Effects of decision rationality on ERP adoption extensiveness and organizational performance

The purpose of this paper is to examine how decision rationality affects ERP adoption extensiveness and subsequently, organization performance. The mediating roles of system usage and user satisfaction on the relationship between adoption extensiveness and organizational performance are also examined.

This study was based on a questionnaire survey of 976 public-listed companies and 200 unlisted manufacturing companies. Responses of 93 ERP adopters were analyzed.

ERP adoption extensiveness is significantly affected by the overall measure of expected economic benefits, but not by any of the economic benefit type individually. On the other hand, mimetic pressure individually affects ERP adoption extensiveness, but not the overall measure of institutional pressures. ERP adoption extensiveness is significantly associated with organizational performance, and the mediating roles of system usage and user satisfaction are supported.

This study has the limitations associated with questionnaire-based research and its small sample size may also limit the generalizability of its findings.

The high emphasis on operational benefits of ERP adoption and the significant effect of mimetic pressure on ERP adoption extensiveness imply that organizations in Malaysia are largely “followers” of the technological innovation and generally have yet to exploit the full potentials of their ERP systems. Government agencies may need to play a more active role to facilitate fuller utilization and adoption of the higher end ERP applications. Vendors of ERP systems may need to review their strategies to increase their sales of ERP systems to the smaller business enterprises.

The paper addresses the relatively void in literature on the link between decision rationality and technology adoption extensiveness and the subsequent organizational performance in the context of an emerging economy.