Blockchain Adoption is Driven Externally: Blockchain technology has been extensively tested, implemented, used, or even abandoned by organizations. Whether organizations adopt blockchain technology depends on many factors. Previous literature has identified a range of potential factors affecting the adoption of blockchain technology, but most studies have focused solely on a subset of specific factors. As a result, these studies can provide only limited explanations for the varying degrees of blockchain adoption.
Ecosystem readiness is characterized by the following attributes:
- A large ecosystem scope
- Stakeholders that are not yet collaborating in a trustful and regulated environment
- A powerful organization leading the ecosystem.
- This powerful organization further intentionally promotes innovation by making the benefits of this new technology observable to others
- Putting pressure on the other ecosystem participants to adopt the new technology, and eventually
- Striving for regulatory certainty in the application and use of blockchain.
Introduction
Blockchain Adoption is Driven Externally: The phenomenon of globalization has transformed the global economy. Diminishing national trade barriers, increased mobility, and a diffusion of innovative technologies on an international scale have led to the consolidation of existing markets and to the emergence of new industries. These circumstances have led to a surge of competition between firms and revealed an unexpected threat posed by market newcomers from different industries.
To retain their market position and maintain sustainable growth, executives are forced to respond to growing challenges and adapt corporate strategies and operations. In doing so, companies attempt to establish a competitive advantage by seeking innovative solutions, enhancing the efficiency of existing processes, or increasing the quality of their service. New technologies play a special role and have the potential to disrupt current processes, markets, or industries.
Blockchain Adoption is Driven Externally
Background
Blockchain Adoption is Driven Externally: Crosby characterizes blockchain as a “distributed database of records, or public ledger of all transactions or digital events that have been executed and shared among participating parties”. One of the most important features of blockchains is their distributed consensus mechanism. It allows several dispersed network participants to ensure the integrity and correctness of the performed transactions.
Since the introduction of blockchain and distributed ledger technologies, researchers have developed numerous consensus algorithms that provide diverse features, depending on the demands of potential applications or requirements of users. The design or selection of a specific set of rules determines the attributes of a network, among others its accessibility, security, speed of validation, and the number of simultaneous transactions.
Related Work
Blockchain Adoption is Driven Externally: The literature about specific factors influencing the adoption of blockchain technology by organizations is still in its infancy and has only recently begun to gain momentum.
Koens and Poll, Angelis and da Silva, Werner, as well as Schuetz and Venkatesh, define several value drivers for the adoption of blockchain, whereas they mainly focus on blockchain-specific technical characteristics like open access, decentralized consensus, immutability, and distributed verification to explain why or why not the adoption of blockchain can generate values like transparency, efficiency, and disintermediation to users.
This strong focus on the value of blockchain is in line with the Technology Acceptance Mode and its emphasis on perceived usefulness and perceived ease of use to explain why users accept and use technology.
Blockchain Adoption Model
TOE Framework
Blockchain Adoption is Driven Externally: From the limited literature available about blockchain adoption in organizations, it seems that the TOE framework provides the most adequate theoretical concept for a broader empirical analysis of the factors influencing the adoption of blockchain technology in organizations as it takes into account not only technological but also organizational and environmental factors. The TOE framework was developed and introduced in 1990 by DiPietro.
Blockchain Adoption Model: This theoretical concept describes how an innovation is adopted from a firm perspective and how these three aspects technological, organizational, and environmental influence the decision to adopt. The technological factors include the characteristics of all available technological solutions important for a company in particular conditions.
Technological Factors
Blockchain Adoption is Driven Externally: In the context of innovation, Rogers identifies relative advantage as the most decisive explanatory factor for the speed an innovation is adopted by members of a social system. Rogers defined relative advantage as “the degree to which an innovation is perceived as being better than the idea it supersedes”. Relative advantage can be understood as a relation between foreseen benefits compared to prerequisite costs of switching to the new technology.
Blockchain Adoption Model: Rogers found that the perceived benefits of a new technology depend on the nature of the innovation and the character of the adopting party. All of this implies that an organization that sees the blockchain as more advantageous than its current solution is more likely to adopt this new technology.
- Hypothesis 1: Relative advantage positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 2: Compatibility positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 3: Complexity negatively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 4: Trialability positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 5: Observability positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 6: Organizational readiness positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 7: Organizational size positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 8: Top management support positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 9: Organisational age negatively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 10: Competition intensity positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 11: External stakeholder pressure positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 12: Regulatory uncertainty negatively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 13: Pre-existing collaboration with other stakeholders positively affects the decision of an organization to adopt blockchain technology.
- Hypothesis 14: The scope of the business ecosystem negatively affects the decision of an organization to adopt blockchain technology.
Organizational Factors
Blockchain Adoption is Driven Externally: According to Lalic and Marjanovic implementing innovations in business processes is a complex, ongoing procedure and a challenge for managers and entire enterprises. Therefore, fostering the successful adoption of new concepts requires preparing the entire organization for the forthcoming change.
Blockchain Adoption Model: The extent to which an organization can adapt its culture, resources, structures, and, processes to the demands of the intended rearrangement determines the readiness of an organization for change. Organizational readiness can be assessed by the availability of financial and technological resources for the adoption.
Environmental Factors
Blockchain Adoption is Driven Externally: Among the proposed environmental factors in the original TOE framework are industry characteristics and market structure which can be captured by the competition intensity. The intensity of competition is a central element in Porter’s five forces framework and describes the extent to which other market participants affect a company’s behavior.
Blockchain Adoption Model: The impact of competition was, according to the author, increasing on the stagnant markets with a large number of homogeneous firms and immense difficulties to exit. Therefore, we conclude that the higher the intensity of competition, the more likely an organization will decide to adopt blockchain.
A further factor of the environment is external pressure, which refers to the constraint from stakeholders outside an enterprise to adopt an imposed matter, for instance, a particular norm, regulation, certain behavior, or a favored technology. External stakeholders include customers, competitors, trading partners, regulators, governments, investors, and non-profit organizations.
Conceptual Model and Hypotheses
Blockchain Adoption is Driven Externally: The technological context consists of relative advantage, compatibility, complexity, trialability, and observability. The relative advantage is affected by the perceived benefits and the costs. The organizational context has the factors of organizational readiness, organizational size, senior management support, and organizational age.
Blockchain Adoption Model: Organizational readiness is in turn influenced by the availability of human and technological resources and by the organizational structure. The environmental context consists of competition intensity, external pressure, regulatory uncertainty, collaboration, and the scope of the business ecosystem. External pressure can be further divided into competitors, customers, suppliers, regulators, and shareholders
Methodology
Questionnaire Design and Operationalization
Blockchain Adoption is Driven Externally: Methodologically this study will investigate the phenomena of low blockchain adoption rates in organizations with comprehensive quantitative research. Therefore, we formulated assumptions in form of directional hypotheses, based on predictions asserted by authors of corresponding studies with the purpose of analyzing a correlation or influence of independent variables on a dependent variable.
Blockchain Adoption Model: To measure and test our established hypotheses, we conduct a survey. Compared to other approaches, this method allows researchers to reach a large and geographically diverse set of respondents at a low cost, quickly, and efficiently. The design of survey questions, as Sue and Ritter articulate, is an important aspect of the survey process. Additionally, defining the environmental context contains subjective and individual aspects and therefore such questions can not be easily taken from other research.
Therefore, based on the theoretical conceptualization of the hypothesis, competition intensity is assessed through the perceived market growth, pressure is defined by the perceived pressure placed by another stakeholder on one’s company, regulatory uncertainty is measured by the subjective perception of regulatory support for blockchain, collaboration is given by the collaboration with other stakeholders and the scope of the ecosystem results from the number of customers and suppliers and the number of countries they operate in.
Data Collection
Blockchain Adoption is Driven Externally: To reach more participants, the survey was offered in English and German. The targeted population was employees from C-level and management across all industries. Geographically, we focused on the DACH region which consists of Germany, Austria, and Switzerland. We were able to acquire 205 participants in Germany, 75 participants in Austria, and 70 participants in Switzerland. This led to a total amount of 350 participants. The time range for participation was from November 3, 2020, to March 19, 2021.
Data Analysis
Blockchain Adoption is Driven Externally: In order to assess our survey, we used the Python scripting language. A link to the entire code, the survey questions as well as the anonymous dataset are provided at the end of the paper. The assessment of the results happened in three steps. First, in order to calculate the internal consistency of our questions we used Cronbach Alpha. A value should be greater than 0.7 in order to be acceptable. Secondly, we calculated the correlation. Since our scale is ordinal, we used the Spearman rank correlation.
Blockchain Adoption Model: It describes the relationship between two variables through a monotonic function. According to Akoglu a value of 0.2 is weak, a value of 0.3 is moderate, a value between 0.4 and 0.6 is strong and everything above 0.6 is seen as very strong. This logic can obviously be applied to the negative values of the scale, too. Third, to test our BAM we performed a binary logistic regression analysis.
In contrast to other regressions, binary logistic regression has a binary dependent variable. Our analysis’ dependent variable is the variable “blockchain adoption”. The coefficient β of the binary logistic regression by which factor an increase of the independent variable by one unit changes the odds of the dependent variable.
Findings
Descriptive Statistics
Blockchain Adoption is Driven Externally: Figure A1 in the appendix shows the answers to each subquestion. One can observe that the tendency for all constructs tends to be positive. The perceived pressure and the perceived complexity show that more people tend to disagree with the asked questions. Nevertheless, by putting those answers into context, we realize that the respondents do not think there is pressure being placed on them to adopt blockchain and that they do not perceive the technology as complex.
Logistic Regression
Blockchain Adoption is Driven Externally: The final results of the binary logistic regression to test our BAM are shown in Table 6. The Hosmer-Lemeshow-Test shows a significance level of 0.205 meaning that the binary logistic regression fits our data and is therefore a valid approach. The Nagelkerke R-square is 0.595. Looking at the significance level of our constructs, we see that relative advantage, observability, organizational age, pressure, regulatory uncertainty, and scope of the ecosystem have a significant effect on the adoption of blockchain. By looking at the odds ratio we can draw certain conclusions.
Discussion
Factors Influencing Blockchain Adoption
Blockchain Adoption is Driven Externally: Our analysis identifies six factors influencing the adoption of blockchain. Within the technological context, H1 and H5 were confirmed by the regression, meaning that relative advantage and observability have a positive influence on blockchain adoption. These findings go along with Rogers, who determined that those two factors influence innovation in general. We explain the significant positive effect of the relative advantage with the fact that the introduction of blockchain in organizations will incur certain costs.
Ecosystem Readiness
Blockchain Adoption is Driven Externally: In the literature, many researchers have specifically highlighted the importance of the technological and organizational factors influencing the adoption of the blockchain. Even though we could find support for some technological and organizational factors, our results from our Blockchain Adoption Model suggest that the important factors influencing the adoption of blockchain are mainly given by an organization’s environment rather than by the technology or the organization itself.
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Frequently Asked Questions (FAQs)
What are the challenges in the successful adoption of blockchain?
Security and privacy challenges: While cryptocurrencies provide pseudonymity, many potential blockchain applications need smart transactions and contracts to be indisputably linked to real identities, raising significant privacy and data security issues.
Which is a key issue relating to the adoption of blockchain?
Lack of regulatory clarity and good governance: One of the challenges of the blockchain approach (which was also one of its original motivations) is that it reduces oversight. Many organizations are making blockchain technology a means of transaction. But even now there aren’t any specific regulations about it.
How do I increase blockchain adoption?
Privacy, trust, and security issues ask for proper regulation without endangering technology innovations. Lack of skills and poor public perception and awareness should be increased through education and broad information and communication.
Why is the adoption process so complicated?
When adopting, there are much higher standards put into place to ensure permanency. There are strict age and financial requirements. Many times, there are even requirements regarding an applicant’s health, marital status, and sexual orientation, as well as the other children the applicant has.
