Classification of SMEs According to Their ICT Implementation

Small and medium enterprises (SMEs) are firms that have a wide impact on the country’s economy in Colombia and contribute 28% of GDP, so it is essential to achieve the competitiveness of these organizations. The government has promoted plans to adopt information and communications technologies (ICT) at SMEs to increase their productivity and competitiveness. SMEs are organizations that lag behind in technology adoption. Several investigations have been carried out to characterize them, but no questions have been raised regarding the different types of SMEs that can be found according to their ICT implementation. This research aimed to determine the current usability and perception in the implementation of ICT and subsequently classify organizations based on these two factors. The results describe five types of SMEs: those that experience, those that have been negligent, those that lag behind, those that hesitate, and those that improvise. The data were collected in 2019, reflecting the state of SMEs before the lockdown due to the SARS-CoV-2 virus outbreak.

ICT implementation; Small and medium-sized enterprises; SME competitiveness; SME innovation

Technology has become fundamental support for SMEs (Hernández et al., 2017) to support the business model, generating greater efficiency and effectiveness of its management (Córdoba, 2015); the implementation of technological tools in SMEs is presented as a necessity to facilitate processes like operations or production and others to connect with consumers, generating impact and recognition, however, the needs of sophisticate ICT technology continues (Suryanegara et al., 2019). It is not enough to have skill and agility in management processes to achieve competitiveness (Qosasi et al., 2019); that is why it is necessary to develop new strategies to improve focus in the business area (Fonseca, 2013) understanding the concept of the digital economy as an innovative model, which generates social and economic impact, the result of the implementation of ICT (Katz, 2015).

        In spite of the fact that SMEs bring economic growth to the nation, there are factors that hinder their development, such as the ignorance and fear of entrepreneurs to make an investment in ICT, although the National Competitiveness and Infrastructure Strategyproposed in 2014 granted 10% of royalties to the Science, Technology, and Innovation Fund (FCTI), a reform that sought to encourage production and research capacities (Private Council of Competitiveness, n.d.) The policies regarding ICTs set out in the plan “Vive Digital 2010–2014” (Ministry of ICT, 2011) to massify the use of technologies to guide the strategy are focused on the productive sector and end-user to increase the levels of competitiveness in each of the economic sectors and establish innovation as the main axis for the development of business initiatives (Cristancho et al., 2021).

Economic advances have been made in the countries that have invested in science, technology, and innovation activities (STIAs), reaching a high level in producing even more sophisticated goods and services (Novick et al., 2013). Despite the investment made in STIAs, the results remain low compared to other regions’ countries, under 1% of GDP. The country has been focused on the development of increasingly demanding processes and activities, aiming to be competitive based on its business, mainly SMEs, a reason to implement IT in various sectors such as commercial, production, and logistics development, and allowing interconnection according to the demands of globalization (Puentes, 2017), despite the backwardness in innovation, to increase productivity (Private Council of Competitiveness, 2018).

The size should be relative to the performance sector (Montoya et al., 2010) due to the relevance of SMEs because, in addition to representing almost 100% of all firms, in countries of the Organization for Economic Cooperation and Development (OECD), SMEs generate more than half of the employment (OECD, 2002, cited by Blázquez-Santana et al., 2006). It achieves 35% of the GDP (Ministry of Labor and Social Security of the Government of Colombia, 2019). Nevertheless, it represents 3.86% in 2005 and 6.73% in 2019 of all enterprises (Table 1). SMEs face various obstacles: shortage of response to their needs in aspects of knowledge, skills, and capacity development in human capital, difficulty in accessing credit, and reducing the purchase and investment in ICT. Also, limitations in technology innovation advice and its applicability become barriers that hinder growth (Zevallos, 2006) and generate internal deficiencies (Zambrano-Alcívar, 2018).

Table 1 Number of establishments according to their size at the national level

Note: Prepared from DANE (2005) and Applied Economics (2019).

For SMEs, the biggest barrier is the costs that imply ICT, as well as the financing to achieve greater technological investment and the adaptation of technology in systems and processes that meet the needs. Financing and adaptation represent a medium incidence and, to a lesser extent, the availability of information and the supply of services (Rodríguez, 2003); also, the human capital gap is a complex problem due to (1) the limited production of graduates in STEM areas and (2) the lack of critical mass in capacities necessary to work on digital innovation (Katz, 2015).

What digital transformation brings to businesses is the ability to reach their customers, monitor their workforce, and reach out to their suppliers anytime; this allows automation, standardization, and control, management, performance, productivity per worker (Confecámaras, 2018; Shoushtary, 2013) and, enhance the satisfaction of their customers (Berawi, et al., 2020), but ACOPI (2017) argues that SMEs requires greater integration into global information networks and value chains because the impact of the digitization of production processes and the level of productivity of the countries is not linear and depends on variables such as quality of human capital, innovative capacity, and organizational changes (Cimoli et al, 2009; Balboni et al, 201).

The implementation of ICTs must involve training, given that the economy forces organizations to be changing permanently to respond to new demands (Cardona-Mejia, 2018). To be profitable, an organization must innovate (Freel, 2005), thereby achieving product improvement and cost reduction, profit increase, and market share expansion (Heredia, 2010). In this way, technology generates changes both inside and outside the organizations.

Although the accelerated technological advance supposes business growth, SMEs are those types of organizations that present more lag and, given their contribution to the economy, it is necessary to inquire about the current uses and the perception of the implementation of ICT in these SMEs and comprehend the different states in which SMEs could be classified based on the two factors mentioned. Technological trends related to mobile apps, security or data protection in information, cloud computing, big data, and business intelligence are presented. These are an opportunity to access ICT at a lower cost compared to on-site technologies (Marston, 2011). This applies to many practices, including customer management and organizational planning (Gálvez et al., 2014).

In 2010, micro-enterprises increased their use of the internet by 20% (Ortega, 2014); however, Weiss (2010) indicates that the perspective is regrettable considering the different factors that influence the current era, that technology represents daily life, and that development of systems focused on the needs of users is becoming faster.

It shows great differences between service SMEs in the use of ICT, which reflects that the sector is not competitive, the government’s actions have not been effective in spreading the use of technology, and, finally, there is scarcity of knowledge on the part of the entrepreneur to take advantage of the available and accessible technology.
        Micro-business and SME-type firms represent a great contribution to the Colombian economy, with more than 90% of the national productive sector, contributing 35% of GDP and generating 80% of employment (Ministry of Labor and Social Security of the Government of Colombia, 2019), but only SMEs contribute 28% of GDP, 67% of employment, and 37% of national production (Hoyos-Estrada & Sastoque-Gómez, 2020). The findings have allowed us to establish five groups of firms delimited by the use of technological tools, departmentalization, and perception of how critical it is to implement ICTs in the organization.
        Cluster 1 (36.7%) has defining as the business that experiments in the use and implementation of ICTs, tend to turn out more complex in their departmentalization, and has more technological implementation in key areas, but they do not show complete comprehension of the importance of implementing ICTs. Cluster 4 (27.3%) is defined as those organizations that are negligent with the implementation of ICTs, the firms in this class are aware of the importance of ICTs but have not acted to a greater degree of implementation of ICTs. This cluster 2 (17.5%) is named firms that hesitate in the use and implementation of ICTs, due having a lower perception of how critical it is to implement ICTs in the organization; and Cluster 3( 13.3%)  has defining as  the organizations lagging behind in the use and implementation of ICTs, corresponds to young firms, with the least degree of departmentalization and less use of ICTs  and their employees have lower rates of knowledge in ICTs, as well as a lower frequency in the use of electronic equipment. Cluster 5 (5.2%) as firms that improvise in the use and implementation of ICT, which has, on average around 20 years in market. They have a greater departmentalization and use technological tools more frequently, despite having a low perception of the importance of implementing ICT.
        To advance future research, it is suggested to inquire about the gap between service SMEs that implement ICT and those that do not to expose the factors that enable or limit the acquisition and use of ICT. Moreover, the data presented contextualize the ICT implementation prior to the start of the pandemic period, and because it has accelerated entrepreneurship, innovation, and digitization (Gavrila & de Lucas, 2021), it is convenient to reflect the changes adopted during the current scenario.

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