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International Journal of Information Technology and Business Management 29

th July 2013. Vol.15 No.1

© 2012 – 2013 JITBM & ARF. All rights reserved

ISSN 2304-0777 www.jitbm.com

122

CONCEPTUAL MODEL FOR EXAMINING THE FACTORS THAT

INFLUENCE THE LIKELIHOOD OF COMPUTERISED ACCOUNTING

INFORMATION SYSTEM (CAIS) ADOPTION AMONG MALAYSIAN

SMES

Wan Nur Syahida Wan Ismail ¹, Azwadi Ali ²

¹² Department of Accounting and Finance, Universiti Malaysia Terengganu, Malaysia.

[email protected], [email protected]

Abstract

The purpose of this study is to propose and discuss a conceptual model for investigating the influential

factors of computerised accounting information systems (CAIS) adoption in Malaysian SMEs. This study

examines the existing empirical studies in information technology (IT) and information systems (IS) adoption

research related to adoption at organizational level. In particular, the Technological-Organizational-

Environmental (TOE) framework has been widely used in examining the factors influencing IT adoption.

However, studies attempted to use this framework to measure CAIS adoption are limited. In contrast to other

theories commonly used for explaining innovation adoption, TOE framework does not only cover the

technological aspects but more importantly also explores their organizational and environmental contexts.

Hence, this model provides a complete analysis of the possible aspects to be considered. The inclusion of

Diffusion of Innovation (DOI) theory in the technological context and the application of Thong’s SME model

make the proposed model more robust. A summary and conclusion along with research contribution,

limitations, and the direction for future research are also presented in this paper.

Keywords: Computerised Accounting Information System, Information technology, TOE framework, DOI

theory, Thong’s Model, Small-and medium enterprises.

1.0 INTRODUCTION

Small- and Medium-sized

Enterprises (SMEs) have grown in

importance in the global economy (Ang &

Hussin, 2012). They also have high

potential to expand to a larger scale.

Previous research repeatedly showed that

financial management is crucial for the

continuity of SMEs (e.g., Halabi et al.,

2010; Fadhil & Fadhil, 2010; Ahmad &

Seet, 2009; Dyt & Halabi, 2007; McMahon,

2001; Peel & Wilson, 1996). According to

McMahon (2001), financial management in

SMEs could be improved through upgrading

of their financial reporting systems. As

such, SMEs’ owner-managers need a good

record-keeping system that allows them to

maintain control of their finance, and the

most important use is to aid the owner-

managers in making decisions about the

firms (Davis et al., 2009). This accounting

report also provides financial information

which could inform owners of the

consequences of their firms’ operations and

the effects of their past decisions. Therefore,

it serves as a good basis for realistic future

plans (Butkevicius, 2009). The system that

mailto:[email protected]

mailto:[email protected]





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records all the financial transactions of a

business or organizations is known as

accounting information systems (AIS).

Information technology (IT) offers

many benefits in order to keep the financial

information sharp, clean and well organized.

The important question raise from this issue

is whether firms ready to implement changes

in order to have effective financial

management that will enable them to

analyze results, to interpret, to forecast

future performance and improve their

business decisions. Therefore this study is

conducted to examine the factors that

influence the SMEs in Malaysia to adopt IT

in their accounting processes since effective

financial management could easily be

obtained today with the help of related IT

such as computerized accounting

information systems (CAIS).

The previous studies on AIS are

mainly focused on issues of CAIS

effectiveness (Kouser et al., 2011; Ismail

2009), CAIS threats (Abu-Musa, 2005),

selection of CAIS software (Adhikari et al.,

2004; Adhikari & Zhang 2003) and user

satisfaction (Illias et al., 2009; Nazem

1990). Only a handful of studies (Fowzia &

Nasrin, 2011; Breen et al., 2003) explore the

factors that influence the CAIS adoption.

However, none of them have empirically

validated a conceptual framework that can

consider all the aspects of the organizational

level to represent the case of CAIS adoption

in general and SMEs in particular.

Therefore, the basis for selection of

the hypotheses for this research was based

on previous IT and information system (IS)

adoption literature at the organizational

level. The justification and formulation of

subsequent hypotheses have been made on

adequate evidence of the significance of the

relationships in prior studies with a

probability that they will be proven

significant when implementing the adoption

of CAIS.

2.0 THEORIES USED IN

IT/IS ADOPTION

Information technology is a key

driver of many technological innovation and

organizational evolution including CAIS

(Liang et al., 2010). Liang et al. (2010) has

listed several theories that have been

proposed to explain the widespread issues of

IT such as Resource-based View (RBV),

Transaction Costs, Media Richness Theory

and Coordination Theory. Each theory has

different applicable research domains.

Regarding IT adoption, many

theoretical models have been used to

examine the adoption of IT/IS innovations

such as Technology Acceptance Model

(TAM) (e.g. Li et al., 2011; Vance et al.,

2008; Grandon and Pearson, 2004; Igbaria et

al., 1997), Theory of Planned Behaviour

(TPB) (e.g. Grandon et al., 2011; Harrison

et al., 1997), Combined TAM and TPB (e.g.

Riemenschneider et al. 2003; Chatzoglou et

al., 2010); TAM2 (e.g. Venkatesh 2000),

Diffusion of Innovation Theory (DOI)

(e.g.Premkumar 2003), Resource-Based

View (RBV) (e.g. Ramanathan et al., 2012;

Jacks et al., 2011; Mehrtens et al. 2001),

Stage Theory (e.g. Poon & Swatman, 1999),

and Unified Theory of Acceptance and Use

of Technology (UTAUT)(e.g. Kijsanayotin

et al., 2009; Fowzia & Nasrin, 2011;

Anderson & Schwager, 2003).

However, according to Alam

(2009) and Alatawi et al. (2012), the

literature on technology adoption by

businesses suggests that most research are

based on the Theory of Planned Behaviour

(TPB) (Ajzen, 1991), Technology

Acceptance Model (TAM) (Davis, 1989),

The diffusion of Innovation (DOI) (Rogers,

1995), The Technology-Organization-

Environment Model (TOE) (Tornatzky &

Fleischer, 1990) and the Resource-based

Theory (RBV) (Wernerfelt, 1984). The

DOI, TPB, TAM and TOE theory are highly

applicable in predicting adoption behaviour

of the firm in considering new technology

while RBV has been used to provide the





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theoretical underpinning to understand how

the adoption of innovation is linked to firm

performance (Ramanathan et al., 2012).

As TAM and TPB only focus on

technological perspective which based on

perceptions and attitudes, they have

commonly been used as groundwork for IT

research at the individual level (Salleh and

Rohde, 2005). As the purpose of this study

is to examine the CAIS adoption among

SMEs, the theories and models at the

organizational level are more applicable.

After carefully reviewing the literatures, this

study found that the TOE framework is a

suitable framework for the study of factors

influencing the adoption of IT/IS in any

stages as it allows us to evaluate the

importance of different factors which affect

the propensity to adopt IT (Lin & Lin,

2008). The TOE framework also is

consistent with Rogers’ (1983) theory

(Orturk, 2010) which is one of the dominant

theory used to examine organizational

adoption of IT over the prior two decades

(Yoon, 2009).

2.1 Technological-Organizational-

Environmental (TOE ) framework

Tornatzky and Fleischer (1990) are

credited with being the first to develop the

TOE framework to study the adoption of

technological innovations. Tornatzky and

Fleischer (1990) developed a framework for

organizational adoption based on

Contingency Theory of Organizations

(Arpaci et al., 2012). According to Arpaci

et al. (2012), the former theory postulates

that an effective organization should have a

structure which is consistent with its

environmental needs. The effectiveness of

an organization is based upon its fitness

towards both internal and external factors.

Tornatzky and Fleischer (1990) believed

that the adoption and assimilation of new

technologies in a company were under the

influence of three major dimensions –

Technological-Organizational-

Environmental. Therefore they developed

the TOE framework to determine what

factors influence a firm’s adoption decision.

The TOE framework identifies three aspects

of a firm’s contexts that influence the

adoption and implementation of a

technological innovation, namely

technological, organizational and

environmental aspects.

The technological context describes

both the existing technologies in use and

new technologies relevant to the firm; the

organizational context refers to

characteristics of the organization; and the

environmental context is the arena in which

a firm conducts its business, referring to its

industry, competitors, and dealings with the

government (Oliveira & Martins, 2010).

These three groups of contextual factors

influence a firm’s intent to adopt an

innovation, effect the assimilation process

and eventually the impacts of the innovation

on organizational performance (Zhu et al.,

2004) and therefore has been the choice of

many prior studies in technological

adoption.

Many researchers also agreed that

TOE provide an excellent theoretical

foundation for exploring IS adoption

behaviour within SMEs. For example,

Mehrtens et al. (2001) adopt TOE

framework for investigating the adoption of

internet in seven SMEs. Lertwongsatien and

Wongpinunwatana (2003) show the

suitability of the TOE framework for

studying the e-commerce adoption study in

Thailand SMEs. Ramdani et al. (2009)

adopt the TOE framework for predicting the

potential enterprise systems adopters in

SMEs in England. Drawing upon the

empirical evidence detailed above, the TOE

framework is an appropriate theoretical

foundation for investigating CAIS adoption

in Malaysian SMEs.

TOE does, however, not aim to

offer a concrete model describing the factors

that influence the adoption process; it is

rather taxonomy for classifying factors in

their respective context (Ven & Verelst,

2011). The main contribution of this





125

framework is that it encourages the

researcher to take into account the broader

context in which the adoption takes place

(Ven & Verelst, 2011). The constructs

used under each context usually were

selected from previous studies which were

found suitable with the condition of the

technology that was studied. However some

researchers suggested that to identify

specific technological, organizational and

environmental factors and to establish the

causal relationships needed for hypothesis

development, the TOE framework should be

combined with other theories (Awa et al.,

2011; Henderson et al., 2012; Chong &

Chan, 2012; Alatawi et al., 2012).

According to Awa et al. (2011), integrating

TOE with other models offering larger

number of constructs than the original and

provides richer theoretical lenses to the

understanding of adoption behavior (Awa et

al., 2011). Literatures have proved that

many studies combined TOE frameworks

with other theories to better explain IT

adoption (Alatawi et al., 2012).

From the literature review, the

present study revealed that DOI theory is the

main theory that is used together with the

TOE framework (e.g. (e.g. Chong & Chan,

2012; Picoto et al., 2012; Hossain &

Quaddus, 2011; Low et al., 2011; Wang et

al., 2010; Ramdani et al., 2009).

2.2 Diffusion of Innovation Theory

(DOI)

DOI theory by Rogers (1995) is a

theory of how, why, and at what rate new

ideas and technology spread through

cultures, operating at the individual and firm

level (Oliveira & Martins, 2011). DOI

provides insights into the innovation or

technological factors that influence the

adoption of innovation (Rogers, 1995).

Originally, innovation characteristics in DOI

was presented in the context of the

innovation adoption at the individual level,

however, Rogers (1995) argued that the

characteristics of innovations could also be

applied to the innovation adoption models at

the organizational level (Picoto et al., 2012;

Hameed & Counsell, 2012). Hence, DOI is

used in many studies to study innovation

adoption issues by firms (e.g. Tan et al.,

2009; Ramdani et al., 2009; Ramdani &

Kawalek, 2007; Hussin & Noor, 2005; Seyal

& Rahman, 2003; Premkumar & Roberts,

1999; Thong, 1999).

One of the main contributions of

DOI is its set of innovation attributes. DOI

suggests that innovations possess certain

attributes, which as perceived by adopters,

regularly determine the adoption of

innovation (Ozturk, 2010). The innovation

attributes include relative advantage,

compatibility, complexity, trialability and

observability (Roger, 1995). Each

characteristic helps to reduce a potential

adopter’s uncertainty regarding the

perceived benefits of innovation adoption

(Yoon, 2009). Consequently, innovations

which are perceived as having more relative

advantage, compatibility, trialability,

observability and having less complexity

will be adopted more rapidly than other

innovations (Rogers, 1995).

Among these characteristics, the

most frequently adopted factors are relative

advantage, compatibility and complexity.

They were chosen by many studies due to

frequently found as significance factors in

IT/IS adoption in many empirical researches

(e.g. Ramdani et al., 2009; Thong, 1999; Al-

Qirim, 2007b; Premkumar & Roberts,

1999). This is consistent with Tornatzky

and Klein (1982) which identified only three

characteristics of an innovation which would

be the most important: relative advantage;

compatibility; and complexity. This is based

on the finding of their meta analysis studies

on 75 innovation articles.

The more frequent use of DOI with

TOE framework also seems to be driven by

the fact that this framework is consistent

with TOE, where Rogers (1995) highlighted

individual as well as internal and external

characteristics of the organization (Alatawi

et al., 2012). Based on the DOI theory at





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firm level, innovativeness is related to such

independent variables as individual (leader)

characteristics, internal organizational

structure characteristics and external

characteristics of the organization (Rogers,

1995).

Accordingly, this study use the

TOE framework to specify the categories of

factors (Technological, Organizational and

Environmental) affecting CAIS adoption.

The technological factors are taken from

DOI theory, while the organizational factors

and environmental are adapted from

previous literatures. As the area in CAIS

adoption using this framework is among

pioneer studies, the basis for the selection of

the construct and formulation of subsequent

hypotheses have been made on adequate

evidence of the widely known significance

constructs in previous studies, with the

assumption that they will be proven

significant when implementing the adoption

of CAIS.

Derived from a strong theoretical

background, satisfactory empirical

validations, and suitability for the contexts

examined for SMEs and CAIS, it was

decided that TOE supplemented with DOI

theory would serve as a guiding framework

for this research.

2.3 DTOE framework for SMEs

(Thong’s (1999) Model)

As stated previously, in TOE

framework, the process by which a firm

adopts and implements technological

innovations is influenced by three aspects:

the technological context, the organizational

context, and the environmental context.

Thong (1999) on the other hand suggested

TOE theory in four dimensions when

studying SMEs sectors.

Extending the TOE theory, Thong

(1999) argued that based on SMEs highly

centralized structures, the CEOs or owner-

managers make most of the critical

decisions. As such, Thong (1999)

conceptualized and verified the importance

of a fourth dimension (besides

technological, organizational and

environmental) which has been classified as

CEO’s characteristics. Thong’s study

distinguished from others as most of the

study added together the characteristic of the

decision makers in organizational context

(e.g. Scupola, 2009; Chang et al., 2007;

Premkumar & Roberts, 1999; Kuan & Chau,

2001).

Following Thong (1999), Al-Qirim

(2007a) and Seyal and Rahman (2003) also

distinguished decision-maker context from

the organizational context, consequences

TOE framework in four dimensions:

decision-makers, technological,

organizational and environmental context

(DTOE).

In agreement with the significant

role played by the owner-manager’s in

SMEs, this study shall apply Thong’s (1999)

model by including the decision-maker

characteristics as one of the main variables

together with technological, organizational

and environmental context. However, this

study does not adopt all the variables in

Thong’s model. Several modifications have

been made on original model. By reviewing

previous technological innovation literature,

this study integrated and developed its own

variables which identified as suit with the

CAIS condition.

3.0 PROPOSED

CONCEPTUAL MODEL

The objective of this study is

related to the likelihood of CAIS adoption

which is targeted to CAIS non-adopters. As

shown in figure 1, using DTOE and DOI

theory, the model proposes that there are

significant relationships between decision

maker, technological, organizational and

environmental contexts and the likelihood of

CAIS adoption among non-adopters.

This conceptual model describes

the factors that are hypothesized to influence

the CAIS adoption. The decision-maker





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contexts comprised of the owner-manager

IT knowledge, owner-manager attitude

towards IT and owner-manager

commitment. The organizational context

contains factors such as organizational

readiness, employees IT knowledge and

satisfaction with manual systems. Although

none of the studies were found to be related

specifically to CAIS, these variables have

been gathered from the contemporary IS/IT

field of research and deemed significant to

be considered as the factors in the

organizational context for describing the

adoption of CAIS in Malaysia. The

environmental context relates to the factors

such a vendor support, competition and

government influence.

4.0 HYPOTHESES

DEVELOPMENT

Despite the lack of research which

particularly focused on CAIS adoption

factors and SMEs, general IT and IS

adoption studies however have been

extensively researched. Since CAIS is an

important sub-set of overall small business

IT research (Premkumar & Robert, 1999),

this study will adapt the finding of IT/IS

adoption literature to suit the current study.

In this research, the endogenous

variable is the likelihood of CAIS adoption

which is defined as the willingness of non-

adopters to adopt and utilize the CAIS to

support daily recording of business

transaction and decision making in the

business.

There are many adoption factors

have been studied in prior research.

However, it is not possible to study all the

factors identified in the technological

innovation literatures. Furthermore,

innovation researchers have argued that it

may not be possible to develop a unifying

theory of innovation due to the fundamental

differences between innovation types

(Thong & Yap, 1995). Hence, as previously

mentioned, this study has selected factors

that are more applicable to the adoption of

CAIS. These selected factors were based on

the DTOE context. Each of the factors is

discussed below, and a corresponding

hypothesis enunciated.

4.1 Decision-maker context

In organization, the decision for IT

adoption process is directly affected by top

management. In SMEs, top management

usually refers to the chief executive officers

(CEO’s) or owner-managers of the firm. In

SMEs studies, CEO and the owner-manager

was used interchangeable since in most

cases CEO and owner-manager is the same

person (Hussin & Noor, 2005; Thong,

1999).

In SMEs, it is often difficult to

separate SMEs owners from their firms

since all decisions from daily functions or

activities to future investments are made by

them (Thong, 1999). This also refers to IT

adoption decision from planning to

implementing and afterwards, maintaining

and upgrading the system. According to

Awa et al. (2011), IT adoption depends





128

largely on the functional, and/or emotional

feelings of decision makers, which reflect

their attitudes, perceptions and motivations

towards IT adoption. As revealed in

Antlova’s (2009) study, he found that one of

the significant barriers to innovation

acceptance in SMEs is resistance to

organizational changes, especially in

connection with older owner-managers. For

this reason, Thong and Yap (1995)

suggested the rate at which a small business

changes depends not only on factors like

business size or market forces, but also on

the abilities and inclinations of the owner-

manager and the extent to which he is able

to prepare to devolve management. The

owner-manager therefore is an entrepreneur

figure who is crucial in determining the

innovativeness of the business. Hussin and

Noor (2005) pointed that the role of owner-

manager undoubtedly is very important in

SMEs, especially in a developing country

like Malaysia. This is because there is a

large power distance in the Malaysian

culture and therefore, the decision making

will be centered on the owner-manager

(Hussin & Noor, 2005).

Decision-maker’s characteristic is a

key adoption predicator of Thong’s (1999)

DTOE model. Thong (1999) separated

decision-makers characteristics from

organization in TOE and gave it boost to

bring the model to decision-maker,

technology-organization-environment

(DTOE). He proposed that the four

conceptual adoption predicators assume a

more detailed set of factors that assist to

predict the likelihood of IT adoption among

SMEs.

This study adopted three decision-

makers characteristics from previous

TOE/DTOE literatures that showed some

relevance strength to this study which

include owner-manager’s IS/IT knowledge,

owner-manager’s attitude towards IT and

owner-manager’s commitment.

4.1.1 Owner-manager’s IT Knowledge

(OM_IK)

Lack of understanding about IT is a

frequently cited reason for failure of small

businesses to consider computer

opportunities since decades ago (DeLone,

1988). Thong and Yap (1995) noticed that

many SMEs rejected the notion of IT in their

business as they had no idea of the benefits

that IT could potentially offer. This is due

to lack of basic knowledge and awareness of

IT among owner-manager.

According to Hameed and Counsell

(2012), IT knowledge of owner-manager is

important to realize the benefits of an

innovation adoption. Some knowledge of IT

possessed by the owner-manager also can

add value to the organization in order to

select the software with the information that

they require from the vendor (Proudlock et

al., 1999). Study by Caldeira and Wald

(2002) indicated that the lack of expertise to

select and adopt the software was one of the

reasons why the adoption has not succeeded.

The significant relationship

between the owner-manager IT knowledge

and the adoption of innovation technology

has been revealed by many studies. Study

by DeLone (1988) suggested that in firms

where the CEO is familiar with computers

and is involved in computerization, the

computer operations are more successful.

Thong and Yap (1995) found that small

businesses are more likely to adopt IT when

the owner-manager possessed greater IT

knowledge. Nguyen (2009) found the

understanding of IT and innovation skills

contribute substantially to the likelihood of

IT adoption. Later, Antlova (2009) stressed

that one of the barriers preventing

acceptance of IT by SMEs is connected to a

missing information strategy and an

insufficient knowledge of IT on the part of

the owner or manager of the organization.

And recently, Huy (2012) suggested the

knowledge of the information technology

possessed by owner-manager has an effect

on the adoption of IT and has a positive

influence on the degree of use of innovation

technology.





129

Regarding CAIS, based on the

above reason, this study predicted that the

greater the understanding the owner-

manager has of IT, the more likely that they

will adopt CAIS. Therefore, this study

hypothesizes that:

H1a: There is a positive relationship

between owner-manager’s IT knowledge

and the likelihood of CAIS adoption.

4.1.2 Owner-manager’s Attitude

towards IT (OM_AI)

Owner-managers’ attitude towards

IT refers to the owner-managers’ perception

of IT to the degree of which they are agree

or disagree with the benefits that IT could

offer to their firms (Thong & Yap, 1995).

According to Rogers’ (1983), formation of a

favourable or unfavourable attitude towards

an innovation takes place before a decision

to adopt is made. In the case of SMEs, as

the main decision-maker is from the owner-

manager, his/her perception of the adoption

of IT is of prime importance (Rogers, 1983).

The owner-manager’s attitude

towards IT could relate to the IT knowledge

of the owner-manager. As such, a number

of studies suggested the greater the

understanding that the top management or

owner-manager has of IT, the more likely

that they will adopt IT and the more

successful the adoption (Nguyen, 2009;

Alam, 2009; Thong & Yap, 1995). The

explanation might be the owner-manager

who has been using the computer for some

time is able to know the advantages and

disadvantages of the technology (Alam,

2009). Consequently, computer skills of the

owner-manager could influence the attitude

towards IT and in turn increase the intention

to adopt innovation system among SMEs.

In another perspective,

implementing a new system requires

financial commitment. This includes the

initial cost of software and hardware, the

cost of personnel training and development

and the post implementation costs (Nguyen,

2009). For these reasons, the owner-

managers have to see or at least believe that

new IT will bring advantages to the firm.

Awa et al. (2011) argued from RBV point of

view, SMEs develop internal skills,

competences and capabilities subject to top

management perspectives and attitudes

towards IT adoption.

Therefore, many studies suggested

that owner-manager’s perception of IT is

that such tools that can provide them with

some advantage in the business environment

(Harrison et al., 1997; Lee & Runge, 2001;

Thong, 1999; Thong & Yap, 1995; Poon &

Swatman, 1999). For this point many

researchers have stressed the importance of

the attitudes of owner-managers towards

innovation in the adoption of the IT (Thong

& Yap, 1995; Grandon & Pearson, 2004;

Caldeira & Ward, 2002; Seyal & Rahman,

2003; Mehrtens et al., 2001; Kuan & Chau,

2001).

From the above discussion, it can

be said that the more positive perception that

the owner-manager have towards IT, the

higher the chances that they will adopt the

CAIS. This study therefore predicted that:

H1b: There is a positive relationship

between owner-manager’s attitude towards

IT and the likelihood of CAIS adoption.

4.1.3 Owner-manager’s Commitment

(OM_CM)

Owner-manager’s commitment

refers to the level of commitment by the

owner-manager towards the CAIS adoption.

Varukolu and Park-Poaps (2009) defined

owner-manager commitment as the degree

to which the values and perceptions of the

management are in favour of and open to

technology adoption.

DeLone (1988) noticed that top

management’s commitment is not only

important for initial decisions regarding

computerization, but also for ongoing





130

computer decisions because computerization

is a continuous and evolving process. In

addition, the owner-manager’s commitment

in a variety of information and participation

in the implementation of CAIS encourages

users to develop positive attitudes towards

the use of CAIS (Kouser et al., 2011).

Ifinedo (2012) used the term

owner-manager’s support and owner-

manager’s commitment interchangeably and

his study found support for the relevance of

this factor in the successful adoption of e-

business. As such, when the owner-manager

of SMEs perceived an innovation

technology to be valuable, they would

manage IT-related activities within the

organization and outline things that would

affect the performance of the system

adopted, such as the strategies, policies and

future directions of the organization (Wang

et al., 2006). Therefore on many occasions,

failed implementation of technological

innovation was attributed to the lack of top

management’s commitment and support

(Yang et al., 2012; Varukolu and Park-

Poaps, 2009).

At the same time, if the owner-

manager has greater interest in IT, they will

give full commitment and could do a better

job in strengthening the prospect brought by

the adopted IT/IS and could encourage their

employees to utilize the IT/IS to generate

superior performance (Yang et al., 2012).

This is because owner-manager acts as

change agents in the adoption process of

technological innovations. Where such

commitment and support lacking, the

acceptance of technologies such as CAIS

tend to suffer (Ifinedo, 2011; Chatzoglou et

al., 2010; Igbaria, 1990; Igbaria et al., 1997).

Study by Hussin and Noor (2005)

proved that there was a linear relationship

between owner-manager’s commitment to

IT and e-commerce adoption. Past studies

have also shown that owner-manager

commitment’s and support to favour the

acceptance of technological innovations in

adopting organizations, including SMEs

(e.g. Ifinedo, 2012; Grandon & Pearson,

2004; DeLone, 1988; Iacovou, 1995;

Premkumar & Roberts, 1999).

Regarding CAIS, it could be

assumed that top management’s vision for

the use of technologies determines the levels

of support and policies for this technology

adoption. This means when owner-manager

understands the importance of technological

innovations such as CAIS in their

organizations, they tend to play a crucial

role in influencing other organizational

members to accept the use of such

innovations. Consequently, this study

believes that owner-manager’s commitment

is likely to shape the firm’s technology

adoption activities. At this point, owner-

manager’s commitment is suggested to

influence system success, with regard to the

new adoption. Based on the arguments, the

following hypotheses therefore formulated:

H1c: There is a positive relationship

between owner-manager’s commitment and

the likelihood of CAIS adoption.

4.2 Technological Context

As per TOE/DTOE, the

technological context of an organization is

important in influencing the adoption and

implementation of new IT/IS. Tornatzky &

Fleischer (1990) describes technological

context as both internal and external

technologies relevant to the firm. In more

detail, technological context refers to the

innovation that is to be adopted by the

organization (Teo et al., 2004) or

characteristics that relates to the

technologies available to an organization

(Chau & Tam, 1997). Its main focus is on

how technology characteristics themselves

can influence the adoption process (Chau &

Tam, 1997). It includes current practices

and equipment internal to the firm, as well

as the pool of available technologies

external to the firm (Tornatzky & Fleischer,

1990).





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The technological context in which

a firm operates plays an obvious role in

determining the firm’s adoption activity.

Decisions to adopt technology depend on

what is available, as well as how the

available technology fits with the firm’s

current technology (Tornatzky & Fleischer,

1990).

This research considers three

innovation characteristics in the context of

CAIS adoption: relative advantage,

compatibility and complexity. All these

constructs have been identified on the basis

of a Diffusion of Innovation (DOI) theory

by Roger (1983). Researchers have

combined aspects of DOI with TOE to

increase understanding of organizational IT

adoption (Oliveira & Martins, 2011).

Specifically, they suggested that the

technological context in TOE includes the

knowledge of innovation characteristics

from DOI (Rogers, 1995).

Roger’s (1983) model of

technological innovation in DOI Theory is

widely accepted in information systems

research. Roger (1983) identified five

critical characteristics of the innovation that

influences its adoption: relative advantage,

compatibility, complexity, trialability and

observability. However, among them,

compatibility, relative advantage and

complexity were found to have consistent

associations with innovation behaviours

(Tornatzky & Klein, 1982; Kuan & Chau,

2001).

Following the suggestion, this

study decides to examine these three

technological characteristics as the factors

contributing to the likelihood of CAIS

adoption. Therefore, the constructs will be

analyzed one by one for the formulation of

the hypotheses.

4.2.1 Relative Advantage (R_ADV)

According to DOI theory, Roger

(1995) defined relative advantage as the

degree to which an innovation is perceived

as being better than the idea it supersedes.

The degree of relative advantage is generally

expressed as the degree of perceived

benefits that the innovation may provide to

the organization, and thus, relative

advantage and perceived benefits are used

interchangeably in IT adoption literature

(Henderson et al., 2012; Oliveira & Martins,

2010; Iacovou et al., 1995; Yoon, 2009). In

CAIS context, it refers to the degree to

which the CAIS is perceived as providing

greater benefit for firms compared to the

manual system. DOI theory suggests that the

relative advantage of an innovation

positively influences an organization’s

propensity to adopt the innovation.

Since being proposed by Rogers in

DOI as a key factor affecting the adoption of

innovations, relative advantage has been

consistently found to have a significant

influence on SMEs adoption of innovation

technologies. For examples, Premkumar

and Roberts (1999) found that organizations

adopt the innovation technology because

they perceive a relative advantage of the

technology compared to traditional methods.

Many other prior IT adoption studies that

employ the TOE framework also suggested

relative advantage as one of most important

factors that affects firm adoption of an IT

innovation (e.g. Chau & Tam, 1997; Thong,

1999; Ramdani et al., 2009; Seyal et al.

,2007; Al-Qirim, 2007b; Premkumar &

Roberts, 1999; Ghobakhloo et al., 2011;

Low et al., 2011; Ifinedo, 2011; Shiau et al.,

2009; Hung et al., 2010). Based on these

studies, it is highly possible that when

organization perceived the benefits of the

new systems, they are more willing to adopt

the technology.

The above discussions were in line

with the argument from Premkumar et al.

(1994) who suggested that positive

perception of the benefits of the technology

should provide an incentive for users to use

the technology. As in the CAIS context,

firms that recognize the true potential of

CAIS should realize the need to fully adopt

CAIS to realize the benefits. From the

discussion, this study posits:





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between relative advantage and the

likelihood of CAIS adoption.

4.2.2 Compatibility (COMP)

Likewise, compatibility is another

technological characteristics perceived by

individual which was suggested by DOI

theory as a driver of the decision to adopt a

new system. DOI theory defines

compatibility as the extent to which an

innovation is perceived as being consistent

with the existing values, needs, and past

experiences of potential adopters (Rogers,

1983). In most organizations, it is realized

as compatibility with IT infrastructure

(Henderson et al., 2012). In order to adopt

new technology, Shaharudin et al. (2012)

described that the existing infrastructure

should be compatible with the new

technology. This means the existing

infrastructure is important to the firm’s

adoption decision, in which, the more an

innovation is perceived as consistent with

present systems, procedures and value

systems of the potential adopters especially

in term of infrastructure, the more likely it

will be adopted (Henderson et al., 2012).

Prior research has discussed how

compatibility influences the IT/IS adoption.

Several prior researches on IT adoption

found that IT adoption and usage is

significantly affected by IT compatibility

(Alam, 2009; Al-Qirim, 2007b; Hong and

Zhu, 2006). In addition, prior IT adoption

studies based on the TOE framework

suggest that a high level of compatibility

between the technology to be adopted and

existing technologies (e.g. IT infrastructure)

motivates an organization to adopt an IT

innovation (Premkumar et al., 1994; Thong,

1999).

Compatibility is an important

consideration in a firm’s IT innovation

adoption decision because, with a high level

of compatibility, the organization needs to

make minimal adjustments and changes,

which implies less resistance to adoption

(Thong, 1999). Furthermore, compatibility

suggests lesser risk to potential adopter and

makes the innovation more meaningful to

the organization (Yoon, 2009). However,

lack of incompatibility may cause low

adoption and utilization (Alam, 2009).

When technology is viewed as significantly

incompatible, major adjustments in

processes that involve considerable learning

are required (Low et al., 2011). Sharing this

view, Huy (2012) described the

incompatibility of a new technologies with

existing procedures, value systems and

infrastructure negatively affects the attitudes

of users and increases their resistance to

change, which in turn hinder the adoption of

the technology.

Compatibility is important in the

context of CAIS as CAIS has the potential to

change the business reporting system.

Adopting CAIS also can introduce

additional systems integration issues. The

incompatibility of CAIS with current

processes and legacy system is a significant

factor for non-adoption of CAIS. The

incompatibility of the software in term of

data format with the business nature might

be a barrier to the use of CAIS. These

incompatibilities could result in

encountering resistance in the CAIS

adoption.

Another barrier is that CAIS

adoption replaces many of the manual work

procedures used in firm transaction

recording systems and can lead to significant

changes in work practices and procedures.

According to Premkumar et al. (1994),

organizations’s resistance to change due to

changes in work procedures and possible

loss of jobs as a result of automation of

document processing functions is a major

inhibiting factor in the use of technological

innovation.

For the above reasons,

compatibility is an essential factor that

affects the adoption and utilization of the

CAIS. When the firms have adequate

infrastructure for the adoption and it is





133

compatible then the adoption and utilization

of the innovation is usually high because the

firms are not require to invest large sum on

the infrastructure. When a technology is

recognized as compatible with internal

values and work application systems, firms

are usually likely to consider the adoption of

new technology. Therefore, this study

expects:


between compatibility and the likelihood of

CAIS adoption.

4.2.3 Complexity (CMPX)

In the DOI theory, complexity is

another important technological factor that

needs to be studied in depth in innovation

adoption. Complexity refers to the degree

to which an innovation is perceived as

difficult to use (Roger, 1983).

Generally, complexity is widely

recognized as a key barrier to IS adoption

(Thong, 1999). Henderson et al. (2012)

suggested that the complexity of innovation

technology originates from systems

integration issues and the tagging process.

For example, in the case of CAIS, the

difficulty of the tagging process stems from

the specialized financial knowledge required

to tag financial data. Lack of basic

accounting knowledge might cause

difficulty in keying in data. In Davis et al.

(2009), manual AIS users stated that the

complexity of CAIS system and that no one

in their firm knew how as one of the reasons

for not using CAIS. And for adopters, the

most influential factor that encouraged them

to maintain the usage of CAIS was ease of

use. Thus, complexity of an innovation can

act as a barrier to the implementation of new

technology such as CAIS. As well,

complexity of one particular system during

implementation will become the inhibitor

that discourages the greater usage of the

innovation (Low et al., 2011).

In another point, Henderson et al.

(2012) described that some technological

innovation is not perceived to be complex;

however, the changes in the business

processes, organizational culture and

environment introduce additional

complexity. Earlier, Ramamurthy et al.

(1999) has argued that integrating a new

system with various internal applications

can be complex due to the uniqueness of

individual firm’s system environment. As

such, many researchers perceived

complexity as reflecting a match between

the technical skill required to use the

innovation and skills the organization

possessed (Rui, 2007; Low et al., 2011;

Premkumar et al., 1994; Lin, 2008). For

that reason, an innovation could be

considered as complex by some firms who

lack associated knowledge and skill, but not

complex by some firms who have the

necessary knowledge and skill (Rui, 2007).

Hence, it could be suggested that complexity

is a fit-based concept between the technical

skill required and skills firms possess (Rui,

2007).

SMEs, due to lack of in-house

expertise and large information systems staff

may make new technology seem complex,

difficult to implement and may take a long

time to understand (Premkumar et al.,

1994). Although an innovation may appear

to be useful to the firm, it may not have

necessary expertise to use it, thereby

increase the risk in the adoption decision

and also creates greater uncertainty for

successful implementation (Huy, 2012). In

other words, firms may not have confidence

in this innovation if they assume the

technology is a complex system.

CAIS could be perceived as a

complex innovation, especially for SMEs,

since it is a hybrid innovation with record

keeping (changes in method of recording)

and technological (require IT infrastructure)

implication. Previous studies have indicated

that a complex innovation requires greater

resources and skills to adopt, and requires

increased cognitive effort on the potential

adopter, thus, the perceived complexity of

the innovation technology is expected to





134

influence the decision to adopt them

negatively (Lin, 2008)

Many other prior IT adoption

literatures that employ the TOE framework

also suggested relative complexity as one of

most important factors that affects firm

adoption of an IT innovation. For example,

Al-Qirim (2007b) found that complexity

negatively affected the e-commerce

adoption in Jordan. Teo et al. (1995)

revealed complexity to be a strong predictor

of intention to adopt financial EDI in

Singapore. Azam and Taylor (2011) study

showed complexity of the technology is

significantly related to the likelihood of

standard business reporting (SBR) adoption

in Australia.

From the discussion this study

believes that complexity of an innovation

can function as an inhibitor to adoption, and

is usually negatively related to adoption

(Premkumar et al., 1994). Thus, the next

hypothesis will be:

H2c: There is a negative relationship

between complexity and the likelihood of

CAIS adoption.

4.3 Organizational Context

According to the TOE framework,

organizational adoption of technological

innovation can be influenced by the

organizational context. The organizational

context refers to the characteristics and

resources of the organization (Tan & Felix,

2010). It looks at the structure and

processes of an organization that constraint

or facilitates the adoption and

implementation of innovations (Chau &

Tam, 1997).

The previous IT adoption literature

based on TOE has proposed various

organizational factors that are significant

determinants of innovation technology

adoption. Example of these factors included

business size, top management support and

organizational readiness. Based on the IT/IS

system adoption literature, two

organizational variables were selected and

assumed to be most suited for analyzing the

CAIS adoption in Malaysian SMEs. These

organizational variables are organizational

readiness and employees IT knowledge.

Furthermore this study tries to examine a

new construct, satisfaction with manual

accounting system as it is predicted to be a

barrier in CAIS adoption.

4.3.1 Organizational Readiness

(O_REA)

The DOI theory in organizations

suggests that organizational resource

availability positively influences

organizational adoption of innovations

(Rogers, 1983). This theory emphasizes the

importance of organizational readiness in

the context of organizational adoption.

Organizational readiness is defined by

Iacovou et al. (1995) as the availability of

the needed organizational resources for

adoption.

Review of this study on IT/IS

adoption literature suggests that

organizational readiness in many studies

primarily concerns the technological

(hardware or software resources) and

financial resources of the organization

(Gemino et al., 2006; Chau & Hui, 2001;

Grandon & Pearson, 2004; Iacovou et al.,

1995; Chewlos et al., 2001; Nelson & Shaw,

2003; MacKay et al., 2004; Yoon, 2009). In

the case of SMEs in particular, even if the

owner-managers perceive the adoption of

new technologies as important, the

enterprises often do not have sufficient

resources to adopt them (Yang et al., 2012).

This is the major obstacles to the integrating

of new technologies in SMEs. Chau (2001)

pointed that only realizing potential benefits

may not be enough for an organization to

decide to adopt new innovation technology.

In this case, SMEs may be reluctant to adopt

innovation if they do not feel “ready” to

adopt. This lack of readiness may come

from certain organizational resources such

as financial readiness and technological





135

readiness (Iacovou et al.,1995; Ramdani &

Kawalek, 2007). Therefore financial and

technological readiness is the important

issues to be considered in innovation

adoption as the organizational readiness

indicator.

Prior studies of IT/IS adoption also

found that technological and financial

readiness positively influences

organizational adoption of different types of

innovation technology. For example,

Mehrtens et al. (2001) find that an

organization’s decision to adopt the Internet

is positively influenced by financial and

technological readiness. Mackay et al.

(2004) also find that technical and financial

readiness has a positive influence on an

organization’s decision to establish a

website. Iacovou et al. (1995) and Chewlos

et al. (2001) find that organizational

readiness positively influences an

organization’s intent to adopt Electronic

Data Interchange (EDI). Another example

is found in Khalifa and Davidson (2006),

who found that organizations with higher

levels of organizational readiness have

greater intent to adopt electronic trading

systems.

However, in some cases, while the

technological and financial resources are

ready, it is also often the case that the

employees refuse to adopt the new

technology due to various reasons, such as

dangers of job loss and reluctant to change

the work practices (Tan & Felix, 2010).

Some employees may not believe that the

new system will change or improve the way

the business functions. As innovation

process will affect every function and

organizational stakeholder, it requires

fluidity of coordination (Powell & Dent-

Micallef, 1997). As for CAIS, many

alterations might significant in the adoption

process such as organizational structures,

communications patterns, and other

practices in daily processes. All these in the

first order require incremental modification

of existing behaviours. If people in

organization are readily to change and have

open behaviour on the new systems, than the

firms will be more likely to accept the

innovation (Ifinedo, 2012). Powell and

Dent-Micallef (1997) termed this condition

as organizational flexibility.

Inspired from Tan and Felix

(2010), Nguyen (2009) and Powell and

Dent-Micallef, this study decided to term

this third organizational readiness indicator

as organizational flexibility culture. As a

result, this study moves a step further than

prior studies as organizational readiness in

this study will be measured in term of

financial readiness, technological readiness

and organizational flexibility culture.

Drawing from the above lines of theoretical

argument, it can be visualized that the

organization must require financial,

technological as well as flexibility culture to

adopt CAIS. In other words, the firm

should have financial, technological and

organizational flexibility culture as

influential factors to the CAIS adoption. The

foregoing discussion then permits the

prediction that:


between organizational readiness and the


4.3.2 Employees IT Level (E_ITL)

Nguyen (2009) suggested top

management or the owner-managers are not

only people who contribute to the success of

the business. It is clear that in most firms,

employees also make a contribution and

they have a major impact on the rise or fall

of the businesses (Nguyen, 2009). From this

point of view, employees are assets, as a

firm’s success depends on them. They are a

resource that needs to be developed

(Nguyen, 2009). This is also refers to IT

adoption success. At this point many studies

suggested that the level of employees IT

knowledge influence the adoption of

technological innovations (Ifinedo, 2012;

Thong & Yap, 1995; Zhu et al., 2006)





136

Employees IT level refers to the

level of IT knowledge or experience that the

employees have (Hung et al., 2010).

Relevant IT knowledge and experience

variables have been investigated in many

studies. Kuan and Chau (2001) found that

prior IS experience influences the adoption

of new technologies. Study by Caldeira and

Ward (2002) proved that the firms that

revealed the lowest levels of satisfaction

with IT/IS adoption and use did not have

sufficient IS/IT knowledge to implement

their systems. Also Antlova (2009)

suggested one of the main barriers

preventing acceptance of ICT, especially by

SMEs is knowledge and skills regarding IT.

Many other studies also found IT knowledge

and technical skills are the important factors

in the adoption of new technologies. This

factor also has been found to be positively

related to IT adoption (e.g. Scupola, 2009;

Thong, 1999).

However, since typically SMEs

lack of this expertise, many of them unaware

of new technologies (Thong, 1999;

Premkumar and Roberts, 1999) or tempted

to postpone adoption of the innovation until

they have sufficient internal expertise (Hung

et al., 2010). Ramdani et al. (2009)

mentioned that those organizations that do

not have much IT/IS experience may not be

aware of new technologies and may not

desire to the risk by adopting them.

Therefore, Premkumar and Roberts (1999)

suggest that keeping employees informed or

aware of the new IT allows them to

maximize the resources that can help be

more productive. Hence, if employees of

SMEs are knowledgeable about IT, the

businesses may be more willing to adopt

technological innovations (Ifinedo, 2012;

Thong & Yap, 1995; Zhu et al., 2006)

Based on these discussions, the

employees IT level can be seen as important

to the technological innovation adoption

including CAIS. The evidence from

previous literature suggests that the

availability of IT knowledge among

employees will help a firm to adopt CAIS

systems. Therefore the next hypothesis of

this study is:


between employees’ IT knowledge and the


4.3.3 Satisfaction with Manual System

(S_WMS)

Satisfaction is one of the most

important concepts especially in marketing

and information system, and has attracted

much of research interest (Limayem &

Cheung, 2008). Lots of researchers have

suggested that user satisfaction is one of the

key influencers leading to system success

(Chen et al., 2009).

Zhuo et al. (2012) refer satisfaction

as an effective state representing an

emotional response to the service encounter.

For Bokhari (2005), satisfaction is a sum of

one’s feelings and attitudes towards a

variety of factors affecting the situation.

While Winnie and Low (2012) mentioned

satisfaction as the response and outcome of

using processes which generate a

comfortable feeling and a positive attitude to

use the systems (Winnie & Low, 2012).

Satisfaction represents an individual emotive

state following first-hand experience with

the target object or behaviour (Premkumar

& Bhattacherjee, 2008). From the definition,

it is clear that researchers consider

satisfaction to be synonymous with attitude

and one of the psychological construct.

Satisfaction as a psychological

construct has been studied in various

contexts, including job satisfaction,

satisfaction with product or service

consumption, and end-user satisfaction with

IT usage (Premkumar & Bhattacherjee,

2008). Prior research on user satisfaction

typically use this variable (satisfaction) to

predict future intention to continue a service

(continuance intention), hence this variable

is more synonym in post-adoption stage

studies (Bhattacherjee, 2001; Ali et al.,

2012; Zhuo et al., 2012; Hossain &





137

Quaddus, 2011; Limayem & Cheung, 2008;

Bokhari, 2005) except for Chau and Tam

(1997) and Alatawi et al. (2012). Chau and

Tam (1997) and Alatawi et al. (2012)

examine satisfaction variable in pre-

adoption stage.

This implies that there is still lack

of sufficient research effort to establish a

conclusive relationship between satisfaction

and technological innovation in pre-adoption

stage. Insufficient research however is in

some ways offering the opportunity for

researchers to further investigate the issues

and collaborate to the literatures (Bokhari,

2005).

Satisfaction construct differs in pre

and post adoption studies in several aspects.

Post adoption stage studies usually reporting

the influence of satisfaction on continuance

intention, meaning the focus is on the same

existing systems. In contrast, pre-adoption

stage studies attempt to show the influence

of satisfaction with existing system towards

the adoption of new innovation, meaning the

focus is on the new or alternative system.

As such, satisfaction with existing system is

believed to influence post-adoption attitude

and continuance intention positively. It

different in pre-adoption stage studies as

satisfaction with existing system is predicted

to have negative influence on adoption of

new system. However, review of this study

on previous literatures indicated that

satisfaction issues in post-adoption stage and

satisfaction issues in pre-adoption stage

owing to the similarity concept.

Bhattacherjee (2001) pointed that

user’s intention to continue service use is

determined primarily by their satisfaction

with prior use of that product or service.

Therefore, satisfaction is viewed as the key

to building and retaining a loyal base of

long-term usage. On this point,

Bhattacherjee (2001) mentioned that

satisfied users continue using the existing

services, while dissatisfied users discontinue

it or switch to alternative services.

Users are satisfied if their actual

experience exceeds their prior expectations

(Winnie & Low, 2012). Anderson and

Sullivan (1993) found that in the long-run,

firms that consistently providing high

satisfaction were less sensitive to the change

of satisfaction, that is, satisfied users tend to

use the same system (Zhuo et al., 2012).

Conversely, if system usage does not meet

user needs, satisfaction will decrease and

restrict further use (Bokhari, 2005). Bokhari

(2005) argued that in low satisfaction level

condition, dissatisfied users may discontinue

system usage and seek alternatives.

According to Chau and Tam

(1997), low satisfaction level with existing

system which generally referred to as

performance gap, will provide the impetus

to find new ways to improve performance.

In an organization, a performance gap may

result from a low satisfaction level with

existing performance of the existing systems

or inability to serve the organization’s new

needs (Chau & Tam, 2000). This means that

the greater the satisfaction with the existing

systems, the lower the incentive to change to

a new system (Chau and Tam, 1997). Using

the organizational context of a TOE

framework and on the basis of the above

arguments, in their study on organizational

adoption of open system, Chau and Tam

(1997) hypothesized that higher levels of

satisfaction with the existing systems will

negatively influence the possibility of open

systems adoption. The result showed that

satisfaction level with the existing systems

has a negative relationship with the open

systems adoption decision, thus support their

hypothesis.

This study builds upon this line of

argument and posits an equivalent

relationship in the CAIS context. However,

in contrast to Chau and Tam’s (1997) study

which measured satisfaction with existing

system in term of the evaluation on existing

computer system, and as a new contribution,

this study developed new items specifically

refers to the satisfaction with manual

accounting information systems practices.





138

At the same time, this study attempt to

examine the openness to change from non-

computerised to computerised system.

Satisfaction with manual systems

may be defined as a positive attitude and

response towards a manual system. In the

CAIS context, satisfaction with manual

system associates with the extent to which

users believe the manual system meet their

information requirements.

Using CAIS could improve the

financial management and record keeping

practices (McChlery et al., 2005), thus

problems in or with manual system may lead

to the likelihood of CAIS adoption.

Therefore, in the context of adopting CAIS,

the satisfaction level with manual systems

should be closely related to the need for

improvement and thus, the adoption

decision. In this case, whenever the manual

systems satisfiy the needs of the

organization, the propensity to change

should be lower. This means that if the

manual system meets the requirements of

the users, the users’ satisfaction with the

system will increase, thus resulting in

refusal of adopting CAIS. This suggests that

deferring using CAIS might be a result from

high satisfaction from using the manual

system. Thus, satisfaction with manual

system was introduced for the first time and

especially developed for non-adopters model

in this study. This variable was predicted as

negatively affecting the willingness of CAIS

adoption among non-adopters. The above

arguments lead this study to this hypothesis:

H3c: There is a negative relationship

between satisfaction with manual systems

and the likelihood of CAIS adoption

4.4 Environmental Context

According to the TOE framework,

factors that pertain to the environmental

context influence organizational adoption of

technological innovations. The

environmental context is the area in which

the firm does business (Tornatzky and

Fleischer, 1990) or in another words

concerns the surroundings of the

organization, looking at how external

influences affect the motivations or barriers

to adopt an innovation (Teo et al., 2004).

Although the decision to adopt IT

is depending on the owner-manager and

internal organizational need as previously

suggested, the actions and decisions of

owner-manager would be affected by

external environment and they make policy

decision accordingly (Alatawi et al., 2012).

Therefore, the adoption of IT can be the

result of pressure exerted on the enterprise

by its environment.

The review of organizational IT/IS

adoption studies suggests that pressures and

supports from an organization’s external

environment are found to be significant in

influencing the decision to adopt innovation

technology. The external environmental

incorporates the structure of the industry,

such as the extreme competition was

frequently found encourages the adoption of

innovation. The support from vendors also

repeatedly showed as significant in

influencing innovation. Finally, government

regulation can have a favourable or negative

impact on organizations, depending on

whether its policy encourages or discourages

innovation (Alatawi et al., 2012). Based on

the IT/IS adoption literature, such adoption

drivers (vendor support, competition and

government influence) were selected and

assumed to be most suited for analyzing the

CAIS adoption in Malaysian SMEs.

4.4.1 Vendor Support (V_SPT)

One of the important aspects of the

IT adoption process is the assistance of

external support such as IT/IS vendors.

Vendor support refers to the existence of

support from IT/IS vendor for employing

and using the systems (Ramdani et al.,

2009). This construct has not only been

found to be a significant construct in IS

success, but also a determinant that

positively influences IS innovation adoption.





139

Many researchers agreed that the

availability of IS vendor can mitigate the

lack of IT expertise in most SMEs. Thong et

al. (1996) noted that due to the nature of

SMEs, which generally lack of IT expertise

and skills, firms should seek professional

vendors when it comes to IT adoption.

Ramdani et al. (2009) suggested that with

increasing support from the third party,

firms are more willing to adopt IS

innovations. Nguyen (2009) pointed that

quality advice from IT professional such as

IT vendors is always useful for management

or owner-manager as many of them do not

have sufficient experience or understanding

of IT. Ifinedo (2012) then stressed that

vendor support should be considered in the

planning process and implementation of IT

adoption. And recently Yang et al. (2013)

also supported the crucial role of external

vendor for the implementation of IT

innovations, especially when the

organization is unfamiliar with the

technology (Yang et al., 2013). According

to Proudlock et al. (1999), the employment

of such external support can overcome

knowledge gaps and guide firms in

implementing appropriate IT.

The availability of external support

especially vendor also has been shown to be

an important factor in several adoption

studies, especially in small organizations.

Study by Thong et al. (1996) of 114 small

businesses in Singapore found that external

IT expertise plays an important role in the IT

implementation process. One year after,

study by Igbaria et al. (1997) also indicated

that external support is a significant variable

influencing system satisfaction and usage.

More recently, the results from Ellis and

Belle’s (2011) study on open source

software adoption in South African

identified technical support as a facilitator to

the ongoing operation of the ICT

infrastructure. Most organizations in their

study felt they could not function without

reliable ICT support services.

Regarding CAIS, the introduction

of CAIS may expose the firms with new

skill requirements. With little internal IT/IS

expertise, SMEs in Malaysia are believed to

rely on the advice and support from CAIS

vendors. The degree to which a vendor

possesses CAIS skills may make it easier for

SMEs to adopt and use the CAIS without

extensive in-house expertise, thus can help

lower the barriers in adopting CAIS.

Furthermore, researchers elsewhere have

found vendor support to be an important

factor in the adoption and usage of

innovation technologies; therefore, this

study also predicts the same effect on CAIS.

Thus, it is predicted that:


between vendor support and the likelihood

of CAIS adoption.

4.4.2 Competition (CPTN)

It has long been empirically

recognized that competition can put pressure

on organizations to adopt an innovation

(Thong, 1999; Zhu et al., 2003; Yoon,

2009). In high competitive markets, IT

innovation adoption is necessary to maintain

and achieve competitive advantage (Yoon,

2009). Non-adoption of an IT innovation

that is adopted by others in such an

environment may result in competitive

disadvantage.

Porter and Millar (1985) argue that

IT adoption can enable an organization to

achieve competitive advantage in either cost

or differentiation. In other words, by

adopting IT, an organization can lower its

costs and differentiate itself from

competitors. The argument by Porter and

Miller can be applied to the context of

CAIS. Adopting CAIS may enable firms to

differentiate it in several ways especially

from competitors who have not adopted

CAIS. For example, CAIS may help a firm

to provide a standard and proper preparation

of financial information, thereby allowing

financial data to be automatically extracted

and efficiently analyzed by the top





140

management. This benefit thus enhancing its

differentiation in term of accurate

information for decision making compared

to their non-adopters counterpart.

In addition, competition is an

important factor driving firms to adopt a

new technology in order to avoid

competitive decline which many studies

refer as competitive pressure (Zailani et al.,

2009; Hameed & Counsell, 2011; Zhu et al.,

2006; Chwelos et al., 2001). Ghobakhloo et

al. (2011) defined competitive pressure as

the extent to which firms perceive

themselves threatened by their counterparts

within their industry or substitute sector.

Many researchers who applied

Institutional Theory (Alatawi et al., 2012;

Yoon, 2009) believed that when firms face

pressures from their external environments,

they are likely to adopt innovations that

others in their environment have already

adopted. In other words, firms are likely to

adopt a technology when they perceive that

the number of their competitors that have

already adopted the technology increases

(Yoon, 2009). They also intend to adopt the

technology if they perceive that competitors

that have adopted the technology have

benefited or succeeded from using it.

Because their competitors have already

adopted the technology, firms will then

intend to do the same in order to achieve

organizational legitimacy. Organizational

legitimacy is referred to the acceptance of an

organization within its external environment

(Yoon, 2009). Those who choose not be

follow the trend, risk themselves from being

left behind and may at a disadvantaged

position as opposed to their competitors

(Chong & Ooi, 2008; Chong & Chan, 2012;

Ghobakhloo et al., 2011b).

It is reasonable therefore to assume

that the more a company feels a pressure in

its operating environment, the more likely it

will adopt a ‘best practice’. In some

instances, these pressures force companies

to look for best practices in the future

(Zailani et al., 2009). For that reason,

competitive pressure is generally perceived

to have a positive influence on the adoption

of innovation technology and is one of the

widely mentioned reasons for organizations

to adopt IT. It has driven many researchers

to analyze the strategic rationale underlying

the relationship between competition and

technology innovations (Ghobakhloo et al.,

2011; Zailani et al., 2009; Hameed &

Counsell, 2011; Varukolu & Park-Poaps,

2009; Chwelos et al. 2001).

In the CAIS context, the SMEs is

predicted to be more likely to adopt the

technology if they find that many of their

competitors have started using it. Salwani et

al. (2009) noted that decisions to engage in a

particular behaviour depends on perceived

number of similar others in an environment

that have already done likewise. It seems

therefore competition is one of the main

reasons for SMEs to adopt CAIS. It also

seems rational to believe that the

competition affects the adoption of CAIS

when SMEs perceive that the technology

may differentiate them from others and

assist them to achieve superior firm

performance. The SMEs also may consider

adopting CAIS when they perceived

themselves threatened of losing

competitiveness to their counterparts within

the industry. Derived from the above

discussions this study predicts that:


between competition and the likelihood of

CAIS adoption

4.4.3 Government Influence (G_INF)

Above discussion in environmental

context described that competition and

external support from vendors are important

in technological innovation adoption. The

other pressing and practical reasons for

SMEs to adopt IT might also come from

government influence (Kuan & Chau, 2001).

Government influence refers to the

commitment and assistance provided by the

authority to encourage the spread of IT/IS

innovation in its context (Ifinedo, 2012).





141

Government influence can also referred as

government support in many studies (e.g.

Ifinedo 2012; McKenzie, 2006; Hameed &

Counsell, 2012).

Government has great influence

over any kind of companies (Yang et al.,

2012). For instance, Yang et al. (2012)

suggested that the formulation of related

regulations can become limitations or entry

barriers for companies’ investments, or

subsidies that can motivate the companies to

adopt information technologies or to

develop new techniques. However,

McKenzie (2006) described that

governments around the world are eager to

see small businesses to adopt technological

innovations. Governments from various

countries also understand how important IT

is to their nation’s growth (Chong & Ooi,

2008). As such, many researchers agreed

that government play a indispensable role in

firms’ adoption of technological innovation

(Yang et al., 2013; Hameed & Counsell,

2012; Yang et al., 2012; Riyard et al., 2009;

Chong & Ooi, 2008; Thatcher et al., 2006;

Looi, 2005; Lee & Kim, 2004; Scupola,

2003).

The development of digital

technology and the emergence of new

products and services require formulation of

a new policy and regulatory framework.

These policies include direct research and

development (R&D) funding, agency level

research policy, investment tax credits,

industry policy and R&D tax credits (Yang

et al., 2012). This is because without

parallel development of laws, policies and

strategic directions by government can result

in abuses and discourages the adoption and

use of technological innovation (Riyard et

al., 2009). Sharing this view, many studies

suggested government through regulations

can encourage the adoption of innovation in

organizations. Thatcher et al. (2006) pointed

out that the existence (or non-existence) of

government policies and incentives are

influential in encouraging (or discouraging)

companies to adopt technology. Riyard et al.

(2009) mentioned that government through

setting up infrastructure and enacting rules

and regulations can create environment for

SMEs for technological intake. Recently,

Yang et al. (2013) suggested government

involvement through policies and support

can influence the decision to adopt new

systems to a large extent.

Besides regulatory framework,

many researchers agreed government

support in terms of providing incentives

would facilitate innovation adoption and

usage. In Looi’s (2005) study, government

initiatives like the e-government

programme, entrepreneurship development

programme and the information support

programme were found to be the dominating

factors for internet growth and IT adoption

(Looi, 2005). More recently, Hameed and

Counsell (2012) mentioned that by

providing training, guideline, financial

assistance, technical support, independent

advice and other incentives government can

encourage adoption of IT in organizations.

Yang et al. (2012) when discussed the role

of government in influencing adoption of IT

suggested the subsidies that the government

offers will encourage the companies to

accelerate the pace of their introduction of

new IT so that they can improve the

condition of their operations and, in turn,

influence the performance of the IT

implemented by the companies. This is to

say that government can stimulate the

introduction of new IT in the companies

through the institution of certain regulations

or the provision of related assistances.

Many studies also suggest the

important of government role as one of the

external related factors that is very important

to break through the barriers of ICT

adoption. Study by Lee & Kim (2004) on

driving factors and barriers of e-business in

Korea found that the government related

factors are very important in the reduction of

the main barriers and the creation of the

atmosphere of ICT adoption in SME sector

especially related to the cost issues. Lee and

Kim (2004) stressed that the cost issue

seems to be difficult to solve by SMEs, per





142

se, because of the inferiority of the SMEs’

environment. Their study also revealed the

type of government support that SMEs

wished in their study are mostly related to

the reduction of cost burden such as

financial support of development of ICT

service platform, funds for training and tax

cuts. Lee and Kim (2004) suggested that the

main role of government is to open the way

for using IT without the burden cost and to

create the atmosphere of IT usage through

systematic support to let the SMEs realize

benefits of IT and to give more motivation

in all possible areas.

It is clear therefore, government

involvement plays an important role in

promoting technological innovations,

facilitate the adoption and break through the

barriers of innovation adoption in

organizations (Tan et al., 2009). Several

researchers in recent years have studied the

role of government in the adoption of

innovation technology and it is generally

agreed that the government support has a

positive relationship on adoption of

innovation technology (Dhurbakula & Kim,

2011; Riyard et al., 2009; Lin, 2008;

Iacovou et al., 1995; Kuan & Chau, 2001).

The important of government influence also

made some studies expand the TOE

framework to four dimensions in which

government dimension has been extracted as

another important dimensional factor (e.g.

Riyard et al., 2009; Durbhakula & Kim,

2011).

According to the literature review

as discussed above, government entities are

among the most powerful institutional forces

affecting innovation. One can see that the

more appealing the government’s assistance

is the more contribution the government can

make toward innovation technology

adoption in a firm. Regarding CAIS, this is

to say that government can stimulate the

introduction of this technology in the firms

through the institution of certain regulations

or provision of related assistances. Based on

the influence government factor has on

technology adoptions in previous literatures,

this study hypothesizes that:

H4c: There is a positive relationship

between government influence and the

likelihood of CAIS adoption

5.0 SUMMARY AND

CONCLUSION

The SMEs have always been

recognized as an important segment of the

economy and will remain as a backbone of

economic development in many economies

throughout the world (Tan et al., 2008). As

a developing country, SMEs represent a

vital segment of Malaysian economy.

Therefore, the financial stability of SMEs is

very important to the health of Malaysian

economy, and the impact of SMEs failures

on the economy is a very important concern.

Several factors are important in

determining the failure of the SMEs, one of

which is accounting records. Accounting

reports are the principle source of

information for the management of SMEs.

Therefore, the importance of the accounting

system for SMEs cannot be disregarded.

Today, with efficient computer

operations such as CAIS, an adequate

accounting system could be achieved more

easily than through traditional methods.

Moreover, with the introduction of lower-

cost and more user-friendly accounting

softwares in the market, there appears to be

fewer obstacles to improved record keeping

practices. However, some SMEs are not yet

ready for this innovation. For the roles play

by the CAIS in improving financial

management in SMEs, is it important to

examine the factors that influence the

likelihood of CAIS adoption among non-

adopters in Malaysian SMEs. For that

purpose, this study proposes the conceptual

model to be used in future research.

The proposed research model has

been devised on careful consideration of the

models used in previous IT adoption studies





143

at the organizational level. The developed

research model was based on the TOE

framework using the DOI theory in its

technological contexts. The DOI theory has

been used by many innovation researchers

since more than two decades ago. The use

of this framework therefore will not only

empirically validate its usefulness but will

also test the performance of the DOI theory

which has been used for a long of time.

More importantly, based on the works by

Thong (1999,) a TOE resource-based model

for SMEs is developed. This further

complements the use of DTOE framework

for SMEs. For the integration of TOE

framework, DOI theory and Thong’s model,

this conceptual model is hoped to produce

useful combination especially in

constructing specialized model for SMEs.

5.1 Limitation and Future Research

Directions

The formulation of the proposed

research model is based on the empirical

validation of the constructs taken from

different research studies of IT adoption at

the organizational level and not fully

exploited from the extant research on CAIS

adoption. Therefore, the constructs

proposed for this model is need to be

empirically validated. The next direction for

this research is to collect data from the

various types of SMEs in Malaysia in the

future in order to support the hypotheses of

the proposed research model. In addition, if

this model is proven to be one of the

accepted models for the adoption of CAIS, it

can be tested further to see whether its result

remains similar in the contexts of other

countries and other IT innovations.

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