Effects of Information Technology on FirmPerformance: Do Small Business Owners Believe It?

Abstract

Economic contribution of small business firms in Indonesia has been higher as to compare with medium and large business firms. However, based on their unit number and number of labor involved, this contribution was relatively low indicating that their productivity (i.e., financial performance) was lower than that of their medium and large business firm counterparts. A number of factors affecting small business performance have been identified. Two of which were innovation and productivity which were lacking. Information technology (i.e., Internet) was believed to have the potential—through variety of ways— to improve small business innovation, productivity and, in turn, business performance. This study was aimed at investigating small business owners’ perception towards Internet technology and how it affects their business performance. Three hundred and twenty six respondents consisting of 88 small food processing firm owners, 101 small agribusiness firm owners, and 137 small embroidery firm owners were used in this study. Descriptive and cluster analyses were performed. The study results found that perception of small business owners towards internet technology and its effect on business performance varies according to a number of factors such as age, gender, level of education, level of technology adoption, and business types. It was also found that, regardless their individual characteristics, the majority of respondents believed that Internet technology has the potential to increase their firm performance.