Summer Journal
SMALL BUSINESS E-COMMERCE ADOPTION
THROUGH A QUALITATIVE LENS:
THEORY AND OBSERVATIONS
Evan H. Offstein
Frostburg State University
eofffstein@frostburg.edu
J. Stephen Childers, Jr.
Radford University
jchilders2@radford.edu
ABSTRACT
Using approaches consistent with the qualitative research tradition, the authors attempt to
understand the motivation behind small business adoption and exploitation of e-commerce. A
theoretically grounded model of e-commerce deployment by small businesses owners is
presented, which can best be explained by two theoretical lines: an economic evolutionary
perspective and a sociological institutional perspective. Further, our findings suggest a tie
between owner characteristics, dispositions, traits, and the level of e-commerce integration
achieved. We contend that understanding the drivers of e-commerce adoption, policy makers
and other help agencies can tailor programs to assist firms with integrating and exploiting e-
commerce in a cost effective manner.
INTRODUCTION
The United States has a vested interest in
small business. According to the Small
Business Administration (2006), small
businesses constitute 99.7 percent of all
employer firms and employ roughly half of
all non-farm private sector jobs. The report
findings also indicate that small businesses
generate more than 50 percent of the U.S.
non-farm gross domestic product. In 2003,
only employers of 500 or fewer employees
experienced a positive net change in
employment, creating close to 2 million new
net jobs while, at the same time, firms with
over 500 employees lost close to one million
employees (Small Business Administration,
2006). These findings suggest that the
success and continued contributions of our
nation’s small businesses are critical to the
long-term viability of the U.S. economy.
However, the context in which many small
businesses form and grow is remarkably
different than a mere decade ago. Foremost
among the challenges and opportunities
facing small businesses owners is the rise
and use of technology, and in particular, e-
commerce.
For various reasons, practitioner-oriented
journals and outlets advocate the use of e-
commerce for small businesses (Lohr, 2006;
NFIB, 2005a; Ossinger, 2006).The primary
thrust behind many of these pro e-commerce
arguments is the notion that small businesses
are resource constrained and that e-
c o m m e r c e i s a r a t h e r i n e x p e n s i v e
mechanism in which to improve operations
and provide customer service. By using such
mechanisms as on-line advertising, e-mail
marketing campaigns, and back-office
support programs, small businesses can vie
for business and consumers previously
available only to large corporations. Further,
a growing body of research indicates a shift
in consumer behavior and business strategy
where, through the use of e-commerce,
“consumers locate, evaluate, and purchase a
32
STRATEGYJOURNAL OF SMALL BUSINESS
far wider variety of products than they can
v i a t r a d i t i o n a l b r i c k - a n d - m o r t a r
channels” (Brynjolfsson, Hu, and Smith,
2006). This “long tail” phenomena, as first
identified by Anderson (2004), may allow
small business owners to create virtual shelf
spaces where they can offer more variety,
choice, and value for customers world-wide
(Brynjolsson et al., 2006). Said differently, e-
commerce may allow small businesses to go
from “niches to riches” (Brynjolfsson et al.,
2006) by reaching larger markets while
minimizing their cost structure. In turn, these
improvements may lead to higher growth
and wealth creation (Lohr, 2006).
Many small business owners are taking
advantage of e-commerce resources.
According to one SBA report, 57 percent of
small businesses used e-commerce in 2002
(Pratt, 2002). Other estimates indicate that
82 percent of small businesses will be online
by 2011 (Gandhi, 2006). However, being
“online” does not necessarily mean that the
small business owner is taking full advantage
of the possible benefits of e-commerce.
Further, existing survey data suggests
considerable variance regarding small
business owner’s acceptance of technology
and innovation. A 2005 poll conducted by
the National Federation of Independent
Businesses found that 16 percent of those
small business owners surveyed indicated
that they try to avoid technology (NFIB,
2005b). These survey findings suggest that
researchers and policy makers must better
understand the motivations and uses of e-
commerce tools by our nation’s small
business owners in order to successfully
integrate e-commerce prescriptions.
Given the perceived importance of small
business e-commerce use by owners, mixed
survey data regarding its use, and a notorious
lack of theory in small business research
(Zahra and Dess, 2001), the purpose of this
study is to begin building theory aimed at
better understanding the phenomenon of
small business e-commerce adoption and
usage through the lens of the small business
owner. Indeed, the primary role of theory
and theory building exercises is to help
scholars and practitioners understand,
explain, and predict a given phenomenon
(Pedhazur and Schmelkin, 1991). In
p a r t i c u l a r , t h e r e s e a r c h q u e s t i o n s
investigated in this study are: (1) why do
small business owners adopt an e-commerce
strategy? (2) what explains why some small
b u s i n e s s e s a r e m o r e e x p a n s i v e a n d
comprehensive in e-commerce adoption and
exploitation, and (3) in what ways does small
business use e-commerce differ, and what
factors explain these differences?
Since there is little empirical and theoretical
work regarding the factors or variables that
influence small businesses to pursue e-
commerce strategies, the authors turned to
the qualitative research tradition to provide a
rich, contextual, and thick understanding of
this phenomenon (Eisenhardt, 1989).
Specifically, we analyze several sources of
data via a constant comparative method to
develop an initial grounded theoretical
model describing and explaining why some
small business owners actively cultivate e-
commerce opportunities while other business
owners resist. The findings of this research
can be a starting point for researchers
wishing to bring theory into entrepreneurship
e-commerce literature (Gephart, 2004;
Weick, 1995). Also, since the success of
small businesses is tied tightly with our pro-
growth and innovation-oriented economy,
insight into this phenomenon should resonate
with both basic and applied audiences.
Finally, the findings of our research could
inform policymakers who aim to advance the
success rate of small business ventures.
METHODS
I n d i v i d u a l s a t t a c h m e a n i n g t o t h e i r
experiences which can be thought of as
threads or textures of a blended fabric made
up of the experiences of many (Creswell,
1998). To get a feel for this “fabric,” the
authors employed the qualitative research
tradition, which many now understand as
“making a substantial contribution to
management theory and our field’s empirical
knowledge” (Lee, 2001, p. 215).
The rationale for employing a qualitative
research design is straightforward. First,
qualitative research is appropriate when
scholars wish to build theory, not test theory
via hypotheses testing (Creswell, 1998;
Seidman, 1998). Given the scant theory
Volume 19, Number 1 Spring/Summer 2008
33
development regarding small business e-
commerce strategy, theory building as
opposed to theory testing is in order.
Second, qualitative research is often
preferred when the given phenomenon is
rich, complex, and embedded amongst other
social phenomena (Strauss and Corbin,
1990). The operations, functioning, and
long-term strategy of small businesses seem
to speak to these types of phenomena. In
particular, a host of multi-disciplinary and
anthropological forces, including affective,
cognitive, social, and political forces (Chell,
Haworth, and Brearley, 1991; Kalleberg and
Leicht, 1991; Mitchell, Busenitz, Bird, et al.,
2007; Wiklund, Davidsson, and Delmar,
2006), affect small businesses. Moreover, the
issue of units of analysis in small business
strategy presents a problem for traditional
quantitative research since many phenomena
appear to span individual, team, group, and
organizational levels. Some of the most
esteemed social scientists recognize that
these issues cause problems for quantitative
research designs. For instance, Cronbach
(1975) noted that statistical research
possesses severe limitations in its effort to
take into account interaction effects and
situations with multiple and higher order of
abstract variables. Cronbach (1975, p. 124)
further stated that “the time has come to
exorcise the null hypothesis” because it
ignores effects that may be important but are
not statistically significant.” In general,
qualitative inquiry is more suited to handle
and accept the complex, rich, and dynamic
quality of the social world (Cronbach, 1975).
This sentiment also corresponds with other
scholars who suggest that as advanced as
quantitative research has become, there are
still some social and organizational
phenomena that quantitative measures
cannot adequately describe or capture.
Third, qualitative research is the preferred
mode of inquiry when the research objective
is exploratory or where rich detail into a
given phenomenon is sought (Creswell,
1998; Strauss and Corbin, 1990). Since both
theoretical and empirical progress has been
slow regarding the topic of small business e-
c o m m e r c e , e m p l o y i n g a q u a l i t a t i v e
methodology was both necessary and
c o m m o n s e n s i c a l . I n d e e d , l e a d i n g
quantitative and qualitative researchers agree
that qualitative research is particularly
valuable early on in the development or
maturation of a research stream where
variables are first identified and later tested
via a quantitative approach (Creswell, 1998;
Merriam, 1998; Strauss and Corbin, 1990).
Consequently, the authors feel that there is a
complimentary relationship between these
two approaches and that employing them
both simultaneously via a mixed methods
design or in a sequential fashion may
enhance the ultimate research objective of
advancing knowledge and understanding of a
g i v e n p h e n o m e n o n ( P e d h a z u r a n d
Schmelkin, 1991).
Finally, a practical rationale supports the use
of a qualitative methodology. For small
business research, it is difficult to overstate
the potential contribution of qualitative
research since small business owners
generally resist releasing operational and
financial information (Brockhaus, 1994).
While this study is one of a handful of
qualitative research efforts aimed at small
businesses, there is ample precedent to
utilize qualitative research techniques to
understand the small business population.
For instance, Chowdhury and Lang (1996)
used qualitative research to understand why
and how small businesses decline. Churchill
and Lewis comment that qualitative research
is particularly appropriate for small business
research where “the underlying concepts
have not been adequately defined” (1986, p.
335).
It is beyond the scope of this study to
exhaustively detail the differences between
quantitative and qualitative research
methodologies. However, some topical
discussion is necessary in order for
researchers to interpret and evaluate the
research and findings contained in this
manuscript. The distinctions are neither
comprehensive nor exhaustive, but serve to
highlight the critical differences between
these two approaches. At the most global of
levels, quantitative and qualitative research
differ according to the underlying research
objective. Qualitative research aims to gain a
rich, deep, and detailed understanding of a
given phenomena (Creswell, 1998). The goal
Journal of Small Business Strategy
34
is to generate ideas and theory for future
evaluation. Conversely, quantitative research
aims to quantify data and generalize from a
sample to a greater population (Pedhazur and
Schmelkin, 1991). As such, the goal is theory
testing through hypothesis testing – not
theory development. Assumed in the
research objective are also some assumptions
regarding how researchers arrive at
knowledge. Qualitative research is inductive,
which extrapolates from observation to
theory (Creswell, 1998; Strauss and Corbin,
1990). In contrast, quantitative research is
deductive, with theory arriving first and
falsification attempts coming soon after
(Popper, 1959). In addition, each research
tradition approaches the notion of “sample”
differently. In qualitative research, small
samples are accepted and encouraged under
the assumption that a rich and deep
understanding of the sample will ensue.
Exactly the opposite is true with quantitative
research, where large samples that most
resemble the population of interest are
preferred. This is unlike qualitative
researchers, who may purposely seek out
samples that are un-representative through a
technique termed “maximum variation
sampling” (Seidman, 1998). In regard to
variables, qualitative research is recognized
for investigating small samples with many
variables. Quantitative research prefers large
samples that often have fewer variables
recognized as independent, dependent, and
control variables. Moreover, the preferred
research design to enhance inferences of
internal validity and causation of quantitative
research is the true experiment where
subjects are assigned randomly and an
independent variable is manipulated
(Pedhazur and Schmelkin, 1991). It is also
common for quantitative research to follow
an established structure based on the
scientific method. Qualitative research
abides by no such structure where no
manipulation of independent variables
occurs and is more emergent and interpretive
than quantitative research. As it relates to
data collection and data analysis, qualitative
research is marked by unstructured or semi-
structured techniques, such as in-depth
interviews (Seidman, 1998). Emphasis is
placed on capturing the “whole” experience
or phenomenon so as to try to recreate the
context. It follows, then, that data analysis is
non-statistical and interpretive. In contrast,
quantitative researchers employ high
structured techniques such as survey
instruments, and little variance exists in the
research design, as most quantitative
research follows the scientific method. Of
course, data analysis is often statistical in
nature with findings usually presented in the
form of a correlation or regression
coefficient. The two research traditions also
differ markedly in how each approaches the
role of the researcher. In qualitative research,
the researcher is involved and actually
becomes an instrument and/or participant in
the research (Lincoln and Guba, 1985;
Seidman, 1998; Strauss and Corbin, 1990).
That is why the presentation of qualitative
research often involves both first and third
person perspectives (Creswell, 1998;
M e r r i a m , 1 9 9 8 ; S e i d m a n , 1 9 9 8 ) .
Quantitative research expects that the
researcher remain detached, and the goal is
to remain as objective as possible (Pedhazur
and Schmelkin, 1991). For all of these
reasons, the outcomes associated with each
type of research tradition tend to be unique.
Notably, qualitative research is more
exploratory and investigative in nature.
Many argue that a meaningful outcome of
qualitative research is to present a given
phenomenon in such detail and richness that
w o u l d b e a l m o s t u n a t t a i n a b l e b y a
correlation coefficient (Creswell, 1998;
Eisenhardt, 1989; Lincoln and Guba, 1985).
Quantitative research is more conclusive in
its thrust. To better depict these key
differences between these two major
research traditions, a table is offered below
that summarizes the above discussion and
captures the sentiment of leading qualitative
scholars (Creswell, 1998; Lincoln and Guba,
1985; Kennedy, 1979; Merriam, 1998,
Mahoney, 1991; Seidman, 1998, Strauss and
Corbin, 1990).
Not all qualitative research is created equal,
however, and the authors took careful
precautions to maintain high levels of rigor
in the design and execution of this study. To
enhance the trustworthiness of our findings,
we conducted in-depth interviews and
examined physical artifacts, including
existing websites (Douglas, 1985; Kvale,
1996; Spradley, 1979). This data was then
Volume 19, Number 1 Spring/Summer 2008
35
Journal of Small Business Strategy
36
Table 1. Tabular Comparison of Qualitative and Quantitative Research Traditions*
Qualitative Research Tradition Quantitative Research Tradition
Objective • Gain an understanding of
underlying reasons and
motivations.
• Insights into the context and
setting of a problem
• Generating ideas and
hypotheses for future
quantitative research
• To more deeply and richly
uncover prevalent trends in
thought and opinion
• Detail as opposed to
generalization
• Excels at telling a story
• Explore a topic broadly
• Illumination, understanding
• Generation of theory
• Quantify data and generalize
results from a sample to the
population of interest
• Generalization as opposed to
detail
• Excels at summarizing large
amounts of data and
reaching generalizations
based on statistical
projections
• Explore more narrowly;
answering narrow research
questions
• Causal determination,
prediction, and
generalization
• Theory testing via
hypotheses testing
Approach
towards
knowledge
• Inductive-Building theory
from observation
• Deductive and falsification--
From theory looking for
disconfirming observations.
Sample &
Setting
• Usually a small number of
non-representative cases
purposely selected
• Almost always natural
setting (Patton, 1990)
• Large number of cases
representing the population
of interest
• Randomly selected; could
use a mix of settings to
include natural and
experimental settings
Variables • Many; no manipulation;
variance encouraged
• Few in the form of IVs,
DVs, and CVs; manipulation
of IV favored
• Standardization of variables
preferred (Lincoln &Guba,
1985)
Data Collection • Unstructured or semi-
structured techniques such as
in-depth interviews and
observation
• More freedom to pursue and
explore emerging themes
• Emphasis on capturing
context
• Collect different variables
from the respondents.
• Highly structured techniques
like survey instruments
• Little variance in the
scientific method and
falsification approach
• Collect same variable and
measures from the sample
* Content of table was constructed by appealing to seminal works by several scholars to include
Creswell (1998), Merriam (1998), Seidman (1998), Lincoln and Guba (1995), and Strauss and Corbin
(1990). For the more received logical positivist and quantitative approach we consulted Pedhazur
and Schmelkin (1991). We invite our readers to consult any and all of these works for a more
nuanced understanding of these research methodologies.
a n a l y z e d a c c o r d i n g t o t h e c o n s t a n t
comparative method, which is widely
regarded as the most commonly used
approach to organizing themes and concepts
(Creswell, 1998; Holt and Turner, 1970).
Not all qualitative research is created equal,
however, and the authors took careful
precautions to maintain high levels of rigor
in the design and execution of this study. To
enhance the trustworthiness of our findings,
we conducted in-depth interviews and
examined physical artifacts, including
existing websites (Douglas, 1985; Kvale,
1996; Spradley, 1979). This data was then
a n a l y z e d a c c o r d i n g t o t h e c o n s t a n t
comparative method, which is widely
regarded as the most commonly used
Volume 19, Number 1 Spring/Summer 2008
37
Qualitative Research Tradition Quantitative Research Tradition
Data Analysis • Non-statistical & interpretive • Statistical; findings are
conclusive and usually
descriptive in nature
Data
Presentation
• Original language of the
research participants
• Expressive description and
language
• Correlation coefficient
• Factual language
Role of the
Researcher
• Involved; becomes
instrument and/or participant
of the research
• Detached and objective
Research Flow • Fluid, iterative, and
interpretive
• Often cross-sectional in
nature
Research judged
or evaluated
on…
• Credibility, trustworthiness,
dependability
• Internal, external validity,
reliability
Outcome • Exploratory and/or
investigative
• Findings are not conclusive
and cannot be used to make
generalizations about the
population of interest
• Helps develop an initial
understanding and sound
base for further decision
making
• Very deep understanding of
phenomenon that would be
difficult to obtain from a
correlation coefficient
• Particularly valuable when
the problem is multi-
disciplinary and
anthropological in nature
containing affective,
cognitive, social, political
forces
• Good for complex and
sensitive issues
• Generates rich descriptions
of the phenomena
• Used to recommend a final
course of action
• More conclusive in its thrust
approach to organizing themes and concepts
(Creswell, 1998; Holt and Turner, 1970).
Participants
We used in-depth interviews of six small
business owners located in a semi-rural area
of a large Mid-Atlantic state. All businesses
were retail oriented. Four of the small
businesses could be described as offering
tangible goods while two could be identified
as retail service providers. Of the six
respondents, five were male, and one was
female. All but one were the owners/
principals and original founders of the small
business. In the lone exception, we
interviewed the manager of the business,
who was intimately involved in the strategic
direction and day-to-day operations of the
firm. All business models appeared to follow
what could be best described as a focus
differentiation strategy (Porter, 1980).
Procedures
Research participants were recruited by a
non-probabilistic sampling technique
(Merriam, 1998). While our sample was
obtained largely through geographical
convenience, some purposeful sampling
(Patton, 1990) was used to ensure a diversity
of small business models and genders among
s m a l l b u s i n e s s o w n e r s . H e n c e , a
convenience/maximum variation criterion
was used for final selection of participants.
The maximum variation technique is
particularly important when the purpose of
the study is to build grounded theory (Glaser
and Strauss, 1967). Perhaps even more
important, utilizing multiple participants
tends to enhance the construct validity of the
data obtained in qualitative research
(Beverland, 2001; Merriam, 1995).
Small business owners tend to be reserved
and reluctant when discussing operational,
financial, or strategic aspects of their
business. For these reasons, special care was
taken to maintain appropriate levels of
anonymity and confidentiality. Pseudonyms
were used and the authors carefully limited
any information that could be used to
identify the participants. Protocols and
procedures were reviewed and approved by
an Internal Review Board. To begin each
interview session, the participant was given a
verbal overview of the purpose of the study.
The participant was then provided, allowed
to read, and completed an informed consent
form. The use of an informed consent form
provides the participant a presentation of
their rights during the interview process. The
informed consent form can therefore be
viewed as a step to insure the ethical
treatment of the participant (Seidman, 1998).
Data Sources and Collection
Each of the six small business contacts
participated in a 30-90 minute semi-
structured interview. A copy of the interview
protocol can be found in Table 2. The
protocol was reviewed and evaluated by
colleagues and by an expert qualitative
scholar who had logged more than 3,000
hours in the field. To help with verification
of core themes, member checks were used
throughout the process. All interviews were
tape recorded and transcribed by the second
author to ensure accurate interpretation of
events. In addition, a memo log kept to
maximize reflexivity was updated within 30
minutes of the interview with thoughts and
inferences of that specific interview. This
occurred before the formal transcription
process was conducted. In total, six
transcripts totaling about 100 pages resulted
from these in-depth interviews. To increase
the rigor of our methodology, we used full,
as opposed to log, transcription.
Data Analysis
The authors’ objective with this research
project is not to test theory, but to build
theory. To achieve that goal, grounded theory
techniques and methods, initially developed
by Glaser and Strauss (1967), were utilized.
In this method, data is acquired and coded as
part of the analysis process (Strauss and
Corbin, 1990). A constant comparative
method was used as the dominant analytic
approach during coding, as the authors
constantly checked and referenced against
existing literature (Glaser and Strauss, 1967).
This method leads to improved internal
validity (Eisenhardt, 1989). The data analysis
phase of building grounded theory starts with
open coding. During this process, codes were
extracted from the participants’ own
language and were defined and refined
across all transcribed interviews. In essence,
Journal of Small Business Strategy
38
this step is used to identify, name, and file
events, feelings, and descriptors provided by
the participants. After identifying and
defining such codes, they were methodically
compared and contrasted, resulting in a
listing of categories. The researchers then
used axial coding, which involved building
l i n k s b e t w e e n c a t e g o r i e s a n d t h e i r
subcategories with the goal of identifying
causal relationships. Finally, through what is
termed “selective coding,” a story emerges
and a theoretical framework is constructed
from the data. In this process, the authors
identified “core” categories from which
other categories and sub-themes seemed to
relate (Creswell, 1998). Model saturation
was reached when no new codes or
categories could be identified from the data.
Creswell (1998) and Mahoney (1991)
encourage qualitative researchers to actively
anticipate and respond to human cognitive
bias—particularly that of the researcher who
acts as the instrument of the study. In this
regard, the first author was not involved in
the direct interview process with the
participants. Instead, the first author was
brought on to code the interview data in a
more objective and analytical manner.
Discussions regarding bias were often
intense and rich. Interestingly, this author is
also a small business owner and is only six
Volume 19, Number 1 Spring/Summer 2008
39
Table 2. Interview Protocol
Interview # (OWNER NAME)- BUSINESS NAME
Date
Strategy Type: PORTER GENERIC
Dominant Product Type:
Market:
1. Describe your business to me. (includes how long have you been in business; number
of employees; any other descriptions you might add)
2. How would you describe your average customer for each of the various product lines
you sell? (demographics)
3. Would you describe your customers as frequent or sporadic purchasers of your
products?
4. What “value” do you attempt to provide for your customers? (e.g. quality,
assortment; convenience; reputation)
5. When I use the term e-commerce, what does that mean to you?
6. How, if at all, has e-commerce changed your industry? Why or why not? Will it
eventually change your industry?
7. How has the Internet specifically changed your business in terms of sales; customer
types; customer wants or demands; supplier relations (relations or number used);
product attributes (price, quality, scope).
8. In what ways, if any, do you use the Internet for your business?
9. If you do currently use the Internet, describe to me any ways you have of
determining whether your use is effective (accomplishing the goals that you set forth
for the project).
10. How, if any, have you attempted to use the Internet in any way that you feel was a
failure?…a success?
11. Please describe to me any future plans you have to use the Internet as a business tool
and why?
12. Overall, do you think the Internet will be a good thing or bad thing for your business?
Your industry?
13. Is there anything you would like to tell me that I have not asked you?
months into the launch of a retail business in
a different Mid-Atlantic state with a similar
rural area. We feel this unique perspective
helped to interpret the rich meanings behind
many of the small business owners’ words.
It is important to note that the results of this
analysis are bound to the particular
investigators, participants, and context of
this study. As is common in qualitative
studies, the particular nature of the data tends
to affect the external validity of the findings.
Accordingly, one should apply caution
before applying these findings to small
business owners in other settings. It is our
intention to provide the reader with a rich
description of the data in order for readers to
make their own generalizations (Kennedy,
1979).
The participants in this study included Joan,
the owner of a small mid-to-upscale
women’s clothier which has been in business
for almost 30 years; Bob, an owner and Vice
President of a retail travel agency that had
been in business for over 25 years; Matt, the
owner of a custom framing shop that also
offers Civil War antique-type sales; Ridge,
the owner of an outdoor equipment
dealership focusing on sales, parts, and
service that had been open for five years;
Brandon, a manager of a specialty music and
video store that had been in business for
fifteen years in another town before opening
up an additional location where the interview
was conducted (this newer store had been in
operation for five years); and Pop, an owner
of a small scale retail hardware firm that had
been in operation for 20 years. Participant
demographics and other attributes are
presented in Table 3.
INTERPRETATION OF FINDINGS
The categories identified in open coding
were processed through axial coding and
revealed a central phenomenon behind the
relationship behind small business and e-
commerce technology. The theoretical model
is depicted in Figure 1.
Notice the two-step model. In our analysis,
all small businesses embraced the use of e-
commerce technology. However, as the
model depicts, the level of this relationship
differs. Specifically, we found that two of
our participants were on the low end of the
scale, meaning that they chose only to adopt
Journal of Small Business Strategy
40
Figure 1. Investment and Commitment to E-Commerce Strategies
Volume 19, Number 1 Spring/Summer 2008
41
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e-commerce. Adoption is the first step of the
model and is where all participants begin.
For instance, Joan’s adoption of e-commerce
was extremely limited and barely able to
meet the Adoption parameters in our model.
Joan remarked:
I don’t like it and I tried it before and
I didn’t like it then and I don’t like it
now. I suppose some of our customers
do go to the Internet to find out about
a business, or find out where it is.
Some of the cosmetics we sell, people
will go to the Internet to find out
where they can buy certain things.
And then they call us because we sell
it.
Viewing a business on the low end of
Adoption, we observe several characteristics
a s s o c i a t e d w i t h e - c o m m e r c e u s e .
Specifically, the Internet is used here only to
relay information. In Joan’s case, she did not
have her own website, but had her contact
information on some of her suppliers’ and
vendors’ website. Interestingly, information
dissemination in a one-way manner seems to
be the dominant theme at this stage.
It is important to note, however, that all six
small business owners began at this stage.
The intriguing element of this phenomenon,
instead, is why some remain at this low
Adoption stage, while others advance to a
high level of e-commerce use, which we
term the Exploitation stage. However, before
we can examine the phenomenon of
advancement to the high stage, it is
necessary to better appreciate why these six
small businesses chose to adopt, while many
small businesses still opt to not engage in e-
commerce at all. This was one of our core
findings as we found that in each case,
Adoption was predicated on institutional
pressure. Brandon reflects this institutional
pressure along with his music and video
store’s slow and almost forced entry into e-
commerce:
I think that record stores are possibly
the one thing that the Internet can kill.
I don’t mean that in a morbid type
way…that I’m going to lose my job
because of the Internet. I just think
that it’s a different way that record
stores are going to have to adapt into
a different means of doing things. But
there is also Napster burning huge,
huge…I wouldn’t say taking food
from my mouth or anything, but
would say that it does change the way
things operate. It is essentially like
when people started taping songs off
the radio, only it is in a much bigger
way.
Brandon’s statement reflects one of our core
findings prevalent in each and every case.
Namely, institutional theory is the dominant
logic in understanding why the small
businesses that we sampled chose to adopt e-
commerce. For these reasons, it is necessary
to revisit the core premise of institutional
theory along with several core assumptions
that accompany this theoretical perspective.
Institutional theory predicts that firms
engage in actions, build structures, and
engage in processes similar to another firm’s
in an effort to achieve legitimacy (Meyer and
Rowan, 1977). Without this legitimacy, it is
difficult for firms to survive, let alone pursue
strategies for competitive advantage (Dacin,
1997). For these reasons, institutional theory
predicts mimicry type behaviors that result in
s t r u c t u r e a n d p r o c e s s s i m i l a r i t y ,
isomorphism, between firms (Meyer and
Rowan, 1977). Matt’s explanation to adopt
some limited e-commerce strategies in
support of his Civil War collectible business
seem predicated on this institutional
rationale:
But as far as Civil War, Ebay has
single handedly changed the entire
scope of Civil War collecting, buying,
selling and shows. I bet you 25
percent of the dealers that used to go
to shows no longer go to shows. They
say they can make more money and
spend less time putting things on
Ebay. Why incur the work and
expense of going to a show when
they can sit at home and sell just as
much?
We see here that Matt’s decision to adopt is
not so much premeditated as it is following,
mimicking, or copying the E-bay business
model. For him, survival was a critical
Journal of Small Business Strategy
42
component of his decision to Adopt, since
“everyone else seemed to be doing it.”
Another hallmark of institutional theory is
what DiMaggio and Powell (1983) refer to
a s c o e rc i v e i s o m o r p h i s m . C o e r c i v e
isomorphism suggests that firms do not copy
or mimic voluntarily, but are forced into
adopting a structure or process by a stronger
force such as government or a legal entity.
Interestingly, we found evidence of this
coercive isomorphism in several instances.
Brandon was the first to suggest that his
suppliers strong-armed him into adopting e-
commerce technology:
They like that [when I use the
Internet]. I think we get some sort of
[price] break when we do it that way.
I think they [his suppliers] are trying
to open that up because I think it is
just easier for them. I think we used
to FAX our order in.
Central to institutional theory is an
assumption that a firm compares itself
against other firms to assess its own
legitimacy. We witnessed some of these
comparative processes. Pop, the hardware
store owner, remarked candidly:
Well everybody got a web page. I’ve
looked at some; I just wanted to see
how mine compares to theirs. It’s no
different to me than signage on the
street, you know, as to who looks
good, who’s getting the message
across, that type of thing.
Thus, institutional pressures of conformity,
which sometimes seemed coerced or forced,
e x p l a i n e d w h y a l l s m a l l b u s i n e s s e s
interviewed in this research project chose to
adopt e-commerce. However, institutional
pressures could not explain why half of our
small business participants moved beyond
the Adoption stage to what we term
Exploitation.
Exploitation of e-commerce advanced
beyond just informational flow between
business and consumer. In the cases of high
exploitation, we saw a full-fledged e-
commerce strategy that deeply integrated e-
commerce into basic and fundamental
operations: both upstream and downstream
processes with consumer and vendor. Of the
six small business participants, Ridge
appeared to meaningfully advance beyond
the Adoption stage and served as an example
of what the Exploitation stage may look like:
We use the Internet to do business
with the majority of our large suppliers
and we actually make decisions
regarding whom to buy from based on
access to electronic data interchange. I
can get online and I need to be able to
check stock level…That’s our other
competitive advantage because we are
selling the same Briggs & Stratton
engine that you can buy at 25,000 other
locations. The only reason that you are
buying it from me is going to be price,
some other value level of service, or
guaranteed information such as that
engine is in [the warehouse] right now
and I can ship it to you and it will be
there in 3 days and here’s the tracking
number and here is this, this, and this.
That’s where the technology comes
into play. If we are buying from a
vendor whom I can’t confirm stock
levels without making a phone call and
talking to two people who actually
have to go in a warehouse and look,
that slows us down to the point that it’s
not efficient. That engine, we take the
order whether it comes local or from
Japan. While I had the customer online
or on the phone--But back to this,
when I was on the phone with this guy
in Japan, we were talking about the
engine, he wanted to know when he
could get it and I was simultaneously
online checking stock levels in [the
warehouse] and then we just could
either drop ship it from [the
warehouse] or have it come here.
U n l i k e i n s t i t u t i o n a l t h e o r y, w h i c h
emphasized the core theme of survival,
during the axial coding process we detected
another theoretical perspective at work that
appeared more robust in explaining why
some small businesses, like Ridge, made the
transition to Exploitation while others
remained in the survival or Adoption stage.
Captured in this more competitive vantage of
e - c o m m e r c e u s e w a s t h e n o t i o n o f
evolutionary economics.
Volume 19, Number 1 Spring/Summer 2008
43
Evolutionary economics is rooted in natural
science studies, in general, and biological
competition, in particular (Nelson and
Winter, 1982). The essence of evolutionary
economics is that firms become more
competitive by evolving through a series of
incremental innovations. Built upon prior
knowledge and capability foundations, firm
evolution is thought to consist of the altering
of an organizational process or routine in
response to some external or environmental
challenge (Nelson and Winter, 1982).
Sometimes perceived as a threat, this
environmental stimulus sparks the firm to
respond in a manner that makes it more
competitively viable. The factors that allow
some firms to evolve into the Exploitation
stage highlighted in this study appear to be
some of the same factors that allow larger
firms to evolve and compete in other
settings. For instance, scholars contend that
firms that utilize component technologies
(Amit and Schoemaker, 1993) create
dynamic capabilities (Teece, Pisano, and
S h u e n , 1 9 9 7 ) , l e v e r a g e c o m b i n a t i v e
capabilities (Kogut and Zander, 1992), or
fine tune internal managerial systems
(Leonard-Barton, 1992) can evolve and
compete better than those firms lack these
skills or abilities. We found compelling
evidence during our constant comparative
method and axial coding process that these
forces are at work in the small retail
businesses that moved beyond the Adoption
stage to Exploitation. The best example of
this was Bob, who experienced the
environmental threat of direct-to-consumer
Internet use within the travel industry. A
retail travel services provider, Bob faced
threats from his competition from such
w e b s i t e s a s E x p e d i a . c o m a n d
Tr a v e l o c i t y. c o m . B o b f u r t h e r f a c e d
disintermediation threats from airline
w e b s i t e s s u c h a s S o u t h w e s t . c o m o r
U S A i r w a y s . c o m . I r o n i c a l l y , B o b
incrementally, but substantially, enhanced his
use of the Internet to combat the very threat
of the Internet.
With the Internet, I don’t think that you
can stand still. I think you have to
move ahead. I’m not always a great
visionary when it comes to these things
so I don’t necessarily see what the next
step is but usually somewhere along
the line you get jolted into the next step
whether you want to or not so I would
say the answer to that is Yes. I’m just
not sure what it’s going to be [long
pause]. E-commerce is a very tough
competitor, you know. If you had
somebody who is willing to sit down
and quarrel with material for hours to
find something particularly the
pleasure traveler as opposed to the
business traveler. I wouldn’t be
surprised that many times they are
going to find rates as low if not lower
than what we are reflecting here. But it
takes a fairly sophisticated user of the
Internet, I think, to pull this
information out. To that end, I think
they [Bob’s on-line competitors] have
probably had some success with people
who are able to just pick up and go that
quickly. But the majority of people
aren’t able to do that. There is, Yes,
there is much more information
available to us[with emphasis]. And I
should say immediately available to us.
We’ll get a call and they’ll say what are
the latest government directives on
travel to here to Lebanon or to the
Philippines or what have you and we
can immediately go in [pause]; the
government has a website, and all that
information is right there and you can
pull it up immediately and you can
print it out send it along with the ticket.
Constant updates on visas, passports.
We’re able to pull up rail schedules all
around the world that used to not be
readily available. So yes there is a ton
of information. But you can actually
garner a great deal of information
about restaurants and hotels in many
places. Yes, there is a lot of information
that we can provide that was not
readily available before [and we know
where to look].
Ridge’s comment about the Internet and his
power tool business speak to the continual,
b u t i n c r e m e n t a l , t h e m e s f o u n d i n
e v o l u t i o n a r y e c o n o m i c s . N o t i c e t h e
reference to “Big Box” competitors:
If you don’t embrace that [the
Internet], you kind of get pushed
aside because the customers are going
Journal of Small Business Strategy
44
to constantly go to somebody they
think is bigger or more
knowledgeable because this big box
mentality…
Our core findings indicate that small
businesses follow a two stage model
regarding e-commerce Adoption and then
Exploitation. Initially, mimicry and external
pressures drove all of our participants to the
Adoption stage, and thus institutional theory
is well equipped to explain and predict
behavior. Some owners remained stagnant
and content in the Adoption stage. Across all
of our participants, we found language that
reinforced this notion of survival. However,
those small business participants who
e x p l o i t e d e - c o m m e r c e s e e m e d m o r e
interested in beating their competition and
earning a competitive advantage than just
survival. Here, we found evolutionary theory
could be used as a better tool to help explain
the behavior of these small business owners,
as they appear to be guided by economic
pressures, as opposed to institutional
pressures.
CONCLUSIONS
Qualitative research, unlike quantitative
research, tends to involve a few cases with
many variables as opposed to large sample
sizes with a limited number of variables. The
benefit from this qualitative approach and
accounting of multiple variables is a deep,
contextual, and rich understanding of the
phenomenon (Cresswell, 1998). As we
examined the transcribed data in our axial
coding process, we noted some causal
conditions that helped explain the presence
o f I n s t i t u t i o n a l v e r s u s E v o l u t i o n a r y
Economic forces. Mainly, we found that the
characteristics, dispositions, and traits of the
business owner seem to predict whether the
s m a l l b u s i n e s s s t o p p e d a t A d o p t i o n
(institutional pressures only) or advanced to
E x p l o i t a t i o n ( e v o l u t i o n a r y e c o n o m i c
pressures).
To begin with, we found that the business
owner’s goals influenced Adoption or
Exploitation. Joan remarked that her use of
the Internet did not “make much difference”
because she is in business because “it’s fun;
it’s really good.” Joan’s perspective of small
business ownership and operation, like
o t h e r s i n t h e l o w i n v e s t m e n t a n d
commitment stage, or Adoption stage, is that
of having fun and/or pursuing the business
predominantly as a hobby. In contrast to Joan
is Bob, who sees e-commerce as a way to
shave costs and to increase efficiency by
“saving time.”
Similarly, we found indicators that the
participants who adopted a pro-growth
mentality tended to embrace Exploitation
more so than those in the Adoption e-
commerce stage. Joan remarked that there
was no need to fully exploit the Internet
because, “when I go or die, I’m not going to
retire, but you know when somebody takes it
over, if, when I’m gone, it might change
completely.” When compared against
Ridge’s statement, we see a pro-growth
o r i e n t a t i o n t h a t l e n d s i t s e l f t o t h e
Exploitation e-commerce stance. Ridge says:
Yes, right now, this year, our sales
mix is about [long pause] out of a
million in annual sales we have about
150K originated through the Internet.
About 15 percent. And that number
went from 0 in 1997 to quickly went
to 5, 10, then 15 percent and we have
been holding steady at 15 percent.
These two comments reflect differing
dispositions towards growth. Clearly, Joan is
content with a status-quo orientation towards
her business. Conversely, Ridge leans toward
a more aggressive and growth orientation for
his firm, a position that could aid him in
“long tail” markets. This, in part, appears to
explain Joan’s position towards e-commerce
as Adoption only, while Ridge has launched
an Exploitation e-commerce strategy.
Another notable difference between small
business participants that appeared to explain
the variance in e-commerce strategy was the
participant’s risk orientation. Those with
risk-aversion seem content with an Adoption
only strategy. Those with a risk-seeking
disposition tend to embrace an Exploitation
strategy and seek out ways to deploy e-
commerce more fully. Interestingly, this
finding appears to lend credence to Shane
and Venkataraman’s (2000) entrepreneurial
characteristic framework, which asserts that
Volume 19, Number 1 Spring/Summer 2008
45
more entrepreneurially minded individuals
are capable of seeing how tools can be used
for an end goal, in this case the use of e-
commerce to achieve business objectives.
When asked about taking the risk and
moving towards e-commerce, Matt indicated
that he did not like technology and taking
that type of risk is “just not us.” Matt’s
framing and Civil War business had only
advanced marginally past the Adoption stage
by conducting a low volume of E-bay
auctions. Bob’s sentiment, however, is
markedly different. When this topic arises,
he argues passionately:
I think overall it’s a positive…can be
used as a positive force. I think that
that really depends on the attitude of
the merchant. You can sit there and
cry about the Internet supposedly
stealing all your business but there
are ways for you to participate and if
you are willing to participate it can be
a very positive thing. If all you are
going to do is whine about it, then yes
the Internet is going to do you in.
Hence, from our limited sample we found a
correlation between attitudes towards risk
and whether the small business stopped with
institutional pressures (Adoption) or felt the
urge to respond to evolutionary economic
forces (Exploitation).
Not surprisingly, we found a link between
self-efficacy and our sample’s receptivity
towards employing e-commerce (Bandura,
1997). Those with high self-efficacy, which
is analogous to self-confidence in a person’s
ability and skill-set to perform a task, were
much more likely to pursue an Exploitation
strategy. In contrast, those with low self-
efficacy towards technology, in general, and
e-commerce, in particular, were more likely
t o s t o p w i t h a n A d o p t i o n s t r a t e g y.
Interestingly, those with lower self-efficacy
towards e-commerce appeared equally
reluctant to hire or out-source e-commerce
operations/strategy to a third party. Matt
aligns himself in the Adoption only camp
when he indicates:
Number one, I’m 55 and I’m not
going to change. The younger kids
have a lot of computerization in their
shops. Computerized mat cutters,
computerized point of sale… More
and more suppliers have websites.
Many of them allow you to order
online. I do not do it. I call on the
phone or my wife calls on the phone
because we like that immediate
feedback. I like to talk to somebody. I
like to have somebody say, “Sorry
that’s out of stock” and then we have
to make an intelligent choice. Things
that I don’t put on the net because I
don’t have the capability or don’t
have the knowledge to put images on
the net. I don’t really want to do that.
I don’t want to sit down and work at
the computer.
Consistent with institutional prescriptions,
we saw that many of our small business
participants who chose and then remained
with an Adoption-only strategy displayed a
follower or second mover mentality towards
e-commerce. In contrast, those small
business participants who we rated as high
on the Exploitation strategy demonstrated
both a pioneering and market leader
orientation. Ridge illustrates this leader
mentality and his rationale for moving
towards a complete integration of e-
commerce or Exploitation strategy when he
notes that he tries to give “the small
company feel” while also providing the
“appearance of being larger than we really
are just for people to feel comfortable”
because “people just like to do business with
branded companies.” Pop appeared to
understand that while many large hardware
and home improvement firms were using e-
commerce, “we don’t put enough emphasis
on it to carry it further.” He says before he
decides to invest more in e-commerce usage,
“someone would have to give me figures of
what competitors are doing and how
successful they are.”
Finally, we found Exploiters adopted a fairly
rational, detached, almost scientific approach
towards improving their e-commerce
strategy, falling in line with evolutionary
economic theory. This trial and error
viewpoint is best illustrated through a
dialogue with Bob who moved away from
Internet coupons:
Journal of Small Business Strategy
46
At one time we were offering
coupons: for instance with the student
body, particularly in April and May,
we start getting requests for Euro-rail
passes. They are going to go over to
Europe and travel around for a couple
of months and then decide they want
to use the Euro-rail pass and we used
to put coupons on the Internet that
they could run off for $10 savings on
a Euro-rail pass. It didn’t stimulate
any business. I think in the 2 years
that we did it I took in two coupons.
We still sold a lot of Euro-rail passes.
It was not very effective. And it may
have been our fault in that we didn’t
market it as well over the Internet as
we probably could have.
Matt is considerably less reflective when we
asked him about data supporting or
discounting framing services on the Internet.
In a response bordering on dismissive, he
said, “people just don’t do that on the net.”
His sociological, as opposed to more rational
or researched view, is more indicative of
institutional rather than evolutionary
economic prescriptions.
In conclusion, our core findings indicate that
institutional pressures encouraged all of our
participants to, at the very least, adopt e-
commerce. However, those that moved
beyond Adoption to Exploitation identified
and responded to evolutionary economic
pressures. The characteristics of these small
business participants were remarkably
distinctive when compared to those who
remained in the Adoption-only stage. In
general, those that moved to a more
integrated and comprehensive strategy
demonstrated characteristics and dispositions
best described as leaders that were rational
but risk-seeking, growth oriented with rather
high self-efficacy towards e-commerce.
Conversely, those that remained in the
Adoption-only stage appeared to be more
sociological as opposed to rational, more risk
averse, more hobby oriented than growth
oriented, and indicated lower self-efficacy
towards e-commerce tasks and strategy
implementation.
DISCUSSION AND IMPLICATIONS
Shane and Venkataraman (2000)
call for entrepreneurial studies that identify
the “sources of opportunities; the processes
of discovery, evaluation, and exploitation of
opportunities; and the sets of individuals
who discover, evaluate, and exploit
them” (218). Following this directive, the
findings from this study indicate that not all
small businesses approach e-commerce with
like goals or motives. Behind these choices
are institutional and evolutionary economic
pressures. We found that the theoretical
perspective best suited to explaining owner
actions was largely predicated on the
business participant’s characteristics, traits,
and dispositions.
Possibly the best illustration of the
importance and magnitude of this topic can
be gleaned by studying the current agenda
and expenditures of the Small Business
Administration towards technology and
small businesses. Given the small sample
size and already noted issues pertaining to
generalizability and external validity, the
authors believe some policy dialogue is
timely and necessary. We provide evidence
that while many small businesses, even in
rural areas, may wish to embrace e-
c o m m e r c e , p o l i c y e x p e c t a t i o n s a n d
expenditures should account for differing
levels of technology adoption and use. While
many small businesses may be content with
only informational advantages associated
with e-commerce, others may wish for a
fuller integration of e-commerce technology
within their business model. This distinction
is important since finite resources from
governmental and support agencies such as
the SBA can be spent in a more responsible
manner if these agencies know what position
the small businesses gravitated toward. For
instance, it would be wasteful and inefficient
to spend full integration dollars towards a
small business that only wishes to pursue
Adopt-only. However, providing Adopt-only
assistance to small businesses that wish to
gain Exploitative capability and compete in
long tailed markets may actually retard the
growth of this small business.
A more nuanced implication is the role that
education and training can play in shaping a
Volume 19, Number 1 Spring/Summer 2008
47
business owner’s decision to adopt or
exploit. If self-efficacy and self-confidence
are important contributing variables toward
Exploitation as this study suggests, then
government and support agencies may wish
to devote some resources towards education
and training, which can improve a person’s
self-efficacy (Bandura, 1977). This notion is
particularly important since the assumption
behind much of the current policy discourse
is that infrastructure and high-speed access
are the critical variables that explain why
small, rural businesses do not engage in e-
commerce (Johnson, 2001; Kroepsch, 2008;
Pociask, 2005). While this assumption
cannot be dismissed, our study suggests that
just providing the infrastructure alone is not
enough to drive small business owners
towards e-commerce. Other factors such as
leader versus follower mentality, orientation
towards risk and growth, and personal self-
efficacy all impact a small businesses
chances of adopting and exploiting e-
commerce. In conclusion, policy design and
discourse should move beyond just the
presence or lack thereof of technology
infrastructure to include other variables as
well.
Future research may wish to build on this
study by continuing with the qualitative
research tradition but investigate other types
of businesses such as industrial services and
sales. Also, researchers may wish to examine
the influence of type of product and/or
service and the ease in which it lends itself to
e-commerce. It is important to note that with
our six participants, our discussions did not
gravitate towards that direction. However,
Matt did tangentially talk about how framing
was not susceptible to e-commerce. While a
six-second quote is not enough to justify
findings or provide strong evidence, it is
reasonable to suggest that product attributes,
particularly the high level of customization
required of some goods (such as frames),
may work against—not toward—an e-
commerce strategy. Despite the research
limitations surrounding external validity and
the fact that the research was conducted in a
single geographic location in a mid-Atlantic
state, the authors hope that their research
helps address both the lack of theory and the
lack of understanding regarding technology
usage by small businesses.
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J. Stephen Childers, Jr. is an Assistant
Professor of Management at Radford
University. His research interests are in
small business strategy.
Evan H. Offstein is an Assistant Professor
o f M a n a g e m e n t a t F r o s t b u r g S t a t e
University. His research interests are in
leadership, human resources, and small
business strategy.
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