Key Drivers and Barriers to Technology Adoption Among Small and Medium Enterprises in Indonesia

Abstract

Small and Medium Enterprises (SMEs) play a critical role in global economic growth, employment, and innovation. In Indonesia, SMEs contribute approximately 61% to the nation’s GDP and provide jobs for around 117 million people, serving as engines of regional resilience and poverty reduction. However, as digital transformation reshapes industries worldwide, Indonesian SMEs face growing pressure to adopt new technologies to remain competitive. While technology adoption can improve operational efficiency, productivity, and market opportunities, SMEs encounter significant barriers, such as high complexity, limited human expertise, and rapidly changing external environments. Understanding these factors is vital to addressing the challenges of technology adoption and enabling SMEs to thrive in an increasingly competitive global marketplace. This study aims to explore the drivers and barriers influencing technology adoption among SMEs in Indonesia and examine the moderating role of environmental dynamism in this process. By employing a mixed-methods approach, the study integrates qualitative and quantitative findings to provide a comprehensive analysis. The qualitative phase involved multiple case studies of SMEs, which offered insights into the challenges and enablers of technology adoption. These findings informed the experimental design in the quantitative phase, where scenario-based manipulations were used to validate and quantify the relationships between key variables. The qualitative findings identified technology complexity as a significant barrier, deterring SMEs from adopting new technologies due to perceived difficulties in understanding and integration. Many SMEs reported concerns about the resources and expertise required to implement complex systems effectively. On the other hand, human expertise and skills emerged as critical drivers of technology adoption. SMEs with well-trained personnel were better equipped to manage complexity and integrate new technologies into their operations. Environmental dynamism, marked by frequent and unpredictable changes in the operating environment, emerged as a crucial factor. Dynamic market conditions and regulatory shifts added further challenges for SMEs. While these environments amplified risks, they also compelled firms to innovate and adapt to remain competitive. The quantitative phase validated these insights through an experimental study involving 159 participants from SMEs across Indonesia. The study confirmed that technology complexity significantly hinders adoption intentions, particularly in dynamic environments where the perceived risks of adopting complex technologies are heightened. However, in such environments, SMEs were also more likely to adopt complex technologies as a survival strategy. Human expertise emerged as a key driver, enabling SMEs to navigate technological challenges and facilitate smoother adoption processes. The study also revealed that environmental dynamism moderates these relationships, with its impact varying based on the levels of complexity and expertise. SMEs with lower expertise showed increased adoption intentions in dynamic environments, although their processes were less efficient compared to firms with higher expertise. In conclusion, this research underscores the dual role of internal and external factors in shaping technology adoption among SMEs. Technology complexity acts as a barrier, while human expertise is a driver that enhances adoption capabilities. Environmental dynamism amplifies these dynamics, emphasizing the need for SMEs to align their strategies with both organizational resources and external conditions. This study contributes to the literature by integrating theoretical frameworks and employing a rigorous mixed-methods design, providing actionable insights for fostering technology adoption and innovation among SMEs in Indonesia.

Keywords: complexity, environmental dynamism, experimental study, human skills and expertise, technology adoption in SMEs