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Research Article

An Empirical Study on the Diffusion of Enterprise Resource Planning (ERP)

Kim, Seunghan · Lee, Wonyeong · Ham, Juho · Shin, Hyeongil

Published: January 2001 · Vol. 30, No. 2 · pp. 475-501
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Abstract

The rapid growth of ERP in recent years has brought about major changes in organizational work practices, enabling organizations to obtain considerable tangible and intangible benefits through ERP. Despite these advantages, many problems still exist in implementing and diffusing ERP due to factors such as resistance to change. This study first sought to identify which factors have a significant influence on the diffusion of ERP systems, and then to examine how these identified factors can be effectively managed. A research model was constructed based on prior research findings on innovation diffusion, information systems implementation, and ERP implementation. The study aimed to determine how the selected determinants—organizational compatibility, complexity, cost, information systems maturity, top management support, innovation champions, time elapsed since initial adoption, project planning and management, and additional development—affect the intra-organizational diffusion of ERP systems. To measure the degree of diffusion, the dependent variable of this model, the concepts of vertical and horizontal diffusion were employed. "Vertical" diffusion represents the range of functionality that ERP systems provide to support organizational operations, while "horizontal" diffusion represents the extent to which ERP systems are used within the organization. Of the 128 firms surveyed, 44 responded to the questionnaire, and multiple regression analysis was conducted to analyze the empirical results. The findings showed that innovation champion support and project planning and management had positive effects on both vertical and horizontal diffusion, while time elapsed since initial adoption had a significant effect only on vertical diffusion. In contrast, the effects of innovation factors and information systems-related factors on ERP diffusion were not significant, a finding attributable to the characteristic of ERP systems that, unlike other IT/IS innovations, emphasizes understanding of business processes rather than information technology itself. The overall level of ERP diffusion in Korean firms was found to be low, indicating that the domestic ERP situation is still at the adoption stage. Due to this contextual limitation, the study had to be conducted with a small sample size, which constitutes a limitation of this research.