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University of E COJIOITIICS IRStltUté Of social studies HO Chi Minh City The Hague Vietnam Netherl ands Vl4?tRa m — Netherlan ds Project for MA Program in Developmen t Economics DET ERMINA NTS OF APPLICATI ON SOFTWARE ADOPTION: The Case of SMEs in HCMC LE THANH BINH Academic Supervisor: Associate Dr NGUYEN DINH THO He Chi Minh City, March 2011 Declaration I declare that the thesis hereby submitted for the Master degree at the Vietnam- Netherlands Program for M.A in Development Economics is my own work and has not been previously submitted by me at another university for any degree Ho Chi Minh City, March 2011 Le Thanh Binh Acknowledgement In the first of all, my heartfelt thank goes to my supervisor, Associate Dr Nguyen Dinh Tho During the course of my thesis research and writing, I received precious guidance, useful comments and encouragements My deepest thank also goes to Associate Professor Dr Nguyen Trong Hoai, Co- Director of Vietnam - The Netherlands Program for M.A in Development Economics, for his encouragements during the course and thesis research In addition, I wish to offer much thanks to: my kindly and enthusiastic classmate, Mr Nguyen Ngoc Danh, who was always ready to give me his ideas and recommendations; my friend and ex-colleague, Mr Marc Nguyen, who assisted me to edit English writing of my thesis My heartfelt gratitude also goes to my wife and my son, Trinh and Trung Quoc, who are my love and motivation during the studying time Abstract This study aims to investigate the factors that affect the adoption of application software by SMEs in Ho Chi Minh City A sample of 140 firms in HCMC was surveyed to test the model It was found that perceived usefulness and ease of use of application software are potential predictors of application software adoption It was also found that IT knowledge has impacts on the adoption of application software BOM Innovativeness was not significant It may be due to the limitation of this study Some questionnaires were answered by who were not from B OM and the sample was not large enough to make sure the results are entirely credible The findings of this study suggest that the government and software firms should focus on improving the IT knowledge of people who work in the office, especially people from BOM Software firms should promote the usefulness and ease of use of application software In addition, the laws of intellectual property and laws to protect the software users are also recommended to the government Table of Contents ACKNOWLEDGEMENTS II ABSTRACT III TABLE OF CONTENTS .IV LIST OF FIGURES VI LIST OF TABLES VII LIST OF EXHIBITS VIII ABBREVIATION .VIII CHAPTER - OVERVIEW 1.1 INTRODUCTION .1 1.2 THE CONTEXT OF VIETNAMESE SOFTWARE INDUSTRY 1.3 OBJECTIVES OF THE RESEARCH 1.I RESEARCH QUESTIONS 1.5 RESEARCH METHODOLOGY AND SCOPE CHAPTER — LITERATURE REVIEW INTRODUCTION 2.2 D 5JNJT1 NS 2.3 THEORIES AND EMPIRICAL STUDIES 2.3 Innovativeness -9 3.2 Perceived Usefulness , .9 2.3.3 Perceived Ease oJ Use II 3.3.4 /J Knowledge , 7 2.3.5 Sire ofFirms 12 2.3 Competitive Intensity 13 2.3 Type ofBusiness 13 INTRODUCTION 24 4.2 THE SAMPLE 24 4.3 DESCRIPTIVE ANALYSIS 24 4.4 RELIABILITY ANALYSIS 26 4.5 MVISE MODEL 27 4.6 FACTOR ANALYSIS 28 4.7 OLS REGRESSION 31 4.5 HYPOTHESIS TESTING .34 4.9 DISCUSSIONS .37 CHAPTER — IMPLICATIONS AND CONCLUSIONS .39 INTRODUCTION .39 5.2 MAIN RESULTS CONTRIBUTION AND IMPLICATIONS 39 5.3 LIMITATIONS AND DlRECTIONS FOR FUTURE RESEARCHES 42 REFERENCES 43 APPENDIX 1: THE QUESTIONNAIRE 48 APPENDIX 2: NOTATION OF VARIABLES 55 APPENDIX 3: CRONBACH’S ALPHA 57 APPENDIX 4: FACTOR ANALYSIS 60 APPENDIX 5: HETEROSKEDASTICITY TEST 63 List of Figures Figure — Conceptual Model 13 Figure — Research Process 15 Figure 4.1 — Revised Conceptual Model 26 List of Tables Table l — List of Applications Table 4.1 — Type of Business 24 Table 4.2 — Business Size 24 Table 4.3 — Application Software .25 Table 4.4 — Reliability Analysis 25 Table 4.5 — Rotated Component Matrix(a) 27 Table 4.6 — KMO and Bartlett’s Test 28 Table 4.7 — KMCI and Bartlett’s Test (ASADOPT) 29 Table 4.8 — Component Matrix (a) 29 Table 4.9 — Frequency Analysis of sum values of two items of CINT 30 Table 4.10 — Business Type with dummy variables 30 Table 4.11 — The dummy variables of the business size 31 Table 4.12 — Regression with data survey 32 Table 13 — Summary of Hypothesis Testing 34 List of Exhibit Abbreviation BOM Board Of Managers Determinants of Application Software Adoption: The Case of SMEs in HCMC Chapter Overview 1.1 Introduction Nowadays information technology plays a crucial role in economic development Among them, the software industry is growing faster than most other industries The world software market was approximately US$110 billion in 1988 (Schware 1992), and is about US$600 billion (Rizk 2002) Software industry is viewed as a good choice for developing countries to leverage their economy and strengthen their national competitive power (Lee & Lee 1994) For example, the annual growth rate of India’s software industry has been consistently over 20 percent since 1996 The revenues from software industry of India were US$8.7 billions in 2001 (Economy Watch) The amiual growth rate of Brazil’s software industry has been also 11%-12% (Schware 1992) According to Schware (1992), the developing countries should focus more on the domestic software market; therefore, it makes software exports develop faster because of increases in experience and innovation in softwarc production In acknowledging the importance of the software industry to the economic development, the Vietnamese government has paid much attention to dex eloping the software industry in general, and the domestic software market in particular by issuing many policies to support the software industry and software firms and by investing a lot of money to its development Vietnam’s domestic software market has a lot of potential with approximately 7,000 organizations, 6,000 state firms, and nearly 260,000 limited firms However, the number of firms using application software continues to be very limited In the year of 2006, the revenues of application software were only 93 million USD (Laodong 2007) Many conferences have been organized to discuss on how to leverage the demand of domestic application software but to date, no effective Determinants of Application Softv•ai e Adoption: The Case of SMEs in HCMC Vctiphan mém ring dung, cong ty chug loi co dvc c thong tin thong ké tién quan dén doanh nghiep ré hon By using application software, our firm would find it more effective in making business decisions Vctiph‹in mém hug dung, cong ty chhng toi co thé dva quyét dinh hieu qua hon Overall, our firm would consider that application • software is useful for managing business activities Néi chung, cong ty chhng toi xem phan mém ting diing ID him dung cho viec quan If cac hoat dong doanh nghiep Perceived ease of use / Dwiyc nhan thfrc la de str dijng Application software which is easy to learn would be good for our firm Phan mém ring dung d hoc sé tot cho doanh nghiép chhng /cii It is easy to look up the information related to our business by using application software - That de ding tim kiém théng tin tién qticin dén docinh nghiep bang ph n mém ii:rig dung It is easy to use application software to improve the communication between the departments in our firm That de déng sit: dung phan mém ring dung dé céi tién viec trao doi théng tin giii: cac b(› phan doanh nghiep Overall, our firm prefer application software which is easy to use Néi chung, céng ty chhng Hi thich phan mém ring dung Determinants of Application Software Adoption: The Casc of SMEs in HCMC de sit dung hon IT Knowledge / Kien th frc cling ngh( thfing tin I would rate my own understanding of computers (before my company computerized) as very good compaied to • other people in similai positions Toi tu: dénh gié inn:c hiéu biéi vé méy tinh ciia tot (tru:de cong ty toi tin hpc héa) la rat tot so vai nhiing ngircti khéc vi tri tvong dirong Competitive Intensity / Cw6iig canh tranh The rivalry among firms in the industry in which my company is operating is very intense Su: cqnh tranh cac doanh nghiep ciing nganh ciici céng ty chung téi rat manh liet There are many products/services in the market which - are different from ours but perform the same functions Cé nhiéu san pham va dich vu tt-ong ciing th[ trvong khéc vcti sén pham va d[ch vu ciia chhng toi nhung thij:C /ifefI ciing chiic niing Business Size / Do lém doanh nghi(p Number of employees: So lvprig nhan vién 51 Type of Business / Loai doanh nghi(p You can circle more than one Ban cé thé chpn nhiéu hon in‹)t (i) Manufacturing San xuat (ii) Commerce Thvong mii (iii) Dich vu Service Ownership / Quyén str hfru (i) State-owned Sc hiru nha ntréc (ii) Private-owned Sc hii:u tu’ nhén (iii) Co phan Joint-stock Adoption of application software / Sir l;ya ch pn phan mém frng dung • Does your firm use application software? Cong ]² ban cé st dung phan niém mug dung k.hong? Strongly Strongly Disagree Agree Our firm has applied application software efficiently and effectively in financial management 52 Determinants of Application Softwaie Adoption: J“he Case of SMEs in HCMC C.éng ty chiing téi dé ép dung phén mém ting dung hieu qué va cé két qué viec qucin Iy’ téi chin“It Our firm has applied application software efficiently and effectively in the improvement of our inventory control activities and purchasing activitics Céng ty chiing téi dé ép dung phan méin ii:ng dung hi u qua vet cé két qua van viec céi tién czic /iop/ dciifg mu‹i wiig v‹i • quén lj "› kho Our firm has applied application software efficiently and effectively to improve our sales activitics and customer services Céng ty chiing téi dé ép dung phan niém hrig dung hieu qua vh cé két qué dé cai tién céc hopt d(›ng kinh doanh va d[cli vu khach hcing Our firm has applied application software efficientlJ² and effectively in the utilization and simplification o1’ human resource management Céng ty chung téi dé ép dung pli n mém ii:rig dung hi u qué vé cé két qua vi c Hi uu héa va don gicin héa viec quan IQ nguon li.tc Our firm has applied application software efficiently and - effectively in the simplification of manufacturing resources planning Céng ty chiing téi dé ép dung phan iném ring diing hiéu quci vé cé két qué viéc don gicin héia vic:c hopch d[nh ngtion lvc sén xuét Software Applications / C:i c phan mem frng dung For each computer applications /u use in your company, please put a tick against the application (This is a survGy to know how many firms use each software application) Doi vcti moi ring dung nity tinh dang si’r dung cong ty, vui long danh dan véo hug dung dé (Day ID khao sét dé biét bao nhiéu c‹5ng ty si ’r dung t“vng phan mém Eng dung) Application / "Eng dijng In-use / Dang str dung Accounting / Ké to:in Inventory control / Qu:in ly kho | | Sales / Quan 1y kinh doanh |] Purchasing / Mua hiing | | Personnel and Payroll / Nhan st v:i tién luong CRM / Qu:in ly quan h( kh:ich h:ing SCM / Quiin ly chuoi cung c:ip MRP / Hoach diiih ngufi n luc s:in xuat Others (please specify) / Kh:ic (vui long ghi ro) 54 Determinants of Application Softwaie Adoption: The Case of SlvlEs in HCMC Appendix 2: NoQtion of Variables Notation • Innovativeness INNO BOM usually has original ideas INNO BOM would sooner create something new than improve INNO2 something existing BOM often risks doing things differently INNO3 Perceived usefulness OPU By using application software, our firm would manage OPU1 information related to our business wore easily By using application software, our firm would process and OPU2 obtain information ielated to our business more quickly By using application software, our firm would obtain the OPU3 statistic data related to our business more cheaply By using application software, our firm would find it more OPU4 effective in making business decisions • Overall, our firm would consider that application software OPU5 is useful for managing business activities Perceived ease of use OPEU Application software which is easy to learn would be good OPEUI for our firm It is easy to look up the information related to our business OPEU2 by using application softwaie It is easy to use application software to improve the OPEU3 communication between the departmcnts in our lii in 55 Overall, our firm prefer application software which is easy OPEU4 to use IT Knowledge ITKNOW I would rate my own understanding of computers (befoie my ITKNOW company computerized) as veiy good compared to othei peoplG in similar positions • Competitive Intensity CINT The rivalry among firms in the industry in which my CINT1 company is operating is very intcnse Therc are many products/services in the market which are CINT2 different from ours but perform the same functions Our firm has applied application softwaie efficiently and AASI effectively in financial management Our firm has applied application software efficiently and AAS2 effectively in the improvement of our inventory control activities and purchasing activities Our firm has applied application software efficiently and AAS3 effectively to improve our sales activities and customer services Our firm has applied application software efficiently and AAS4 effectively in the utilization and simplification of human resource management Our firm has applied application software efficiently and AAS5 effectively in the simplification of manufacturing resources planning 56 Determinants of Application Software Adoption: The Case of SMEs in HCMC Appendix 3: Cronbach’s Alpha • Cronbach’s Atpha of AAS factor Reliability Statistics Cronbach’s Alpha Based Cronbach's Al 873 on Standardized Items 876 N of Items Item-Total Statistics Scale Apply AS in financial management [AASI] Scale Mean if Variance if Item Item Deleted 13.83 15.485 , 14.14 14.617 13.84 15.426 13.95 14.564 14.03 14.822 Corrected Item-Total Item Deleted Deleted 699 Apply AS in inventory control [AAS2] Apply AS in sales and customer services [AAS3] 729 Squared Multiple Correlation Cronbach’s , Alpha if Correlation ” 593 ” 847 542 853 566 841 Apply AS in human resource management [AAS4] Apply AS in manufacturing resource planing [AASS] 832 657 ,' 858 Cronbach’s Alpha Based on Standardized Items 452 ! Cronbach's AI 453 N of Items 57 Item-Total Statistics Scale Mean if Item Deleted Scale Variance if Item Deleted Corrected Item-Total Correlation Cronbach’s Squared Multiple Correlation i Alpha if Item Deleted BOM has original ideas [lK ±O1] BOM would creat something new [INNO2] 6.48 2.648 273 BOM takes risks [INNO3] 6.69 3.024 486 • Cronbach’s Alpha of Perceived Usefulness factor Reliability Statistics Cronbach's Alpha Based on Standardized Items 828 Cronbach's Alpha 821 ! N of Items Item-Total Statistics Firm would manage , information more easily [OPU1] Firm would process information more quickly [OPU2] Firm would obtain statistic data more cheaply [OPU3J Firm would make business decisions more effectively [OPU4] AS (application software) is seemed to be useful for managing biz Scale Mean if Item Deleted 15.50 Scale Variance if Item Deleted Corrected Item-Total Correlation Squared Multiple Correlation 8.206 753 Cronbach’s Alpha if Item Deleted 770 15.56 7.710 , 15.95 8.798 16.02 8.346 ! 621 , 438 784 15.69 7.894 ! 675 494 ' 768 745 activities [OPUS] 58 Determinants of Application Software Adoption: The Case of Sh4Es in HCMC Cronbach’s Alpha Based on Standardized Cronbach’s Alpha Items 808 '.808 N of Items Item-Total Statistics Scale Mean if , Item Deleted AS being easy to learn would be good [OPEUI] Easy to look up information by using AS [OPEU2J Easy to use AS to improve communication [OPEU3] Firm prefers AS which is easy to use [OPEU4] • Scale Variance if Item Deleted 11.70 5.877 11.98 Corrected Squared Correlation Correlation Item-Total 644 Multiple Cronbach’s Alpha if Item Deleted 516 751 6.244 , 458 745 11.75 7.013 365 ! 798 11.57 6.293 669 738 Cronbach’s Alpha of Competitive Intensity factor Reliability Statistics Cronbach's Alpha ”.809 Cronbach's Alpha Based on Standardized Items , N of Items 809 Item-Total Statistics Competition is very high [CINT1] Many products/services in the market [CINT2] Scale Mean if Item Deleted Scale Variance if Item Deleted ! Corrected Item-Total Correlation Squared Multiple Correlation 3.57 1.159 680 462 3.73 1.159 680 462 Cronbach’s Alpha if Item Deleted (a) (a) a The value is negative due to a negative average covariance among items This violates reliability model assumptions You may want to check item codings 59 Appendix Factor Analysis • Factor analysis of Adoption o1’ Application Software factor (Dependent factor) KMO and Bartlett’s Test Kaiser-Meyer-OIkin Measure of Sampling Adequacy .801 Banlett's Test of Sphericity Approx Chi-Square 294.530 10 df Sig .000 ' Total Variance Explained Initial Ei enva lues Com onent ! of Total Variz nce Cumulative % 3.341 708 66.816 14.154 66.816 80.970 416 8.315 89.285 299 5.985 ' 237 4.730 Extraction Sums of Squared Loadings % of Total 3.341 Variance 66.816 Cumulative % 66.816 95.270 100.000 Extraction Method: Principal Component Analysis Component Matrix(a) Componen Apply AS in financial management [AASI] Apply AS in inventory control [AAS2] Apply AS in sales and customer services [AAS3] Apply AS in human resource management [AAS4] Apply AS in manufacturing resource planing [AASS] 814 799 835 853 784 Extraction Method: PrincipalntCompone Analysis a components •,xtracted 60 Determinants of Application Software Adoption: The Case of SMEs iii HCMC • Factor analysis of indepenclent factois KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .818 Bartlett's Test of Sphericity Approx Chi-Square 650.893 66 000 df Sig Rotated Component Matrix(a) Compone nt Firm would manage ' information more easily [OPU1] Firm would process information more quickly [OPU2] Firm would obtain statistic data more cheaply [OPU3] Firm would make business decisions more effectively [OPU4] AS (application software) is seemed to be useful for managing biz activities [OPUS] 884 112 127 150 835 299 164 -.018 243 , 309 -,420 655 247 287 -.228 629 360 407 -.014 would be good [OPEUI] Easy to look up 314 796 030 , 241 information by using AS 105 799 , 257 -.157 263 , 563 397 -.220 096 176 AS being easy to learn , [OPEU2] Easy to use AS to improve communication [OPEU3] Firn! prefers AS which easy to use [OPEU4] ".262 A member of BOM is very good at computer [ITKNOW] Competition is very high 252 165 , [CINT1] Many products/services 215 , 146 in the market [CINT2] Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations .752 123 826 129 61 Total Variance Explained Component Extraction Sums Intl E envalues Total 5.405 1.226 1.179 uared Loadin Rotation Sums of Squared Loadinsq % of Variance Cumulative % Total | Variance Cumulative % Total i Variance Cumulative % 45.045 5.405 | 45.045 45.045 2.839 23.656 10.215 , 9.828 55.260 65.088 1.226 10.215 55.260 2.663 22.188 23.656 45.844 1.179 9.828 65.088 2.116 17.634 63.478 818 6.814 71.903 818 6.814 71.903 1.011 8.424 71.903 715 5.962 77.865 645 574 5.372 83.237 4.783 88.020 ' 463 3.858 91.878 11 208 1.735 98.514 12 178 1.486 100.000 45.045 ! Extraction Method: Principal Component Analysis 62 Determinants of Application Software Adoption: The Case of SMEs in HCMC Appendix 5: Heteroskedasticity Test White Heteroskedasticity Test: F-statistic Obs“R-squared 1.465173 55.24219 0.086139 0.140914 Probability Probability Test Equation: Dependent Variable: RESID°2 Method: Least Squares Date: 04/02/10 Time: 15:02 Sample: 140 Included observations: 103 Excluded observations: 36 ³ « * Variable C CINT CINT“DBTYPE1 CINT“DBT’7PE2 CINT“ITKNOW CINT’OPEU CINT“OPU CINT“SIZE1 CINT“SIZE2 CINT“SIZE3 DBTYPE1 DBTYPE1“DBTYPE2 DBTYPE1“ITKNOW DBTYPE1“OPEU DBTYPE1“OPU DBTYPE1’SIZE1 DBTYPE1*SIZE2 DBTYPE1“SIZE3 DBTYPE2 DBTYPE2”ITKNOW DBTYPE2“OPEU DBTYPE2“OPU DBTYPE2“SIZE1 DBTYPE2“SIZE2 DBTYPE2“SIZE3 ITKNOW ITKNOW"2 ITKNOW“OPEU ITKNOW”OPU ITKNOW’SIZE1 ITKNOW“SIZE2 ITKNOW“SIZE3 Coefficient Std Error 0.186862 0.735589 0.424713 1.002619 -1.320573 0.701837 0.289535 0.666914 -0.689046 0.823499 -0.212865 0.435150 -0.453140 0.477587 -0.796483 1.123535 -0.046529 1.075971 -0.382309 1.148450 1.026955 0.554746 -0.533199 0.735529 -0.109505 0.398436 0.321087 0.261101 0.158296 0.220662 0.036310 0.646598 -0.593641 0.490640 0.314866 0.585653 -1.640799 1.008187 -0.156045 0.320739 -0.426130 0.254442 155155 0.230159 1.353349 0.915306 1.446942 0.938666 1.557673 1.005033 0.110262 0.658018 195025 0.195493 0.060786 0.183650 -0.033448 0.173432 0.479597 0.502364 0.221317 0.453395 0.125691 0.576705 t-Statistic 0.254030 0.423603 -1.881594 0.434142 -0.836729 -0.489178 -0 948811 -0.708908 -0.043244 -0.332891 1.851215 -0.724920 -0.274836 1.229745 717369 0.056155 -1.209931 0.537632 -1.627475 -0.486518 -1.674764 0.674119 1.478575 1.541488 1.549872 167567 0.997606 0.330989 -0 192861 0.954680 0.488133 0.217946 Prob 0.8004 0.6734 0.0650 0.6658 0.4062 0.6266 0.3467 0.4813 0.9657 0.7404 0.0693 0.4715 0.7844 0.2238 0.4761 0.9554 0.2313 0.5929 0.1092 0.6285 0.0995 0.5030 0." 448 0.1287 0.1267 0.8675 0.3227 0.7419 0.8478 0.3438 0.6273 0.8282 63 , OPEU OPEU"2 OPEU“OPU OPEU“SIZE1 OPEU“SIZE2 OPEU“SIZF.3 OPU OPUº2 OPU“SIZE1 OPU’SIZE2 OPU”SIZE3 SIZE1 SIZE2 SIZE3 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat -0 159585 0.016422 0.134130 0.578937 0.617227 0.713037 0.649483 0.022157 -0.425140 -0.563475 -0.339788 0.592215 0.139487 -0.094012 0.536332 170278 0.G69103 25.51881 -74.29203 2.066229 0.452674 -0.352539 0.096415 0.170322 0.128682 1.042333 0.301311 1.921397 0.346564 1.780989 0.528604 1.348905 0.399557 1.625507 0.094443 0.234603 0.302151 -1.407046 0.311440 -1.809257 0.405305 -0.838352 0.709486 0.834710 0.721411 0.193353 0.844058 -0.11 1381 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) p-value > 0.05 => Heteroskedasticity does not exist in this model 0.7257 0.8654 0.3017 0.0597 0.0802 1827 1096 0.8154 0.1648 0.0757 0.4053 0.4074 0.8474 9117 0.489802 0.734559 2.335768 3.512443 1.465173 0.086139 ... firm is not Trading Determinants Software Adoption: Adoption: The The Case Case of of SMEs SMEs in in HCMC HCMC Determinants of of 4pplicatioii Application Softwaie The business types with dummy... in Table 4.3 was the application that the firms 25 Determinants of 4pp1icatioii Application Software SoftwareAdoption: Adoption: The The Case Case of of SMEs SMEs in in HCMC HCMC had employed A... implement the application software for them or purchase it from a software development fiim Determinants of of Application Application SoftwarG Softwaie Adoption: Adoption: The The Case Case of of SMEs
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