Gadjah Mada International Journal of Business Ae September-December.
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Gadjah Mada International Journal of Business Vol.
No.
3 (September-December 2.
: 237-261 The Determinant Factors of Technology Adoption for Improving FirmAos Performance:
An Empirical Research of IndonesiaAos Electricity Company Zainal Arifin,1 Firmanzah,2 Avanti Fontana,2 and Setyo Hari Wijanto2 PT PLN.
Indonesia.
Faculty of Economics and Business.
Universitas Indonesia Abstract: This study investigates the determinant factors of technology adoption by connecting Technology Organizational Environment (TOE) with the dynamic capability factors.
Using 518 respondents representing 222 business units of IndonesiaAos electricity company, the study found that only the absorptive capability has a positively significant effect on technology adoption.
Practically, the study emphasizes that without the absorptive capability for managing the resource, the core competence of a firm will not occur and the adoption of technology will be less effective.
Another finding is the absorptive capabilityAos typology mapping the eight technology adoption statuses in an organization, based on three of the determinant factors: the externalities, entrepreneurial leadership and slack resources.
Abstrak: Penelitian ini menguji berbagai faktor penentu pengadopsian teknologi dengan menghubungkan lingkungan organisasional teknologi dengan faktor kapabilitas dinamis.
Dengan menggunakan 518 responden yang mewakili 222 unit bisnis Perusahaan Listrik Negara (PLN), studi ini menemukan bahwa hanya kapabilitas absorptif yang mempunyai pengaruh positif signifikan pada pengadopsian teknologi.
Dalam praktiknya, studi ini menekankan bahwa tanpa kapabilitas absorptif untuk pengelolaan sumber daya, kompetensi inti perusahaan tidak akan tercipta, sehingga pengadopsian teknologi menjadi kurang efektif.
Temuan lain adalah tipologi kapabilitas absorptif memetakan 8 .
status pengadopsian teknologi dalam organisasi berdasarkan tiga faktor penentunya: eksternalitas, kepemimpinan kewirausahaan dan sumber daya yang tertunda.
Keywords: absorptive capability.
electricity utility.
technology adoption.
TOE framework JEL classification: D83.
L94.
O33 * Corresponding authorAos e-mail: zainal.
arifin22@pln.
ISSN: 1141-1128
http://journal.
id/gamaijb Arifin et al.
Introduction Technology has improved and continues to improve the way we live, communicate, interact socially and do business.
In the context of a firm.
Dussauge .
argued that technology is a factor affecting many aspects of a firmAos strategy.
The technological changes and innovations were fundamental sources of productivity and sustainable growth (Moris 1998.
Johnson et al.
Van Ark et al.
Thus, viewing technologyAos adoption as a consistent process is the key to successfully adopt and use technology.
Strategically, the successful adoption of technology by firms significantly affects their competitive advantage, especially their performance (Porter 1985.
Barney 1991.
Majundar and Ventaraman 1998.
Rayport and Jaworski 2004.
Kotler and Keller 2.
Concerning this issue, some research studying the use of technology in production processes to increase a firmAos productivity has been conducted in the 19th and 20th centuries (Abramovitz 1956.
Solow 1957.
Saloner and Shepard 1.
Further studies have linked technology to firmsAo performance, as measured through wages, the firmsAo productivity, growth, and other factors (Bressler et Many studies argued that technologyAos adoption had significantly affected the firmsAo performance (SSinha and Noble Sabbaghi and Vaidyanathan 2008.
Benitez-Amado et al.
Bressler et al.
Adewoje and Akanbi 2.
However the impact of technologyAos adoption remains inconclusive.
Some studies proved that ITAos (Information Technolog.
adoption contributed to an up to 81 percent increase in output (Brynjolfsson and Hitt 2.
, reduced labor costs by up to 40 percent (Rodd 2.
, increased efficiency and the total productivity of the adopting firms (Chandrasekhar et al.
Benitez-Amado et al.
, enhanced the firmsAo profitability (Adewoje and Akanbi 2012.
Kabiru and Usman 2.
, and improved the firmsAo financial profits (Sarker and Valacich 2.
the other hand some empirical studies did not find any relevant improvements in productivity associated with investment in technology (Quinn and Baily 1994.
Becchetti et al.
Berndt and Morrison .
also found a negative relationship between profitability and investment in IT.
Thus, the notion of the productivity paradox of IT was created and has been one of the main issues in IT research areas (Raymond and Blili 1.
Shu and Strassmann .
also noticed that ICT technology cannot improve firmsAo earnings in terms of their return on assets.
In addition a quantitative research by Jawabreh et al.
found that there was a negative correlation between the adoption of technology and the profit rate of the airlines adopting it.
This paradox requires further research to examine what are the initial determinant factors of technologyAos adoption and what is the mediating factor which determines the relationship between technologyAos adoption and firmAos performance.
At the firmsAo level, the TOE (Technology - Organization - Environmen.
model has been considered to be the most effective tool explaining technologyAos adoption (Oliveira and Martins 2.
However it is not sufficient to analyze technologyAos adoption in relation to a firmAos performance in dynamic circumstances.
Viewing technologyAos adoption as a process for managing some resources.
it could be analyzed and determined by RBV (Resource Based Vie.
order to develop its competitive advantage, a firm must have resources and capabilities that are superior to its competitors (Barney The firmAos resources and capabilities together form its distinctive competencies.
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Literature Review The study of the adoption of technology can be approached from several levels (Taylor and Tod 1.
Some researchers investigate its adoption from a macro-view within the social context or at the country level (Kiiski and Pohjola 2.
Others have examined this issue at the organizational or intra-firm level (Plouffe et al.
Some others focused on investigating technologyAos adoption by its individual determinants (Bagozzi et al.
Davis 1989.
Venkatesh et al.
Extending Taylor and ToddAos .
classification, the research into the determinants of technologyAos adoption could be distinguished into three streams: Firstly, those based on intention-based models relying on how users accept or do not accept it, and further use or reject technology.
secondly, diffusion innovation, focusing on why and how a new technology spreads around an organization or community.
and thirdly, how the new technology affects the goals, objectives and performance of an organization.
The first stream was exemplified by such theories as the Technology Acceptance Model or TAM (Davis 1.
and the Unified Theory of Acceptance and Use of Technology (UTAUT) (Venkatesh et al.
The second stream was primarily represented by the Diffusion Of Innovation or DOI theory (Rogers 1963.
, and the Technology Adoption Life Cycle or TALC model (Rogers et al.
Moore 1.
The last one was dominantly explained by organizational theories such as the Technology Organization and Environment or AoTOEAo framework (Tornatzky and Fleischer 1.
Considering the content and context of the research .
e Wit and Meyer 2.
, and exploring all those main related theories, this paper proposed the TOE frame- work as the most relevant theory for searching for the determinant factors of technologyAos adoption at the firmsAo level.
The three elements present both constraints and opportunities for technological innovation (Oliveira and Martins 2.
Although RBV could explain technologyAos adoption processes for achieving a firmAos competitive advantage, it is essentially a static theory since it does not explain how the firmAos resources and capabilities evolve over time to be the basis of its competitive advantage (Priem and Butler 2.
RBV research does not essentially examine the effects of a firmAos external environment on how it manages its Hence there was a need for a theory which would not just view a firm as a bundle of resources, but also the mechanisms by which firmsAo learn and accumulate new skills and capabilities, and the forces that limit the ratio and direction of this process (Teece et Then the concept of Aodynamic capabilityAo emerged.
it reflects how quickly the capabilities and resources of the company change following changes in an increasingly dynamic environment (Eisenhardt and Martin 2.
Referring to the previous Dynamic Capabilities (DC) research, the most important relationship in this field is that of dynamic capabilities with performance.
The literature is divided (Silva 2.
some explain that there is a direct relationship between firmsAo dynamic capabilities and their performance or competitive advantage (Makadok 2001.
Zollo and Winter 2.
Others have linked dynamic capabilities to competitive advantage but have asserted that this link is indirect (Zott 2003.
Helfat and Peteraf 2003.
Ambrosini and Bowman 2009.
Wang and Ahmed 2.
Contrary to those ideas.
Helfat and Peterraf .
argued that dynamic capabilities did not necessarily lead to Arifin et al.
a competitive advantage.
However to sustain their competitive advantage, firms need to renew their stock of valuable resources, as their external environment changes because of their dynamic capabilitiesAo processes (Teece et al.
Makadok 2001.
Helfat and Peterraf 2003.
Wang and Ahmed 2007.
Majumdar et al.
Nowadays a firmAos absorptive capacity is mostly conceptualized as a dynamic capability (Abreu et al.
Following key empirical studies pertinent to DCs from 1996 to 2012.
Dynamic capability in the form of absorptive capability has been implemented at many levels and in the context of numerous studies at this time.
It has been widely examined at the firmsAo level (Teece et al.
industriesAo level (Lin and Lin 2.
, intrafirm (Amlakuet al.
, inter-firm (Brady and Davis 2.
SMEs (Griffith and Har vey 2.
and non-profit organizations (Zahra and George 2002.
In addition absorptive capability is the most applicable form of DC for many fields/ The implementation of absorptive capability has been included in studies focusing on research and development (Caloghirou et al.
, knowledge management (Corso et al.
, organizational structures (Lin 2.
, human resources (Caloghirou et al.
Freels 2.
, external interactions (Caloghirou et al.
, social capital (Landry et al.
, supplier integration (Malhotra et al.
, client integration (Johnsen and Ford 2.
and inter-organizational fit (Lane and Lubatkin 1.
These existing various relationships of absorptive capability to firmsAo performance requires further research to examine what are the determinant factors of absorptive capabilityAos effects and what is the mediating factor that connects the relationship between absorptive capability to firmsAo performance.
Hypotheses Following the TOE framework, there were some relevant environmental factors influencing firmsAo adoption of technology, such as the role of partners (Al-Qirim 2006.
Jeyaraj et al.
Scupola 2.
, competitive pressure (Porter and Millar 1.
, and regulatory compliance (Lai 2008, and Lin As well as their effect on the adoption of technology, those external factors also influence how leadersAo perceive the way to manage their organizations more efficiently and effectively.
External effects are mostly related to the character and behavior of the management, and how the organization interacts with its environmental dynamics.
organizational leadership.
When the industrial environment was more competitive, turbulent and unpredictable, it brought severe pressure to bear on the types of analytical approaches to management.
The cornerstone of competition pushed people to think that analytical planning, which leads to competitive success, was no longer feasible (Gupta et al.
In this chaotic and dynamic environment, where the power of analytical leadership was diminished, the need the entrepreneurial leadership by organizations was higher (McGrath 1.
However the need for and emergence of entrepreneurial leadership was caused by the recent dynamic circumstance, so entrepreneurial leadership clearly was affected by external factors (McGrath and MacMillan 2.
Additionally by considering the context of our study, we prefer to use AoexternalitiesAo for representing all the determinant factors of technologyAos adoption by an external organization.
the external networks, regulations and social issues etc.
Entrepreneurial leadership is known as the dynamic process of presenting a vision.
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building commitment among followers, and risk acceptance when facing opportunities, which causes the efficient use of the available resources, along with discovering and utilizing new resources, with respect to the leaderAos vision (Lee and Venkataraman 2.
The most important feature of entrepreneurial leadership is creating value, by discovering new opportunities and creating new strategies in order to gain a competitive advantage (Schulz and Hofer 1.
Moreover, entrepreneurial leadershipAos development occurs during the process of transforming the knowledge acquired from experience and social interaction, allowing the opportunities for personal development and business creation to be identified (Churchill et al.
Hence:
Hypothesis 1: the externalities positively affect the entrepreneurial leadership.
On one hand, such a capability mostly depends on technological collaborations, formal or informal networks between firms and their external pressures, such as industries and professional groups, and between industry and university laboratories (Massini and Lewin 2.
Furthermore, this relationship would increase the effectiveness of knowledgeAos absorption capability as it enhances the complementary asset of experience inside the firm (Cohen and Levinthal 1.
Then, collaboration and partnerships could be a learning resource for an organization, that helps companies to recognize dysfunctional routines and to avoid hidden strategic constraints (Teece 2.
While the study by Helfat and Peterraf .
stated that all dynamic capability processes adapt, integrate and reconfigure internal and external organizational skills, resources and functional competences, in order to match the requirements of a changing environment.
It was further emphasized by Rindova and Kotha .
who explained how a dynamic market and turbulent industry pushes firms to enter tough fields of competition through their continuous organizational absorptive So:
Hypothesis 2: the externalities positively affect absorptive capability.
As well as its effect on absorptive capability, the externalities also had the effect of slackening the resources.
Bourgeois .
argued that, in practical terms, slack resources can serve some primary functions.
They allow the organization to offer salaries that are higher than those actually required to retain the employeesAo services.
In addition slack resources also aid conflict resolution when problem solving.
Other functions of slack resources are as a buffering mechanism, used to adapt to sudden changes in the environment.
Then the most important function of slack resources is to facilitate strategic or creative behavior to help make long-term decisions such as seizing a business opportunity, developing a new product, or realizing a growth strategy.
In summary, the functions of slack resources are related to internal tensions within the organization, and also to external tensions between the organization and its environment .
he externalitie.
Then some studies found that environmental conditions or externalities are one of the antecedents leading to the development of slack resources (Stevens 2002.
Donada and Dostaler 2.
Thus:
Hypothesis 3: the externalities positively affect slack Some recent literature has shown that firms benefit from having absorptive capabilities when crafting new business and corporate strategies (Ambrosini and Bowman learning new skills (Zollo and Winter Ambrosini and Bowman 2.
Arifin et al.
aging their other resources (Ambrosini and Bowman 2.
introducing innovative programs that stimulate strategic changes (Repenning and Sterman 2.
and successfully commercializing new technologies generated through their R&D activities (Marsh and Stock 2.
Other studies argue that absorptive capabilityAos effects are indirect.
emerge through such things as entrepreneurial capability (Zahra 2.
and organizational leadership (Hejazi et al.
Even though there are opposite views in some researchesAo findings about the importance of entrepreneurial and leadership activities for the conception, development, configuration and maintenance of the absorptive capabilities in an organization (Repenning and Sterman 2002.
Zahra et al.
, some recent studies argue that several best practice processes supporting knowledge acquisition, knowledge creation, and knowledge integration in firms have affected their entrepreneurial leadershipAos status (Simsek et al.
So:
Hypothesis 4: the absorptive capability positively affects entrepreneurial leadership.
Internally slack resources could be a valuable resource to improve firmsAo performance through managerial initiatives.
Indeed, managerial capability is necessary to find ways to devote slack resources to productive activities (Burkart et al.
A positive relationship between slack resources and firmsAo performance is more likely in firms with higher levels of managerial dynamic capability (McKelvie and Davidsson 2.
They found that four dynamic capabilities had positive effects stemming from their access to particular resources, and provided empirical support for the notion of treating the firm as a dynamic flow of resources, as opposed to a static stock.
Along with the study, recent empirical scholarship suggests that in both the dynamic managerial capabilities (Ireland et al.
and the micro-level foundations of routines and capabilities (Felin and Foss 2.
, researchers have found that firmsAo absorptive capabilities have fundamental roles in the fir msAo slack resourcesAo status (McKelvie and Davidsson 2.
Hence:
Hypothesis 5: the absorptive capability positively affects slack resources.
Due to investigating technologyAos adoption using RBV logic, which leads to static circumstance, firms need dynamic capabilities to renew their stocks of valuable resources, as their external environment changes (Teece et al.
Makadok 2001.
Wang and Ahmed 2007.
Majumdar et al.
Considering that a firmAos absorptive capacity is mostly conceptualized as a dynamic capability, which has been widely researched at the level of firms, sectors, regions and nations, based on a wide consensus (Abreu et It is the ability of the organization to recognize the values of novelty in its external forms, then assimilate and apply it for commercial purposes (Cohen and Levinthal Specifically, the absorptive capability measures a firmAos ability to absorb, assimilate, and exploit an innovation throughout the firm (Link et al.
The higher the level of its absorptive capability a firm demonstrates, the more it exhibits its dynamic capabilities (Zaheer and Bell 2.
Regardless that there are different views of dynamic capabilitiesAo effects on firmsAo advantages, recently there have emerged studies arguing that the absorptive capability builds and reconfigures resource positions (Eisenhardt and Martin 2.
, zero-order capabilities (Winter 2.
, operational routines (Zollo and Winter 2.
or operational capabilities (Helfat and Peteraf 2.
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through them, affects performance.
This chain of causality is designated as an indirect link between absorptive capabilities and The indirect relationship results from the idea that absorptive capabilities originated and defined firmsAo individual resource configurations, including their functional capability processes, which shape the firmsAo competitiveness and therefore performance (Zott 2.
Therefore this paper argues that technologyAos adoption is one of the functional capabilities which mediate the relationship between the absorptive capabilities and the firmAos performance.
Thus:
Hypothesis 6: the absorptive capability positively affects technologyAos adoption.
Based on strategic management practices, another significant organizational factor of technologyAos adoption is organization Fundamentally, leadership has an influence over organizations via their strategic decision-making, determining organizational structures and managing the organizational process (Day and Lord 1988.
Nahavandi 1.
Moreover a leader with good perceptional resources will contribute to higher performance (Dessler 1.
Additionally Devarajan et al.
found that the success of firms in dynamic industries depended on Aothriving innovation activityAo, that in turn is primarily driven by Aoeffective entrepreneurial leadershipAo.
Such leadership, as represented by top management, plays a very critical role in driving innovation in firms, and in mastering its dynamics (Kuczmarski Kipp and Michael 2.
It could be summarized that the key factor determining successful technological adoptions under these circumstances is the Aoeffective entrepreneurial leadershipAo of the organization (Devarajan et al.
So:
Hypothesis 7: the entrepreneurial leadership positively affects technologyAos adoption.
TOEAos technological and organizational context describes that technologyAos adoption depends on the pool of resources exceeding the minimum necessary to produce a given level of organizational output, or slack resources (Lin 2.
The raw materialsAo input to technologyAos adoption process also includes tangible and intangible assets (Prakash et al.
Instead of technology, some TOE focused studies postulated that slack sources for technologyAos adoption were financial (Franquesa and Brandyberry 2.
, knowledge (Jeyaraj et al.
Sabherwal et Lin 2013.
Wang et al.
, and employee or human capital (Wang et al.
Vanacker et al.
In conclusion, such resources have a positive effect on a firmAos flexibility and innovation in a dynamic environment, (Damanpour 1996.
Judge et al.
and provide organizations with the ability to be proactive as well as defensive in adopting new technologies or designing new lines of services (Lawson 2001.
and Daniels et al.
Thus:
Hypothesis 8: slack resources positively affect the adoption of technology.
Although there are still debatable results about the effect of technologyAos adoption on firmsAo performance.
most literature shows that the use of new technology during production increases a fir mAos productivity (Abramovitz 1956.
Solow 1957.
Saloner and Shepard 1.
Many recent researchers argue that technologyAos adoption brings down the operational costs (Saloner and Shepard Rodd 2004.
Chandrasekhar et al.
Benitez-Amado et al.
, contributes to output increases, even if they are only marginal, (Brynjolfsson and Hitt 2000.
Arifin et al.
Adewoje et al.
, improves efficiency and effectiveness (Milne 2006.
Sabbaghi and Vaidyanathan 2008.
Rusli 2.
, reduces environmental impacts by lowering energy costs (Bressler et al.
, and also leads to significant reductions in firmsAo mortality rates (Sinha and Noble 2.
Matching those studies, we argue that technologyAos adoption has significant effects on a firmAos performance.
Hence:
ship, slack resources and technologyAos adoption.
While both entrepreneurial leadership and slack resources directly affect technologyAos adoption, eventually technologyAos adoption will affect firmsAo performance.
However the model should be tested empirically through a quantitative approach.
Hypothesis 9: the adoption of technology positively affects the firmAos performance Research Objective The Proposed Model All nine hypotheses construct a hypothetical conceptual model as the following figure (Figure .
shows, explaining the relationship between the determinant factors of technologyAos adoption at the firmsAo level.
The modelAos logic starts from externalities as the the organization is driven by the external factors.
It has an effect on the three organizational factors: Entrepreneurial leadership, absorptive capability, and slack resources.
So absorptive capability is the determining factor for entrepreneurial leader- Methods Starting from the TOEAos view, this study analyzes the influence of externalities and absorptive capability on technologyAos adoption for improving firmsAo performance.
Other determinant factors Aeentrepreneurial leadership and slack resourcesAe were also investigated to assess the relationship between TOEAos factors with the absorptive capability at the firmsAo level.
The study purposes to empirically test a conceptual model of the indirect effects of the externalities and absorptive capability on the adoption of technology, which can be the key predictors of firmsAo performance in a dynamic environment.
Figure 1.
The Conceptual Hypotheses Model Enterpr Slack Techn Extern Absorb Firm Gadjah Mada International Journal of Business Ae September-December.
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Respondents and Procedure Using an online survey, this study was conducted by collecting data from 518 managers representing 229 business units around Indonesia belonging to the Indonesian Electricity Company (PLN).
There were 222 units .
94%) that completed the survey correctly, 1 unitAos reply .
4%) was considered not to be valid, and 6 units .
6%) did not respond at all.
PLN was chosen because it represents the content and context of the research issues, namely: .
A AoRBV perspectiveAo company .
a Aotechnology-intensiveAo organization where 87 percent of its assets are technological things .
a AocomprehensiveAo technology adoption flow, which covers both Aotop-downAo and Aobottom-upAo processes .
it is a Aonational companyAo with 40,000 employees spread out over all areas of the country.
The respondentsAo core business unit is for the organization of the electricity utility companyAos supply chain, for the generation, transmission and distribution or retail/service of electricity.
Considering their similarity characteristics, the working experience of the respondents is varied, from less than 5 years, while others have 5-10 years experience and over.
Meanwhile their ages are divided into three groups: Less than 30 years old, between 30-40 years old and over 40 years old.
The number of samples, which exceeds 100 questionnaires, is an appropriate number for research that analyzes its data using a SEM (Structural Equation Mode.
, especially for the overall fit measures side, which is represented by the likelihood-ratio chi-square statistic (Hair et al.
The SEM analysis, which uses LISREL version 7 software, is done with a Aotwo-stage approach,Ao (Wijanto 2.
, with the process as follows: .
Analysis of the measurement model using Confirmatory Factor Analysis (CFA).
Analysis of the structural model to analyze the relationship among all the latent variables that have been simplified.
Analysis of the significance test results for each hypothesis to determine whether the hypothesis will be accepted or rejected.
Measurement For measuring the externalities, 9 selected items are used, with reference to a previous study with 3 controlling variables: An external network ( Lin and Lin 2.
, regulation (Lai 2.
, and social issues (Asres et Meanwhile entrepreneurial leadership is measured by the construct of the entrepreneurial leadership data from the GLOBE (Global Leadership and Organizational Behavior Effectivenes.
program (Gupta et al.
It consists of 2 main dimensions: Cast enactment and transformational enactment with a total of 19 items.
Then DC is represented by Aoabsorptive capabilityAo, which is summarized from previous DC literatures (Abreu et al.
It has 4 dimensions: Knowledge acquisition, assimilation, transformation and exploitation, with 12 items.
Slack resources are represented by 3 variables: technology, knowledge, and human resources (Wang et al.
with 10 Regarding the context of this study, slack finance is neglected.
TechnologyAos adoption, which has 6 items, is measured through 2 dimensions: appropriateness and effectiveness (Mirvis et al.
Hall and Kahn Then the firmAos performance is observed by financial and non-financial variables with 6 items (Kabiru and Usman 2.
Overall, 62 items using 6 Likert-type scales are used to measure the 6 latent variables.
Arifin et al.
Result lower than their standard (RSMEA and Std RMR).
Using LISREL the test presents the calculated value of RSMEA = 0.
NFI =
NNFI = 0.
CFI = 0.
IFI = 0.
RFI = 0.
Std RMR = 0.
GFI = 0.
and AGFI = 0.
Table 2 shows that there is only one GOFI indicator that shows a marginal fit (AGFI), therefore it can be concluded that the overall fit of the structural model is good.
In addition CFA also measures the validity for all the indicators .
bserved variable.
and the reliability of the measurement for each latent variable .
As presented in Table 3, from the 19 observed variables of the model, there are 2 indicators of the externalities construct .
egulation and social issue.
which have a SLF (Standardized Loading Facto.
of < 0.
ot good The table also shows that 2 of the 6 latent variables have a CR (Construct Reliabilit.
score of < 0.
70 and a VE (Variance Extracte.
score of < 0.
This means that the latent variables of the externalities and slack resources are less reliable.
However the CFA test confirmed that the overall variables of the measurement model have good reliability and validity.
The loading factors for all the items can be seen in Appendix 1, and the result of the descriptive statistical analysis can be seen in Table 1.
Even though the standard deviation is included in the analysis, the latent variablesAo score is still higher than average.
For example, slack resources, with a standard deviation of 53, has a lowest limit of 2.
19 Ae 0.
This value shows that most of the respondents believe that their actual perceptions are Additionally based on the ANOVA test result, in general there are no differences for all the latent variables in the respondentAos profile group which refer to those discriminate factors: Type, location and the size of the organizationAos respondents.
Then a Confirmatory Factor Analysis (CFA) is used to test how well the measured variables represent the number of constructs.
It is conducted to specify the number of factors required in the data, and which measured variable is related to which latent variable.
have a good overall fit of the measurement model, some of the GOFI (Goodness of Fit Inde.
indicators should be higher than the standard values (NFI.
NNFI.
CFI.
IFI.
RFI.
GFI and AGFI) and two others should be Table 1.
Descriptive Statistics Analysis Result Construct Number of items Mean Standard Deviation Skewness Kurtosis Externalities Entrepreneurial leadership Absorptive capability Slack resources Technology adoption Firm performance Gadjah Mada International Journal of Business Ae September-December.
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Table 2.
GOFI Values of the Structural Model Test
GOFI
Calculated Values Standard Value RSMEA < 0.
> 0.
> 0.
> 0.
> 0.
> 0.
< 0.
> 0.
> 0.
NFI
NNFI
CFI
IFI
RFI
Std.
RMR
GFI
AGFI
Conclusion Fit is good Fit is good Fit is good Fit is good Fit is good Fit is good Fit is good Fit is good Fit is marginal Table 3.
Validity and Reliability of Measurement CFA Model Variables/ Dimensions *SLF Ou 0.
Absorptive capability AcquL AssiL TranL ExploL Adoption Technology ApproL EffectL Entrepreneurial leadership BuildL DefL ChalL AbsorL UnderL Externalities NetL RegL SocL Firm performance FinL NonfinL Resource slack TechL KnowL HumL Error *CR Ou 0.
7 *VE Ou 0.
SLF = Standardized Loading Factor.
where a good SLF score is > 0.
**)
CR = Construct Reliability.
where a good CR score is > 0.
***)
VE = Variance Extracted.
where a good VE score is > 0.
Conclusion Good reliability Good validity Good validity Good validity Good validity Good reliability Good validity Good validity Good reliability Good validity Good validity Good validity Good validity Good validity Less reliable Good validity Marginal validity Marginal validity Good reliability Good validity Good validity Less reliable Good validity Good validity Good validity Arifin et al.
Table 4.
Test Results of the Structural Research Model Hypotheses Latent VariableAos Relationship Calculated t-value Structural Coefficient Conclusion Externalities E Entrepreneurial There is an insignificant positive effect, hypothesis 1 is Externalities E Absorptive capability There is a significant positive effect, hypothesis 2 is accepted.
Externalities E Slack There is an insignificant positive effect, hypothesis 3 is Absorptive capability E Entrepreneurial There is a significant positive effect, hypothesis 4 is accepted.
Absorptive capability E Slack resources There is a significant positive effect, hypothesis 5 is Absorptive capability E Technology adoption There is a significant positive effect, hypothesis 6 is Entrepreneurial leadership E Technology adoption There is an insignificant negative effect, hypothesis 7 is Slack resources E Technology adoption There is an insignificant negative effect, hypothesis 8 is Technology adoption E Firm performance There is a significant positive effect, hypothesis 9 is The calculated t-values and structural coefficients of each latent variable, and the hypotheses results are presented in Table 4.
From the hypotheses testing results, five hypotheses are accepted .
-value > 1.
and four hypotheses are rejected .
-value < 1.
It is surprising, finding that the externalities have no significant effect on both entrepreneurial leadership and slack resources (H1.
conclusion the model demonstrates that the determinant factors of technologyAos adoption for improving a firmAos performance works only through 1 pathway: Externalities Aeabsorptive capabilityAe technology adoption (H2.
Even though the absorptive capability has positive significant effects on both entrepreneurial leadership and slack resources (H4.
, the relationship does not significantly affect the adoption of technology .
oth H7 and H8 are rejecte.
The study has empirically proven that the effect of dynamic capability Aein this study represented by ab- Gadjah Mada International Journal of Business Ae September-December.
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sorptive capabilityAe on firmsAo performance is indirect mediated by technologyAos adoption (H6.
Discussion Starting from the TOEAos framework, this study is focusing on the determinant factors of technologyAos adoption at the firmsAo level, and especially the role of externalities as the primary antecedent and absorptive capability as a dynamic factor.
Through an empirical conceptual model, this study has found and tested the cor relation of technology adoptionAos antecedents Aein the form of the TOEAos factorsAe (H1.
, and then connected them to a firmAos DCs (H2.
H4.
and eventually to a firmAos performance through technologyAos adoption (H6.
H7.
H8.
Many studies using the TOE framework have proven that the determinantsAo factors have a significant relationship with technologyAos adoption for enhancing firmsAo performance (Al-Qirim 2006.
Jeyaraj et al.
Scupola Lai 2008.
Lin 2.
However, this study empirically proved that entrepreneurial leadership has an insignificant negative relationship with technologyAos adoption (H.
as well as slack resources (H.
Based on further investigation most of the process of technologyAos adoption by PLNAos business units is Aobottom-up.
Ao it is likely driven by the organization rather than the management.
This is why entrepreneurial leadership has a negative insignificant effect on technologyAos adoption (Greenberger and Sexton 1988.
Roomi and Harrison 2.
The slack resources also have a negative insignificant effect, due to some important resources such as financial and human capital, which are not controllable by the business unitsAo managers (Chau and Hui 2001 and Franquesa and Brandyberry 2.
Those re- sources are mostly managed by PLNAos regional offices so that resources are AogivenAo to the business units (Vanacker et al.
In addition, previous literature shows that the relationship between TOEAos factors theoretically is significantly positive, such as the externalities to entrepreneurial leadership (McGrath and MacMillan 2000.
Cohen and Levinthal 1.
and externalities to slack resources (Pfeffer and Salancik 1978.
Sharfman et al.
Stevens 2002.
Donada and Dostaler 2.
However this study shows that the externalities affect both entrepreneurial leadership and slack resources positively, but not significantly (H1.
The insignificant effect of the externalities on entrepreneurial leadership is caused by the relationship between PLNAos business units and their networks, such as government agencies, the industry and their professional associations, none of which are relevant to the development of entrepreneurial and leadership capabilities in the organization.
A similar reason is also applicable for the positive, insignificant effect of the externalities on the slack resources in PLNAos business units (Iacovau et al.
1995, and Lin 2.
With the recent turbulent and unpredictable circumstances there is a need for directly connecting the TOEAos factors to the absorptive capability, especially to show the adoption of technology as a functional competence/capability in a dynamic business environment (H2.
H4.
Moreover the study empirically proves that the effect of absorptive capability Aeas a representative of DC on the firmAos performance is indirect and - in this researchAe mediated by technologyAos adoption (H6.
This supports some previous studies (Zott 2003.
Helfat and Peteraf 2003.
Ambrosini and Bowman 2009.
Wang and Ahmed 2.
Practically, the adoption of technology by PLNAos business units is mostly Arifin et al.
an output of such absorptive capability, such as knowledge management practices.
TechnologyAos adoption is commercial Aoknowledge implementation.
Ao it is one of the stages of the knowledge management cycle in an Therefore like other intangible its effect on the organizationAos performance takes a relatively long time to be felt, as it is not direct.
This study emphasizes that, without absorptive capability Aeat next higher orderAe for managing the resource, the core competence .
he VRIN resource.
of firms will not occur, thus it means no competitive advantages emerge, and the adoption of tech-nology will be less effective (Barney 1991.
Priem and Butler 2.
Consequently managers should realize that technologyAos adoption is not a static process (Moore 1991.
Rogers 1.
is not only about the relationship between resources both inside and outside the organization, but also the ability of the organization to recognize the values of novelty in the external forms, then assimilate and apply them for commercial purposes, or the companyAos ability to evaluate and utilize external knowledge as the primary purpose of the level of prior/previous knowledge (Link and Siegel 2002.
Zaheer and Bell 2.
Considering the externalities as an antecedent, to achieve a successful tech-nology adoption, managers must also acknowledge that the influence of partners such as vendors, associations they belong to.
R&D centers, universities, all commonly known as Aonetwork effectsAo, are likely to significantly impact on technologyAos adoption since they can affect the expected benefits from new technology that exists with other assets of the firm (AlQirim 2006.
Jeyaraj et al.
Scupola Examining further the three determinant factors of technologyAos adoption, this study found the technolog y adoption organizationAos typology consists of 8 .
levels: AoIdealAo technology adoption with a high absorptive capability .
, high entrepreneurial leadership .
and high slack re- Figure 2.
Technology Adoption Organization in a 3D Matrix Gadjah Mada International Journal of Business Ae September-December.
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Aopro-activeAo with high absorp, high entrep and low resou.
Aobottom-upAo with high absorp, low entrep and high resou.
AoorganizationalAo with high absorp, low entrep and low resou.
Aotop-downAo with low absorp, high entrep and high resou.
AoentrepreneurialAo with low absorp, high entrep and low resou.
AoslackAo with low absorp, high entrep and low resou and AostagnantAo technology adoption with low absorp, entrep and resou.
In summary the technology adoption organization can be plotted as in Figure 2.
This study has examined the organizationAos typology of technologyAos adoption related to the firmsAo performance as in Table It shows that the AoidealAo adoption has the most significant effect on the firmAos performance .
57 out of .
On the other hand the study found that most of the unit analysis is pro-active organization .
of 222 unit.
affecting the firmAos performance with a score of 4.
ower than the idea.
This finding supports the result of the empirical research, proving that technologyAos adoption by PLNAos business units is significantly proven to enhance the organizationAos performance.
To achieve a robust hypothetical model, this study has been limited and bounded by several conditions.
Firstly, the technologyAos adoption in this study is defined as Aooutput.
Ao it is an outcome of the process of search and technology options are selected by the organization.
detailed understanding is and the new technology is used in new products/services.
This limited the scope of the study, neglected other definitions, and put technologyAos adoption as just a AocontentAo of the firm.
However many studies argue that technologyAos adoption is mostly a AoprocessAo in dynamic circumstances.
Secondly, this study is conducted at the intra-firm level .
usiness uni.
of a utility industry.
the findings might not be transferable to other types of organizations.
A highly regulated utility, such as the electricity industry, is less influenced by the market, so that an important externality such as pressure from competitors is not applicable.
Thirdly, this study relies on Aosnap shotAo data which do not provide any longitudinal or time series data which examines the past, present, and future of the relationships.
Table 5.
The Typology of Technology Adoption Organization Firm Performance No.
Unit
Absorp
Ideal
HIGH
HIGH
Pro-active HIGH
Bottom-up
Organizational Technology Adoption
Entrep
Resou
Scale
Score
HIGH
HIGH
HIGH
LOW
HIGH
HIGH
LOW
HIGH
LOW
HIGH
LOW
LOW
LOW
Top-down
LOW
HIGH
HIGH
LOW
Entrepreneurial LOW
HIGH
LOW
LOW
Slack
LOW
LOW
HIGH
LOW
Stagnant
LOW
LOW
LOW
HIGH
Arifin et al.
Therefore further research is highly recommended for Aomarket-drivenAo organizations in dynamic industries with tough competition.
It is also suggested that further research can be conducted on multi-national organizations and also in countries with different cultures for the external validity of the model.
In addition, further surveys can be designed in such a way that firmsAo performance, technologyAos adoption and leadership can be measured by longitudinal data, to find their consistency and to investigate further into the process, and not only technology adoptionAos Conclusion The study has investigated the influence of externalities and absorptive capability on the adoption of technology, and others determinant factors for enhancing firmsAo performance.
Four determinant factors which have been examined are: Externalities, slack resources, entrepreneurial leadership and absorptive capability.
The successful adoption of technology by a firm can be only achieved by an excellent absorptive capability with the externalities as the antecedent.
However the effects of entrepreneurial leadership and slack resources are not significant, even though they are affected significantly by the absorptive capability.
The relationship between TOEAos components and absorptive capability is positively significant.
Meanwhile technologyAos adoption is proven to mediate the absorptive capability with the performance of a firm.
Practically the model of this study is mostly relevant for top corporate executives .
oards of director.
or top management teams, who seek to provide some supporting AohardwareAo content such as externalities, resources and leadership, and should improve their firmAos AosoftwareAo abilities such as the absorptive capability, in order to achieve a successful technology adoption in their organization.
Using the eight organizational typologies of technologyAos adoption they will be able to manage all the determinant factors effectively, and achieve a successful adoption in their organization.
Without such a capability Aeat next higher orderAe for managing the resource, the core competence (VRIN resource.
of a firm will not occur, thus it means no competitive advantages emerge.
On the other hand managers should utilize Aovicarious learningAo or learning from the actions of other firms .
because adopting technology is a dynamic processes that can be merged by inter-related organizational responses.
TechnologyAos adoption depends on prior knowledge and facilitates the cumulative learning of new related knowledge, efficient and effective coordination or integration of activities internal to the firm, as well as the external coordination of activities and technologies, via formal or informal cooperation between industries, university laboratories, and professional networks.
Further research is recommended for different contexts and to focus more on the process rather than the content.
Gadjah Mada International Journal of Business Ae September-December.
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References