The Impact of Information and Communication Technology Capability on the Competitive Advantage of Small Businesses
Corresponding email: win.buyung@gmail.com
Published at : 28 Jan 2019
Volume : IJtech
Vol 10, No 1 (2019)
DOI : https://doi.org/10.14716/ijtech.v10i1.2332
Qosasi, A., Maulina, E., Purnomo, M., Muftiadi, A., Permana, E., Febrian, F., 2019. The Impact of Information and Communication Technology Capability on the Competitive Advantage of Small Businesses. International Journal of Technology. Volume 10(1), pp. 167-177
| Achsanul Qosasi | Department Business Administration, Faculty of Political and Social Siences, Padjadjran University, Street Bukit Dago Utara Bandung 40135, Indonesia |
| Erna Maulina | Department Business Administration, Faculty of Political and Social Siences, Padjadjran University, Street Bukit Dago Utara Bandung 40135, Indonesia |
| Margo Purnomo | Department Business Administration, Faculty of Political and Social Siences, Padjadjran University, Street Bukit Dago Utara Bandung 40135, Indonesia |
| Anang Muftiadi | Department Business Administration, Faculty of Political and Social Siences, Padjadjran University, Street Bukit Dago Utara Bandung 40135, Indonesia |
| Erwin Permana | School of Business Management, Binus University, Street Kebon Jeruk Raya 27, Kebon Jeruk Jakarta Barat 11530, Indonesia. |
| Fajri Febrian | Department Business Administration, Faculty of Political and Social Siences, Padjadjran University, Street Bukit Dago Utara Bandung 40135, Indonesia |
The aim of this paper is to establish
how Information and Communication
Technology (ICT) capability has
no effect on competitive advantage through the entrepreneurial orientation and
organizational agility of Indonesian SMEs in the apparel retail sector. The
study is based on resources that cannot be directly converted into the competitive
advantage of companies but must instead be subjected to an entrepreneurial
process and offer new insights into the use of ICT as a valuable corporate
resource. The paper is based on a quantitative approach using a population
comprising apparel retailers from traditional markets in Jakarta, Indonesia.
The sample was obtained using random sampling. The survey was conducted among
462 small businesses across five traditional apparel markets managed by PD.
Pasar Jaya. The data were processed using Structural Equation Modeling-Partial Least Squares. The
results show that ICT capability has no significant effect on competitive
advantage, although it does have a significant effect on entrepreneurial
orientation and organizational agility. Organizational agility and entrepreneurial
orientation have a significant effect on competitive advantage, thus indicating
that ICT capability in small businesses cannot be directly converted into a competitive advantage. The finding of the
research is that ICT capability is able to create competitive advantage in
small businesses but only when present in conjunction with entrepreneurial orientation
and organizational agility.
Apparel retail; Competitive advantage; Entrepreneurial orientation; ICT capability; Organizational agility
Information and Communication Technology (ICT) capability is one of the approaches by which business organizations can aim to increase their competitive advantage. According to Parida et al. (2016), ICT capability involves a firm’s ability to strategically use information and communication technology functions or applications in their business activities and incorporates the use of e-mail, websites, e-commerce, web conferencing, intranets, extranets, and other similar tools. This definition is in accordance with that given by Teece et al. (1997) on capability, namely that it relates to a firm’s ability to reconfigure resources
Indonesia is experiencing a high rate of growth in the utilization of ICT as a small business capability. Euromonitor International notes that online sales in Indonesia are higher than those in Thailand and Singapore, while it is believed that the Indonesian e-commerce market offers the potential for further growth in the future. This is supported by both the country’s large population and by it having the highest gross domestic product (GDP) among the ASEAN. Statista International notes that there was continued growth in the average volume of online sales in Indonesia during the period 2014–2020. Wireless mobile broadband (3G, LTE/4G) is the most widely used network access technology for online transactions for individual buyers, which means that the development of mobile phone technology influences the dynamics of the business.
The high volumes of online sales in Java and Bali are also driven by the high penetration of the Internet across their regions. Yogyakarta, Jakarta, and Bali are the three provinces with the highest Internet penetration rates, standing at 47%, 4%, and 4%, respectively. This penetration is driven mainly by 3G cell phone users. With their large populations and potential for economic growth, these three provinces represent prospective markets for e-commerce players.
According to statistics from the Ministry of Communication and Information Technology of the Republic of Indonesia (2016) pertaining to the volume of goods and services purchased via e-commerce in 2016, a total of 78.3% of purchases were for ready-made apparel. These data indicate that in the digital economy era, the process of buying and selling products occurs not only in conventional stores but also via digital media.
Previous research has shown that ICT capabilities can have a significant effect on competitive advantage (Powell & Micallef, 1997; Maguire et al., 2007; Olatokun & Kebonye, 2010; Cakmak & Tas, 2012; Chibelushi & Trigg, 2012; Harrigan et al., 2012; Higón, 2012; Adeniran & Johnston, 2014; Kadadevaramath et al., 2015; Adeniran & Johnston, 2016; Yunis et al., 2017). Hult and Ketchen (2001) argue that it is the collective contribution of a combination of resources that can determine competitive advantage.
Researchers of the competitive advantages of SMEs such as Bagheri et al. (2014), Budiarto et al. (2017), and ?erbu and Borza, (2014) believe that the current era of the digital economy requires every person and organization to be involved in effective ICT in the context of economic and community development. Hoque et al. (2016) in particular state that the study of the role of ICT in small businesses has become a special challenge. This is due to the fact that it relates to small businesses that have only limited resources and ICT but yet also possess certain distinctive characteristics from which to create a competitive advantage (Tripathy et al., 2016). Small clothing businesses in traditional markets have realized the importance of managing their ICT capability resources.
The originality of this research lies in its bid to test and explain the competitive advantages of small apparel retailers in traditional markets in Jakarta Province based on Resources Based View (RBV). In this case, there are three constructs involved, namely ICT capability, which forms part of the RBV of the firm, entrepreneurial orientation in the process of building organizational capability, and organizational agility in the process of forming competitive advantage. This phenomenon is approached based on the theory of the firm proposed by Barney (1991). A library search for ICT Capabilities, Entrepreneurial Orientation, Organizational Agility, and Competitive Advantages in SMEs revealed there to have been no prior study of the relationships among the constructs as described.
The results of this research
prove empirically that ICT capability does not directly affect the competitive
advantage of small businesses. ICT capability in small businesses will affect
competitive advantage only if present and executed in conjunction
with organizational agility and or through an entrepreneurial orientation. Thus, organizational agility does have a
direct effect on competitive advantage.
Small-scale retail apparel
businesses need to improve their ICT capabilities, notably with regard to improving
their ICT infrastructure so that they can reach a wider market, not only locally
but also abroad. In addition, ICT capability helps companies to improve the efficiency
and effectiveness of their business operations, which in turn can bolster the competitive
advantage of small businesses. This research confirms the results of research by
Nowacki and Staniewski
(2012), Lee et al. (2016), and Qosasi and Permana (2017) that innovation is critical
when seeking to deal with various situations in the market and in order to maintain
a competitive advantage.
The
results of this study could be further strengthened by conducting research in
different places and with an expanded population, such as the population in
Indonesia. In order to strengthen and confirm the relationship between the variables
in order to become a well-established theoretical concept, it is recommended
that future research uses a different choice of dimensions, even if the locus
and emphasis of the research remain the same.
We gratefully acknowledge the support of the DKI Provincial Government through the PD. Pasar Jaya.
Adeniran,
T.V., Johnston, K.A., 2014. ICT Utilization within Experienced South African
Small and Medium Enterprises. Electronic
Journal of Information Systems in Developing Countries, Volume 64(1), pp.
1–24
Adeniran,
T.V., Johnston, K.A., 2016. The Impacts of ICT Utilization and Dynamic
Capabilities on the Competitive Advantage of South African SMEs. International Journal of Information
Technology and Management, Volume 15(1), pp. 59–89
Andrews,
D. F., 1972. Plots of High-Dimensional Data. Biometrics, Volume 28(1), pp. 125–136
Azwar, S., 2009.
Perilaku Dan Sikap Manusia, Teori dan Pengukurannya (Human Behavior and Attitudes, Theory and Measurement). Pustaka Pelajar. Jakarta [in Bahasa]
Bagheri,
M.M., Hamid, A.B.A., Soltani, I., Mardani, A., Soltan, E.K.H., 2014. The Role
of Supply Chain Antecedents on Supply Chain Agility in SMEs: The Conceptual
Framework. Sains Humanika, Volume
66(1), pp. 53–60
Baker,
D., 1996. Improving Vertical Jump Performance Through General, Special, and
Specific Strength Training. A Brief Review. Journal
of Strength and Conditioning Research, Volume 10(2), pp. 131–136
Barney,
J., 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, Volume 17(1),
pp. 99–120
Budiarto, D.S., Prabowo, M.A., Herawan, T., 2017. An Integrated Information
System to Support Supply Chain Management
& Performance in SMEs. Journal of Industrial Engineering and Management, Volume 10(2),
pp. 373–387
Cakmak,
P.I., Tas, E., 2012. The Use of Information Technology on Gaining Competitive
Advantage in Turkish Contractor Firms. World
Applied Sciences Journal, Volume 18(2), pp. 274–285
Chibelushi,
C., Trigg, D., 2012. Internal Self-assessment for ICT SMEs: A Way Forward. International Journal of Business
Performance Management, Volume 13(2), pp. 103–126
Chin,
W.W., 1998. The Partial Least Squares Approach to Structural Equation Modeling.
Modern Methods for Business Research,
Volume 295(2), pp. 295–336
Frambach,
R.T., Prabhu, J., Verhallen, T.M.M., 2003. The Influence of Business Strategy on New Product Activity: The Role of Market Orientation. International Journal
of Research in Marketing, Volume 20(4), pp. 377–397
Hair,
J. F., Money, A.H., Samouel, P., Page,
M., 2006. Research Methods for Business.
Education and Training, Volume 49(4), pp. 336–337
Harrigan,
P., Ramsey, E., Ibbotson, P., 2012. Entrepreneurial Marketing in SMEs: The Key Capabilities of e?CRM. Journal of
Research in Marketing and Entrepreneurship, Volume 14(1), pp. 40–64
Higón,
D.A., 2012. The Impact of ICT on Innovation Activities: Evidence for UK
SMEs. International Small Business
Journal, Volume 30(6), pp. 684–699
Hoque,
M.R., Saif, A.N.M., AlBar, A.M., Bao, Y., 2016. Adoption of Information and Communication Technology for Development.
A Case Study of Small and Medium
Enterprises in Bangladesh. Information Development, Volume 32(4), pp. 986–1000
Hult,
G.T.M., Ketchen Jr, D.J., 2001. Does Market
Orientation Matter?: A Test of the Relationship Bbetween Positional Advantage and Performance. Strategic
Management Journal,
Volume 22(9), pp. 899–906
Imam. G., 2005. Model Persamaan Struktural,
Konsep dan Aplikasi dengan Program Amos
Ver.5.0 (Structural Equation Models,
Concepts and Applications with the Amos Ver.5.0 Program). Badan Penerbit
Universitas Diponegoro. Indonesia [in
Bahasa]
Kadadevaramath, R.S., Chen,
J.C., Sangli, M., 2015. Attitude of Small and Medium Enterprises Towards Implementation and Use
of Information Technology in India - An Empirical
Study.
International Journal of Business and Systems Research, Volume 9(2), pp.
123–137
Laforet, S., 2008. Size, Strategic, and Market
Orientation Affects on Innovation. Journal
of Business Research, Volume 61(7), pp. 753–764
Lee, V.H., Foo, A.T.L.,
Leong, L.Y., Ooi, K.B., 2016. Can Competitive
Advantage be
Achieved Through Knowledge
Management? A Case Study on
SMEs. Expert Systems with Applications.
Elsevier Ltd, Volume 65, pp. 136–151
Lucchetti, R., Sterlacchini,
A., 2004. The Adoption of ICT Among SMEs: Evidence
from an Italian Survey. Small Business Economics. Springer,
Volume 23(2), pp. 151–168
Lumpkin, G. T., Dess, G. G.,
1996. Clarifying the Entrepreneurial Orientation Construct and Linking It to
Performance. The Academy of Management
Review, Volume 21(1), pp. 135–172
Maguire, S., Koh, S.C.L.,
Magrys, A., 2007. The Adoption of e?Business
and Knowledge Management in SMEs. Benchmarking:
An International Journal, Volume 14(1), pp. 37–58
Mahmood, R., Hanafi, N.,
2013. Entrepreneurial Orientation and Business Performance of Women-owned Small
and Medium Enterprises in Malaysia: Competitive Advantage as a Mediator. International Journal of Business and Social
Science, Volume 4(1), pp. 82–90
Malhotra, N.K., 2010. Marketing Research: An Applied Orientation, 6th Global
Edition
Miller, 1983. Revisited: A
Reflection on EO Research and Some Suggestions for the
Future. Entrepreneurship: Theory and
Practice, Volume 35(5), pp. 873–894
Nowacki, R., Staniewski, M.W., 2012. Innovation in the Management of Smes
in the Service Sector in Poland. Amfiteatru Economic Journal, Volume 14(6), pp. 755–773
OECD, 2004. Promoting SMEs
for Development. In: 2nd
OECD Conference of Ministers Responsible for Small and Medium-Sized Enterprises
(SMEs), France
Olatokun, W., Kebonye, M.,
2010. E-commerce Technology Adoption by SMEs in Botswana. International Journal of Emerging Technologies and Society, Volume
8(1), pp. 42–56
Parida, V., Oghazi, P.,
Cedergren, S., 2016. A Study of How ICT Capabilities
Can Influence
Dynamic Capabilities.
Journal of Enterprise Information Management, Volume 29(2), pp. 179–201
Parida, V., Örtqvist, D.,
2015. Interactive Effects of Network Capability, ICT Capability, and Financial
Slack on Technology-based Small Firm Innovation Performance. Journal of Small Business Management,
Volume 53, pp. 278–298
Pavlou, P.A., El Sawy, O.A.,
2006. From IT Leveraging Competence to Competitive Advantage in Turbulent
Environments: The Case of New Product Development. Information Systems Research, Volume 17(3), pp. 198–227
Porter, M.E., 2008. The Five Competitive Forces That Shape Strategy. Harvard
Business Review, Volume 86(1), pp. 78–93
Powell, T.C., Dent-Micallef,
A., 1997. Information Technology as Competitve
Advantage: The Role of Human, Business, and Technology Resources. Strategic Management Journal, Volume 18(5), pp. 375–405
Qosasi, A., Permana, E.,
2017. Pemanfaatan Wadah Berbagi Pengetahuan untuk Membangun Brand
Aura UMKM Fashion
di Jakarta (Utilization of a Place for
Sharing Knowledge to Build a Brand of Fashion for Aura SMEs in Jakarta). Jurnal Manajemen Bisnis Krisnadwipayana, Volume 1(1),
pp. 1–5 [in Bahasa]
Rauch, A., Wiklund, J.,
Lumpkin, G.T., Frese, M., 2009. Entrepreneurial Orientation and Business
Performance: An Assessment of Past
Research and Suggestions for the Future.
Entrepreneurship Theory
and Practice, Volume 33(3), pp. 761–787
Roostika, R., Muafi, M.,
2014. The Role of Source Credibility and Place Attachment in Enhancing Visitors’
Satisfaction. Journal of Technology
Management, Volume 13(3), pp.
239–252
Sambamurthy, V., Bharadwaj,
A., Grover, V., 2003. Shaping Agility through Digital Options:
Reconceptualizing the Role of Information Technology in Contemporary Firms. MIS Quarterly, Volume 27(2), pp. 237–263
?erbu, R.S., Borza, S.,
2014. Achieving Sustainable Competitive Advantage of Romanian Rural Area by Integrating Information Technologies: An
Interdisciplinary Approach. Studies in
Informatics and Control, Volume 23(2), pp. 215–222
Sirivanh, T., Sukkabot, S., Sateeraroj, M., 2014. The Effect
of Entrepreneurial Orientation and Competitive Advantage on SMEs’ Growth: A
Structural Equation Modeling Study.
International Journal of Business and Social Science, Volume 5(6), pp.
189–194
Sussan, A.P., Johnson, W.C.,
2003. Strategic Capabilities of
Business Process: Looking for
Competitive Advantage. Competitiveness Review: An International
Business Journal, Volume 13(2), pp. 46–52
Suwarno, S., 2002. Model
Persamaan Structural, Teori dan Aplikasinya (Structural
Equation Model, Theory and Application). IPB Press, Bogor
Teece, D.J., Pisano, G.,
Shuen, A., 1997. Dynamic Capabilities
and Strategic Management. Strategic
Management Journal, Volume 18(7), pp. 509–533
Tenenhaus, M., Vinzi, V.E.,
Chatelin, Y.M., Lauro, C., 2005. PLS Path Modeling.
Computational Statistics & Data Analysis, Volume 48(1), pp. 159–205
Tripathy, A., Agrawal, A.,
Rath, S.K., 2016. Classification of Sentiment
Reviews using
n-gram Machine Learning Approach.
Expert Systems with Applications, Volume 57, pp. 117–126
Uden, L., 2006. Activity Theory
for Designing Mobile Learning.
International Journal of Mobile Learning
and Organisation, Volume 1(1),
pp. 81–102
Wang, C.L., Ahmed, P.K.,
2007. Dynamic Capabilities: A Review and Research
Agenda. International
Journal of Management Reviews, Volume 9(1), pp. 31–51
Yaghoobi, N.M.,
Bakhshimazdeh, M., Alikhasi, M., 2014. Analysing Key Concepts of Organization: Knowledge Management, Competitive
Intelligence and Competitive Advantage.
International Journal of Services and
Operations Management, Volume 18(3), pp. 321–341
Yang, L., Wang, D., 2014.
The Impacts of Top Management Team Characteristics on Entrepreneurial Strategic Orientation: The
Moderating Effects of Industrial Environment and Corporate Ownership. Management Decision, Volume 52(2), pp. 378–409
Yunis, M., El-Kassar, A.-N.,
Tarhini, A., 2017. Impact of ICT-based Innovations on Organizational Performance. Journal of Enterprise Information Management, Volume 30(1), pp.
122–141