A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott Flashcards
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
Introdoctuin and aim of the paper?
- linkages between primary facets of institutional theory & systems adoption decisions
- firms considering complex structures (implementing ERP systems) are more susceptible to institutional pressures
- aim of paper: examine if late-stage adopters of ERP systems tend to be underperforming firms and see if their performance improves post-adoption
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What are two ways in which firms decide to implement ERP systems?
1) cost-benefit analysis aimed at quantifying operational efficiency firm can obtain 2) institutional pressures
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What it the Institutional theory?
effects of social pressures on organisational decisions; includes three faets that influence how individuals formulate organisational decisions after considering outside influences
1) compliance to coercive pressures
2) conformity to established norms
3) mimicry of perceived legitimate organisations
-> both conformity & mimetic facets are rooted in insecurity, risk & uncertainty – both give decision-maker feeling as if it is justified that he made decision to implement as others did before
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What it the Coercive facet?
depicts how firms comply with powerful entities (governments, large customers); compliance with these entities is less voluntary than with the other two facets
-> has proved to be major driver of ERP adoption (Zwangsgefühl)
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What it the Conformity to established norms facet?
depicts how orgas go along with industry norms and standards; tends to occur more easily in industries because interaction allows firms to exchange ideas
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What it the Mimetic facet?
depicts how underperforming firms tend to follow the lead; helps waiting firms to avoid costs and pitfalls of developing and implementing new technologies on their on
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What it the Mimetic facet?
depicts how underperforming firms tend to follow the lead; helps waiting firms to avoid costs and pitfalls of developing and implementing new technologies on their on
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
INSTITUTIONAL THEORY & ERP ADOPTION: HA1/HA2
Hypothesis 1: late-stage ERP adopters are more likely to underperform relative to early-stage ERP adopters
* as late-stage adopters avoid costs of cost/benefit (systematic) analysis, they may see their relative performance increase thus:
Hypothesis 2: the performance of late-stage ERP adopters improves more than the performance of early-stage adopters post adoption
-> both correct
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
INSTITUTIONAL THEORY & ERP ADOPTION: HA1/HA2
Hypothesis 1: late-stage ERP adopters are more likely to underperform relative to early-stage ERP adopters
* as late-stage adopters avoid costs of cost/benefit (systematic) analysis, they may see their relative performance increase thus:
Hypothesis 2: the performance of late-stage ERP adopters improves more than the performance of early-stage adopters post adoption
-> both correct
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
METHODOLOGY?
- measure of firm performance: total returns that shareholder experience based on change in price & dividends earned over period of time
- 1st hypothesis testing: examining monthly returns for ERP adopters prior to ERP implementation – comparing frequency of positive and negative abnormal returns over four-year period leading up to implementation for both early-stage and late-stage
- 2nd hypothesis testing: insertion of interaction variable that measure impact of returns for late-stage adopters post ERP implementation, relative to early-stage – positive coefficient = improve late-stage
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
DATA SAMPLE?
- 137 firms from 36 industries that decided to implement ERP systems between 1994 & 2001
- announcement date of ERP implementation: event date of implementation
- post-ERP testing: collected data for 48 months following the implementation
Early-stage adopters: 1994-1997 adopters – 54 firms
Late-stage adopters: 1998-2001 adopters – 83 firms - relationship of ERP systems with manufacturing sector: anticipation that relationship will be most pronounced in manufacturing firms -> thus: split of sample into manufacturing & non-manufacturing
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What are the results and the conclusion?
- late-stage adopters experience lower financial performance up to adoption compared to early-stage adopters supports that early-stage adopters do in way to maintain competitive advantage by investing in ERP while late-stage adopters do so due to institutional pressures
- interconnectedness amplifies institutional pressures manufacturing firms show strength of performance + adoption stage relationship
- late-stage adopters benefit more than early-stage adopters post-adoption
conclusion: both hypotheses are supported
A Study of How Underperforming Firms Follow Industry Leaders When Adopting ERP Systems – Ugrin, Morris & Ott
What are LIMITATIONS & FUTURE RESEARCH?
- conclusion is derived through deductive reasoning + there was no study of individual firms’ decision processes
- it cannot be parcelled out which institutional factors influenced adoption decision of firms in sample
- future research should examine how firms learn from own past experience not just by observing others in ERP adoption
- future research should consider examining characteristics of firms test relationships in other industries, with other technologies & among different firm sizes
chracteristics
