THE RELATIONSHIP BETWEEN ENTERPRISE RESOURCE PLANNING (ERP) IMPLEMENTATION AND INTELLECTUAL CAPITAL UNDER THE MODERATING EFFECT OF ORGANIZATIONAL LEARNING CAPABILITY by Quang Vu Nguyen A thesis submitted to the Victoria University of Wellington in fulfilment of the requirements for the degree of Doctor of Philosophy in Information Systems Victoria University of Wellington 2016 ABSTRACT Although Enterprise Resource Planning (ERP) systems alone are not the source of competitive advantage, they may do this indirectly through enhancing or VXSSOHPHQWLQJWKHRUJDQL]DWLRQ¶VRWKHUVWUDWHJLFUHVRXUFHV6WXGLHVRQ(53KDYHQRW explicitly examined the interactions of ERP systems with other organizational capabilities to determine how investment in ERP systems can be leveraged into the creation of strategic resources of organizations. Further, ERP systems are large and complex, and the degree to which they are implemented throughout an organization can vary ± this is described as the ERP scope. The scope of ERP implementation is believed to influence the degree of its effects on an organization. Relying on the literature on ERP effects, business value of information technology (IT) and the notion that organizations are learning systems which utilize their knowledge to create value and to accumulate further knowledge, this study examines the influence of the scope of ERP implementation on a strategic resource of organizations, namely intellectual capital, under the moderating effect of organizational learning capability.
This study develops a research model to show the influence of the three dimensions of ERP implementation scope (breadth, depth, and magnitude) on intellectual capital and simultaneously the influence of organizational learning capability on these base relationships. The hypothesized relationships among variables are evaluated by a data set of 226 responses collected from manufacturing firms in Vietnam. With the support of SmartPLS version 2.0, the structural equation model is evaluated using the techniques of multiple regression analysis, and the moderation effects are analyzed using group comparison and product term approaches. The findings provide support for the hypotheses.
The three dimensions of ERP implementation show a positive impact on intellectual capital. Organizational learning capability more or less moderates the relationship between ERP implementation scope and intellectual capital. As a result of the group comparison approach for moderation analysis, firms with a low level of learning capability are i likely to have no effect of ERP implementation on intellectual capital. However, in the group with a high level of learning capability the breadth and magnitude of ERP implementation have a positive effect on intellectual capital.
By using the product term approach, only the magnitude of ERP implementation shows an interaction effect with organizational learning capability on intellectual capital. The breadth and depth of ERP implementation appear to have minimal interaction with organizational learning capability. The results inform the literature on the business value of IT by demonstrating that an ERP system can become a strategic asset as its implementation has a positive effect on intellectual capital especially with the presence of a ILUP¶V OHDUQLQJ FDSDELOLW\ Additionally, the research reveals another ERP effect (e. the effect on the intellectual capital of organizations) that complements the understanding of ERP effects that have been identified in prior studies.
The findings practically contribute to managerial knowledge by showing that ERP implementation should not be considered in isolation, but rather organizations should build a substantial level of learning capability to fully obtain the positive effect of ERP implementation on intellectual capital. ii ACKNOLWEDGEMENTS Nothing in this world would exist without other things. Equally, my research work would not have been possible without support of other people. I would like to express my most sincere gratitude to Dr.
Philip Calvert, Dr. Mary Tate, and Prof. I appreciate very much your valuable and patient guidance, enthusiastic encouragement, and useful critiques of this research work. I would like to thank all academic, administrative, and technical staff of the School of Information Management for their help and support during my study.
My thanks also to the Research Committee for the support in terms of conference attendance and field work. My grateful thanks are extended to Mr. Tuan Manh Nguyen. You encouraged me, shared your thoughts with me as an academic colleague, a brother, and as a friend.
I would especially like to acknowledge Mr. Tuan Bao Huynh and Ms. Phuong Thi-Anh Nguyen at the School of Industrial Management, Ho Chi Minh City University of Technology; Mr. Thong Tri Nguyen at the Institute of Development of Economics Research, University of Economics Ho Chi Minh City.
You kindly assisted me to contact with ERP consultants and supported me in data gathering work. I would also like to extend my thanks to all of my students who helped me in data collection. I would like to acknowledge all companies who participated in the survey. Without them, I could not have completed this thesis.
My acknowledgement is to Ms. Jackie Bell who provided proof-reading service in accordance with the Editorial Advice Policy of Victoria University of Wellington. Last but not least, I greatly express my deep gratitude to my parents. You give me an opportunity to live and learn in this world, and always love and believe in me.
Thanks to my wife Thao Thi-Hong Nguyen and my daughter Minh Hong Nguyen, for your love and unconditional support during my study. iii TABLE OF CONTENTS ABSTRACT. iii LIST OF FIGURES .vii LIST OF TABLES. viii CHAPTER 1 INTRODUCTION.1 Background to the research .2 Research problem, research questions, and research objectives .3 Scope and delimitation of the research.4 Definition of terms .5 The roadmap of the study .6 The organization of the thesis.
15 CHAPTER 2 LITERATURE REVIEW .1 Enterprise resource planning (ERP) systems .1 The history and concept of ERP systems .3 The extent or scope of ERP implementation .4 Measurement of the effects of ERP implementation .5 ERP and competitive advantage .2 IT business value and the role of organizational resources .3 Two organizational resources: intellectual capital and organizational learning capability .2 Organizational learning capability .3 Strategic characteristics of organizational learning capability and intellectual capital. 46 iv CHAPTER 3 RESEARCH MODEL AND HYPOTHESES DEVELOPMENT.1 ERP implementation and intellectual capital .2 Organizational learning capability and the relationship between ERP implementation and intellectual capital. 55 CHAPTER 4 RESEARCH METHODS .1 Justification of quantitative research design .2 Measurement model characteristics .1 Reflective and formative constructs .2 Appropriateness of higher order constructs .1 Measures of intellectual capital .2 Measures of organizational learning capability .3 Measures of ERP implementation scope .5 Back-translation and pre-test .1 Sample size and informants.2 Population and sampling frame .5 Data analysis techniques .1 Covariance-based SEM and Partial Least Squares (PLS) .2 Structural equation model assessment. 86 CHAPTER 5 DATA ANALYSIS .1 Missing values and outliers .2 Non-response bias .3 Possibility of common method bias .3 Assessment of measurement models .1 Reflective measurement models .2 Formative measurement models .4 Assessment of the structural model.1 Group comparison approach .2 Product term approach.
108 CHAPTER 6 DISCUSSION AND CONCLUSION .1 Discussion of the results .1 Summary of the results .2 Discussion of the research questions .4 Limitations of the research. English Version of the questionnaire. Vietnamese Version of the questionnaire. List of ERP software companies in Ho Chi Minh City.
Other ERP packages. Factor loadings of reflective constructs. 150 vi LIST OF FIGURES Figure 1.1 The role of strategic value of ERP between ERP implementation and competitive advantage .2 The roadmap of the study.1 The enterprise system experience life cycle .2 The IS-impact measurement model .3 The extended IS measurement model .4 IT business value model .1 The research model .1 Redundancy analysis model .2 Moderating effect using group comparison approach .3 Two-stage approach for moderating effects analysis with formative constructs involved .1 Structural model for moderating effect analysis using the group comparison approach .2 Structural models for moderating effect analysis using the product term approach.1 The virtuous circle of strategic ERP implementation. 122 vii LIST OF TABLES Table 2.1 Second wave of ERP implementation .2 The effects of ERP implementation .3 Typical definitions of intellectual capital .4 Typical definitions of organizational learning .1 Criteria for distinguishing between formative and reflective models .2 Item measures of intellectual capital .3 Item measures of organizational learning capability .4 Item measures of ERP implementation scope .5 Modifications of ERP implementation scope measurement .6 Key informants and multiple informants .7 Types of surveys and their features.8 Evaluation of reflective measurement models using PLS .9 Evaluation of formative measurement models using PLS .1 Job titles of respondents answering part A .2 Years in current organization of respondents answering part A.3 Self-rating of respondents answering part A .4 Job functions/work areas of respondents answering part B .5 Job positions of respondents answering part B .6 Years in current organization of respondents answering part B .7 Self-rating of respondents answering part B .8 Profile of surveyed companies.9 ERP implementation characteristics .10 Factor loadings of reflective constructs.11 AVE and reliability of constructs before and after items removal.12 Correlation matrix, composite reliability, and AVE of constructs .13 Path coefficients and multicollinearity of formative dimensions .14 Moderating effect analysis using the group comparison approach .15 Moderating effect analysis using the product term approach.
107 viii Chapter 1: Introduction CHAPTER 1 INTRODUCTION 1.1 Background to the research Organizations implement enterprise resource planning (ERP) systems because they want to gain benefits from these technologies. ERP systems are complex software packages that are supposed to provide organizations with capabilities of coordinating information flows into business processes and integrating all business departmental functions into a united system (Markus & Tanis, 2000). Due to the capabilities of ERP systems, organizations expect to obtain business benefits from the systems, such as more efficient business processes, inventory reduction, improved decision-making, customer services improvement, and business growth (Panorama, 2015; Shang & Seddon, 2002). Organizations hope to achieve strategic advantage as a result of these benefits.
Nevertheless, the achievement of benefits from an ERP investment is equivocal. Some organizations have realized the benefits they anticipated, but other firms have not. A recent report on ERP benefits realization (Panorama, 2015) has shown that, on average, 53% of organizations achieved less than 50% of the benefits they expected. Not only is the achievement of benefits equivocal, there is also debate about how ERP implementation benefits should be measured.
There are many overlapping approaches for measuring the positive effects of ERP implementation, which are described variously by scholars as impacts, benefits, and performance. These are all measures of positive outcomes from different perspectives, which include: the balanced scorecard; the IS-Impact model; and benefit taxonomies of various sorts. However not all of these effectively measure strategic advantage. The balanced scorecard (BSC) has been used to identify the impact of ERP on organizations in terms of financial performance, internal processes, customer satisfaction, and growth and learning (Chang, Yen, Ng, Chang, & Yu, 2011).
This touches on competitive advantage in its measures of learning and growth, but strategic value of ERP is not the main focus. Other studies such as the IS-Impact 1 Chapter 1: Introduction model have attempted to measure the impact of ERP systems at individual, workgroup and organizational level (Gable, Sedera, & Chan, 2008; Ifinedo, 2006). Once again, this does not have a strong strategic focus. Another research branch has attempted to assess the benefits of ERP in terms of five categories: operational, managerial, strategic, IT infrastructure, and organizational benefits (Shang & Seddon, 2002).
These studies have shown that the benefits of ERP can be measured across many aspects including the strategic benefits, which demonstrates the ability of ERP to produce and sustain superior performance or competitive advantage for organizations. This is the focus of this study. Firms expect to achieve competitive advantage from ERP. According to the resource- based view of the firm, organizations have sustainable competitive advantage when they own resources that are valuable, rare, inimitable, and cannot be substituted (Barney, 1991).
Clearly, ERP systems by themselves can be valuable but it is difficult to argue they have other properties of a strategic resource.