A STUDY ON ADOPTION OF TECHNOLOGY IN SMEs FOOD INDUSTRY: UTAUT MODEL

FAIRUS BINTI ABU

MASTER OF SCIENCE IN TECHNOLOGY MANAGEMENT

(Uppercase, centred, bold, 18 point coloured font)

2016

Master of Science in Technology Management

2016

Faculty of Technology Management and Technopreneurship

A STUDY ON ADOPTION OF TECHNOLOGY IN SMEs FOOD INDUSTRY: UTAUT MODEL

Fairus Binti Abu

A STUDY ON ADOPTION OF TECHNOLOGY IN SMEs FOOD INDUSTRY : UTAUT MODEL

FAIRUS BINTI ABU

A thesis submitted in fulfillment of the requirements for the degree of Master of Science

in Technology Management

Faculty of Technology Management and Technopreneurship

UNIVERSITI TEKNIKAL MALAYSIA MELAKA

2016

DECLARATION

I declare that this thesis entitled “A Study on Adoption of Technology in SMEs Food

Industry : UTAUT Model” is the result of my own research except as cited in the

references. The thesis has not been accepted for any degree and is not concurrently

submitted in candidature of any other degree.

Signature : ...........................................

Name :

Date :

APPROVAL

I hereby declare that I have read this thesis and in my opinion this thesis is sufficient in

terms of scope and quality for the award of Master of Science in Technology Management.

Signature :……………. .....................................................

Supervisor Name : DR. JUHAINI BINTI JABAR

Date :

DEDICATION

I dedicate this thesis to my beloved father and mother, Mr. Abu Musa and Mdm. Jasnah

Binti Baba and also to my lovely family.

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ABSTRACT

Small and medium enterprises (SMES) are the backbone of the world and the local economy including Malaysia as one of the developing countries. It is estimated that more than 90 percent of all enterprises are SMES and the contribution from SMES is more than 70 percent of goods and services that are sold all over the world. In Malaysia, the food industry is primarily dominated by SMEs. However, SMEs in Malaysia are still utilizing low-technology in producing their products. The adaptation of technology in Malaysian SMEs occur at a slow rate due to high costs and most importantly the lack of knowledge and capability of SMEs. The contribution of the economy and competitiveness of food manufacturing SMEs in Malaysia can be enhanced through the use of high technology. Therefore, the Unified Theory of Acceptance and Use of Technology (UTAUT) model is tested and revalidated in this research to understand and measure the use and acceptance of technology in SMEs. The UTAUT model is useful to explain the behaviour of the use of technology by the user. In this research, UTAUT model was verified in the context of SMEs in the food industry in Malaysia. Accordingly, this study has analyzed 135 food manufacturing SMEs in Malaysia to understand the behaviour of SMEs towards the acceptance and use of technology. The data was then analyzed using SPSS through exploratory factor analysis and multiple linear regression analysis. As a result, UTAUT model for SMEs food industry have been introduced. The results has demonstrated that social influence, expected effort and performance are significant in influencing behavioural intentions to use technology. In addition, the conclusion of this study provides a wide range of implications in the different context of use and acceptance of food manufacturing

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ABSTRAK

Perusahaan kecil dan sederhana (PKS) merupakan tulang belakang kepada ekonomi dunia dan ekonomi tempatan termasuk Malaysia sebagai salah satu daripada negara-negara membangun. Adalah dianggarkan bahawa lebih daripada 90 peratus daripada perusahaan adalah PKS dan sumbangan daripada PKS adalah lebih daripada 70 peratus daripada barangan dan perkhidmatan yang dijual di seluruh dunia. Di Malaysia, industri makanan terutamanya dikuasai oleh PKS. Walau bagaimanapun, PKS di Malaysia masih menggunakan teknologi yang rendah dalam menghasilkan produk mereka. Adaptasi teknologi dalam PKS Malaysia berlaku pada kadar yang perlahan kerana kos yang tinggi dan yang paling penting kekurangan pengetahuan dan keupayaan PKS. Sumbangan ekonomi dan daya saing PKS pembuatan makanan di Malaysia boleh dipertingkatkan melalui penggunaan teknologi tinggi. Oleh Itu, model Teori Bersepadu Penerimaan dan Penggunaan Teknologi (UTAUT) diuji dan disahkan semula dalam kajian ini untuk memahami dan mengukur penggunaan dan penerimaan teknologi dalam PKS. Model UTAUT berguna untuk menerangkan tingkah laku penggunaan teknologi oleh pengguna. Di dalam kajian ini, model UTAUT ini telah disahkan dalam konteks PKS dalam industri makanan di Malaysia. Sehubungan itu, kajian telah menganalisa 135 PKS pembuatan makanan di Malaysia. Sehubungan itu,kajian ini telah menganalisa 135 PKS pembuatan makanan di Malaysia untuk memahami tingkah laku PKS terhadap penerimaan dan penggunaan teknologi. Data kemudiannya telah dianalisis menggunakan SPSS melalui analisis faktor penerokaan dan analisis regresi linear. Hasilnya, model UTAUT bagi industri maka nan PKS telah diperkenalkan. Keputusan telah menunjukkan bahawa pengaruh sosial, usaha jangkaan dan prestasi adalah penting dalam mempengaruhi niat tingkah laku untuk menggunakan teknologi. Di samping itu, kesimpulan kajian ini menjelaskan pelbagai implikasi dalam konteks yang berbeza terhadap penggunaan dan penerimaan teknologi pembuatan makanan di PKS.

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ACKNOWLEDGEMENTS

Alhamdulillah. Praise be to Allah (SWT) the Almighty for the successful completion of this thesis as through His Grace and the prayers of my loved ones, this challenging journey in the pursuit of my master study has finally reached its destination. I would have never done this alone without the support of loving people around me.

There are number of peoples to whom I owe a great deal of gratitude. I wish to convey my utmost gratitude to Dr. Juhaini Binti Jabar, my beloved supervisor for her encouragement, valuable suggestions and advice during the entire period of this research. I am also indebted for her helpful comments, support and understanding.

My special thanks are also for my second supervisor, Professor Dr. Ahmad Rozelan Bin Yunus, for giving me opportunity and great experience as Graduate Research Assistant as part of MTUN research team and provide me with valuable advice and suggestion.

My sincere thanks also goes to my dear friends who have help me a lot during my thesis writing and make sure that I’m not alone facing this journey, together motivated each other. Dr. Siti Hajar, Mastura, Zaliza, Hazwani, Maizura, Zainab, Rafidah and all fellow postgraduate friends at FPTT Graduate room, UTeM. Thank you so much

Finally, I wish to express my gratitude and utmost appreciation to my beloved parents Mr. Abu Musa and Mdm. Jasnah Baba and not forget to my siblings, Zalizal, Zulfaszali, Fadilah, Mohd Fadir, Mohd Fuad and Fatin for their prayer and encouragement for me to complete this journey. Words of mouth are not enough to thank you all. May Allah repay with something good in return.

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TABLE OF CONTENTS

PAGE DECLARATION DEDICATION ABSTRACT i ABSTRAK ii ACKNOWLEDGEMENTS iii TABLE OF CONTENTS iv LIST OF TABLES vii LIST OF FIGURES ix LIST OF APPENDICES x LIST OF ABBREVIATIONS xi CHAPTER 1. INTRODUCTION 1 1.0 Introdcution 1 1.1 Food Industry Malaysia 1 1.2 Small Medium Entreprise 3 1.3 Technology Adoption 5 1.4 Adoption Theory 6 1.5 Problem Statement 9 1.6 Research Objective 11 1.7 Research Questions 11 1.8 Significance of Study 12 1.9 Research Methodology 13 1.10 Research Delimitation 13 1.11 Definition of Term 14 1.12 Layout of Thesis 15 2. LITERATURE REVIEW 17 2.0 Intoduction 17 2.1 Food Industry in Malaysia 17 2.2 Small Medium Enterprise 19 2.3 Technology Adoption 21 2.4 Adoption Theory 26 2.4.1 Innovation Diffusion Theory (IDT) 26 2.4.2 Theory of Reasoned Action (TRA) 28 2.4.3 Theory of Planned Behaviour 29 2.4.4 Technology Acceptance Model (TAM) 31 2.5 Unified Theory Acceptance and Use of Technology (UTAUT) 35 2.5.1 UTAUT Constructs in this Study 37 2.5.1.1 Independent Variables 37 2.5.1.2 Dependent Variable 40 2.5.1.3 Moderator Variables 41 2.6 UTAUT Practice in Malaysia 43 2.7 Summary of Chapter 45

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3. THEORETICAL FRAMEWORK AND HYPOTHESES 46 3.0 Introduction 46 3.1 Research Focus 46 3.2 Research Question 49 3.3 Research Hypotheses 49 3.3.1 Relationship between UTAUT Factors and 49 Behavioural Intention to Use 3.4 Theoretical Framework 57 3.5 Summary of Chapter 59 4. RESEARCH METHODOLOGY 60 4.0 Introduction 60 4.1 Operationalization of Constructs 60 4.2 Research Instrument 67 4.2.1 Pilot Testing of Questionnaire 67 4.2.2 Final Questionnaire 68 4.3 Population and Sampling 69 4.3.1 Questionnaire Distribution 70 4.3.2 Missing Data 71 4.3.3 Check for Outlier 71 4.3.4 Distribution of Respondents 72 4.4 Data Analysis Procedures 72 4.4.1 Scale Reliability and Validity 73 4.4.2 Exploratory Factor Analysis 73 4.4.3 Correlation Analysis 74 4.4.4 Regression Analysis 74 4.4.5 Hierarchical Regression Analysis 75 4.5 Summary of Chapter 75 5. ANALYSIS RESULT AND DISCUSSION 76 5.0 Introduction 76 5.1 Frequencies Analysis Result 76 5.2 The Analysis Result of Behavioural Intention of Adoption 84 Technology as Performance Expectancy, Effort Expectancy Social Influence and Facilitating Condition 5.2.1 The Analysis Result Constructs of UTAUT Model 84 (Descriptive Statistics) 5.3 Missing Data 88 5.4 Exploratory Factor Analysis (EFA) 90 5.5 Reliability Analysis Result 99 5.6 Correlation Analysis Result 100 5.7 Multiple Regression Result 102 5.8 Hierarchical Regression Analysis Result 105 5.8.1 Relationship Moderator with UTAUT Factors 106 5.9 Finalized Model for SMEs Food Industry 108 5.10 Discussion on Findings 110 5.11 Summary of Chapter 120

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6 CONCLUSION,IMPLICATION AND LIMITATIONS 121 6.0 Introduction 121 6.1 Summary of the Findings 122 6.2 Theoretical Implication 124 6.3 Managerial Implication 125 6.4 Policy Maker 127 6.5 Limitation of Study and Future Recommendation 129 6.6 Conclusion 130 REFERENCES 132 APPENDICES 153

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LIST OF TABLES

TABLE TITLE PAGE

2.1 Definition of SMEs 2014 20 2.2 The Summary of Previous Theories 34 2.3 Basic Construct and UTAUT Model Constructs 36 2.4 Summary of Moderator Variables 42 4.1 Structure of the Research Instrument 62 4.2 Items Measuring Background of Organization 63 4.3 Items Measuring Technology adoption and Experience 65 5.1 Respondent’s Profile Data 77 5.2 The Analysis Result of Respondent’s Profile Data by Using 78 Descriptive Statistics (Frequencies) 5.3 The Analysis Result of Respondent’s Background of the 80 Firm Data by Using Descriptive Statistics (Frequencies) 5.4 Profile Respondents’ Regarding Technology 82 5.5 Descriptive Statistics of Performance Expectancy 85 5.6 Descriptive Analysis Result of Effort Expectancy 86 5.7 descriptive Analysis Result of Social Influence 87 5.8 Descriptive Analysis Result of Facilitating Condition 88 5.9 Missing Data Result 89 5.10 Exploratory Factor Analysis 93 5.11 Exploratory Factor Analysis 96 5.12 Exploratory Factor Analysis Final Result 98 5.13 Reliability Analysis 99 5.14 Correlation between Constructs UTAUT and Behavioural 100 Intention to Use

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5.15 Model Summary for UTAUT Factors 102 5.16 ANOVA for UTAUT Factors 102 5.17 Coefficients Result for UTAUT Factors 103 5.18 Summary of Findings 118

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LIST OF FIGURES

FIGURE TITLE PAGE

2.1 Theory of Reasoned Action (Fisbien and Ajzen, 1975) 28

2.2 Theory of Planned Behaviour (Ajzen, 1985, 1991) 30

2.3 Technology Acceptance Model (Venkatesh and Davis, 2000) 31

3.1 UTAUT Model for SMEs Food Industry 51

5.1 Finalized Model for SMEs Food Industry 109

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LIST OF APPENDICES

APPENDIX TITLE PAGE

A Information Sheet 153

B Questionnaire 154

C Table of Moderator Relationship 160

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LIST OF ABBREVIATIONS

SMEs - Small Medium Enterprise

TAM - Technology Acceptance Model

TRA - Theory of Reasoned Action

TPB - Theory of Planned Behaviour

IDT - Innovation Diffusion Theory

UTAUT- Unified Theory of Acceptance and Use of Technology

PE - Performance Expectancy

EE - Effort Expectancy

SI - Social Influence

FC - Facilitating Condition

BI - Behavioural Intention to Use

χ2 - Chi-square

p - Significant value df - Degree of Freedom Sig - Significant

LIST OF PUBLICATIONS

Refereed Journal Article

Abu, F., Jabar, J. & Yunus, A.R., 2015. Modified of UTAUT Theory in Adoption of Technology for Malaysia Small Medium Enterprises ( SMEs ) in Food Industry. Australian Journal of Basic and Applied Sciences, 9(4), pp.104–109.

Fairus , Abu and Ahmad Rozelan, Yunus and Izaidin, Abdul Majid and Juhaini, Jabar and Amir, Aris and Hamzah , Sakidin (2014) Empowering smart customer to participate in electricity supply system: Extended of technology acceptance model. Journal of Technology Management and Technopreneurship. pp. 85-94. ISSN 2231-7996 (In Press)

Refereed Conference Papers

Fairus Abu, Juhaini Jabar, Ahmad Rozelan , (2014) A Review Unified theories of Acceptance and Use of Technology (UTAUT): Technology Acceptance in Malaysia, Paper presented at 8th MUCET Universiti Teknikal Malaysia, Melaka 2014.

http://eprints2.utem.edu.my/12984/http://eprints2.utem.edu.my/12984/

CHAPTER 1

INTRODUCTION

This chapter has introduce the food industry in Malaysia, alongside with the

problem statement, research objectives, research questions, significance of study, and

research limitations.

1.1 Food Industry in Malaysia

The food industry plays an important role in Malaysia’s economy. The Malaysian

food industry is diverse as Malaysia has a multicultural community which brings a wide

range of Asian food. The food processing industry in Malaysia accounts for approximately

10 percent of the country’s total manufacturing output. The processed food is exported to

more than 200 countries with an annual export value of more than RM 13 billion,

amounting to two thirds of the total food exports of over RM 20 billion in 2012 (MFBD,

2014). Malaysia’s total export of food and beverages remained stable at RM 15.5 billion

in 2012, almost the same as in 2011. The main exports in 2012 were RM3.3 billion of

cocoa and cocoa preparations, and RM 5 billion in other processed food (MITI, 2012).

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In the Malaysia’s Industrial Plan period of 2006-2020 (IMP3), the Ministry of

International Trade and Industry (2012) targets that the food processing industry’s

investment to be at RM 24.6 billion. Currently, functional food, health food, convenience

food, food ingredients and halal food are the key growth areas in the Malaysian food

industry. This was determined on the basis of its potential contribution to manufacturing

development, particularly with respect to employment generation, foreign exchange

savings and value added creations (Ahmed, 2012).

The food industry has always provided plenty of opportunities for investments, thus

the Malaysian government chose the food processing sector as its priority in the context of

industrial policy. According to the Department of Statistics (2012), Malaysia remains a net

importer of food in 2011 (RM34.5 billion). Major food imports were cereals and cereal

preparation, vegetables and fruits, cocoa, sugar and sugar confectionary. Nonetheless, there

are a few problems or factors faced by the food industry in Malaysia that differentiates the

striking growth between this sector and other manufacturing industries in Malaysia

(MIDA, 2012). A number of factors are responsible for the imbalanced growth, such as

low quality of raw materials, high labour costs, inconsistent supply, poor technological

inputs, lack of skilled manpower and problems relating to changes and implementation of

government policies for industrialization.

However, the food processing industry is mainly Malaysian-owned and dominated

by small medium enterprise (SME) companies. The majority of them are still using low

technologies to produce their products, for example in the preparation of traditional food

such as ‘kuih bahulu’, frozen curry puff, ‘keropok lekor’ and others. These companies still

rely on manual labour and lack quality standards in their food production.

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1.2 Small Medium Enterprise (SMEs)

According to SME International Malaysia (2013), some advance economies have

succeeded because their small medium enterprise industry comprises over 98 percent of

their total establishment and contributes over 65 percent employment as well as over 50

percent of gross domestic product (GDP). Although the numbers might be lower in

Malaysia, SMEs still have the potential to provide a strong basis for growth of new

industries for Malaysia’s future development. Developing stronger SMEs require major

changes in the manufacturing sector, as SMEs make up over 90 percent of Malaysia’s

manufacturing sector.

Malaysian SMEs were expected to record a steady growth pace of 6.5 to 7.0

percent in line with the official GDP projection of 4.5 to 5.0 percent to be achieved in 2012

(Economic Census, 2011). The latest statistics from the Census show that Malaysian SMEs

now constitute 97.3 percent (645,136) from the total of 662,939 establishments in the

country (SME, 2012).

Malaysian SMEs play a major in contributing towards economic growth (Omar et.

al., 2009). The future progress of Malaysia seem to depend greatly on the development of

SMEs and for them to be fully developed. In order to become an industrialized nation by

the year 2020, Malaysia should capitalize on the country‘s strengths and overcome its

weakness through SMEs (Omar et al., 2009). Thus, the government has also recognized the

role of SMEs in the economy and has implemented various policies and programs to assist

them in difficult circumstances (Char et. al., 2010).

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To be more competitive in the global business environment, SMEs require support

or assistance from the government to potentially be the engine of economic growth as seen

in developed countries such as Germany and Japan (Khan and Khalique, 2014).

Furthermore, the success of SMEs in Malaysia enable the country to revolutionize from a

middle income nation to a high income nation. However, there are several constraints that

hinder Malaysian SMEs, such as lack of financing, human capital issues, lack of business

competitiveness, lack of infrastructural support and difficulty to gain access to the

management and technology (Zain et al., 2012). This growing number of challenges as

discussed above may contribute to the low level of efficiency among SMEs in Malaysia,

and this includes the SMEs in the Malaysian food industry. Low levels of productivity and

input quality are the challenges which contribute to the low levels of added value in the

Malaysian food industry, which eventually affects the performance of SMEs (Saleh and

Ndubisi 2006). Low financing and lack of managerial capabilities in Malaysian SMEs are

also the challenges that hinder them from improving their productivity in technology.

In order to enhance their productivity levels yet remain competitive, SMEs need to

keep up with technological changes as well as innovation activities. The Masterplan (2012)

had highlighted innovation and technology adoption as among the most important

indicators of performance in order for Malaysian SMEs to successfully contribute to the

national aspirations of becoming a high income nation by 2020. Technology adoption

among Malaysian SMEs becomes an important issue due to the government focusing on a

fresh approach to bring SMEs to the next level by accelerating growth through productivity

gains and innovation (SME, 2012).

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A complete study on technology adoption was last done in 1988, and there are

limited recent studies on the adoption of various technologies among SMEs in Malaysia

(Abdullah and Shamsuddin 2009). Therefore, the range of SME technology adoption in

Malaysia is still not clear and needs further investigation. The next section discuss on

technology adoption in developing countries.

1.3 Technology Adoption

Technology adoption is one of the processes where organizations or individuals

decide to make full use of an innovation in their daily operation or business (Rogers,

2003). As mentioned by Venkatesh (2003), “for technologies to improve productivity, they

must be accepted and use by employees in organizations” (p.426). Technology works as a

tool to help employees or organizations to improve their productivity levels. Despite the

increased international competition for high skilled employees, several East Asian

countries including Malaysia and Thailand have managed to build globally competitive

sectors that require high levels of technology adoption and utilization (Maynard et al.,

2007). The major issue with developing countries attempting to catch up technologically is

when the current workforce set who are developed under one economic stage have

difficulties in adapting to a new stage (Steinmueller, 2001).

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1.4 Adoption Theory

Several theories have been proposed to explain the adoption of innovations/new

products during last few decades ago, and it attracted the attention of researchers studying

in the information communication field, banking sector, education field and other fields.

The first theory is the diffusion innovation theory (IDT), which is a theory that seeks to

explain how, why and at what rate a new idea or technology spreads through cultures

(Rogers, 1995). Although there are more than four thousand articles across many

disciplines published on this theory, there are some limitations (Robert, 2005). Diffusion is

difficult to quantify because humans and human networks are complex and it is impossible

to measure what exactly causes adoption of an innovation (Damanpour, 1996). For

example, for adoption of technology in the workplace, it is impossible to forecast

individual intentions or their decisions to adopt the technology.

The first theory is theory of reasoned action (TRA) introduced by Fishbein and

Ajzen (1975). This theory is forecast individual behaviour in variety of domains and it is

general develop in social psychology. Although TRA is widely applied in different field of

study but it seems that the power prediction of TRA narrowed to which it is applied under

the context of voluntary behaviour since the original objective of developing TRA are

aimed to explain voluntary behaviour ( Hale et. al, 2003).

The second theory is the theory of planned behaviour (TPB) which was developed

by Ajzen (1991) as an improvement to the TRA model by adding the construct of

perceived behavioural control. The complexity of the TPB model limits its use in

information system research. TPBs include more variables than may be important in most

information systems’ technology implementation (Taylor and Todd 1995).