An Outlook: Key Drivers and Hurdles for Blockchain Adoption in Indian MSMEs' Sustainable Supply Chains

Adopting cutting-edge technologies is a pressing need for Indian Micro, Small, and Medium-Sized Enterprises (MSMEs) as they strive for sustainable development. Blockchain is a revolutionary technology that gained prominence with the advent of cryptocurrencies. It is quickly gaining recognition as an effective tool for advancing sustainable supply chain management (SSCM). Our SP Jain research team, based out of Singapore and India, delved into the relevant area of blockchain adoption among Indian MSMEs to explore the drivers and hurdles that MSMEs face when integrating this innovative technology.

Limited visibility, transparency, and sustainability are recurring issues in modern supply chains. Blockchain technology presents a unique opportunity to address these challenges and promote greater sustainability due to its inherent qualities of trust, transparency, and the ability to prevent tampering. The decision to adopt blockchain is complex, however, and requires a thorough understanding of the factors influencing its adoption. To thoroughly investigate these factors, our study introduces a novel "SOS framework" for the strategic adoption of blockchain technology for SSCM. 

Key Drivers of Blockchain Adoption

Our research identifies several key factors that positively and significantly influence Indian MSMEs' intention to adopt blockchain for SSCM.

Software Quality: High-quality software with essential features, including functionality, reliability, usability, efficiency, maintainability, and portability, is crucial for adoption. For MSMEs, this means focusing on strong, mature, and well-designed blockchain solutions. Relying on average or low-quality products can have adverse consequences, as blockchain often necessitates a fundamental shift in operations rather than just incremental enhancements.

Environmental Sustainability: Organizations that are committed to environmental sustainability tend to have a strongly positive association with the intention to adopt blockchain. This is especially important in a time when awareness of environmental issues is growing and Environmental, Social, and Governance (ESG) audits are gaining significance. Environmentally conscious MSMEs are better positioned to evaluate and leverage the benefits of blockchain in reducing their ecological footprint, despite concerns about the technology's energy consumption.

Collaboration: Collaboration plays a significant role in the adoption of blockchain, particularly in work cultures that prioritize teamwork. Since blockchain is decentralized, collaboration within departments and with external partners is crucial for enhancing operations and efficiency. Organizations that are flexible and willing to adapt are more likely to benefit from the new ways of coordination that blockchain offers.

Economic Sustainability: An organization's economic stability and profitability are essential for its intention to adopt blockchain. Economically sustainable MSMEs possess the resources and resilience to invest in disruptive technologies and effectively manage the changes they bring. They can see past initial costs and recognize the long-term value, which is crucial for successful automation and digital transformation.

Experience: Recognizing the perceived relative advantage of using blockchain innovation, our study highlights the significant mediating effect of experience in this relationship. This mediating effect of experience implies that recognizing the benefits of innovation alone is insufficient; MSMEs require an experienced workforce to successfully render those strengths into actual adoption. This experience can be gained within the company through internal development or through hiring and training. It enables the organization to plan and implement digital transformation effectively.

The Unexpected Hurdles of Blockchain Technology Adoption

Our study identified two factors that have a negative influence on the intention to adopt blockchain in Indian MSMEs.

Computer Self-Efficacy: Surprisingly, high computer self-efficacy, encompassing general computer knowledge and workforce skills, is associated with a lower intention to adopt blockchain. Our study indicates that broad computer literacy may lead to a "comfort zone" with current technologies. This comfort can oversimplify complex issues and result in incorrect evaluations of disruptive technologies, such as blockchain. Instead, successful blockchain adoption requires trained experts who understand the complexities of this new technology, rather than a generally tech-savvy workforce.

Social Sustainability: Organizations with high social sustainability, which encompasses social cohesiveness, ethics, and brand image, exhibit a strong negative association with the intention to adopt blockchain. This might be because these socially sustainable organizations are more cautious about adopting new technologies that could disrupt their established culture, harm their brand image, or lead to job losses or other high-risk activities. These organizations may focus on stability and public opinion, so they need blockchain technology to be more streamlined and developed before considering its adoption.

Strategic Adoption of Blockchain with the SOS Framework

Theoretically underpinned by the Technology-Organization-Environment (TOE) framework, the "SOS framework" offers a comprehensive overview of technology adoption, highlighting the socio-technical, organizational, and sustainability contexts. It emphasizes that examining the three contexts together provides a comprehensive perspective for MSMEs.

Actionable Insights for Indian MSMEs:

Guided by our research findings, Indian MSMEs should consider strategizing as follows:

Invest in High-Quality Blockchain Solutions. Prioritize solutions that meet stringent software quality standards, such as those outlined in ISO 9126. Do not compromise on quality for a technology that requires a significant operational change.

Embrace Environmental Leadership: Leverage existing environmental sustainability efforts to promote blockchain adoption. ESG reports can help identify opportunities for blockchain to improve eco-friendly practices and gain a competitive edge.

Cultivate a Collaborative Culture: Foster a company culture that values and promotes collaboration, both within and outside the organization. This openness will be essential for incorporating blockchain's decentralized nature into supply chain processes.

Strengthen Economic Foundations: Establish a robust economic foundation to effectively manage the costs and risks associated with adopting a disruptive technology. This stability gives the necessary support for a successful transition.

Prioritize Specialized Expertise Over General IT Literacy: Instead of expecting everyone to be a blockchain expert, focus on building or developing a core team of experienced and knowledgeable personnel. These specialists will play a crucial role in designing, implementing, and managing blockchain initiatives.

Address Social Concerns Proactively: For socially sustainable MSMEs, it's essential to address potential disruptions to work culture, job roles, and brand image before implementing blockchain. Clear communication, involving stakeholders in planning, and showing the long-term social benefits of blockchain can help reduce resistance.

Strategically Evaluate Relative Advantage: Recognizing the benefits alone is not enough. A clear assessment of blockchain's relative advantages must be coupled with the organization's ability and experience to achieve those benefits.

Monitor the Regulatory Landscape: Be aware that blockchain adoption is closely tied to changes in national and international laws, economic policies, and political structures, particularly in relation to cryptocurrencies.

In conclusion, while blockchain technology holds great potential for SSCM in Indian MSMEs, its successful adoption requires a thoughtful and strategic approach. By strategically navigating the identified drivers and hurdles, MSMEs can effectively manage the complexities and harness the transformative power of blockchain.

By Shalini Chandra, Professor - Information Technology