Enterprise resource planning system capability and decision making success: evidence from Thai manufacturing businesses in Thailand.

Author:Laonamtha, Uthen
Position:Survey
 
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  1. INTRODUCTION

    Over the past decade, technology has created new information that may influence information systems. Enterprise Resource Planning (ERP) systems are comprehensive packaged information systems (IS) that represent one set of technologies (Griffin and Dempsey, 2011; Forslund, 2010; Jain, 2008).They comprise several configurable modules that integrate core business activities such as financial, accounting, human resources, manufacturing by integrated information flow across business functions tied together into a common platform and even among business partners (Galini et al., 2010; Morton and Hu, 2008). Integration is the linking information within and inter organization provided submits for managing valuable information to achieve goals. Besides integration, the aim is to reduce cycle time, faster business transactions, more accurate and timely information, higher flexibility or increased response to customer demands, enhance operational performance, facilitate better managerial benefits such as better planning, controlling, and monitoring, real time-financial reporting, financial statement dissemination (O'Donnell and David, 2000) and improved decision making (Davenport, 1998; Jain, 2008; Singla, 2008; Stvens et al., 1991). In addition, ERP systems conclude established linkage with supplier and reduce response time to customer needs (Galani et al., 2010). It is also the trend in information systems toward integrated enterprise-oriented systems (Doine et al., 2011).

    According to a number of studies on ERP systems, many companies have continued increasingly among organizations to invest in ERP systems to improve their business performance by adopting ERP system to provide valuable information for effective decision making and competitive position (Davenport, 1998; Doinea et al., 2011; Forlsund, 2010; Galani et al., 2010; Jain, 2008; Karimi et al., 2007; Madapusi, 2008; Schichter and Kraemmergaard, 2010; Tsai et al., 2011). As business environments become ever more competitive, there is an increase emphasis on operational efficiency, improved product and service quality and responsiveness. Interestingly, many business organizations have sought to use information's systems as means to achieve objectives. This study focuses on ERP system capability as a valuable source of firm's competitive capabilities that enhance firm's ability to use resource effectiveness, to have business process efficiency and received accounting information quality for decision making purposes.

    Based on Bharadwaj (2000), the sources of advantage are of two broad types: resources, representing assets controlled by the firms that are used as the inputs to organizational processes; and capabilities, concerning the firm's ability to combine, develop and use its resources in order to create competitive advantage (Bharadwaj, 2000; Kaleka, 2002). Additionally, Kaleka (2002) divides firm's competitive resources into four areas: physical assets, such as the use of modern technology equipment, preferential access to valuable sources of supply, geographical proximity to the market and production capacity availability (Kaleka, 2002). The resource-based view (RBV) is applied to develop the theoretical links and empirically examine the association between ERP system capability and operational performance. The RBV posits that firms have unique corporate resources that are valuable, difficult to imitate, rare and non- substitutable by other resources (Barney, 1991; Bharadwaj, 2000). Teece et al. (1997) further argued: "Capabilities cannot easily be bought; they must be built". Both attempt to use an analysis of processes and routines to offer an explanation of the organizational strategies that more implemented by managers who can give the result in higher firm performance and create the difference in outcomes among firms under environments of rapid technological change (Teece et al., 1997).

    As mentioned above, information technology function is associated with information resource. Therefore, this study develops a conceptual framework of the ERP system capability as a part of IS/IT capabilities, intended to enhance our understanding of the links among resource, process efficiency and decision making success. In this study, ERP system capability refers to a firm's ability to mobilize and deploy information, integration or co-present with other resource. Proposed ERP system capability construct comprised of three dimensions: user (quality of ERP system use), Information use (Operational use of ERP information) and IT strategy (Strategic ERP management).

    A review of the previous literature on ERP systems success reveals that there are various obstacles that must be overcome in the successful implementation of an ERP system by an organization (Bradford and Florin, 2003; Gulledge and Sommer, 2003; Tsai et al., 2011). ERP systems require substantial effort of implementing them which spans multiple years with significant in investments, but is also complex undertaking and risky tasking while many projects are problematic leading to failure while others succeeding. Most of managers believe that the introduction of an ERP system may create difficulties for organization activities due to implementation problems (Spano et al., 2009). Therefore, how ERP enables operational capabilities of the performance is the research questions of this study.

    There are a few studies that focus on capabilities required to derive benefits from ERP systems in the post-implementation phase. Thus, the objectives of this study are to (1) to investigate the effects of ERP system capability (quality of ERP system use, operational use of ERP information and strategic ERP management) on resource utilization effectiveness, accounting information quality and business process efficiency, (2) to determine whether environmental munificence moderates relationships between ERP system capability and consequences, (3) to test how resource utilization effectiveness, accounting information quality and business process efficiency influence decision making success, and (4) to determine whether environmental munificence moderates among resource utilization effectiveness, accounting information quality, business process efficiency on decision making success.

    The next section of this article is divided into four parts. The first is the relevant literature for this research through a brief historical trace of the various approaches to the constructs. The second presents research methods. The results and discussion are presented in the third. The final offers the contributions and future directions for research together with conclusion.

  2. LITERATURE REVIEWS AND CONCEPTUAL MODEL

    The following Figure 1 below presents the conceptual model constructed to answer how ERP system capability (quality of ERP system use, operational use of ERP information and strategic ERP management) influences resource utilization effectiveness, accounting information quality, business process efficiency and decision making success, and to test the impact of moderating environmental munificence whether it affects the relationship between ERP system capability and four consequences variable relationship. The conceptual model is delineated by the resource-based view to link variables of the model logically.

    [FIGURE 1 OMITTED]

    Resource-Based View of the firms (RBV)

    The Resource-Based View (RBV) states that valuable, rare, inimitable and non-substitutable resources make a firm's competitive advantages that enhance their operations by enabling firms to implement strategies that improve efficiency and effectiveness (Barney, 1991; Wernerfelt, 1984). By employing the resources-based view, based on Bharadwaj (2000) this theory explains that information technology (ERP system) is fundamental of the firm's survival and growth (Bharadwaj, 2000). Many of existing studies were conducted on a potential theoretical framework for ERP systems based on the RBV theory of the firm (Aral and Weill, 2007; Bharadwaj, 2000; Ditkaew and Ussahawanitchakit, 2011; Kaleka, 2002; Karimi et al., 2007). These theories can explain how firms utilize resources to create ERP system capability. They determine a firm's overall organizational capability effectiveness from combining IT resources such as hardware/software, human resources like management supporting or flexible organizational culture and business resources by management's plan to integrate a new capability into the overall business process within or across business function to create new capability for decision making. This study defines ERP system capability as a part of IS/IT capability, and this study defines ERP system capability as a firm's ability to mobilize and deploy information in combination or co-present with other resources. Moreover, ERP system capability is often connected to the other resource base embedded in the business process. Hence, the RBV theory is employed to explain the linkage between ERP system capability and operational performance.

    2.1 ERP system capability

    A firm's distinctive capabilities are embedded in business process by enabling it to be more effective than its competitors by selecting, combining, integrating, and deploying those resources (Karimi et al., 2007; Makadok, 2001; Wade and Hulland, 2004). Capabilities must be built as they (implementation) cannot easily be bought (Teece et al., 1997; Karimi, 2007). At the operational level, IT capabilities create business process innovation and transformation (Karimi et al., 2007; Mooney et al., 1996). Bharadwaj (2000) defined a firm's IT capability as a firm's ability to mobilize and deploy IT-based resources in combination or co-present with other resources and capability and divides IT-based resources into three categories: IT infrastructure, human-IT resource and intangible IT-enables (Bharawadwaj, 2000). IT capabilities as a part of Information technology, similar is to the context of ERP system...

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