Factors and Policies for the Diffusion of Information and Communications Technology among Japanese SMEs Teruyuki Bunno School of Business administration, Kinki University Hiroki Idota Faculty of Management, Otemon Gakuin University Masatsugu Tsuji Graduate School of Applied Informatics, University of Hyogo and Machiko Nakanishi, Department of Commerce, Chukyo University, Abstract In this paper, we make an attempt to extract factors to promote ICT (Information, Communications Technology) use by SMEs (Small- and medium-sized enterprises). For this purpose, we first construct an index of ICT use. The previous papers Tsuji et al [2005] and Bunno et al [2006a], [2006b] challenged this issue by conducting extensive mail surveys and in-depth interviews in two of the largest SME clusters in Japan, Higashi-Osaka and Ohta Ward, Tokyo. Questionnaires to more than 6,000 SMEs in two clusters were sent, and received nearly 1,200 replies. The papers identified factors including policies to promote ICT for SMEs. SMEs analyzed there, however, are found to be not necessarily so innovative in ICT use, in other words, they are not good examples. Therefore, we conducted mail survey again on SMEs which were awarded in ICT use by organizations such as IT Hyakusen Committee and the Ministry of Economics, Trade and Industry, which select 100 SMEs for best ICT practices every year. We refer those SMEs selected by these two as to IT Hyakusen SMEs. They are supposed to be advanced in ICT use. Focus on these SMEs, we can analyze ICT use from the view of advanced SMEs. As for an index of ICT use, we utilize AHP (Analytical Hierarchical Process) including the following five items: (i) the number of PCs owned by SMEs; (ii) the number of PCs connected by networks such as LAN; (iii) the amount of software that contributes to efficient utilization of managerial resources; (iv) Internet use such as homepages, e-mail, and e-commerce; and (v) security measures such as introducing security systems and organizational measures. 11 ICT experts were asked about their weights of above five items by pair-wise comparison. This paper proposes a method of constructing a single index of ICT use based on these five items by making use of AHP. Based on this index, we extract exactly the factors promoting ICT use by IT Hyakusen SMEs by making use of the regression analysis. The results 1