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Emerald Article: The use of ICT in rural firms: a policy-orientated literature review Laura Galloway, Robbie Mochrie

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The use of ICT in rural rms: a policy-orientated literature review

Laura Galloway and Robbie Mochrie

Laura Galloway (e-mail: lgalloway@hw.ac.uk) and Robbie Mochrie are Lecturers at the School of Management, Heriot-Watt University, Edinburgh, UK.

Abstract Purpose There is much evidence that information and communication technologies (ICTs) are drivers of economic growth. As a result, government is keen to promote ICT take-up, particularly where there is economic development need. The rural economy in most countries is regarded as that which requires intervention in order to foster sustainability and development, and there have been many empirical studies of both the value and the use of ICTs in rural areas. These are, however, highly disparate, often being industry-, country- and, indeed, type-of-technology-specic. Aims to draw together the highly eclectic literature on the use of ICTs in rural small to medium-sized enterprises (SMEs) in order to provide an overview of generic issues, relevant to policy. Design/methodology/approach Comprises a literature review, based on academic, government and agency publications, and provides commentary on emergent issues, particularly those relating to policy recommendations. Findings Finds that there is a lag in rural uptake of ICTs and that the reasons for this include both supply and demand failures. From a policy perspective the review notes that intervention is best directed via a multi-channel approach. Originality/value The value of the paper lies in the provision, for the rst time, of a coherent review of ndings and implications of the many research studies and informed commentaries on ICT up-take by SMEs, particularly in rural areas, thus providing a more sound basis for understanding the implications for, and informing, those involved in policy intervention and support. Keywords Rural areas, Rural economies, Communication technologies, Internet Paper type Literature review

Introduction
The current paper aims to provide a thorough review of recent literature about information and communication technology (ICT) use for business in rural rms[1]. Several studies have provided empirical evidence, informed commentary and detailed analysis of issues concerning rates of adoption of ICT in rural rms, potential benets of ICT use for rural economies, barriers to adoption in rural small- to medium-sized enterprises (SMEs), and critiques of policy interventions aimed at promoting ICT use. Despite these studies, however, commentators have noted that there is a lack of cohesion in understanding of issues relating to and affecting ICT use in rural areas particularly. This is not exclusive to rural studies of ICT use, as the study of ICT use in general is limited by a notable paucity of empirically rigorous surveys (Matlay and Addis, 2003, p. 322) and tend to be insufciently precise about how e-commerce contributes to local and regional development (Matlay and Addis, 2003, p. 322). This is, in part, due to the inclusive nature of ICT access is afforded to all, and all may realise benets (social and business) as a result of its use. Conversely, studies of business, and the practice of business, is necessarily divisive in that issues, and analysis thereof, are often specic to common subgroups such as industry, rm type, geographical location, business orientation. What has emerged from this inherent conict, therefore, is that, as a widely applicable technology, ICT has been implemented, or has the potential to

DOI 10.1108/14636690510596784

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be implemented, and that implementation or potential has been, necessarily, researched, analysed and explored intellectually, within subgroups separately. However, knowledge based on this eclectic and specic research has been applied in more general contexts than the individual researches merit, universally in some instances, and comparisons, many of which may be inappropriate, made. As a result, commentators such as Ramsay et al. (2003, p. 253) have noted that analyses of business ICT use is at present under researched, conceptually confused and widely generalised. This has implications for those with an interest in understanding and supporting ICT use, particularly if, as is commonly claimed, it has the potential to be of advantage to individual businesses, as well as declining sectors and locales, such as rural economies. For example, in their report to the UKs Department of Trade and Industry (DTI), Hawkins and Prencipe (2000) note that cross-sector comparison [of ICT use for business] is made difcult by the absence of an obvious overall comparative framework, and that the danger for governments and other interested parties is that inappropriate comparisons are made based on different sectoral analyses, and policy or other interventions based on them. At the rm level also, confusion prevails in terms of what ICTs to use; how they might benet business and internal practice; and to what extent they might become increasingly necessary for rm survival. As a result, practitioners have turned to business schools, researchers and nally to consultants and, until very recently, have found them wanting in both rigour and quality of insight (Reynolds, 2000, p. 417), a matter made worse by the fact that the speed of change and growth of the technologies themselves present a challenge of such signicant complexity and uncertainty (Reynolds, 2000, p. 417). Essentially, researchers and industry are engaged in an intensive period of e-commerce exploration and experimentation . . . In such a dynamic environment, typical or normative behaviours, much less practice criteria, are virtually impossible to dene (Hawkins and Prencipe, 2000). With current confusion inhibiting understanding of business ICT use, and for the purpose of this paper, specically in rural business ICT use, the current authors main objectives are to explore the empirical, analytical and theoretical literature about business in rural areas, and specically, rural business ICT implementation issues, in order to bring together general trends in understanding, and provide a holistic overview of current knowledge, and implications for policy.

Evidence of the use of ICT in rural businesses

ICT nowadays comes in a variety of forms. While uptake of some technologies is widespread, others may be less widely used, particularly for business purposes. Therefore, just as rm differences (such as industry sector) may prompt variation of ICT uptake, so too may variation in ICTs themselves. From a research point of view this plethora of variables means that generalisations from the study of, say, one industry, or of one form of ICT, are highly unreliable. The current paper therefore considers computer-based ICTs only, and categorises them into two broad groups. Standalone ICT Mitchell and Clark (1999) contend that PCs are used for purposes that do not require communication technology. The current tendency, however, is for studies of ICT use by SMEs to focus on internet-based and other networked technologies, and a focus on these tends to lead to an emphasis on e-commerce. While there can be little doubt that the development of networked technologies has transformed the capacity of SMEs to share and transfer information, there also is no doubt that, especially for micro-rms, the adoption of standalone ICT applications to meet specic business needs, e.g. nancial planning, are used even where networked applications are not. Information on standalone technology use is not, however, prolic. Even as comprehensive a document as Smallbone et al. (2002) makes little reference to stand-alone ICTs, except to quote Mitchell and Clark (1999, p. 451) that the three most commonly used ICT applications in SMEs are typically, word-processing, nancial management and producing accounts. This is corroborated by other empirical studies such as Lawson et al. (2003) and

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Deakins et al. (2003). Daniel (2003, p. 234) cites research by Mitev and Marsh (1998) which found (at that time) that business use of ICT tended to be conned to tools to automate standard administrative functions such as accounting, budgeting, inventory control and word processing packages rather than extended to communications technologies. He implies additionally that the use of standalone applications for business purposes has had a highly signicant effect on business operations, in that their use is now almost universal, and cites Pollard and Hayne (1998) who found that the use of standalone applications is often fundamental for competitive advantage (Daniel, 2003, p. 234). Huggins and Izushi (2002) argue that there are many spillover effects between personal and business use of ICT. A very typical example would be of the micro-business whose owner purchases a PC that is used initially by children within the family, and only subsequently for such business purposes as record keeping. Survey data (Warren, 2000, p. 8) also suggests that stand-alone PCs are almost ubiquitous among younger farmers and those who have post-school education. Standalone ICT use does not, however, appear to be having a particularly strong push effect on the use of extended, networked technologies. Internet adoption and use In contrast to PC based ICTs, usage of the internet and the world wide web (WWW) have been studied intensely. With improved trust and use as a transaction medium, increasingly the internet is uniquely poised to promote and deliver services, both to individual and business customers (Zinkhan, 2002, p. 423). This is evidenced by published gures pertaining to internet access and use for business. For example, Sparkes and Thomas (2001, p. 332) cite Baker (1999) by stating that internet users in the home rose by 76 per cent to six million in the UK during 1998, with the use at the ofce up 54 per cent to 5.3 million in the same period; and Keogh and Galloway (2003, p. 217) cite Ernst & Young (2000) who estimate that the proportion of those who purchase on-line rose from 41 per cent in 1999 to 61 per cent in 2000. Similarly, in the USA, Zinkhan (2002, p. 412) estimates that approximately 50 million Americans are currently on-line, and cites Granic (2001) by stating that more than half of those . . . also shop there. The potential benets to business are thus obvious, and indeed, Cardinali (2001, p. 347) observes, e-commerce is growing at a meteoric rate of greater than 150 per cent per year, and Baourakis et al. (2002, p. 580) note the internet is now considered as an established channel for commercial transactions. Buhalis and Main (1998, p. 201) note that the internet is gaining commercial viability and is particularly suited to small business, where it enables [them] to keep doors open 24 hours a day, at minimal cost to customers all over the world. With access to increasing markets throughout the world, businesses, including those in rural areas, have a unique opportunity to expand either business-to-business, or business-to-consumer, operations from the traditional and local, to the global (Reynolds, 2000; Amit and Zott, 2001; Lawson et al., 2003). Whether a rm trades online with customers or not, however, the internet can give rms the advantage of increased prole in that it can allow them to present information to potential customers (Tse and Soufani, 2003), and provide another channel for the purposes of brand building (Jacobs and Dowsland, 2000), advertising, and marketing (Turban et al., 2000). While the potential of access to increased markets is well documented, commentators such as Hawkins and Prencipe (2000) and Tse and Soufani (2003) claim that benets may be highly industry, and rm, specic. For example, trading on-line with remote markets is not possible for rms that provide customers with perishable or low value products as time for transport and protability, respectively, make this unfeasible. Hawkins and Prencipe (2000) also note that where the physical movement of material goods is involved, there is a call for policy acknowledgement of the relationship between e-commerce growth and the national transport infrastructures. The ability of rms to develop relationships with customers via customer information gathering and personalised marketing further affords advantage to business, and

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particularly small businesses (Anderson and Lee, 2003). As Baourakis et al. (2002, p. 582) point out:
. . . using the proper internet technology, companies can gather information from consumers . . . this helps companies to improve the quality of products, to develop new products and adopt an attitude of exible response to the wants and needs of their potential customers.

It also affords:
. . . the ability to build customer proles and, consequently, to establish dialogues with individual customers . . . [which] . . . helps rms to improve target marketing and to create Web-based personalisation (Baourakis et al., 2002, p. 584).

The potential benets of business use of the internet are not conned to improved relationships with markets, however. They also include affording greater internal efciency, as noted by commentators such as McBride (1997) and Hawkins and Prencipe (2000). To illustrate, in terms of business to business dealings, Leatherman (2000, p. 4) identies that the internal functions of business operations, such as order placement, inventory control, technical specication procurement, and product distribution, from paper-based to electronic transactions can dramatically reduce business costs and increase productivity. The internet can also allow access to increased and improved supply chains (Kaplan and Sawheny, 2000; Hawkins and Prencipe, 2000). While Hawkins and Prencipe (2000) report that most rms . . . are only beginning to climb the e-commerce learning curve in an internet environment, especially as regards relationships in the supply chain, Baourakis et al. (2002) identify this potential of the internet for business as a highly attractive prospect. They state that rms have the ability to nd a greater number of suppliers, to communicate and interact internationally with a larger number of companies involved in the supply chain (Baourakis et al., 2002, p. 582), and that this can be advantageous in terms of cost reduction for rms as well as improved efciency. With an increased dependency on the services sector, rural economies could benet from the cumulative effects of diversication, increased efciency and access to markets. The facilitation of networking via internet technology is also subject to much comment in the literature. Notwithstanding ICT use, networking activity, as a social communication process which encourages the sharing of knowledge (Swan et al., 1999), has been shown by several commentators to have a positive inuence on business growth (Chell and Baines, 2000; Lechner and Dowling, 2003). Lechner and Dowling (2003) assert that, for small rms particularly, limited resources result in the need to access external resources through inter-rm networks in order to grow. Specically, businesses can be motivated to networking activity for a variety of reasons, such as to generate innovation (Swan et al., 1999), or to improve marketing (Shaw, 1999). This latter function could be advantageous, particularly in rural areas, in terms of collaborative activity (such as communal branding), co-operation and complementation. The role of ICT in networking has been subject to some debate, however. For rms in which international dependencies are numerous and strong (Mitchell and Clark, 1999, p. 450), the internet is an obvious and easy means of managing network relationships. Evidence exists, however, which questions the applicability of internet technologies to the creation of networks for business purposes. It is contended that while the internet can provide channels for network communication, it is only effective where it is used alongside relevant people management and organisational practices (Swan et al., 1999, p. 263). Essentially, internet networking can not replace face to face interactivity because trust, rapport, and tacit knowledge are essential to effective networking practice (Swan et al., 1999). That being the case, however, there is increasing discussion of the use of the internet for specic types of networking use. For example, Reynolds (2000) notes that online networks have been shown to be effective for collaborative purchasing by larger rms. Additionally, Tse and Soufani (2003, p. 310) refer to strategic networks consisting of different players in the market [becoming] an essential form of organisation. This could have important implications for rural rms in that the unique characteristics of the virtual market enable rms . . . to identify and

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incorporate valuable complementary products and services offered by different companies into their bundle of offerings in a novel way (Tse and Soufani, 2003, p. 310). This product bundling is not a new idea. Reynolds (2000, p. 420) refers to conventional specialist bundling (e.g. by mail order), but notes that, with the increased proliferation of the internet, it has become a more efcient way of marketing products and services because they are rendered more visible . . . by making use of electronic channels. Traders in specialist industries have a unique opportunity, therefore, to access remote markets via the internet. In rural areas it has been shown that the locality itself can be marketed (McKain, 2003; Deakins et al., 2003), so by extension, businesses within a locality can group strategically on-line to exploit this potential. Empirical evidence bears this out. For example, Sparkes and Thomas (2001) and Baourakis et al. (2002) have identied collective presentation of niche products, from Wales and Crete respectively, on the internet; and Galloway et al. (2004) have identied similar collective activity amongst rural businesses in Scotland, using the rural locality as the common brand, from which to proffer products and services of a specialist and complementary nature. Deakins et al. (2003) refer to these locality or industry-based collective internet representations as internet forums and have found that while they tend to be highly disparate in terms of organisation and structure, there seems to be a relationship between membership and business growth. They describe internet forums as an online facility that provides local businesses with an internet portal and additional services, using the locale, or an industry peculiar to the locale, as the unique selling point or common brand (Deakins et al., 2003). They go on to argue that potential customers of included businesses comprise those with an interest in the brand, namely the locality (or perceptions of it). Again, this blurring of what is being sold is not new. Reynolds (2000) notes that successful internet operators have consistently exploited perceptions of the distinctions between goods and services offered. To illustrate his point, Reynolds (2000) uses the example of Amazon.com, which acts as a service provider of reviews, suggestion services, etc., to compliment, support and enhance its core function of selling books. While rms that collaborate using ICT are not necessarily networking in the sense that they are communicating with each-other, this type of collective activity, as a result of ICT-based network membership, by providing the small rm with an additional sales channel, information about products/services, etc., can have a positive effect on business.

The rural paradox

There is considerable evidence that ICT business use can prompt development at both the rm and economic levels (Colecchia, 2002; CEBR, 2003; BCC, 2004). However, it is now well documented (e.g. Fillis et al., 2003; Jones et al., 2003) that SMEs tend to lag behind larger rms both in terms of awareness and implementation of ICT use (Hawkins and Prencipe, 2000). The lag in, specically internet use, is even more marked. Ramsay et al. (2003, p. 251) cite statistics from the European Observatory for SMEs which show that SMEs are not using . . . the internet . . . for commercial transactions to any great extent, and Anderson and Lee (2003) note that internet use for business amongst SMEs is, in itself, highly variable as progressive SMEs engage in e-commerce, but many [others] are stuck at the web presence point. For businesses in rural areas, studies have found that ICT use is even less prevalent (Keeble et al., 1992; Buhalis and Main, 1998; Smallbone et al., 2002)[2]. These ndings are paradoxical given the potential [of ICT and the internet] for overcoming the disadvantages of rural and peripheral locations with respect to markets and suppliers (Smallbone et al., 2002, p. 18).

Barriers to ICT adoption in rural areas

The reasons for low levels of ICT take-up by rural businesses is subject to much comment in the body of literature. These can be summarised as comprising two general issues: supply and demand. Supply-side issues One of the major barriers to internet use amongst rural business owners is a comparatively poor technological infrastructure. For example, Huggins and Izushi (2002, p. 114) note that

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the very disadvantages of remoteness and weak public transport infrastructure result in individuals and rms in rural areas those who are in need of a steady ow and ready access to information . . . being deprived access to the wider business . . . networks. In response to claims that low ICT use in rural areas is to do with incomplete, obsolete or insufcient provision of infrastructure, Friedlander (2002, p. 3) states that expansion of services requires demand as well as supply, and . . . infrastructure providers whether telephone, energy or internet are unlikely to venture far into markets where protability is low. Indeed, in the UK, BT (British Telecommunications) commonly will only provide ADSL (asymmetric digital subscriber line) connections when more than 350 requests per telephone exchange have been registered. For many rural exchange areas, this is an unfeasible interested population. Friedlander (2002) compares the diffusion and distribution of internet access with that of electricity provision in the early twentieth century. She identies one of the problems relating to geographical differences in access to services in the USA as being about cost-effectiveness for providers who operate within the open market:
. . . in networked systems including water, gas, electricity, telegraphy, telephony and the internet population density matters because revenues per unit of construction will be greater in areas with the highest population density . . . Geography counts urban locales are more likely to be protable than rural locales.

Smallbone et al. (2002, p. 19) identify this as a constraint within the UK also: A major barrier to the use of ICT is inadequate telecommunications infrastructure in rural areas. The problem is not one of access to the internet, however, as dial-up internet connectivity has been available in most areas since the mid-1990s in part because it piggybacked on the successful and expansive telephone system, which had been built incrementally over decades (Friedlander, 2002). The problem is really about maintaining access suitable for business purposes as technology evolves. As Smyth et al. (2001, p. 43) point out: rural lines that used to be suitable for internet access are becoming overloaded, and data transfer is much slower than it was a year ago. Telephone wire dial-up is no longer suitable for the volume and sophistication of many modern internet technologies. Hankins (1994, p. 71) notes that in the USA there have been no efforts by public utility commissions or other regulatory bodies to ensure affordable internet access across any geographic region. In the UK the situation is even more concerning as Smyth et al. (2001, p. 43) point out, in that BT is obliged to give people a right to a basic telephone service i.e. a voice-quality connection but not the right to have a connection suitable for a modem for internet access. The reality in the UK is that while most people have access to dial-up connection technology, some exchanges . . . are unable to offer ISDN [integrated services digital network] . . . ADSL is available in even fewer rural areas. [Some] rural areas . . . cannot get access to ISDN or ADSL Smyth et al. (2001, p. 43). This is corroborated by Deakins et al. (2003), and is of concern as without access to high speed, low cost digital communication networks, remote rural areas will be unable to realise the benets of ICT (Anderson, 2001, p. 2). Friedlander (2002) notes that in the parallel case of distribution of electricity in the USA, targeted public interventions were required to bring electricity . . . infrastructure to hard-to-serve populations, particularly those in remote areas. However, in the UK, while the importance of ICT for the technological development of rural localities has been recognised by regional and local governments alike and embraced by encouraging the development of ICT by SMEs through training and support (Thomas et al., 2002, p. 36), due to problems of bandwidth capacity not surprisingly, rural areas are lagging behind more populous urban areas in the development of telecommunications infrastructure capable of the high-speed transmission of large quantities of data (Leatherman, 2000, p. 10). This being the case, an alternative technology solution to high speed/high volume internet access may be more appropriate. There are several such technologies in progress (DTI, 2004), though for remote areas, suitability in terms of both commercial feasibility and technological capability is still questionable (Galloway, 2004). As a result, only time will tell which, if any, will achieve market dominance. As Lawson et al. (2003, p. 265) note, internet access does not . . . equate with e-business practices . . . but it is the rst step.

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Downes and Greenstein (2002) examined the distribution of Points of Presence (POPs) in the USA in 1997. They report upon very intense competition in urban areas, and its almost complete absence in rural areas. While POPs are required for dial-up internet connections, the absence of provision of a key service component would severely impede uptake of this form of technology. It might be anticipated that the level of provision of service of one kind would be correlated with the level of provision of others, and so a further aspect of rurality might be very low levels of certain types of technical support for ICT implementation (Smallbone et al., 2002). To illustrate, Downes and Greenstein (2002), point out that the rapid diffusion of the internet was made possible because essentially it was an application of an existing networked technology. They note that internet services became low-cost as soon as internet service providers (ISPs) were established within the local call area of households, and using 1997 data, they estimate that 93 per cent of US households by that time faced competitive markets, even if competition in rural areas would often be between competing local ISPs. However, this alone is not enough, as the entire infrastructure (expertise, innovation in the form of upgraded technology, etc.), if not available in rural areas, results in lower levels of actual and potential use. Availability of ICT expertise is identied as a supply-side barrier to rural ICT business adoption. Lawson et al. (2003, p. 266) cite Farmer (1996) when they note that in general, SMEs may have difculties rst in meeting the initial costs and then the ongoing expense of maintaining [ICT use]. Matlay and Addis (2003) also note that SMEs are most likely to access expertise only when subsidized. This may comprise a greater problem in rural areas as a result of fewer competing specialists, thus allowing for even higher prices. There are obviously questions generated by supply-side issues that require to be addressed at policy-level. Within the literature, regulation of access to the internet is commonly suggested, based on the idea that without it, access is likely to be impeded, or at best, confused (Reynolds, 2000). Similarly, the literature tends to suggest a role for policy in terms of raising awareness and skills in ICT (Hawkins and Prencipe, 2000), and particularly in rural areas (Smallbone et al., 2002; Grant, 2003). Demand-side issues There are good reasons put forward for rural SMEs actively choosing to avoid ICT adoption. UK based literature concerned with the adoption of ICT in rural SMEs has identied a number of barriers to adoption based on perceived lack of need (Ramsay et al., 2003). Warren (2000) considers the behaviour of farmers in South West England and East Anglia. He reports many reasons for farmers preferring to use lower technology alternatives. These can be as simple as the time taken to download information, or the cost of subscription to a service, and the lack of web content that is targeted at their needs. Equally, as Warren (2000, p. 15) notes, agriculture is well served by conventional information services, and the communication needs of most farm businesses are adequately met by phone, mail and fax. Organisational units (such as many farms) that are concerned only with local markets need not avail themselves of ICT. When a business expands its activities to participate in national or international networks, this is no longer possible. It is necessary for members of networks to agree upon the need for adoption of a new technology. Inferred in this is that an industry sector moves on in terms of technological advancement and businesses within it therefore have to progress in order to keep up with their industry. There is some evidence to support this idea. For example, several researches have found that ICT take-up amongst SMEs varies by sector, and this variation depends on the degree to which an industry (often internationally) has developed in terms of ICT use (Hawkins and Prencipe, 2000; Smallbone et al., 2002; Daniel, 2003). Another observation from the literature is that effective business use of ICT comes about as a result of considered implementation as part of the strategic direction of a rm (e.g. Rodgers et al., 2002; Ramsay et al., 2003). Hawkins and Prencipe (2000) identify that barriers to adoption in SMEs include organisational inertia. This may be more signicant in rural areas, in that Mitchell and Clark (1999) note that rural rms are relatively less likely to be globally oriented. Fillis et al. (2003, p. 338) extend this idea to explain one of the main

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reasons for low adoption of ICT in SMEs as being resultant of a lack of entrepreneurial orientation. Empirical studies (e.g. Scottish Executive, 2000; Paisley Enterprise Research Centre (PERC), 2000; Deakins et al., 2003) have corroborated this in that there is much evidence that businesses in rural areas tend to be smaller scale and less growth-oriented than those in urban areas (Galloway and Levie, 2001). Rural areas, therefore, tend to include businesses which could be described as lifestyle rather than entrepreneurial (Deakins and Freel, 2003), but as Vaessen and Keeble (1995) note, with the decline of traditional rural industries, rural economies now have a greater need for globally oriented, entrepreneurial rms. In terms of ICT take-up, Grant (2003) (corroborated by Gray and Juhler, 2000; Huggins and Izushi, 2002; Smallbone et al., 2002) observes, in her study of ICT use and female rural business ownership, that skills deciency in terms of other business skills, personal and interpersonal skills and business communication has led to low levels of enterprise in rural areas, and that low levels of ICT use are simply symptomatic of this. It is also the case, however, that lack of entrepreneurial orientation is inherently linked with lack of entrepreneurial opportunity, and as documented, there have always been considerable disadvantages to businesses in rural areas in terms of remoteness from markets, access to suppliers, lack of skilled labour, etc. ICT has the potential to reduce these limitations and thereby, by proxy, increase the enterprise ability and orientation of rural businesses. In order to take an opportunity, however, it is necessary that the opportunity is perceived. Lack of information about, and perceived benet of ICT amongst SMEs is a well-documented demand-side issue. For example, in terms of internet use, Ramsay et al. (2003, p. 255) claim that SMEs may not understand the ways in which such an information infrastructure could enable them to operate their businesses more efciently or cost-effectively. Similarly, low levels of appropriate ICT skills have been identied as a signicant barrier to ICT adoption amongst SMEs (Lawson et al., 2003), and particularly in rural areas (Thomas et al., 2002, p. 35). Leatherman (2000, p. 10) claims that low levels of ICT awareness and skills in rural areas are connected, in part, to the demographic make-up of many rural areas, where populations tend to have lower levels of income and educational attainment and higher proportions of the elderly and disabled. All of these factors are known to inuence computer access and use. Alternatively, Huggins and Izushi (2002, p. 113) maintain that since many rural business trade is, in the main, local, they have a lower propensity for ICT awareness and that this lack of awareness results in failure to take-up formal training associated with opportunities to develop new ICT-related business skills and expertise (Huggins and Izushi, 2002, p. 113). Smallbone et al. (2002, pp. 18-19), however, note conversely that there is evidence that small rms recognise the need to upgrade their skills and competence in the eld of computing and the use of ICT, and exemplify this by citing a study of rural English businesses (Centre for Rural Economy, 2000, p. 43) in which it was found that IT was the most frequently reported support need (Smallbone et al. 2002, p. 19). Adding credibility to this, similar results were obtained from a study of one rural region in Scotland (PERC, 2000). One recent strand of thinking, about rural economies specically, is concerned with the need for adjustment to change, i.e. the need to promote the benets of ICT for business in rural areas. Freshwater (2001, p. 7) suggests that this will include:
. . . an emphasis on education, especially continuous learning; a recognition that the economic base of a community is likely to continually evolve so development efforts have to be an ongoing task; adapting to pressures to make investments in businesses, infrastructure and people that promise high payback; and the importance of developing a local strategy for adapting to change.

Ramsay et al. (2003, p. 261) contend that it is not just about raising awareness of the potential and benets of ICT use, but also about increasing business skills in general as in reality, problems will not be reduced by merely increasing the technological competence of small businesses. Grant (2003) concurs, and notes that it is of even greater importance in rural areas in order to encourage enterprise for the purpose of local economic development:

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. . . the skills gap must be narrowed by investing not just in ICT training within rural communities, but by providing a more balanced holistic approach to good business skills education, initiating programmes which are aimed at raising awareness of good business practice and development.

In summary, discussion of low ICT take-up amongst rural SMEs tends to consider that the potential of (networked) ICTs to erode the costs of remoteness can only be realised fully if conscious efforts are made to ensure that the technological infrastructure, perceived benets and necessary demand for ICT use, are promoted.

Policy
Some commentators argue that the public sector has a role in intervening with respect to ICT use for business, and especially in rural areas. Justication for this comes from the idea that business in general now requires ICT use: for all intents and purposes, you cannot compete nowadays without some kind of e-business strategy (Rodgers et al., 2002, p. 184). This argument, thus, points to policy intervention as an inclusion issue. Other writers go further and argue the need for intervention as a matter for rural economic survival: [many businesses in rural areas] will require both access and the capacity to utilize technology . . . to remain economically viable (Leatherman, 2000, p. 28). The extent of policy intervention, and effectiveness is documented in the literature, and commonality of argument can be observed in many cases. The role of policy Policy is advocated (and observed) for a number of ICT-related issues, including raising awareness of ICT, providing advice and support for ICT use, and supporting infrastructure development (Hawkins and Prencipe, 2000). Thomas et al. (2002, p. 39) cite Gibbs and Tanner (1997) who reported that existing ICT infrastructures were inadequate and their usage low, leading to intervention. Similarly, Leatherman (2000) and Smyth et al. (2001) argue for support for technical infrastructure. Lawson et al. (2003, p. 265) claim that interventions to improve infrastructure are insufcient in that diffusion of new technology can take decades, and involves more than simply reproducing and distributing the technology. Indeed, other issues recorded in the literature include the need for intervention in the form of assisting availability and access to professional and specialist ICT services, as well as the technology: leaving the distribution of telecommunications services to the market without government intervention [has been] to the detriment of rural areas (Smallbone et al., 2002, citing Warren, 2000); and the development of ICT awareness and skills in order to increase demand and realise economic benets at the rm level (Grant, 2003; Lawson et al., 2003). Indeed, if uptake of ICT is slower in rural areas than in urban areas (Keeble et al., 1992), and if innovative use of ICT was one of the principal drivers of economic growth over the period 1995-2000 (Colecchia, 2002), then it may be that there is an important role for government policy in encouraging business use of the internet. This assumption is at least implicit within Fuller and Southern (1999), Lowe and Talbot (1999), Smallbone and North (1999), Smallbone et al. (2002). The extent and effectiveness of intervention Downes and Greenstein (2002) note that internet-based technologies have received much public subsidy. Similarly, Huggins and Izushi (2002) note that government has undertaken a number of high prole initiatives . . . [including] a growing number of local initiatives . . . to facilitate ICT skills development within rural communities. However, Thomas et al. (2002, p. 38) point out that it is, rightly or wrongly, considered that all effort and money invested in ICT will result in a benet for society. Smallbone et al. (2002) cite the claim of Freshwater (2000) that government support in rural areas has traditionally been sector or community specic. Alternatively, the potential of ICT use for diversication, accessing markets and suppliers, etc. are cross-sectoral, and as a result, the usual manner in which governments support rural ICT development may not be appropriate. Ramsay et al. (2003, p. 252) claim, for small business in general, there is nave understanding of what motivates [them] to adopt and assimilate ICTs in their business activities . . . particularly in micro-enterprises who (sic) are

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the least likely to be involved with e-commerce or the internet. Indeed, in rural areas, it is micro-enterprises that dominate the small business landscape, further reducing the appropriateness of policy. Policy implications There are trends in the literature as to how policy may best intervene to support rural ICT development for economic sustainability or advantage. Thomas et al. (2002, p. 39) argue that training, information and ICT advisory services [must be] brought together in a coherent framework to be effective. Lowe and Talbot (1999, p. 485) favour a one-stop shop approach to awareness and training in their appraisal of the Small Business Services remit. They are, however, in the minority on this issue. Smallbone et al. (2002, p. 19) maintain that policy initiatives are required which provide both basic and more advanced courses for rural SME managers in the use of the internet, and argue that it is necessary to take the technology to the users, and to offer support through many channels (Smallbone et al., 2002, p. 49). Similarly, Huggins and Izushi (2002) advocate various forms of intervention, direct and indirect, such as: provision of community resource centres and internet cafes to raise awareness and remove barriers to ICT inclusion; promotion of self help to encourage a sense of personal investment for participants; appropriate means of delivery of training and support services, such as mobile facilities that can afford services to even the most remote locations. Much of this corresponds with that described in Galloway et al. (2004) by a case study expert-respondent who claimed that providing training and support sessions at a xed location was less effective in terms of raising ICT awareness, access, and skills, and removing barriers to ICT adoption in rural areas, than providing bespoke consultancy on-site with businesses to show-case potentials of ICT use. This respondent also reported that increased provision and access to ICT in the local community was effectively achieved via facilities such as internet cafes and PC lending. Other commentators have argued similarly in terms of the links between community ICT facilitation and business ICT take-up in rural areas: Huggins and Izushi (2002) claim that it is vital to recognise the community sector . . . if ICT initiatives are to become sustainable. The conclusions of these papers can be distilled into the robust common sense that policy will be effective where it engages actively with the needs of potential users.

Conclusion
This review of the literature relating to the development of ICTs among rural SMEs has demonstrated that the current fragmented literature is directed towards understanding policy requirements. It is therefore designed to address policy failure and to problematise the rural business environment. While survey data conrms that rural businesses have been slower to adopt ICTs than other businesses, it has sought to explain the reasons for this in terms of businesses acting optimally in terms of their perceived business environment. Rather than assuming that slow adoption is problematic, the argument presented here is that for locally oriented micro businesses, which are very important to sustainable rural economies, the most appropriate technologies need not be web based. Equally, the review acknowledges the extent to which rural communities face extensive changes in the economic environment that they confront. The importance of web-based technologies as a driver for economic growth means that slower dissemination of these technologies because of difculties of access (to infrastructure and training or exemplars of the benets of ICT adoption in business practice) might lead to increases in the effects of rurality upon economic performance. To the extent that network externalities are not fully realised in rural areas, growth rates will be diminished relative to urban ones, and rural businesses will face higher costs, reducing their protability further. However, there is only limited evidence of such problems. Rural businesses that are externally oriented may be able or indeed required to participate in networks that are not locally based. These networks can be organised on a vertical basis (a supply chain) or a horizontal one (an industry marketing group), permitting the interchange of information and acquisition of knowledge among members. Similarly, businesses in any locale can work

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together through internet forums to build up expertise in marketing. Additional empirical work is required to investigate the extent to which rural businesses are adapting to the challenges posed by ICT. While such research should not proceed from the assumption that there are not signicant market failures, by auditing the use of ICTs fully, we believe that it may reveal a rather more complex pattern of adoption than the existing body of research seems to recognise. There are a variety of reasons why businesses take up ICT. These range from interest of the business owner (for example, Huggins and Izushi, 2002; Warren, 2000), to the idea that value can be added or greater efciency generated (for example, Leatherman, 2000), to the adoption of ICTs in order to conform with requirements of customers and suppliers (for example, Mitchell and Clark, 1999, p. 451). Much of the literature discusses the importance of ICT for growth (Colecchia, 2002) primarily through increasing access to information and markets (Zinkhan, 2002), accessing resources (Baourakis et al., 2002), improving efciency (Buhalis and Main, 1998), and networking (Smallbone et al., 2002). The implications for the rural rm, and the rural economy are several, but advantage can only come about if rural rms are prepared to embrace the possibilities associated with ICT use, and only if governments, support agents and the private sector alike are prepared to recognise and support the potential of the development of the rural economy.

Notes
1. For the purposes of this literature review, which draws from a variety of studies where rurality is dened as per the requirements and objectives of the particular study, a very broad interpretation of rural is inferred, in order that these various researches and commentaries can be compared and presented. 2. Conversely, Deakins et al. (2003) found that the rate of ICT use in rural Scotland was actually high, however, the extent to which ICT was used in their sample rms was limited.

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Further reading
Lorenzoni, G. and Lipparini, A. (1999), The leveraging of interrm relationships as a distinctive organizational capability: a longitudinal study, Strategic Management Journal, No. 20, pp. 317-37. Martin, W.J. and McKeown, S.F. (1993), The potential of information and telecommunications technologies for rural development, The Information Society, Vol. 9 No. 2, pp. 145-56. National Farmers Union (1999), The Human Cost of the Farming Crisis Audit for Action, National Farmers Union, London. Roberts, S. (2002), Key Drivers of Economic Development and Inclusion in Rural Areas, initial scoping study for the socio-economic evidence base for DEFRA, DEFRA, London. Rosa, P. (2001), Entrepreneurial Diversication and Scottish Farmers, Report for Scottish Enterprise Borders, Centre for Entrepreneurship, University of Stirling, Glasgow.

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