Enterprise resource planning systems in operations management: A model, an instrument and an empirical test

A model of certain costs and benefits arising from the implementation of Enterprise Resource Planning (ERP) systems is developed and tested. Organizational Information Processing Theory states that performance is influenced by the fit between coordination mechanisms and organizational context. ERP is such a mechanism—one that provides high levels of integration but requires considerable standardization. Two propositions follow regarding firms that implement ERP systems: Interdependence among a firm's sub-units is associated with positive business impacts from ERP. However, to the extent that sub-units are highly differentiated from one another, impacts will be less positive.; Using manufactures plants running ERP systems as the domain, these two propositions are further refined based four case studies. The resulting causal model is then tested using a questionnaire survey of 173 plants.; Structural equation modeling is used to purify the measurement model and to test the causal model. Interdependence between plants and the sales and distribution functions sharing their ERP system is positively associated with overall plant impacts of ERP; however, there is no statistically significant association involving interdependence with other plants in the organization. Differentiation among plants in the ERP implementation is associated with reliance on alternative (non-ERP) systems and with increased time required for managerial tasks. Finally, increased time for managerial tasks is associated with negative overall plant impacts of ERA. Thus the two central propositions are generally supported.