The implementation of enterprise resource planning : an innovation diffusion approach

Enterprise resource planning (ERP) systems have been adopted by many businesses in the past decade. These systems have revolutionized organizational computing by integrating the majority of business processes, sharing common data and practices across the entire enterprise, and producing and accessing information in a real-time environment. Organizations have realized important tangible and intangible benefits from ERPs including general and administrative expense reduction, margin enhancement, revenue growth, improved customer satisfaction, and personnel and information technology (IT) staff reduction. Despite these benefits, many companies have had serious problems implementing ERP systems. These problems have caused many companies to abandon their ERP initiative or implement the system in limited capacity. This study investigates the implementation of ERP systems by drawing upon research in diffusion of innovation (DOI) theory and information systems. Specifically, this study examines the relationship between certain key factors grounded in DOI theory and the extent of implementation and success of implementation of ERP. Two dimensions of extent of implementation examined are the breadth of implementation, or percentage of company sites using ERP, and depth of implementation, or the number of different ERP components deployed within a company. The model developed includes contextual variables such as innovation characteristics, organizational characteristics, and environmental characteristics as determinants of the extent of implementation and success of implementation of ERP systems. The data for the study was obtained from a field survey of 51 firms that have adopted ERP systems. Survey respondents are the project managers of ERP implementations within manufacturing organizations. The results of regression analyses reveal that two innovation characteristics, compatibility and relative advantage, and an environmental characteristic, competitive pressure, are major predictors of breadth of implementation. Additionally, a control variable, size, was significant in the model. The only significant explanation of depth of diffusion is size. Two innovation characteristics, complexity and relative advantage, and one organizational characteristic, top management support, were instrumental in explaining implementation success.