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Ram, Jiwat; Corkindale, David; Wu, Ming-Lu
Enterprise resource planning adoption: structural equation modeling analysis of
antecedents
Journal of Computer Information Systems, 2013; 54(1):53-65
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1
This is the accepted version of the following journal article:
Ram, J., Corkindale, D., Wu, M-L. (2013), Enterprise Resource Planning Adoption: Structural Equation
Modeling Analysis of Antecedents, Journal of Computer Information Systems, Fall 2013, Vol. 54, No. 1,
pp.53-65.
2
ENTERPRISE RESOURCE PLANNING ADOPTION: STRUCTURAL
EQUATION MODELING ANALYSIS OF ANTECDANTS
Dr Jiwat Ram
Entrepreneurship, Commercialisation and Innovation Centre
Engineering South Building, North Terrace Campus
University of Adelaide
Phone: 61 8 8313 2562
Fax: 61 8 8313 7512
Email: jiwat.ram@adelaide.edu.au
Professor David Corkindale
The International Graduate School of Business,
Division of Business, City West Campus
University of South Australia
Phone: 61 8 830 20322
Fax: 61 8 830 20709
Email: David.Corkindale@unisa.edu.au
Associate Professor Ming-Lu Wu
Division of Business and Management
United International College, Beijing Normal University-Hong Kong Baptist University
B113, 28 Jinfeng Road, Tangjiawan, Zhuhai, Guangdong 519085
P. R. China
Phone: 86-756-3620647
Fax: 86-756-3620183
Email: mlwu@uic.edu.hk
ABSTRACT
This study identifies the key antecedent factors for accomplishing the adoption stage of
enterprise resource planning (ERP) systems. Five potential antecedent factors of
adoption were derived from the literature, including that on innovation theories, and data
were obtained from a sample of 217 organizations across Australia. A structural
equation modeling (SEM) technique was used to examine the complex relationships
between antecedents and the adoption decision. We found that there were three
positive drivers of a successful outcome of the ERP adoption stage. Prior findings have
shown that system quality is a key enabler for innovation adoption by individuals, and
we found that system quality is also an important driver for organizational adoption of
ERP. It was also indicated that organizations consider adopting ERP when the market
and customer patterns are relatively stable rather than in turbulent environments.
Keywords: adoption, enterprise resource planning (ERP), structural equation modeling
(SEM), partial least square (PLS), implementation
3
INTRODUCTION
An important source of improved competitiveness is technological process innovation,
and enterprise resource planning (ERP) systems are one source of such innovation—
one that can bring about a fundamental shift in the way a business functions, moving it
from a functional to a process-oriented way of operating. ERP promises to incorporate
best business practices, improve coordination and control and link “back-office and
front-office operations” [1]. Researchers have concluded that ERP improves
coordination, enhances order management, information visibility, and customer
responsiveness, and boosts accountability and discipline [2, 3].
Therefore, the potential of ERP to deliver value seems to be well recognized, yet its
introduction into organizations continues to be a daunting task, encountering failures
and difficulties [4]. The risks, challenges, and high failure rates of ERP projects have
been documented in the literature since the mid-1990s [4, 5, 6, see Appendix A for ERP
failure examples]. The significantly high costs, the broad scope of the projects, and the
associated changes it brings to people, processes, culture, and organizational structure
make ERP projects a complex endeavor that leave little room for error. The continued
failures may be due to the lack of a holistic and structured understanding of the
organizational innovation process involved in ERP projects, particularly, the
organizational approach at the adoption stage [7]. Esteves and Bohorquez [8] observed
that the number of ERP studies with theoretical foundations remains limited.
Much of the research in the ERP context focuses on the implementation stage, while
very few studies have examined the stages of its introduction and use [9, 63]. Some
researchers [10, 11] attribute this focus to the high risks and failure rates of ERP
projects. It may well be that some researchers consider implementation a term that
includes initiation, adoption, implementation, and use [63], whereas these are identified
as separate terms by innovation adoption scholars [e.g., 12]. Van Stijn and Wensley
[13] explain that the focus on the implementation stage is due to researchers
considering the implementation stage an “obstacle” that needs to be overcome first.
We suggest that the research focus on the implementation stage alone is
counterproductive, as it has led to the generation of fragmented, unsystematic
knowledge output. While each stage of the innovation adoption process has its set
goals, priorities, focus, stakeholders, and strategies, the successful accomplishment of
one stage serves as an input to the next stage [14]. Therefore, to improve the chances
of achieving success in ERP projects, the issues related to a successful outcome at
each stage of the innovation process should be investigated separately [7, 63]. Thus,
the way in which problems at one stage may cause related problems at another can be
more easily exposed. Similarly, antecedent success factors at one stage can be
examined to see if they are also factors of success at another and whether they are
independent of each other, as an understanding of the possible synergies can be
important managerially [15]. By focusing on one specific stage of the overall process, a
greater understanding of the entire innovation management process can be reached
and can help to improve the chance of successful outcomes for ERP projects.
Accordingly, the research described here focuses on one stage of innovation: the
adoption stage of an ERP system.
4
As we have argued above, achieving the adoption of an ERP system is critical to the
overall subsequent successful outcome; however, little research has been done on the
issues, problems, and antecedent factors of this stage in the process. ERP adoption
differs from the adoption of a typical IT system because ERP systems are inherently
complex, integrated in nature, capital intensive, more risk prone, and generally not tailor
made, and they require different organizational capabilities to operate and maintain [16].
Therefore, the research findings on the adoption process of traditional IT systems may
have limited ability to provide direct indications of the complexities of the ERP adoption
decision-making process and antecedent influencing factors. An understanding of the
antecedents critical to the success of the adoption process of ERP can help
organizations to achieve savings in cost and time and reduce the risk of failures [15].
Therefore, this topic merits research attention. In the context of the foregoing
arguments, the aim of our study is to identify the antecedents that influence the
adoption decision stage of an ERP project.
ADOPTION OF ERP
The initial adoption of an innovation is a key stage of any project seeking to install and
use it, as the adoption will lead to substantial monetary and resource commitments and
this applies to ERP projects as they can be considered innovations [17]. A lack of
understanding of what is required at this primary stage can lead to serious difficulties
later on and a drain on critical organizational resources. The adoption stage has been
recognized as one of most critical stages in the innovation process [15, p.423]. We use
Rogers’s definition of adoption: “the decision of any individual or organization to make
full use of an innovation as the best course of action available” [12, p.177].
The identification of the antecedents of the organizational adoption of ERP is important
for the successful achievement of an ERP project. We summarize below some of the
main findings from the literature relevant to our study and, in this selective review, we
examine adoption from an organizational perspective. While the adoption stage has
been considerably researched in the innovation diffusion literature [e.g., 18, 19], it
seems to have attracted little attention in the ERP literature, where the prime focus has
tended to be on the implementation process of ERP [8].
For IT projects, in general, the following have often been found to be significant
predictors of the adoption behavior of organizations: organization size, business
complexity, availability of resources, control mechanisms, and staff skills and expertise
[12]. We briefly examine below the degree to which these antecedents, and related
items, have been found to apply to the adoption of ERP.
A formalized and centralized organization structure has been found to help smooth
implementation [19] because ERP entails increasing the control and centralization of
information and processes within an organization. However, Kostopoulos et al. [20]
found that centralization is negatively related to ERP adoption.
Organization size, structure, knowledge, and management capabilities have been found
to be antecedents of ERP adoption [21], whereas business complexity appears to have
less of an influence on ERP adoption [22].
