Abstract
This study endeavours to investigate empirically how Information and Communications Technology (ICT) usage affects the bounded rationality and business performance of Small and Medium Enterprises (SMEs) in Sri Lanka. The data collection has been done with 400 owners of SMEs in Sri Lanka by employing telephone and face to face interviews using a structured questionnaire. The Partial Least Squares-Structural Equation Modelling (PLS-SEM) was utilized to analyse the data. The empirical results discovered that the different dimensions of ICT usage such as infrastructure, applications, policy, human resources, and mobile technology have a negative impact on bounded rationality and positive effects on the business performance of SMEs in Sri Lanka. Thus, the study recognizes that several dimensions of ICT usage make proper information flow to pull out information asymmetry and reduce the bounded rationality of SMEs, thereby increasing the business performance of SMEs in Sri Lanka.
Highlights
Small and Medium Enterprises (SMEs) are a major development engine of a country and they provide valuable economic activities such as making new employment opportunities, reducing poverty, income inequality, and inflation, as well as introducing innovative products, services, and business types in a country (Kayanula & Quartey, 2000; Prasad et al, 2012; Priyanath & Premaratne, 2014; Singh et al, 2010)
As per the definition given by the Department of Census and Statistics (DCS) of Sri Lanka, SME is considered as an established organization with 5 – persons engaged for small enterprises and – 199 persons engaged for medium enterprises
The convergent validity of the first-order constructs was evaluated by using Average Variance Extracted (AVE) values
Summary
SMEs are a major development engine of a country and they provide valuable economic activities such as making new employment opportunities, reducing poverty, income inequality, and inflation, as well as introducing innovative products, services, and business types in a country (Kayanula & Quartey, 2000; Prasad et al, 2012; Priyanath & Premaratne, 2014; Singh et al, 2010). A number of studies identified this characteristic of SMEs and mentioned they have a high failure rate on various factors including capital, human as well as market-based, legal or regulatory and their business performance is problematic (Abor & Quartey, 2010; Gbandi & Amissah, 2014; Kayanula & Quartey, 2000; Petković et al, 2016). It is due to these two factors that Transaction Cost (TC) is generated between the exchange partners (Williamson, 1981) According to these assumptions, SMEs have greater likelihood of encountering hazards of the opportunistic behaviour of exchange partners because of insufficient knowledge of the market and lack of other information. Even when information is available, due to the incapability of handling information such as gathering, evaluating, and using information for decision-making, they lack the experience to avoid opportunistic behaviour. Businesses use market discrimination and incurs costs for searching, negotiating, monitoring, and enforcing transactions for safeguarding from opportunism (Storey, 1994)
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