Firm Performance Effects in Relation to the Implementation and Use of Enterprise Resource Planning Systems

Abstract

Research indicates that successful adoption of information technology to support business strategy can help organizations gain superior financial performance. The recent wave of enterprise-wide resource planning systems adoptions is a significant commitment of resources and may affect almost all business processes. This study examines the effect of adoption of enterprise systems on a firm's long-term financial performance. A large-scale data identification and collection method compared the financial data of 247 firms adopting enterprise wide systems with a matched control group of firms cross-sectionally and longitudinally before and after adoption. A number of implementation characteristics were also measured and their effects assessed. The results show that firms adopting enterprise systems exhibit higher differential performance only after two years of continued use. Furthermore, controlling for implementation characteristics as vendor choice, implementation goal, modules implemented, and implementation time period, helped explain the financial performance effects of enterprise resource planning system use. These results provide important insights that complement extant research findings and also raise future research issues.