Adoption of Enterprise Application Software and Firm Performance

Abstract

Due to the rapidly changing business and IT environments, firm-level adoption of IT shifted from in-house development to purchasing EA software. This paper analyzes the effects of EA (Enterprise Application) software – ERP, CRM, SCM, Groupware, KM, EAI – on SMEs’ productivity. The distinct feature of this paper is that I use a formal econometric approach with combined data of SMEs’ accounting and IT usage aspects, while case studies have been mostly used in the previous works. The empirical results show that Groupware and SCM significantly raise the SMEs’ productivity, and the manufacturing sector has stronger effects than the service sector. From these results, the following implications are derived. First, the adoption rate and the real benefits of EA software are not closely related domestically. Second, in SMEs, EA software facilitating the inter-firm relationship is more effective than EA software focusing on the internal efficiency. Third, easy-to-understand, and relatively long-experienced enterprise applications are more effective than hard-to-understand and brand-new applications. Finally, the government IT policy on SMEs should focus on the process coordination and standardization of the manufacturing sector with upstream and downstream firms. Copyright Springer 2006SMEs, Enterprise Application Software, ERP, CRM, productivity, D21, D24,

Combining Technology and Work Organization: An Analysis of Complementarity between IT and Decentralization across Firms of Different Size

“…In isolation, ERP with weak significance and SCM raise productivity. This finding is similar to the productivity contributions of these three systems for Korean firms where only SCM raises productivity significantly (Shin (2006)). …”

“…The existing evidence is mixed, although, pointing towards a positive relationship between the use of some of the systems and performance. With data from Korean SMEs, SCM use is significantly and positively associated with total factor productivity (TFP), while ERP and CRM are not (Shin (2006)). German firms benefitted most from the systems when they had adopted all three systems, ERP, SCM and CRM, together (Engelstätter (2013)).…”

Enterprise Systems and Labor Productivity: Disentangling Combination Effects

“…The coefficients of these added terms can then accordingly be interpreted as percentage differences in productivity. In case of software adoption, the coefficient captures the enterprise software's effect on firm-level productivity other things being equal (Shin, 2006). Besides software adoption I control for East German heritage, industry sector and for ICT capital captured in X i .…”

The Impact of ICT on Productivity: The Moderating Role of Worker Quality and Quality Strategy

“…Non-ICT capital is measured by conventional 2 Encuesta de Estrategias Empresariales (ESEE) in Spanish. 3 Similar depreciation rates close to 20% have been used, for example by Kafouros (2006), who assumes a depreciation rate for intangible technological resources of 20%, and Shin (2000Shin ( , 2006 who uses a depreciation rate of 22.4 % for ICT investments. In any case, although rates used in prior studies vary widely, Bloom et al (2006) show that the significance and the magnitude of the coefficient obtained for ICT is not affected by the exact choice of the alternative depreciation rate.…”