Study: Information and communication technology gap between small and large companies

Small firms have managed to close the technological gap with their larger counterparts when it comes to adopting basic technologies. However, new gaps have appeared, as large firms have implemented complex, advanced technologies more rapidly, according to a new study.

This growing gap between large and small firms in implementing more complex technologies is important because it may result in competitive disadvantages that small firms find difficult to overcome.

Initially, integrating information and communication technologies (ICTs) into the workplace was a challenge for many small firms, largely because of the high infrastructure costs and the inability to adjust business plans accordingly.

Basic technologies - computers, e-mail and Internet use - have now become more accessible and affordable for small firms. However, the same technologies have reached saturation for large firms.

Large firms have now expanded into more complex technologies such as websites, intranets and extranets. They are also involved in e-commerce, because they have the resources and infrastructure necessary to sell their goods and services online.

For the purposes of this study, size is based on the number of full-time employees. Small firms are those with 19 or less employees. Large firms have over 100 employees, except for those in the manufacturing sector, where large firms are defined as those with over 500 employees.

Small firms catch up with basic technology

In today's highly advanced world, personal computers, e-mail and the Internet have become fundamental and basic technologies for the majority of companies. In 1999, 82% of all private sector enterprises were using PCs, workstations or terminals. By 2002, this proportion had only risen to 86%.

During the same period, the proportion of small firms using PCs rose from 79% to 84%, while medium and large firms did not experience any growth at all in PC use. The same trend is observed for e-mail use.

Similarly, Internet use among small firms jumped from 59% to 73% between 2000 and 2002, but remained stagnant for large firms. Virtually all large firms are using the Internet, so there is little or no room for further growth.

Large firms far ahead in advanced technologies

The largest firms are far ahead of their small counterparts when it comes to adopting the newest technologies, such as high-speed Internet. In addition, developments such as intranets, extranets and electronic data interchange (EDI) systems are the exclusive domain of large firms.

In 2002, 84% of large firms used high-speed Internet, compared with only 56% of small firms. Two years earlier, 68% of large firms used high-speed Internet, compared with 33% of small firms.

Meanwhile, between 2000 and 2002, the proportion of small firms with websites increased from 21% to 27%. While only 64% of large firms had a website in 2000, by 2002, more than 77% had one.

An extranet is a private network which can be used to grant certain people access to the supply catalogue of a business, or its information or operations. They are most commonly used by firms to enable communication with suppliers, vendors or customers. While only 5% of all firms used an extranet in 2002, 30% of large firms did so.

Small firms purchase online, but few manage to sell

Small firms have made important gains in online purchasing. In 2002, about 57% of large firms engaged in online purchasing, nearly twice the proportion of 29% among small firms. Only two years earlier, the gap was more pronounced: 51% of large firms purchased online, compared with 16% of small firms.

Between 1999 and 2002, sales over the Internet, with or without online payment, have more than tripled, rising from $4.2 billion to $13.3 billion. The proportion of large enterprises selling online has fallen since 2000, while the proportion of smaller firms has increased slightly.

Small firms are catching up in this regard, but only by the smallest of margins. In 2002, 16% of large firms sold online, while only 7% of small firms did so. Despite this growth, online sales in Canada still accounted for less than 1% of the value of overall sales.

The analytical article Information and Communication Technology Use: Are Small Firms Catching Up? (11-621-MIE2004009, free) is now available online in the Analysis in Brief series.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Mark Uhrbach (613-951-2856) or Bryan van Tol (613-951-6663), Science, Innovation and Electronic Information Division.