Small-Firm Computing: Motivators and Inhibitors

Small-Firm Computing: Motivators and Inhibitors
Author(s): Paul B. Cragg and Malcolm King
Source: MIS Quarterly, Vol. 17, No. 1 (Mar., 1993), pp. 47-60
Published by: Management Information Systems Research Center, University of Minnesota
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Small-Firm Computing
Small-Firm
Computing:
Motivators and
Inhibitors
Introduction
Computing has transformed many organizations
over the last several decades, but only since the
advent of the microcomputer has the impact been
significant on small firms. The development of
computing in larger organizations has been
carefully studied, and several models of growth
have been proposed (Huff, et al., 1988; Nolan,
1973; 1979; Saarinen, 1989).
By: Paul B. Cragg
Department of Management
Systems
University of Waikato
Private Bag 3105
Hamilton, New Zealand
Malcolm King
Loughborough University
Business School
Ashby Road
Loughborough LE11 3TU
England
However, very little is known about the evolution
of computing in small firms, even though more
and more firms have installed computers or, if
they already had them, have continued to
upgrade. Earlier studies show that prior to the
mid-1980s, accounting applications was the
dominating focus of computers (Cragg, 1984;
Easton, 1982). But what about the impact of more
powerful microcomputers and enhanced
computing experience on small firms?
This research examines the evolution of smallfirm computing. In order to understand what
motivates or inhibits this evolution, several questions are addressed: How has computing
developed in small firms? What factors have influenced these developments? Are the models
used to describe growth for large-firm computing
relevant to small firms? The findings are used to
develop a research agenda for further study of
small-firm computing evolution.
Small-Firm Computing
There have been many descriptive surveys on the
Abstract
general use of computers by small firms (e.g.,
This paper examines information system evolution in small firms. It focuses on applications
growth, and uses the experiences of six small
manufacturing firms to identify motivators and inhibitors of growth. Many factors were identified.
Motivators of growth included: improved enthusiasm for the technology. Inadequate resources
and limited education about information systems
were among the factors that inhibited applications
growth.
Baker, 1987; Cheney, 1983; Easton, 1982;
Farhoomand and Hrycyk, 1985; Lees and Lees,
1987; Malone, 1985). Rather than study IS evolu-
tion, these surveys have investigated applications, problems, benefits, etc. The surveys
showed that although the participating firms had
few or no programmers, many had plans to increase their computer applications. The surveys
also showed that the enthusiastic involvement of
managers and employees who were open to
change could encourage IT growth in small firms.
Keywords: Small-firm computing, growth mo-
Other avenues for growth have been recom-
tivators, growth inhibitors, growth
mended by critics of small firms that focus only
process
on accounting applications. These include the
support of decision making in other functional
ACM Categories: H.1.1, H.4.2, J.1, K.6
areas and the development of revenue-genera-
MIS Quarterly/March 1993 47
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Small-Firm Computing
tion applications (Lincoln and Warberg, 1987;
and Kraemer, 1984), Nolan's model provides a
Massey, 1986; Raymond and Magnenat-
rich description of the growth in computing
Thalmann, 1982; Willis, 1986).
organizations (Saarinen, 1989).
Much of the previous research on MIS success
Nolan (1979) looked at DP expenditure as well
in small firms has attempted to confirm findings
as certain processes. These processes include:
from studies set in large firms. For example, two
technology, applications portfolio, DP organiza-
variables found related to MIS success for the
tion, DP planning and control, and user
small firm are the MIS function at a high organiza-
awareness. Studies of small-firm MIS success
tional level (Raymond, 1985) and the presence
have referred to many of Nolan's variables
of a systems analyst (Montazemi, 1988). These
(DeLone, 1988; Montazemi, 1988; Raymond,
results indicate that building on internal rather
1985), but none have looked at them over time.
than external MIS expertise is important to small
firms. On-site computer use was also found to
be related to success (DeLone, 1988; Raymond,
1985). In the 1970s, many small firms relied on
Research Objectives
a computer "bureau" but later moved to an in-
As stated earlier, little previous research has
house computer. The number of administrative,
focused on computer growth in small firms.
rather than transactional, applications is also
Because Nolan's growth stages model con-
related to success (Raymond, 1985). These ap-
sidered computing developments over time in
plications would most likely be time dependent
large firms, we thought it might provide a con-
because they often rely on other applications for
ceptual base for a study of small-firm computing.
However, since Nolan's model has been criti-
data. Other variables that were found related to
IS success and that would probably change over
time are: the proportion of applications developed
and run internally (Raymond, 1985); computer
cized, it seemed inappropriate to test the model
itself in the small-firm setting. Instead, we used
Nolan's growth processes to focus on exploratory
planning and controls (DeLone, 1988); and end-
interviews designed to obtain a broad picture of
user involvement, intensity of computer literacy,
and interactive systems (Montazemi, 1988).
computing developments in small firms. This exploratory work led to the development of the
The firm owner's knowledge and involvement are
paper.
also important to success (DeLone, 1988).
However, the nature of this involvement can vary
from owner to owner, as shown by Martin (1989)
who revealed five types of involvement, ranging
from remote to close involvement (discussed later
in the paper).
study, which is discussed in the remainder of this
The initial research focused on small firms that
had used computers for at least four years, and
therefore would have had the opportunity for
computing growth. Participants in an earlier computing study (Cragg, 1984) met these criteria.
Moreover, information on each firm was avail-
Surprisingly, one factor gained no support from
able. Consequently, in 1988 contact was made
the studies. The number of years of computer use
with 27 of the 33 manufacturing firms from the
has been negatively correlated with MIS success
original study. All 27 companies had less than
50 employees. Interviews were conducted with
(DeLone, 1988; Montazemi, 1988; Raymond,
1985).
Several studies suggest that Nolan's growth
stages model is worth testing on small firms
(Cooley, et al., 1987; Stair, et al., 1989). To date
no such studies have been reported. As early as
1973, Nolan proposed a four-stage growth model
of computer use in organizations (Nolan, 1973).
In 1979, this model was revised, and two further
stages were added. The six stages include: initiation, contagion, control, integration, data administration, and maturity (Nolan, 1979).
Although criticized (Benbasat, et al., 1984; King
the people responsible for computing. The questions focused on the variables proposed by Nolan
and addressed applications, IS organization, IS
planning and control, and user awareness.
The interviews disclosed that 12 of the firms (45
percent) had not updated their hardware since
the earlier visits. In some of the other 15 companies, replacement computers had been acquired. Still others had added to rather than
replaced older hardware. One firm estimated
spending $16,000 annually on repairs and
maintenance of an old mini-computer rather than
48 MIS Quarterly/March 1993
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Small-Firm Computing
acquire a new system. In general, very few of
these small firms had experienced change in
their IS organization. Typically the computer was
still under the control of either the office manager
or the accountant. IS planning and control also
Because the most significant changes had occurred in the area of applications, the study
adopted "the number of new applications since
1984" as a major selection criterion.1 Six firms
remained generally unchanged and was com-
were ultimately chosen: two each with low,
average, and high applications growth since
monly an informal process involving the owner-
1984.2
manager. End users, however, had become more
involved since the 1984 study and now participated in applications development in 12 of the
firms (45 percent). Typically, end users relied on
either spreadsheet or computer-aided design
software.
The most significant change involved applications. Eighty percent of the 27 firms had increased their number of computer applications
during the four year period. Table 1 shows this
increase. As can be seen, some firms had done
very little, and others had made many changes.
Details of the systems and their use were collected through interviews with the person responsible for computing. Interviews were then
conducted with the owner-manager and other key
staff. A broad range of topics were raised. The
interviews did not just concentrate on information technology (IT), but permitted us to explore
the underlying forces and connections between
variables (as suggested by Pettigrew, 1985 and
Yin, 1984). The discussions included company
history, major products, market factors, company
performance, owner's background, and computer use and impacts.3
Table 1. Number of Additional Applications
From 1984 to 1988
Number of Additional Number
Applications of Firms %
0
6
1
7
26
5
19
3
4
15
>4
automotive parts.
22
2
4
As for characteristics, all the firms were privately owned and had fewer than 50 employees. All
were in the engineering industry, but their products were sold in various markets, including electronics, windows, cutting tools, valves, and
2
3
7
11
Total: 27
To clarify the variability depicted in Table 1, a
follow-on study was carried out. The general objective was to understand the factors causing
some firms to experience more computing growth
than others. The methods and findings are
discussed in the next sections of this paper.
Research Methods
More detailed interviews were conducted in six
of the firms. A number of factors were taken into
consideration in order to determine which specific
firms to revisit (Benbasat, et al., 1987). Since
Bonoma (1985) recommended selecting firms
from the same industry, we considered a group
of 10 engineering firms. The sample also needed to reflect different levels of computing growth.
Results
The results are based on the data collected from
the six in-depth case studies (referred to as firms
A, B, etc.). All firms had changed their use of
computers since the previous study. Furthermore, all had ideas for future growth in computer
use, though for some this was not expected to
occur within the next year. The year-by-year
changes are shown in Table 2, which identifies
the year an application was first introduced. It was
easy to identify the initial phase when each firm
implemented most of the applications planned
prior to acquisition. This phase, referred to as the
"initial settling-in period" of computerization, is
indicated in Table 2 by a dotted line. Typically,
this was within the first year of installation.
However, it is the period after this initial settlingin period that is of particular interest. The experiences for three of the firms are outlined below
to show how their systems have evolved over
time.
Firm B-This firm acquired a microcomputer in
1982. Until then the owner's spouse had carried
MIS Quarterly/March 1993 49
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Small-Firm Computing
Table 2. The Growth of Computing in Six Case Studies
Year
Introduced Firm A Firm B Firm C Firm D Firm E Firm F
1978
Bureau
Invoicing
&
Accounts
Receivable
1979
Accounts
Payable
General
Ledger
1980
Micro-Acquired
1981
CNC
Programming
1982 Micro-Acquired Micro-Acquired CAD
Invoicing Word Processing -----------------Accounts Design
Receivable & Calculations
Payable
1983 Micro-Acquired Profit Mini-Acquired Costing Payroll Micro-Acquired
Analyses Invoicing ------------------ Stock Control
Accounts
Receivable &
Payable
General Ledger
1984 Invoicing Check Writing Costing Design Word
Accounts Stock Control Processing
Receivable
------------------
Design
Calculations
1985
Accounts Budgeting
Payable Stock Control
1986 Replacement Micro-Acquired Micro-Acquired Micro-Acquired
Mini-Acquired Product Testing Invoicing Invoicing
Invoicing Accounts Accounts
Accounts Receivable Receivable &
Receivable & General Ledger Payable
Payable Word Processing General Ledger
General Ledger
1987 General Ledger Costing Creditors CAD Word Processing
Stock
Control
Budgeting
Payroll
Micro-Acquired
CAD
1988
Micro-Acquired
Accounts
Word Processing Payable
(mailshots)
Payroll
Notes: CAD = Computer-Aided Design.
CNC = Computerized Numerical Control.
The dotted line is used to indicate the end of the initial settling-in period for
computerization.
50 MIS Quarterly/March 1993
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Small-Firm Computing
out all clerical duties. When the couple learned
dividually, they are highly interdependent. Much
they were expecting their third child they turned
accounts receivable package was soon followed
of the basic data is summarized in Table 3, some
of which is based on Table 2. Typically, growth
was measured since the initial settling-in period
by the addition of an accounts payable module.
of computerization.
to computerization to save time. An invoicing and
Data extracted from these systems provided
monthly performance reports. In 1984, a check-
writing facility was added. Apart from adapting
the software to accommodate the introduction of
Growth in IT hardware
a sales tax in 1986, there had been no systems
Four of the six firms had acquired new hardware
development since 1984.
since their initial acquisition. Typically this was
Firm C-This firm acquired a minicomputer in
1983 for invoicing, accounts receivable, accounts
payable, and general ledger. They had previously
relied on a service bureau. A custom-built jobcosting system was added, with difficulties and
delays in implementation. In 1986, their software
supplier moved to new hardware and software.
The firm acquired this new system and implemented the above applications. Minor
enhancements were added over time to suit user
needs. A microcomputer was acquired in 1988
to replace a typewriter. This was also intended
to be used for spreadsheets because the main
to extend their range of applications, rather than
to replace hardware.
Growth in IT software
Three firms (A, B, and C) had acquired little or
no new software. Three other firms (C, E and F)
had almost completely replaced their original software. These three firms had implemented new
accounting systems and acquired software to
support end users. The accounting systems were
packages, apart from firm C's custom-built
system.
system's spreadsheet was both unfriendly and
limited.
Growth in IT applications
Firm E-This company acquired a computer in
1981 for computer-aided design (CAD) and
numerical control programming of lathes. The
computer was also used to control stock and for
payroll. In 1986, another computer was acquired
for invoicing, accounts receivable, and general
ledger. This computer was subsequently used for
Hardware was acquired primarily to support new
applications. However, there had also been some
applications growth on the existing hardware at
firms A and B. All firms showed some applications growth, and this ranged from two to six new
applications.
word processing (1986), computer-aided design
of new products (1987), and accounts payable
(1988). It was anticipated that this computer
would be replaced in 1989 to provide better support for computer-aided design (CAD) and
computer-aided manufacturing (CAM). The firm
has rejected the idea of using the computer for
bill of materials and job costing.
Types of IT Growth
Nolan (1979) reported many types of computing
growth in large firms. Our case study analysis
drew heavily on Nolan's variables, with the ad-
Diffusion of IT
For all firms, some of the new applications were
used to support a new part of the business. For
example, the general ledger software in firm A
provided monthly reports for tighter financial control. This extended the breadth of use of the computer from the operational accounting (invoicing,
accounts receivable and payable) and design
functions. A diffusion score was calculated based
on the total number of new functional areas since
computerization that had support from IT (based
on the Appendix). The diffusion scores ranged
from one to three new functional areas.
dition of end-user computing. Many types of
growth were identified including hardware, soft-
ware, applications, diffusion, end-user development, and number of users. All of these types are
discussed below. Although they are discussed in-
Growth in end-user development
End-user development was common in five of the
firms, as it had been during the initial settling-in
MIS Quarterly/March 1993 51
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Small-Firm Computing
Table 3. Types of IT Growth by Firm
Firm Firm Firm Firm Firm Firm
Type
of
IT
growth
A
B
C
D
E
F
Hardware
Number of new computers since 0 0 3 1 1 2
initial computerization
Software
Number of software packages 1 1 7 0 7 7
acquired since initial computerization
IT Applications
Number
of
new
applications
2
2
4
4
6
6
since initial computerization
Diffusion
Number of new functional areas 1 1 3 2 2 1
supported since the initial
computerization
End-User Development
Number of additional end-user 0 0 1 0 0 1
developers since initial
computerization
Users
Number of additional hands-on 0 0 3 0 1 2
users since initial computerization
period. It was still a relatively insignificant and
infrequent activity at firm A. At firm D, end-user
development remained the only method of
development. The only change at firm E had
been a switch to a more user-friendly CAD software package. Firm C was experimenting with
end-user development using a spreadsheet. The
biggest change had occurred at firm F, where
CAD had become a major activity for one
manager new to computing.
Growth in IS managerial practices
Up to this point, the research has focused on
aspects associated with the growth in the number
and type of applications. The case studies revealed that the other growth processes sug-
gested by Nolan had little applicability to these
small firms. This was mainly due to the lack of
a recognized information management function.
The original champions of computerization remained as the champions several years later.
Typically, the computer was located in the main
Growth in users
office. Data entry and print runs were the responsibility of an office employee. Decisions on
In three of the firms (A, B, and D) new applica-
developments were made by the "manager,"
tions had been undertaken by the existing users.
who was not always the owner. Two of the firms
At the three larger firms (C, E, and F), some of
had day-to-day managers, with expenditure ap-
the new applications were performed by both ex-
proval required from the owner. This was precise-
isting users and new users. Most new users were
ly the same arrangement as in 1984. Little had
professionals or managers.
changed, despite the growth in applications.
52 MIS Quarterly/March 1993
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Small-Firm Computing
Other management processes remained unchanged. For example, there were few formal
effort, economic benefits, and decreases in
discomfort, to name a few.
planning and control activities associated with
The case study firms illustrated several types of
computing, or for that matter, with the business
advantage. Firms D, E, and F wanted to save
as a whole. Also, in-house expertise had changed
time and effort by improving their outdated
only enough to run externally developed systems.
accounting systems. These firms, along with firm
Exceptions were the computer-aided design ac-
A, also sought economic benefits by improving
planning and control through the effective use of
tivities at firms E and F. There had been no attempt to develop programming skills for either
predominantly internally generated data. Firms
end-user programming or for routine
E and F sought to improve working life by
maintenance.
eliminating many boring tasks.
Factors That Encourage IT
Growth
None of the firms set out to gain competitive ad-
The literature on reasons for acquiring a com-
vantage from their use of IT. However, after be-
1985; King and McAuley, 1989; Lefebvre and
wanted to use the staff more effectively and saw
Competitive pressure
ing slow to computerize, the owner of firm F
puter was used as a basis for analyzing the
reasons for encouraging further IT growth (Baker,considered it necessary to have high-quality IT
in order to compete effectively. The owner
1987; Easton, 1982; Farhoomand and Hrycyk,
IT as an enabling technology that could make the
Lefebvre, 1988; Malone, 1985). The motivators
firm flexible and profitable.
reflected a wide range of internal, external, and
individual factors. The presence of these factors
is indicated by a "Yes" in Table 4. In three firms
Consultant support
there were a number of influencing factors.
A consultant strongly influenced the IT growth at
firm E. This was the only firm where there was
Relative advantage
regular contact with an expert in the business ap-
plications of IT. As a result, a number of poten-
Factors encouraging greater use of IT could be
classified as providing individuals or the organiza-
tially innovative IT applications had been
tion with "relative advantage." Relative advan-
explored.
tage, a motivator of many types of innovation,
refers to "the degree to which an innovation is
perceived as being better than the idea it
Managerial enthusiasm
supersedes" (Rogers, 1983, p. 213). Relative ad-
Some owners and managers were very en-
vantage can be derived from savings in time and
thusiastic toward IT. The owner of firm D under-
Table 4. Motivators of IT Growth by Firm
Encouraging
Firm Firm Firm Firm Firm Firm
Factors
A
B
C
D
E
F
Relative Advantage
Improved information processing Yes Yes Yes
Improved planning and control Yes Yes Yes Yes
Work improvement Yes Yes
Other Factors
Competitive pressure Yes
Consultant support Yes
Managerial enthusiasm Yes Yes Yes
MIS Quarterly/March 1993 53
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Small-Firm Computing
took developments, despite severe financial
"Yes" indicates the presence of a factor in a
constraints. He was fascinated with technology
specific firm. There was evidence of some very
and gained considerable job satisfaction from his
strong forces, as well as others in various com-
computing skills. The manager at firm E frequent-
binations, that can halt the growth of computer-
ly used the technology in his work. Firm F's
ization in a small firm. It can be seen from Table
manager, although not a hands-on user,
7 that more inhibiting factors were identified in
encouraged all employees to use IT.
firms that exhibited low applications growth than
In studies of small firms, Martin (1989) identified
in those with high growth.
five types of chief executives, based on their role
in computerization. The six cases used in this
study include examples of all five types. from
"remote" (firm A) to "routine interaction" (firm
D). Their individual roles are shown in Table 5.
To relate the owner's role in IT to the purchase
of new IT applications, Table 6 compares the
owner's "type" from Table 5 and the number of
new IT applications from Table 3.
IS education factors
The case studies identified a number of factors
relating to IS education that inhibited IT growth.
Any computer training tended to be limited to the
initial period of hands-on use of a new system.
No one in any of the firms had been on a course
that would give them a broad view of computers,
or even develop hands-on skills. Hence, exper-
As Table 6 shows, new applications were introduced in firms where the owner was en-
tise was restricted to whatever was gained working directly with the computer. This discouraged
the consideration of other applications or even
thusiastic toward the technology (firms D, E, and
of improvements to the existing environment.
F). Little growth took place in two of the firms with
less interested owners (firms A and B). The influence of the owner on IT growth in firms D, E,
and F was very strong.
In Table 7, "lack of IS knowledge" refers to the
lack of a broad knowledge and understanding of
IS, whereas "skills shortage" refers to the lack
of people with specific skills in systems analysis,
Factors That Discourage IT
design, and development. At firm A, the owner's
low level of knowledge discouraged others from
Growth
exploring possibilities, and the skills shortage
Three previous studies identified factors that in-
perience. The owner of firm B had never heard
made their implementation a long and painful ex-
hibit IT growth (Baker, 1987; Bourner, et al., 1983;
of a spreadsheet. This lack of IS education meant
King and McAuley, 1989). These studies provided a framework for our case study analysis and
covered a broad range of inhibitors relating to
organizational, economic, and technological factors. The factors are listed in Table 7, where a
that the amount of in-house development at firm
B had seen no change over the years. Firm B was
therefore unable to move forward from its rela-
tively early introduction of some standard
applications.
Table 5. Owner's Role in Computerization
Owner's Role in Computerization
Company (Based on Martin's Typology)
Firm A Remote from management of the computer (Type 1)
B Involved in a managerial, overseeing capacity (Type 2)
C Involved in a managerial, overseeing capacity (Type 2)
D Routine interaction directly with computer (Type 5)
E Directly involved technically in implementation (Type 4)
F Closely involved in choice and implementation decisions (Type 3)
54 MIS Quarterly/March 1993
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Small-Firm Computing
Table 6. Relationship of Owner's Role to IT Growth
Firm Firm Firm Firm Firm Firm
A
B
C
D
E
F
Owner's role in computerization 1 2 2 5 4 3
New
IT
applications
2
2
4
4
6
6
Managerial time
Economic factors
Systems were often acquired to save time as well
A number of economic factors inhibited IT
as to reduce costs. But the installation and im-
growth. Firm B was barely "surviving" because
plementation of systems alone absorbed con-
of a recessionary economy. The owner therefore
siderable amounts of senior managerial
had given little consideration to upgrading or
time-time these firms could ill afford. This prob-
replacing the company's systems. Firm D was
lem, linked with the lack of expertise, caused
financially in an even weaker position. Though
some firms to take a very cautious approach.
the owner was very keen to replace the oldest
Firm A desired a more sophisticated system.
computer, he felt that it would be impossible to
However, because the initial developments took
justify such expenditure to the bank manager.
so long to implement, the firm was very wary of
Both firms recognized that their systems were
introducing a totally new system. Firm C was
outdated.
waiting to complete its job-costing system before
moving into other applications. The manager at
There was evidence that other potential applica-
firm D wanted to computerize more activities but
tions had been considered but rejected on the
did not have the time.
basis of an informal cost-benefit analysis. For ex-
Table 7. Factors That Discourage IT Growth
Firm Firm Firm Firm Firm Firm
Discouraging
Factors
A
B
C
D
E
F
Education
Lack of IS knowledge Yes Yes Yes
Skills
shortage
Yes
Yes
Yes
Influence of higher levels Yes
Managerial Time
Lack
of
time
Yes
Yes
Yes
Economic
Inappropriate economic climate Yes Yes
Excessive
cost
Yes
Yes
Firm too small Yes Yes
Technical
Unstructured
system
Yes
Yes
Poor software support Yes Yes
MIS Quarterly/March 1993 55
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Small-Firm Computing
ample, firm E considered a bill of materials
very few longitudinal studies of small-firm com-
package. The owner felt that to make proper use
of it would require one full-time person devoted
puting. As a result, the study provides new insights into the process of small-firm computing.
to data entry and other tasks. For a firm employ-
The considerable variability in IT growth between
ing 35 people this seemed to be too large a cost
firms was due to a number of influences, in-
for the potential benefits. Firm D had very few
cluding both motivating and inhibiting factors.
sales orders per year, though each was of high
The strongest motivating factor was the owners'
value. A computerized invoicing system could not
enthusiasm toward computing. The strongest in-
be justified.
hibiting factors were a lack of IS knowledge, lack
of managerial time, poor support, and limited
Technical factors
Packaged systems are ideal systems for many
small firms. They are affordable and require low
IS expertise. The firms in this study often accepted software limitations and adapted their
organization to meet system requirements. One
firm was an exception. Firm C had acquired a
customized solution for its unstructured job-
costing needs. This customization involved external design and programming and was accom-
panied by systems errors and delays.
Furthermore, maintenance was required as new
needs were identified. This developmental approach to package use (rather than the non-
developmental approach described by Kole,
1983) slowed up the implementation process at
firm C. It also affected growth as the firm placed
resources, including time, into the development,
thus discouraging further development. These
problems in developing a job-costing system
delayed firm C's moves to give computer support
to the marketing and production areas.
With little internal computer expertise, small firms
financial resources. These factors need to be
validated in other settings-for example, in nonmanufacturing firms, in growing firms, in firms
that have moved more recently into IT, and in
other countries.
Many of the factors that encouraged IT growth
for this case study's firms were similar to the
typical motivators for small firms to acquire their
first computer. However, it should be noted that
all six firms, even those that exhibited con-
siderable IT growth, experienced inhibitors to further IT growth. Low-cost hardware and packaged
systems have made it possible for many small
firms to implement quite sophisticated IT during
the 1980s. To build on this base will require
scarce internal resources in the form of IT exper-
tise, time, and money. It will also require new
roles for IT consultants (Gable, 1991).
It may be possible to build these influencing factors into a model that could explain IT growth
behavior in some small firms. Such a model
would be particularly useful if it could be used
to indicate the necessary conditions for IT growth
and could explain the drives and barriers of smallobtain from vendors. For the firms in this study,
firm computing growth. The model could be
luck was associated with the initial choice of hardbased on the innovation literature, which
ware and software. Firm A found its accounting
recognizes that change occurs over time as part
firm to be uncooperative when it requested help
of a process. Kanter (1983) found that many
in implementing a general ledger system. The
organizations avoid innovation, which could exsoftware supplier also failed to help. As a result,
tend to computerization in small firms. Many
it took 21/2 years to implement the general ledger
small firms choose to stay small (Davidsson,
system, and the company is naturally reluctant
1989). Firms that actively seek company growth
to upgrade its system. Because the initial system
may behave differently with respect to comwas such a poor fit, the firm may have been betputers. Also, different types of small firms have
ter off totally replacing the system three or four
different objectives, practices, and corporate
years ago.
philosophies (Rizzoni, 1991). Furthermore, firms
may seek different types of IT at different stages
of growth (Chenhall and Romano, 1989; Olaisen,
Discussion and Implications
1991). IT innovations are likely to vary across
for Research
these typologies. Therefore, it seems unlikely that
one growth model will apply to all types of small
This study is the first to research small-firm IT
evolution rather than adoption. It is also one offirms.
are very reliant on the advice and support they
56 MIS Quarterly/March 1993
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Small-Firm Computing
Researchers must also decide what growth
very little; others had made many changes.
variables to measure. This research relied heavily
Although some forces, like the wish for better in-
on the variable "number of IT applications" as
formation, were identified as motivating forces in
a measure of IT growth. Although this variable
all six case-study firms, application growth tend-
may be highly correlated with other measures of
ed to take place in firms where the owner was
IT sophistication (Raymond, 1987), by itself it fails
enthusiastic toward the technology. In addition,
to portray a rich picture of IT developments in
many inhibitors to growth were identified, some
small firms. Other approaches must be con-
strong enough to halt IT growth in a firm. Inade-
sidered, including the amount of use in terms of
quate resources, particularly in the form of
users and time (Ein-Dor and Segev, 1991; Trice
finance, managerial time, and internal expertise,
and Treacy, 1988). Activities that are of great im-
discouraged growth.
portance to the firm should be emphasized (Cale
and Curley, 1987; Kagan, et al., 1990; Kwon,
1990; Raymond and Pare,1992; Sparrow, 1990).
Another dimension worthy of research is IT
management practice (Raymond and Pare,
1992). What, if any, IS planning and control
activities are appropriate for small firms?
This study provides a picture of growth and
stagnation in small-firm computing. While many
firms had experienced growth in the number and
type of IT applications, there had been little
change with respect to the management of IT in
small firms. The results identified specific topics
in need of further research, including factors that
The case studies provided evidence to under-
influence IT growth and how IT growth should be
stand the previously reported negative relation-
studied.
ship between "years of computer experience"
and "IS success" (DeLone, 1988; Montazemi,
1988; Raymond, 1985). One measure of IS success used in all three studies was "user satisfac-
tion." In firms A, B, and E, years of computer
experience was a handicap as far as user
satisfaction was concerned. All three of these
firms had found it hard to justify replacing their
original computer systems because the systems
were working satisfactorily (although not wonder-
fully). In a similar vein, firm F acquired a much
The firms demonstrated low levels of internal IT
expertise and poor relationships with IT
specialists. They also showed little desire for the
situation to change. These areas are worth
greater attention by professional/trade organiza-
tions, IT vendors, and IT consultants, including
many accountants. They could take a more ac-
tive role by helping firms review their current
systems, develop an IT plan, and educate and
train personnel.
better accounting system in 1986 than would
Acknowledgements
have been available in 1983. Therefore, the
negative correlation between "IS experience"
and "IS success" happened because firms that
had computerized more recently have benefited
from improved hardware and software (Raymond,
1985).
The authors gratefully acknowledge the construc-
tive comments of MISQ's editor, associate editor,
and three anonymous reviewers on earlier
versions of this paper.
The above research agenda shows the need for
Endnotes
further studies of computing in small firms.
Longitudinal studies will encourage researchers
The study's emphasis on the number of applications was sup-
to view IT growth as a process, with different
ported by Raymond's (1987) finding that the applications port-
types of change taking place, influenced by many
individual, organizational, and environmental
factors.
folio was highly correlated with other measures of IS
sophistication. Nolan's (1979) measure of "DP Expenditure"
was rejected as a criterion because it would have relied heavily on hard-to-locate cost data. It would also have been
distorted by maintenance and replacement expenditure,
which would give little indication of increased use of
computing.
Conclusions
Return visits to 27 small manufacturing firms
showed considerable variability in their growth
in computer applications. Some firms had done
2 Two firms had to be substituted for firms unable to devote
further time to the study.
3 The interviews were tape-recorded to retain actual responses
rather than rely on written notes.
MIS Quarterly/March 1993 57
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Small-Firm Computing
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About the Authors
Paul B. Cragg is a senior lecturer in the Depart-
ment of Management Systems at the University
of Waikato, New Zealand. He teaches and
researches in the areas of management information systems and management science and has
particular interests in computers in small firms,
and user-developed decision support systems.
Malcolm King is professor of management
science at Loughborough University Business
School, England. He is widely published and
recently completed a major longitudinal study of
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Small-Firm Computing
Appendix
IT Applications by Functional Area
(used to determine the number of functional areas supported by IT)
Functional Area Applications
Production stock control
NC/CNC/DNC programming computer
controlled equipment
job/work scheduling
capacity planning
Design engineering analysis
CAD (computer-aided design)
Costing job estimating/quoting
job costing/cost analysis
Office Administration invoicing, debtors, creditors
purchase order processing
word processing
payroll
Marketing mailshots to customers
Financial
general
ledger
budgeting
The diffusion score could have a maximum of 6, reflecting the total number of functional areas covered.
A firm needed to have at least one application from the list to be considered as providing assistance
in that functional area.
60 MIS Quarterly/March 1993
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