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Adoption of Enterprise Application Software and Firm Performance

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  • Ilsoon Shin

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 2006

Suggested Citation

  • Ilsoon Shin, 2006. "Adoption of Enterprise Application Software and Firm Performance," Small Business Economics, Springer, vol. 26(3), pages 241-256, April.
    • Handle: RePEc:kap:sbusec:v:26:y:2006:i:3:p:241-256
    DOI: 10.1007/s11187-005-0215-9
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    References listed on IDEAS

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    1. Oecd, 2001. "The Development of Broadband Access in the OECD Countries," OECD Digital Economy Papers 56, OECD Publishing.
    2. Zoltan J. Acs & Henri L. F. Groot & Peter Nijkamp (ed.), 2002. "The Emergence of the Knowledge Economy," Advances in Spatial Science, Springer, number 978-3-540-24823-1.
    3. Riccardo Lucchetti & Alessandro Sterlacchini, 2004. "The Adoption of ICT among SMEs: Evidence from an Italian Survey," Small Business Economics, Springer, vol. 23(2), pages 151-168, September.
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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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