SESSION 6 - A study of how underperforming firms follow industry leaders

Question 1

Whats the paper about?

Answer 1

• 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

Question 2

What are the two ways in which firms decide to implement ERP systems?

Answer 2

1) cost-benefit analysis aimed at quantifying operational efficiency firm can obtain 2) institutional pressures

Question 3

Whats the institutional theory?

Answer 3

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

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
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
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
–>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

Question 4

What were the results of the study?

Answer 4

• 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