CEC Theses and Dissertations

Title

The Impact of ERP Investments on Organizational Performance

Date of Award

2008

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Information Systems (DISS)

Department

Graduate School of Computer and Information Sciences

Advisor

Steven D. Zink

Committee Member

Ling Wang

Committee Member

Sumitra Mukherjee

Abstract

Enterprise resource planning (ERP) systems affect organizations and are implemented to enhance organizational effectiveness. However, ERP implementation is complex, costly and the research to date on the results of ERP investments on organizational performance have been inconclusive. The goal of this study was to discover the impact of ERP systems implementation on organizational performance by measuring the impact of an ERP on financial performance of public companies over a period of four years. Based on a comprehensive literature search, two independent variables and four dependent variables that represent organizational performance were defined. Return on asset, return on investment, return on sales, and cost of goods sold over sales measured organizational performance. ERP implementation status and ERP scope (independent variables) affected dependent variables.

This causal comparative study was based on a quantitative research design and was divided into two parts. The first part of the study focused on discovering the relationship between ERP implementation and organizational performance. The second part of the study focused on finding relationships between the scope of ERP and organizational performance for firms that have implemented ERP.

The results achieved from analysis of data showed that deployment of ERP systems did not affect financial performance of organizations significantly when measured over a four-year post-adoption period. When comparing pre- to post-adoption financial performance, both ERP-adopters and non-adopters had financial performance decline in the first and second post-adoption years because of the stock market devaluation of the 2000-2002 period. However, ERP-adopters lagged one year behind the non-adopters in recovery. Furthermore, varying ERP scope did not affect significantly financial performance of the firms that had implemented ERP. Pre-adoption differential performance was a better predictor of post-adoption performance than ERP scope over a four-year post-adoption period.

This study adds to the body of knowledge in the area of information technology and ERPs and its results can contribute to improved decision-making and setting ERP expectations at the time of ERP purchase. Future researchers can use the financial performance measures used in this study to develop formal measures to assess the financial performance of future adopters of ERP systems.

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