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Enterprise Systems Adoption and Firm Performance in Europe: The Role of Innovation

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  • Fardad Zand
  • Cees van Beers

Abstract

Despite the ubiquitous proliferation and importance of Enterprise Systems (ES), little research exists on their post-implementation impact on firm performance, especially in Europe. This paper provides representative, large-sample evidence on the differential effects of different ES types on performance of European enterprises. It also highlights the mediating role of innovation in the process of value creation from ES investments. Empirical data on the adoption of Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM), Knowledge Management System (KMS), and Document Management System (DMS) is used to investigate the effects on product and process innovation, revenue, productivity and market share growth, and profitability. The data covers 29 sectors in 29 countries over a 5-year period. The results show that all ES categories significantly increase the likelihood of product and process innovation. Most of ES categories affect revenue, productivity and market share growth positively. Particularly, more domainspecific and simpler system types lead to stronger positive effects. ERP systems decrease the profitability likelihood of the firm, whereas other ES categories do not show any significant effect. The findings also imply that innovation acts as a full or partial mediator in the process of value creation of ES implementations. The direct effect of enterprise software on firm performance disappears or significantly diminishes when the indirect effects through product and process innovation are explicitly accounted for. The paper highlights future areas of research.

Suggested Citation

  • Fardad Zand & Cees van Beers, 2010. "Enterprise Systems Adoption and Firm Performance in Europe: The Role of Innovation," DRUID Working Papers 10-26, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    • Handle: RePEc:aal:abbswp:10-26
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    References listed on IDEAS

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    1. Valerie Botta-Genoulaz & Pierre-Alain Millet, 2005. "A classification for better use of ERP systems," Post-Print hal-00392168, HAL.
    2. Polder, Michael & Leeuwen, George van & Mohnen, Pierre & Raymond, Wladimir, 2009. "Productivity effects of innovation modes," MPRA Paper 18893, University Library of Munich, Germany.
    3. Mark van der Laan & Maya Petersen, 2004. "Estimation of Direct and Indirect Causal Effects in Longitudinal Studies," U.C. Berkeley Division of Biostatistics Working Paper Series 1155, Berkeley Electronic Press.
    4. Al-Mashari, Majed & Al-Mudimigh, Abdullah & Zairi, Mohamed, 2003. "Enterprise resource planning: A taxonomy of critical factors," European Journal of Operational Research, Elsevier, vol. 146(2), pages 352-364, April.
    5. Eric von Hippel, 1994. ""Sticky Information" and the Locus of Problem Solving: Implications for Innovation," Management Science, INFORMS, vol. 40(4), pages 429-439, April.
    6. Valerie Botta-Genoulaz & Pierre-Alain Millet & Bernard Grabot, 2005. "A survey on the recent research literature on ERP systems," Post-Print hal-00392165, HAL.
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    Cited by:

    1. Zand, Fardad & Van Beers, Cees & Van Leeuwen, George, 2011. "Information technology, organizational change and firm productivity: A panel study of complementarity effects and clustering patterns in Manufacturing and Services," MPRA Paper 46469, University Library of Munich, Germany.
    2. Sadaf Bashir & Uwe Matzat & Bert Sadowski, 2014. "The Adoption of Information and Communication Technologies in the Design Sector and their impact on Firm Performance: Evidence from the Dutch Design Sector," Working Papers 14-01, Eindhoven Center for Innovation Studies, revised Feb 2014.
    3. John Oredo & Denis Dennehy, 2023. "Exploring the Role of Organizational Mindfulness on Cloud Computing and Firm Performance: The Case of Kenyan Organizations," Information Systems Frontiers, Springer, vol. 25(5), pages 2029-2050, October.

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    More about this item

    Keywords

    Enterprise Systems; ERP; SCM; CRM; KMS; DMS; IT Adoption; Post-implementation Phase; IT Business Value; Innovation; Firm Performance; Europe;
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