Investment in Enterprise Resource Planning: Business Impact and Productivity Measures

“There are many internal and external entities involved in this type of high-risk project besides the executive steering committee for project management (PM) which require expertise that is not typically found within the organization, such as system vendors and implementation consultants [25].”

“In this research, we use the project-based adoption definitions because prior research has attributed success and failure of projects to how a technology is implemented in a project [57,101].”

“Risks facing an organization during ES implementation, combined with low productivity which is typically present during and immediately after ES implementations, may even contribute to bankrupting an organization [Scott and Vessey 2002; Hitt et al. 2002].”

“Hitt et al. (2002) investigate the relationship between adopting ERP systems and firm performance.”

“Technology implementation almost always exhibits (i) a learning period before (ii) a new stable steady-state emerges (Hitt et al. 2002; Robey et al. 2002).”

“We note that the literature has also documented the diminishing marginal returns between the scale and benefits of IT (Hitt et al. 2002) and between the time elapsed since implementation and IT benefits (Gattiker and Goodhue 2005).”

“ERP modules automate data-oriented management operations and processes such as inventory control, production, sales support, accounting, and human resources management (Hitt et al. 2002).”

“While researchers have been able to demonstrate productivity improvements from IS spending [43], they have also found that it is easier to capture IS impact at intermediate levels—notably, at the process level [64, 66].”

“Hitt, Wu, and Zhou (2002) also found evidence of improved financial performance immediately after ERP implementation.”

“With multiyear, multi-firm ERP implementation and financial data, firms that invest in ERP tend to show higher per formance across a wide variety of financial metrics [26].”

“Causal models (e.g. [2, 48, 49, 56, 98]), also known as variance models, attempt to establish a cause-effect relationship between ERP investments, ERP characteristics or aspects of the ERP implementation process on one hand, and organizational performance on the other hand.”

“For example, the adoption of enterprise resource planning (ERP) systems for real-time information sharing and coordination in vertically integrated firms is associated with improvement in coordination performance (Hitt et al. 2002).”

“Moreover, Hitt et al. (2002) pointed out that, investment in ERP system improves productivity and business performance.”

“…important for increasing productivity and gaining competitive advantage, as well as being important drivers of innovation and transformation, it is valuable to study ERP at the SME level across countries (Hitt et al., 2002, Raymond and Uwizeyemungu, 2007, Chuang et al., 2009, Maguire et al., 2010).”

“In the case of ERP, existing post adoption studies mainly concentrate on the organizational impact of ERP (Hitt et al. 2002; Hunton et al. 2003; Nicolaou 2004), few studies focus on examining the relationship between ERP assimilation and value creation.”

“ESS are vital to most business processes, including enterprise resource-planning (ERP), supply chain management, financials, payroll processing, human capital management, customer relationship management (CRM), and decision support systems [8, 40 ,57].”

“[73], we measure stock market valuation of BPR projects by using a simplified version of Tobin’s q that relates market value of a firm to its assets.”

“Not surprisingly, researchers in information systems (IS) and economics have extensively examined and found evidence for the impact of IT on economic performance at various levels and using various methodologies [15, 28, 29, 48, 62, 65, 79, 81].”

“Hitt et al. [26] also pointed out improved information flow as the major benefit of ERP systems and, ironically, cautioned that the business performance could be reduced shortly after the implementation of ERP is complete.”

“A plant focus may be particularly appropriate for ERP research because ERP configurations may differ from plant to plant within a firm (Hitt et al. 2002).”

“Even major US software companies have adopted ERP products (Hitt et al., 2002).”

“[52] F.R. Jacobs, E. Bendoly, Enterprise resource planning: business impact and productivity measures, Eur.”

“In certain cases, ERP implementation even threatened the sustainability of organizations [37,39,51,58].”

“A widely cited example is FoxMeyer Drug Company, a $5 billion company and the fourth largest pharmaceutical distributor in the U.S., which went bankrupt when it struggled unsuccessfully with the implementation of its enterprise resource planning system [11, 12 ].”

“Such an environment puts the manufacturer in a better position to exploit the resource endowments of the supplier (Hitt et al, 2002).”

“Hitt and Zhou (2002) summarizes risks as technical and business risk.”

“Prior research on IS investments has successfully used secondary datasets before (Hitt et al., 2002), and it has been demonstrated that these datasets can provide reliable and valid results if the challenges associated with such datasets are addressed appropriately (Bharadwaj, 2002).”

“Studies show that consulting costs can be a large cost factor of an ES project (Hitt et al., 2002) and have exceeded software costs by a factor of 5:1 (Wu et al., 2005) or even more (Zeitz, 1996).”

“Other studies document that IT investments are risky and not cost effective (e.g., Hitt et al. 2002; Dewan and Ren 2011).”

“the business vAlue of it literAture is replete with exAMples describing relationships between It and various types of value and suggestions as to what to control, how to measure, and when to measure [5, 32, 33, 54, 55].”

“…e-business value in the SME context: customers and suppliers’ electronic readiness (Barua and Mukhopadhyay 2000; Barua et al. 2004; Zhu, Kraemer, and Xu 2003) and the quality of external expertise (Thong 2001; Hitt, Wu, and Zhou 2002; Hughes, Golden, and Pow-ell 2003; Siqueira and Fleury 2011).”

“Enterprise software systems, such as Enterprise Resource Planning (ERP) systems, are central to the business operations of a wide variety of firms, and constitute one of the biggest spending categories in their IT budgets (Hitt et al. 2002).”

“First, the adoption of enterprise software inspires wide-spread innovation in the use of corporate IT, and is associated with significant improvement in firm financial and operational performance (Hitt et al. 2002).”

“A number of studies have also discussed the issue of correlation versus causality [7, 17, 18, 20, 30].”

“implementation, including customizations, configurations, and consultation services to implement it (Hitt et al., 2002).”

“In early research, much of the focus was on the technical aspects of ERP systems, examining factors such as system quality, system integration, and customization capabilities 35–37 .”

“(2000) Hitt et al. (2002)”

“and purchase orders for suppliers [46].”

“One explanation of this rather low ERP implementation success may be the fact that banks have started to introduce ERP systems only recently whose benefits (whether relating to efficiency or effectiveness) require some time to unfold ( Hitt, Wu, & Zhou, 2002 ).”

“In addition, the overwhelming majority of researchers have found a positive correlation between IT investment and economic performance at each level of aggregation, for instance, company, industry and national economy (Bernroider et al., 2011; Hitt et al., 2002; Indjikian & Siegel, 2005).”

“ERP systems are configurable software packages that facilitate the integration of business data, both transactional and analytical, and business processes across organizations (Brehm et al., 2001; Hitt et al., 2002; Umble et al., 2003; Al-Mashari, 2003).”

“Thus, IT impacts are often measured in terms of financial ratios (Hitt, Wu, & Zhou, 2002) or yet again in terms of productivity ratios (Thatcher & Oliver, 2001), in terms of competitive advantage (Sethi & King, 1994), or in terms of increased sales and market value (Sircar et al., 2000).”

“associated with above-average emphasis on EIS applications (Hitt et al. 2002).”

“Large firms might have more financial and IT infrastructure resources to devote to the business and thus might experience better organizational performance (Hitt et al., 2002).”

“Firms’ performance may depend on size, since larger organizations may have superior abilities to leverage scale efficiencies and reap further benefits from implementing IOS standards [22].”

“Hitt et al. (2002) found that “firms that invest in ERP tend to show a higher performance across a wide variety of financial metrics.”

“Hitt et al. (2002) also showed that it takes about two years to install enterprise systems, indicating even longer for the systems to affect firm size.”

“), to organizational impacts ( Hitt et al. , 2002”

“Some researchers report that improvements in customer satisfaction and management control really begin with user productivity [6, 20, 21, 42, 46, 88].”

“…function with constant returns to scale and homogeneity of degree one in prices, Shepard ’ s Lemma implies the following cost share equations, where the cost share of highly skilled labour is approximated by the skill intensity of the industry at hand 5 : where i = 1,. (Hitt, Wu, and Zhou 2002).”

“[37] and adapted by Ranganathan and Brown [66].”

“This outcome is in line with many previous studies (Ehie & Madsen, 2005; Gupta & Kohli, 2006; Hendricks et al., 2007; Hitt et al., 2002; Kalling, 2003; Mabert et al., 2001, 2003; McAfee, 2002; Nicolaou & Bhattacharya, 2006).”

“SAP R/3 commands a large percentage of the ERP market [ 50 ] and leads the market in 20 out of 25 industries [92].”

“As the prior literature suggests, when IT is treated like a commodity and is not used strategically, then IT is not likely to lead to success (Rai et al. 2002; Koch 2007).”

“Similar findings were also obtained by past research in management information systems (see, e.g., Bharadwaj 2000, Barua et al. 1991, Hitt et al. 2002, Kudyba and Diwan 2002).”

“Prior research finds that the capital markets reward firms for adopting ERP with higher market valuation and suggests that disclosures about ERP implementations are informative (Hitt et al., 2002; Hayes et al., 2001).”