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Global Development Institute

Growth and Formalisation of Information Systems in Developing Country SMEs

Richard Duncombe

Abstract

The purpose of this paper is to improve understanding of how small and medium enterprises (SMEs) in developing countries move from informal to formal information systems (IS). Formalisation of IS for SMEs implies greater use of sources and channels of formal information and upgrading of internal and external information systems, including use of information and communication technologies (ICTs). This study provides an exploratory model that assesses the factors that influence formalisation of IS, supported by data from a developing country environment.

The study finds that formalisation of IS is important because it leads to improvements in the internal and external business processes that influence enterprise growth and development. Although there is a strong reliance on informal information practices amongst SMEs, there is also widespread unmet demand for formal information. Overall, successful enterprise development requires optimum use of both formal and informal IS. Evidence suggests this is achieved through developing the necessary internal competencies and skills for information handling and by forging key external market linkages - a duality of factors that provide the key drivers for formalisation.

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Educator's guide

Synopsis questions

  1. How is the enterprise information system defined in the context of this study? [part A]
  2. What are the reasons given for adopting a combination of qualitative and quantitative approaches to data collection? [part B]
  3. Why is it important for SMEs to move from informal to formal information systems? [part C]
  4. What factors affect the formalisation of IS in SMEs? [part D]

Development questions

  1. Some studies take a view that information represents a critical resource for enterprise development. What is this paper's view about the role of information?
  2. Why are external (business) linkages critical for enterprise development?
  3. How is the use of ICTs by SMEs different in Botswana compared to your own country?
  4. Which is more important to a small enterprise: formal or informal information systems?
  5. Are the paper's conclusions valid and generalisable given its choice of country, enterprise groups, and research method?
  6. Based on this paper's findings, what recommendations for action would you make to: a) a small enterprise support agency operating in Botswana; b) the Botswana government?