of the internet and communication technologies in reducing
transaction costs by bypassing some, if not all, of the intermediary and facilitating linkages to
the global supply chains (Molla and Licker 2005a). It is believed that e-commerce promises
many benefits, ranging from modest advantages such as reduced communication and
administration costs, and improved accuracy to transformative advantages including enabling
business process reengineering or supporting industry value chain integration initiatives such
as just-in-time inventory, continuous replenishment, and quick response retailing. The
electronic business value of ICT-enabled e-commerce was found to lead to improved firm
performance in sales, internal processes and customer/supplier relationships through market
expansion, improved information sharing efficiency and improved transactional efficiencies
(Zhu, 2004).
However, businesses, in particular SMEs in developing countries face challenges
different from those in developed countries and differs greatly in adopting and benefiting
from e-commerce (Tan et al. 2007). According to Kapurubandara (2009), organisations
adopting e-commerce in developing countries face challenges such as lack of
telecommunications infrastructure, lack of qualified staff to develop and support e-commerce
sites, lack of skills among consumers needed in order to use the internet, lack of timely and
reliable systems for the delivery of physical goods, low bank account and credit card
penetration, low income and low computer and internet penetration. E-commerce adoption in
these businesses has only recently gained attention in the academic press. Similarly, research
related to e-commerce implementation is even scarcer when it applies to SMEs in developing
countries.
Simpson and Docherty (2004) reported that SMEs are generally lagging behind to
large organisation as far as the adoption of e-commerce is concerned. Small firms need to get
in the e-commerce game or they are going to be shut out of a critical part of the market place.
Fillis et al. (2003) examined the adoption of e-commerce by SMEs and found that they could
gain competitive advantage through adopting e-commerce as it could improve access to the
market.
Similarly, the readiness of businesses to govern and regulate e-commerce is an
essential element which lacks in developing countries, due to the trust necessary to conduct e-
business (Molla and Licker, 2005b). Since web and communications technologies are
complex and offer a variety of functionalities ranging from the static presentation of content
to the dynamic capture of transactions with provisions for security and personalisation,
organisations in developing countries must comprehend these technologies and decide how to
draw upon their functionalities for effectively developing e-commerce initiatives
(Sutanonpaiboon and Pearson, 2006). Owing to the contextual differences (both
organisational and environmental) between these two socio-economic arenas, it is recently
warranted to understand how businesses in developing countries could overcome the

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environmental and organisational e-commerce readiness impediments and benefit from e-

commerce. The e-commerce adoption literature implies that in order to adopt e-commerce
appropriately in developing countries, firms need to be internally and externally ready (Tan et
al. 2007).
Fathian et al. (2008) define this readiness which is termed e-readiness of an SME as
the ability of a company to successfully adopt, use, and benefit from e-commerce. Molla and
Licker (2005a) demonstrated that in initial adoption of e-commerce in developing countries,
internal (organisational) readiness is significantly influential. Saffu et al. (2008) define
internal e-commerce readiness as the availability of financial and technological resources, the
top management’s enthusiasm to adopt e-commerce, e-commerce technology infrastructure
(ECTI), compatibility of the firm’s e-commerce, as well as culture and values. On the other
hand, it is suggested that after the initial e-commerce adoption, external readiness (for
example, whether business partners allow an electronic conduct of business) significantly
affect institutionalisation of e-commerce in developing countries (Fathian et al., 2008; Molla
and Licker, 2005b). These discussions imply the necessity of business maturity regarding the
readiness prior to e-commerce adoption in developing countries. Hence, there is a great
interest in scrutinising the relationships between elements of e-readiness and adoptions of
different e-commerce applications in developing countries.
2.1.1 E-commerce Adoption by SMEs
Companies usually go through a number of stages as they grow to realise the power of e-
commerce (Botha et al. 2004) .Generally, these stages move according to the businesses'
needs or goals (Stone, 2003). According to Cloete (2003), there are five progressive stages
that a business may potentially follow such as e-mail, website, e-commerce, e-business and
transformed organisation. However, McKay and Marshall (2004) have a different view of the
stages of adoption. In their view, step one is “wait and see” approach (wait for competitors or
business associates to go online to see if they are benefiting). Step two, static online presence
(information published online presents contact details, products, services information and
catalogues). Step three, interactive online presence (such as e-mail, browsers, and websites;
the internet is not used to complete the transactions, but to support business operation in
traditional ways). Step four, electronic commerce. Step five, internal integration (integrate
Internet transaction within businesses by the support of Internet Technologies and
Information Systems). Step six, external integration (integrate business processes and
technologies of networks with business partners) (McKay and Marshall, 2004). Burgess and
Cooper (2000) developed The Model of Internet Commerce Adoption (MICA) model that
consists of three layered stages that represent the extent of adoption (basic adoption,
intermediate adoption and advanced adoption). At the basic adoption level, websites
classified as in the basic adoption level would be defined as providing basic information or
having a basic web presence; the intermediate adoption level would demonstrate an extension
of basic information by including e-mail, on-line inquiry and contact, frequently asked
questions (FAQs), information on extended services and general value-added information;
and advanced adoption level is when an organisation would have taken its website to a higher
level of value-added services, including secure on-line transaction processing including
online order, online payments and enquiry, links to warehouse and distributors.
E-commerce adoption factors can be described as those that motivate or inhibit the
adoption of e-commerce. The process by which a firm adopts and implements technological
innovations is influenced by factors such as individual dimensions (Owner/Manager
Characteristics, Level of Education, Level of ICT and E-commerce Knowledge Social and
Cultural issues) technological (Availability and Slow Speed of Internet, Complexity of

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Technology, Lack of Payment Facilities the organizational (Security, Trust, and Privacy
Concerns, Financial Ability and Cost Implications, Size of the Organisation, Perceived
benefits of ICT) and the environmental (Government Support, Business Partner Affiliation,
Economic and Political Instability and Human Rights Issue, Natural Disasters, Floods and
Earth-quake, Business Culture, Macro-Economic Policies) context, the model by Tornatzky
and Fleischer (1990) adopted by (Oliveira and Martins, 2011). This model is still being used
for reviewing the factors affecting e-commerce adoption.
2.1.2 Non -adoption of E-commerce by SMEs
Previous studies have generally focused more on the adoption than the non-adoption of e-
commerce. The issue of non-adoption of e-commerce has been approached from a collective
view where firms have been classified as non-adopters such as in the work of Ramsey and
McCole (2005) and Scupola (2009). In these studies, non-adoption is assumed to be a
concluded position of the firm that may suggest that SMEs are unable to make rational
decisions in favour of e-commerce in the firm. Furthermore, Ramsey and McCole (2005)
suggest that a situation of non-adoption in the SMEs is an ill-advised one and that firms that
wish to compete globally must of necessity adopt e-commerce. This study argues that non-
adoption in firms may occur due to some conditions beyond the realm of management’s
control. In this study, non-adoption of e-commerce aligns with the previous views but also
situates the firm in a position where they are unable to undertake e-commerce based on
circumstances beyond their control and might face circumstances of discontinuity of e-
commerce adoption.
2.1.3 Driver and Barriers to E-commerce Adoption by SMEs
It has been observed and examined in many studies that SMEs have been actively searching
for solutions and methods that are suitable to adopt and integrate e-commerce into their
business processes. Chong (2008) argues that if the implementation of e-commerce succeeds,
the potential benefits for small and medium business includes increased sales, improved
profitability, increase productivity, reduce costs associated with inventory, procurement and
distribution, improving the quality of service, and guarantee competitive position. On the
other hand, if the implementation of e-commerce does not work, it will impact heavily on
SMEs with their limited resources (Chong 2008). Fillis et al. (2003) examined the adoption of
e-commerce by SMEs and found that SMEs could gain competitive advantage through
adopting e-commerce as it could improve their market performance by having better access
to the market. Bolongkikit et al. (2006) found among other issues that SMEs markets needed
a high degree of human interaction. Taylor and Murphy (2004) argued that SMEs occupy
small / clearly defined niche markets that do not need global connectivity through
experimentation as inhibitors to e-commerce adoption. Organisations adopting e-commerce
in developing countries face problems such as lack of telecommunications infrastructure, lack
of qualified staff to develop and support e-commerce sites, lack of skills among consumers
needed in order to use the internet, lack of timely and reliable systems for the delivery of
physical goods, low bank account and credit card penetration, low income, and low computer
and internet penetration (Kapurubandara, 2009)
Most of the international economies depend basically on the role of SMEs in
supporting the national economy in different countries. SMEs contribute significantly to the
economies of the African continent, representing around 90% of all businesses, and providing
the main source of jobs and income for African people. Many SMEs in developing countries
are not achieving even minimal levels of e-commerce adoption. In addition, the adoption of
web-enabled transaction processing by small business has not been as widespread as would

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expect (Stockdale and Standing 2006). It has been demonstrated previously that the rate of e-
commerce adoption in SMEs has been low.
The literature suggests that in most developing countries, e-commerce adoption has
been hindered by the quality, availability and cost of access to necessary infrastructure whilst
developed countries have employed a relatively accessible and affordable infrastructure for e-
commerce adoption. Simpson and Docherty (2004) reported that SMEs are generally lagging
behind to large organisation as far as the adoption of e-commerce is concerned. Small firms
need to get in the e-commerce game or they are going to be shut out of a critical part of the
market place. Fillis et al. (2003) examined the adoption of e-commerce by SMEs and found
that SMEs could again competitive advantage through adopting e-commerce as it could
improve access to the market.
The unhurried pace in the adoption of e-commerce on SMEs indicates they are
potentially not gaining competitive advantage which will eventually be shut out of the market
place. Despite wide coverage of potential growth for e-commerce, little research so far
examined the factors influencing the adoption intention. No SME will be interested to adopt
e-commerce or Information and Communication Technology (ICT) unless the benefits
outweigh the cost of developing and maintaining the system (Vatanasakdatul et al., 2004).
3. RESEARCH METHODOLOGY
A dedicated questionnaire (attached in appendix 1) was formulated for the study based on
previous research. The questionnaire comprised of Part A, B and C. Part A requested general
information regarding an indication of the industry within which the respondent is employed,
occupational level, number gender and academic qualifications. In Part B of the questionnaire
respondents were asked about the status of the adoption. Part C of the questionnaire used
Likert scale-type questions where the respondents were asked to “Strongly Agree”, “Agree”,
“Disagree” or “Strongly Disagree” with statements referring to the opinion or perceptions of
doing business using e-commerce.
The adoption measures and variables used in the questionnaire to address the first and
second objectives were obtained from previous studies (Looi, 2005; Grandon and Pearson,
2004). This model was chosen because it consisted of factors such as relative advantage,
competitive pressure, IT knowledge, security and government supports which are relevant to
this study. Furthermore, it would assist to compare or contrast the findings of previous
studies. The questionnaire was taken from the literature of which the validity and reliability
had already been established. For the first objective, the adoption measures were identified
and used in the construction of the questionnaire. These are outlined in Table 1 below:

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Table 1: Adoption Variable and Measures

Variable Measures Reference

Adoption of We have emails and website that allows for advertising, Looi (2005)
E-commerce detailed display of company’s products & services, on-line
enquiry, on-line ordering and on-line transaction processing (for
example, on-line sales and online payment all through the
internet).
We have emails and website that allows for advertising,
detailed display of company’s products and services, searching,
form-filling, on-line enquiry/ booking/ reservation etc.
We have a simple website for advertising purpose and
minimum interaction using emails.
We use the emails only for business purposes in our company
(No company website)
We do not have emails and website in our company.

This model by Looi (2005) was used to determine the current level of the adoption of
e-commerce by SME’s. Table 1 above indicates the measures used to establish the current
level of e-commerce adoption by SMEs in Pretoria East. The measures 1 to 5 are explained in
the Table 1 above. The five independent variables adopted from Looi (2005) such as relative
advantage, competitive pressure, IT knowledge, security and government support were used
as factors that motivates or hinders the adoption of e-commerce by SME’s in Pretoria East
and the relative importance thereof. Table 2 below will briefly discuss each variable as used
in the construction of the questionnaire.

Table 2: Independent Variables and Indicators.

Variable Indicators References

Relative Having a website helps to advertise our products and Teo et al. (1998),
Advantage services around the world Kendall et al. (2002),
Moore & Benbasat
A business website helps us to provide a better
(1991)
customer services by giving quick and latest
information about our products and services Looi (2005),
Using e-commerce would increase productivity and Ghobakhloo et al,
employee performance (2011)
Using e-commerce would save the company time and
effort

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Competitive Many of our business competitors are already having Teo et al. (1998),
Pressure websites and internet for doing business Grover (1993),
Utterbach &
Our customers/ trading partners expect us to have
Abernathy (1975)
website or provide e-commerce facilities
Looi (2005)
Having a website and e-commerce helps us to compete
better with competitors
Our industry is pressuring us to adopt e-commerce
IT There is very little knowledge how Internet and e- James & Thong
Knowledge commerce can help to improve the business and (1999), Gable &
increase sales Raman (1992)
The use of Internet and e-commerce would be more if Looi (2005),
we know more about what it can do for my business. Ghobakhloo et al
(2011)
We do not have the technical knowledge and skills to
start using Internet and electronic commerce
There is a good understanding about how Internet and
e-commerce can be used to help to improve business
profit
Security It is worrying that our business transactions on the Bhimani (1996),
internet can be read and seen by others Cockburn & Wilson
(1996), Rhee &
There is trust that the internet can protect the
Riggins (1997)
confidential data that we enter on the website
Looi (2005)
There is very little risk involved when doing business
over the internet
Customers are worried about privacy and security of
internet and will not use the internet to make payment
Government The South Africa government is helping to lower the Crow (1988),Toh &
Support cost of using internet and setting up e-commerce Low (1993), Tan &
Teo (2000)
The South African government is helping in providing
assistance to help small businesses using e-commerce Looi (2005)
The government often inform us about the good points
of e-commerce and doing business using the internet
Support from government is important to encourage us
to use more of internet in business

3.1 Independent Variables:

Relative advantage: Is the extent to which adopting an innovation is perceived as providing
greater organisational benefits than maintaining the status quo.
Competitive pressure: It is generally believed that competition increases the probability of
innovation adoption.

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IT knowledge: The diffusion of complex technological innovations in terms of decreasing

knowledge barriers.
Security: The issue of security is raised on a number of occasions in the internet adoption and
forms an area of serious concern for most small and medium enterprises.
Government support: Government policies relating to regulation, data protection, security and
tax and marketing criteria, such as the price of internet access have a strong positive influence
on the development of business-to-business electronic commerce.
Each independent variable was operationalised as a latent variable using indicators as stated
in Table 2.

4. DATA COLLECTION, ANALYSIS AND DISCUSSION

Primary data was collected from the population of 2148 SMEs in Pretoria East. A simple
random sample size of 200 from that population of SMEs was selected to participate in the
survey. Out of 200 SMEs who were selected for the survey, only 48 finally responded, thus
giving a response rate of 24%. The reason for low response could be ignorance of the
importance of such kind of study by SMES, while some are afraid to disclose information, for
some it may be matter of unwillingness. Before the questionnaire was administered to SMEs
in Pretoria East, it was subjected to pre-test by 6 individuals on questionnaire design, clarity
and language. Respondents were asked to be critical in the comments and feedback.
Constructive feedback was received and the questionnaire was adjusted accordingly.
The data was checked for any errors or missing value and data was entered into Excel
spread sheet for analysis. No missing value was detected. The questionnaire used was from
previous studied that had tested reliability and validity of the instrument used. A few reversed
scale items were transformed into the normal scale. The table below shows the mean values,
standard deviation, Cronbach Alpha, skewness and Kurtosis of final distributions of the
indicators for the independent variables.
Table 3: Average values, Standard deviation, Cronbach alpha, Skewness and Kurtosis
of final distribution of the indicators (n=48).
Construct Mean Std. Dev Kurtosis Skewness Cronbach’s
Alpha
Relative Advantage 1.70 0.55 -0.81 0.06 0.88
Competitive Pressure 1.78 0.56 -0.39 0.44 0.85
IT Knowledge 2.65 0.49 0.90 0.39 0.70
Security 2.61 0.55 0.48 0.04 0.69
Government Support 2.68 0.47 1.14 0.53 0.69

Table 3 suggests Cronbach Alphas are in the range of 0.7 or greater, while the other
parameters were within expected limits. The data were analysed using descriptive statistics,
Pearson’s chi-square test of association and multiple linear regressions.

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4.1 Descriptive Statistics

Frequency and percentage was used to analyse the demographic profile of responding
organizations. The percentage representation only corresponds to the organisations that
responded to the survey. 72.9% of the respondents were male, whereas 27.1 % were female.
Retail was the largest industry sector (45.8%) followed by Service industry with (35.4%).
While 27.1% were owners of the company; 31.3% were owner and manager and 31.3% were
manager. 87 % of the respondents employed 20 or fewer people. About 54.2% of the
respondents were in the company for 1to 5 years, 22.9% were in the company for more than
10 years, whilst 18.8% were in the company for 6-10 years. 39.6% of the respondents had
Diploma, 22.9% of the respondents had Post Graduate Degree, and 18.8 % of the respondents
have Matric, 16.7% of the respondents have Degree, whilst only 2.1 % of the respondents had
other qualifications (Doctorate).
4.2 Adoption Category/ Status Frequency and Percentage
These results show that 67% of SMEs in the sample in Pretoria East have somewhat
embraced the adoption of e-commerce. The non-adopters constitutes 33% of organisations
did not possess any e-commerce capability (non-adopter without email and with email but no
company website). Out of 67% constitutes, 29% of the organisations were characterized by
the static presence of the company homepage or website as a promotional tool and minimum
interaction. 23% indicates that they possessed intermediate e-commerce capabilities in which
their websites are capable of doing emails enquiry, online enquiry, form- filling,
booking/reservation but not online sale and payment whilst 15% of the respondents indicated
that they possessed the advanced e-commerce applications and their websites are capable of
online transaction processing- online order, online sales and online payment. Retail is the
largest industry sector in the sample followed by Service industry with 45.8% and 35.4%
respectively.
The results indicated that Service sector was at 2 level of adoption status compared with
Retail and others (Telecommunications, Financial Service, Construction and Property
management) which was on level 3 whilst Catering sector was at level 4.
4.2.1 Degree of Association Test
The Chi Square test results indicate that adoption status has significant association with the
type of business (p value 0.014), occupational level (p value 0.001), number of employees in
the company (p value 0.006), academic qualification (p value 0.032) and the adoption status
were statistically significant. Although the male respondents were very dominant in the
survey, there was no association between gender (p value 0.371), how long as owner/manager
(p value 0.384) and the adoption of e-commerce whatsoever.
4.2.2 Correlations
The independent variables were tested individually by using the Pearson correlation analysis.
The positive coefficients in Pearson correlation indicate that the level of e-commerce
adoption is positively influenced by relative advantage, competitive pressure, security and
government support. The relationship of the three factors namely relative advantage,
competitive pressure and IT knowledge were significant at the 95% confident level. These
findings are in contrast with study by Looi (2005) which indicated that all five variables were
positively correlated and relationships are all significant at 95% confident level.

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Table 4: Correlation of the Independent Variables with the Level of Adoption of E-

commerce
Independent Variable Coefficient ( R) p-value
Relative Advantage 0.588 0.001*
Competitive Pressure 0.518 0.001*
IT Knowledge -0.293 0.044*
Security 0.186 0.205**
Government Support 0.072 0.625**
* Significant at 95% confidence level
** Not significant at 95% confidence level
The positive Pearson correlation coefficients of relative advantage and competitive
pressure, 0.588 and 0.518 respectively indicate that the variables are positively correlated
with the adoption of e-commerce, while the low p-value of 0.001 indicates that the
relationship is significant at the 95% confident level. This result simply reconfirmed findings
by Chiliya, et al. (2011:28-36). The positive Pearson correlation coefficients of security and
government support 0.186 and 0.072 respectively indicate that the variables are positively
correlated with the adoption of e-commerce. However, the high p-value of 0.205 and 0.625
indicate that the relationship was not significant at the 95% confident level. Information
Technology indicates a negative -0.293 which means that the variable is negatively correlated
with the adoption of e-commerce, while the low p-value of 0.04 indicates that the relationship
is significant at the 95% confident level.
4.2.3 Multiple Regression
While correlation is useful to determine the relationship between variables, it does not
provide the means for studying the combined efforts on dependent variables of the
independent variables and their relative importance. A regression analysis was carried out to
provide meaningful interpretations of the relative importance of the five constructs. When the
five independents variables were regressed on the adoption of e-commerce as the dependent
variable using the regression function in SPSS, the results are summarised in table 5.

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Table 5: Summary of Results of Regression Analysis

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .644 .415 .345 .867

Sum of
Model Squares df Mean Square F Sig.
1 Regression 22.378 5 4.476 5.960 .000b
Residual 31.539 42 .751
Total 53.917 47

Unstandardized Standardized 95.0% Confidence

Coefficients Coefficients Interval for B
Std. Lower Upper
Model B Error Beta t Sig. Bound Bound
1 (Constant) 1.441 1.136 1.268 .212 -.852 3.735
Relative
.684 .338 .350 2.023 .049 .002 1.367
Advantage
Competitive
.415 .313 .217 1.326 .192 -.217 1.047
Pressure
Information
-.549 .317 -.235 -1.733 .090 -1.188 .090
Technology
Security .527 .458 .181 1.150 .257 -.398 1.452
Government
-.185 .316 -.081 -.586 .561 -.823 .453
Support

The multiple correlation coefficient (R), using all the predictors simultaneously was
0.644. The coefficient of determination (R Square) is the proportion of the total variation in
the SMEs adoption of the e-commerce that is explained by the regression model is 0.415
indicating that 41% of the total variation is explained by this equation. The three predictor
variables, namely, (Relative advantage, Competitive pressure and IT Knowledge) were
statistically significant, since they accounted to 41% of the adoption of e-commerce. The
adjusted R Square of 0.345 is used to incorporate the effect of including additional
independent variables in a multiple regression equation.
The F-Statistic value of 5.960 indicates that the regression equation is statistically
significant (sig.0.000 p < 0.000) in explaining the adoption of e-commerce. The regression of
adoption of e-commerce on the five predictor’s variables was thus highly significant at the

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99% confidence level. Furthermore, it indicates that one or more of the independent variables
are significant predictors of adoption of e-commerce.
Beta Coefficients are coefficients of the independent variables when all the variables
are expressed in standardised form. They are used to compare the relative importance of each
independent variable directly in relation to the dependent variable. The highest Beta
coefficient of 0.350 among the five attributes shows that in comparison, relative advantage is
the most important variable in the adoption of e-commerce. Relative advantage is followed
by competitive pressure (0.217), security (0.181), Information Technology knowledge (-
0.235) and government support (-0.081).
Relative advantage with beta value of 0.350 emerged as the most important factor
influencing the adoption of e-commerce among SMEs. This coefficient implies that relative
advantage was seen as an important motivator by SMEs. Many firms adopted e-commerce
because they perceived it as a tool to advertise their products and services all around the
world. They also have perceived e-commerce as an instrument to provide better customer
service, saving company time and efforts, increase productivity and employee performance.
They found relative advantage to be one the best predictors of an innovation’s rate of
adoption. This result simply reconfirmed the findings by Looi (2005) Chiliya et al. (2011),
Maryeni et al. (2012) and Ghobakhloo et al. (2011).
Competitive pressure is found to the next significant factors (beta value 0.217)
affecting the SME’s willingness to adopt e-commerce. This finding reinforces the belief that
competition increases the likelihood of innovation adoption and that competition leads to
environmental uncertainty and increases both the need for and the rate of innovation
adoption. In other words, competitive pressure influences greatly a SMEs decision to adopt.
An SME operating in an environment that is more competitive would feel a greater pressure
to turn to e-commerce to gain a competitive advantage. On the other hand, an SME operating
in a less competitive environment would not be faced with a push to be innovative. This
result is in agreement with previous innovation adoption research which found that intense
competition is associated with higher adoption rates (Looi, 2015; Chiliya et al. 2011).These
results also concurred with study done by Ghobakhloo et al. (2011).
IT knowledge is the third most important factor affecting SMEs’ willingness to adopt
with a beta value -0.235 indicating that SMEs are not perturbed by the notion that IT
knowledge greatly affects the decision to adopt e-commerce. They have a fairly good
understanding of how e-commerce can be used to help improve business profits. This is
supported by the findings that indicate that entirely 67% of respondents indicated that they
embraced the adoption of e-commerce. The result is consistent with the finding of the study
by Tucker & Lafferty (2004) and Ghobakhloo et al. (2011).
Security does not seem to play such an important role in e-commerce adoption in
Pretoria East with beta value of 0.181. This is further supported by the findings which
indicate that entirely 67% of respondents indicated that they embraced the adoption of e-
commerce. This results are in contrast with findings of several prior studies by Looi, (2005);
Maryeni et al. (2012) and Chiliya et al. (2011) which state that security is one of the factors
that significantly influence the adoption of e-commerce.
The finding implies that changes in the level of government support does not
necessary lead to changes in the level of e-commerce adoption and that most SMEs would be
willing to consider implementing e-commerce regardless of the level of support from
government. When regression individually, the p the high p-value of (0.625) indicates that the
relationship is not significant at the 95% confident level. This finding concurs with the
findings by Looi (2005) with government support ranked the lowest in terms of predictors or
motivators to the adoption of e-commerce.

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5. CONCLUSIONS
The objectives of the study were to determine the current level of e-commerce adoption in
Pretoria East and to assess whether the independent variables motivates or hinders the
adoption of e-commerce by SMEs in Pretoria East and the relative importance thereof. This
study indicates that the Service sector was at level 2 of the adoption status which indicates
they have emails and website that allows for advertising, detailed display of company’s
products and services, searching, form-filling, on-line enquiry/ booking/ reservation and
etcetera. Retail and Other sectors (Telecommunications, Financial Service, Construction and
Property management) were at level 3 of the adoption status which indicates they have a
simple website for advertising purpose and minimum interaction using emails. Catering
sector was at level 4 of the adoption status indicating that they use the emails only for
business purpose in their company (No company website).
From the literature review the following independent variables that affect the adoption
of e-commerce were identified: relative advantage, competitive pressure, IT knowledge,
security and government support. These factors were surveyed in Pretoria East to determine
the current adoption status and assess whether SMEs understand the concept and perceived
benefits/ advantage of adopting e-commerce.
This study confirmed that SMEs in Pretoria East to some extent have embraced the
adoption on e-commerce. It was however not surprising that 33% of organisations did not
possess any e-commerce capability (non-adopter without email and with email but no
company website), due to the type of industry. The importance of relative advantage was seen
as an important motivator as well as the most significant factor influencing the adoption of e-
commerce among SMEs in Pretoria East. Many firms adopted e-commerce because they
perceived it as a tool to advertise their products and services all around the world. They also
have perceived e-commerce as an instrument to provide better customer service, saving
company time and efforts, increase productivity and employee performance. They found
relative advantage to be one the best predictors of an innovation’s rate of adoption. This
result is in contrast with previous research which found that out of the five independent
variables competitive pressure emerged as the most important factor (Looi, 2005).
Previous studies show that the classic Rogers diffusion (2003) model is generally
inadequate in explaining the factors influencing electronic commerce adoption among SMEs
in South Africa. The findings from this study show that besides innovation factors other
factors such as environment (competitive pressure) and management (relative advantage) are
also important to help understand the adoption of e-commerce in South Africa. Molla et al.
(2006) argued that in developing countries successful adoption of e-commerce strategy
depends on the perceived e-readiness in e-commerce, managerial, organisational and
environmental contexts. Researchers need to keep this in mind when considering any study
on factors influencing the adoption of an innovation (Looi, 2005). Most importantly
respondents had adopted basic e-commerce because they want an effective means of
advertising their presence in the globe.
This study highlights the importance of understanding the knowledge about the
potentials of e-commerce. Although many SMEs agree that e-commerce is important to them,
some industries have not yet embraced the adoption. This lack of understanding in some
industries could lead them to believe that they have plenty of time to adopt e-commerce. Not
only does SMEs need to understand the new e-commerce business model, but they also need
to believe that commitment will reap comparative advantage. In other words, they need to
perceive that benefits of e-commerce will outweigh the costs. The challenge is to ensure that

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this change in viewpoint happens quickly to boost the competitiveness of the SMEs and reap
the benefits from increasing turnover and trade (Looi, 2005).
The other challenge that arises is pushing adopters from one level to another, for
example, (from a mere static presence of the company homepage to intermediate e-commerce
capabilities in which their websites are capable of doing emails enquiry, online enquiry,
form-filling, booking/reservation and eventually do the entire transaction online). This focus
may serve as a guide for internet solution providers to develop successful SME adoption
plans. Instead of focusing on the adoption across all industries, it may be useful to examine
the adoption of e-commerce in specific industry sectors. A focused understanding of
particular opportunities and challenges for SMEs adoption within an industry would assist the
South African government in developing policies or initiatives to encourage uptake among
SMEs in critical industries like retail, tourism, catering, service and etcetera.
This study also indicates that there is no relationship between government support and
the adoption of e-commerce. This finding is not surprising because SMEs and their
challenges only became prominent in South Africa and now taken seriously with the
appointment of the Minister of Small Business Development. The results of this study are
useful not only to managers of SMEs but also to government bodies, especially in developing
countries, who have powerful economic reasons and incentives to be concerned about the
development of SMEs. It is believed that the results will also provide some insights to ICT
consultants in regards to their SME customers in order to improve their services and customer
satisfaction.
6. RECOMMENDATIONS
In terms of the study’s limitations, this study is limited due to low response rate and limited
population as it included only SMEs in Pretoria East. This study has investigated a subset of
the variables found to be important determinants of e-commerce adoption among SMEs in
South Africa. Other variables that may provide explanation power include cost effectiveness,
financial resources, national infrastructure, organisational readiness and management support.
Future research can examine these possibilities and the extent of their influence. To
generalise from the research sample, the context of South Africa needs to be taken into
consideration. Further studies could include other SMEs from different areas of South Africa.
The findings may not be universally true, but they are likely to be applicable to e-commerce
adoption in SMEs with similar cultural contexts.
ACKNOWLEDGEMENTS:
The views expressed here are our own and not necessarily of the organisation to which we
belong. We express our sincere gratitude to the anonymous reviewer for improving the
quality of this paper. Our thanks are to Mrs. Eunice Mtshali, Information librarian and her
team for providing library support.
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APPENDIX 1
QUESTIONNAIRE
Part A (Demographic information)
The information requested in Part A of the questionnaire is crucial and it will be used in the
contextualization of the data provided in Part B and C of the questionnaire. Please place an
X-mark opposite the category that best describes your view.
1. What type of business are you in?
Retail
Service
Catering
Wholesale
Others (please specify )

2. What is your occupational level in your company?

Owner
Owner and Manager
Manager
Operational
Others (please specify )

3. How many employees are there in your company?

1 to 10
11 to 20
21 to 50
51 to 100
More than 100

4. How long have you been an owner or manager with the company?
Less than 1 year
1 to 5 years
6 to 10 years
More than 10 years

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5. What is your gender?

Male
Female

6. What is your highest academic qualification?

Matric
Diploma
Degree
Post-Graduate
Others (please specify)

PART B:
Which of the following categories does your business belong to regarding e-commerce
status?
Please tick one only that is most suitable to you.

1 We have a Website that allows for advertising, detailed display of

company’s products & services, on-line enquiry, on-line ordering and on-
line transaction processing (e.g. on-line sales and online payment all
through the Internet) and using emails as well.
2 We have a Website that allows for advertising, detailed display of
company’s products & services, form-filling, on-line enquiry/
booking/reservation and using email as well.
3 We have a simple Website for advertising purpose and minimum
interaction using emails.
4 We use the emails only for business purpose in our company (No company
Website).
5 We do not have emails and Website in our company.

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PART C:
What is your opinion or perception about doing business using internet and e-
commerce?
Please answer the following questions by placing an X-mark on what best describes your
view.
Strongly Agree Disagree Strongly
Agree Disagree
2 3
1 4
Having a website helps to advertise our
products and services around the world
A business website helps us to provide a
better customer services by giving quick and
latest information about our products and
services
Using e-commerce would increase
productivity and employee performance
Using e-commerce would save the company
time and effort
Many of our business competitors are
already having websites and internet for
doing business
Our customers/ trading partners expect us to
have website or provide e-commerce
facilities
Having a website and e-commerce helps us
to compete better with competitors
Our industry is pressuring us to adopt e-
commerce
There is very little knowledge how Internet
and e-commerce can help to improve the
business and increase sales
. The use of Internet and e-commerce would
be more if we know more about what it can
do for my business
. We do not have the technical knowledge and
skills to start using Internet and electronic
commerce
. There is a good understanding about how
Internet and e-commerce can be used to help
to improve business profit

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. It is worrying that our business transactions

on the internet can be read and seen by
others
. There is trust that the internet can protect the
confidential data that we enter on the website
. There is very little risk involved when doing
business over the internet
. Customers are worried about privacy and
security of internet and will not use the
internet to make payment
. The South Africa government is helping to
lower the cost of using internet and setting
up e-commerce
. The South African government is helping in
providing assistance to help small businesses
using e-commerce
. The government often inform us about the
good points of e-commerce and doing
business using the internet
. Support from government is important to
encourage us to use more of internet in
business

Thank you for completing this questionnaire

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