Research Background and Problems

Early ERP systems, however, did not have the improvement of supply chain manage-ment as their objective. Their initial focus was executing and integrating internally-oriented applications that support finance, accounting, manufacturing, order entry, and human re-sources. Satisfaction of internal requirements for information integration and for solutions that will improve SCM competencies, while obviously desirable, is insufficient, and firms expect new information systems to also enable them to swiftly respond to the varied needs of their customers, to share appropriate real-time information, and to establish excellent relationships with supply chain partners. Consequently, many organizations have also addressed supply chain issues with their ERP system, in addition to implementing an integrated version of it internally (Davenport and Brooks, 2004).

When ERP systems are fully realized in a business organization, they can be expected to yield many benefits, such as reduction of cycle time, faster transactions, better financial management, the laying of the groundwork for e-commerce, linking the entire organization together seamlessly, providing instantaneous information, and making tacit knowledge expli-cit (Mabert et al., 2001; Davenport and Brooks, 2004; Shang and Seddon, 2000; Murphy and Simon, 2002; Al-Mashari et al., 2003). ERP can provide the digital nervous system and the backbone in an organization to respond swiftly to customers and suppliers (Cox et al., 2000;

Mabert et al., 2001). As reported in Akkermans et al. (2003), ERP systems are widely believed to contribute to SCM in technical areas such as standardization, transparency and globaliza-tion. ERP systems are a leading tool for this purpose, and are always expected to be an integral component of SCM (Sawy et al., 1999; Nah et al., 2001; Themistocleous et al., 2002).

The potential benefits of an integrated ERP system are such that many organizations are will-ing to undertake the difficult process of conversion.

Adopting an integrated ERP system, however, has mixed results in terms of a firm’s

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performance, and some academic research is much more suspicious of its benefits. First of all, implementing an ERP system is costly and risky; it requires a large amount of capital, and its inflexibility makes it often difficult to implement across all departments within a large corpo-ration (Mabert et al., 2001). Some businesses have invested enormous sums of money in ERP or IT without positive results (Gupta and Kohli, 2006; Ehie and Madsen, 2005; Roach, 1991;

Pentland, 1989; Strassman, 1990).

Hitt et al. (2002), on the other hand, produced multiyear, multi-firm ERP implementa-tion and financial data that shows evidence of short-run gain during implementaimplementa-tion, but a lack of post-implementation data at the time they conducted their study meant they were una-ble to estimate the long-run impact. Gattiker and Goodhue (2004) argued that high interde-pendence among organizational sub-units contributes to positive ERP-related effects because of ERPs ability to coordinate activities and facilitate information flows. When differentiation among sub-units is high, however, organizations may incur ERP-related compromise or de-sign costs. A survey by Mabert et al. (2003a) found some improvements in managers’ percep-tions of performance, but that few firms had reduced direct operational costs. In addition, Hendricks et al. (2007) observed improvements only in profitability, not in stock returns. Data for improvements in profitability is also stronger in the case of early adopters of ERP systems.

Although their results are not uniformly positive across the different enterprise systems (ES, including ERP, SCM, and CRM systems), they are encouraging in the sense that despite the high implementation costs, they do not find persistent evidence of negative performance asso-ciated with ES investments.

More recent evidence has, on the contrary, demonstrated large benefits and uncovered significant productivity gains from IT investments: for example, as reported in McAfee (2002), an in-depth case study of an ERP implementation and its effects on performance at a single firm. This longitudinal research presents initial evidence of a causal link between IT adoption and subsequent improvement in operational performance measures, as well as

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dence of the timescale for these benefits. Hunton et al. (2002) experimentally tested the rela-tionship between ERP and performance by presenting 63 certified analysts at a financial ser-vices firm with the hypothetical case of a company, and comparing these analysts’ initial earning forecasts with their forecasts after they are told that the hypothetical firm has com-mitted to invest in an ERP system. The results show that the revision in earnings is positive, thereby providing supports for the hypothesis that implementation of ERP systems has a posi-tive effect on performance. Huang et al. (2007) proposed an integrated theoretical model that demonstrated that the company’s implementation of ERP has a positive effect on the process capital of its Intellectual Capital (IC); the process capital then affects the customer capital, which ultimately translates into business performance.

Many academic researchers have contributed by confirming the relationship between SCM and firm performance (Du, 2007; Hong and Jeong, 2006; Closs and Mollenkopf, 2004;

Narasimhan and Kim, 2002; Byrd and Davidson, 2003; Gunasekaran et al., 2004) or by con-firming the relationship between ERP implementation and firm performance (Hendricks et al., 2007; Mabert et al., 2001, 2003a; McAfee, 2002; Hitt et al., 2002; Gupta and Kohli, 2006;

Ehie and Madsen, 2005; Laframboise and Reyes, 2005; Kumar and Harms, 2004; Kalling, 2003). Moreover, determining how to integrate various ERP modules into SCM, for planning, control and execution of materials, resources and operations has recently become important (Koh et al., 2006; Wang et al., 2006; Samaranayake and Toncich, 2007; Ho, 2007). Research focusing on the relationship between ERP benefits and SCM competencies is limited and in-conclusive (Hsu et al., 2007). Accordingly, the current research addresses this gap in the lite-rature by analyzing the ERP benefits and SCM competencies. The evidence that the Taiwa-nese IT industry has had a highly successful growth experience with SCM competencies shows that it can be documented, and lessons can be learned. This dissertation proposes a conceptual framework featuring the ERP benefits and SCM competencies, and examines the impacts of the former on the latter. It adds to our cumulative understanding of the relationship

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of ERP systems and SCM competencies and it guides current and future efforts at decision making on selection of enterprise systems and on improvement of SCM competencies.

This dissertation presents a Structural Equation Modeling (SEM) to analyze the rela-tionship between ERP benefits and SCM competencies. Hypotheses derived from the key benefits of adopting ERP system and related SCM practices presented by previous authors. An empirical survey was conducted to collect data from Taiwanese IT companies listed in the Taiwan Stock Exchanges on several aspects of firm competencies and supply chain perfor-mance that adopted ERP systems and/or SCM systems. Results from the model are analyzed and implications for the model are discussed.