Journal of Small Business and Enterprise Development

Is there a relationship between information technology adoption and human resource

management?
Wendy R. Carroll Terry H. Wagar
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Wendy R. Carroll Terry H. Wagar, (2010),"Is there a relationship between information technology adoption
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17,2
218
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Journal of Small Business and
Enterprise Development
Vol. 17 No. 2, 2010
pp. 218-229
q Emerald Group Publishing Limited
1462-6004
DOI 10.1108/14626001011041229
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1462-6004.htm
Is there a relationship between
information technology adoption
and human resource
management?
Wendy R. Carroll
University of Prince Edward Island, Charlottetown, Canada, and
Terry H. Wagar
Saint Mary’s University, Halifax, Canada
Abstract
Purpose – The purpose of this paper is to investigate whether the adoption of information
technology is associated with human resource management and organizational restructuring.
Design/methodology/approach – SMEs in Nova Scotia were visited and complete data from 130
firms were obtained.
Findings – The rate of IT adoption varies noticeably among SMEs in Nova Scotia, with less than 10
per cent being high adopters. IT adoption was strongly associated with employer size, organizational
restructuring and investment in human resource management.
Research limitations/implications – The data are cross-sectional and the generalizability of the
results may be limited. While it was found that HRM and IT were strongly related, it was whether they
are associated with higher employer performance was not examined.
Practical implications – The results suggest that IT may play a role in enhancing the human
resource function.
Originality/value – There has been little research exploring the link between HRM and IT adoption,
particularly among small firms. This paper fills some of the gaps.
Keywords Human resource management, Communication technologies, Organizational restructuring,
Small to medium-sized enterprises, Canada
Paper type Research paper
Introduction
An extensive body of knowledge exists in both the academic and practitioner literature
relating to firm assessment and adoption of technology for future strategic purposes.
Much of this research focuses on the ability of large businesses to adjust, change, and
maximize new technologies. This emphasis on technology adoption has been driven by
significant changes over the last 20 years which have resulted in changes in the ways
we live and work. Technology has further revolutionalized the ways in which many
companies do business, forcing a paradigm shift for management that has resulted in
new and innovative approaches to carrying out business with customers, employees
and other stakeholders (Loebbecke and Wareham, 2003).
The support of the Social Sciences and Humanities Research Council of Canada is gratefully
acknowledged.
 Although the literature relating to large business adoption and use of information A relationship
technology (IT) has grown, much less emphasis has been placed on the effects it has on between IT and
small and medium-sized businesses. Further, even less focus has been placed on
companies’ investment strategies and direction for associated outcomes to areas such HRM?
as human resource management.
This paper uses data obtained from a survey of small and medium-size businesses
in Nova Scotia, Canada to investigate the factors associated with IT adoption and use 219
of technology. The model includes organizational characteristics of the firm and a set
of variables addressing aspects of organizational change, and human resource
management (HRM). The objective of this paper is to examine whether the adoption of
information technology is associated with employer investment in human resource
management and organizational restructuring.
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Literature review
The emergence of IT adoption and use models
Several studies have attempted to develop a holistic approach to assessing the
importance of technology adoption and the role of information technology (IT) for
different types of organizations, such as large employers and trade unions (Dewett and
Jones, 2001; Fiorito and Bass, 2002; Fiorito et al., 2000, 2002). Each of these studies
identify specific organizational characteristics such as size, structure, culture, and
learning, as well as strategic planning and innovation, as key variables in investigating
the role of technology on outcomes such as efficiency and innovation. In addition, there
is a growing literature on technological acceptance (Venkatesh and Davis, 2000). As
observed by Dewett and Jones (2001, p. 337), technology “will only lead to competitive
advantage when they (employers) leverage or exploit pre-existing, complementary
human and business resources”.
A pervasive theme in the literature has been the development of a framework for IT
adoption using the innovation literature as a starting point (Dewett and Jones, 2001;
Fiorito and Bass, 2002; Fiorito et al., 2000, 2002). Innovation has been studied as both
an organizational characteristic and an outcome of technology adoption, and includes
such organizational determinants as strategic planning and structures, leadership and
experience, culture, and technical knowledge (Damanpour, 1991). Organizations that
respond to or pre-empt threats in their environment by adopting new methods,
products, processes, or structures are considered to be innovative (Chattopadhyay et al.,
2001; Dewett and Jones, 2001; Lohrke et al., 2006).
Small and medium-sized employers (SMEs) have long been recognized as having
unique features and characteristics given their entrepreneurial roots (d’Amboise and
Muldowney, 1988). Although the body of work addressing the role of technology
adoption in business organizations has expanded markedly in recent years, these
findings may or may not be similarly applied to SMEs, as has been noted by
researchers studying other forms of organizations (Fiorito et al., 2000).
As noted by Jeyaraj et al. (2006), a common theme in the literature is the focus on the
factors associated with information and communication technology (ICT). In addition,
a number of researchers have addressed the issue of barriers to adoption (MacGregor
and Vrazalic, 2005). However, there are several key areas deserving of research
attention (Matlay, 2004).
 JSBED There is an expanding body of research examining internet adoption and SMEs. While
17,2 one US survey reported that more than half of SMEs had web sites, a number of
respondents did not see value in selling products or services on-line (Greenspan, 2003).
Lohrke et al. (2006) review a number of the benefits to SMEs who use the internet
including increasing their geographic reach, increasing efficiency, reducing printing costs,
enhancing communications and improving marketing. Using a transaction cost analysis
220 model, Lohrke et al. found that internet involvement increased for SMEs competing on the
basis of brand name and among firms that had changed product technology.
Dholakia and Kshetri (2004) note that past research has examined the impact of both
internal (such as firm characteristics, firm strategy and past experience with and
attitudes toward technology) and external factors (including infrastructure,
business-related factors and the competitive environment) on the adoption of
information and communications technology. Based on responses from a sample of 45
SMEs in a New England (USA) town, Dholakia and Kshetri observed that while 91 per
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cent of participants owned a computer and 51 per cent had a web site, only 15 per cent
used the web site to sell products or services. Firm size, self-efficacy, prior technology use
and perceived competitive pressure were all associated with greater internet adoption.
Teo (2007) was interested in the factors associated with modes of internet adoption.
Based on results from 159 firms in Singapore, 27 respondents reported not having a
web site, 100 were classified as basic internet adopters, and 32 were considered
advanced internet adopters. When comparing basic and advanced internet users, Teo
found that advanced users invested more in internet technology, were larger in size,
were more likely to perceive the internet as a source of competitive advantage, and
tended to have a more proactive, innovative strategic approach.
In a recent study of Swedish firms, Eriksson et al. (2008) found that more than 90 per
cent of respondents reported using a web site to market their product or service and a
similar percentage used e-mail. However, many firms are not using more advanced
applications; for example less than half of the respondents indicated that customers
can place orders on the internet and less than 20 per cent permitted customers to pay
for products and services on the internet.

SMEs and human resource management

Technology advancements over the past 20 years have presented both an external
threat and internal opportunity for SMEs. Researchers have focused on strategic
considerations regarding capital investment of such technologies (e.g. Human and
Provan, 1997; Jones and Kochtanek, 2004; MacGregor, 2004), as well as various aspects
of technology adoption and uses (MacGregor, 2004; Meckel et al., 2004). The main focus
of these studies has been on the ability of technology solutions to improve
organizational outcomes such as productivity and effectiveness. Findings from these
studies indicate that organization and innovation characteristics play a key role in the
adoption and successful implementation of new technology solutions.
A stream of literature is emerging relating to SMEs and human resource practices
(e.g. Deshpandé and Golhar, 1994; Sundbo, 1999; Wilkinson, 1999; McElwee and
Warren, 2000; Brand and Bax, 2002; Cassell et al., 2002). Although some advancements
in the use of human resource practices by small to medium-sized businesses have been
identified, the research reveals that SMEs vary markedly from large firms, and the
management of human resources tends to be fragmented, descriptive, and diverse.
 Most of the recent HRM research in SMEs has focused on HRM adoption. For A relationship
example, Kotey and Sheridan (2004) concluded that firm size plays an important role in between IT and
terms of HRM, with a more hierarchical structure, greater documentation and
increased documentation as firm size increases. De Kok et al. (2006) found that HRM?
employers that are family-owned or managed are less likely to use professional HRM
practices while Barrett and Mayson’s (2007) study of Australian SMEs revealed that
growth-oriented firms were more likely to have formal HRM practices. 221
An area that is just starting to attract research attention is the association between
human resource management and firm performance in SMEs. Carlson et al. (2006)
compared high and low sales-growth SMEs and found that high-growth firms were
more likely to place a greater degree of importance on training and development,
employee performance appraisal, employee morale, competitive compensation and
incentive compensation. In addition, Sels et al. (2006) concluded that HRM intensity
was strongly associated with increased productivity and profitability.
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SMEs and IT adoption

From a social exchange lens, there are clear links between investment in human resources
and the use of IT. Snell et al. (1995) believed that IT could not only provide employees
with access to HRM-related information but also reduce response time to some employee
concerns and enhance service. In addition, Lai (2001) asserts that a strong link between
HRM and information technology will allow an organization to exploit the use of
technology and benefit employees. However, Seddon et al. (2002) concluded that many
organizations fail to rigorously evaluate their IT investments, with only around 50 per
cent of employers conducting post-implementation evaluations of IT projects.
Based on studies of seven large organizations in the UK, Gratton et al. (1999) used a
people process model to examine how business strategies are translated through HRM
strategies and people processes into employee and employer performance. They found
that the linkage was stronger for short-term people processes (such as short-term
training and leadership development) and weaker for longer-term oriented processes
such as a long-term people strategy.
Although there are fewer studies examining the link between IT adoption and use and
HRM, Bartol and Liu (2002) argue that HRM practices and policies may reflect a firm’s
core cultural values and play an important role in shaping the climate and culture of an
organization. They assert that HRM can help support the belief that people are a major
source of competitive advantage, “particularly in the context of the emerging technology
interface, which facilitates both push (forward to employees) and pull (make available for
retrieval) information options via such means as the Internet and intranets” (Bartol and
Liu, 2002, p. 227). By way of example, electronic networks can be used to communicate
messages from top management, announce news events affecting the organization, and
provide employees with information about a wide range of workplace issues.
Gera and Gu (2004) found that ICT adoption and human resource management are
complements; in other words, firm investment in a number of HRM practices was
positively associated with ICT use. In addition, their findings also revealed that firms
with a higher investment in ICT were more likely to report a higher incidence of
organizational change.
IT can be viewed as a means of providing basic information to employees but it may
also be asked to play a significant role in enhancing employment relationships. For
 JSBED example, the use of flextime and teleworking can increase employee commitment to the
17,2 organization, aid in retaining quality employees, help employees balance work and
family issues, and improve workplace performance. Although there is growing
evidence that HRM practices are associated with higher performance, Ramsay,
Scholarios and Harley (2000, p. 503) observe that there is a causal link between HRM
practices and performance when they state that “the associations reflect a causal link
222 which flows from practices through people to performance.”
To sum, technology adoption and use varies among different organizational types.
Small and medium-size businesses have unique organizational characteristics which
leads to different outcomes relating to investment strategies and decisions. We
anticipate that firms who invest heavily in human resources might also be more likely
to adopt information technology, and this paper seeks to examine whether there is a
relationship between investment in IT and HRM practices.
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Method
Data collection
The data for this study were collected by means of a survey of senior managers or
owners in Nova Scotia (Canada) businesses with a maximum of 100 employees. Rather
than mail the survey to potential respondents, each business was visited in person, the
purpose of the survey was explained, and a copy of the survey was left with the
appropriate individual. Approximately three to five days later, we went back to the
businesses to collect the completed surveys. While this approach to data collection was
somewhat labour-intensive, it allowed us to identify appropriate participants, answer
any questions about the study, and personally meet the business owners or managers.
Although a total of 145 firms participated in the study, 15 respondents were excluded
from our analysis because of missing data on the dependent or independent variables.

Dependent variable
Our primary objective was to investigate whether the adoption of information
technology (IT) was associated with employer investment in human resource
management and organizational restructuring. Our dependent variable, which we label
the “use of information technology”, was influenced by the IT use scale developed by
Fiorito et al. (2002). We measured IT use by having respondents consider 12 potential
uses of information technology and report on how frequently each was used within the
organization using a six-point scale (1 ¼ “never used” and 6 ¼ “used a lot”). To give a
few examples, respondents were asked about the use of word processing, spreadsheets
(such as Lotus or Excel), database applications (such as Access and Foxpro), and
video-conferencing. We averaged the responses across the twelve items and the
Cronbach’s coefficient alpha for the scale was 0.88.

Primary independent variables

Although there is a growing interest in the adoption of human resource management
practices and the effect of HRM systems on organizational performance (Becker and
Huselid, 2006), there is little work investigating whether IT adoption is associated with
employer investment in human resource management. Our human resource
management scale was adapted from Bae and Lawler (2000). Respondents were
asked to indicate their level of agreement (1 ¼ “strongly disagree” and 6 ¼ “strongly
 agree”) with 14 statements addressing four dimensions of human resource A relationship
management (investment in training, employee decision-making, selective hiring, between IT and
and employee compensation). Sample items included “the organization places a high
priority on training”, “the organization gives employees enough discretion in doing HRM?
work”, and “the organization makes a strong effort to hire the right person for the job”.
The Cronbach’s coefficient alpha for the scale was 0.90.
The degree of organizational restructuring was calculated by averaging responses 223
to six items (sample items included redesigning jobs, eliminating unnecessary tasks,
and reducing layers of management). There is a considerable volume of research on
downsizing but noticeably less work on restructuring (Cameron, 1994; Chadwick et al.,
2004). Each of the items comprising the restructuring scale was measured using a
six-point scale (1 representing no use of the restructuring method and 6 indicating a lot
of use). The Cronbach’s coefficient alpha for this scale was 0.84.
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Control variables
A number of other variables are used as control variables. These include the demand
for the employer’s primary product or service (1 ¼ “substantial increase”;
6 ¼ “substantial decline”), whether the business was part of a larger organization
(1 ¼ “yes”; 0 ¼ “no”), the percentage of the firm’s market that is Canadian, the union
status of the business (1” ¼ “union; 0” ¼ “non-union), the size of the business (natural
logarithm of the number of employees) the age of the business (natural logarithm of the
number of years the business has been operating), and the industry sector
(1 ¼ “manufacturing”; 0 ¼ “service”). Previous research (Dewett and Jones, 2001;
Fiorito et al., 2000; Bayo-Moriones and Lera-Lopez, 2007) has demonstrated the
importance of controlling for such organizational characteristics.

Results
Descriptive statistics
The descriptive statistics for the study are provided in Table I. Respondents, on average,
reported a very modest increase in demand for their firm’s primary product or service,
about 42 per cent were part of a larger organization (that is, two or more facilities), only
about 6 per cent were unionized, and just under one-third were in the manufacturing
sector. For most of the businesses, their primary market was Canadian-based. There was
modest evidence of organizational restructuring (average score of 3.58 out of a maximum
of 6.00), and the score on the human resource management scale was 4.39, indicating that

Variable Mean Standard deviation

Product/service demand 3.32 1.36

Part of larger organization 0.42 0.50
Percentage of market that is Canadian 82.86 29.40
Union status 0.06 0.24
Number of employees (natural log) 2.75 1.02
Years in operation (natural log) 2.69 0.98
Industry sector (manufacturing) 0.32 0.47
Organizational restructuring 3.58 0.77 Table I.
Human resource management scale 4.39 1.48 Descriptive statistics
 JSBED a number of businesses are placing some emphasis on human resource management.
17,2 However, only 15 per cent of employers had a score greater than 5.0 (representing a
strong investment in human resource management).
With reference to employer size, most of the firms were quite small. One-third of
respondent businesses had ten employees or less, 52 per cent had between 11 and 50
employees, and only 15 per cent had more than 50 employees. In terms of the age of the
224 businesses, 16 per cent had been in operation for five years or less, 38 per cent had been
in business for 6 to 15 years, 19 per cent had been in operation for 16 to 25 years, and 27
per cent had been in existence for more than 25 years.

IT adoption
The average score for the 12-item use of information technology scale was 3.58. In
Table II, we provide descriptive information on the use of information technology. Note
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that almost 14 per cent of businesses were very low users of IT (score of 2.0 or less)
while only about 9 per cent of firms were high IT users (as measured by an average
score greater than 5.0 out of a maximum of 6.0 on the use of IT scale). In terms of
specific IT use, the most common uses of information technology included internet
access, the use of spreadsheets and word processing software, and the use of e-mail for
communicating with employees. The lowest level of IT use was for video-conferencing,
satellite/cable TV, and desktop publishing. The results suggest that some firms are
making extensive use of IT but there is wide variation both in terms of IT use and the
use of specific applications.

OLS regression results

We report the hierarchical regression results in Table III. We entered the variables in
three blocks – the first block contained the full set of control variables, the second
included the organizational restructuring variable, and the third block was comprised
of the human resource management scale.
The control variables explained almost 24 per cent of the variance in the use of
information technology scale (Model 1). When considering the full model (Model 3), IT
use was significantly associated ( p , 0.05) with the business being part of a larger
organization (more than one establishment), the number of years the business had been
in operation (p , 0.05), and the number of employees ( p , 0.01). In other words, the
use of information technology tends to increase if the business is part of a larger
organization and as the number of employees gets higher. However, the results also
suggest that greater use of IT is more common within younger firms.

IT usage Percentage of firms Cumulative total

Score of 2.00 or less 13.8 13.8

Score between 2.01 and 3.00 13.8 27.6
Score between 3.01 and 4.00 30.3 57.9
Score between 4.01 and 5.00 33.1 91.0
Table II. Score greater than 5.00 9.0 100.0
Use of information
technology Note: 1 ¼ Never used; 6 ¼ Used a lot
 Variable Model 1 Model 2 Model 3
A relationship
between IT and
Product/service demand 2 0.074 2 0.128 2 0.111
Part of larger organization 0.160 * 0.157 * 0.175 ** HRM?
Percentage of market that is Canadian 2 0.176 * * 2 0.153 * 2 0.119
Union status 2 0.007 2 0.043 2 0.035
Number of employees 0.365 * * * 0.306 *** 0.332 ***
Years in operation 2 0.080 2 0.069 2 0.082 ** 225
Industry sector (manufacturing) 2 0.008 0.011 0.032
Organizational restructuring 0.288 *** 0.260 ***
HRM scale 0.256 ***
F-test 5.472 * * * 6.842 * * * 7.472 ***
R-square 0.239 0.311 0.374
Change in R-square 0.072 0.063
Number of observations 130 130 130
Table III.
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Notes: * p , 0.10; * * p , 0.05; * * * p , 0.01 (standardized betas are reported in the Table) OLS regression results

With reference to the organizational restructuring variable, the coefficient is positive

and significant at p , 0.01 in both Models 2 and 3. Adding the organizational
restructuring variable in Model 2 increased the R-square by more than 7 per cent. It
appears that employers who are engaging in more organizational restructuring are also
greater users of information technology. In addition, there is a strong and positive
relationship ( p , 0.01; R-square change of more than 6 per cent) between IT use and
the human resource management scale (Model 3). In short, employers who invest more
in IT also place more importance on human resource management.
To further examine the relationship between IT use and human resource management,
we ran four additional regressions (see Table IV). Each of the regressions included the full
set of control variables and the organizational restructuring variable as well as one of the
four HRM components (employee compensation, problem solving, selection of employees,
and training of employees). Three of the variables (employee compensation, selection of
employees, and training of employees) were significant at p , 0.05 and the problem
solving variable was significant at p , 0.01. The results provide some evidence for the
position that firms investing in IT tend to make greater use of merit-based compensation,
are more vigilant in terms of selecting employees, develop a climate of trust and a focus on
problem-solving and employee discretion, and invest more in training of employees.

Variable Model 1 Model 2 Model 3 Model 4

Control variables/restructuring Included Included Included Included

Compensation 0.154 * *
Problem solving 0.232 * * *
Selection of employees 0.180 * *
Training of employees 0.196 * *
F-test (full model) 6.682 * * * 7.459 * * * 6.943 * * * 7.105 * * *
R-square (controls/restructuring) 0.311 0.311 0.311 0.311
R-square (full model) 0.334 0.359 0.342 0.348 Table IV.
Change in R-square 0.023 0.048 0.031 0.037 OLS regression results –
Number of observations 130 130 130 130 HRM components
 JSBED Supplemental analysis
17,2 The survey also asked participants to describe the participation of non-managerial
employees in decisions relating to technological change. This question was adapted
from Bemmels and Reshef (1991). Approximately 32 per cent of firms indicated that
employees are partners in the decision-making process, 31 per cent reported that
employees only advise management about their technological change, 21 per cent
226 stated that employees are only informed in advance of technological changes to be
made, and 16 per cent responded that employees are not involved in the
decision-making process relating to technological change.
We ran another regression which included the control variables, organizational
restructuring and human resource management scale measures, and a set of dummy
variables measuring the participation of non-managerial employees in technological
change decisions (the three variables were: advise management, employees informed,
and employees not involved; employees as partners in the decision-making process
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was the comparison category). Adding these three variables explained an additional 5
per cent of the variance in the use of information technology. The coefficient on the
employees are not involved in the decision-making process variable was negative and
highly significant ( p , 0.01), suggesting that higher users of IT tend to have at least
some level of employee involvement in technological change decisions. A copy of these
results is available on request.

Conclusion
In terms of IT adoption, there was considerable variation among the participating
small and medium-sized firms. A number of businesses make very little use of
information technology while about 10 per cent are high users. The most common uses
by SMEs included accessing the internet, using spreadsheets and word processing
software, and the use of e-mail for communicating with employees. Not surprisingly,
IT use is positively associated with employer size. In addition, newer firms tended to
make more use of information technology.
The results relating to IT use and organizational restructuring indicated that
organizations engaging in restructuring make greater use of IT. This finding is in line
with past research (Damanpour, 1991; Dewett and Jones, 2001) and supports the position
that businesses undergoing change (such as redesign of jobs and elimination of
unnecessary tasks) may see the use of information technology as an important part of the
change process. Cameron (1994) observes that organizations often look for quick fixes
(such as cutting staff) rather than developing effective restructuring strategies. However,
some firms do embark on the demanding process of critically evaluating what the
organization does and how it can be improved (Freeman, 1999), and it is these firms that
may see IT as playing an important part in improving work processes and work redesign.
Is investing in IT a substitute for investment in human resource management? We
found that our HRM practices scale was strongly associated with IT use. In addition,
higher IT use was also related to a greater focus on merit-based employee
compensation, an environment that emphasized problem solving and employee
discretion, more rigorous selection of employees, and higher investment in employee
training. These results support Bartol and Liu (2002) who believe that IT may play a
role in enhancing the human resource function, resulting in increased employee
commitment and satisfaction, and ultimately in improved workplace performance.
 In terms of limitations of the research, while personal visits to SMEs had several A relationship
advantages, it was very labour-intensive and made collecting data from across the between IT and
country infeasible. Our study was regional in nature and the generalizability of the results
may be limited. Also, our data are cross-sectional and consequently, causal inference is HRM?
not possible. In addition, the data are based on self-reported information and there are
other IT practices that we did not ask about in our research. As well, non-response bias
and common method variance are concerns in most survey research. On the other hand, 227
factor analysis and the results from past research supported our measures.
There are several opportunities for additional research. Case studies could provide a
more detailed examination of IT adoption in SMEs. In addition, there is a need to
investigate the IT/HRM linkage using data from firms in Canada and in other parts of
the world. Furthermore, there is little work examining whether investment in HRM and
IT result in enhanced workplace performance.
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Further reading
Human, S. and Provan, K. (2000), “Legitimacy building in the evolution of small firm multilateral
networks: a comparative study of success and demise”, Administrative Science Quarterly,
Vol. 45 No. 2, pp. 327-65.

Corresponding author
Terry H. Wagar can be contacted at: terry.wagar@smu.ca

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