Determinants of application software adoption the case of SMEs in HCMC

Determinants of Application Software Adoption: The Case of SMEs in HCMC Other opinions by specialists believe that the current Vietnamese IT services industry has a lot of limitations in

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-000 -DETERMINANTS OF APPLICATION SOFTWARE ADOPTION:

The Case of SMEs in HCMC

By

LE THANH BINH

Academic Supervisor:

Associate Dr NGUYEN DINH THO

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Declaraiion

I declare that the thesis hereby submitted for the Master degree at the Netherlands Program for M.A in Development Economics is my own work and has not been previously submitted by me at another university for any degree

Vietnam-Ho Chi Minh City, March 2011

Le Thanh Binh

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Acknowledgements

In the first of all, my heartfelt thank goes to my supervisor, Associate Dr Nguyen Dinh Tho During the course of my thesis research and writing, I received precious guidance, useful comments and encouragements My deepest thank also goes to Associate Professor Dr Nguyen Trong Hoai, Co- Director of Vietnam - The Netherlands Program for M.A in Development Economics, for his encouragements during the course and thesis research In addition, I wish to offer much thanks to: my kindly and enthusiastic classmate, Mr Nguyen Ngoc Danh, who was always ready to give me his ideas and recommendations; my friend and ex-colleague, Mr Marc Nguyen, who assisted me to edit English writing of my thesis

My heartfelt gratitude also goes to my wife and my son, Trinh and Trung Quoc, who are my love and motivation during the studying time

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It was found that perceived usefulness and ease of use of application software are potential predictors of application software adoption It was also found that IT knowledge has impacts on the adoption of application software BOM Innovativeness was not significant It may be due to the limitation of this study Some questionnaires were answered by who were not from BOM and the sample was not large enough to make sure the results are entirely credible

The findings of this study suggest that the government and software firms should focus

on improving the IT knowledge of people who work in the office, especially people from BOM Software fim1s should promote the usefulness and ease of use of application software In addition, the laws of intellectual property and laws to protect the software users are also recommended to the government

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Table of Contents

DECLARATION I

ACKNOWLEDGEMENTS 11

ABSTRACT III TABLE OF CONTENTS IV LIST OF FIGURES VI LIST OF TABLES VII LIST OF EXHIBITS VIII ABBREVIATION VIII CHAPTER 1 - OVERVIEW !

1.1 INTRODUCTION 1

1.2 THE CONTEXT OF VIETNAMESE SOFTWARE INDUSTRY 2

1.3 OBJECTIVES OF THE RESEARCH 5

1.4 RESEARCH QUESTIONS 5

1.5 RESEARCH METHODOLOGY AND SCOPE 5

CHAPTER 2- LITERATURE REVIEW 7

2.1 INTRODUCTION 7

2.2 DEFINITIONS 7

2.3 THEORIES AND EMPIRICAL STUDIES 8

2 3.1 Innovative ness 9

2.3.2 Perceived Usefulness 9

2.3.3 Perceived Ease ofUse 11

2.3.4 IT Knowledge 11

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2.3.5 Size ofFirms 12

2 3 6 Competitive Intensity 13

2 3 7 Type of Business , 13

CHAPTER 3 - METHODOLOGY 15

3.1 INTRODUCTION 15

3.2 RESEARCH PROCESS ··· 15

3.2.1 Questionnaire Design 15

3.2.2 Survey Design 16

3.3 0PERATIONALIZATION OF MEASUREMENT 16

3 3.1 Dependent Variable 16

3.3.2 Independent Variables 18

3.3.2.1 BOM Innovativeness 18

3.3.2.2 BOM IT Knowledge 18

3.3.2.3 BOM Perceived Usefulness 19

3.3.2.4 BOM Perceived Ease of Use 20

3.3.3 Moderator Variables 21

3.3.3.1 Competitive Intensity 21

3.3.3.2 Business Size 22

3.3.3.3 Type of Business 22

3.3.4 Measurement Scale and Notation ofVariables 22

3.3.4.1 Measurement Scale 22

3.3.4.2 Notation of Variables 23

3.4 SURVEY DESIGN 23

CHAPTER 4- FINDINGS AND DISCUSSION 24

4.1 INTRODUCTION 24

4.2 THE SAMPLE ~· 24

4.3 DESCRIPTIVE ANALYSIS 24

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4.4 RELIABILITY ANALYSIS 26

4.5 REVISE MODEL 27

4.6 FACTOR ANALYSIS.··· 28

4.7 OLS REGRESSION 31

4.8 HYPOTHESIS TESTING 34

4.9 DISCUSSIONS 37

CHAPTER 5- IMPLICATIONS AND CONCLUSIONS 39

5.1 INTRODUCTION 39

• 5.2 MAIN RESULTS CONTRIBUTION AND IMPLICATIONS 39

5.3 LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCHES .42

REFERENCES · 43

APPENDICES 48

APPENDIX 1: THE QUESTIONNAIRE 48

APPENDIX 2: NOTATION OF VARIABLES 55

APPENDIX 3: CRONBACH'S ALPHA 57

APPENDIX 4: FACTOR ANALYSIS 60

APPENDIX 5: HETEROSKEDASTICITY TEST 63

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List of Figures Figure 2.1 -Conceptual Model 13

Figure 3.1 - Research Process 15

Figure 4.1 -Revised Conceptual Model 26

List of Tables Table 2.1 -List of Applications 7

Table 4.1- Type ofBusiness 24

Table 4.2- Business Size 24

Table 4.3 -Application Software 25

Table 4.4- Reliability Analysis 25

Table 4.5- Rotated Component Matrix( a) 27

Table 4.6- KMO and Bartlett's Test 28

Table 4.7- KMO and Bartlett's Test (ASADOPT) 29

Table 4.8- Component Matrix (a) 29

Table 4.9- Frequency Analysis of sum values of two items of CINT 30

Table 4.10- Business Type with dummy variables 30

Table 4.11 -The dummy variables of the business size 31

Table 4.12 -Regression with data survey 32

Table 4.13- Summary of Hypothesis Testing 34

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List of Exhibits

Exhibit 3.1 -Application Software Adoption 17

Exhibit 3.2 - Innovativeness 18

Exhibit 3.3- IT Knowledge 18

Exhibit 3.4 - Perceived usefulness 19

Exhibit 3.5- Perceived ease of use 20

Exhibit 3.6- Competitive intensity 21

Abbreviation

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Determinants of Application Software Adoption: The Case of SMEs in HCMC

Chapter 1 Overview

1.1 Introduction

Nowadays information technology plays a crucial role in economic development Among them, the software industry is growing faster than most other industries The world software market was approximately US$11 0 billion in 1988 (Schware 1992), and is about US$600 billion (Rizk 2002) Software industry is viewed as a good choice for developing countries to leverage their economy and strengthen their national competitive power (Lee & Lee 1994) For example, the annual growth rate of India's software industry has been consistently over 20 percent since 1996 The revenues from software industry oflndia were US$8.7 billions in 2001 (Economy Watch) The annual growth rate of Brazil's software industry has been also 11%-12% (Schware 1992) According to Schware (1992), the developing countries should focus more on the domestic software market; therefore, it makes software exports develop faster because

of increases in experience and innovation in software production

In acknowledging the importance of the software industry to the economic development, the Vietnamese government has paid much attention to developing the software industry in general, and the domestic software market in particular by issuing many policies to support the software industry and software firms and by investing a lot of money to its development Vietnam's domestic software market has a lot of potential with approximately 7,000 organizations, 6,000 state firms, and nearly 260,000 limited firms However, the number of firms using application software continues to be very limited In the year of 2006, the revenues of application software were only 93 million USD (Laodong 2007) Many conferences have been organized to discuss on how to leverage the demand of domestic application software but to date, no effective

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solutions are chosen Even though the growth rate of domestic market is about 25%, its size and growth rate are still below expectation (Nguyen 2004 )

1.2 The context of Vietnamese software industry

The Vietnamese software industry has grown prosperously in recent years Before

2006, its growth was about twenty five percent per year The government plan for the software industry in 2000 - 2005 was aimed to reach 500 million US dollars as revenue but without success The growth in 2006 and 2007 was up to forty percent and its revenue mostly reached 500 million US dollars ( 498 million) The government expected that the revenues for the software industry in the year 2008 were 600 million

US dollars, and for 2010 would be 800 million US dollars (Tram 2009) The target for the year 2008 was reached, however, the economic recession curtailed revenue goals

In late 2008, most of the software firms, especially outsourcing software occupied the most in the revenue structure, were negatively affected by the financial crisis and economic recession For example, FPT software- one of the leading software firms in Vietnam - had a revenue growth of 40%, a decrease of 50% compared to year 2007 The picture of total gloominess of the Vietnamese software industry in 2008 - 2009 reappeared in results of the survey that was conducted by VINASA in May and June of year 2009 and was issued in late August of 2009 64% of the Vietnamese software firms had negative growth compared to the year 2008 Of this number, 12% of the firms declined severely and met with financial difficulty There were only 36% of firms able to sustain stable growth at equal or higher than the year 2008 (Nguyen 2010)

However, in late 2009, there were some positive signals Some software outsourcing firms got new projects It happened because Vietnam software outsourcing firms had

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an advantage of labor cost of less than 30% compared to that of China and India IT department of the Ministry of Post and Telematics, adyised that the revenues of Vietnamese software industry was 880 million US dollars The growth rate remained at 35% and surpassed the norms that were set by the government for the year 2010 (Nguyen 2010)

In general, Vietnamese software industry grows very fast, about 35-40% per year in recent years However, the software outsourcing occupies the major revenues in the software industry According to the results of the survey conducted by Vinasa, 50% of software firms are in software outsourcing (Tram 2009)

According to statistics, there are 2000 firms registering as the software firms but in actuality, there are only 800 firms that participated in the software industry The total number of people that participated in the software industry is approximately forty-five thousand Most of the software firms have less than 30 employees and their charter capital is less than 500 millions Vietnam Dong According to Jefrey Haddee- Deputy Chairman of Business Software Associate, Vietnamese IT and software labors are still too weak For every ten candidates, only one is qualified Mr Haddee assesses that: out

of date teaching programs, failures in teaching and practising soft skills, and weaknesses in foreign languages, are the biggest deficency of Vietnamese IT labors (Manh 2009)

Some experts believe that in order to leverage the Vietnamese software industry; the Vietnamese government needs to focus on developing its IT services The revenue rate for this field occupies over 75% of the revenue in the whole IT and telecom in the world (Hiep 2009) According to Deputy Minister of Post and Telematics Nguyen Minh Hong, the domestic IT services industry has not developed to its fullest potential One reason is because mechanism in place is not clear enough The rest is because the government does not have preferred policies for specialization of the services industry

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Other opinions by specialists believe that the current Vietnamese IT services industry has a lot of limitations in areas like: quantity, investment capacity, professionalism, lack of intellectual property protection, and a shortage of legal documents The government should therefore define specific assessment standards for service quality Some firms think that government should not stipulate the quality of service as a pretest like before They should make assessment based on the service quality agreement between business providers and their clients (Ha 2009)

In order to leverage the IT industry, particularly software, the government has trusted

to assign Minister of Post and Telematics to propose an action plan The Minister of Post and Telematics Le Doan Hop reports that he propose this strategy to Prime Minister and hopes that it would be approved soon Because there is an enormous amount of work, he insist on the six major things (Ha 2010):

First, build up IT human resources on a large scale as well as key resources Second, develop IT industry in order that Vietnam not only consumes but also produces IT products

Third, establish a high bandwidth infrastructure

Fourth, IT should reach everyone, such as communication and internet; tools that contributes to development in modem and civilized countries

Fifth, apply IT into the State management system to save money by: establish govemment to ensure the transparencies from central to local, eliminate back logs and bureaucracy while and speeding up paperwork;

e-Sixth, establish telecom incorporation with international stature

In April 2009, the Prime Minister has decided to invest 980 billions Vietnam dong to develop the software industry and electronic content from 2009 to 20 12 (Decision 50/2009/QD-TTg) At the end of the year 2009, the Prime Minister has decided to invest 16,9 billions Vietnam dong additional for this program (Mai 2009)

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1.3 Objectives of the research

As stated above, Vietnamese domestic software market has very good potential but it has still not advanced as others Therefore, figuring out why Vietnamese domestic software market has not become a booming sector like in other places of the world is very important and crucial since the government has invested a lot of money into the software industry In addition, there have never been studies to research the factors affecting the application software adoption in Vietnamese domestic software market This study will fill hopefully this gap The domestic software market is a huge area to research This research only addresses the ·.domestic application software market because application software plays a very crucial role in improving the management efficiency Understanding the factors affecting the Vietnamese domestic application software market would be a good reference for fmiher comprehensive researches on what Vietnamese policy makers should do to leverage the Vietnamese domestic application software market

1.4 Research questions

This study tries to answer the following questions:

1 Do BOM Characteristics affect the software application adoption?

, Do Business Characteristics affect the software application adoption?

It implicitly answers the question why the domestic software market in Vietnam does not grow as expected The results of this study completely assist the government in understanding what to do to change SME's perception of application software adoption and help the software firms know what to focus on to expand the local software market

1.5 Research methodology and scope

This study only focuses on application software in Ho Chi Minh City's market

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Applications chosen for the study are the ones used for managing firms or businesses' activities This study researches small and medium enterprises (SMEs) in Ho Chi Minh City by using the structured questionnaires After collecting data, Cronbach Alpha and

EF A are used to validate the collected data After that, the regression with OLS model

is carried out to recognize the determinants of application software adoption The statistic software Eview 4.1 is employed in this study

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Chapter 2 - Literature Review

Chapter 1 presented the overview of this study including the important role of the software industry in the economic development of developing countries and research objectives Chapter 2 is an introduction to the argument basis for this study based on the empirical studies This chapter is composed of two main sessions: (1) the definitions of terms that are used in this study, (2) the theories and empirical studies review

2.2 Definitions

"Software engineering 1s the systematic approach to the specification, development, operation, maintenance, and retirement of software" (Schware 1989, p.l2)

System software: is a component that is used to control the hardware (including peripheral equipment such as printers, keyboards, monitors, and memory storage devices) and provide the environment on which application software executes It plays

a mediation role in linking application software to hardware (Schware 1989) Operating system and drivers are called as system software

Application software: is designed to exploit computer power to perform and manage some tasks to facilitate management and administrative issues, i.e Payroll, Human Resources, Accounting, etc (Schware 1989) Softwares that do those tasks above such as Ms Excel, Ms Word are not considered as application software A business can implement the application )Oftware for them or purchase it from a software development finn

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2.3 Theories and empirical studies

Application software refers to many kinds of software applications, which are used for managing a business It is not possible to study all the factors that can impact on the adoption of application software for all types of business Hence, in this study, only factors that are more applicable to the adoption of application software (denoted by ASADOPT) in the small and medium enterprises (SMEs) are selected to be placed in the model According to Government Decree No 90/2001/ND-CP, a business is considered as SME if its registered capital does not exceed VND 10 billion or its annual labor does not exceed 300 employees

This study focuses on the following application softwares:

Application

Accounting Inventory control Sales

Purchasing Personnel and Payroll CRM

SCM

MRP

Table 2-1: List uf Applications

The factors that are invest1gated in this study are mainly extracted from empirical studies from Thong and Yap (1995), Nguyen and Barrett (2006), and Nguyen (2007) These factors are Innovativeness, Perceived Usefulness, Perceived Ease of Use, IT Knowledge, Size of Business, Competitive Intensity, and Types of Business Other empirical studies are also reviewed to support for them

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2.3.1 lnnovativeness

According to Leonard-Barton and Deschamps (1998), personal innovativeness plays an important role in the adoption of innovation because individuals who are highly innovative are more willing to take more chances Highly innovative employees are usually highly skillful as they might be less influenced from managerial directives Therefore, managers with innovativeness influence the employees who are less innovative to adopt the innovation (Leonard-Barton and Deschamps 1988) The CEO with innovativeness does highly affect to the innovation adoption in the SMEs because

he may prefer risky solutions that have not been tried (Thong & Yap 1995; Al-Qirim 2007.) According to Ritu and Jayesh (1998), personal innovativeness influences the relationship between perception and adoption decisions of innovation In the SMEs, a CEO usually gets an agreement from Board Of Managers (BOM) to make a final decision because he or she cannot master in everything For example, a CEO may not know more about Human Resource software than his Human Resource manager Therefore, this study focuses on the BOM, not only the CEO Since application software is a product of innovation, Innovativeness of BOM (denotes as INNO) likely determine if organization applies the new application software to its business

Hypothesis 1: Firms with BOM who are more innovative have positive effect on adopting application software

2.3.2 Percefved Usefulness

According to Thong and Tf ap ( 1995), if CEO has a positive attitude towards the adoption of IT, the business is more likely to implement IT Attitudes toward implementing IT are considered as the perception of IT (Thong & Yap 1995) According to Nguyen and Barrett (2006) and Nguyen (2007), the technology

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acceptance model (TAM) is a strong theory base and supported by many empirical studies Perceived usefulness and perceived ease of use are known as two constructs in TAM and they determine an individual's attitude towards using a system (Davis et al 1989) Nguyen and Barrett (2006) find that perceived usefulness and perceived ease of use can be used to predict the intention to use of IT applications Besides, perceived usefulness and perceived ease of use can be applied to predict the IT usage (Nguyen 2007) Nguyen and Barrett (2006) and Nguyen (2007) prove that TAM can be used to explain both the intention to use and the usage of IT applications not only in terms of individual attitudes but also in terms of organizational attitudes Therefore, attitudes toward adoption of IT are considered as both the perceived usefulness and perceived ease of use of IT Application software is one of aspects of the IT fields This research adopts the concepts of perceived usefulness and perceived ease of use and applies them

in t~e context of BOM that represents for a firm in implementation of application software

Perceived usefulness (denoted as OPU) of application software is a degree to which the SME believe that application software is useful (Nguyen & Barrett 2006; Nguyen 2007) but they cannot verify the usefulness of software before it is applied to in that firm The usefulness of application software can be known as the efficiency and effectiveness of application software on business performance When BOM believes that the application is useful for their business, they are more likely to adopt it (Davis

et al 1989; Nguyen 2007.) Perceived usefulness can be increased if the BOM have a good experience with the application The good experience is best described as using the application or knows of someone who uses the application to help improve his or her performance

Hypothesis 2: Firms with the BOM who perceive the usefulness of application software have positive effect on adopting application software

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;;

2.3.3 Perceived Ease of Use

Perceived ease of use (OPEU) directly affects the behavior of the intentions to use IT (Davis et al 1989.) Perceived ease of use of application software in an organizational context is the degree to which the SME believes that utilizing the application software

to perform and manage some tasks to facilitate management and administration issues would be free of effort (Nguyen & Barrett 2006; Nguyen 2007.) In other words, the less effort the firms are spending to perform and manage their tasks by using application software, the more perceived ease of use they have When the BOM of a firm thinks that application is easy to use, they tend to use that application for their business

Hypothesis 3: Firms with the BOM who perceive the ease of use of application software have positive effect on adopting application software

Research also shows that the usability of a system is considered as one of many factors

to determine the effectiveness of its functionality Therefore, the perceived ease of use

of application software also influences perceived usefulness of the application software (Nguyen & Barrett 2006.) According to Ritu and Jayesh (1998), innovativeness positively moderates the relationship between perceived usefulness and the adoption of application software, and the relationship between perceived ease of use and the adoption of application software However, this study will not examine the relationships between innovativeness, perceived usefulness, and perceived ease of use

2.3.4 IT Knowledge

Thong and Yap (1995) find that lack of IT knowledge (denoted as ITKNOW) contributes to the failure of small firms to adopt IT, howe~er, CEOs understanding the

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benefits of IT may be more willing to adopt it When organizations need to use an IT application, they may believe that it is too difficult to use that application, even if they believe that it is useful (Nguyen & Barrett 2006; Nguyen 2007) Therefore, if the BOM

of organizations have well IT awareness, they can believe that IT application is easy to use (Ritu & Jayesh 1998) IT knowledge is considered the same as IT awareness (Thong & Yap 1995), so it influences both perceived usefulness and perceived ease of use (Ritu & Jayesh 1998) of application software However, the scope of this study does not examine the influences of IT knowledge on perceived usefulness and perceived ease ofuse According to Thong and Yap (1995), many CEOs reject to adopt

IT because they have no idea of the benefits of IT, and if they can be educated on the benefits of IT, they may be willing to adopt IT easily

Hypothesis 4: Firms with BOM who have IT knowledge have positive effect on adopting application software

2.3.5 Size of Firms

Hashim (2007) identifies organizational size as one of determinants having influence

on adoption of IT and e-commerce Al-Qirim (2007) also finds out the positive influence of firm size on Intranet adoption and EDI adoption Thong and Yap (1995) find out that the size of firms (SIZE) impacts on the adoption of application software Small firms face more resource constraints than large firms Large firms have a large scale of operations; therefore they are more likely to use IT than small firms

Hypothesis 5: Firms with larger in size have positive effect on adopting application software

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2.3.6 Competitive Intensity

Another organizational characteristic that has impacts on the adoption of application software is competitive intensity (CINT) Competitive intensity, at some points, influences the acceptance of innovation (Robertson & Gatignon 1986.) Al-Qirim (2007) identifies that SMEs in New Zealand tend to adopt eCommerce communication and application technologies to increase their competitiveness Thong and Yap (1995) identifies that firms are able to change their competitive environment by adopting IT in three ways IT can change the industry structure and alter the rules of competition IT can create competitive advantage because firms have new ways to perform better than their rivals Finally, IT spawns new business opportunities from existing operations of the business It is a reason why a firm in a more competitive environment adopts IT to gain a competitive advantage In contrast, a firm in an environment that is less competitive is not rushed to be innovative

Hypothesis 6: Firms who perceive high competitive intensity of the industry have positive effect on adopting application software

2.3 7 Type of Business

Type of business (BTYPE) is also one of organizational characteristics that were found

as J"1ajor determinants of IT adoption (Hashim 2007) This study investigates the following types of business: manufacturing, trading, and services A firm can do manufacturing, trading and services at the same time However, this study only focuses

on the main types of business, which brings the most revenue to the firm

Lee and Lee ( 1994) identify that manufacturing firms were the largest buyers in Korean software market in 1991 Al-Qirim (2007) finds out that wholesale and manufacturing industries had the highest rate of e-Commerce adoption It seems that the firms, which do manufacturing or trading, are most likely easy to adopt application software

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Hypothesis 7: Firms, which do manufacturing or trading, have positive effect on adopting application software

Figure 1 shows a conceptual model that explains the adoption of application software

by SMEs BOM innovativeness, BOM IT knowledge, BOM perceived usefulness, and BOM perceived ease of use are proposed to be predict'ors of application software adoption In addition, business size, type of business, and competition intensity are expected to have impacts on the adoption of application software

Figure 2.1- Conceptual Model

With all the variables above, the regression model for this research is suggested as follow:

A SA DOPT = f rTNNO OPT T OPFT T TTKNOW ST7F C:TNT RTYPF)

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Determinants of Application Software Adoption: The Case ofSMEs in HCMC

Chapter 3 - Methodology

This chapter is to discuss the methodology that is employed to test the conceptual framework developed in Chapter 2 This chapter introduces (1) the research process, (2) the operationalization of measurement, and (3) the design of the survey questionnaire

Explanatory Factor Analysis (EFA)

Figure 3.1 - Research Process

3.2.1 Questionnaire Design

Least Square Regression

The first step was to design questionnaires for the survey This was undertaken from the literature review From the literature review, all items from the questionnaire were

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generated These items were refined to be relevant with the context of application software The questionnaire is presented in the Appendix 1

3.2.2 Survey Design

This research was conducted in one phrase: a main survey The pilot phase was skipped because this study used the items from the empirical studies· and the measures did not need to be modified or refined The main survey was used to test the measurement and structural models

This study utilized both face-to-face interviews and mail survey The survey was conducted with a BOM member of the firms in Ho Chi Minh City The measures were further refined via Cronbach' s alpha and EF A based on the data of this survey Then, the measures were put into the least squared regression to estimate the results

3.3 Operationalization of Measurement

This study presented the estimate of a OLS model of application software adoption In

a OLS model, the dependent variable was developed by using factor analysis First, it was developed by using Likert scale and was measured by 5 items It was assessed by Cronbach's alpha and EFA Finally, factor analysis was carried out to get the dependent variable The model describes the level of application software adoption of SMEs This level is moving from 1 to 5 5 means highly adopt application software and

1 means highly not adopt application software

3.3 1 Dependent Variable

Measurement of application software adoption was based on the management areas that software applications could help the firms improve their activities This variable indicated many applications, not only one Each firm might use one or many

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applications at the same time (MRP, SCM, CRM, Personnel and Payroll, etc.)

In reality, there was an application named ERP It included MRP, SCM, CRM, Personnel and Payroll, Inventory, and Finance Management In this case, we considered that the firm uses all applications included in ERP, not ERP

Similarly, some firms implemented the application for themselves That application might include one or many applications list above, such as MRP and Personnel &

Payroll In that case, we also considered that the firm uses the MRP and Personnel &

Payroll applications

The questions listed in the following table are for different applications that the firms use Each question is for a type of application

Exhibit 3.1 -Application Software Adoption

Notation Strongly Strongly

Disagree Agree

Our firm has applied application software AAS1

efficiently and effectively in tinancial

efficiently and effectively in the

improvement of our inventory control

activities and purchasing activities D D D D D

efficiently and effectively to improve our

sales activities and customer services D D D D D

efficiently and effectively in the D D D D D

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utilization and simplification ofhuman

resource management

Our firm has applied application software AASS

efficiently and effectively in the

simplification of manufacturing resources

Exhibit 3.2 - Innovativeness

1 BOM usualiy has original ideas INN01 D D D D D

2 BOM would sooner create something INN02

new than improve something existing o· D D D D

3 BOM often risks doing things differently INN03 0 D D 0 D

BOM IT knowledge was measured based on the scale developed by the Thong and Yap (1995) Their scale was measured by two items: (1) the computer experience, (2) the

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rating of the computer knowledge compared to other people in similar positions However, this study used only the item 2 because this item _followed the Likert scale

Exhibit 3.3 -IT Knowledge

I would rate my own understanding of ITKNOW

computers (before my company

computerized) as very good compared to

oj

other people in similar positions D D D D

Perceived usefulness of the application software was measured based on the Nguyen and Barrett (2006) scales, a modified version of the Davis scales Measurement of perceived usefulness included five items: (1) By using the application software, our firm would manage information related to our business more easily, (2) By using the application software, our firm would process and obtain information related to our business more quickly, (3) By using the application software, our firm would obtain the statistic data related to our business more cheaply, ( 4) By using the application software, our firm would find it more effective in making business decisions, and (5) Overall, our firm would consider that application software is useful for managing business activities

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Exhibit 3.4- Perceived usefulness

1 By using the application software, our OPU1

firm would manage information related to

firm would process and obtain information

related to our business more quickly D D D D D

firm would obtain the statistic data related to

firm would find it more effective in making

5 Overall, our firm would consider that the OPUS

application software is useful for managing

Perceived ease of use of the application software was measured based on the Nguyen and Barrett (2006) scales, a modified version of the Davis scales Perceived ease of use

of the application software was measured by four items, composed of: ( 1) The application software which is easy to learn would be good for our firm, (2) It is easy to look up the information related to our business by using the application software, (3) It

is easy to use the application software to improve the communication between the

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•

departments in our firm, and (4) Overall, our firm prefer the application software which

is easy to use

Exhibit 3.5 - Perceived ease of use

Disagree Agree

I The application software which is easy to OPEU1

learn would be good for our firm D D D D D

2 It is easy to !c.Jk up the information related OPEU2

to our business by using the a!Jplication

3 It is easy to use the application software to OPEU3

improve the communication between the

4 Overall, our firm prefer the application OPEU4

software which is easy to use D D D D D

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Exhibit 3.6 - Competitive intensity

1 The rivalry among firms in the industry in CINT1

which my company is operating is very

2 There are many products/services in the CINT2

market which are different from ours but

Strongly Disagree Disagree Neutral Agree Strongly Agree

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or a member of the BOM of these firms via email or collecting the questionnaires from the CEO of the firms or a member of the BOM of these firms directly in the some meetings

We sent out 200 questionnaires, however, we got 140 questionnaires answered finally The data analysis of the survey is presented in the next chapter

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Chapter 4 - Findings and Discussion

This chapter first presents the descriptive analysis based on the data from the survey A reliability analysis was performed to assess the reliability of the scales Next, an explanatory factor analysis (EF A) was used to assess and confirm the factors that had been defined above, and generate the data for running the OLS regression in the following step Finally, after all the necessary data for running the OLS regression was generated and prepared, the OLS regression analysis was used to test the proposed hypotheses as presented in Chapter 2

4.2 The sam pie

According to Hair et al ( 1995), the minimum number of sample for the appropriate use

of maximum likelihood was 100 The greatest number of free parameters to be estimated was 20 The sample size required was about 100 (20x5) Therefore, the number of sample over 100 could be more acceptable for this research

As mentioned in the survey design section in the previous chapter, the population of this research was firms in Ho Chi Minh City Data was collected from the sample of

140 people who were BOM members from the firms located in Ho Chi Minh City by filling out structured questionnaires The sample size of 140 was relevant

4.3 Descriptive Analysis

A frequency analysis was conducted for the characteristics of the business This information included type of business and business size These characteristics are presented in Table 4.1 to 4.2 Besides, a frequency analysis was also carried out for the application software that firms used This is presented in Table 4.3

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Determinants of App lication Software Adoption: The Case of SMEs in HCMC

For business type, two firms were rna

most of these firms were service type firms (61 firms, 44%) nufacturing (30%) while the remaining firms were trading firms (3 7

Forty-e that a firm could also bForty-e a combination of manufacturing, trading

er, this research focused on the core business of the firm - the area

t produced the most revenues

firms, 26%) Netic

or services Howev

of that business tha

Tabie 4.1 -Type of Business

Type of Business Frequency Percentage (%)

Table 4.2 -Business Size

Size Frequ ency Percentage (%)

e 4.2, there were forty-eight firms with the number of employees

30 (34%) Forty-three firms had more than 30 employees but less

0 (31%) Sixteen percent of the firms had more than 100 employees alto 300 (23 firms) The remaining number of firms was twenty-six

than or equal to 1 0 but less than or equ (19%)

ton software shown in Table 4.3 was the application that the firms The list of applicaf

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had employed A firm could employ many applications at the same time Among the one hundred and forty firr:1s, one hundred and seven firms employed Accounting software (76%), eighty-one firms used Personnel application (58%), and sixty-five firms employed Sales application ( 46% ) The rest of the applications are also shown in Table 4.3 below

Table 4.3 -Application Software

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be assessed by Cronbach's alpha The results of reliability analysis are shown in Table 4.4

Table 4.4- Reliability Analysis

BOM Perceived Usefulness [OPU] 0.858

BOM Perceived Ease of Use [OPEU] 0.808

Competitive Intensity [CINT] 0.809

Application Software Adoption [ASADOPT] 0.873

The function was also revised as the following:

Figure 4.1- Revised Conceptual Model

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