INTERNET USE FACTORS FOR SMALL BUSINESS Judy Drennan and Jessica Kennedy

Abstract This paper investigates factors affecting use of the Internet by pharmacies, as an example of small business IT acceptance. It examines the extent to which use of the Internet may be influenced by three factors: organisational readiness, external pressure and perceived benefits. A survey of 177 pharmacists operating as small businesses in Queensland, Australia was undertaken. Preliminary results showed that Internet use was significantly associated with two factors: perceived benefits and external pressures perceived as opportunities. However, no significant relationship was found with either organisational readiness or external pressures perceived as threats. Introduction This paper investigates factors affecting the use of the Internet by pharmacies, as an example of small business information technology (IT) acceptance. This study is significant for three reasons. Firstly, a sizeable proportion of pharmacies in Australia fall into the small business category, which is a key priority of the Australian government's industry policy agenda (DIST, 1996). Secondly, pharmacies are part of the healthcare industry which is experiencing massive strategic and structural changes and rapid IT developments. Pharmacies are therefore a useful barometer at a micro level of wider industry IT forces. Thirdly, as part of a service sector, pharmacies are intermediaries within the distribution channels linked to extensive service technologies. These technologies open up opportunities for value-adding by pharmacists as members of the rapidly growing services industry. Internet acceptance and use by pharmacists is therefore an important research field to investigate. IT has long been recognised as a dynamic facilitator of organisational success and profitability (McFarlan, 1983; Porter and Millar, 1985; Rackoff et al, 1985). Reduced IT costs, flexibility and enhanced IT capabilities have enabled IT to evolve from a reactive organisational tool to a proactive corporate resource (Segars and Grover, 1994). However, much of the literature on IT is related to large organisations that have the investment capability to build up sophisticated information systems. Large firms have the potential to either 'lock-in' or link up electronically with customers, trading partners and suppliers. With the incorporation of smaller firms into IT networks due to the decrease in IT hardware and software costs, smaller enterprises are now major users of IT. IT developments in the pharmacy sector embrace a wide range of players such as wholesalers, government organisations, customers and professional associations. These stakeholders influence adoption, implementation and strategies undertaken. In particular, professional associations are playing an important role in introducing and providing Intranets to their members, and guiding them through the plethora of industry related web-sites. The key figure, however, is still the individual small business manager who needs to respond to internal and external environmental considerations in making decisions about adoption and use of the Internet.

Benefits of Internet use for small business Advances in IT for small firms have moved rapidly over the last decade, particularly in relation to small firm/large firm electronic linkages (Gales and Blackburn, 1990; Ferguson, 1995) and, more recently, with the use of the Internet (Kaplan et al 1997). Already, in Australia, one third of all small businesses are now connected to the Internet (Yellow Pages Small Business Index, 1998), but few in-depth studies of factors affecting small business Internet use are evident. Also, much of the research in this area appears to be predominantly from the USA, and an Australian perspective provides a useful point of comparison. The Internet can present opportunities to create and implement new ways of doing business (Nath, 1998). As such, small firms in the service sector can take advantage of this technology for relatively low entry and establishment costs (Peterson et al, 1998). Benefits to be gained include ease of access and global reach, low cost advertising, perceived image enhancement (Nath, 1998) and direct on-line selling (Cockburn and Wilson, 1996). In addition, it has the ability to provide interactivity (Peterson et al, 1998) and is commonly used for research, communication and collaboration (Cockburn and Wilson, 1996). Small firms are also able to participate in electronic data interchange (EDI) at lower costs by running EDI messages over the Internet without paying network messaging fees (Corbin, 1996; Tucker, 1997). The ability to compete more effectively with larger organisations by using the Internet is a significant advantage for small businesses. Organisations are more visible to competitors and consumers on the Internet, and smaller firms that set up a Website are able to compete by virtue of its presence (Guthrie and Austin, 1996). However, owners often fail to recognise the competitive advantage potential of the Internet (Kaplan et al, 1997). Also, the Internet is still at an early stage for many businesses, and issues relating to security, privacy, payment and intellectual property still need to be solved (Corbin, 1996; The Australian Financial Review, 1998). The level of IT knowledge, organisational resources and external support will impact on the ability of smaller firms to adopt and use their IT effectively (Geisler, 1992; Ray et al, 1994; Winston and Heiko, 1990). For pharmacists, the Internet is a powerful tool for enhancing customer service. It is argued in the pharmacy sector that <> (Beardsley, 1996). Although pharmacists will continue to manage drug distribution, they will be more focused on patient care and it is claimed that 'most professional pharmacy organisations believe that pharmacy's economic future lies in the provision of cognitive services>> known as patient care (Felkey and Barker, 1996:309). The ideal pharmacist is currently defined as someone who cares about the patient and provides a service above and beyond the patient's care needs (Fleming, 1997). Good customer service is a major selling point for pharmacists, and marketing this service is extremely important. The Web provides both marketing opportunities and access to up-to-date, timely pharmacy knowledge to assist with patient care.

Factors affecting Internet use To investigate factors affecting Internet use, it is helpful to consider past research relating to IT developments such as electronic data integration. A study undertaken by Iacovou and his colleagues (1995) proposes that adoption of IT may be influenced by at least three factors: organisational readiness, external pressure to adopt and perceived benefits.

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Organisational readiness involves the level of financial and technological resources of the firm. For small firms, lack of capital and expertise (Quinn, 1992), 'lack of managerial time, poor support, and limited financial resources' (Cragg and King, 1993:56) serve to inhibit IT growth. External pressure relates to government, competitive and customer demands. For example, Treadgold (1990) found that new technology adoption by firms in the service and retail sectors was influenced by external agencies such as professional associations. Also external pressure may arise when an industry has undergone radical, disruptive change, such as deregulation, (Clemons 1986), when new technological developments have emerged (Porter, 1985), or when competitors are using more sophisticated IT. Perceived benefits include recognition by the firm of the relative advantage to be gained by the IT network. These benefits include both direct benefits such as improved productivity and indirect benefits such as competitive advantages (Iacovou et al, 1995).

In this paper, these factors are examined to determine their association with Internet use by pharmacists. However, given that all respondents belong to one industry sector, it was considered that external pressures would be similar. Pharmacists have been strongly influenced by a government organisation (Health Insurance Commission) and pharmaceutical suppliers to link into electronic networks. Specific external pressures on pharmacists include deregulation, use of IT by competitors, Internet direct sales and new technological developments such as the Pharmacy Guild Intranet. External pressures may be perceived by pharmacists to be opportunities or threats and these perceptions may impact on how pharmacists respond to Internet use. Therefore, to test the effect of external pressure on Internet use, this factor is separated into two components: external pressures perceived as opportunities and external pressures perceived as threats. Conceptual model It is hypothesised in this model that high organisational readiness, high perceived benefits and high external pressure, viewed as either a threat or opportunity, will be associated with the extent of Internet use. In this study organisational readiness refers to the following resources: financial resources, time resources to implement, training resources to teach employees and appropriate number of employees. Perceived benefits relating to the use of the Internet include the following five factors: improved customer service (Formicelli, 1997; Peterson, 1998), increased access to information (Snyder, 1996), increased productivity (Palvia, 1997), decreased costs (Fuller, 1996) and linkups with others in the industry (Cockburn and Wilson, 1996). External pressure includes deregulation, use of IT by competitors, Internet direct sales and new technological developments. The proposed model (Figure 1) shows perceived Internet benefits, organisational readiness, external pressures as opportunities and external pressures as threats included as factors affecting extent of Internet use. The specific hypothesis tested was as follows: Hypothesis: Extent of Internet use is a function of perceived benefits, organisational resources and external pressures perceived as opportunities or threats. Research Methodology 5.1 The sample Data collection was undertaken by a state-wide survey of 750 pharmacies that operate as small businesses within Queensland, Australia. All members of the Queensland Pharmacy Guild were sent a highly structured, selfadministered questionnaire with their Guild's professional journal. Five-point Likert-type scales were used with five questions relating to perceived benefits of IT, four questions linked to organisational readiness, and eight questions regarding external pressure. One question related each to 'current use of IT'.

Twenty-four percent of the questionnaires (177) were completed and returned in a postage paid return addressed envelope provided. This rate of return is within the acceptable range for business research (Neumann, 1994). The variables Organisational readiness. Four items were used to describe organisational readiness: financial resources (Fuller, 1996) time resources for implementation (Fuller, 1996), training resources to teach employees and appropriate number of employees (Harrison, 1997). For each item, pharmacists were asked to respond to a five point Likert-type scale ranging from (1) not at all to (5) to a great extent. The four items were combined to form a single scale which had a reliability co-efficient of .81. Perceived Internet benefits. Perceptions of benefits to be gained from the use of the Internet were measured using five items: improved customer service (Formichelli, 1997; Peterson, 1998), increased access to information (Snyder, 1996), increased productivity (Palvia, 1997) and linkups with others in industry (Cockburn and Wilson, 1996). Respondents used the same five point Likert-type scale as above to rate these items. The five items were combined to form a single scale which had a reliability co-efficient of .86. External pressure. The extent of external pressures, which include deregulation, use of IT by competitors, Internet direct sales and new technological developments, was measured using two sets of variables. First, respondents were asked to respond to a five point Likert-type scale as described above relating to the extent to which the four items were perceived as opportunities. Second, they were asked to respond to the same five point Likert-type scale relating to the extent to which the four items were perceived as threats. The four items used in external pressures as opportunities were combined to form a single scale which had a reliability co-efficient of .70. The same procedure was used for the four items in external pressures as threats and this scale had a reliability co-efficient of .69. Extent of Internet use. Pharmacists were asked to indicate, on a five-point Likert-type scale, the extent of their current Internet usage ranging from (1) not at all to (5) to a great extent. For the purposes of this study, only those respondents who indicated that they used the Internet were included. Of the 177 respondents, 71 pharmacists stated that they were currently using the Internet. Results and discussion of statistical analysis Regression analysis using SPSS was employed to test the model describing the relationships between organisational readiness, perceived benefits and external pressures perceived as opportunities, external pressures perceived as threats and extent of Internet use. Results in Table 1 shows that a significant relationship was found between perceived benefits and the extent of Internet usage at the .05 level. A significant relationship was also found between external pressures as opportunities and extent of Internet use at the .05 level. However external pressures as threats and organisational readiness were not found to have a significant relationship with extent of Internet use.

Table 1 -- Regression results for the effect of organisational resources, perceived benefits, external pressure as opportunities and external pressures as threats on extent of Internet use Variable

B

T

Constant

1.498922

2.729

Organisational Resources

-.021551

-.717

Perceived benefits

.057577

2.020*

External pressures as opportunities

.063609

2.020*

External pressures as threats

-.028343

-.972

R Square=.09

Standard error=.70

F=2.7505*

n=71

*Significant at at least 0.05 level These results support lacovou and his colleagues' (1995) findings that perceived benefits and external pressures are important factors influencing IT adoption, while organisational readiness has a weaker association. However, in this study of pharmacists, it is a notable finding that the significance of external pressures as an effect on Internet use differs in terms of their perceptions of these pressures as opportunities or threats. Where external pressures are perceived as opportunities, respondents are more likely to use the Internet to a greater degree. In contrast, the perception of the same external pressures as threats is unlikely to lead to increased Internet use. This result suggests that if small businesses are fearful of rapid IT developments, deregulation in their industry, and competitors' use of more sophisticated IT, they may become overwhelmed by these changes and do nothing. Therefore, it is crucial that professional associations play a role in encouraging them to look for opportunities to be gained from these pressures. Deregulation, for example, is a major issue for pharmacists in that it will enable supermarket chains to sell prescription products also. However, pharmacists who see this as an opportunity use strategies to differentiate themselves from these chains by focusing on their ability to provide superior patient care. As discussed earlier, the Internet provides opportunities for pharmacists to provide improved customer support with easily accessed, timely information about health and drug issues. In addition, for a relatively low outlay, they are able to market themselves on the Web as providing specialized expert patient care beyond that offered by the chain stores. For pharmacists, organisational readiness does not affect the extent of Internet use, and several reasons may be suggested to explain this finding. One factor included in organisational readiness was financial resources. In general, entry costs are low for use of the Internet and pharmacists are already required to have reasonably sophisticated levels of IT by the Health Insurance Commission. Therefore, financial resources may not be as important for Internet uptake and use as they would have been for earlier IT developments where large financial

outlays were required to purchase extensive hardware and software. Another factor was related to resources used for training staff, and it may be that previous experience of employees with computers, for example with Point of Sale terminals, reduces the necessity for training in the use of the Internet. As small businesses gain more experience with computers, they may become more confident and knowledgable in approaching the use of new IT developments. This experience may also reduce the time and effort required to implement new technology, so time resources are also less crucial factors. More important are the benefits that small firms perceive that they will gain from the use of the new technology. Such benefits include the ability to link up with others in the industry for communication, collaboration and transactional purposes, as well as increased access to information. These perceived advantages, combined with the perceptions that the Internet will also provide direct benefits such as improved customer service, increased productivity and decreased costs, appear to be significant motivators for Internet use. Summary and conclusions This paper investigated factors affecting use of the Internet by pharmacists, as examples of small business, in Australia. Results of the study show that the extent of Internet use is significantly associated with perceived Internet benefits and external pressures only if these pressures are identified as opportunities. Where these external pressures were perceived as threats, however, this factor was not associated with Internet use. An explanation provided for this finding was that small business, fearful of rapid IT developments and changes in their industry, may become so overwhelmed that they fail to respond at all. This finding suggests that it is important for small businesses to be aware of opportunities that can be grasped from these external pressures, and industry stakeholders such as professional associations, can play a useful part in addressing this issue. It was also found that organisational readiness was not associated with use of the Internet, and it was argued that low entry costs for the Internet reduce the need for financial resources, and that past experience with computers lessens the time and training usually required for the introduction of new technology. In view of the impact of perceived benefits on Internet use, further research examining factors affecting these perceptions would be useful. For example, consideration may be given to exploring whether positive past experiences with IT are likely to influence perceptions of the benefits of new technology. As small businesses become more familiar with use of the Internet, it will be possible to explore the relationship between perceived benefits and success outcomes. IT developments such as the Internet provide small firms with enormous potential to gain advantages over their larger competitors and research on competitive strategies by small firms will be of major importance. References Beardsley, R., (1996), <>, Journal of the American Pharmaceutical Association, Vol. NS36, Iss. 5, p. 315. Clemons, E., (1986), <>. Computerworld, Vol. 20, No. 44, pp 73, 85-86. Cockburn, C. and Wilson, T.D. (1996), <>, International Journal of Information Management, Vol. 16, No. 2, pp 83-102. Corbin, L. (1996), <>, Government Executive, Vol. 28, No. 12, pp 42-46.

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Ipswich Queensland 4305 Tel: +6107 3381 1038 Fax:+6107 3381 1053 Salisbury Road E-mail: [email protected]