Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms
Gadjah Mada International Journal of Business
January 2002, Vol. 4, No. 1, pp. 17—30

THE INFLUENCE OF CHANGE AGENTS
ON INFORMATION TECHNOLOGY
DIFFUSION IN FIRMS*
Hargo Utomo
The role of change agents in technological diffusion and innovation at
firm level has been addressed in published literature mostly within the
context of the developed countries. However, the involvement of change
agents in the diffusion and adoption of IT-based innovations by small and
medium-sized firms in the developing countries is largely unexplored. The
main research questions are why and how management decisions to adopt
and use IT are influenced (if any) by the interactions of key people in firms
with several identified change agents. Case studies are used as the
preferred approach to answer the research questions and to understand the
qualitative aspects of IT diffusion at the level of the firm. The study
concludes that IT diffusion in small and medium-sized firms expose mixed
institutional influences. The mechanism by which change agents are
involved in IT diffusion is also unique and is claimed to be different from
that is generally found in other studies in this area. Some policy implications are proposed by this study.
Keywords: diffusion; innovation; IT; SMFs

* The earlier version of the paper had been presented at the Second Global Information Technology
Management (GITM) World Conference, Dallas, Texas, USA, 10-12 June 2001.

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GadjahMadaInternationalJournalofBusiness,January2002,Vol.4,No.1

Introduction
This paper examines the influence of
change agents on the diffusion of information technology (IT)-based innovations
within the context of small and mediumsized firms (SMFs) in Indonesia. The paper addresses questions of why and how
management decisions to adopt and use IT
are influenced (if any) by the interactions
of key people in firms with several identified change agents, including business
consultants, business associates/friends,
leaders of government authorities and academics. The numbers and commercial significance of firms in Indonesia identify
them as being particular interest for research into the mechanism by which these
change agents influence IT diffusion.
The idea of involving the role of
change agents in technological innovation
is not entirely new, especially in the sense
that if it derives from the experience of
firms in developed countries (for example
Hanna et al. 1995; Gregor and Jones 1997;
Bode and Burn 2000). However, the involvement of change agents in the diffusion of IT by SMFs in the developing
countries is largely unexplored. This is, in
fact, much more complicated and brings
more consequences than those identified
in the developed countries.
Indonesia is used as a case study to
represent the complexity of IT diffusion
by firms in developing countries. Moreover, SMFs in Indonesia have played a
pivotal role in supporting economic growth
and employment creation. These firms
constitute at least 85 percent of all industrial establishments in the country and
contributed to around 21 percent of total
value added and 53 percent of total employment over the period 1985-1997 [Indonesia Central Bureau of Statistics (BPS)
1997]. Hence, a study which analyses the
18

mechanisms by which change agents influence the process of IT diffusion is not
only important but is also timely for the
country in keeping up with the demand for
technological sophistication. Moreover,
the process is seen to be different from that
observed in other parts of the world.
The paper is organized as follows.
The next section introduces and outlines
the concept of change agents and its relevance to the diffusion of technological
innovation in Indonesia. The research approach taken and methods used in data
collection are described. Research findings along with some anecdotal evidence
gathered from the fieldwork are then analyzed. The last section draws conclusions
and implications of the findings.

Research Context and
Background
The term “change agents” used in
this paper refers to individuals and social
entities that have formally been given primary responsibility for helping management to plan and orchestrate change in
firms (Rogers 1995). Change agents may
have one or more of the following characteristics: They are confident, supportive,
role models, and expert in subject matter
(Holman and Devane 1999). These characteristics are attached to professional occupation such as consultants and educators or are linked to institutions such as
industry associations and government-supported institutions (see Dodgson and
Bessant 1996).
As described by Rogers (1995), the
diffusion of technological innovation in
firms is a kind of social change by which
cooperation among members of the firms,
who commonly have divergent views toward technological innovation, accept
possible alteration within internal systems,

Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms

processes or procedures. Change agents
may have the capacity to orchestrate divergent views amongst people in firms, as
well as to cope with social uncertainty and
other externalities, such as social costs
associated with coordination between firms
and relevant institutions as a result of
adopting IT-based innovations (Thong et
al. 1996).
Thong and Yap (1996) explain that
the involvement of external experts is very
important in the implementation of information systems and technology in small
businesses. These firms usually do not
have internal IS/IT department. Hence,
the involvement of external experts is relevant to reduce the level of resistance
amongst the key people in firms toward
IT-based innovations. Bode and Burn
(2000) advances the issue by describing
how consultants can be involved in the
implementation of web-based technology
in small firms. They argue that the role of
consultants is crucial not only in assessing
the need for adopting web-based technology, but also in monitoring all aspects of
IT implementation in firms.
The role of educators in promoting
technological innovation also cannot be
overlooked (Sam et al. 1999). Many studies show that attitudes, beliefs, and behavior of educators toward IT innovation affect their intention to promote computer
literacy amongst students (for example:
Peter 1999; Ridzuan and Alias 1999).
Moreover, alliances between industry and
educational institutions can prepare and
equip graduates to fulfill the demand for
skilled labor from industry (Etzkowitz et
al. 2000; Etzkowitz and Leydesdorff 2000).
This phenomenon leads to the evolving of
customer-oriented educational institutions
by which educators may design their curricula and teaching systems to meet the
demand from potential employers.

The influence of customers or business patrons on IT diffusion has been
discussed in a number of studies. These
address for example in the adoption of
web-technology (Lai-Yee and Pendse
1997); EDI (Parker and Swatman 1997)
and electronic commerce (Chan and
Swatman 1999). These studies are concerned with the importance of educating
customers, both individual and institutional, in relation to improving their knowledge and subsequently on the level of
acceptance of IT innovation. Moreover,
Swan et al. (1999) examine the influence
of technology suppliers and professional
associations as central agencies in shaping
the diffusion process of Computer-Aided
Production Management (CAPM) in the
United Kingdom and Sweden.
Another potential change agent in the
implementation of IT innovations is government-supported institutions (King et
al. 1994; Yap et al. 1994; Hanna et al.
1996; and Yap and Thong 1997). The
government may perform one or more of
the following major functions: supplier of
technological information, chief regulator, provider of financial assistance, initiator of major R&D projects, and protector
of intellectual property rights. However,
the level and range of involvement of
government-supported institutions in IT
diffusion and adoption by firms vary between one country and another (see
Montealegre 1999). A centralized government tends to perform the whole range of
functions, whilst in a more democratic
country the involvement of government in
IT diffusion tends to evolve in line with a
market-driven structure (Jandos and Uhlir
2000; Kangas 2000).
In the context of Indonesia, several
initiatives have been developed by both
public and private institutions to promote
IT diffusion. The government’s interven19

GadjahMadaInternationalJournalofBusiness,January2002,Vol.4,No.1

tion in IT encourages the technological
learning process and stimulates its strategic development in many aspects of the
country. For example, several governmentsupported institutions and ministries are
involved in setting up general initiatives
whilst private institutions are interested in
practical implementation especially in promoting IT at local government. The Ministry of Industry and Trade (MIT) through
the Directorate General of Small-Scale
Industry, in cooperation with PT. Pos Indonesia, has developed an information
systems kiosk program to encourage public awareness of Internet technology.
Meanwhile, under the coordination of the
Ministry of Research and Technology,
several government initiatives are also
being pursued to promote the diffusion of
networking technology through empowerment of the Indonesian Institute of Science, the National Aerospace Agency, and
the Agency for Assessment and Application of Technology.
Moreover, the diffusion of IT in Indonesia is being facilitated by an increasing number of Internet service providers.
According to the Indonesian Internet Service Provider Association,1 there are currently 35 Internet service providers operating in Indonesia, whilst another 15 providers will be in the business shortly, totalling 50 Internet service providers by the
end of 2001. However, the current level of
Internet penetration in Indonesia is still far
behind the level of penetration in other
Asian countries despite the growth in numbers of Internet users. For example, the
number of Internet hosts or computers
with active Internet Protocol (IP) addresses
connected to the Internet in Indonesia is
only 0.76 per 10,000 people, compared to

the Philippines, which has 1.29, Thailand
4.49, Malaysia 23.5, and Singapore 322.2.
Meanwhile, the average number of Internet
hosts in East Asian and Pacific countries is
2.39 compared to the average number of
Internet hosts in the entire the world 94.4
per 10,000 people (The World Bank 2000).
Despite growing concerns about the
role of external change agents, as discussed above, recent studies have attempted to open new frontiers by exploring internal factors of firms which foster
ways of IT diffusion. For example, Utomo
(2000) demonstrates that internal factors
such as the level of IT knowledge amongst
key people in firms which has significantly influenced the diffusion rate and
improved the extent to which SMFs adopt
and use IT. Perceived impacts of IT, combined with strong attitudes of key people
in firms towards organizational learning
and change management, also contribute
to boosting IT diffusion in firms (Harrison
et al. 1997; O’Callaghan 1998; Utomo and
Dodgson 2000) although it is difficult to
single out which factor(s) strongly affect
the other.
Meanwhile, recent developments
within institutional theory highlight the
importance of social networks and political struggles amongst members of firms
(Hughes et al. 1996). This development
raises major implications for empowering
internal firms’ capability to gain optimum
benefits of technological innovation. The
importance of networks is articulated in
numbers of situations where institutions
need to develop its internal capability in
order to access external knowledge and
expertise. The social networks provide an
interface through which members of the
institutions may acquire and implement

1
Further information about the Indonesian Internet Service Provider Association can be found at http://
www.apjii.or.id/ (Accessed 5 October 2000).

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Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms

external ideas on the diffusion of the innovation process. This suggests that the idea
of ‘learning by learning’ as opposed to
‘learning by doing’ amongst employees or
internal staff accelerates the diffusion of
the innovation process at the level of the
firm.
As conclusion, previous studies on
the role and function of change agents in
relation to IT diffusion were diverse. Many
studies are mainly concerned with the roles
of external forces on IT diffusion and have
discounted firms’ internal capabilities to
respond proactively to institutional influences. Previous studies also focused on
identifying the influence of formal institutions as change agents, with less attention
being placed on assessing the influence of
informal constituents on the diffusion of
technological innovation. Although there
is a continuing debate over the type of
change agents that may significantly affect the diffusion of IT, the influence of
specific agents such as social institutions
in the form of business associates and
friends is still not adequately addressed.
Further investigation that considers this
particular aspect as well as the integration
of various change agents will enhance
general understanding concerning the influence of institutional factors on IT diffusion. The next section provides empirical
evidence for validating a framework
through which the influence of institutional networks on technological diffusion in Indonesia is explored.

Research Approach
As suggested by Yin (1993, 1994),
case studies are used as the preferred approach to answer the research questions

which are employed not only to investigate the ‘why’ and ‘how’—type questions, but also and to understand the qualitative aspects of IT diffusion at the level of
the firm. A single firm then is used as the
unit of analysis. The study used semistructured interviews, note taking, and tape
recording as methods of collecting data.
Research findings are based on triangulation of interviews with designated people
within firms and on extraction of selected
documentation of information gathered
from newspapers, business magazines,
professional journals as well as company
reports. All interviews were conducted by
the same researcher to minimize investigator bias.
Sample firms were drawn from two
general categories of industry: “high-tech”
(machinery, metal works, industrial parts
and components) and “low-tech” (food
processing and wood products) in various
industrial clusters in Central and East Java
provinces which are hosts of many SMFs
in Indonesia. By focusing on two general
categories, it is hoped that the study will
discern clear patterns of the role of change
agents in the diffusion of IT innovation
across industries. It will also reveal any
resistance of firms within the particular
industry resulting from the effects of the
recent Asian economic and financial crises.2

Description of Cases
A total of 60 firms responded to my
enquiries and agreed to participate in this
study. Sample firms were drawn from the
two major provinces (Central and East
Java) using purposive sampling method
for practical considerations. Moreover, this

2
Indonesia has severely suffered from the unprecedented event of the economic and financial crises in 199798. More details about the crises see for example Arndt and Hill (1999) and Krugman (1998a, 1998b).

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GadjahMadaInternationalJournalofBusiness,January2002,Vol.4,No.1

non-probability sampling often gives acceptable results especially if it is conducted within a carefully controlled exploratory research (see Cooper and
Schindler 2001). To reduce the possibility
of narrowing the scope as a consequence
of location bias, sample firms were carefully chosen on the basis of predetermined
selection criteria: the size of the firm, the
activities of the business, and the level of
IT usage (described in Table 1).

Of the 60 firms included in the study,
58 firms are manufacturers of industrial
products and 2 firms operate mainly in the
service sector. The business activities of
the sample firms varied, and included food
processing, manufacture of wood products, machinery and metal works. Table 1
shows 29 firms operate within the ‘hightech’ industries (chemicals, metal works
and machinery); 27 firms operate within
‘low-tech’ industries (food processing and

Table 1. Profile of the Sample
Business Type
Private
Agency or Wholly-owned State-owned
Independent Dealership Subsidiary
Company Total
Business Activities
Food Processing
Wood Products
Chemicals
Metal Works
Machinery
Miscellaneous

7
15
2
11
6
2

1

1

1

2
3
1
2
5
1

11
18
3
13
11
4

Total

43

2

14

1

60

2

4
2
8

1

2

14

1

60

Size of firms
1 – 20 employees
21 –100 employees
101 – 150 employees
151 – 250 employees

7
22
7
7

Total

43

IT Usage
Mainly phone and fax
Stand Alone PCs
PC Networks

8
14
21

1
1

1
13

1

8
17
35

Total

43

2

14

1

60

22

7
29
9
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Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms

wood products); and another 4 firms mainly
operate within miscellaneous industry,
such as technical workshops, construction
and engineering services.
Although the number of sample firms
taken was quite small compared to the
whole business population, their business
type as an independent firm was closely
matched to the general profile of small and
medium-sized firms in Indonesia. According to Indonesia’s Central Bureau of Statistics, there are about 34.2 million small
and medium-sized firms; around 80 percent of these were private-independent
firms.
With regard to the level of IT usage,
the majority of the sample firms had installed and used personal computers in the
businesses, either as stand-alone or attached to networks. Some firms relied
mostly on the use of telephone and facsimile rather than on computers to manage
their business activities. These firms did
not suggest any specific future date for
installing and using computers in their
businesses.

Research Findings
Perceptual influence of the major
change agents: business associates/friends,
customers, academics, business consult-

ants, local government authority, and
people at the Ministry of Industry and
Trade on IT diffusion in firms was sought
by interviewing owner-managers of the
firms. These selected change agents were
identified as investigative variables in the
diffusion of IT-based innovations (see
Utomo 2001). Codified responses from
the sample were then used by the researcher
to identify the significant influence of these
selected change agents on the diffusion of
IT in firms. Table 2 shows the correlation
matrix for each change agents as investigative variables and the level of its significance.
The Pearson correlation matrix for
these variables is used to identify whether
or not multicollinearity problems exist.
The highest squared correlation amongst
the independent variable was 0.30, which
existed between local government authority and linkages with academics. None of
the squared correlation is close to 0.8,
suggesting that there is no evidence of
multicollinearity amongst the research
variables (Hair et al. 1995).
Multiple regression analysis then is
used to explain the influence of change
agents on IT diffusion. The dependent
variable of the study refers to the extent of
IT diffusion within the level of the firm,
whilst the independent variables include

Table 2. Correlation Matrix for Major Change Agents
Variables

(1)

(2)

(3)

(4)

(5)

(1) Business Associates/Friends
(2) Customers
(3) Academics
(4) Local Government authority
(5) Ministry Industry and Trade
(6) Business Consultants

0.189
-0.147
-0.051
-0.110
-0.144

0.272 *
0.103
0.258 *
0.024

0.549 **
0.465 **
0.309 *

0.551 **
0.227

0.079

* Correlation is significant at the 0.05 level (2-tailed)
** Correlation is significant at the 0.01 level (2-tailed)
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GadjahMadaInternationalJournalofBusiness,January2002,Vol.4,No.1

activities involving business associates,
customers, academics, business consultants, local government authority and people
at the Ministry of Industry and Trade.
Table 3 shows the result of this multiple regression. All of the research variables, except business associates/friends,
are significantly related to the extent of IT
diffusion within the level of the firm. The
most significant variable that determines
the extent of IT diffusion is business con-

sultants. This suggests that the involvement of technical experts is important especially during the implementation stage
of IT innovation, although the interactions
of key people in firms with business consultants can be developed through informal and personal networks.
The role business consultant play in
the diffusion of technological innovation
within SMFs in Indonesia varies; it ranges
from information facilitation to project

Table 3. Multiple Regression for Change Agents
Dependent

Independent

Extent of IT diffusion Business Associates/Friends
Customers
Academics
Local Government Authority
Ministry of Industry and Trade
Business Consultants

Beta

T

p-value

-0.104
0.310
-0.329
-0.365
0.344
0.378

-0.891
2.555
-2.244
-2.483
2.459
3.197

0.377
0.014 *
0.029 *
0.016 *
0.017 *
0.002 **

R-squared = 0.347; F = 4.704; p-value = 0.001
** p<0.001; * p<0.05
Table 4. What Small Firms Expect from their Consultants?
Firm

Area of Business

Firm A

Metal work and foundry

I invite a private business consultant come to
the firm on a regular basis to discuss various
issues related to administrative processes,
business strategies, and the use of new technologies in the firm.

Firm B

Metal work (galvanized steel)

This firm has benefited from the involvement of a private consultant in developing
computer software applications.

Firm C

Furniture

I believe that the firm has gained advantage
from using technical expertise and experience offered by business consultant in marketing products through the Internet.

Source: Field Interviews
24

Comments

Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms

team leadership depending on the need of
clients or adopters. Comments from ownermanagers of firms indicate that business
consultants are facing new challenges, not
only in dealing with technical matters, but
also in orchestrating extensive resources
(entrepreneurial skills and capital) to reach
optimum benefits arising from the adoption of IT as summarized in Table 4. Ownermanagers of firms expect consultants to
play an active role in facilitating the learning process to improve small business
capabilities to adopt and use IT-based innovations in broad areas of firms’ activities.
The statistical result as well as the
comments above are consistent with the
finding of Thong et al. (1996), which describe how top management supports and
firms’ engagement with external experts
influence the extent of IT adoption within
small businesses. As most small and medium-sized firms do not have a formal,
internal IT department, the owners or managers usually rely on the external IT experts, such as computer vendors and business consultants to provide technical assistance until the small businesses are confident of working with IT. On number of
occasions, the study found that the relationship between IT vendors and small
businesses goes beyond selling the products or services, and often become part of
the firm’s personal network.
The MIT, with its special programs,
also a variable in this study, which was
found to be significant. This result suggests that the selected government policies that are designed to facilitate industry
development and linkages will strongly
influence the diffusion of IT amongst firms.

The selected government program, such
as the national program of information
kiosks for small businesses3 can be considered as positive points for the government. This program is a current joint initiative between the directorate general of
trade and small-scale industry and PT. Pos
Indonesia (a state owned company in the
postal service) to help small businesses
secure an access to computer and communication technology applications using the
Indonesian postal service networks. Although information kiosks program sees
an ideal way of reducing the technological
gap in small businesses, the program focuses merely on preserving marketing push
and pays less attention to improving other
functional businesses, such as quality assurance, cost control and delivery time.
Similar to the information kiosks campaign, the MIT through the National
Agency for Export Development
(NAFED)4 has developed on-line services
to assist export-oriented businesses to obtain market information as well as overseas business partners. The agency conducts seminars, workshops, and professional training for potential exporters although the participation rate of small and
medium-sized firms in this program was
not disclosed.
Another potential source of influence comes from small business interactions with customers. Respondents of the
study claim that their customers, mostly
other private firms, become an important
source of influence on decisions to adopt
IT, although the level of such influence
varies amongst firms or industry categories. For example, more small and medium-sized firms that sell their products to

3
Further description of the objectives of information kiosks program can be found on http://
warsi.wasantara.net.id (Accessed October 2000).
4
Further details about to NAFED can be found at http://www.nafed.go.id/ (Accessed October 2000).

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GadjahMadaInternationalJournalofBusiness,January2002,Vol.4,No.1

export markets tend to have Internet technology installed, compared to companies
that sell most of their products on the
domestic market.5 In-depth interviews with
business owners or managers also revealed
that the export-oriented firms have a stronger temptation to build technological image than domestic-oriented firms. Therefore, many firms are designing joint web
sites on the Internet; these are commonly
organized by Internet Service Providers.
This assistance is needed in order to resolve telecommunication problems in Indonesia and to overcome local bandwidth constraints. This invites speculation
concerning the existence of pressures from
overseas trading partners in relation to the
adoption and use of IT for the business.
However, this result contradicts the
result of the analysis of the role of local
government authority, which shows a negative direction. The absence of local government involvement in the process of IT
diffusion might effect on the owners or
managers’ perception toward the authority. The study also finds that the linkages
between small business communities and
higher education or research institutions
move to a negative direction toward the
extent of IT diffusion. The negative directions of the two variables indicate the
absence of local government and higher
education institutions’ involvement in IT
diffusion in firms. In-depth interviews revealed that owner-managers of the firms
relied on potential sources of influence
other than local government and higher
education institutions to acquire benefits
of the technological innovation.
The result suggests that a “link and
match” scheme, launched by the Ministry
of National Education, do not receive sub-

stantial support from the industry. This
indicates that the universities or research
institutions are concerned with developing IT awareness than in providing ‘handson’ experience in IT diffusion, despite the
fact that some respondents of this study
have benefited from their linkages with
the manufacturing polytechnic in Bandung,
West Java. This invites new challenges for
the current educational system in Indonesia particularly in aligning the educational
curriculum with business needs. For example, one of the respondents in the furniture industry explained that his continuous
connections with academics improved his
theoretical basis for managing the business. His computer skills and literacy,
developed during his study in the business
school, have helped him in managing the
business as well.
In summary, this study has found that
the influence of change agents in the diffusion of IT within small and medium-sized
firms in Indonesia flows through informal
institutional networks at the first stage and
goes into more in-depth interactions with
formal institutions. However, the results
should be interpreted with caution as the
data gathered may incur the possibility of
having industry and situational effects.
Respondents to the study came from five
different industries and the interviews were
conducted in various situational settings,
such the timing of interviews and the social and political distress following the
crises as noted earlier. These unprecedented events may have impacted on the
perception of the owner-managers especially towards trustworthiness of the local
government or other government supported
institutions. Despite limitations of the study
in relation to sampling and the ‘timing’ by

5
Correlation between the export market orientation and the use of Internet in business is positive and
significant (r = 0.356, p < 0.005).

26

Utomo—TheInfluenceofChangeAgentsonITDiffusioninFirms

which the study is conducted, there are
some important lessons that will describe
in the conclusions and implications.

Conclusions and Implications
The diffusion and adoption of IT by
SMFs in Indonesia expose mixed institutional influences as identified in this study.
The mechanisms by which change agents
are involved in IT diffusion in the country
are also unique and is claimed to be different from that is generally found in developed countries. The involvement of change
agents in the diffusion of IT starts form
informal situations before they can get
involved in more depth and extensive interactions with owner-managers of firms.
The role of change agents therefore must
be considered as a necessary but not sufficient condition in the diffusion of IT within
SMFs in general.
Moreover, the institutional factors can
be used either as the major source of IT
knowledge or the facilitator for IT diffusion although there is evidence to support
the critical role played by these factors in
both private and public institutions. The
study concludes with observations and
conjectural evidence regarding the crucial
role played by both consultants and the
government at the ministry level as the
paradigmatic institutions, from which
SMFs could learn, in terms of their power,

expertise and experience in relation to the
adoption of IT-based innovations.
Two major policy implications can
be derived from this study. First, there is
little doubt that owner-managers will oppose potential benefits of IT diffusion in
firms. Improved IT knowledge amongst
owner-managers of the firms, as identified
in the previous studies, might be important
in accelerating the diffusion of technological innovations. The creation of ‘triple
helix’ through building collaborative efforts of government authorities, industry
groups and perhaps higher education institutions becomes another necessary condition to accelerate the adoption and use of
IT-based innovations within small and
medium-sized firms in Indonesia.
Second, some firms are already obtaining useful technical assistance from
private consultants, especially during the
initial stage of IT implementation. While
large firms may commonly make extensive use of the services provided by consultants and have learned how to manage
the relationship involved, SMFs may not
follow the same direction. If technical
consultants are needed to help small firms
to adopt IT, then attention needs to be paid
to how these change agents may deliver
their services to SMFs at subsidized rates
and how their activities may be controlled
and monitored.

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