Response of Small Enterprises to the Pressures of ERP Adoption

Response of Small Enterprises to the Pressures of ERP Adoption

R. Rajendran, N. Elangovan
Copyright: © 2012 |Pages: 23
DOI: 10.4018/jeis.2012010103
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Decision to adopt ERP by small enterprises is influenced by external forces due to their dependence on the supply chain. However, certain factors mediate the external forces and alter their influences. This article intends to highlight that the response of small enterprises to the institutional isomorphic pressures in adoption decision of ERP depends on the perception of cost-benefit and the complexity of the organization. A conceptual model was developed and empirically tested by a survey among SMEs of the knitwear garment cluster that has a well developed institutional structure. The mediation effect is tested in SEM software and its significance is verified by bootstrapping. The results show that perceived benefit, challenges and organizational complexity confound the external forces. The study reveals how the small enterprises respond to the external pressures so that stakeholders involved in promotion of ERP can plan a right strategy for encouraging ERP adoption among SMEs.
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Literature Review

Most of the diffusion research in the information system (IS) domain confirms to one of the two distinctive styles: adopter studies and macro diffusion studies. The first one looks at the differences in adopter innovativeness, whereas the second deal with characterizing the rate and pattern of technology adoption among potential adopters (Attewell, 1992). Small and medium-sized enterprises (SMEs) are important for the economic growth, employment and social development of any country. The ERP adoption study for SME is of the latter type in which the pattern of the ERP adoption is specifically studied among the SMEs. A study on ERP adoption in SMEs requires attention because their issues are different from large organizations and the motives that drive ERP adoption are unique and needs to be understood independently for a better penetration of ERP system.

There is only a little research published on IS adoption by SMEs and researches that focus on the early stages of the adoption decision which are necessary to help in evaluating and selecting an ERP system (Bernroider & Tang, 2003; Cereola, 2008). Nzaou, Raymond, and Fabi (2008) developed a positivist case study based on the Boudreau and Robey’s (1999) multidimensional framework for adoption of ERP system. The framework addresses ERP adoption as a 3D process (form of the change, motor of change, and adoption theories). The theoretical dimension of the model includes the diffusion of innovation, neo-institutional and complexity theories (Anderson, 1999; DiMaggio & Powell, 1983; Rogers, 1962).

Shiau, Hsu, and Wang (2009) developed a measure to assess the ERP adoption of SME. In their study, they focus on the investment decisions, benefit analysis, cost analysis and technology analysis related to the adoption decision of ERP systems. Some of the other models used in organizational adoption of ERP are benefits, barrier and risk framework (Kamhawi, 2008); Strategy, Technology, Organizational, People and Environment (STOPE) (Oliver, Whymark, & Romm, 2005); IT/IS Justification, (Gunasekaran, Ngai, & McGaughey, 2006); Discrete Choice Analysis (DCA) (Keating, Coltman, Michael, & Baker, 2009); Innovation adoption (Rajendran, 2010).

Yet these models do not address the context of the decision making characteristics of the SME, whose decisions are bound to be influenced by an interaction of both external and internal factors.

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