Empirical Study Of The Impact Of ERP System Implementation On Firm Performance

The concept of Enterprise Resource Planning (hereinafter ERP) was first raised by American information technology advisory firm, Gartner Group Inc. in the 1990s. Since its debut, ERP gained popularity across the world as a new generation of integrated business management application among companies and has gradually evolved into a modern enterprise management software oriented on a supply chain management. Enterprise information management today faces multiple data processing challenges in terms of volume, velocity and complexity. Company management need to find a more efficient and effective way to accelerate information processing speed. ERP combines IT and advanced enterprise management solution and epitomizes the ideal tool for modern business management.For many companies seeking a competitive edge in the market, ERP system is a vital area for upgrading. Although examples of large-scale investment in ERP implementation and customization abound, the result is not as satisfying as managers expected. ERP system requires enormous financial investment and human resources. Involvement of all sectors and layers of the business operation and long implementation cycle add more risks and uncertainties to ERP system. Literature on this subject so far failed to reach consensus on the effect ERP has on company’s performance due to the absence of comparable data on the time effect and financial variables. In this thesis, the author attempt to assess ERP system’s impact on host companies’ mid- and long-term performances based on more nuanced and comprehensive data. The author will also examine ERP’s impact on the profit and operation abilities of the companies in the sample to shed light on how ERP implementation affects company performance.This thesis consists of six parts which proceed as follows:The first part is the introduction, in this section the thesis will look back on the development of ERP in China and abroad and illustrate the importance of ERP to company development. Research rationale, objectives, methodologies and contribution will be lined out.The second section, literature review, consists of three major parts. The author will first discuss the conceptualization, features, cost and benefits of ERP system. Then the thesis will review previous studies on the relationship between ERP and company performance and the role time plays on that relationship.The third section covers theoretical ground and puts forward the hypotheses of this study. Theories will be drawn upon in this thesis include those on scientific management, value chain, lean production, agile manufacturing and business process reengineering.The fourth section is the research design, the sampling and data collection process and models and quantitative methods to be utilized.In the fifth section, the author will analyze and discuss the data and perform hypotheses tests regarding the time effect of ERP system’s impact on company performance. Descriptive statistics will be first used on performance data in different time frames, followed by correlation analysis and multivariate regression analysis.The last part is the conclusion and recommendation. Based on the results and discussion, suggestions on ERP system implementation and company management will be given. Also will be included are limitations and directions for future research.Based on data of manufacturing listed companies on Shanghai and Shenzhen stock exchanges between 1997 and 2013, the following observations are formed:(1) In the short-term, ERP system significant boosts company operation ability while hampers its profitability; (2) In the long-term, both company operation ability and profitability benefit from more customized and integrated ERP implementation; and (3) ERP has a more significant positive effect on operation efficiency than profitability of the company investigated despite time periods.Two new contributions made by this study to the current discussion are:(1) Extending the observation window of ERP impact to eight years after its initial implementation will gives a fuller picture on its effect on the mid- and long-term performance of the company, which will enrich the data of similar studies;(2) Distinguishing operation ability and profitability leads to a more nuanced analysis of ERP impact on company performance.