The current issue and full text archive of this journal is available at www.emeraldinsight.com/1462-6004.htm E-commerce E-commerce for SMEs: empirical for SMEs insights from three countries Asghar Afshar Jahanshahi and Stephen X. Zhang Department of Industrial & Systems Engineering, 849 Pontificia Universidad Catolica de Chile, Santiago, Chile, and Alexander Brem School of Business and Economics University of Erlangen-Nuremberg, Nuremberg, Germany Abstract Purpose – The main purpose of this paper is to study the benefits that an Asian company can achieve by using e-commerce. Another objective is to identify and rank the barriers influencing the application of e-commerce by innovative small- and medium-sized enterprises (SMEs) in India, Malaysia, and Iran Design/methodology/approach – The survey design uses a sample of 601 SMEs from three countries. In this study, data were collected by sending out questionnaires electronically and by mail. The Friedman test is used to analyse questionnaire data in conjunction with SPSS 16 software. Findings – The results indicate that an “enhanced company brand and corporate image” is the most important e-commerce advantage from the perspective of East Asian SMEs, whereas “doubts about the security and privacy” is the most important barrier. Research limitations/implications – Differences between the three countries in terms of electronic structure and infrastructure are the most important limitations for the study. Practical implications – As the company brand and the image of the company are very important in this region, companies should strategically invest into these areas. Nowadays, in times of social media, this is not as cost intensive as it was ten years before. So particularly, SMEs have a good chance to succeed in this area. Originality/value – This paper offers researchers a broader and more comprehensive view of the benefits of and barriers to electronic commerce application by SMEs. Researchers, educators, and practitioners will benefit from this paper. The analyses are more complex and varied than the methodologies used in most of the limited previous research. Keywords E-commerce, SME, Benefits, Barriers, Business, India, Malaysia, Iran Paper type Research paper 1. Introduction Electronic commerce (e-commerce) plays a unique role in contemporary small- and medium-sized enterprises (SMEs). With the advancement of e-commerce, people using the internet for their purchases no longer need to be physically present when their transactions occur. E-commerce has created major changes in the retail and service industries. Today, customers can purchase products from their homes or offices. They are also able to see goods and products on their computer monitors and view information about how the products are manufactured. Journal of Small Business and Since one of the main objectives of SMEs is to take advantage of development Enterprise Development Vol. 20 No. 4, 2013 opportunities in foreign international markets, an e-commerce strategy is necessary pp. 849-865 and cannot be developed without organisational goals and strategies for short- and q Emerald Group Publishing Limited 1462-6004 long-term gain. E-commerce is still considered a new idea for SMEs, consumers, and DOI 10.1108/JSBED-03-2012-0039 JSBED governments. Today, through the creation and deployment of web sites, SMEs have 20,4 relationships with the external environment that constantly change according to the situation. The benefits of e-commerce include reduced costs (e.g. for transactions and marketing), increased accessibility for end users, improved business process flow, and increased efficiency in dealing with suppliers (Afshar Jahanshahi et al., 2011; Fenech and O’Cass, 2001; Khatibi et al., 2003; Magutu et al., 2011). Another advantage involves 850 smart, or genuine, negotiations conducted in the internet environment, through which suppliers may offer different prices in various conditions. Products that produce less profit or no profit may be reasonably priced and sold based on these negotiations. Presence in a global market makes suppliers visible to all buyers, which has many advantages. However, there are also disadvantages, including unsolicited e-mail, the high cost of user support, and a lack of security and privacy (Lee, 2001; Watson et al., 1998; Zhang and von Dran, 2001). E-commerce enables buyers to compare the products and pricing offered by competitors, creating a monopoly for buyers and generating extra software and hardware costs for SMEs. Like previous technologies, e-commerce presents benefits and disadvantages for innovative SMEs. The present paper conducts a literature review of e-commerce and the perceived benefits and barriers for SMEs. This is followed by a research approach description. Finally, the results are reported and discussed. 2. Literature review 2.1 The impact of e-commerce on SMEs The current period is termed the era of “thorough electronic phenomena”, as it has seen the introduction of several electronic phenomena, such as e-learning, electronic banking, electronic government, citizen electronics, electronic customer relationship management, electronic procurement and e-commerce, and, finally, electronic life. E-commerce, owing to its diverse applications, has different definitions. Some of them are described below. E-commerce refers to a wide range of online business activities involving products and services (Rosen, 2000). It is more than just ordering goods from an online catalogue. It involves all the aspects of an organisation’s electronic interactions with its stakeholders, the people who determine the future of the organisation (Watson et al., 2008). E-commerce is usually associated with buying and selling over the internet or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network (Mesenbourg, 2001). Innovation is recognised as an essential component of the economic growth process, and in this context, it can be broadly defined as the development, deployment, and economic utilisation of new products, processes, and services (OECD, 2001; Brem, 2008). As world economies become more integrated and interdependent, the ability of entrepreneurs and firms to seize global business opportunities by commercialising new products and processes faster than their competitors is critical in raising the economic wealth of a nation (OECD, 2004). SMEs form a very heterogeneous group, which include a wide variety of firm types, such as grocery stores, restaurants, small machine shops, and computer software firms. A subset of SMEs is the dynamic, innovative, and growth-oriented group. They are generally considered flexible, innovative, and adaptive firms, and these characteristics, in turn, make them a good fit for e-commerce (Al-Qirim, 2007). E-commerce technologies have the potential to lead to significant productivity gains at the firm level (OECD, 2000). Through e-commerce applications, E-commerce firms within supply and distribution chains that were not previously connected can for SMEs establish direct contact. Zhu and Kraemer (2002) argue that e-commerce improves information flow and decreases inefficiency and transactions costs. However, despite the perceived advantages, the application of e-commerce by SMEs has been hindered by a number of barriers and constraints. The major barriers include doubts about security and privacy, the high cost of user support, and the running and 851 maintenance costs exceeding the expected levels (Lee, 2001; Watson et al., 1998; Zhang and von Dran, 2001). To maximise the potential of e-commerce, businesses must be aware about the benefits of and barriers to trading electronically (Kuzic et al., 2002). This research examined these factors among innovative SMEs in East Asia. 2.2 Benefits and barriers related to e-commerce Access to the internet around the world and the spread of e-communications between individuals and organisations has provided a suitable base for establishing trade and economic exchange. The rapid growth of the internet in India, Malaysia, and to some extent Iran has increased the potential of e-commerce. Table I shows the number of internet users as a percentage of the population in these countries. Previous researchers have noted that the internet is an inexpensive, flexible, and efficient means through which businesses can trade and communicate (Nath et al., 1998; Raman, 1996; Senn, 2000; Zwass, 1996). According to Ratnasingam (2002), the internet has revolutionised the capacity to share information across organisations, resulting in radical transformations of organisational practices for procuring supplies, delivering goods and services, and conducting financial transactions. Organisations around the world are capitalising on new technologies such as the internet and the world wide web to develop e-commerce. E-commerce is the major achievement of the application of information communication technology (ICT) on economic grounds. The use of this technology has led to business development, facilitated communication on economic factors, improved productivity, reduced costs, and saved time. ICT enables firms to increase competitiveness capability and has led to the creation of new jobs. For suppliers, presence in global markets, where they are visible to all buyers, has many benefits. On the other hand, however, this visibility enables buyers to compare competitors’ offers, removing supplier monopolies. Another benefit involves smart and intelligent negotiations in the internet environment