E-business Adoption amongst SMEs: A Structural Equation Modeling Approach

The adoption of e-business amongst small and medium sized enterprises in the state of Terengganu, Malaysia is still quite low. Hence, identifying the success factors that JIBC August 2011, Vol. 16, No.2 2 contribute to e-business adoption is crucial. This article examines the factors that determine the e-business adoption amongst small and medium enterprises and its causal effects using a theoretical model based on the Innovation Diffusion Theory. The research model consists of five exogenous latent constructs, namely relative advantage, compatibility, complexity, trialability and observability. Data relating to the constructs were collected from 337 small and medium sized enterprises located in the state of Terengganu, Malaysia and subjected to Structural Equation Modeling analysis. Confirmatory Factor Analysis (CFA) was performed to examine the reliability, construct validity, convergent validity and goodness of fit of individual construct and measurement models. The hypothesized structural model fits the data well. Results indicate that the significant factor that leads to the adoption of e-business is compatibility. Finally, implications and suggestions of these findings are discussed.