Small and medium-sized enterprises play a signifcant role in the East African Community, contributng highly to the natonal income and employing a signifcant number of people. Exportaton provides a great opportunity for these enterprises to expand their businesses and improve their performance. However, they encounter a number of informatonrelated barriers before and during exportaton. Based on literature, this paper identfes these barriers and discusses how the internet could be used to reduce them. Based on the internet, internatonal business and small business literature, the paper provides propositons and develops a model that will be useful for future studies in this area.
Keywords: SMEs; Informaton barriers; Internet; Exportaton; East African Community.
In the last few years, the use of the Internet in the East African community (EAC) has grown thanks to the introducton of internatonal fbre bandwidth in these countries in 2010. This has facilitated high access to the Internet as it has become relatve cheaper and more reliable (Lange, 2011). Also, the use of mobile telecommunicatons has increased access to the Internet for many people in the region, not only in big cites but also in remote areas where a large proporton of the populaton stll lives. This arrival of bandwidth has been received with great optmism by various stakeholders in the EAC. As part of the on-going process, it is believed that proper use of the Internet could have positve effect on the lives of many East Africans through enhanced communicaton and informaton technologies.
One important business area in which the EAC countries have started beneftng from Internet access is exportaton (Boateng, Hinson, Heeks, & Molla, 2008). Most businesses in the EAC are small and medium-sized enterprises (SMEs). SMEs play a signifcant role in the world’s economy (Anderson, 2011; Dietl, 2005; KyereboahColeman & Amidu, 2008). Grossman and Helpman (1989) further show that SMEs are able to grow because of improvements in technology, which enable them to introduce new products and services. Because of their growth, SMEs are able to make a major contributon to the natonal income and employ a signifcant number of people. Furthermore, SMEs are major players in exportaton, as they are ofen involved in the producton and export of goods and services (Knight & Kim, 2009).
However, SMEs from the EAC are not performing well in exportaton because of the various export barriers they face (Husein, 2009; Milanzi, 2012). Because of this, EAC countries’ involvement in exportaton is low compared with other regions and contnents and, as a result, they are lagging behind in terms of economic and social development (Asiedu, 2004; Bakunda, 2003). For those that are partcipatng in exportng, their performance is not as good as expected. One of the barriers to exportng facing these SMEs is their poor access to and knowledge of informaton and communicatons technologies (Ernst & Young, 2009; Anderson, 2011).
The use of the Internet as an important communicaton tool could help prevent SMEs from being lef behind (IFC, 2012). Together with the business experience SMEs already possess, they could make use of the Internet to facilitate their operatons, partcularly for accessing internatonal markets. In the light of this, the objectves of this paper are to (1) identfy and discuss the informaton-related barriers faced by exportng (and non-exportng) SMEs in the EAC; (2) discuss the role of the Internet in helping to reduce these barriers and enhance SMEs’ export performance.
A full evaluaton of the implicatons of Internet use for SMEs’ export performance may require a thorough empirical analysis. This paper therefore provides a foundaton for such analysis by providing a descriptve analysis, propositons and a model that can be used in future research to empirically explain the relatonship between the informaton-related barriers facing SMEs, the use of the Internet, and SMEs’ export performance.
The rest of this paper is organized as follows. The next secton presents the methodology used in this study. This is followed by a background secton discussing the Internet and exportaton by SMEs. The EAC is introduced afer this. The following secton describes the role of the Internet as regards SMEs and develops propositons and a model. The fnal secton presents the conclusion, theoretcal and practcal implicatons and areas for future research.
This paper uses two methods, literature review and secondary data analysis. The review of literature methodology, as argued by Boateng et al (2008), enables researchers to identfy critcal knowledge gaps, to alert other researchers to opportunites for further contributons and to chart a course for future research. We therefore start by reviewing the global literature on the Internet and exportaton. This is followed by a literature review on SME exportaton in terms of the opportunites and challenges faced when seeking to export. Since the study focuses on discussing the implicatons for the EAC, a related literature search was conducted, followed by the gathering of secondary data, both looking at the background of the community, SMEs’ exports from it and the informaton-related barriers facing SMEs there. The literature review and secondary data analysis (provided in tables 1, 2 and 3) led to the development of propositons and a conceptual model that suggests that the Internet has a direct and moderatng effect on overcoming informaton barriers and improving SMEs’ export performance.
The Internet and SME Exportaton
The Internet: Meaning and business use
The Internet is regarded as one of the extensive forms of communicatng, and the one with the great business potental, worldwide (Shabazz, 2000). Obra, Cámara, & Meléndez (2002) describe the Internet as an internatonal computng system that enables frms to exchange informaton internally and communicate externally with other organizatons. Hamill (1997a) lists users of the Internet as including individuals, companies, governments, universites, research establishments and many others. As a component of informaton technology (IT), the Internet gives users the ability to exchange, integrate and manipulate data (text, video graphics, and audio) over long distances at high speed (Shabazz, 2000). Similar to Obra et al. (2002), this study defnes internet access as having an Internet Service Provider that will enable the user to visit any website, to obtain informaton from that website, and to send and receive emails and transfer fles.
The Internet has many uses and in terms of business usage, as it has been argued that it has been and will contnue to be the arena for exchange between buyers and sellers in the future (Abrat & Silva, 2002). The literature suggests that the Internet is used by businesses in a number of ways. First, it is used for internal and external communicaton via e-mail. Second, it is used in corporate logistcs; for example, multuser dialogue can be used to achieve “real tme” communicaton across distances. Third, it can provide more rapid access to internatonal markets. Fourth, frms can use it to achieve a compettve advantage, for example, by erectng barriers to entry. Other uses mentoned in the literature include online support for inter-frm collaboraton, especially in R&D, as a tool for searching for and retrieving informaton, for creatng websites for marketng and sales promoton purposes, and for transmitng any type of data (Hamill, 1997a; Grossman & Helpman, 1989).
These benefts from using the Internet could be far-reaching for SMEs and, when used in conjuncton with other resources (such as beter managerial support and ﬂexibility), could provide them with a major compettve advantage. Obra et al. (2002) further contend that the Internet can alter an SME’s cost structure as it affects the elements needed to manage informaton, hence enabling their actve partcipaton in exportaton.
Exportng has traditonally been regarded as the frst step in entering internatonal markets (internatonalizaton) and it serves as a platorm for future internatonal expansion (Owusu & Habiyakare, 2011). It is considered a popular strategy for SMEs because it does not require signifcant resources (Hornby, Goulding, & Poon, 2002) or a high level of market knowledge or experience (Johanson & Vahlne, 2009). Internatonalizaton through exportng is also considered a useful way for SMEs to increase their growth. According to the traditonal stage theory of the frm (Johanson & Wiedersheim-Paul, 1975), internatonalizaton is achieved through a developmental and sequental process with the following steps: (i) no regular export actvites, (ii) exportng via independent agents, (iii) establishing sales subsidiaries, and (iv) startng producton in a foreign country.
Similarly, Bakunda (2003), focusing on exportaton by African frms, identfes four stages. He argues that SMEs start out as family-owned businesses, serving the domestc market. Through this process, SMEs are able to make contacts and form networks. The second stage involves the frms setng up producton facilites locally, using imported technology and raw materials, and producing for the local market. In the third stage, the SMEs start to export to neighbouring markets. Finally, they export to overseas markets that are further afeld. Bakunda further contends that moving between these stages is associated with three aspects: the presence of networks, internatonal exposure and an understanding of markets.
These aspects are also considered in the revised internatonalizaton process proposed by Johanson & Vahlne (2009). They argue that, nowadays, the business environment is a web of relatonships. Therefore, through interactons and networks, businesses can create knowledge, and channel valuable informaton and resources, which they can use to identfy foreign market opportunites. In other words, frms no longer need to go through each individual stage in order to become internatonal. Networking and interactons are thus important for SMEs in terms of operatng in internatonal markets, especially exportaton (Zhou, Wu, & Luo, 2007).
Furthermore, the literature has shown that there are SMEs that start exportaton from their incepton or afer a few years afer incepton (Zhou et al., 2007). This is argued to be a result of fast-changing economic, technological, social and networking conditons (Johanson & Vahlne, 2009). One of the frequent motves for exportng is to gain access to new and larger markets in order to achieve growth and, as a result, remain compettve and perform beter (Masum & Fernandez, 2008).
However despite SMEs’ willingness and potental for exportaton, there are complexites involved that are associated with the distance, risks and other barriers (Tesfom, Lutz, & Ghauri, 2006). Due to these barriers, some SMEs decide not to partcipate in exportaton, which puts them at a disadvantage compared to those that engage fully in exportaton (Anderson, 2011; Leonidou, 2004).
In this regard, the Internet could be helpful in reducing some of the barriers that are encountered – specifcally, the informaton-related barriers –thereby enabling SMEs to capture the benefts of exportaton (Hornby et al., 2002). It could help exportng SMEs to leapfrog the conventonal stages of internatonalizaton (Bennet, 1998) and some of the stages of exportaton listed by Bakunda (2003) by removing many if not all of the geographical and informatonal barriers and permitng virtual branches to be established instantly, throughout the world, grantng SMEs direct and immediate foreign market entry (Bennet, 1998).
The aim of this paper is therefore to look at how the Internet could specifcally reduce the informaton-related barriers faced by SMEs exportng from the East African region. The paper focuses on this region because of the contextual similarites of the countries, all of which are members of the EAC. As Hornby, Goulding & Poon, (2002) note, SMEs’ export barriers are shaped by the contextual background of the frms, which is why this study focuses on the EAC and draws conclusions based on the informaton-related barriers that are faced by SMEs in that community. To provide the necessary background, the next secton examines the EAC.
The East African Community
The EAC is the regional intergovernmental organizaton of the Republic of Kenya, Uganda, the United Republic of Tanzania, the Republic of Rwanda and the Republic of Burundi. The agreement establishing the EAC was signed in November 1999 and came into force in July 2000. The community aims at widening and deepening cooperaton among the partner states in, among others, politcal, economic and social felds, for mutual beneft. To this end, the EAC countries established a Customs Union in 2005 and a Common Market in 2010. The community is currently working on establishing a monetary union and, ultmately, aims to become a politcal federaton of East African countries.
The fve partner countries had a combined populaton of more than 130 million people as of 2010, a land area of 1.82 million square kilometres and a combined gross domestc product of $74.5 billion as of 2009 (EAC, 2011b). These features give the EAC great strategic and geopolitcal signifcance and the potental for a renewed and reinvigorated region. Furthermore, the community has vast potental in terms of mineral, water, energy and wildlife resources. It is also currently engaged in agricultural, livestock, industrial and tourism development (EAC, 2011a). The people of this community have a common history, a common language (Kiswahili), and a shared culture and infrastructure (Ernst & Young, 2009). Table 1 shows selected basic informaton on the EAC partner countries.
|Partner member||Land area in 000s sq. kms.||Populaton in millions (2010)||Real GDP in million USD (2010)||GDP per capita USD (2010)|
Overall, this table shows that the EAC has a large potental market in terms of suppliers and customers of various products, and therefore has great potental for acceleratng growth and becoming compettve in the global market. This is further shown in the EAC development strategy for the next decade (2011–2020), which is focused on improving global compettveness so as to provide faster and sustainable economic growth and move closer to the status of a newly industrialized region (EAC, 2011a). The aim is to achieve this through, among other things, the region’s actve support of its SMEs and improvements in global communicatons/informaton technology.
Internet use in the EAC
In 2010, the region was connected by a second fbre optc cable linking East Africa to the rest of the world, and specifcally to Europe. The cable is known as the East African submarine cable system. The cable led to beter Internet access and improved connectons in the region. The EAC (2011a) report argues that access to and use of informaton and communicatons technology (ICT), including the Internet, is essental for the development of the EAC, both from an economic and social viewpoint. The report further shows that ICT is growing at a fast rate in the region, although the statstcal indicators used to measure this development may not be completely reliable
Informaton from the internetworldstats website further shows that growth in East Africa’s internet and broadband sector has accelerated in recent years due to improvements in infrastructure, the arrival of wireless access technologies and lower tariffs. Broadband is rapidly replacing dial-up as the preferred access method in the region. The use of social media such as Facebook, Skype, LinkedIn and Twiter is also growing. The website, for example, shows that three EAC partner states (Kenya, Tanzania and Uganda) are among the top ten African countries in terms of number of Internet users. Table 2 shows that in these three countries internet users make up more than 10% of the total populaton. This shows the great potental of the Internet for many endeavours, including partcipaton in internatonal markets through exportaton.
|Country||Year 2000||Year 2011||% of populaton||% of populaton (Africa)|
|Burundi||3,000||176,040||1.7 %||0.1 %|
|Kenya||200,000||10,492,785||25.5 %||7.5 %|
|Rwanda||5,000||818,048||7.2 %||0.6 %|
|Tanzania||115,000||4,932,535||11.5 %||3.5 %|
|Uganda||40,000||4,178,085||12.1 %||3.0 %|
|Source: Internetworldstats.com. Accessed 20th April, 2012.|
Exportaton from the EAC
The EAC encourages exports by SMEs and large enterprises. Similar to other African economies, the governments of the partner states have adopted export promoton strategies (Anderson, 2011; Bakunda, 2003). The establishment of the customs union has catalyzed the expansion of trade. Exports between countries within the community (intra-EAC trade) grew by 40% between 2005 and 2009. For example, Uganda’s exports to Kenya increased more than tenfold, while Tanzania’s exports to Kenya over the same period nearly tripled (EAC, 2011b). This increased trade and investment among the EAC partner states has broadened the prospects for economic growth and is also expected to extend to other countries globally. Table 3 shows the trend in exports to other parts of the world over the period 2006-2010.
|Source: EAC (2011b).|
SMEs contribute greatly to exports in this region. Reﬂectng this, the current EAC development strategy for 2011-2016 indicates that the SME sector forms the bulk of the industrial sector (by number of frms), and contributes more than 60 percent of employment in the region. The strategy indicates further that this sector has the potental to address the development needs of the region, through poverty reducton, technological innovaton, economic linkages and the reducton of disparites in regional development, if well supported and brought into the mainstream of the formal economy (EAC, 2011a). As a result, one of the current priorites for the EAC is to facilitate the development and growth of SMEs, including helping them to excel in regional and internatonal markets through exportaton (Ernst & Young, 2009; EAC, 2011a). The EAC strategy also mentons that SMEs in the region are currently expanding their businesses to partner states and internatonally.
However, SMEs face a number of barriers that hinder them from partcipatng fully in exportaton. Delloite (no year) lists various barriers faced by SMEs in the EAC, including (but not restricted to) the weak labour market, lack of access to fnance, internatonal competton, weak management skills, the lack of internatonal experience and poor informaton technology. Hussein (2009) mentons that similar barriers are faced by Tanzanian exporters. The focus of this paper, however, is on informaton-related barriers, and the next secton describes the types of barriers caused by poor or missing informaton.
Informaton-Related Barriers Faced by Exportng SMEs
Various informaton-related barriers are faced by SMEs globally. Many of these are also faced by SMEs in the EAC. The following barriers are drawn from the literature, including empirical studies carried out in the EAC:
Lack of informaton to locate and analyse foreign markets: Many SMEs lack adequate informaton about foreign markets. Anderson (2011), for example, conducted a study on SME internatonalizaton in Tanzania and found that the export performance of 35% of SMEs may be affected by this barrier.
Inability to contact overseas customers: The export promoton strategies adopted in many African countries, including those in the EAC, have enabled some SMEs to make contacts in overseas markets (Anderson, 2011; Bakunda, 2003). However, the challenge is the reliability of accessing such contacts.
Inability to identfy foreign business opportunites: This is a key aspect of SMEs’ export performance. SMEs need to know where they might fnd business opportunites and where there might be a market for certain products. Anderson (2011) shows that 40% of exporters obtained their markets through partcipaton in trade fairs. It seems that many exportng SMEs are not able to identfy markets, either through trade fairs or any other means. In additon, there seems to be an overall lack of knowledge among SMEs as to how and where they might search for business opportunites (Tesfom et al., 2006).
Distributon channels: The barriers faced by EAC SMEs in this area include gaining access to export distributon channels, the complexity of local and foreign distributon channels, control by foreign middlemen, and long delivery tmes (Mori, 2010). All of these issues are related to inadequate informaton. If an SME has more informaton about the choice of distributon channels available, it will be beter able to select the most appropriate one for its needs. Informaton also gives SMEs more power to deal with middlemen.
Lack of product promoton: The ability to excel at exportng requires that products are promoted effectvely. The EAC countries have adopted promoton campaigns and export development strategies to boost their export performance. Advertsing is one of the most widely used means of communicaton and promoton in internatonal markets (Darley, 2002). However, SMEs may fnd it difcult to produce effectve advertsements for a number of reasons, including ignorance about what is required, the inability to promote their product to the target audience, and, as a result, inappropriate content in the advertsing message. Exacerbatng this, the promoton campaigns in the EAC are currently mainly focused on trade fair partcipaton, which is insufcient for improving SMEs’ export performance (Mori, 2010).
In summary, barriers associated with communicaton and access to informaton seems to be the concern of many of the SMEs engaged in exportng (Delloite, no year; Tesfom et al., 2006). Clearly these problems need to be tackled. This paper contributes to this objectve by analysing how use of the Internet could help SMEs to reduce or eliminate these problems and become more successful in internatonal markets. By taking into account the effects of the internet on exportaton, the next secton discusses how it could help SMEs to overcome some of the informaton-related barriers identfed in this secton. Propositons are stated and a model is presented.
The Role Of The Internet For Exportng SMEs In The EAC
The Internet provides organizatons, including SMEs, with new ways of conductng business by exchanging informaton and business ideas. This secton argues that the opportunites provided by the internet would enable SMEs to overcome informatonrelated barriers.
The Internet has the ability to transform an organizaton’s operatons if used properly. For this reason, many frms use the Tnternet as a major strategic informatonal tool. They also use the Internet to gain an edge in an increasingly compettve business environment, both domestcally and internatonally (Anderson, 2011; Dholakia & Kshetri, 2004).
Internatonal market costs
Internet technology enables SMEs to improve the efciency of their performance and develop new ways of coordinatng their actvites in the internatonal context (Loane, 2005). It offers SMEs an important resource that can be used to carry out export actvites cheaply. SMEs which are using the Internet can quickly gain global recogniton via a website and email, without too much difculty. In his study, Bennet (1998) observes that the Internet is a valuable tool for generatng sales leads, helping SMEs to sell their products in remote countries, to penetrate unfamiliar markets and to create internatonal awareness. These benefts can be achieved at litle cost.
In additon, marketng costs, such as advertsing costs, can be signifcantly reduced as the internet makes it possible to reach a global audience cheaply (Hamill, 1997b). Also, SMEs offering specialized products for a niche market may be able to cheaply fnd the many customers needed to succeed internatonally through the worldwide reach of the internet (Hamill, 1997b). Based on the above arguments, we make the following propositon:
Propositon 1: The use of the Internet enables SMEs to reduce the costs of accessing internatonal markets.
Communicaton with customers
One of barriers encountered by SMEs is the inability to communicate with overseas customers (Fillis, 2002; Husein, 2009; Leonidou, 2004). The main reasons for this are the large physical and psychological distances involved in reaching internatonal markets and the poor communicatons infrastructure in many countries (Leonidou, 2004). SMEs can use the internet as a communicatons tool to overcome this problem if other countries with which they are communicatng also have good communicatons infrastructure. The Internet acts as a global channel through which both existng and potental customers can be targeted. SMEs can use it to publicize their commercial offerings (Melewar & Smith, 2003).
In additon, according to Poon and Swatman (1999), the most useful functon of the Internet is the use of e-mail to conduct business communicatons. Qualman (2009) also notes that the use of social media such as Twiter and Facebook not only enables social interacton but also the building of business networks. The Internet offers something that telephone and fax services cannot, namely, asynchronous communicaton, which overcomes tme and geographic limitatons, and electronic document transmission (Poon & Swatman, 1999).
Thus, SMEs could use the Internet as a communicatons tool to facilitate interacton with overseas customers. This leads to the following propositon:
Propositon 2: The Internet facilitates SMEs’ communicaton with overseas customers.
Distributon channel’s effectveness and efciency
Having an effectve distributon channel is one of the most important factors for ensuring that the export business is successful. In many trading actvites, the distributors are the key link between the manufacturer and the customer (Tesfom et al., 2006; Wilkinson & Brouthers, 2006). However, the ability of SMEs to access appropriate distributon channels can be hampered by a number of factors, such as competton from large frms that already control distributon, physically long channels that drive up the costs to a level that SMEs cannot afford, and a system in which the distributors have an excessive amount of control and SMEs have weak bargaining power (Wilkinson & Brouthers, 2006).
The Internet helps SMEs to overcome these problems because they could use it to eliminate redundant processes and establish direct links with customers. By connectng end-users and producers directly, the Internet reduces the importance of traditonal intermediaries in internatonal markets, thus speeding up SMEs’ entry into the export business (Hamill, 1997b). Thus, the following propositon is posited.
Propositon 3: The use of the Internet reduces SMEs’ distributon channel barriers.
Selling to foreign market customers
The Internet enables SMEs from the EAC to instantaneously positon themselves in many foreign markets at the same tme (Bennet, 1998). As a result, customers would have the opportunity to search and buy from any place in the world and at any partcular tme via frms’ websites. Thus, use of the Internet would enable SMEs to overcome foreign customers’ accessibility problems. For example, informaton could be accessed via the web about small hotels and tour operators located in remote areas of Tanzania and Burundi. Websites provide informaton about the services a frm is offering customers located anywhere in the world, which could be accessed at any tme. As a result, SMEs are able to access internatonal markets directly via their websites, and export the goods or services demanded by foreign market customers. This leads to the following propositon.
Propositon 4: The Internet enables SMEs to market and sell their products to foreign customers.
Risk assessment and the identfcaton of business opportunites
One of the main barriers hindering SMEs from exportaton is that it is difcult for them to identfy foreign business opportunites (Leonidou, 2004). This has been highlighted as a problem for SMEs from the EAC (EAC, 2011a). The internet provides the opportunity for frms to identfy, access and utlize new business opportunites, for example, by facilitatng the search for and retrieval of informaton (Peterson, Balasubramanian, & Bronnenberg, 1997). For example, frms can fnd business partners on the web, via networks of suppliers and customers of various goods and services set up specifcally to provide opportunites for trade. There are a number of websites providing this type of service (Bennet, 1998). SMEs could use these types of networks, and other opportunites offered by the Internet, to interact, form business contacts and identfy foreign business opportunites.
Exportaton is typically perceived as a risky undertaking for any frm regardless of size (Ghoshal, 1987; Johanson & Vahlne, 2009). According to (Ghoshal, 1987), an internatonal frm faces many kinds of risk, some endemic to all frms and others unique to organizatons operatng across natonal boundaries. These perceived risks can ofen be a major hindrance to an SME aiming to export, partcularly as they may lack adequate informaton about foreign markets that might help mitgate such risks (Johanson & Wiedersheim-Paul, 1975).
It can be costly for SMEs to access this informaton; as a result, they may be at a disadvantage compared to large frms with a huge amount of resources. However, if SMEs started using the internet it would alter the situaton in their favour, as it would provide a vast amount of informaton that could be used to assess the risks associated with internatonal business and to identfy appropriate new opportunites in foreign markets. On the basis of this argument, the following propositon is suggested.
Propositon 5: The use of the Internet assists SMEs to assess the risks in internatonal markets and to identfy appropriate business opportunites.
Global marketng Promoton
By using the Internet as a communicatons tool, SMEs in the EAC would be able to devise suitable global marketng strategies. Having a presence on the web means that a frm is internatonal (Yi-Long & Chun-Liang, 2006). The internet can be used as a fullyﬂedged global marketng communicatons channel, and can deliver many aspects of an organizaton’s global marketng strategy, including branding, database building, and customer acquisiton, providing customer services, forming relatonships and building loyalty (Melewar & Smith, 2003).
This is partcularly relevant for SMEs that have been unable to compete on a global scale through lack of means. With growth in its use and because it is not constrained by either tme or locaton, the Internet has the potental for mass communicaton and advertsing with negligible costs per customer. This leads to the following propositon.
Propositon 6: The use of the Internet increases SMEs’ ability to devise global marketng strategies.
The Conceptual Model
The discussion and propositons above have argued that the use of the Internet could have a direct effect on an SME’s export performance and a positve moderatng effect on the relatonship between informaton-related barriers and export performance. SMEs from the EAC could overcome informaton-related barriers by having easier access to informaton at a relatvely low cost as a result, enhancing their export performance. Figure 1 shows the conceptual framework summarizing the above arguments and propositons.
The model indicates that informaton-related barriers may lead to poor export performance by SMEs. However, by using the Internet, SMEs are able to overcome some of these barriers and improve their export performance. In essence, Internet use has a moderatng effect on the relatonship between informaton barriers and SMEs’ export performance. In additon, Internet use has some direct positve effects on SMEs’ export performance. This implies that, even if using the Internet does not reduce or eliminate the informaton-related barriers encountered, it could stll have a direct positve effect on export performance. And this may be the case especially for SMEs in the EAC who start exportng from incepton. Thus, we argue that SMEs from the EAC that use the internet in their business operatons will do beter at exportng than those that do not.
This model has some limitatons. First, it only considers informaton-related barriers and ignores other barriers. We do this purposely, since the focus of this study is on informaton-related barriers. We are aware that other barriers are faced by SMEs that affect export performance (Leonidou, 2004; Anderson, 2011). These barriers relate to market orientaton, innovaton, product development, management problems and lack of infrastructure. They have very litle to do with the internet and much more to do with leadership, management and fnancial resources. Second, our model only looks at how export performance could be improved as a result of internet usage. From the literature, we know that SMEs’ export performance is also affected by other factors such as managerial capacity, experience, resource availability and organizatonal culture (Myszak, 2010; Tesfom et al., 2006). These factors are not discussed in our model and future studies should take them into consideraton.
Conclusion and Implicatons
This paper analysed the informaton-related barriers facing SMEs in the EAC, and how the Internet could help to overcome these barriers and improve export performance. The paper argues that, if SMEs were to use the Internet efciently, their export performance would improve due to their exploitaton of the distnctve features of the Internet. The paper has various implicatons.
This paper contributes to the internatonalizaton process model that was revised in 2009. In this model, Johanson & Vahlne (2009) argue that frms nowadays create new knowledge through exchanges and interactons via business networks of interconnected relatonships. This paper contributes to this angle by showing how the Internet could be used as a means of interactng and forming business networks. When SMEs are able to form these networks, their partcipaton in exportaton and internatonal markets is likely to improve. We further contribute to the discussion on the ability of SMEs to identfy and utlize business opportunites through the internet. Similar to Johanson & Vahlne (2006), this paper argues that developing business opportunites and improving export performance through use of the Internet is an interactve process, characterized by a gradual increase in SMEs’ learning and commitment to utlizing such opportunites.
The resource-based view of the frm suggests that frms can build compettve advantage through utlizing their unique resources (Barney, 1991). Teo & Pian (2003) show the positve relatonship between the level of internet use and the compettve advantage of large frms. This paper contributes to this research area by showing how SMEs could use the internet to reduce informaton barriers and as a result build compettve advantage that would enable them improve exportaton and compete internatonally.
This paper has specifc implicatons for SMEs in the EAC. First, the EAC is making an effort to improve its partcipaton in internatonal business, and the use of the Internet could contribute to the success of this strategy. A report by the EAC (2011b) shows that the use of the internet and IT is expanding rapidly in the region. This paper argues that the EAC should make more effort to measure the growth rate of internet usage and identfy how it could help SMEs within the community to partcipate in exportng and in other forms of internatonalizaton.
Although the Internet has a direct effect on informaton-related problems, it could also indirectly affect frms’ overall export performance as informaton is vital if they are to be successful in this regard. We argue that, because of the unique features of the Internet, it could act as a source of compettve advantage for SMEs, partcularly those engaged in exportng. SMEs in the EAC should increase their use of the Internet, specifcally social media and websites, to market their products and discover new business opportunites.
Although the Internet is important, it is not the only soluton for exportng SMEs in the EAC. SMEs should be aware that, despite the Internet’s advantages, there are costs associated with its use. Care should be taken in selectng what informaton to display and what not to display (Qualman, 2009). They should also realize that there is always competton out there and that, sometmes, putng a frm online may mean opening it up to greater competton. These could be the gains for not using the Internet.
Limitatons and Future Research
This paper is limited as it lacks a thorough empirical aspect. However, the model and propositons developed here are a good foundaton for an empirical study to be conducted in the East African setng in the future. Also, the paper focuses on the effects of the Internet on informaton-related barriers. The literature shows that there are other barriers and other factors that affect SMEs’ export performance. Anderson (2011) examined other factors in the Tanzanian context, for example. Future research could utlize the arguments put forward in this paper, and borrow others from the related literature, to examine what other factors are important for EAC SMEs’ partcipaton in exportaton.
We acknowledge the fact that we studied the Internet as a contributon to enhancing SMEs’ export performance. It is possible that there is a reverse relatonship in that the development of SMEs is the reason for the tremendous growth in Internet use. This is another limitaton of our study and future empirical studies should take this into consideraton.
This paper is also limited in that it only looks at the exportaton mode of the internatonalizaton process. There are other SMEs in the EAC that partcipate or would like to partcipate in licensing, franchising, joint venturing, strategic alliances and foreign direct investment (Owusu & Habiyakare, 2011). These SMEs may face different barriers that are worth investgatng.
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- We defne networks as a set of long-term contacts between people or organizatons in order to get informaton and build resources. They are further made up of people, who are united by work, friendship, inﬂuence or communicaton. These networks can further be categorized as business and/or social networks. A business network is a set of two or more connected business relatonships, in which each exchange is between businesses that are conceptualized as collectve actors, while social networks refer to a web of personal connectons and relatonships for the purpose of securing favours for personal and/or frms’ advantage (Anderson, Hakansson, & Johanson, 1994)
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