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1.2 Objective

As noted above, there is little Malaysian empirical study that links to the adoption of TI associated with firm size. To date, there are very few empirical studies that have been carried out to compare and contrast small, medium, and large businesses with respect to the adoption of TI particularly in Malaysia. The aim of this study is to make some contribution to this area by carrying out an empirical analysis of the relationship between the adoption of TI associated with firm size in the SMEs. Therefore, to undertake the gaps in this study, we will be addressing on what are the determinants of TI adoption and how the TI adoption is associated with the firm size.

1.3 Literature Review

A. TI Adoption by SMEs

TI is referring to the process through which technological advances are producing [5] significant technological improvements in product and processes which require an objective improvement in the performance of a product in the way in which it is produced and delivered (Community Innovation Survey-2 by OECD/European Communities). Information technology (IT)/information communication technology (ICT) is technically believed as one of the TI processes which can overcome many of the drawbacks of conventional systems and to save money and time. Besides that, IT/ICT has as its main feature the application of knowledge, and at the same time, it generates new technology [6]. Nevertheless, IT can be a tool in encouraging innovation [7]. Most of technological research has focused on analyzing the determinants of technological adoption. The determinants of technological adoption analysis in previous literature can be categorized into three groups, namely, factors related to companies who are going to use the technology (skill and education level), firm characteristic (domestic or international, firm size, age, etc.), and firm environment (country, culture, and legal system) [6]. Small firm is likely to be engage with adopting TI activities than do the large firm [3]; however, high-tech firms are likely to invest in R&D activities compared to non-high-tech firms. Apart from that, the determinants of the adoption of technologies can be explained through technological diffusion theory which is developed by Robert et al. [8]. The study by Ollo-Lopez and Aramendia-Muneta [9] which is out in the Swiss business sector using technological diffusion theory found that firm size mostly exerts a strong positive influence on adoption, whereby medium-sized firms seem to have the highest propensity to adopt new technology. This study was supported by Shefer and Frenkel [3] and [10] whereby they found that firm size appears to be correlated with the efficiency of technology input, and it plays a larger role in the process and organizational innovations [11].

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