Introduction

As articulated by Al-aaridhi (2018), the Internet’s role in day-to-day activities has greatly expanded. The COVID-19 pandemic further amplified this trend, leading to a surge in online interactions as traditional retail outlets swiftly transitioned to online sales, a shift noted by Xie et al. (2022). Consequently, there has been a pronounced shift toward integrating Internet use into routine life, a change highlighted in the works of Khan et al. (2020).

E-commerce, as designated by the World Trade Organization in 1998, refers to the digital processes involved in producing, distributing, marketing, selling, and delivering products and services. Tolstoy et al. (2021) have characterized it as conducting commerce of goods or services through electronic networks like the Internet. Research conducted by Schu et al. (2016) and reiterated by Tolstoy et al. (2021) suggests that the adoption of e-commerce can catalyze small and medium-sized enterprise (SME) growth through the exploration of new markets and reaching new customer segments previously unengaged. In summary, the dynamics of international expansion for smaller businesses have evolved, driven by the rapid shift toward digital, automation in business transactions, the emergence of niche markets, and the rise of the service economy, as observed by the OECD in 2017.

The significance of SMEs to a nation’s economic expansion is indisputable, as posited by Rahayu and Day (2017). Kurnia et al. (2015) highlighted the substantial contributions of SMEs to the economic tapestry, especially within developing countries. Al-Alawi and Al-Ali (2015) provided evidence that portrays SMEs not only as crucial players in socio-economic progress and employment generation but as resilient pillars even during fiscal downturns, a sentiment echoed in earlier works (Burrone, 2005; Levy & Powell, 2005; OECD, 2010). Recent data from MIDA (2023) underscores the foundational role of SMEs worldwide. In Malaysia, astonishingly, 1.15 million SMEs make up more than 97% of all businesses and account for 38.2% of the gross domestic product (GDP), underscoring their pivotal role in the Malaysian economy. Consequently, it is evident that SMEs can greatly benefit from engaging in e-commerce to secure their future sustainability, a view supported by Tolstoy et al. (2021).

Despite the wealth of research on the uptake of e-commerce (Herzallah & Mukhtar, 2015; Kabanda & Brown, 2017; Lip-Sam & Hock-Eam, 2011; Mahroeian, 2012), there remain underexplored areas that warrant attention.

Additionally, while e-commerce models and theoretical frameworks have been widely applied across numerous sectors to understand and predict consumer behaviors, their use within the SME context seems somewhat restrained. Consequently, the forthcoming research will define its objectives within this framework.

  1. (a)

    To explore the TOE factors influencing e-commerce adoption among SMEs

  2. (b)

    To explore the barriers to e-commerce adoption among SMEs

  3. (c)

    To provide strategic recommendations for boosting e-commerce adoption among SMEs and suggest directions for future research.

Literature Review

Definition of E-Commerce

E-commerce is the practice of conducting business transactions—buying and selling—via digital platforms or over the Internet. The concept was first coined by Robert Jacobson, who served as the Principal Consultant to the Utilities & Commerce Committee of the California State Assembly. The term made its debut in the legislative arena within the title and text of the Electronic Commerce Act of California, a piece of legislation advocated by the then Committee Chairwoman, Gwen Moore (D-L.A.), and implemented into law in the year 1984.

E-commerce commonly utilizes the Internet as a fundamental component throughout various stages of a transaction’s life cycle, though other technologies such as email may also be employed. According to Statista (2021), typical e-commerce activities encompass the acquisition of products (for instance, purchasing books from platforms like Amazon) or services (like digital music downloads available on distribution channels such as the iTunes Store). E-commerce manifests in three principal areas: electronic markets, online auctions, and online retailing (Wienclaw, 2013). It is underpinned by electronic business.

The intrinsic value of e-commerce lies in facilitating online shopping and payment through the Internet, thus economizing time and space for both consumers and enterprises. This notably enhances transaction efficiency, particularly for busy office workers, and contributes to substantial time savings (Subramani and Walden 2001).

Business Type of E-Commerce

There exist six fundamental categories of e-commerce as shown in Fig. 1.

Fig. 1
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Business type of e-commerce. Source: Doğaner (2007)

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  1. 1.

    Commerce between companies (B2B): This type of e-commerce is characterized by dealings between business entities. It involves trading goods, services, or data among firms.

  2. 2.

    Commerce from business to individual (B2C): This refers to exchanges where companies sell directly to consumers. It is the most prevalent form, often seen in online retail environments.

  3. 3.

    Individual-to-individual commerce (C2C): In this scenario, transactions occur between private individuals, with digital platforms serving as facilitators for the trade of products or services.

  4. 4.

    Individual-to-business exchanges (C2B): Here, individuals offer their products or services to companies. This commerce model is commonly linked with independent work and crowdsourced content.

  5. 5.

    Deals from government to business (G2B): This e-commerce model involves interactions and transactions from public authorities to commercial entities, encompassing governmental services or procurement activities.

  6. 6.

    Government-to-individual consumer transactions (G2C): This involves direct transactions from government bodies to private citizens, often entailing the provision of governmental services to the populace.

E-Commerce Timeline

The timeline of e-commerce development spans several decades and is marked by key milestones. The following is a brief overview of the e-commerce timeline:

  1. (a)

    1970s: Early Concepts and Innovations

    The foundations of e-commerce were laid with the development of early electronic data interchange (EDI) systems, enabling electronic transactions between businesses.

  2. (b)

    1980s: Emergence of Online Shopping

    The concept of online shopping began to take shape with the introduction of platforms like CompuServe and Electronic Mall. The first recorded online transaction occurred in 1984.

  3. (c)

    1990s: Commercialization and Dot-Com Boom

    The 1990s witnessed the commercialization of the Internet, leading to the rise of e-commerce giants like Amazon and eBay. The dot-com boom brought a surge in e-commerce startups.

  4. (d)

    1995: Amazon and eBay Launch

    Amazon was founded by Jeff Bezos in July 1994 but officially launched in 1995, initially as an online bookstore. eBay, a pioneering online auction platform, was also launched in 1995.

  5. (e)

    1999: Introduction of PayPal

    PayPal was founded in December 1998 and became a widely used online payment system, contributing to the growth of e-commerce.

  6. (f)

    Early 2000s: Expansion and Diversification

    E-commerce continued to grow, and companies diversified their offerings. Online payment systems, improved security, and faster Internet connections facilitated further expansion.

  7. (g)

    Mid-2000s: Mobile Commerce (M-Commerce) Emergence

    The mid-2000s saw the advent of mobile commerce, allowing consumers to make purchases using smartphones. Companies began optimizing their websites for mobile devices.

  8. (h)

    Late 2000s: Social Commerce and Group Buying

    Social commerce gained traction as companies integrated e-commerce with social media platforms. Group buying sites like Groupon became popular.

  9. (i)

    2010s: Mobile Dominance and Omnichannel Retail

    Mobile e-commerce continued to rise, with smartphones becoming the primary device for online shopping. Omnichannel strategies, integrating online and offline retail experiences, gained importance.

  10. (j)

    2014: Rise of Alibaba

    Alibaba Group, a Chinese e-commerce giant, went public in the USA with the largest initial public offering (IPO) in history, further highlighting the global impact of e-commerce.

  11. (k)

    2020s: Acceleration and Global Pandemic Impact The COVID-19 pandemic accelerated the shift to online shopping, with e-commerce experiencing unprecedented growth. The importance of contactless transactions and digital platforms became more apparent.

    The e-commerce timeline reflects a dynamic evolution, from the early concepts of electronic transactions to the widespread adoption of online shopping and the integration of technology into the retail landscape.

Global Trends of E-Commerce

E-commerce has significantly impacted businesses globally by fostering active customer engagement and transcending traditional sales transactions (Burgess et al., 2009; Eisingerich et al., 2008). As a key player in the globalization movement, cross-border e-commerce has facilitated market entry, new venture creation, and overcoming of trade barriers by numerous companies, marking a shift toward discreet business information exchanges and collaborations. This shift has particularly benefited SMEs by introducing a novel paradigm for transactions, aiding in financial stability, resource utilization, and increased revenues (Chen et al., 2022). E-commerce reached a pivotal milestone in 2012, with sales exceeding $1 trillion (eMarketer, 2012), and the advent of mobile commerce was projected to claim a significant market share by 2017 (Enright 2013). This integration, along with IT advancements in e-commerce, presents vast opportunities for rapid business growth, underscored by the importance of system quality, service quality, and user satisfaction (DeLone et al., 2014). The elimination of geographical and temporal constraints offers a platform for global customer connectivity and cost reduction, emphasizing personalized marketing strategies to enhance product competitiveness (Bakos 2001). Furthermore, the adoption of 3D graphics and augmented reality by brands like Sony and Wayfair reflects evolving marketing techniques for a more engaging consumer experience (Constine 2018).

Technology-Organization-Environment (TOE) Framework

“The Processes of Technological Innovation” by Tornatzky and Fleischer (1990) thoroughly examined the lifecycle of technological innovation, from its inception by engineers and entrepreneurs through to the adoption and utilization within a corporate setting. Within this broad exploration, the TOE framework is introduced, clarifying the role that a firm’s unique setting plays in the integration and embracement of new technologies.

In this framework designed for analysis at the organizational level, the TOE posits that a triad of aspects within a company’s milieu—namely, technological, organizational, and environmental factors—plays a critical role in guiding the decision-making process regarding technology adoption as Fig. 2. These components collectively impact the way in which technological advancements are assimilated within a business.

Fig. 2
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TOE framework. Source: Tornatzky and Fleischer (1990)

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Research Methodology

Literature reviews can be systematically classified into various forms, including those that are focused on specific domains, theories, and methodologies, and employ meta-analysis. Reviews centered on domains cover a wide array of topics that extend to disciplines within the business sphere, such as management and marketing, as well as areas outside of business. The use of meta-analysis in literature reviews is increasing across a multitude of fields, a trend that is well documented across different academic disciplines (Paul & Feliciano-Cestero, 2020).

This research is centered on a domain-based exploration to assess how e-commerce influences SME performance. Utilizing a longitudinal methodology, this study methodically sifts through numerous articles on the topic from the years 2013 to 2024. The procedure includes an organized structure for the review, employing tabulation for clarity. Key sources such as Scopus, Google Scholar, and ScientDirect were mined for relevant articles spanning the last 10 years. The objective of this comprehensive analysis is to pinpoint the factors influencing the adoption of e-commerce within the technology-organization-environment (TOE) framework for SMEs. This facet is extensively examined in Table 1, focusing on how these elements affect the integration and effectiveness of e-commerce strategies in small businesses. Table 2 shows the challenges of adopting e-commerce among SMEs, and Table 3 lists the top five journals related to e-commerce and the TOE framework, ranked by their quartile and H index according to the Scimago Journal & Country Rank.

Table 1 Impact of elements on e-commerce adoption in SMEs
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Table 2 Challenges of adopting e-commerce among SMEs
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Table 3 The top five journals related to e-commerce and the TOE framework
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For the purposes of this study, the literature review was confined to articles published in academic journals, specifically excluding conference papers and review papers to concentrate on the most rigorously vetted empirical findings within the chosen time frame. Furthermore, this study incorporates methodological flowcharts to provide a clearer understanding of the research processes undertaken as Fig. 3.

Fig. 3
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Source: Created by the authors

Methodological flowcharts.

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Results and Discussion

This systematic review sought to analyze literature from the last decade pertaining to factors that affect e-commerce adoption among SMEs from the TOE framework perspective. The findings unearth nuanced factors that influence e-commerce adoption and unearth barriers that SMEs encounter.

Technology Challenges

The adoption of e-commerce among SMEs is significantly hampered by technological challenges. One primary deterrent is the substantial expenses associated with implementing e-commerce infrastructure and maintaining it. Many SMEs operate with limited finances, and the initial investment and ongoing costs of e-commerce can be prohibitive. Additionally, concerns regarding the security of online transactions continue to be a substantial impediment. As reported in the literature, SMEs grapple with the risk of cyber threats that could potentially harm their reputation and lead to financial losses.

Another significant barrier is the challenge of compatibility and integration with existing systems. SMEs often find it problematic to integrate new e-commerce solutions with their pre-existing processes and systems. This problem is compounded by the complex nature of e-commerce technologies which small businesses, with their limited technical expertise, often find difficult to navigate.

Organizational Challenges

Organizational challenges are also significant barriers to e-commerce adoption within SMEs. Foremost among these barriers is a widespread lack of knowledge about technology within these enterprises. A related issue is resource constraints; SMEs often do not have the financial or human resources necessary to implement and support e-commerce. There is also a general opposition to technological adaptation due to a hesitation within these organizations’ cultures to change longstanding business practices.

Strategic deficiencies are apparent within SMEs, as a clear strategy for e-commerce adoption is often lacking. This issue is exacerbated by skill shortages, limiting the organization’s ability to conduct e-commerce effectively. Market entry barriers, such as fierce online competition and a lack of online market understanding, further constrain SMEs. Finally, management reluctances, rooted in skepticism about the benefits of e-commerce or fear of potential failure, also restrict adoption.

Environmental Challenges

Externally, SMEs face a variety of environmental challenges including partnership difficulties. Establishing trust and collaboration with online partners can be challenging, particularly when it comes to logistics and supply chain management. Moreover, challenging socio-economic conditions, such as market instability or lack of Internet access in certain regions, can hinder e-commerce initiatives.

Consumer adoption resistance plays a role; not all target demographics may be ready or willing to shift from traditional brick-and-mortar transactions to online ones. Financial obstacles, particularly in gaining access to credit and other financial services needed to support an e-commerce platform, are also prevalent. Lastly, a restrictive policy environment can impose additional burdens on SMEs, with regulations that fail to keep pace with technological changes potentially stifling e-commerce development.

Conclusion

In conclusion, the systematic review of the TOE framework concerning e-commerce adoption by SMEs over the last decade has illuminated a complex interplay of technological, organizational, and environmental challenges. Technological barriers such as high costs, security concerns, compatibility issues, and system complexities present pronounced hurdles. Organizational challenges, including limited technology awareness, resource constraints, resistance to change, strategic gaps, skill deficiencies, market entry challenges, and management reluctance, significantly deter e-commerce adoption. Moreover, SMEs are also navigating a thorny environmental landscape marked by difficulties in partnerships, challenging socio-economic conditions, consumer resistance to online shopping, financial accessibility, and restrictive policies.

Addressing these challenges calls for a multifaceted approach, where support systems from government, industry associations, and technological partnerships play a pivotal role. Future research should emphasize creating practical strategies and frameworks to support SMEs as they navigate the complexities of e-commerce adoption. It should also focus on the development of adaptive policies that recognize the rapid evolution of digital technologies. With an expected increase in global e-commerce, identifying and overcoming these barriers represent not only an entrepreneurial imperative for SMEs but a broader economic necessity. Therefore, a concerted effort by all stakeholders is crucial for fostering an inclusive digital economy where SMEs can thrive.

Recommendations and Future Research

This review provides multiple avenues for future research. It is recommended that future studies delve deeper into SMEs’ strategic planning processes for e-commerce adoption and seek to understand how SMEs can overcome the reluctance to change manifested at the management level. Moreover, there is a need for research that formulates frameworks to lower financial barriers for SME entry into e-commerce. Additionally, examining the role of governmental policies and regulations in facilitating or hindering e-commerce adoption by SMEs could yield insights into ways forward. The trend toward mobile commerce as a gateway for SMEs entering e-commerce with comparatively lower initial costs also deserves further investigation. Lastly, the development of partnerships and networks to assist SMEs in e-commerce adoption could be a focus area that may unveil synergies reducing the environmental challenges currently faced by SMEs.

Implications for SMEs

The implications for SMEs emerging from this review are significant in shaping their strategies toward effective e-commerce adoption. In grappling with technological, organizational, and environmental challenges, SMEs must prioritize the following key areas to leverage e-commerce effectively:

  1. (a)

    Investment in knowledge and skills: SMEs must allocate resources to train their workforce, enhancing their technology literacy and skills related to e-commerce platforms. This investment will mitigate the knowledge gaps and skill shortages that often impede successful digital transitions.

  2. (b)

    Strategic planning and resource allocation: Strategic planning is critical for SMEs, and resources should be thoughtfully allocated to ensure that e-commerce adoption aligns with overall business goals. This includes budgeting for e-commerce setups and operations and optimizing existing resources for seamless integration.

  3. (c)

    Security measures: With the looming threat of cyber security risks, SMEs must adopt robust security measures to protect customer data and build trust in their e-commerce platforms. Investing in cybersecurity defenses is non-negotiable in the digital marketplace.

  4. (d)

    Adaptation to technological change: SMEs should foster an organizational culture that is adaptable and receptive to technological changes. This could enhance their competitiveness and enable quicker responses to technological advancements.

  5. (e)

    Partnerships and alliances: Forming strategic partnerships and alliances can help SMEs overcome environmental challenges such as financial barriers and partnership difficulties. These collaborations can also provide valuable support networks for logistics and distribution.

  6. (f)

    Engagement with policymakers: SMEs should engage proactively with policymakers to advocate for regulations and policies that support e-commerce growth and provide avenues for financial aid and incentives for adopting digital platforms.

  7. (g)

    Customer-centric approach: Understanding consumers’ resistance to adopting online shopping and addressing it through targeted marketing strategies and educational initiatives can help SMEs attract and retain customers in their e-commerce ventures.

  8. (h)

    Leveraging mobile commerce: As mobile devices continue to proliferate, SMEs should consider mobile commerce as a viable and perhaps more accessible e-commerce entry point, which can be less expensive and more adaptable to various market conditions.

These implications drive home the need for SMEs to holistically approach e-commerce adoption. This includes not only overcoming internal barriers but also proactively engaging with external factors that affect online business practices. By doing so, SMEs can better position themselves to harness the benefits of e-commerce and ensure sustainability and growth in the digital age.