How do New Zealand SMEs use the Internet for internationalisation? A comparison between firms in sectors with high and low rates of E-commerce adoption over time.

Abstract

Aim: The primary objective of this thesis was to examine how the level of internet adoption in New Zealand SMEs within different industries had influenced the internationalisation processes of the SME. The secondary objective was to analyse the integration of internet and e-commerce adoption into the everyday business processes of the export SME in order to see whether Shneor and Flaten’s (2008) conceptual framework and propositions regarding internet-enabled stages, sequences, and pathways were in line with actual business practice. Theoretical background: The theoretical base for this study touches on seminal studies regarding early research on how and why internet and computers are used for business purposes, as well as seminal internationalisation research. It then branches out further into internationalisation theory, exploring approaches and patterns of internationalisation such as the Uppsala Model, Export Approach, and International New Ventures, moving into e-commerce theories and models. In-depth study into internetalisation theory and the internet-enabled internationalisation process is examined. This includes the reasons for internet usage such as communication, marketing, lowering barriers to entry, unsolicited orders, trust building, and industry. Methodology: This mixed method study was conducted in two parts. The quantitative portion of the study involved cross referencing the MYOB Business Monitor with the Business Operations Survey 2012 to find four dissimilar industries regarding level internet usage and level of internationalisation. That is, industries that fit into the four categories of 1) high internet adoption: high internationalisation (Computer Systems Design, IT), 2) high internet adoption: low internationalisation (Financial and Insurance Services), 3) low internet adoption; high internationalisation (Agriculture), and 4) low internet adoption: low internationalisation (Construction). A random sample of 400 New Zealand SMEs were taken from the Kompass Directory (100 firms per industry) with findings regarding internet usage, website information, and other internet activity and presence tabulated to identify the trends and correlations between internationalisation and internet usage. Triangulation by qualitative methods was used to obtain more in-depth longitudinal data. Interviews from two case firms, who had been in business for over 20 years, were conducted to form mini case studies. Findings: The majority of the 400 New Zealand SMEs sampled have an internet presence whether through a dedicated website or email contact. Of these, only a small proportion of the SMEs export to overseas markets. In addition, only a few of the sampled SMEs have an online shop through which customers can purchase goods with an even smaller proportion of these SMEs serving international customers. There appears to be little correlation between the export activities of the few exporting SMEs in the sample and whether the SME uses the internet to facilitate export activities beyond easing communication and time barriers between the SME and potential customers. The mini cases reveal product characteristics are a factor for export. On the other hand, the internet allows the SME to be more efficient and productive, allowing for larger volumes of sales. Unsolicited orders allow for entry into new markets, with the orders coming mainly from wider industry networks, resulting issues of trust and trust-building. Conclusions: The level of internet adoption for the New Zealand SMEs sampled is generally above 90% with this usage being mainly for activities such as online banking and email communication. Where the SME has international processes such as export activities, the internet is used more to ease communication and time barriers than for active e-commerce. The internet also allows for potential international clients to make unsolicited orders from the SME as opposed to the SME actively targeting new markets. However, much care is required to prevent scams, highlighting the importance of trust and commercial reputation. For those SMEs who do engage in ecommerce, few sales involve international customers. Implications: Findings show the reasons for internet usage and adoption (e.g. communication, marketing, and market research) in New Zealand SMEs has not changed significantly from when the internet first became commercialized. Although the internet can be used as a sales facility through dedicated websites, in reality, many SMEs don’t follow the pattern of internationalisation for internet-enabled SMEs conceptualised in Shneor and Flaten’s (2008) conceptual framework. Rather than creating e-commerce capabilities, the internet is mostly a tool for efficiency and productivity to aid SMEs in their sales activities, whether domestic or international.