Analysis of the Factors Affecting Internet Adoption in Nicaragua’s Tourism Industry

In the previous chapter, we saw an introduction about the factors affecting Internet adoption in Nicaragua, in this chapter we are going to organize and analyze that information in order to answer the question proposed in chapter 1: What are the factors affecting the Internet adoption in tourism industry in Nicaragua? Answering this question will allow us to better understand the barriers affecting Nicaragua’s tourism industry in the adoption of Internet for its better performance, once we have clarified the factors, we will be able to put forward solutions on how to improve its actual situation. The factors found in this study are:

1. Economic development

Bazar and Boalch (1997) explained one of the factors influencing the diffusion of Internet in developing countries is the level of economic development, which is related to the level of demand for Internet services, in a low-level income country, the demand for technology services tend to be low. This point is also confirmed by Arnum and Conti (1998). On the other hand, Nicaragua is one of the poorest countries in Latin America, its GDP was US$12.6 billion in 2015 and its GDP per capita US$2,027, for a low-level income country it is hard to afford a 1Mbps of fixed broadband service, which cost is 8.8% of average monthly income, while in other Latin American countries, the amount needed to pay for 1Mbps of fixed broadband service does not exceed 2.1% of the monthly income.

2. Internet penetration

The improvement of telecommunication infrastructure can increase the networking capacity, when there is lack of basic telecommunication infrastructure, the Internet usage costs can be high, affecting negatively the adoption of these Internet technologies (Bazar & Boalch, 1997; Press et al., 1998). The poor telecommunication infrastructure is another factor affecting Internet diffusion in Nicaragua, this can be reflected on the small number of Internet access per household in the country, with less than 20% of connectivity in Latin America (CEPAL, 2016).

3. Lack of awareness for modern technologies

According to Croes and Tesone (2004), SMEs in Nicaragua have low technology awareness, less than 1% of all the employees in firms in Nicaragua use computers, 12% of the hospitality firms in Nicaragua reported that their employees do not use computers, less than 1% of SMEs use the Web and less than 4% sell through the Internet. It is also worth mentioning that in The Global Competitiveness Report by WEF, in the pillar of technological readiness about the firm-level technology absorption, Nicaragua ranks 120 out of 138 countries. According to Alejandro Delgado, president of Nicaraguan Council of Micro, Small, and Medium Enterprises (CONIMIPYME, Spanish) mentioned that “there are small companies that are afraid of using the Internet to promote their products for fear of being copied” (Álvarez Hidalgo, 2016b). These perceptions can stem from

the low level of education among the population, leading to ignore or reject the technology just because they do not understand its benefits or simply do not understand how to use it.

4. Level of education

There are also studies indicating that high education is related with high Internet subscription, because those highly educated people are more likely to possess the skills needed to use the Internet technologies (Dimitrova, 2002; Jisi, 2001; Mendoza & Alvarez de Toledo, 1997). Bazar and Boalch (1997) indicated that “The use of the Internet by students plays an important role in diffusion of the Internet”, while Nicaragua ranks 131 out of 138 countries regarding to Internet access in schools and the perceived quality of the education system ranks the country 132 at 2.3 points on a scale of 7 (Schwab & Sala-i-Martin, 2016), the low level of education among the population is preventing users and non-users from exploring the benefits of the Internet.

5. Shortage of qualified personnel

For the implementation of ICT technologies, high qualified personnel are needed for the use and diffusion of the Internet.

6. Digital literacy

One of the biggest barriers to Internet adoption in Nicaragua is the lack of digital literacy (GSMA, 2016). The digital literacy is defined as a set of knowledge and skills that allows the user the effective use of ICT devices such desktop, laptops, smartphones, access the Internet without problem, create information and online content. According to GSMA (2016) “lack of basic digital literacy deprives consumers from exploring the real value of the Internet”, the low level of digital literacy can be reflected in the low number of Internet users that use it more for entertainment than for productivity purposes, in Nicaragua 31% of those who have Internet access use it for entertainment purposes (Facebook, Netflix, Wechat, etc.), and only 8.5% use it for educational purposes (Lara, 2017).

7. Constraints by SMEs in obtaining financing for innovation

One of the main obstacles to innovation in Latin America is the constraint in securing financing and access to credit for innovation (IDB, 2010; Pagés, 2010). In a report, 2,539 Nicaraguan firms were analyzed, 1,370 were microenterprises, 693 were small companies, 297 were medium-sized enterprises and 179 were large companies. This report found out that only 15% of microenterprises and 37% of small companies invest in new technologies compared to 77% in medium-sized enterprises and 87% in large companies. The micro and small companies reported they are having greater difficulty obtaining loans for general business purposes, as well as for the incorporation of new technologies, with 63% and 58% respectively (COSEP, 2015). The perceived ease of access to loans ranks Nicaragua 123 out of 138 countries, which means this pillar needs to be improved by providing financial support and reducing barriers for entrepreneurship and investment.

8. High handset tax

According to statistics, there are 8.2 million of mobile phones in Nicaragua, which only 2.5 million are smartphones (Lara, 2017). One of the main barriers to afford a mobile device in Nicaragua is the taxation, Nicaragua charges 20% of Selective Consumption Tax for the importation of mobile devices and 15% of Value Added Tax, which means that if a mobile device in Guatemala costs US$100, in Honduras costs US$112, in Nicaragua would cost US$135.

9. Telecommunication infrastructure

For the successful diffusion of the Internet in a country, it is needed the adequate infrastructure.

Bazar and Boalch (1997) explained that “in countries where there is no infrastructure, the initial investment is high; however, once infrastructure is made available using advanced communications technologies, the usage costs tend to be low due to fast transmission rate.” The perceived quality of overall infrastructure ranks Nicaragua 105 at 3.2 points on a scale of 7, the Nicaragua’s telecommunication infrastructure can be improved through more and better investments.

In this chapter we have seen some of the factors affecting the adoption of new technologies in Nicaragua’s tourism industry, although the Government of Nicaragua is improving some basic infrastructure for tourism development, but it’s doing it at a slow pace, the government also has the duty to increase digital literacy among the SMEs in order to improve tourism’s services and provide a better value-added to the international tourists, the Figure 10 provides a summarizing about the factors affecting the adoption of new technologies in Nicaragua’s tourism industry based on the analysis of the data discussed above: