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Management DecisionEmerald Article: Effect of ITC on the international competitiveness of firmsJesús C. Peña-Vinces, Gabriel Cepeda-Carrión, Wynne W. Chin

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To cite this document: Jesús C. Peña-Vinces, Gabriel Cepeda-Carrión, Wynne W. Chin, (2012),"Effect of ITC on the international competitiveness of firms", Management Decision, Vol. 50 Iss: 6 pp. 1045 - 1061

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Effect of ITC on the internationalcompetitiveness of firmsJesus C. Pena-Vinces and Gabriel Cepeda-Carrion

Department of Business Management and Marketing, University of Seville,Seville, Spain, and

Wynne W. ChinDepartment of Decision and Information Sciences,

C.T. Bauer College of Business, University of Houston, Houston, Texas, USA

Abstract

Purpose – This paper’s aim is to evaluate the effect of the use of information technology andcommunications (ITC) on the international competitiveness of firms in developing countries. Thestudy also seeks to evaluate other factors that allow or condition the use of ITC such as: humanresources, collaboration of the industrial sector, and local environment.

Design/methodology/approach – These effects are examined through an empirical research of 100small to medium-sized enterprises (SMEs) from a developing country – Peru.

Findings – SMEs from developing countries follow an isomorphic approach. This is because theytend to imitate or copy the better practices from developed countries. The results have shown thatITCs have a positive effect on the international competitiveness of firms.

Research limitations/implications – A limitation is the cross-sectional character of this research.

Practical implications – Firms use ITC to manage their inventory, for the communication betweenmanufacturers and offices, and suppliers, for bill payments, and for the management of sales andmarketing, and for the management of their networks.

Originality/value – According to the literature reviewed, this study is one of the pioneers incontrasting empirically whether the use of ITC contributes positively to the internationalcompetitiveness of firms in the developing countries of Latin America.

Keywords Information technologies and communications, International competitiveness,Competitive advantage, Industrial sectors, Exporting, Internationalization, Competitive strategy, Peru,Developing countries, Globalization

Paper type Research paper

1. IntroductionCurrently, foreign trade (e.g. exports) plays a crucial role for both countries and firms.This is because it represents an opportunity for their economic growth, especially forfirms located in developing countries. In fact, Dunning and Lundan (1998) argued thatthe incomes of internationally competitive firms come from their foreign activities(exports). This is due to the fact that, in the global market, only firms that are reallyprepared will survive when they are faced with others worldwide (Drucker, 2003).

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Jesus C. Pena-Vinces wishes to expresses his gratitude to the C.T. Bauer College of Business(University of Houston), especially to the Department of Management, and of course to theDepartment of Decision and Information Sciences, because without their hospitality this researchwould not have been possible to complete. Special thanks are due to Professor AlvaroCuervo-Cazurra (Sonoco International Business, University of South Carolina) for reviewing thepreliminary version of this article.

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Management DecisionVol. 50 No. 6, 2012

pp. 1045-1061q Emerald Group Publishing Limited

0025-1747DOI 10.1108/00251741211238328

Hence, information technology and communications (ITC) has recently become one ofthe factors that allow firms to compete more successfully in foreign markets (Elenurm,2007; Eraqi, 2006; Cho et al., 2007).

Many researchers have studied the important role that the use of ITC has on thefirm’s international competitiveness (Abereijo et al., 2009; Flor and Oltra, 2005; Jonesand Crack, 2001; Lopez and Garcıa, 2005; Powell and Dent-Micallef, 1997; Zeng et al.,2008), but the vast majority of these studies have been developed in industrializedcountries (e.g. Japan, the USA, England, Germany, etc). There have been very fewstudies carried out in developing countries. The results of research in developedcountries cannot always be applied to developing countries (Casanova, 2004;Cuervo-Cazurra, 2008) since their economic behavior is quite different and they usuallyhave an unstable and chaotic environment, poor political and educational systems anda low level of industrialization, even in development, and so forth ( Jarvenpaa andLeidner, 1998). In this sense, our study will cover the gap presented by the literaturereviewed in developing countries. It therefore evaluates whether the use of ITCs wouldhave a positive impact on the firm’s international competitiveness focus in small andmedium-sized multinational enterprises (SMEs) from Latin American developingcountries.

This paper is structured in the following manner: First, it defines the firm’sinternational competitiveness. Second, it shows the literature reviewed, which allowsthe formulation of a research model. Third, it describes the methodology used. Fourth,it analyzes the results and conclusions, and finally it shows the limitations and futurelines of research.

2. Literature review and research modelA firm’s international competitiveness (FIC) can be defined as the set of results of afirm (financial and non-financial) that has activities in foreign markets, obtained incomparison with other firms that also offer similar products and services (Lopez andGarcıa, 2005; Toppinen et al., 2007; Zeng et al., 2008). The firm’s results can beexpressed in terms of international sales (exports), foreign direct investment (FDI),market share, satisfaction with the achievement of the firm’s goals, and so on.

Currently, the resource-based view (RBV) (Barney, 1996) plays a very important rolein international business management (Fahy, 2002; Hatch and Dyer, 2004; Lopez andGarcıa, 2005) for the simple reason that it considers some resources of a firm as sourcesof competitive advantage (Barney, 1996; Lopez and Garcıa, 2005). This is because notall firms have similar resources (i.e. firm size, skills of personnel, technology, etc.). ITCis a clear example of this. ITC varies greatly in each firm; it may be better, worse, orsimply different (Powell and Dent-Micallef, 1997).

Moreover, ITCs are clearly considered a key element for business growth in this eraof the present century (Okoli et al., 2010). This is especially so in a dynamic businesswith a highly competitive environment which requires the utilizing of advanced ITC toimprove its efficiency and cost effectiveness, and also for offering high qualityproducts and services for its customers (Mosleh and Shannak, 2009; Powell andDent-Micallef, 1997). Hence, ITCs have only recently become one of the most importantpillars for the FIC (Flor and Oltra, 2005; Hao-Sung, 2003; Jones and Crack, 2001).

Various researchers have found empirical evidence of the effects that the use ofITCs have on the FIC (Eraqi, 2006; Cho et al., 2007; Lopez and Garcıa, 2005). Thus,

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firms that invest in technology show more international presence in terms ofinternational sales (Eraqi, 2006; Jones and Crack, 2001; Lee et al., 2008).

On the other hand, there are firms that utilize ITC as a source of competitiveadvantage. This is because they have multiple plans and projects that make them ableto adapt and compete in different sectors and areas (Elenurm, 2007; Jones and Crack,2001). Flor and Oltra (2005) have shown that the use of ITC as a source of competitiveadvantage is not due to the management department assigned. It occurs because all ofthe personnel working in the firm have been implicated.

Concerning international competitiveness, it is currently almost impossible to speakof ITCs and not mention electronic commerce (e-commerce), especially in developingcountries (Okoli et al., 2010). With respect to this topic, Drucker (2003) argued thate-commerce represents a new challenge for international companies. This is becausethe firms that are not really prepared to face it just die off, engulfed by this e-commerce.This requires a different mentality, different team management, and a new definition ofperformance. E-commerce not only overcomes the geographic distances between thebuyer and seller, it simply eliminates them completely (Drucker, 2003). Clear examplesof this are such companies as Amazon or Interflora. In New Zealand, the lattercompany sends flowers and plants around the world. But the truth is that their case isnot unique; in fact many more exist (e.g. Sears in the USA, Inditex in Spain, etc.). In thisline of thinking, people play an important role in a hyper-competitive environment. Theliterature reviewed (see Pla-Barber, 2001), shows us that some relevant characteristics(age, education, fluency in foreign languages; knowledge of foreign markets;experience in other countries and cultures, and so forth) concerning the humanresources (HR) of firms help achieve an improvement of the FIC. Hence, the use of ITCwould not be possible if firms did not count on qualified personnel with internationalexperience, language skills ( Jones and Crack, 2001; Hatch and Dyer, 2004) and otherspecific characteristics. In this sense, the combination of technologies and thecharacteristics of human capital becomes a competitive advantage when firms utilizethis as a marketing tool. This is because it allows them to establish contact withcustomers and clients located in different places around the world (Mosleh andShannak, 2009), thus allowing, for example, better international performance in termsof sales. Abereijo et al. (2009) said that the use of ITC also lets firms train their humanresources when these are abroad. Therefore, the characteristics of human resources arean important factor in the effective use of ITC (Jones and Crack, 2001; Powell andDent-Micallef, 1997)

It is important to mention that the sector variable is widely used as a controlvariable. In this research, however, the sector is studied from the point of view of thecollaboration between companies belonging or related to similar activities (e.g. textiles,farm business, and chemicals). Their mere presence only indicates their position withinan industrial group, not the role that they play within the FIC. In this sense, when wetalk about their collaboration, we are referring to the mechanisms that, one way oranother, allow firms to compete more successfully in foreign markets. This is due tofirms needing the support or the assistance of their sector to grow and competeinternationally (Cho et al., 2007; Nadvi, 1999). Enterprises get the maximum benefitsfrom the local environment of their country of origin when their suppliers’ industriesare themselves global competitors. In this case, the necessary facilitating technologyflows to their customers settled in foreign markets (Hao-Sung, 2003; Nadvi, 1999).


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According to Porter (1998), firms need the collaboration of the industrial sector togrow and compete internationally, since at this time no company operates alone (Chenet al., 2009), especially in global markets. In the not too distant future, competition ininternational markets will not be between companies that operate alone, but betweengroups of firms (e.g. strategic alliances). In this sense, D’Cruz and Rugman (1992) haveshown that those enterprises that have managed to achieve success in foreign markets(better performance), do so because they have enabled the exchange of technologies,knowledge transfer, research and development, and other activities. Theseaffirmations coincide with studies done by Toppinen et al. (2007). To summarize up,ITC could be affected in a large part by the collaboration of the industrial sector(Hao-Sung, 2003; Powell and Dent-Micallef, 1997). However, from institutional theory(IT), all firms’ resources are conditioned by the environment in which they have theircommercial operations (Meyer et al., 2009). In this sense, according to Porter (1998) andMeyer et al. (2009), technologies are also affected by the environment. This is becausein an environment in which ITC do not exist, their utilization would be impossible(Hao-Sung, 2003; Chen et al., 2009; Okoli et al., 2010). Hence, the environment is one ofthe factors that also condition the use of information technologies, particularly in thecase of firms located in developing countries (Okoli et al., 2010). Hao-Sung (2003)affirmed that local infrastructures play an important role in the FIC, especially indeveloping countries.

Moreover, Jarvenpaa and Leidner (1998) have shown, in a study done in Mexico,how firms have achieved a competitive advantage in terms of performance when theyefficiently exploit environment factors, despite the fact that the environment indeveloping countries is usually chaotic (i.e. a lack of R&D, inefficient government, alack of competitive suppliers). These authors have found that the skills and capabilitiesof human resources play a crucial role in this task. This is because only people withtalent, capabilities and knowledge can transform the chaotic and complex environmentof developing countries into a favorable one. In this line of research, one can find astudy carried out in the industrial surgical steel sector of Pakistan (Nadvi, 1999) thatshows how the local environment of the country of origin of the firms, aids the firm’ssuccess in international markets. Hence, some firm resources, such as ITC, would beaffected by various environment factors, such as government policy, the presence oflocal suppliers with an international presence, R&D developed by the local centers ofresearch and universities, and so on (Okoli et al., 2010; Lefebvre et al., 1998). Therefore,the literature reviews described above allow us to establish the following assumptions:

H1. The use of ITC will have a positive effect on FIC in developing countries.

H2. The characteristics of HR will have a positive effect on the use of ITC.

H3. The local environment will have a positive effect on the use of ITC.

H4. Collaboration between industrial sectors will have a positive effect on the useof ITC.

3. Methodology3.1 Population and sample descriptionThis study was carried out in a developing country of South America – i.e. Peru –because this country has shown a great level of economic industrial growth over the

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past three years (a mean rate of 9.9 percent of GDP growth). We thus studied the SMEsof Peru according to the classification made by its Ministry of Tourism and Commerce(Mincetur, 2006).

With respect to the unit sample, the questionnaires were answered by internationaloperations managers. The questionnaire was sent to the top 1,000 SMEs, which make upthe population of this study. A total of 103 questionnaires (discounting those that wereincomplete) were returned in different forms – via e-mail, postal mail, online survey (websurvey) and personal interviews with manufacturers (June 2007-May 2009). Thisrepresents a reply rate of 10.3 percent. The low reply rate is explained in part becausemany SMEs from developing countries are hesitant to answer surveys from foreignuniversities, as has been found in similar studies carried out in developing countries(e.g. Mesquita and Lazzarini, 2008; Okoli et al., 2010; Zou et al., 1997). This study wasconducted from Spain and the subjects of study were in Peru. It is very important tohighlight that 100 percent of the SMEs were export firms. The study was therefore carriedout in sectors directly linked to international markets (Cuervo-Cazurra, 2008). That is, theyare all SMEs. Tables I-III summarize the descriptive statistics of the unit analysis.

3.2 Measures and constructsFor this stage of the research, in order to gain better results, instruments ofmeasurement were used that have been utilized and validated in previous research.Hence, many scales of measurement exist to evaluate the use of ITC with respect toFIC. However, these scales are very extensive. In this sense, a smaller scale, asdeveloped by Powell and Dent-Micallef (1997) was used, where all variables weremeasured on a seven-point scale (1 ¼ not yet begun, 7 ¼ highly advanced

Sector Percentage

Textiles 27Agribusiness 22Chemical 14Fishing 14Iron and steel 8Wood and paper 6Jewelry 3Mechanical metals 2Footwear and leather 2Nonmetallic mining 1Crafts 1

Table II.Sample statistics and

characteristics:composition of industrial

sectors studied

Firm characteristics (2006-2009) Mean SD

International sales ($US) 15,600.746 41,205.281Rate of growth of international sales (percent) 45.72 104.11Firm size (number of employees) 554.36 927.25Years of local operation 24.41 18.46Years of international operation 13.80 10.73Number of countries sold to 12.37 11.65

Table I.Sample statistics and

characteristics: firmcharacteristics


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implementation). This scale was made up of 13 items, where what is evaluated areaspects of the firms such as the internal and external communication between storesand the home office, the use of technologies in the distribution center, specifically theuse of machines for inventorying, for scanning prices and products, and the use ofelectronic data interchange (EDI) with suppliers, clients and so forth. In measuring thehuman resources (HR), our intention is not to evaluate the quantity of the workforce,but rather those relevant characteristics of the employees that help to configure thefirm’s competitive advantage, according to Pla-Barber (2001). In this way, the scale ofWheeler et al. (2008) was used, with a seven-point scale (1 ¼ not at all important,7 ¼ absolutely important). This construct was made up of six items that evaluatedbusiness success in foreign markets with relation to the importance of thecharacteristics of the HR. Here we studied aspects of the employees, such as theirage and education, their fluency in foreign languages, their experience in foreignmarkets, and so on.

Regarding the environment of the home country, Lefebvre et al. (1998) established aset of environment elements that affect a firm’s resources and capabilities. This scalewas also used in this research. It is to be emphasized that all the items of this constructwere measured in terms of the importance for business success in foreign markets(1 ¼ not at all important, 7 ¼ absolutely important). Thus, topics such as the localclients, the competitors, the possibilities of outsourcing activities, the presence ofuniversities and research centers and the actions undertaken by governments in favorof firms were considered.

In the survey questions regarding the collaboration of industrial sectors, the scaledeveloped by Belso-Martınez (2006, p. 217) was used. This was emphasized in the useof a seven-point Likert scale, in terms of its importance for firms (1 ¼ not at allimportant, 7 ¼ absolutely important). Here what is evaluated are aspects such as therelationship with the client’s relevance in internationalization, the presence of suppliersabroad, the relevance of relations with the competitors in the internationalizationprocess, and so on.

In order to measure the firms’ international competitiveness, both financial andnon-financial measures were employed. The scale of measures proposed by Wheeleret al. (2008) was used. Here we measured the growth rate of international sales, thepercentage of net profits, the percentage of net profits as a consequence of the sales

Market Percentage

The USA 23.6China 9.6Switzerland 7.2Canada 6.8Chile 6Japan 5.2Germany 3.4Brazil 3.4Italy 3.3Spain 3.2Other countries 28.3

Table III.Sample statistics andcharacteristics: maindestination markets, andtheir share of sales(2006-2009)

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overseas, the perceived success of firms in foreign markets (1 ¼ very bad and 5 ¼ verygood) and satisfaction with the objectives compliance and goals achieved in foreignmarkets (1 ¼ very bad and 5 ¼ very good). It is emphasized that all the measures ofthe FIC were evaluated taking into account the last three years as a reference in theforeign activities.

It is worth mentioning that in our research, control variables were also used in orderto obtain a parsimonious model, according to Mesquita and Lazzarini (2008).Therefore,five items were included in the control variables construct. Studied herein are:

(1) firm size;

(2) firm age;

(3) foreign demand (number of countries that firms have sold to during theprevious three years);

(4) rivalry level (number of competitors that each enterprise had during the lastthree years, in local and international markets); and

(5) marketing expenses (the last three years) as a consequence of internationalactivities (see full survey in the Appendix, Figure A1).

4. Data analysis and hypothesis testingThe data analyses have been analyzed through the structural equation model (SEM)using the partial least squares (PLS) technique. The PLS procedure has been gaininginterest and increasing in use among researchers in recent years because of its abilityto model latent constructs under conditions of non-normality and small tomedium-sized sample sizes (Barroso et al., 2010; Chin, 1998; Real et al., 2006). Theuse of this technique (PLS) can be carried out into two stages (Wold, 1979). The firststep requires the evaluation of the measurement model (MM). The second step is toassess the structural model (SM).

Our research model (Figure 1) to evaluate the use of ITC in the FIC was made up ofsix variables, with one second-order construct (i.e. ITC). This construct was operatedusing a molecular approximation (Chin, 1998; Lohmoller, 1989). The results of thisestimation can be seen in Table IV.

Before starting the evaluation of MM, it will be necessary to differentiate betweenreflective constructs and formative constructs (Chin, 1998). Our model is made up ofonly two reflective constructs (ITC and CIS) and four formative constructs (FIC, EV,HR, and CV; see the abbreviations in Figure 1). The unique problem that the formativeconstructs could present is the problem of multicollinearity (PM). The statistic mostused to calculate the PM is the variance inflation factor (VIF). Roberts and Thatcher(2009, p. 18) have established that a formative construct does not present PM if any oftheir indicators record values less than or equal to 3.30 (PM # 3:30). According to ourresults no indicator recorded PM (see Table V).

The evaluation of a MM or the testing of the hypotheses begins with the assessmentof individual item reliability (i.e. factor loadings). Carmines and Zeller (1979) mentionthat in order for one item’s measure to be accepted as part of a construct, it must exceeda threshold of 0.707. In this study (Table VI), the items IS5 and IS6 of the collaborationof the industrial sector (CIS) do not exceed the parameters set. Various researchersbelieve that this rule of thumb should be less inflexible (Chin, 1998; Real et al., 2006),but, unfortunately, these items show a value far beyond the parameters set. For this


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reason, these items were deleted. The next step within the MM is the estimation of thecomposite reliability (CR). The reflective constructs (ITC and CIS) have recorded valuesabove the limit set (Table VII), in accordance with Nunnally (1978), who suggests avalue of CR $ 0:70. Finally, within the MM, the average variance extracted (AVE) andadditionally the discriminant validity (DV) are evaluated. To accept a better value of

TIE TCD EDI

ITC1 0.856 0.523 0.370ITC2 0.934 0.594 0.291ITC3 0.527 0.728 0.305ITC4 0.449 0.869 0.491ITC5 0.448 0.910 0.639ITC6 0.509 0.888 0.543ITC7 0.673 0.723 0.499ITC8 0.434 0.673 0.881ITC9 0.230 0.451 0.850ITC10 0.254 0.452 0.867ITC11 0.506 0.514 0.591ITC12 0.148 0.440 0.820ITC13 0.069 0.321 0.728CR 0.890 0.915 0.911AVE 0.802 0.685 0.634CA 0.761 0.882 0.884

Note: Italicized values are significant at p # 1. CR, composite reliability; AVE, average varianceextracted; CA, Cronbach’s a; TIE, communication internal and external; TCD, technologies in center ofdistribution; EDI, electronic data interchange

Table IV.Factor loading of thesecond order constructs(ITC)

Figure 1.Results of SEM

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AVE this must be over 0.50 (Fornell and Larcker, 1981). The two constructs (ITC andCIS) show values above the parameter set (0.584 and 0.605). For the DV analysis, thesquare root of the AVE (i.e. the diagonals in Table VII) is compared with thecorrelations among constructs (i.e. the off-diagonal elements in Table VII). On average,each construct relates more strongly to its own measures than to others.

VIF Weight t-statistic

Firm’s international competitiveness (FIC)FIC1 1.010 20.1549 0.6716FIC2 1.426 20.4211 1.9950 * *

FIC3 1.291 0.4110 1.9896 * *

FIC4 1.145 12.353 2.6704 * * *

FIC5 1.076 20.8644 1.4818 *

Human resource (HR)RH1 1.389 0.0359 0.1443RH2 1.722 20.2190 0.3543RH3 1.521 20.0581 1.5204RH4 2.532 0.2647 0.7168RH5 1.272 20.3923 2.9297 * * *

RH6 1.917 0.8861 1.5458 *

Environment (EV)EV1 1.600 20.0718 0.3018EV2 1.756 0.1205 0.3543EV3 2.286 20.4707 0.4928EV4 3.015 0.1941 0.7899EV5 1.899 1.149 1.8334 * *

EV6 1.869 20.6112 0.5902 * *

Control variables (CV)FS 2.466 0.5785 1.3571 *

FE 1.182 0.1932 0.6972COUN 1.662 1.1990 3.0974 * * *

RIVA 1.160 0.5254 1.9329 * *

MKT 1.425 20.3562 1.0092

Notes: *p , 0:1; * *p , 0:05; * * *p , 0:01; * * * *p , 0:001

Table V.Statistical values of the

formative constructs

TIC CIS

EDI 0.767 0.371TCD 0.785 0.119TIE 0.736 0.236IS1 0.251 0.887IS2 0.370 0.910IS3 0.096 0.582IS4 0.235 0.759IS5 0.233 0.341IS6 20.187 0.193

Note: Italicized values are significant at p # 1

Table VI.Factor loadings of

reflective constructs ofstructural model


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To evaluate the SM, the explained variance (R 2) values are assessed. Here the stabilityof the estimates is examined through the use of the t-statistics obtained from abootstrap test with 1,000 re-samples. The path coefficients and the t-values areobserved with the level of significance achieved from the bootstrap test (Chin, 1998,Real et al., 2006). Therefore, in Figure 1 we summarize the results of the PLS analysis.Here the R 2 of endogenous constructs and the standardized path coefficients (b) can benoted. Since PLS makes no distributional assumptions in its parameter estimation,traditional parameter-based techniques for significance testing and model evaluationare considered to be inappropriate (Chin, 1998).

4.1 ResultsOur results suggest that when ITC is studied with relation to a firm’s competitiveness,the use of subjective measures is more appropriate. Our study used both financialmeasures and non-financial measures. In fact, the perceived measures (subjective) haverecorded better values than the purely financial measures.

On the other hand, the first exploratory analysis shows us that upon examining thecorrelations between variables in our research model, the strongest relation is to befound between ITC and FIC (0.470 * *). This indicates that this model is highlyappropriate for studying the effects of ITC on a firm’s competitiveness in accordancewith the main objective of our research.

With reference to the R 2 value concerning this subject, Falk and Miller (1992, p. 80)mention that acceptable values should be above 0.10. The SEM results show that theacceptable values are never below 0.26. (R 2 ¼ FIC 0:2646 and ITC 0.3773). In relation toQ 2, our model shows good predictive power and also presents a good GOF. In otherwords, this model presents a good fit (see Figure 1).

Continuing with the analysis of our research model, with respect to the firsthypothesis (H1), the results confirm the positive effects that the use of ITCs have on theinternational competitiveness of SMEs (b ¼ 0:4150; p , 0:05). H2 (b ¼ 0:3790;p , 0:01) is also absolutely confirmed. That is to say, the characteristics of humanresources help the effective utilization of ITC. In this sense, the previous experience andthe educational level of the people have become very important elements for SMEs tobe more competitive abroad. This is because the ITCs cannot operate alone since theyneed persons for their management and maintenance.

H3 re-affirms the theory used for building this research model. Here we can see thepositive influence of the collaboration of the industrial sector on the use of ITC

Mean SD CR AVE CA 1 2 3 4 5 6

1. FIC 3.177 1.291 N/A N/A N/A N/A2. EV 3.896 1.991 N/A N/A N/A 0.231 N/A3. HR 4.531 1.582 N/A N/A N/A 0.270 20.112 N/A4. ITC 5.307 1.692 0.807 0.584 0.645 0.470 0.291 0.407 0.7645. CIS 5.865 1.349 0.855 0.605 0.815 0.103 20.013 0.105 0.273 0.7786. CV 113.986 184.76 N/A N/A N/A 0.323 0.018 0.175 0.260 20.105 N/A

Notes: The mean is the average score for all items in this measure. SD, standard deviation; CA,Cronbach’s a; CR, composite reliability; AVE, average variance extracted. Italicized figures on thediagonal are the square root of AVE, while off diagonal elements are correlations among constructs

Table VII.Descriptive statistics andcorrelation matrix

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(b ¼ 0:2590; p , 0:05). This is because firms need their sector to be able to grow and tocompete in foreign markets (Porter, 1998).

H4 is also confirmed. This highlights the positive effect of the local environment onthe use of ITC (b ¼ 0:3330; p , 0:05). Therefore, the national environment of thecountry origin of the firm in itself becomes a launch pad for SMEs to be able tointernationalize their technologies in foreign markets later. Regarding the controlvariables used for testing the research model, one can say that the ITC used byPeruvian SMEs is conditioned by their time in the markets, and by the foreign demandand the level of rivalry abroad (b ¼ 0:2140; p , 0:01). It is somewhat surprising thatall the control variables with relation to the FIC (see Figure 1) could not be sustained.However, these variables are always shown in previous research as conditions of theFIC.

5. ConclusionsMosleh and Shannak (2009) also show that ITCs are one of main factors responsible fora firm’s international competitiveness. Therefore, one may say that with respect toSMEs from Latin American developing countries, Peru follows an isomorphicapproach (Meyer et al., 2009). This is because these SMEs tend to imitate or copy betterpractices from developed countries. This affirmation can be confirmed with adescriptive analysis sample, which revealed that 80 percent of the SMEs studied have awebsite in three different languages (i.e. Spanish-English, French or German, orChinese, etc.) and a good computer system that allows them to communicate withmanufacturers and local and international offices.

On the other hand, the local environment of the country of origin of the SMEs favorsthe use of ITC. Evidently, ITC success depends to a great extent on the presence oflocal customers and competitors that require the Peruvian SMEs to use their owntechnologies in the local market. This could be internationalized to foreign markets.This affirmation has found strong support because the results indicate that localoutsourcing has not been helped (weight ¼ 20:4707) by the use of ITC. In other words,one might say that Peruvian SMEs located in Latin American developing countriescompete in international markets with their own technologies. The presence ofuniversities in the local environment (local market) is also very important for the use ofITC. This is because those who work with ITC in SMEs have received education fromlocal universities. Obviously, the knowledge to manage information technologiescomes from local universities.

Continuing with the analysis of the local environment and analyzing help from thegovernment, the results have also allowed us to learn that local government has notassisted with the use of ITC (weight ¼ 20:6112, see Table V) in Peruvian SMEs. Theseresults coincide with research conducted by Abereijo et al. (2009) who, through a studyapplied to Nigeria’s manufacturing firms, also showed that government help is verylimited in developing countries. In fact, in this study Peruvian SMEs do not considerthe work of this institution important (nor do recent studies; see Okoli et al., 2010). Oneexplanation for this could perhaps be the limited resources that the governments ofdeveloping countries have available to invest in local infrastructure such asinformation technologies (Abereijo et al., 2009; Okoli et al., 2010). Therefore, SMEs areobliged to spend great amounts of money to obtain their own technology, on occasionfrom third countries. Another explanation, according to the qualitative information


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obtained through personal interviews in this work, is that sometimes local governmentis a barrier for the SMEs because it does not permit a means of communication betweenmanufacturers and the office if these have not been previously regulated.

The results have also shown that the use of ITCs would not be possible without thecollaboration of the industrial sector (according to Abereijo et al., 2009; Chen et al.,2009). The presence of local suppliers with an international presence allows PeruvianSMEs to use technology to manage their inventory, for communication betweenmanufacturers and offices for bill payments, and for the management of sales andmarketing, but it is also true that Peruvian SMEs networks (suppliers, clients, etc.)have been positively helped by the use of ITC.

The control variables, such as firm age and size, have been shown as conditioners ofITC use. This is closely related to the qualitative information obtained in theinterviews, which reveals that most SMEs studied have powerful information systemssuch as material requirements planning (MRP), customer relationship management(CRM), so on, and others specific to each sector. Generally, these systems are developedby the local partners in function of the firm’s needs. Therefore, not all SMEs can investin powerful information systems. This is because its acquisition is costly in developingcountries, and its maintenance and implementation is almost prohibitively expensive.

6. ImplicationsFrom the practical point of view, our studies suggest that SMEs can improve theircompetitiveness in foreign markets when they use ITC. This is because they allow theproducts that SMEs have developed in their country of origin to be offered to foreigncustomers. In this sense ITC have played a very important role in theirinternationalization process, since prior to a product going to the destinationmarkets, it has first been made known by means of the SME’s technology, such as itswebsite.

On the other hand, ITCs are a clear factor that help the internationalization of themarketing activities of SMEs in foreign markets, since through the use of informationtechnology, such as EDI, SMEs can carry out activities, research marketing forexample, that are specifically an analysis of the behavior of their foreign clients.

According to our model of ITC on competitiveness, ITC has become a source ofcompetitive advantage when it is managed adequately. In this sense, SMEs’ success inforeign markets (competitiveness) depends to a great extent on the capabilities andabilities (HR) of the personnel working within firms. Therefore, if SMEs did not counton highly skilled personnel, it would be unlikely for ITC to become a source ofcompetitiveness. To summarize, the mixture of personnel and technology allows SMEslocated in developing countries to be able to compete worldwide.

Finally, smaller businesses from Latin American developing countries areencouraged to invest in new and more sophisticated information systems. As hasbeen shown here, this will contribute to their competitive advantage.

7. Limitations and directions for future researchDue to the cross-sectional character of this research, future research may tackle similarphenomena through the use of panel datasets that observe SMEs through time in otherregions of Latin America, such as Bolivia, Ecuador, Venezuela, Chile, etc.

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Our model could be improved with the inclusion of other variables that are relateddirectly to the firm’s resources and capabilities (Barney, 1996; Fahy, 2002) and thatcould condition or allow the use of ITC.

Another interesting line of research would be to evaluate the factors that moderatethe relationship between ITC and the firm’s international competitiveness. Here, theyhave been evaluated directly, though perhaps in the real business world thisrelationship could be different. Similar research could be carried out in the servicesector of developing Latin American countries.

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(The Appendix follows overleaf.)


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Appendix

Figure A1.The survey

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About the authorsJesus C. Pena-Vinces has a PhD in Economics and Business (University of Seville). Currently, heworks as a Researcher/Lecturer at the College of Economics and Business at the University ofSeville. He is a Visiting Professor at several universities in Latin America. Furthermore, he is aconsultant for various governments in South America. Before starting his academic career, hewas a businessman in the wood and coffee industries in Peru. He has published in Journal ofEconomics and Administrative Sciences, Journal of Business UP and others. Jesus C. Pena-Vincesis the corresponding author and can be contacted at: [email protected]

Gabriel Cepeda-Carrion is a Doctor in Management. Currently, he is an Associate Professor inthe Management and Marketing Department at the University of Seville. His research topicsinclude organizational learning, knowledge management and qualitative and quantitativeresearch methods and he has published in Journal of Business Research, Journal ofOrganizational Change Management, Management Decision, Journal of KnowledgeManagement, and British Journal of Management, among others.

Wynne W. Chin is a Professor of Management Information Systems at the University ofHouston (C.T. Bauer College of Business). He received his PhD from the University of Michigan.Before joining the University of Houston faculty in 1997, Wynne taught at the University ofCalgary and Wayne State University. In addition, he holds visiting status at the School ofInformation Systems, Technology and Management at the Australian School of Business, UNSW.Chin’s articles have appeared in many high-quality academic journals, including MIS Quarterlyand Information Systems Research. His research interests include information technologydiffusion, technology acceptance, structural equation modeling (SEM) methodologies, etc.

Figure A1.


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