International Symposium on Technology Management and Emerging Technologies (ISTMET) 2015 The Determinant Factors of Technology Adoption for Improving Firm’s Performance; an Empirical Research of Indonesia Electricity Company Zainal Arifin Strategic Procurement Planning, Engineering and Technology Division PLN Indonesia Jakarta, Indonesia zainal.arifin22@pln.co.id Firmanzah, Avanti Fontana* Faculty of Economic and Business Universitas Indonesia Depok, Indonesia fizfirmanzah@gmail.com avantifontana@gmail.com Abstract - Although many technology adoption theories have been formulated there is still lacking any studies that show a correlation between the particular models in relation to firm’s performance in dynamic circumstances. This study proposed technology adoption as a functional competence/capability which mediate relationship between dynamic capabilities with firm’s performance. The four determinant factors has been identified are externalities, entrepreneurial leadership, resources readiness, and absorptive capability. There is positively significance relation among them in firm level. The study found that without dynamic capability for managing the resource, technology adoption will be less effective. Consequently manager should provide some supporting “hardware” content such as externalities, resources and leadership, and should improve firm’s “software” ability such as absorptive capability in order to achieve a successful technology adoption in their organization. Keywords – Technology adoption; Dynamic capability; TOE framework I. INTRODUCTION Viewing technology adoption as a consistent process is the key to successfully adopt and use technology. Concerning to this issue then some research examining the use of technology in the production process to increase firm’s productivity has been conducted in the 19th and 20th centuries (Abramovitz, 1956; Solow, 1957; Stephen and Prescott, 1994; Saloner and Shepard, 1995 etc). Then a range of studies have linked technology to firm performance, as measured through wages, firm productivity, growth, and other factors (Acevedo, 2002). Many researches argue that technology adoption have significantly effect to the firm’s performance (Sinha and Noble, 2008; Sabbaghi and Vaidyanathan, 2008; Amado et al., 2010; Bressler et al.; 2011; Adewoje et al., 2012; Kabiru et al., 2012). However, the impact of technology adoption especially on information and communication technologies (IT/ICT) remains uncertain. Some researches proved that IT adoption contributes up to 81% marginal increase in output (Brynjolfsson and Hitt, 2000), reduces labor cost up to 40% (Rebb, 2004), increases efficiency and total productivity of firms (Chandrasekhar et al., 2008; Amado et al., 2010), enhances firms’ profitability (Adewoje et al., 2012; Kabiru et al., 2012), and improve firm’s financial profits (Grover et al., 2009; Nevo and Wade, 2010). On the other hand some empirical studies did not find relevant productivity improvements associated with IT investments (Quinn and Baily, 1994; Becchetti et al., 2003). Berndt and Morrison (1995) also found a negative relationship between profitability and investment in IT. Thus, the notion of productivity paradox of IT was created and has been one of the main issues in IT research areas (Rai et al., 1997). While Shu and Stressmann (2005) noticed that ICT technologies cannot improve firms’ earnings in terms of return on assets. In addition a quantitative research by Jawabreh et al. (2012) found that there is a negative correlation between IT adoption with a profit rate of the airlines firm. This paradox requires further research to determine what are actually the determinant factors of technology adoption for improving firm’s performance? II. LITERATURE REVIEW AND HYPOTHESES Following TOE framework, there are some relevant environmental factors influencing firm’s technology adoption are the influence of partners (Kuan and Chau, 2001; Al-Qirim, 2006; Jeyaraj et al., 2006; Scupola, 2009), competitive pressure (Porter and Millar, 1985; Abrahamson, 1991; Iacovau et al.,1995; Kuan and Chau, 2001; Zhu et al., 2004), regulatory compliance (Lytinen and King, 2006; Lai, 2008; Lin, 2013). While in line with the growing of public awareness, the social issues also been recognized as a critical factor that can impact technology adoption (Helper, 1995; Hubbard, 1998). Other some researches clearly find that the influence of partners commonly as “network effects” are likely to significantly impact technology adoption since they affect the expected benefit from a new technology that exist with other firm assets (Katz and Saphiro, 1986; Chari and 2015 International Symposium on Technology Management and Emerging Technologies (ISTMET), August 25 - 27, 2015, Langkawi, Kedah, Malaysia 978-1-4799-1723-5/15/$31.00 ©2015 IEEE 181