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The Technology–Organization–Environment Framework

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DOI: 10.1007/978-1-4419-6108-2_12

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Chapter 12 1

The Technology–Organization–Environment 2

Framework 3

Jeff Baker 4

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Abstract This chapter describes the Technology–Organization–Environment (TOE) 5
framework. It begins by presenting a description of the TOE framework and its con- 6

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structs. Next, a brief review of studies that have used the TOE framework is provided. 7
In this review, an emphasis is placed on noting the type of innovation that is being 8
adopted in each study. Also, the different ways in which the framework has been adapted 9
for various adoption contexts are highlighted. Finally, directions for future research with 10
ed
the TOE framework are described. In spite of this framework’s stability since its initial 11
development, many avenues for evolution and development appear promising. 12
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Keywords Adoption of innovations, • Diffusion of innovations • Technology- 13

Organization-Environment framework • Technology adoption 14
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Abbreviations
or

15

CRT Cathode ray tube 16

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DOI Theory Diffusion of innovations theory 17

EDI Electronic data interchange 18
ERP Enterprise resource planning 19
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IOS Interorganizational systems 20

IS Information systems 21
RBV Resource-based view 22
RFID Radio-frequency identification 23
SCM Supply chain management 24

J. Baker (*)
Department of Management Information Systems, School of Business and Management,
American University of Sharjah, P.O. Box 26666 Sharjah, United Arab Emirates
e-mail: jbaker@aus.edu

Y.K. Dwivedi et al. (eds.), Information Systems Theory: Explaining and Predicting
Our Digital Society, Vol. 1, Integrated Series in Information Systems 28,
DOI 10.1007/978-1-4419-6108-2_12, © Springer Science+Business Media, LLC 2011
 J. Baker

25 TAM Technology acceptance model

26 TAM2 Technology acceptance model version 2
27 TOE Technology–organization–environment framework
28 TPB Theory of planned behavior
29 UTAUT Unified theory of acceptance and use of technology

30 12.1 The Technology–Organization–Environment Framework [AU1]

31 The technology–organization–environment (TOE) framework is described in

32 Tornatzky and Fleischer’s The Processes of Technological Innovation (1990). The
book describes the entire process of innovation – stretching from the development

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33

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34 of innovations by engineers and entrepreneurs to the adoption and implementation
35 of those innovations by users within the context of a firm. The TOE framework
36 represents one segment of this process – how the firm context influences the ­adoption
37 and implementation of innovations.

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38 The TOE framework is an organization-level theory that explains that three ­different
39 elements of a firm’s context influence adoption decisions. These three ­elements are
40 the technological context, the organizational context, and the environmental con-
ed
41 text. All three are posited to influence technological innovation.

12.1.1 The Technological Context

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42

The technological context includes all of the technologies that are relevant to the
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43
44 firm – both, technologies that are already in use at the firm as well as those that are
45 available in the marketplace but not currently in use. A firm’s existing technologies
or

46 are important in the adoption process because they set a broad limit on the scope and
47 pace of technological change that a firm can undertake (Collins et al. 1988).
48 Innovations that exist but are not yet in use at the firm also influence innovation –
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49 both by demarcating the limits of what is possible as well as by showing firms ways
50 in which technology can enable them to evolve and adapt.
51 Within the group of innovations that exists outside the firm are innovations of three
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52 types, those that create incremental, synthetic, or discontinuous changes (Tushman

53 and Nadler 1986). Innovations that produce incremental change introduce new fea-
54 tures or new versions of existing technologies. These incremental innovations repre-
55 sent the least amount of risk and change for the adopting organization. Examples
56 include the transition from cathode ray tube (CRT) computer monitors to liquid crys-
57 tal display (LCD) monitors, or an upgrade from one version of enterprise resource
58 planning (ERP) system to a newer version of the same system. Innovations producing
59 synthetic change represent a middle point of moderate change, where existing ideas or
60 technologies are combined in a novel manner. An example is universities’ delivery of
61 course content via the Internet. No new technologies – in recording, storage, or trans-
62 mission are used – neither is there necessarily an innovation in course content. Thus,
63 existing technologies are combined in a novel way to innovate. Innovations that
12 The Technology–Organization–Environment Framework

p­ roduce a discontinuous change – which have been referred to as “radical” innovations­ 64

(Ettlie et al. 1984) – represent significant departures from current technology or 65
­processes. Examples include the adoption of bar-code scanning in the grocery indus- 66
try in the 1970s and 1980s, the change from mainframes to PCs at many corporations 67
in the 1980s, or the shift to cloud computing that began in the early 2000s. 68
Industries that are characterized by technological innovations that cause incremen- 69
tal and even synthetic change allow a measured pace of adoption. In contrast, indus- 70
tries that are characterized by technological innovations that produce discontinuous 71
change require firms to make quick and decisive adoption decisions to maintain 72
and enhance competitive standing. When evaluating technologies that will cause 73
discontinuous change, firms must also consider whether these technologies are 74
“competence-enhancing” or “competence-destroying” (Tushman and Anderson 1986). 75

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Competence-enhancing innovations enable firms to gradually change as they build 76

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upon their expertise, while competence-destroying innovations render many existing 77
technologies and many types of expertise obsolete. These discontinuous, competence- 78
destroying innovations often cause major shifts in industries. For instance, the shift to 79

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cloud computing may ultimately prove to be a competence-destroying technology. 80
Firms that have achieved a high level of expertise within their IT function may find 81
that such a competency is no longer needed and no longer a source of competitive 82
advantage. In contrast, the adoption of RFID technology appears to be competence- 83
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enhancing. Firms that have a demonstrated skill in tracking assets and resources – a 84
skill that most likely relies on bar-coding technology – can build upon this compe- 85
tency. As they replace bar codes and optical scanners with RFID tags and digital RFID 86
ct

scanners, they can use the same databases to store item data and can find new efficien- 87
cies in business processes as manual scanning of bar codes becomes unnecessary. 88
In sum, organizations must carefully consider the type of organizational changes
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89
that will be created by adopting a new innovation. Some innovations will have a 90
dramatic impact on the firm and the industry in which it competes, while others will 91
or

have a relatively small impact. 92

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12.1.2 The Organizational Context 93

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The organizational context refers to the characteristics and resources of the firm, 94
including linking structures between employees, intra-firm communication pro- 95
cesses, firm size, and the amount of slack resources. There are several ways in 96
which this context affects adoption and implementation decisions. First, mecha- 97
nisms that link internal subunits of the organization or span internal boundaries 98
promote innovation (Galbraith 1973; Tushman and Nadler 1986). The presence of 99
informal linking agents – such as product champions, boundary spanners, and gate- 100
keepers – is associated with adoption. Cross-functional teams and employees that 101
have formal or informal links to other departments or to other value chain partners 102
are additional examples of such mechanisms. 103
More broadly, organizational structure has been studied to identify its relation- 104
ship to the innovation adoption process. Organic and decentralized organizational 105
 J. Baker

106 structures are associated with adoption (Burns and Stalker 1962; Daft and Becker
107 1978). Organizations with these types of structures emphasize teams, have a degree
108 of fluidity in responsibilities for employees, and promote lateral communication in
109 addition to communication along reporting lines. Other research on organizational
110 structure indicates that while organic and decentralized structures may be best-
111 suited to the adoption phase of the innovation process, mechanistic (rather than
112 organic) structures, with their emphasis on formal reporting relationships, central-
113 ized decision-making, and clearly defined roles for employees, may be best-suited
114 to the implementation phase of the innovation process (Zaltman et al. 1973).
115 Communication processes within the organizational context can also promote or
116 inhibit innovation. Top management can foster innovation by creating an organiza-
117 tional context that welcomes change and is supportive of innovations that further the

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118 firm’s core mission and vision (Tushman and Nadler 1986). Top management lead-

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119 ership behaviors and communication processes include describing the role of inno-
120 vation within the organization’s overall strategy, indicating the importance of
121 innovation to subordinates, rewarding innovation both formally and informally,

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122 emphasizing the history of innovation within a firm, and building a skilled executive
123 team that is able to cast a compelling vision of the firm’s future.
124 Among the most frequently discussed factors within the organizational context
125 that affect innovation, however, are slack and size. While much research indicates
ed
126 that slack promotes adoption (March and Simon 1958; Rogers 1995), additional
127 work indicates that innovation can take place in the absence of this factor and that
128 the presence of slack may not necessarily lead to technological innovation (Tornatzky
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129 et al. 1983). Thus, while slack is desirable and helpful, it is “neither necessary nor
130 sufficient for innovation to occur” (Tornatzky and Fleischer 1990, p. 161).
Size is also widely studied, but a conclusive link between this factor and innovation
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131
132 does not exist. Larger organizations are generally more likely to adopt innovations
133 (Cyert and March 1963; Kamien and Schwartz 1982; Scherer 1980), but much of this
or

134 research has been criticized on the grounds that size is often a crude proxy for more
135 specific and more meaningful underlying organizational factors such as the availability
136 of specific resources (Kimberly 1976). Thus, a link between size and innovation cannot
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137 be conclusively established, and researchers argue for the use of more specific mea-
138 sures of organizational variables than simply the generic measure “size.”
139 An example of a firm that was able to cultivate an organizational context that was
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140 receptive to the adoption of innovation is the motorcycle-maker, Harley-Davidson

141 Motor Company (Austin et al. 2003). When the company was considering imple-
142 menting a new supply chain management (SCM) system in the late 1990s, they
143 deliberately assembled a project team that included key employees from different
144 sites and different functions in the firm. They benefitted from a company structure
145 where rigidly divided functional silos do not exist, but interlocking functional teams
146 collaborate to make decisions and define strategy. Furthermore, the company values
147 self-directed teams rather than formal hierarchy. And finally, a champion for the
148 innovation, the CIO of the firm, was instrumental in the adoption of a new SCM
149 system. This example illustrates one specific setting where the organizational con-
150 text was particularly well-structured to promote the adoption of an innovation.
12 The Technology–Organization–Environment Framework

12.1.3 The Environmental Context 151

The environmental context includes the structure of the industry, the presence or 152
absence of technology service providers, and the regulatory environment. Industry 153
structure has been investigated in several ways. For instance, intense competition 154
stimulates the adoption of innovation (Mansfield 1968; Mansfield et al. 1977). Also, 155
dominant firms within the value chain can influence other value chain partners to 156
innovate (Kamath and Liker 1994). 157
With regard to industry life cycle, it is argued that firms in rapidly growing indus- 158
tries tend to innovate more rapidly. In mature or declining industries, however, innova- 159
tion practices are not clear-cut (Tornatzky and Fleischer 1990). Some firms use the 160
decline of an industry to innovate through efficiency initiatives or by expanding into

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161

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new lines of business. Other firms may avoid investment in innovation in an effort to 162
minimize costs. Empirical work validating these assertions about the relationship 163
between industry life cycle and the adoption of innovation remains to be carried out. 164
The support infrastructure for technology also impacts innovation. Firms that 165

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must pay high wages for skilled labor are often compelled to innovate through 166
labor-saving innovations (Globerman 1975; Levin et al. 1987). The availability of 167
skilled labor and the availability of consultants or other suppliers of technology 168
services also fosters innovation (Rees et al. 1984).
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169
Finally, government regulation can have either a beneficial or a detrimental effect 170
on innovation. When governments impose new constraints on industry, such as 171
requiring pollution-control devices for energy firms, innovation is essentially man- 172
ct

dated for those firms. Similarly, stringent safety and testing requirements can retard 173
innovation in numerous industries. For instance, in construction, where new materi- 174
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als must be extensively tested before they can be used, or in agriculture, where new 175
varieties of crops must be patented and licensed, the cost of innovation can be quite 176
high. Another example exists in banking, where privacy requirements may prevent 177
or

banks from introducing new ways for customers to access their account informa- 178
tion. Thus, government regulation can either encourage or discourage innovation. 179
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In sum, these three elements – the technological, organizational, and environmen- 180
tal contexts – present “both constraints and opportunities for technological innova- 181
tion” (Tornatzky and Fleischer 1990, p. 154). These elements influence the firm’s 182
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level of technological innovation. Figure 12.1 depicts this framework visually. 183

12.2 The Technology–Organization–Environment Framework 184

in Research 185

Extant research has demonstrated that the TOE model has broad applicability and pos- 186
sesses explanatory power across a number of technological, industrial, and national/ 187
cultural contexts. The TOE model has been used to explain the adoption of interorga- 188
nizational systems (Grover 1993; Mishra et al. 2007), e-business (Zhu et al. 2003; Zhu 189
 J. Baker

External Task Environment Organization

Industry Characteristics and Formal and Informal Linking

Market Structure Structures

Technology Support Infrastructure Communication Processes

Government Regulation Technological Size

Innovation Decision
Making Slack

Technology

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Availability

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Characteristics

Fig. 12.1 The technology–organization–environment framework

190
191
192
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and Kraemer 2005; Zhu et al. 2006b; Zhu et al. 2004), electronic data ­interchange
(EDI) (Kuan and Chau 2001), open systems (Chau and Tam 1997), enterprise systems
(Ramdani et al. 2009), and a broad spectrum of general IS applications (Thong 1999).
ed
193 The TOE model has been utilized to explain the adoption of innovations in a host of
194 industries, including manufacturing (Mishra et al. 2007; Zhu et al. 2006b), health care
195 (Lee and Shim 2007), retail, wholesale, and financial services (Zhu et al. 2006b).
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196 Furthermore, the TOE model has been tested in European, American, and Asian con-
197 texts, as well as in both developed as well as developing countries (Zhu et al. 2003; Zhu
and Kraemer 2005; Zhu et al. 2006b, 2004). In each study, the three elements of tech-
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198
199 nology, organization, and environment have been shown to influence the way a firm
200 identifies the need for, searches for, and adopts new technology.
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201 In each of the empirical studies that test the TOE framework, researchers have
202 used slightly different factors for the technological, organizational, and environ-
203 mental contexts. In essence, researchers have concurred with Tornatzky and
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204 Fleischer (1990) that the three TOE contexts influence adoption, but these research-
205 ers have then assumed that for each specific technology or context that is being
206 studied, there is a unique set of factors or measures. For instance, in Zhu et al.
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207 (2004), the authors argue that one pertinent factor in the technological context that
208 affects the adoption of e-business is “technology readiness.” Similarly, these authors
209 argue that “firm size,” “global scope,” and “financial resources” are the pertinent
210 factors that should be studied to understand how the organizational context affects
211 the adoption of e-business. Finally, the “regulatory environment” and “competition
212 intensity” are relevant when researchers wish to understand how the environmental
213 context influences the adoption of e-business. Different types of innovations have
214 different factors that influence their adoption. Similarly, different national/cultural
215 contexts and different industries will have differing factors as well. Thus, other
216 research studies use different factors for the technological, organizational, and
217 ­environmental contexts.
12 The Technology–Organization–Environment Framework

Table 12.1 lists these factors that compose the technological, organizational, and 218
environmental context elements in each of the extant empirical studies. In this table, 219
asterisks denote factors that were statistically significant predictors of adoption; 220
plain text denotes a factor for which partial support was found, and italics denote 221
that the factor was not statistically significant. This table also identifies the type of 222
innovation that is being studied. 223

12.3 The Technology–Organization–Environment Framework 224

in Future Research 225

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To this point, the majority of the theoretical development that has taken place related 226

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to the TOE framework has been limited to enumerating the different factors that are 227
relevant in various adoption contexts. No new constructs have been added to the 228
framework. Little theoretical synthesis has occurred. Scant critique has been offered. 229

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Thus, the TOE framework has evolved very little since its original development. In 230
this section, reasons for this lack of theoretical development will be presented, fol- 231
lowed by directions for future research. 232
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12.3.1 Reasons for Lack of Development 233
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There may be multiple reasons for the relative lack of evolution and change in the 234
TOE framework since its initial development. First, the TOE framework has been
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235
described as a “generic” theory (Zhu and Kraemer 2005, p. 63). This assessment 236
seems appropriate considering that the theory has come to be used as a framework 237
or

within which a host of various factors can be placed (as has been demonstrated in 238
Table 12.1). The freedom to vary the factors or measures for each new research 239
context makes the TOE framework highly adaptable. Thus, scholars have seen little 240
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need to adjust or refine the theory itself. 241

Second, the TOE framework may have seen relatively little evolution because 242
it has been viewed as aligned with other explanations of innovation adoption – 243
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rather than offering a competing explanation to them. Tension between the TOE 244
framework and other theories has been seen as slight, and this tension has, at this 245
point, to be resolved by allowing the TOE framework to subsume competing 246
ideas, rather than respond to them. For instance, it has been noted that the TOE 247
framework is consistent with the theory of the diffusion of innovations (DOI) 248
(Rogers 1995). The DOI adoption predictors, individual leader characteristics 249
and internal characteristics of organizational structure are said to be comparable 250
to the TOE’s organizational context element. A similar renaming equates DOI’s 251
external characteristics of the organization with TOE’s environmental context. 252
Finally, Rogers’s implicit emphasis on technological characteristics of the inno- 253
vation has been said to equate with the TOE’s technological context (Zhu et al. 254
t1.1 Table 12.1 Summary of prior studies using the TOE framework
t1.2 Reference and innovation
U Technological context factors Organizational context factors Environmental context factors
t1.3 Chau and Tam (1997) Perceived barriers* Satisfaction with existing systems* Environmental uncertainty
t1.4 Perceived benefits Complexity of IT infrastructure
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t1.5 Open systems Perceived importance of compliance Formalization on system development and
t1.6 to standards, interoperability, management
t1.7 and interconnectivity
t1.8 Grover (1993) Compatibility* Size* Role of IT*
or
Complexity* Strategic planning* Management risk position*
t1.9 Customer-based IOS Relative advantage Infrastructure* Adaptable innovations*
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t1.10 Top management support* Technology policy
t1.11 Championship* Customer interaction
t1.12 Centralization Competitor scanning
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t1.13 Formalization Competition intensity
t1.14 Integration Information intensity
t1.15 Implementation planning Power
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t1.16 Generic strategy
t1.17 Maturity
t1.18 Vertical coordination
t1.19 Kuan and Chau (2001) Perceived direct benefits* Perceived financial cost* Perceived industry pressure*
t1.20 EDI Perceived indirect benefits Perceived technical competence* Perceived government pressure*
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t1.21 Lee and Shim (2007) Perceived benefits* Presence of champions* Performance gap*
t1.22 RFID Vendor pressure Market uncertainty*
t1.23 Mishra et al. (2007) Procurement process digitization* Diversity of organizational procurement Suppliers’ sales-process
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t1.24 knowledge digitization*
t1.25 Internet in procurement Organizational perceptions of
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J. Baker

t1.26 technological uncertainty

t1.27 Ramdani et al. (2009) Relative advantage* Top management support* Industry
t1.28 Compatibility Market scope
t1.29 Complexity
U Organizational readiness* Competitive pressure
t1.30 Enterprise systems Trialability* External IS support
t1.31 Observability IS experience
t1.32 Size*
t1.33 Thong (1999) Relative advantage of IS Business size* Competition
nc
t1.34 Compatibility of IS Employees’ IS knowledge*
t1.35 IS Complexity of IS Information intensity
t1.36 CEO’s innovativeness
t1.37 CEO’s IS knowledge
or
t1.38 Zhu et al. (2003) Technology competence (second-order Firm size* Competitive Pressure*
t1.39 construct composed of IT Firm scope* Consumer readiness (interactive
E-business
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t1.40 infrastructure, Internet skills, construct composed of
t1.41 e-business know-how)* consumer willingness,
t1.42 Internet penetration)
t1.43 Lack of trading partner readiness
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t1.44 Zhu et al. (2004) Technology readiness* Firm size* Regulatory environment*
t1.45 Global scope* Competition intensity
12 The Technology–Organization–Environment Framework

ed
t1.46 e-business Financial resources*
t1.47 Zhu and Kraemer (2005) Technology competence* Size* Regulatory support*
t1.48 e-business Financial commitment* Competitive pressure
t1.49 International scope
t1.50 (Zhu et al. 2006b) Technology integration* Firm size Competition intensity
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t1.51 e-business Technology readiness Global scope Regulatory environment
t1.52 Managerial obstacles
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 J. Baker

255 2003, 2006a). Because these ­theories are described as markedly similar, the TOE
256 ­framework has not been altered in response to DOI. Instead, researchers explain
257 them as being closely related.
258 An example of the TOE framework subsuming a similar theoretical approach is
259 seen in the blending of the TOE with a model of EDI adoption (Iacovou et al. 1995).
260 The EDI adoption model was developed in a multiple case-study research program
261 and explains that perceived benefits, organizational readiness, and external pres-
262 sure predict the adoption of EDI. One study “integrates” the EDI adoption model of
263 Iacovou et al. (1995) with the TOE framework (Kuan and Chau 2001, p. 509),
264 another cites these models alongside each other as though they have the same pre-
265 dictors (Lee and Shim 2007), and others go even farther, stating that “following
266 Tornatzky and Fleischer (1990), Iacovou et al., developed a model formulating three

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267 aspects of EDI adoption – technological factor, organizational factor, and environ-

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268 mental factor…” (Zhu et al. 2003, p. 253, emphasis in original – see also Zhu et al.
269 2004, p. 20). This is a particularly striking statement given that the EDI adoption
270 model was developed independently of the TOE framework, with Iacovou et al.

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271 never referencing or citing TOE research. It is also striking in that Zhu et al. have
272 described the EDI adoption model constructs in a way that makes them appear iden-
273 tical to the TOE elements. Similar statements about Iacovou et al.’s research sup-
274 porting the TOE framework can be found elsewhere (Zhu and Kraemer 2005; Zhu
ed
275 et al. 2006b). Thus, the EDI adoption model of Iacovou et al. (1995) – rather than
276 being recognized as an independent theoretical development, and rather than being
277 acknowledged as having different drivers of the adoption process – is gradually
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278 becoming subsumed into the body of TOE research. This reality also prevents the
279 theoretical evolution of the TOE framework. The TOE framework’s elements of
technological context, organizational context, and environmental context have not
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280
281 been contrasted with the EDI adoption model predictors of perceived benefits, orga-
282 nizational readiness, and external pressure.
or

283 Third and finally, other theories do exist in the area of adoption and DOI. The
284 TOE framework is not the only option researchers have available to explain organi-
285 zational adoption. Arguably the most similar explanation to TOE is DOI theory
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286 (Rogers 1995), with the aforementioned EDI adoption model of Iacovou et al.
287 (1995), also somewhat related. Furthermore, network externalities have been put
288 forward as an explanation for the adoption of certain types of innovations (Zhu et al.
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289 2006a). Other theories of the adoption of innovations include task-technology fit
290 theory (Cooper and Zmud 1990), institutional theory (Teo et al. 2003), the theory of
291 organizational design (Swanson and Beath 1990), and social contagion theory
292 (Angst et al. 2010). These theories can and have been utilized as alternatives to the
293 TOE framework. These alternatives mean that the TOE framework need not be
294 adapted or changed to apply in more varied contexts. Other theories exist that may
295 fit the particular research context better.
296 A closely related point is that researchers have argued that perhaps it is not pos-
297 sible to have a single theory that applies to all types of innovations. Because innova-
298 tions are of different types (Damanpour and Evan 1984; Robey 1986; Swanson
299 1994; Zmud 1982), it seems unlikely that a single theoretical explanation can be
 12 The Technology–Organization–Environment Framework

developed to describe the adoption and diffusion of all types of innovations 300
(Kimberly and Evanisko 1981; Lai and Guynes 1997; Lee and Shim 2007; Thong 301
1999; Zhu et al. 2006b). While these arguments are well-founded, they have the 302
potential to limit the comparison of theories with one another. By avoiding compari- 303
son and critique of the various theories of adoption of innovation, the refinement of 304
these theories is restricted. 305

12.3.2 Future Directions for TOE Research 306

Future research with the TOE framework can take a number of directions. Perhaps 307

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the most obvious is that the TOE framework can continue to be used for empirical 308

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research. As long as new technologies are developed, and as long as novel contexts 309
for adoption can be identified, the need to understand the adoption of innovation in 310
organizations indicates that the TOE framework is capable of providing insights for 311

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researchers and practitioners. Thus, continued empirical work is one future direc- 312
tion for TOE research. 313
Other possibilities exist as well. For instance, one area of interest to researchers 314
is interorganizational adoption. The TOE framework has been used to study the 315
ed
adoption of interorganizational systems, but only from the perspective of a single focal 316
firm. Extant research does not examine how decisions are made when multiple firms 317
must collectively reach a decision about a new system. How do the multiple 318
ct

firms’ multiple technological contexts influence adoption? How do the multiple firms’ 319
multiple organizational contexts influence adoption? Is the environmental context 320
viewed differently by different firms? Does the position of a firm in the value chain
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321
cause it to view new technologies differently than its value chain partners view 322
those same technologies? Exploration and investigation of each of these questions 323
or

would allow researchers to extend the TOE framework in ways that would 324
increase its explanatory power or possibly reveal its limits. Such research would 325
also provide actionable insights for practitioners in an age of increasing organiza- 326
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tional interconnectedness. 327

Additionally, theoretical synthesis may extend and enrich the TOE frame- 328
work. For instance, one explanation for the organizational adoption of many 329
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types of technology – an explanation that has slightly different emphases than 330
the TOE framework – is that of network externalities. When the value of an 331
innovation depends on the number of other users or other firms who adopt that 332
innovation, positive adoption externalities, also known as network effects or 333
network externalities, are said to exist (Katz and Shapiro 1985, 1986). Network 334
effects can be either direct network effects, which are the physical effects of 335
being able to exchange information, or indirect network effects, which arise 336
from the interdependencies with other organizations in the use of complemen- 337
tary goods (Katz and Shapiro 1985, 1986; Weitzel et al. 2006). Numerous types 338
of technologies are said to generate network effects, including computer net- 339
[AU2] works for academic research (Gurbaxani 1990), EDI (Chwelos et al. 2001), and 340
 J. Baker

341 open-standard interorganizational systems (Au and Kauffman 2001; Riggins

342 et al. 1994; Zhu et al. 2006a). In each case, the value of being a member of the
343 network of adopters increases with each additional adoption decision. Thus,
344 these researchers argue that network externalities are one of the primary reasons
345 for adoption.
346 Where do network externalities fit within the TOE framework? Can they be
347 understood as a characteristic of some specific types of technologies – and thus
348 included as part of the technological context? Or are externalities something
349 entirely different that the present TOE framework does not truly account for? It
350 remains to be seen how the TOE framework will evolve and change in response to
351 this theory.
352 Theoretical synthesis can take additional routes. Researchers have already

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353 included other theories and typologies in TOE-based research studies. Some

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354 researchers explain how the TOE factors predict use of an innovation, and then
355 appeal to the resource-based view (RBV) of the firm to explain how use of an inno-
356 vation creates value or improves performance (Mishra et al. 2007; Zhu and Kraemer

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357 2005). Such research indicates that the dependent construct in the TOE model, tech-
358 nological innovation, might possibly be enlarged to include an element of organiza-
359 tional performance. Furthermore, TOE framework research has also included
360 typologies of innovations such as Swanson’s Type I, II, and III innovations (Chau
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361 and Tam 1997; Swanson 1994; Zhu et al. 2003; Zhu and Kraemer 2005; Zhu et al.
362 2004). If conditional statements could be made about how the technological, orga-
363 nizational, and environmental contexts influence the adoption of Type I, II, or III
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364 innovations, the TOE framework would be enlarged.

365 Yet another route for theoretical evolution involves exploring ways in which
theories of individual behavior and individual adoption can influence the TOE
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366
367 framework’s explanation of organizational adoption. Researchers have suggested
368 that not only should the technological, organizational, and environmental contexts
or

369 be considered, but also that task characteristics and individual factors should be
370 included in studies of adoption (Premkumar 2003). In adoption research, some of
371 the most widely used theories include the theory of planned behavior (TPB) (Ajzen
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372 1985, 1991), the technology acceptance model (TAM) (Davis 1989; Davis et al.
373 1989), a more recent version of TAM known as TAM2 (Venkatesh and Davis 2000),
374 and the unified theory of acceptance and use of technology (UTAUT) (Venkatesh
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375 et al. 2003). Perhaps a synthesis can be achieved that combines the strengths of
376 these theories in explaining individual behavior with the strength of the TOE frame-
377 work in explaining organizational behavior.
378 In sum, each of the ideas for future research listed above allows scholars to
379 develop or critique the TOE framework and the research that supports it.
380 Definitions of the three elements of a firm’s context could be refined. Also, as
381 noted above, the definition of the dependent construct could be perhaps enlarged.
382 Furthermore, the ways that the TOE elements influence the various types of inno-
383 vations could be discussed. And finally, theories of individual behavior can be
384 examined for ways to enrich the TOE framework. The potential exists for much
385 fruitful work to be done.
 12 The Technology–Organization–Environment Framework

12.4 Conclusions 386

The adoption of innovations is clearly affected by the technological, organizational, 387

and environmental contexts within a firm. Given this reality, it appears that the TOE 388
framework will continue to provide useful guidance for researchers and practitio- 389
ners. However, a variety of other ideas exist alongside the TOE framework. 390
Competing theories will need to be addressed and the ideas within those theories 391
will need to be incorporated into the TOE framework – or else critiqued by it. The 392
challenge for researchers and theorists will be to comprehensively address these 393
competing ideas and to craft a refined version of the TOE framework that is at the 394
same time parsimonious and broadly applicable. 395
Fortunately, researchers know considerably more about the adoption of innova-

f
396

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tions than they did when the TOE framework was initially developed. The TOE 397
model has been shown to be useful in the investigation of a wide range of innova- 398
tions and contexts. Furthermore, it has been broadly supported in empirical work. It 399
remains among the most prominent and widely utilized theories of organizational 400

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adoption since its development. The work of researchers in the coming decades will 401
reveal how the TOE framework can continue to shape work on the adoption of 402
innovations. 403
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