The Impacts of Enterprise Resource Planning System Adoption on Firm's Performance Among Medium Size Enterprises

The Impacts of Enterprise Resource Planning System Adoption on Firm's Performance Among Medium Size Enterprises

Adejare Yusuff Aremu (Othman Yeop Abdullah Graduate School of Business (OYAGSB), University Utara Malaysia, Changlun, Malaysia), Arfan Shahzad (Senior Lecturer of Management Information System and Business, Othman Yeop Abdullah Graduate School of Business (OYAGSB), University Utara Malaysia, Changlun, Malaysia) and Shahizan Hassan (Professor of Information Systems, Othman Yeop Abdullah Graduate School of Business (OYAGSB), University Utara Malaysia, Changlun, Malaysia)
Copyright: © 2020 |Pages: 19
DOI: 10.4018/IJISSC.2020010103

Abstract

The main objective of this study is to investigate the impacts of ERP system adoption on the relationship between performance of medium enterprises (PME) and communication process (CP), organization structure (OS), technological change (TC), and technology infrastructure support (TIS) and moderated by top management support. This study proposes a theoretical framework based on theories such as resource-based view, contingency theory, and diffusion of innovation. The data was collected from the medium-sized enterprise firms operating in South Western Nigeria. Out of the 658 questionnaires distributed, only 355 were useable. The empirical data was analyzed using the partial least squares structural equation modelling and the results showed that CP, OS, TC, TIS, ERP and TMS have significant direct relationship with the PME. Hence, ERP system adoption mediates the relationship between the CP, OS, TC, and TIS with PME. The findings show that CP, OS, TC, TIS will influence the performance of medium enterprises in the adoption of ERP. The findings also confirm that the top management support plays an important role in moderating the relationship between ERP and PME. The findings provide important insights to CEO, managers, policymakers and researchers to understand the important use of ERP system that will enhance the performance of medium-sized enterprise organizations in Nigeria. Limitation of the study is based on medium-sized enterprise only and another limitation is that author has not included other measures of medium sized enterprises performance outside of the procurement area despite these factors could provide further insights to medium sized enterprises performance, and will be an interesting topic for future research. In this light, future research can focus on the evolution of small enterprises and large firms.
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1. Introduction

Recently, the performance of small and medium-sized enterprises (SMEs) has generated a great deal of discussions among practitioners, researchers, educators, and policymakers. In this regard, the characteristics and determinants of SMEs have been the focus of much debate and interest (McKelvie, & Wiklund, 2010) due to the unique constraints and limitations faced by SMEs, such as the limited number of employees, insufficient financial resources, the lack education background, experience, managerial expertise, technological innovations and other limiting factors (Saleh, & Ndubisi, 2006; Aris, 2007). Consequently, there are continuous efforts to understand how the performance of SMEs could be further enhanced. Thus, these efforts are important since this sector is recognized as one of the crucial engines of growth for a country’s economy (Kassim, & Sulaiman, 2011). Equally, SMEs are also recognized as crucial mechanisms of national development in technologically advanced and industrialized economies (Aigboduwa, & Oisamoje, 2013; Abdullahi, Jakada, & Kabir, 2015; Lai & Arifin, 2011; Abrie & Doussy, 2006). They also serve as a backbone for the economic revival of many countries in Sub-Saharan Africa (SSA) (Babajide, 2011) where micro, small and other medium enterprises generate a great deal of employment as they hire large number of labor in these economies (Mahmood, & Hanafi, 2013). Consequently, in most countries, SMEs generate employment and reduce poverty, as well as help improve the GDP. For instance, in the UK, it was projected that in 2014, small businesses would make up nearly 99.3 percent of the entire UK private sector with the employment turnover of almost 47.8percent. The report further clarified that SMEs employ almost 13.4 million individuals with a turnover of almost £1,600 billion. Anyanwu (2001) argued that in emerging economies, such as in Singapore and Malaysia, SMEs have contributed enormously towards the economy; In Malaysia, it was reported that 93.8% of the firms in the manufacturing sector are SMEs and they employ 38.9 percent of the workforce and contribute to 27.3 percent of the total output of the manufacturing industry (Saleh, & Ndubisi, 2006). In addition, in Japan, SMEs contribute to almost 70 percent to their nation exports. The significant contribution of SMEs to country’s economy is also evident in Germany, where SMEs contribute to about 53% of the GDP followed by the UK (51%), Korea (49) and SMEs in Singapore and Thailand that recorded contributed to 49% and 38 of their countries’, respectively (NSDC, 2010; Nadada, 2013). However, even though SMEs are recognized as a principal agent of growth in many countries (Panitchpakdi, 2006; Hilmi, Ramayah, Mustapha, & Pawanchik, 2010; Mahmood, & Hanafi, 2013), their contribution to the Nigerian economy is still comparatively small compared to the contributions of SMEs in industrialized countries, as well as in other developed and developing countries (Eniola, 2014; Agwu & Emeti, 2014), and as stated by Ibru (2013) stated that the failure of SMEs has generated genuine concerns for Nigerians.

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