Understanding Environmental Influences on Advanced Digital Technologies Adoption in Micro, Small, and Medium Enterprises

Although advanced digital technologies enhance productivity, small enterprises in developing countries adopt them more slowly than counterparts in developed economies. Structural and institutional barriers, such as unreliable internet, costly devices, political instability, regulatory inefficiencies, and weak institutional support, limit the adoption and increase firms’ reliance on external assistance. Previous studies employing the technology–organisation–environment framework to identify drivers of technology adoption have produced varied and inconclusive findings, particularly regarding environmental factors. This study examines how and why environmental factors influence or fail to influence technology adoption by small firms in Indonesia. Interviews with 15 managers across manufacturing, services, and agriculture sectors indicate that trading partner pressure significantly influences adoption decisions, while government resource support, government regulatory support, and competitive pressures have limited impact. Hence, policymakers could modernise the regulatory framework, offer targeted incentives, and promote partnerships with larger firms to provide platforms and training.