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?La tecnologia de Internet ayuda al desempeno de las pequenas y medianas empresas? Evidencia de una seleccion de empresas mexicanas.

Does Internet technology improve performance in small and medium enterprises? Evidence from selected Mexican firms *

1. INTRODUCTION

The Internet currently constitutes the technological basis for the information society and for network organizations. The use and adoption of the Internet is a major academic research topic (Porter, 2001; Tapscott, 2001; Del Aguila-Obra & Padilla-Melendez, 2006). Internet use as a strategic business tool puts the information revolution within reach of small and medium-sized enterprises (SMEs) and gives these kinds of enterprises more opportunities to compete in today's fast-changing markets. Such firms are considered of fundamental importance to maintain a competitive market (OECD, 2000b, 2002b), as they account for a large share of jobs and hence play an essential role in social development (Ba, Whinston, & Zhang, 2000; Hisrich & Drnovsek, 2002; Jutla, Bodorik & Dhaliwal, 2002). Efficient use of the Internet for both strategic purposes and operations affects the success of SMEs. However, the degree to which SMEs benefit from the use of this technology varies (Dholakia & Kshetri, 2004; Lohrke, Franklin & Frownfelter-Lohrke, 2006).

The main purpose of this paper is to identify whether SMEs that make more intensive use of the Internet, have as a consequence greater growth, as a possible performance indicator. We circumscribe our research to developing economies, such as Mexico. The choice of high enterprise growth as a performance indicator is based on the conception that growth is the most important social and economic consequence for developing SMEs (Low & MacMillan, 1988), and for this reason SMEs are one of the most important actors for sustained economic growth in emerging markets. The SMEs in this study are from San Luis Potosi City, Mexico. This is the tenth largest urban region in the country, with nearly one million people, and represents a good example of an average medium-sized Latin-American city. The results of this research can be added to current work done predominantly in developed countries.

2. LITERATURE REVIEW

2.1. SMEs and the Internet

Internet, just like any of the most important Information and Communication Technologies, ICTs, can be an agent of change and organizational innovation as well as a key element for company operations. As the use of Internet becomes more common in organizations, it may constitute an important tool for business strategy (Dandridge & Levenburg, 2000). The Internet is flexible technology with many useful applications for companies. For example a study by the United Kingdom Department of Trade and Industry (DTI, 2000) shows Internet adoption in SMEs in the form of a ladder going from simple electronic mail to the complexities of ebusiness. However, many latinamerican SMEs face a lack resources with which is not psible to implement and use Internet (and other ICTs) to their full potential. This is one of the main factors inhibiting Internet adoption and its spread in SMEs (Chapman, James-Moore, Szczygiel & Thompson, 2000; Berranger, Tucker & Jones, 2001; Jutla et al., 2002; Street & Meinster, 2004). Nevertheless, the progressive reduction in the cost of ICTs has facilitated SMEs' access to these technologies, particularly to the Internet. This has also helped SMEs and entrepreneurs in many sectors to join the so-called "new economy" through e-commerce and e-business (Colombo & Delmastro, 2001; Weiss, 2004; Fillis & Wagner, 2005).

The pattern of Internet adoption and its subsequent use in SMEs usually differs from the adoption of traditional information and computer systems (Goode & Stevens, 2000). Basic PC technologies and their related software are rapidly turning into commodities (Lee & Runge, 2001; Tapscott, 2001), while the competitive advantages conferred by an Internet-based economy are becoming a key element for firms (Castells, 2001). Internet technologies help businesses to establish distinctive strategic positions to a much greater extent than previous information did (Porter, 2001). With traditional information technologies, first-movers achieve a temporary advantage but this technology is only an indispensable tool for enterprises when it becomes an open standard. Only those businesses that achieve a high level of lock-in continue to maintain their competitive advantage over their rivals (Shapiro & Varian, 1999). Given that the Internet is a newer rapidly changing technology, companies found they were able to model and examine new forms of business (Tapscott, 2001).

The Internet is a relatively new technology for many SMEs, and all the more so in developing countries (Riquelme, 2002; Schlenker & Crocker, 2003; Wresch, 2003). For this reason, historical information such as conceptual frameworks only yields limited theoretical approaches and very precise models (Kim & Galliers, 2004). Several studies reveal differences in Internet adoption and use by SMEs (Amoros, 2003; Matlay 2004). However, it is important to note that such differences can arise from the type of SMEs in the study and the sector to which they belong. In addition, different methodologies stress different aspects depending on the way the research is designed. Nevertheless, there are certain common factors which crop up in all the studies: First, Internet adoption is not related to previous organizational experience or the adoption of traditional information systems. Second, the owner, who generally assumes the functions of the general manager in SMEs, plays a key role in Internet adoption and third, the most tightly integrated industrial sectors (with formal mechanisms for inter-organizational cooperation) facilitate more rapid Internet adoption. The same effect occurs in sectors that are more internationally oriented.

2.2. Information Technologies, Internet and SME growth

There are several research studies on the causes of adoption and diffusion of technology in the literature of economics, strategic administration, management sciences and organizational behaviour that emphasize the potential for improvement in the performance of the organization that has a technological strategy. In the field of more recent technological innovations, the fact of good management of Internet (and other ICTs) can translate into a clear competitive advantage (Porter, 1998; Sadowski, Maitland & van Dongen, 2002). Nevertheless, most of these studies correspond to large companies. In contrast, only a few empirical studies remark on the effect that information technology could have on the performance of SMEs (Baum, 2001; Street & Meinster, 2004; Lockett & Brown, 2006).

An empirical study by Levy, Powell & Yetton (2002) analyses a sample of SMEs in the United Kingdom. Using a proposal based on Churchill & Lewis (1983), Storey (1994) and their own model, the authors describe how the ICT strategy of SMEs entails a bias of growth. Mechanisms of collaboration and innovation have revealed that these technologies, such as the Internet, play an important role in the ICT strategy of SMEs (Daniel, 2003; Aragon & Cordon, 2005.). Other work conducted by Roberts, Larsen & Tonge (2002) regards ICTs and the Internet as technologies that provide competitive advantages (short and long term), used mainly for administration and internal control, but also very significantly in market and customer service strategies. Baum (2001) concludes in a longitudinal study with newly created companies that the adoption of technology represents a significant factor for the improvement of company performance and therefore a cause of growth.

Summarized, the studies analysed agree that the Internet can be a factor that helps the performance of SMEs; nevertheless, its use is still very incipient. According to Amoros (2003), some general conclusions are:

* In general terms a major number of SMEs have little experience in the use of the more sophisticated Internet technologies. Obviosly some SMEs that have been founded based around Internet technologies have more experience.

* Basic e-mail has become a low-cost tool for establishing effective channels of communication. For this reason, the Internet is intensively used as a communication medium. E-mail is most frequently used to contact both existing and potential customers. Some businesses even use e-mail to establish communication with suppliers and business partners, although this is uncommon among SMEs.

* SMEs use the Web as a means of obtaining and spreading their business information relatively cheaply. The studies analysing web page use in SMEs show that this technology is generally used for promotional purposes. There is evidence that in the most cases, the SMEs studied have not exploited web-related technologies beyond marketing and promotional purposes.

* Service companies or those competing in sectors making intensive use of information are also those that make greater use of the Internet.

Summarising, this study proposes a conjunction of "adoption and use of Internet" research and that of venture growth, and to analyse whether SME growth can be explained partly through the degree of Internet use. We can emphasize on the use of Internet as one of the possible factors to explain SME performance in developing countries.

3. RESEARCH MODEL AND RESEARCH QUESTIONS

Use of the Internet affords SMEs many benefits, mainly in the short term (Sadowski et al., 2002). These processes may represent competitive advantages, but are temporary or do not represent a sustainable improvement for the company. Therefore, the main question that this research attempts to answer is:

Can the use of the Internet be a growth factor for small and medium enterprises? In this framework we understood that growth can be valued as a positive indicator of performance when it is continuous. This growth could be a sustainable competitive advantage for SMEs.

We identified four frameworks for Internet use with the purpose of detecting some typologies that have been analysed in the literature and are significant for determining whether they are linked to the company's growth (Raymond, Julien & Ramangalaby, 2001; Grandon & Pearson, 2004; Del Aguila-Obra & Padilla-Melendez, 2006):

1. Activity Factors

2. Managerial Factors

3. Competitive Factors

4. Organizational Factors

A summary of these four factors that affect the use of the Internet "as internal or external factors" is shown in Table 1.

On the basis of these factors, we intend to clarify the relationship between Internet use and SME growth by posing the following research questions:

RQ1: Do SMEs with industrial and service activities use the Internet more intensively and have propensity for greater growth? (Activity Factors)

RQ2: Do SMEs with activities in business to business commerce use the Internet more intensively and have propensity for greater growth? (Activity Factors)

RQ3: Do SMEs with a CEO or owner manager who is highly motivated about the use of the Internet use it more intensively and have propensity for greater growth? (Managerial Factors)

RQ4: Do SMEs with a CEO or owner manager with experience in the use of the Internet, use it more intensively and have propensity for greater growth? (Managerial Factors)

RQ5: Do SMEs that compete in a more integrated sector use the Internet more intensively, and as a result of this use have propensity for greater growth? (Competitive Factors)

We decided to use organizational factors as control variables, because these indicators can help to clarify relationships identified in the three previous factors.

Figure 1 illustrates the general research model. This model shows the relationships among the different variables, in order to determine whether the Internet is one of the causes of SME growth.

[FIGURE 1 OMITTED]

4. METHODOLOGY

4.1. Sample

The population for our study was selected from companies that operate in San Luis Potosi metropolitan area in Mexico. The requirements for inclusion in the survey were size (between 10 and 250 employees, micro-enterprises thus not being included. By the end of 2005, nearly 11,000 business were registered in the official statistics system, but basically 96.6% are micro-enterprises), ownership status (companies should not be subsidiaries of another larger company) and finally the existence of at least one e-mail account for commercial, industrial or service activities. Following some previous studies, (Sadowski et al., 2002; Dholakia & Kshetri, 2004) we placed emphasis on SMEs from several industries and those operating "traditionally", meaning enterprises that did not come from pure-Internet technology based operations, for example e-retailers.

We used the regional 2004-2005 Enterprise Data System (Sistema de Informacion Empresarial Mexicano, SIEM) because this database only includes organizations and businesses that have an electronic register. Using our inclusion criterion, we obtained and sent 226 personal invitations to the SME's who had their information up to date. Companies were selected completely at random and contact was made personally (in most cases with the CEO or owner manager). We received 102 valid questionnaires. The questionnaire included aspects of the company's information technology infrastructure, use of the Internet, distinguishing characteristics and factors related to this use, sales and employee growth indicators, and factors indicators.

4.2. Measures and Model

Business Growth: According to Baum (2001) and following Low & Macmillan's (1988) concepts of business growth as one of the most important performance indicators, SME growth in this study was measured with two indicators: change in annual sales and change in total yearend number of employees. Both measures comprise the period from 2000 to 2003. However, the rate of growth can be expected to differ across enterprises of different size. Birch (1987) developed a formula to standardize the growth rate by multiplying it by a "correction factor". The correction factor is the absolute difference in the number of workers (or sales) from year 1 to year 2. Using Birch's formula in a weighted scale range, growth (GRO) is a function of the sales growth indicator (SALES) and the employee growth indicator (EMPLO), which both range from -3 (companies that shrink) to a maximum value of 15 (those with high growth). These measures take into account the data for all four years.

Internet use, INTUSE: Is based on the DTI (2000) ladder adoption model and some empirical studies (Chan & Foster, 2001; Sadowski et al., 2002; Lee, 2004; Dholakia & Kshetri, 2004). This measure is constituted by an index, UIE, that goes from 1 (which represents the simplest form of Internet use: having an electronic mail account) to 48 (assuming integral Internet use in the operations of the company). We calculate this scale (1-48) pondering 16 questions about the use of Internet, giving a major value to the questions related to complex systems based on Internet technologies.

The activity factors, ACT. Was measured by categorical variables, type of customers in five categories from B2B to B2C (and intermediate categories) and type of activities measured on an accumulative scale from 0 to 100 percent in the three types of generic activities (commerce, manufacturing and services).

The managerial factors related to managerial motivation, MNG: was measured with questions in 1 to 7 Likert scales. Managerial experience, EXP, is measured with a scale called "Experience in the use of the Internet" (IEX) from 1 to 15.

The rest of the indicators in the competitive factors, COM were also measured with Likert scales.

Confirmatory factor analysis was used to test the measurement model underlying the questionnaire, and SEM to specify, estimate and test the underlying relationships among the constructs; additionally, non-parametric tests are provided to illustrate the responses to some research questions. The summary of the variables, evaluation dimensions and sources are shown in Table 2.

5. RESULTS

As we described previously, the use of the Internet is represented by an index with values ranging from 1 to 48. Of the total sample, 49 companies (48 percent) had a value in the range from 2 to 10, which shows that Internet use was basically electronic mail and the use of the World Wide Web for information purposes. In contrast, only 13 companies (12.7 percent) scored above 22, which indicate some evidence of e-business in these companies. None of the sampled companies registered a value of 48, the maximum being 36. On average, the index of Internet use was 12.65, and the most frequent value was 10.

In relation to these indicators, on average, the companies studied had 11 computers, 8 connected to the Internet, and 6 electronic mail accounts. It should be noted that these average values do not reflect the technological infrastructure of most of the companies. The most frequent values were 3 computers, l with an Internet connection, and 1 electronic mail account. In total, 44 companies (43 percent of the sample) stated that they had websites; these data reflect that a good percentage has an operational website for information purposes at least.

With respect to growth, the average growth in employees was 4.47, and sales 5.55, the most frequent value being 3, for both sales and employees. This means that the majority of participant companies had no growth. The average number of employees in the 102 companies that participated was 52, with an average age of 19.7. A summary of the descriptive statistics of the variables appears in Table 3, and the categorical variables are summarized in Table 4 and Table 5.

The questionnaire and the measurement model were validated by a confirmatory factor analysis using LISREL 8.54 (Jdreskog, Sdrbom, Du Toit & Du Toit, 2000).

Activity Factors. Owing to the nature of the variables involved in this construct, it was decided not to include them in the first SEM analysis. Therefore, we test the research questions by means of a series of non-parametric tests using SPSS. With respect to RQI on the activities of the company, Kruskal-Wallis one-way analysis of variance (sig. 0.287) indicates that there is no evidence of differences in the use of the Internet in the various types of activity of the company; hence we rejected RQI. With respect to RQ2, which refers to the type of customers, one Mann-Whitney U test (sig. 0.023) indicates that there are significant differences in GRO depending on the UIE index: companies engaged in B2B have higher growth, and therefore we cannot reject RQ2.

Managerial Factors. Our analysis using SEM for the general model -- which includes, in addition to the measurement model, the estimates of the effects among the factors measured -- shows that motivational factors MNG (SMEs with an owner manager/CEO who is highly motivated about Internet use) have a significant indirect effect on business growth (GRO) through INTUSE (see Figure 2). Therefore, RQ3 cannot be rejected. Analogously, the model shows that the experience of the owner manager/CEO regarding the use of the Internet, EXP, also has a significant indirect effect on business growth (GRO) through INTUSE. Therefore, RQ4 cannot be rejected either.

Competitive Factors. Using SEM again, the competitive factors (COM) had a significant indirect effect, through Internet use (INTUSE), on business growth (GRO) (see Figure 2). Therefore, RQS, which states that SMEs that compete in integrated sectors and use the Internet more intensively have a propensity to show higher growth, cannot be rejected.

[FIGURE 2 OMITTED]

Organizational Factors: With respect to the control variables, we observe a significant effect of technological resources (TEC) on Internet use, although it has no significant direct influence on growth (see Figure 2). The negative sign of the effect on GRO is related to some companies that have technological resources but do not present a high growth index. Neither management software nor years using computers was significant in relation to the use of the Internet.

In our SEM analysis, initially we included both regressors, MNG and COM, in the equation for INTUSE(1) (see Table 6). However, if we compare model INTUSE(1) and model INTUSE(2), with and without COM, we observe that the regression coefficient of MNG has diminished from 1.685 to 0.492 and its standard error has increased from 0.555 to 0.710. Inflation of standard errors and instability of the estimated coefficients are obvious indications of the existence of multicollinearity between the variables that constitute the COM and MNG factors. Model INTUSE(3) without MNG confirms this situation. So, we consider both regressors as plausible, and 0.472 as the percentage of variance of GRO accounted for by the model ---since R2 is not affected by multicollinearity and can actually be trusted. These results are in agreement with the findings of Lee (2004), who states that competitive pressure in the industry is probably less influential if other factors for adoption, such as motivational factors, are present.

Nevertheless, we have chosen model INTUSE(2) in Table V, because it fits our data much better ([chi square]=50.906 with DF=50; p=.438; RMSEA= 0.0; NNFI= 0.997; CFI= 0.998) and also for parsimony reasons. Again, both factors, experience in Internet use (EXP) and CEO motivation (MNG), show significant effects on INTUSE, and as a consequence they have indirect effects on growth (GRO).

6. DISCUSSION AND IMPLICATIONS

The analysis of this research shows that those companies that make greater use of the Internet in their business processes are indeed those that have greater and sustained growth. This effect can be construed as evidence that the use of Internet and related technologies could be at least one of the factors that influences business growth. In the sample of SMEs studied, Internet use can be quantified as 47 percent (R2=0.469) of the values of the indicators of growth of sales and employees. However, the results should be interpreted with care because the SEM model, as we said before, only estimates and tests the underlying relationships among the constructs. Obviously there are some other factors that could explain business growth (Storey, 1994) but our conclusions support the importance of technology (in this case Internet) on the performance and subsequent growth of SMEs. According to the research model, four specific facts are to be considered:

* The type of activity does not differ by the degree of Internet use in the sample of SMEs studied. This result is similar to Sadowski et al. (2002) findings. Our results show slight differences in the fact that manufacturing and service companies are obtaining greater advantages from Internet use. Complex business activities are more related with further technological implementation and use, consequently "traditional" commercial activities (like small retail business) have had a lesser degree of use of Internet and related technologies. But this does not imply that commercial activities do not benefit from it. However, by type of consumers, Internet use expands more among companies serving other companies and non-end consumers.

* Our specific model shows that the main influence in favor of Internet use comes from highly motivated CEOs or owner managers. These results are similar to previous research which explains the role of the owner managers who promote the use of this technology in the company (Feindt, Jeffcoate & Chappell, 2002; Lee, 2004). Motivated CEOs by consequence, just promote Internet use. Some other key factors are involved in the "intention to grow". But our results confirm that motivation is a key element and ultimately has a positive effect on company performance and hence on business growth.

* As consumers and suppliers of SMEs (main COM indicators) use the Internet in their business processes, it will become a multiplying factor whereby more and more companies get involved in the use of these technologies. As Poon & Swatman (1997) and Mehrtens, Cargg & Mills (2001) argue, not to use the Internet in sectors that are demanding it can be a significant disadvantage for SMEs.

* The extent of ICT resources has a positive effect on Internet use (INTUSE) but an indirect one on growth. This result should be expected, as the effect of TEC on GRO by INTUSE is essentially indirect and positive. These results are concurrent with Baum (2001) and Martin & Matlay (2001), who state that a high level of technological resources does not explain or have a direct repercussion on business performance, because companies need to employ their technology investments efficiently, and not just buy computer equipment for the sake of acquiring the latest tech.

The fact that this particular investigation was measured by sales and employee growth does not mean that the use of Internet technologies will very probably rebound on other performance indicators for SMEs. A review of the numerous studies conducted in other countries confirms that the use of information technologies, specifically the Internet and related technologies, by SMEs has a positive effect on performance. The results of this research can be added to existing ones, since most of the studies that have been published were conducted in developed countries. Therefore, this study could be of interest for showing another business reality under different economic, political and social parameters.

Implications for theory: One first empirical results from this study for the specific case of the sample analysed is that the use of the Internet be able to have a significant and positive achieve on growth. The results concur with previous research that regards the use of ICTs and related technologies like Internet as an explanatory factor of enterprise growth (Levy et al., 2002; Roberts et al., 2002; Baum, 2001; Street & Meinster, 2004) and suggest that these technologies could be considered an important strategic resource. Secondly, the research model demonstrated the strong relationship between the SME owner-manager (or CEO) and company performance and intention to grow (Greiner,1972; 1998; Storey, 1994; Baum, 2001; Scupola, 2003). As a result of these findings, the analysis of Internet adoption and use by SMEs requires simultaneous analysis of factors having major influence on the use of the Internet: motivational attitudes and the direct influence of the owner-manager, as one of the most important factors for the use of this technology, with an even greater significance than external influences or technological resources.

With respect to the research methodology, other studies conducted with these analytical techniques (Raymond, 2001; Lee & Runge, 2001; Baum, 2001) confirm its usefulness for estimating the relationships among the variables studied. Thus, this methodology has proven very efficient and continues to be used to investigate the use of ICTs and the Internet in SMEs (Grandon & Mykytyn, 2004; Lin Fen-Hui & Wu Jen-Her, 2004) and constitute an important complementary technique (both quantitative and qualitative) to analyse the use of the Internet and related technologies, as well as the effects on enterprise growth.

Implications for management: The Internet is a technology that has and will continue to have a strong presence in the business world. Simply put, no other technology in modern economic history has hit so forcefully and in such a short time (Chaston & Mangles, 2002; IDB, 2001; Castells, 2001; OECD, 2000a, 2002a). The scale of influence of the Internet in the world-wide market is increasing despite negative effects that were experienced in 2001 with technology-based companies (Castells, 2001; Cisco Systems, 2003; IDC, 2003). It is commonly recognized that there are major problems and barriers facing SMEs desiring to adopt and use Internet technologies especially in developing countries. However, this study stresses the importance of SME owner-manager involvement and their motivation to adopt and use Internet technology. For these reasons owner-managers from emergent regions or countries would do well to focus on some specific strategies to improve their performance through Internet use. For example, (1) Generation of capacities: SMEs should recognize and develop competitive advantages, helping themselves with the potential of the Internet to be different from other companies, for example, through e-commerce; (2) Mobilization of resources: SMEs should assure as far as possible financial and human -- and in this case technological -- resources that aim towards growth of the company. The Internet and related technologies are now relatively accessible tools to SMEs in many developing countries (low investment); and (3) Negotiated transitions: SMEs should make the necessary adjustments to the company and its members to adapt themselves to the dynamics of the organization, products, services and markets, where the Internet plays an important role as a support for business processes. The motivation and the impulse provided by managers are essential to accomplish these continuous improvements.

Implications for public administrations: Programs to support the creation and development of SMEs are one of the principal roles of many public administrations. In general terms, the spread of the Internet to SMEs has in many countries been accompanied by government programs fostering ICTs related to Internet such as e-government, Web education programs, public e-commerce bidding, virtual clusters, etc. The results of this study point to important implications for government and public administrations, especially in emerging economies like Mexico or Latin-America. Government financial support programs should be targeted to SMEs to facilitate and aid computer and ICT acquisition. Another important measure could be the regularization of industry providers of ICTs to improve competition and give SMEs more competitive Internet access options. Finally, if SMEs' owner managers are one of the most important factors for Internet use, public administration in conjunction with other institutions could make Internet business training programs accessible for these kinds of people.

7. LIMITATIONS, CONCLUSIONS AND FUTURE RESEARCH

One of the main limitations of the study consists of the small geographical area in which it was conducted, the relatively small number of companies studied, and the typical shortcomings of a transversal study as opposed to a longitudinal one, it might therefore be difficult to generalize from these results to other regions. Another constraint is the fact that the measure of growth was restricted to sales and number of employees, without considering other performance indicators such as ROI, net profit or measurement of growth by productivity indicators. Another limitation is the use of a specific quantitative model (SEM) that does not consider other variables that can influence business growth. Business growth is a multi-variable and complex phenomena not only related to technological adoption. In the future we need to test some other factors and possibly employ Internet use as a moderator variable or introduce other Internet and related technologies measures. This could help to provide other SME performance perspectives in relation to a more holistic approach. Other future research could employ a larger sample or conduct a longitudinal survey involving more companies in Mexico or replicate this study in other regions and other countries to compare the results and perform cross-national studies of highly developed versus developing countries.

Despite its limitations, this study highlights some issues to understand the use of the Internet by SMEs and their positive relation to business growth. Furthermore, this study shows significant empirical evidence of the situation in Mexico's regions in relation to Internet use and has contributed to recognizing local and regional conditions to assist in the development of strategies for Internet and related technologies focused on SMEs. The incorporation of technologies such as the Internet that are attractive to consumers, suppliers, employees and other actors in the various markets can be an important competitive factor for SMEs (Baum, 2001). In Latin America, SMEs are a key factor for national and regional development. The empirical evidence of this study contributes important conclusions to the effect that the Internet can indeed help SMEs improve their performance, taking into account the fact that the Internet is a technology that has grown in emerging countries such as Mexico.

Finally, the mere use of the Internet does not constitute a structural solution for many of the problems that SMEs could face, especially in emerging and developing countries. Nevertheless, the potential of this technology will clearly bring quantifiable benefits and continuous improvement of processes and operations for those SMEs that know how to make the most of all the advantages the Internet has to offer.

Recibido: 6/12/06

Envio evaluacion: 13/02/07

Correccion: 3/07/07

Aceptado: 18/08/07

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Jose Ernesto Amoros

Universidad del Desarrollo, Santiago, Chile

eamoros@udd. cl

ESADE Business School, Universitat Ramon Llull

Barcelona, Espana

ernesto.amoros@esade.edu

Marcel Planellas

ESADE Business School, Universitat Ramon Llull

Barcelona, Espana

marcel.planellas@esade.edu

Joan Manuel Batista-Foguet

ESADE Business School, Universitat Ramon Llull

Barcelona, Espana

joanm.batista@esade.edu

* Una primera version de este articulo fue presentada en la IV Conferencia de la Iberoamerican Academy of Management Conference, Lisboa, Portugal, 8-10 de diciembre de 2005. Una version parcial y en espanol fue publicada en Universidad & Empresa, 5(10).

Jose Ernesto Amoros es Ph. D. en Management Sciences de Esade-Universitat Ramon Llull, Barcelona, Espana. Es Licenciado en Administracion de Empresas y tiene Maestria en Mercadotecnia por el Tecnologico de Monterrey, Mexico. Es profesor de emprendimiento en la Universidad del Desarrollo, Santiago, Chile. Tambien es un colaborador academico e investigador del Departamento de la Politica de Empresa y el Centro de Iniciativa Empresarial en Esade. Sus intereses de investigacion actuales son: creacion de nuevas empresas, emprendimiento corporativo y empresas con alto potencial de crecimiento.

Marcel Planellas, Ph. D. Es Doctor en Ciencias Economicas y Empresariales de la Universitat Autonoma de Barcelona y Licenciado en Filosofia y Letras - Historia Moderna, Universitat de Barcelona. Es profesor ordinario del Departamento de Politica de Empresa y secretario general de Esade-Universitat Ramon Llull. Sus intereses actuales de investigacion son: desempeno de nuevas empresas, estrategias del alto crecimiento y emprendimiento corporativo.

Joan Manuel Batista-Foguet, Ph. D. Es Doctor Ingeniero Industrial, ETSUB - Universitat Politecnica de Catalunya y Master in Social Sciences Data Analysis, de la School of Social Sciences, Universidad de Essex, Reino Unido. Es profesor ordinario del Departamento de Metodos Cuantitativos, director del Survey Research Center y actual director de Investigacion en la Escuela de Negocios de Esade. Sus campos de interes son el diseno de la investigacion, la mejora de instrumentos de medida en la investigacion social y los modelos estadisticos multivariantes, usando principalmente modelos de ecuaciones estructurales.
Table 1
Description of factors affecting Internet use in SMEs.

           Activity Factors              Managerial Factors

Internal   The Internet has helped to    This refers to the
Factors    develop and create new        influence exerted
           business models (Tapscott,    by the CEO (commonly
           2001). For example,           the owner manager) or
           e-commerce provides           the general manager
           SMEs with many                on Internet use. These
           commercial opportunities      aspects are related to
           (Poop & Joseph, 2000;         motivation, experience,
           Chaston & Mangles,            support and the degree
           2002).                        to which the CEO or
                                         general manager is
           Internet adoption and         involved in the
           use varies in individual      implementation and
           SMEs between markets,         development of Internet
           commercial processes          projects (Southern
           and main activities (Poon     & Tilley, 2000; Lee
           & Joseph, 2000), and also     & Runge, 2001; Raymond,
           depending on the nature       2001, Scupola, 2003).
           of the business and generic   The CEO is in the best
           activities: commercial,       position to identify
           manufacturing (processing     the critical
           industry) or services, and    requirements of new
           whether they are engaged      technologies (Feindt
           in business to business       et al., 2002; Fillies
           (13213) or business to        et al., 2003; Thong
           consumer (132C) commerce      et al., 1997).
           (Mehrtens et al., 2001).
                                         Usually the CEO takes
           Generally, complex            the majority of the
           industrial activity           decisions on the
           sectors are more prone        adoption and diffusion
           to use some type of           processes of ICTs in
           technological development     the company (Lee &
           to a greater degree, and      Runge, 2001).
           the Internet has been no
           exception (Chappell &         If the CEO has the
           Feindt, 2000; Mehrtens        necessary competences
           et al., 2001; Porter, 2001).  and abilities to
           The question is to identify   determine the best
           whether more extensive        strategic options,
           use of the Internet is        together with a high
           related to some patterns      degree of motivation,
           or processes in companies'    he/she can be a leader
           operation.                    in the success of the
                                         SME, which can
                                         translate into growth
                                         (Baum et al., 2001).

           Organizational Factors

           This refers to the
           company's history,
           structures and resources
           data, capacity for ICT
           investment, computers and
           information systems
           infrastructure. Another
           factor to consider is the
           number of employees
           (Baum, 2001; Baum et al.,
           2001).

Competitive Factors

External   This weighs the influence of the sector in which the company
Factor     competes (external agents). It describes the relations with
           the various actors in the sector, the supply channels,
           sector entry and exit barriers, clients or consumers and
           direct and indirect competition. Sectors that are more
           integrated and show bonds of cooperation among its
           components may be more likely to use certain technologies
           (Mehrtens et al., 2001; Raymond, 2001; Sadowski et al.,
           2002; Lee, 2004

           The Internet and related ICTs are having major repercussions
           on the transformation of the industrial sector (Canals,
           2001; Porter, 2001). ICTs and Internet innovations can be
           viable ways to unify growth (Levy et al., 2002).

Table 2
Research Variables.

Evaluation       Construct        Variables
Dimension           Type         (Indicators)           Source

Growth (GRO)     Endogenous   SALES: Weighted       Birch (1987)
                              rate sales            Storey (2001)
                              EMPLO: Weighted       Baum (2001)
                              rate, employees

Use of the       Endogenous   UIE: Use of           Spectrum (1997)
Internet                      the Internet          DTI UK (2000)
(INTUSE)                                            Chan & Foster
                                                    (2001); Sadowski
                                                    et al. (2002)
                                                    Lee (2004)
                                                    Dholakia &
                                                    Kshetri (2004)

Activity         Exogenous    ACT1: Commercial      Goode &
Factors:         (not         activities            Stevens (2000)
Type of          included     ACT2: Manufacturing   Martin &
activities       in the       activities            Matlay (2001)
                 structural   ACT3: Service
                 model)       activities

Activity         Exogenous    ACT4: Customer type   Sadowski et
Factors:         (not         (13213 or 132C)       al. (2002)
Type of          included
customers        in the
                 structural
                 model)

Managerial       Exogenous    MNGI: Perception      Poon &
Factors:                      that the Internet     Swatman (1997)
Motivation                    helps business        Lee & Runge
(MNG)                         activities            (2001)
                              MNG2: Participation   Baum, Locke &
                              in the adoption       Smith (2001)
                              of the Internet       Thong, Raman &
                              MNG3: Influence       Yap (1996, 1997)
                              for the use of the    Mehrtens, Cargg
                              Internet              & Mills (2001)
                              MNG4: Perception      Raymond (2001)
                              of the impact of
                              the Internet on
                              performance

Managerial       Exogenous    IEX: Experience in    Colombo &
Factors:                      the use of the        Delmastro (2001)
Experience                    Internet              Levy et
(EXP)                                               al. (2002)
                                                    Windrum &
                                                    Berranger (2002)

Competitive                   COMI: Integration     Poon &
Factors (COM)    Exogenous    of the sector         Swatman (1997)
                              COM2: Influence       Chau &
                              of customers          Hui (2001)
                              COM3: Influence       Porter (2001)
                              of suppliers          Sadowski et
                              COM4: Integration     al. (2002)
                              with the Internet
                              NCOM: Number of
                              computers

Organizational   Endogenous   CINT: Number of       Goode &
Factors                       computers with        Stevens (2000)
(Control):                    Internet connection   Baum (2001)
Technological                 MAIL: Number of
resources                     e-mail accounts
(TEC)                         SIZE: Company size

Table 3
Variables' Descriptive Statistics (n=102).

Variables              Mean    Median    S.D.

Growth (a)
  SALES                5.55     5.00    4.316
  EMPLO                4.47     3.00    4.058
Use of the Internet
  UIE                 12.65    11.00     6.94
Managerial Factors
  MNG1                 5.58     6.00    1.685
  MNG2                 5.75     6.00    1.500
  MNG3                 5.46     6.00    1.806
  MNG4                 5.27     6.00    1.830
Competitive Factors
  COM1                 3.77     4.00    2.320
  COM2                 4.40     5.00    2.322
  COM3                 4.58     5.00    2.191
  COM4                 5.11     6.00    1.990
  IEX                  3.65     3.00    2.845
Controls
  NCOM                11.75     6.00    14.46
  CINT                 8.19     4.00    11.15
  MAIL                 6.16     1.00    10.21
  SIZE                55.55    26.00    56.64

Variables              Min.     Max.

Growth (a)
  SALES                -1       15
  EMPLO                -3       15
Use of the Internet
  UIE                   2       36
Managerial Factors
  MNG1                  1        7
  MNG2                  1        7
  MNG3                  1        7
  MNG4                  1        7
Competitive Factors
  COM1                  1        7
  COM2                  1        7
  COM3                  1        7
  COM4                  1        7
  IEX                   1       15
Controls
  NCOM                  1       80
  CINT                  1       66
  MAIL                  1       51
  SIZE                  10     250

(a.) Kolmogorov-Smimov tests demonstrated that distributions of the
variables of growth, Internet use and factors
do not display a normal behaviour.

Table 4
Frequency of Activity Variables, Generic Activities (n=102).

                  ACT1: Commerce          ACT2: Manufacturing

Percent for
activity
(category)    Frequency     Percent     Frequency     Percent

0                33          32.4         47          46.1
10 to 40         18          17.6         12          11.8
50               18          17.6         12          11.8
60 to 40         12          17.6         12          11.7
100              21          20.6         19          18.6
Total            102         100          102         100

                ACT3:       Services

Percent for
activity
(category)    Frequency     Percent

0                67          65.7
10 to 40         15          14.7
50               4            3.9
60 to 40         3            3.0
100              13          12.7
Total            102         100

Table 5

Frequency of Activity Variables, Customer Type (n=102).

Customer Category     Percent

Totally B2C             13
Mainly B2C              19
Equal B2C and B2C       30
Mainly B2C              18
Totally B2C             20
Total                   100

Table 6
Matrix of Beta Coefficients, INTUSE Equations.

                             INTUSE       EXP         TEC

GROWTH          B           0.187                  -0.054
                Error std   (0.055)                (0.024)
                T           3.379                  -2.265

INTUSE (1)      B                       0.524      0.130
All constructs  Error std               (0.202)    (0.052)
                T                       2.597      2.502

GROWTH          B           0.185                  -0.053
                Error std   (0.055)                (0.024)
                T           3.348                  -2.25

INTUSE (2)      B                       0.487      0.127
Without COM     Error std               (0.208)    (0.053)
                T                       2.335      2.400

                B           0.186                  -0.053
GROWTH          Error std   (0.055)                (0.024)
                T           3.357                  -2.234

INTUSE (3)      B                       0.561      0.127
Without MNG     Error std               (0.201)    (0.053)
                T                       2.797      2.400

                              MNG         COM      [R.sup.2]

GROWTH          B
                Error std                            0.472
                T

INTUSE (1)      B           0.492       1.006
All constructs  Error std   (0.710)     (0.494)     (0.254)
                T           0.693       2.039

GROWTH          B
                Error std                            0.469
                T

INTUSE (2)      B           1.685
Without COM     Error std   (0.555)                  0.200
                T           3.037

                B
GROWTH          Error std                            0.469
                T

INTUSE (3)      B                       1.344
Without MNG     Error std               (0.338)      0.200
                T                       3.976

                            Model Evaluation

GROWTH          B           [chi square]=116.25
                Error std   D.F = 95 (p =.068)
                T           RMSEA=0.478

INTUSE (1)      B           NNFI = 0.945
All constructs  Error std   CFI= 0.957
                T

GROWTH          B           [chi square] = 50.906
                Error std   D.F = 50 (p = .438)
                T           RMSEA=0.0

INTUSE (2)      B           NNFI = 0.997
Without COM     Error std   CFI= 0.998
                T

                B           [chi square] = 69.786
GROWTH          Error std   D.F = 50 (p=.033)
                T           RMSEA=0.063

INTUSE (3)      B           NNFI = 0.934
Without MNG     Error std   CFI= 0.95
                T
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Date:Jul 1, 2007
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