Examining the Impact of Enterprise Resource Planning system Implementation on Firm Performance

Abstract

In recent years, many companies have been implementing ERP systems to overcome new challenges and survive severe business environments which are changing dramatically. However, implementation of the ERP system requires a great deal of resources including money, time, effort, etc. Despite the tremendous amount of costs and effort, there are still doubts about the effects of ERP implementation. In this paper, by analyzing the multi-year financial data of ERP adopting firms as well as a wide variety of performance measures, we examined whether or not firms have shown performance improvements through the implementation of ERP systems. We employed the intra-firm comparison and matched pair comparison methods to compare performance measures before and after ERP implementation within a firm over a period of 7 years. Overall, the results revealed that ERP system implementation was positively associated with the overall improvement of firm performance. We also found that the average performance of ERP adopting firms was greater than that of non-ERP adopting firms. These significant findings suggest that adopting ERP systems allows for better firm performance because more future benefits are gained from ERP systems.