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Critical success factors in enterprise resource planning system implementation: An analysis

Dissertation
Author: Chuen Ip
Abstract:
Enterprise resource planning system is a complex and integrated system which management regards as a strategic tool to make improvement. Owing to its predefined processes and integrated nature, organizations are usually required to make some changes to adopt the system. The perception of high failure rate in ERP implementation motivates researchers to study critical success factors which are expected to help organization implement ERP systems successfully. Although critical success factors in ERP implementation have been quite well studied, it is still one of the popular topics in the field. This study combined the process and variance approaches to define critical success factors. Based on the ASAP implementation methodology, a critical events chain was formulated. Some critical success factors which identified in prior research were critical events in the chain. Based on the process approach, those events should not be regarded as critical success factors because they were necessary but not sufficient conditions. At the end of the literature review, six potential critical success factors were identified including the surrogates of the critical events chain and the training processes. A survey was conducted to collect data in a research site which had the systems go-live a few months ago. The six factors were confirmed by factor analysis but one of them was found insignificant in the regression analysis. The five critical success factors include top management support, effective project management, consultants support, perceived usefulness and self-efficacy. The results of the study indicate that some critical success factors identified in prior research should not be critical success factors. There are critical events chains in ERP implementation and their outcomes should be regarded as critical success factors.

TABLE OF CONTENT

ABSTRACT ............................................................................................................................................. 2 TABLE OF CONTENT ............................................................................................................................. 3 LIST OF TABLES .................................................................................................................................... 5 LIST OF FIGURES .................................................................................................................................. 8 CHAPTER 1 – THE PROBLEM AND ITS SETTING .............................................................................. 9 INTRODUCTION ................................................................................................................................. 9 STATEMENT OF PROBLEM ............................................................................................................ 11 STATEMENT OF PURPOSE ............................................................................................................ 12 SIGNIFICANCE OF THE STUDY ..................................................................................................... 12 SCOPE AND DELIMITATIONS OF THE STUDY ............................................................................. 13 DEFINITIONS OF TERMS ................................................................................................................ 16 CHAPTER 2 – REVIEW OF THE LITERATURE .................................................................................. 17 INTRODUCTION ............................................................................................................................... 17 THEORETICAL BACKGROUND ...................................................................................................... 19 PROCESS THEORY IN ERP IMPLEMENTATION .......................................................................... 21 VARIANCE THEORY IN ERP IMPLEMENTATION ......................................................................... 34 CRITICAL SUCCESS FACTORS ..................................................................................................... 41 SUMMARY ........................................................................................................................................ 52 CHAPTER 3 – METHODOLOGY .......................................................................................................... 53 PURPOSE OF THE STUDY ............................................................................................................. 53 RESEARCH METHODS ................................................................................................................... 53 SOURCES OF DATA ........................................................................................................................ 55 CONCEPTUAL FRAMEWORK ......................................................................................................... 56 HYPOTHESES AND BASIC ASSUMPTIONS .................................................................................. 57 INSTRUMENTATION ........................................................................................................................ 59 VALIDITY AND RELIABILITY ........................................................................................................... 61 STATISTICAL TREATMENT ............................................................................................................ 63

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SUMMARY ........................................................................................................................................ 66 CHAPTER 4 – PRESENTATION AND INTERPRETATION OF DATA ................................................ 67 INTRODUCTION ............................................................................................................................... 67 POPULATION SIZE, RESPONSE RATE, AND MARGIN OF ERROR ............................................ 67 RESPONDENTS DEMOGRAPHICS ................................................................................................ 68 DETAILS OF ANALYSIS................................................................................................................... 70 SUMMARY ...................................................................................................................................... 115 CHAPTER 5 – SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ...................................... 116 SUMMARY ...................................................................................................................................... 116 RESEARCH QUESTIONS .............................................................................................................. 116 RESEARCH METHODOLOGY ....................................................................................................... 117 FINDINGS ....................................................................................................................................... 118 CONCLUSIONS .............................................................................................................................. 119 RECOMMENDATIONS TO ORGANIZATIONS .............................................................................. 122 PROBLEMS FOR FURTHER STUDY ............................................................................................ 122 BILIOGRAPHY .................................................................................................................................... 124 APPENDIX A ....................................................................................................................................... 139

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LIST OF TABLES Table 2.1 Phases of process models in reference phases ................................................................... 23 Table 2.2 ASAP implementation milestones ......................................................................................... 24 Table 2.3 ASAP implementation roadmap (V3.5 May 2006) ................................................................ 25 Table 2.4 Critical events chain .............................................................................................................. 27 Table 2.5 Critical success factors identified in five articles ................................................................... 38 Table 3.1 Question items in the questionnaire ...................................................................................... 60 Table 4.1 Frequency table – Departments ............................................................................................ 69 Table 4.2 Frequency table – Positions .................................................................................................. 69 Table 4.3 Frequency table – User types ............................................................................................... 69 Table 4.4 Frequency table – Frequency of using SAP .......................................................................... 70 Table 4.5 Frequency table – SAP experience ....................................................................................... 70 Table 4.6 Descriptive statistics – Top management support ................................................................ 71 Table 4.7 Ratio of Skewness and Kurtosis – Top management support .............................................. 72 Table 4.8 Extreme values – Standardized residuals of top management support ............................... 72 Table 4.9 Descriptive Statistics – Teamwork and communication ........................................................ 73 Table 4.10 Ratio of Skewness and Kurtosis – Teamwork and communication .................................... 73 Table 4.11 Extreme values – Standardized residuals of teamwork and communication ...................... 74 Table 4.12 Descriptive statistics – Effective project management ........................................................ 74 Table 4.13 Ratio of skewness and kurtosis – Effective project management ....................................... 75 Table 4.14 Extreme values – Standardized residuals of effective project management ...................... 75 Table 4.15 Descriptive statistics – Self-efficacy .................................................................................... 76 Table 4.16 Ratio of skewness and kurtosis – Self-efficacy ................................................................... 76 Table 4.17 Extreme values – Standardized residuals of self-efficacy ................................................... 77 Table 4.18 Descriptive statistics – Perceived usefulness ..................................................................... 77 Table 4.19 Ratio of skewness and kurtosis – Perceived usefulness .................................................... 78 Table 4.20 Extreme values – Standardized residuals of perceived usefulness .................................... 78 Table 4.21 Descriptive statistics – Consultants support........................................................................ 79 Table 4.22 Ratio of skewness and kurtosis – Consultants support ...................................................... 79

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Table 4.23 Extreme values – Standardized residuals of consultants support ...................................... 79 Table 4.24 Descriptive statistics – Intentions-to-use ............................................................................. 80 Table 4.25 Extreme values – Standardized residuals of intentions-to-use ........................................... 80 Table 4.26 Independent samples test – Top management support ...................................................... 81 Table 4.27 Group statistics – Top management support ...................................................................... 82 Table 4.28 Independent samples test – Teamwork and communication .............................................. 82 Table 4.29 Independent samples test – Effective project management ............................................... 83 Table 4.30 Group statistics – Effective project management ................................................................ 83 Table 4.31 Independent samples test – Self-efficacy ........................................................................... 84 Table 4.32 Group statistics – Self-efficacy ............................................................................................ 84 Table 4.33 Independent samples test – Perceived usefulness ............................................................. 85 Table 4.34 Group statistics – Perceived usefulness ............................................................................. 85 Table 4.35 Independent samples test – Consultants support ............................................................... 86 Table 4.36 Group statistics – Consultants support ............................................................................... 86 Table 4.37 Extreme values of standardized residuals – Before and after transformation .................... 87 Table 4.38 Skewness and kurtosis ratios before and after transformation ........................................... 88 Table 4.39 Reliability statistics – Top management support (5) ........................................................... 89 Table 4.40 Item-total statistics – Top management support (5) ............................................................ 89 Table 4.41 Reliability statistics – Top management support (4) ........................................................... 90 Table 4.42 Item-Total statistics – Top management support (4) .......................................................... 90 Table 4.43 Reliability statistics – Teamwork and communication ......................................................... 90 Table 4.44 Item-total statistics – Teamwork and communication ......................................................... 90 Table 4.45 Reliability statistics – Effective project management .......................................................... 90 Table 4.46 Item-total statistics – Effective project management ........................................................... 91 Table 4.47 Reliability statistics – Self-efficacy ...................................................................................... 91 Table 4.48 Item-total statistics – Self-efficacy ....................................................................................... 91 Table 4.49 Reliability statistics – Perceived usefulness (5) .................................................................. 91 Table 4.50 Item-total statistics – Perceived usefulness (5) ................................................................... 92 Table 4.51 Reliability statistics – Perceived usefulness (4) .................................................................. 92

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Table 4.52 Item-total statistics – Perceived usefulness (4) ................................................................... 92 Table 4.53 Reliability statistics – Consultant support ............................................................................ 93 Table 4.54 Item-total statistics – Consultants support .......................................................................... 93 Table 4.55 Summary of Cronbach’s Alpha and number of items of each construct ............................. 93 Table 4.56 Correlation matrix – First run ............................................................................................... 95 Table 4.57 KMO and Bartlett's test – First run ...................................................................................... 96 Table 4.58 Total variance explained – First run .................................................................................... 97 Table 4.59 Communalities – First run ................................................................................................... 98 Table 4.60 Rotated component matrix – First run ............................................................................... 100 Table 4.61 KMO and Bartlett's test – Second run ............................................................................... 101 Table 4.62 Communalities – Second run ............................................................................................ 101 Table 4.63 Rotated component matrix – Second run .......................................................................... 102 Table 4.64 Communalities – Third run ................................................................................................ 103 Table 4.65 KMO and Bartlett's test – Third run ................................................................................... 103 Table 4.66 Component correlation matrix – Third run......................................................................... 104 Table 4.67 Rotated component matrix – Third run .............................................................................. 105 Table 4.68 Summary of Cronbach’s Alpha and number of items of each construct ........................... 105 Table 4.69 Component score covariance matrix ................................................................................. 106 Table 4.74 Extreme Values – Mahalanobis distance .......................................................................... 107 Table 4.70 Correlations and one-tailed significance of constructs ...................................................... 110 Table 4.71 Model summary – Dependent variable (IUse1)................................................................. 111 Table 4.72 ANOVA

of models – Dependent variable (IUse1) ............................................................. 112 Table 4.73 Coefficients – Dependent variable (IUse1) ....................................................................... 113 Table 4.74 Results of hypotheses testing ........................................................................................... 115 Table 5.1 Relationship between research questions and hypotheses ................................................ 117 Table 5.2 Result for research question 1 – The critical events chain ................................................. 119 Table 5.3 Results of hypotheses testing for research question 2 ....................................................... 120 Table 5.4 Results of hypotheses testing for research question 3 ....................................................... 121 Table 5.5 Results of hypotheses testing for research question 4 ....................................................... 121

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LIST OF FIGURES Figure 1.1 Conceptual foundation of the research model ..................................................................... 15 Figure 2.1 Relationship among critical events chain, perceived usefulness and intentions-to-use ...... 34 Figure 3.1 Conceptual foundation of the research model ..................................................................... 57 Figure 4.1 Scree plot ............................................................................................................................. 99 Figure 4.2 Histogram - Dependent variable: Intentions-to-use ........................................................... 108 Figure 4.3 Normal P-P Plot of Regression Standardized Residual ..................................................... 109

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CHAPTER 1 – THE PROBLEM AND ITS SETTING INTRODUCTION Enterprise resource planning (ERP) system provides a framework for integration and standardization of business processes. The key benefits gained by implementing an ERP system include better control over costs, improvement on customer response times, streamlined and automated processes, visibility to data and process status (Aberdeen Group, 2009). ERP system has had a fast growth since 1990s. By 1998, 40% of multinational organizations with a turnover of $1 billion had implemented ERP systems (Hellens, Nielsen & Beekhuyzen, 2004). The ERP software market was $23.8 billion in total software revenue for 2008 with a predicted growth to approximately $24.5 billion by year-end 2009 (Hestermann, Anderson & Pang, 2009). Jacobs & Weston Jr. (2007) wrote a brief history of ERP system and indicated that it began in the 1960s when material requirements planning (MRP) was born through a joint effort between J.I. Case in partnership with IBM for planning and scheduling materials for complex manufactured products. The term manufacturing resource planning (MRP II) was coined in 1980s for new capabilities added in the MRP. In 1990s, Gartner Group coined the term enterprise resource planning (ERP) which included criteria for evaluating the extent that software was actually integrated both across and within the various functional silos. Jacobs & Weston Jr. (2007) further indicated that ERP system had reached a level of maturity where both software vendors and users understood the technical, human resource and financial resources required for implementation and ongoing use. Organizations requiring short implementation cycles highlighted the project management issues in the ERP implementation. Armbrüster & Kipping (2003) reported that ERP related consulting services grew rapidly during the 1990s. ERP systems had not only generated demand for the implementation project, but had also triggered a number of different advice services to restructure and prepare client organizations for the changes. With increasing scepticism to consultants, the client-consultant relationship was increasingly seen as a long-term partnership that included accompanying the organization during the implementation phase. Organizations expected consultants taking a much more hands-on role. The involvement of consultants in the implementation increased and so were their influences. Kitay & Wright (2004) indicated the close interaction of consultants and clients within joint project teams over a period of months or years resulted in a “blurring of the boundaries”. The development of an “insider” role could become a source of problems. Success to implement ERP system is important to the organizations which the managements believe it as a strategic tool to improve the existing operations. Improvement inevitably leads to changes which must be managed. Change management is surely a concern

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when organizations plan to implement ERP systems (Kemp & Low, 2008). Besides changes in infrastructure, process changes and their related changes are inevitable. Related changes may include roles and responsibilities which may affect the power distance (Esteves, Pastor & Carvalho, 2003). In addition, management and users are required to learn new knowledge which are not available in the organization but embedded in the new ERP systems (Lee & Lee, 2000). Kenett & Raphaeli (2008) described it as a complex and dynamic process with high uncertainty accompanied by unexpected problems. Change management is a human-related matter which involves stakeholders of the ERP implementation (Skok & Legge, 2001). Another important process in the ERP implementation is training which is regarded as one of the tools in change management (Bechtel & Squires, 2001). In the technical side, users need to know how to use the ERP system. In the process side, they need to know how it changes the current way of working in terms of new activities and new collaborative relationships (Kraemmerand, Moller & Boer, 2003). When users have confidence on using the ERP system for the new activities with the new relationships, they feel less uncertain about their future in the organization. In view of the recent issues related to the ERP implementation, the current study revisited the factors which affect the ERP implementation. By applying the concept of critical success factors which was introduced by John Rockart (Boynton & Zmud, 1984), the current study concentrated on the factors which had significant impacts on the ERP implementation. Since ERP implementation is a change process from legacy systems to new ERP systems (Boudreau & Robey, 1999), two approaches to the study of change, namely process theory and variance theory, were discussed with the emphasis on the perspective of ERP implementation in the current study. Process theory explains how a sequence of events leads to some outcomes, while variance theory explains change in terms of relationships among independent variables and dependent variables (Poole, 2004). When referring to the ERP implementation studies, the process theory approach are to develop inductively stage models (Kumar, Maheshwari & Kumar, 2002). The variance theory usually refers to the studies of the critical success factors of the ERP implementation (Ma & Loeh, 2007). The two approaches are not mutually exclusive. Some researchers have tried to put the two approaches together as a hybrid model in their ERP implementation studies (Somers & Nelson, 2004; Wong, Scarbrough, Chau, & Davison, 2005; Newman & Zhao, 2008). Somers & Nelson (2004) indicated that the relative importance of the critical success factors changed with the stage of the project life cycle. It is necessary to understand the implementation processes which make the critical success factors meaningful.

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STATEMENT OF PROBLEM High failure rate in ERP implementation has been reported by prior research and were frequently quoted by researchers based on the results of other prior research to indicate the risks of implementation projects (Xue, Liang, Boulton & Snyder, 2005; Liang, Saraf, Hu & Xue, 2007; Ma & Loeh, 2007; Martin & Huq, 2007; Parthasarathy & Ramachandran, 2008). However, no studies show the evolution of success and failure rates during recent years (Esteves & Bohorquez, 2007). Yu (2005) indicated that prior research had found widely differing failure rates because “implementation success” was defined quiet differently by different researchers. It may be the reason why there are no more studies on the success or failure rates. Regardless to the definitions, high failure rate is a perception that both researchers and practitioners have been aware it is a problem to be solved. Finding the reasons of failure is one of the approaches. Kim, Lee & Gosain (2005) identified 47 impediments along the different phases of ERP implementation and expected them as guidelines to solve the problem. Wong et al. (2005) examined and discussed fourteen critical failure factors and suggested that the role of consultants, effective project control and monitoring, and making use of business process reengineering to match business processes to ERP functions were important in ERP implementation. To avoid or destroy the failure factors may not lead to success. In the opposite side, researchers devote their time to find out what the critical success factors are in ERP implementation. ERP implementation is a complex and strategic project which involves risks and uncertainties. Organizations should be aware what the critical success factors are (Sternad & Bobek, 2006). High failure rate is one of the motivations to study critical success factors of ERP implementation (Nah, Lau & Kuang, 2001; Xue et al., 2005). It explains why the study of critical success factors of ERP implementation is still an active topic recently (Zabjek, Kovacic & Stemberger, 2009; Lin & Rohm, 2009; Francoise, Bourgault & Pellerin, 2009; Snider, Silveira & Balakrishnan, 2009). The current study follows the main stream and concentrates on the study of critical success factors which are expected to solve the high failure rate problem or to make the implementation projects more successful. An interesting question is why the failure rate remains high if the critical success factors have already been identified in prior study. Esteves & Bohorquez (2007) indicated that critical success factors in ERP implementation were quite well studied. Over fifty research relating to critical success factors of ERP implementation are listed in the bibliography from 2001 to 2005. A possible reason is that the researches have not been put in practice. Esteves & Bohorquez (2007) further indicated that there was a need to develop approaches to put in practice and it was important to relate critical success factors with implementation methodologies.

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STATEMENT OF PURPOSE The purpose of the current study is to provide a guideline which helps practitioners implement ERP system. One dimension follows the process approach that there are sequences of events which are important to ERP implementation and relate to implementation methodologies. Since ERP vendors have their own implementation methodologies, the critical events chain for each ERP system may be different. In the current study, the critical events chain is based on the methodology of one selected vendor. The second dimension is based on the variance approach that some factors have significant relationships with the ERP implementation. With reference to the process theories, the activities included in the critical events chain should not be considered as critical success factors because they are necessary but not sufficient conditions to the ERP implementation success. The effects of these activities are collectively represented by surrogates that are regarded as critical success factors in the current study. Three objectives have been set out for the current study. First, critical events chains are formulated based on ERP implementation methodologies. Second, it is to confirm the existence of the surrogates as critical success factors. Third, it is to confirm the critical success factors identified having significant relationships with the success of ERP implementation.

SIGNIFICANCE OF THE STUDY The current study provides an ERP implementation guideline to practitioners. It revisited the critical success factors of ERP implementation identified in prior research and differentiated the causal factors from the process events. Some critical success factors identified in prior research were components of the critical events chain which included the most important activities in the ERP implementation processes. The change of roles (from critical success factors to activities in the critical events chain) of these activities in the implementation processes does not reduce the importance of the activities. In the contrary, it emphasizes the importance of the temporal effects of the activities in ERP implementation. The activities must be completed according to the sequence of the critical events chain. Practitioners can use it as a guideline and converted it to implementation plans. With the critical success factors identified in the current study, practitioners should have sufficient guidelines to ensure a smooth transition from legacy systems to new ERP systems. The identification of the two new critical success factors, perceived usefulness and self- efficacy, provides another way of thinking how to determine a critical success factor. Since activities or events were components of the critical events chain, they should not be regarded as critical success factors. However, the outcome of the critical events chain can be considered as

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one of the critical success factors because the critical events chain plays a critical role in the implementation processes. Based on this assumption, critical success factors should be neither events nor activities in the implementation processes. The same logic can be applied to training. Training itself is one of the processes in ERP implementation. It should not be regarded as a critical success factor. However, its outcome or effectiveness can be a potential candidate of critical success factors. The introduction of the two new factors in the current study enriches the study of critical success factors in ERP implementation. The current study also highlights the importance of stakeholders of ERP implementation. Among the four traditional critical success factors identified in the literature review and the two new factors, there is a common characteristic that stakeholders of ERP implementation are involved. It supports Skok & Legge (2001)’s view that the environment in which a software is selected, implemented and used may be viewed as a social activity system which consists of a variety of stakeholders. In short, the current study highlighted the importance of the critical events chain as an integrated factor and the perspective of stakeholders in the ERP implementation. It provides guidelines for practitioners to implement ERP systems and another way to look at the critical success factors for researchers in the field of information system.

SCOPE AND DELIMITATIONS OF THE STUDY Three dimensions were considered in the research design, namely what to research, whom to research and when to research. In the current study, the main objective was to find what the critical success factors were. For whom to research, Nah et al. (2003) suggested that it was necessary to account the critical success factors perceived by various stakeholders. The target group of survey should include different groups of people who involved in ERP implementation. Finney & Corbett (2007) also pointed that it was necessary to cover the perception of all stakeholders in studying critical success factors. The unit of analysis in this survey was individuals who had participated in the ERP implementation and would use the ERP system. Although they could not represent the perceptions of all the stakeholders, they were the group of stakeholders who were most familiar with the implementation activities and impacts. For when to research, Forster & Rockart (1989) noted that critical success factors method was a form of descriptive research which often used cross-sectional design (Balnaves & Caputi, 2001). It was necessary to determine when to take the snapshot at a point of time. As process research reported that organizations always came across a tough period immediate after go-live. Users and management would concentrate on fixing issues (Markus & Tanis, 2000; Nah et al.,

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2001; Kumar et al., 2003; Martin & Huq, 2007). It was not an appropriate time to conduct survey. On the other hand, it was not appropriate to conduct survey far away from the go-live day because the answers might be affected by the post-implementation impacts or other factors. Hakkinen & Hilmola (2008) collected data two months after the system rollout. Wei, Wang & Ju (2005) considered three to five months for the period. So it was planned that the survey would be conducted not later than five months after the go-live of ERP system. Research Questions The current study combines both process and variance theories to discuss the critical success factors for ERP implementation. The general problem of the current study is how critical success factors affect the Enterprise Resource Planning System Implementation. There are four specific problems: 1. What are the critical events or activities in ERP implementation? 2. How are the critical success factors for ERP implementation be described in terms of perceived usefulness, self-efficacy, top management support, effective project management, teamwork and communication, and consultants support? 3. Are there significant differences in the critical success factors identified in the prior research on ERP implementation? 4. Are the surrogates (substitutes) of critical event chains critical success factors in ERP implementation? The Research Model The conceptual foundation of the research model is to find out the significant relationship between dependent an independent variables. The dependent variable is intentions-to-use an ERP system. The independent variables are critical success factors identified in the literature review. There are six factors identified in the current study, namely teamwork and communication, top management support, effective project management, consultants support, perceived usefulness and self-efficacy. Among the critical success factors, perceived usefulness and self- efficacy are mainly discussed in the literature of information system and are usually included in the study relating to the acceptance and training of information system. In literature review, one of the vendors’ methodologies was discussed with reference to the process approach. The most critical events were outlined to form a critical process chain. The chain is important because it leads to the acceptance of the ERP system before systems go-live. With reference to the Technology Acceptance Model (TAM) developed by Davis (1989), perceived usefulness was selected as a surrogate of the acceptance of an ERP system. It was included in

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the research model of the current study as one of the critical success factors to the intentions-to- use which it was the surrogate of the actual use of the ERP system after systems go-live. Computer self-efficacy is an indicator of readiness for change and perceived ease of use which affect user attitudes to the acceptance of ERP systems (Shivers-Blackwell & Charles, 2006; Amoako-Gyampah & Salam, 2004). In the current study, self-efficacy refers to the results of practices and training which are system related and process related. It is an indicator of effective training or transfer of training. Having the confidence to handle the new processes reduce users’ anxiety of uncertainty. A clear and certain future encourages positive attitude to the changes. It was assumed as one of the critical success factors in the current study. With the other four traditional critical success factors identified in the literature review, the research model for the current study is shown in figure 1.1. Figure 1.1 Conceptual foundation of the research model

Assumptions Some assumptions have been set out for the current study. They are not exhaustive but are intended to help further frame the study. First of all, it was assumed that the enterprise resource planning implementation phase started from the decision to implement the system to systems go-live. This assumption was important because it could eliminate other factors such as the selection of an appropriate system and the actual impacts of the system. Under this assumption, it was further assumed that organizations selected the ERP systems which were most fit to their needs. Also, before the actual use of the ERP system, it was assumed that the actual impacts of the system should not be considered. All the impacts were potential impacts which had not been realized yet. Another assumption was that the organization completed the events or activities of the critical events chain in ascending order. Although there might be other sequences leading to the Critical success factors

-

Perceived usefulness

Critical success factors :

-

S elf - efficacy

-

Top management support

-

Effective project management

-

Teamwork and communication

-

Consultants support

Intentions - to - use ERP system

Critical events chain

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same outcome, they were not considered in the current study because it would complicate the research. It was also assumed that perceived usefulness was a surrogate to measure the outcome of the critical events chain. The implementation process itself is an important factor which affects the intentions-to-use. In order to consider it in the variance approach, it is necessary to use surrogate to quantify it for analysis purpose. Limitations The critical success factors discussed in the current study are limited to the factors related to the implementation project phase in the reference model mentioned in the literature review. Those factors for planning and production phases of the reference model are not considered. Furthermore, although a rather extensive review has been done in the literature, there may be some missing factors not being reviewed in the literature review. Another limitation is related to the sample data. Since it is rare to go-live ERP systems in different research sites within a certain period, it is difficult to collect data from different sites for analysis within a particular period. In addition, each organization has its own history and business philosophy, it is difficult to isolate the site-dependent factors if samples data are collected from multiple sites. So, sample data in the current study came from one research site. It limits the generalizability of the findings.

DEFINITIONS OF TERMS The following definitions are provided to clarify specific terms in this study. ERP referred to the core ERP system. The additional modules for the extended ERP were not considered. Users refer to both of key users and end users unless otherwise specified. Stakeholders are defined as any group or individual who can affect or is affected by the ERP implementation. In the current study, internal stakeholders include top management, process owners, key users, end users and the project management team in the organizations which ERP is implemented. External stakeholders include application consultants, business consultants and related vendors. Systems go-live refers to the actual use of the system. Usually the go-live date is the systems cut-over date. Before that day, legacy systems are used. Starting from that day, new systems are in operations.

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CHAPTER 2 – REVIEW OF THE LITERATURE INTRODUCTION There were five sections in this chapter. The first section discussed the evolution of enterprise resource planning and the critical success factors in ERP implementation. It provided a general idea on what enterprise resource planning and critical success factors were. The second section provided a theoretical background on managing changes which was a primary concern in ERP implementation. Two approaches to the study of change are process theory and variance theory. Each theory has its own logic form but they can complement each other. The third section discussed the process theory in ERP implementation. Based on the process theory, some critical success factors identified in prior research were re-classified as activities or events in an ERP implementation. In the fourth section, the variance theory in ERP implementation was discussed and the critical success factors for the current study were identified. In the final section, each critical success factor identified in the last section was discussed. The evolution of enterprise resource planning Enterprise resource planning was coined in the early 1990s by the Gartner Group of Stamford (Jacobs & Weston Jr., 2007). According to Keller (1995), ERP has the following characteristics:  It is an integrated set of financial distribution and manufacturing software and an expanded and altered functional model of manufacturing resource planning (MRP II).  It is a flexible application set that can reside on technology that can support it.  It is proactive and it embeds business rules into software. It adapts to the rules of the business. It is not a revolutionary conceptual breakthrough (Hicks & Stecke, 1995) but is a result of the evolution of computerized system in business application. Jacobs & Weston Jr. (2007) started the story from 1960s when they provided a brief history of enterprise resource system. The predecessor to and backbone of MRP II and ERP is material requirements planning (MRP) which was made possible in 1970s. In 1980s, the term manufacturing resource planning (MRP II) was coined to identify the newer systems’ capability. Tincher & Sheldon Jr. (1997) indicated that MRP was viewed by the management as a computer tool to help material and manufacturing do their jobs. When the concept of MRP II was introduced, the management viewed it as a structured approach, a process way of thinking and a formal way to manage a manufacturing company. Hicks & Stecke (1995) pointed out that ERP was concerned with making manufacturing decisions by considering the impact on the supply chain. Similar to MRP II, production decisions

Full document contains 140 pages
Abstract: Enterprise resource planning system is a complex and integrated system which management regards as a strategic tool to make improvement. Owing to its predefined processes and integrated nature, organizations are usually required to make some changes to adopt the system. The perception of high failure rate in ERP implementation motivates researchers to study critical success factors which are expected to help organization implement ERP systems successfully. Although critical success factors in ERP implementation have been quite well studied, it is still one of the popular topics in the field. This study combined the process and variance approaches to define critical success factors. Based on the ASAP implementation methodology, a critical events chain was formulated. Some critical success factors which identified in prior research were critical events in the chain. Based on the process approach, those events should not be regarded as critical success factors because they were necessary but not sufficient conditions. At the end of the literature review, six potential critical success factors were identified including the surrogates of the critical events chain and the training processes. A survey was conducted to collect data in a research site which had the systems go-live a few months ago. The six factors were confirmed by factor analysis but one of them was found insignificant in the regression analysis. The five critical success factors include top management support, effective project management, consultants support, perceived usefulness and self-efficacy. The results of the study indicate that some critical success factors identified in prior research should not be critical success factors. There are critical events chains in ERP implementation and their outcomes should be regarded as critical success factors.