May 2007

Discriminants for the adoption of ICTs

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Factors representing entrepreneurship, international orientation, causes and consequences of ICT use, sources of competitiveness, and knowledge acquisition opportunities were used in the analysis of this article.


The study aims at identifying factors that discriminated non-ICT using small firms from the rest in Costa Rica. In order to identify those factors, a survey of sixty-eight firms was conducted during July 2004 and February 2005. The technologies that have been included in the study are: CAD/CAM, CAE, FMS, MIS, eMail, Internet, and web enabled technologies. Data was analysed in a multivariate framework. The results suggest that the managing director's (MD's) qualification emerged as a significant discriminant though the level of significance was at 5 per cent. The emergence of MD's academic qualification as a significant factor is not only in line with existing literature but also supports the hypotheses of the study (Lal, 1996; Earl, 1989). Since the sample was dominated by manufacturing firms, ICT tools can be used in both peripheral and core activities. This places a demand on the MDS to be aware of the intricacies of ICT tools so that the potential benefits are fully reaped. Moreover, GMs of SMEs are never in a position to adopt technologies whose benefits are not assured.

The relationship between skill intensity and the intensity of ICT used is in accordance with the hypothesis of the study. The findings also corroborate with other earlier studies (Doms et al., 1997; Rada, 1982). In fact ICTs are regarded as skill based technological change. Although several proxies of skill intensity such as experience of workers and wages paid to workers have been used in earlier studies, we have considered the number of engineering graduates. We could have used percentage of engineering graduates and ordinary graduates/postgraduates in the total workforce. But we have preferred to use only engineering graduates due to skill intensity, which is more relevant for the use of ICTs. We are not arguing that engineers are needed to use Email and the Internet but they are certainly needed for implementing the ever-changing technologies such as portal and web enabled technologies. And this might be the reason of capturing the role of skill intensity in discriminating advanced ICT using firms from the rest. 

Recent studies     
Several scholars (Stiglitz, 1989; Kiiski and Pohjola, 2002) have emphasised that ICTs play an important role in exchange of information, knowledge, and product designs between manufacturers and suppliers of technology. One of the major contributions of ICTs in the business environment is to facilitate better co-ordination of manufacturing activities. Portal and web enabled tools may be the best-suited technology to co-ordinate with foreign companies particularly. Emergence of technological collaboration as an important discriminant is a case in point. The results support findings of earlier studies (Oyelaran-Oyeyinka and Lal, 2005; Pohjola, 2001). Technologically collaborating firms need a greater degree of interaction with the suppliers of technology than other firms. Interaction consists not only in knowing the specification of imported equipment but also in sharing intangible and embodied technological knowledge. Codified knowledge such as engineering drawing, detailed design, and so on could be exchanged with the use of advanced ICTs more effectively.

Emergence of MGMNT_CTRL as one of the important discriminants substantiates the findings of earlier studies (Lal, 1996; Mehta, 2000). The use of office automation technology such as MIS might have been providing better control of information to GMs. Hence, GMs of advanced ICTs using firms, who were also users of MIS, might have given more importance to better management control. Although technologies such as local area network (LAN) and wide area network (WAN) have not been included in the study, it was noticed during the survey that a few firms were using these networking technologies, and they were found to be very effective for managerial functions. 

ICT integrated work system 

Computer integrated assembly lines are expected to be more efficient than traditional ones. The efficiency derives from the structure and self-fault detection mechanism built in at crucial stages of manufacturing. For instance, after inserting electronic components such as Large and Very Large Scale Integrated chips (LSI and VLSI) in the PCB used in an electronic product, the input and output parametres of the module are checked at the assembly stage itself. And if there is any discrepancy found between the expected and actual parameters, PCB does not proceed to the next stage of manufacturing processes. It is sent automatically to the fault correction stage of the production process. Although there were very few firms engaged in manufacturing of electronic goods, the chemical and chemical products, machinery and equipment, and textiles firms might have experienced efficiency in production processes. This can be achieved by ICTs such as FMS and CNC. Consequently, GMs of firms using such tools might have attributed high importance to efficiency in production processes due to use of ICTs.

Internet facilitates in searching information to a great extent are required. Information could be related to product specifications or configuration of production technologies. With the increasing use of Internet and related technologies, industry associations have developed tendencies to provide such information to their clients through non-traditional means. The relevant information can be easily searched and downloaded by firms. Technology manufacturing firms are increasingly using their web sites for advertising latest specifications of the new technologies. This information can again be easily accessed by users of those technologies. Latest trends in design and composition of textiles are very crucial information for firms engaged in this business. Without use of the Internet, access of this kind of information was virtually impossible. Hence GMs of innovative firms might have assigned due importance to ability of ICTs in providing market information.

Labour friendly system

Although one need not go into details of whether the use of ICTs contributes in labour or capital productivity, the question was mainly meant for labour productivity. Findings of the study corroborate with post-1995 studies on ICTs and productivity. One was not aware of any study until mid-1990s that found evidence of productivity gains due to the use of ICTs. However, after mid-1990s there have been several studies to show that advanced ICTs yield in higher labour productivity (Brynjolfsson and Hitt, 1996; Pohjola, 2001). Productivity gains in non-production activities come from the exchange of information electronically. The information exchange can take place between workers and management, within management groups, between firm and other business partners. The productivity gains in production processes stem from the use of programmable equipment.

Although SMEs contribute significantly to the national economy in terms of jobs and exports, public efforts to improve their competitiveness have been erratic or weak, so the progress towards that objective seems to be small. In terms of industrial policy, the experience of the last twenty years suggests that an overall industrial strategy should be developed with a long run perspective, more than the 4 years of the presidential term. Support programmes aimed at SMEs should be overviewed through administrations and become a long-term plan focused on cluster economies based upon technology improvements and R&D to develop new and improved ways to achieve productivity and competitiveness.

Equipping SMEs

SMEs are relatively young companies managed by middle aged, highly educated managers. Common strategies to compete are quality and product differentiation in specific niches. Training is important but R&D has very few rooms in the SME's agenda. ICTs are highly significant for the performance of SMEs.  Although the country has been able to provide extensive coverage of basic technologies in the last  fourty years (fix lines, for instance), there is some lagging behind in comparison to other countries with respect to modern technologies such as Internet (coverage and speed). Although the package of Internet services provided by National Institute of Electricity allows firms to use basic functions, lack of an adequate infrastructure is impeding SMEs to advance in theuse of Internet for productive, marketing and sales purposes. In general, improved performance in productivity, time advantages, design flexibility, reorganisation and management is associated with an extensive use of advanced ICTs, supporting the idea that ICTs are essential for enhancing the competitive profile of the firm.


It was not possible to investigate the role of policy initiatives in the context of the performance of SMEs using statistical techniques. However, firm level data allowed us to identify and analyse factors that discriminated advanced ICT using firms from the rest. The ICTs that were included in the analysis are eMail, Internet, portal, web enabled technologies, MIS, CAD/CAM, CAE, FMS, and CNC. Firms were categorised into three groups, namely: low level of ICT using firms, moderate users of ICT, and advance ICT using firms. Classification was done by a statistical technique called cluster analysis. Clustering of firms based on their intensity of ICT use was imperative as the sample had to be divided into reasonable number of distinctive groups. Subsequently, discriminant analysis was used to identify factors that discriminated different levels of ICT using firms.

Factors representing entrepreneurship, international orientation, causes and consequences of ICT use, sources of competitiveness, and knowledge acquisition opportunities were used in the analysis. The results suggest that GMs knowledge base and academic background emerged as an important discriminant. The study finds that skill intensity of advance ICT using firm was higher than the rest. International orientation of firms also discriminated three groups of firms. Findings also show that GMs that attributed higher importance to ability of ICTs in providing better management control and useful market information adopted more advanced ICTs. The study finds evidence to support the argument that the adoption of ICTs results in productivity gains and efficiency in production processes. We have not been able to evaluate the performance of SMEs as a result of the adoption of ICTs due to the lack of data. 

One can conclude that the government needs to encourage and provide institutional support to SMEs to participate in international markets so that they remain globally competitive. Lack of this type of support could be attributed to the present state of low level of globalisation of Costa Rican SMEs. Greater participation in global markets might enable firms to increase their contribution to the national economy.  

Call for Nominations to UNESCO-IPDC Prize

The UNESCO-IPDC prize for Rural Communication was established by the UNESCO Executive Board at its 120th session, in pursuance of the decision of the fifth session of the Intergovernmental Council of the IPDC. The UNESCO-IDPC Prize for Rural Communication would be awarded for the eleventh time during the twenty-sixth session of the Intergovernmental Council of the International Programme for the Development of Communication (IPDC). The award giving ceremony will be held at UNESCO Headquarters, Paris (France) from 26th to 28th March, 2008. One of the objectives of the IDPC is to promote the awareness about the  role communication plays in the development process. The UNESCO-IPDC Prize, consisting of a sum of US $ 20,000/- is awarded every two years. All the applications which meet the criteria for  the award will be submitted through the Chairperson of the IPDC  to its Bureau, which will act as the selection jury of the prize-winner.

UNESCO-IDPC Prize for Rural Communication  aims to  to draw attention to particularly meritorious and innovative activities undertaken by public or private institutions or by persons or groups of persons working on a personal basis or as members of staff of such institutions with a view to improving communication in all its forms



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