Financial Analysis of Potential Benefits from ERP Systems Adoption
The Journal of Business and Information Technology, Vol. 2, Issue 1, pp. 40-50, Spring 2003
Posted: 25 Feb 2009
Date Written: November 23, 2008
Past research findings indicate that the successful adoption of information technology to support business strategy can help organizations gain superior financial performance versus their competitors. Adopting enterprise-wide resource planning systems is considered a strategic investment decision because it represents a significant commitment of resources and can have a dramatic effect on business processes. These strategic investments may also influence a firm's performance over a long-term time horizon. This study examines the effect of adoption of enterprise systems on a firm's operational performance. Financial data of companies adopting enterprise wide systems and of a matched control group of firms were compared cross-sectionally across time periods before and after adoption. The results from a multivariate analysis show that firms adopting enterprise systems exhibit a significantly higher overall differential performance since the second year after adoption than a matched control group. A decomposition of overall performance into profitability and efficiency financial indicators shows that significant differences attained by the ERP adopting firms are due to higher profitability but not efficiency.
Keywords: Financial Analysis, ERP
JEL Classification: M41, M15, O14
Suggested Citation: Suggested Citation