Industrial Management & Data Systems

Process efficiency of the enterprise resource planning adoption

Shaio Yan Huang Shi-Ming Huang Tung-Hsien Wu Wen-kai Lin

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Shaio Yan Huang Shi-Ming Huang Tung-Hsien Wu Wen-kai Lin, (2009),"Process efficiency of the enterprise
resource planning adoption", Industrial Management & Data Systems, Vol. 109 Iss 8 pp. 1085 - 1100
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Process efficiency of the

enterprise resource planning
adoption

Process
efficiency of the
ERP adoption

Shaio Yan Huang, Shi-Ming Huang and Tung-Hsien Wu

1085

Department of Accounting and Information Technology,

National Chung Cheng University, Chia-Yi, Taiwan, and
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Wen-kai Lin

Received 20 February 2009

Revised 11 May 2009
Accepted 30 June 2009

Department of Accounting, Providence University, Taichung, Taiwan

Abstract
Purpose The purpose of this paper is to examine the performance of business processes,
operational process efficiency and profitability of enterprise resource planning (ERP) pre- and
post-adoption in the long term. The paper also aims to examine the factors of ERP supplier types and
firm size in Taiwan.
Design/methodology/approach The paper measures business process (structure capital value
added and operational expense ratio), process efficiency (account receivable turnover and inventory
turnover) and profitability (continuing operating income and net profit margin) of pre- and
post-adoption ERP. First, the overall samples are tested. Second, ERP performances are compared,
classified as large, medium and small. Finally, the ERP performances, classified as international and
local supplier, are compared using the Wilcoxon rank test.
Findings The results show that the business process, process efficiency, and profitability increase
in the fourth or fifth years. This shows that the benefits of ERP are evident in the long term. Regarding
firm size, big firms enhance their business process through process efficiency and financial
performance. Medium-sized firms raise continuing operating income only in the first five years. Small
firms show no improvement. The results show that the business process, relating to process efficiency
and profitability, demonstrates significant improvements in implementing international ERP vendors.
Adversely, firms using local ERP systems have a diminished outcome in overall performance.
Practical implications This paper suggests that when companies plan to adopt an ERP system,
large firms possess more advantages than medium-sized or small firms and international ERP vendors
are preferable to local systems.
Originality/value Previous research has rarely compared the results of process reengineering after
ERP system implementation. This paper offers insight into ERP adopters in the electronics industry.
Keywords Manufacturing resource planning, Business process re-engineering, Intellectual capital,
Business performance, Electronics industry, Taiwan
Paper type Research paper

1. Introduction
Enterprise resource planning (ERP) can achieve the goal of immediate management
through the integration of information systems of different departments like
production, finance, accounting, and human resources. After ERP implementation,
enterprises can successfully integrate the processes of each department, decrease costs,
improve effectiveness, increase clients level of satisfaction, and also immediately share
information with the whole enterprise (Davenport, 1998; Krumwiede and Jordan, 2000;

Industrial Management & Data

Systems
Vol. 109 No. 8, 2009
pp. 1085-1100
q Emerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570910991319

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1086

Kang et al., 2008; Pan and Jang, 2008). Moreover, enterprises can support and combine
prior traditional systems into a single system. The whole enterprise is able to share the
same database which avoids duplication costs, and also avoids the collection and
analysis of the same information (Ferrando, 2001).
However, the adoption of an ERP system, like other IT projects (Chua, 2009), may
result in problems for the enterprise despite its advantages aforementioned. The
complexity of the system may cost a lot of time and money. According to Gartner
Group, 70 percent of adopters eventually fail to use it properly. Poston and Grabski
(2001) conducted a study, which examined performance changes in three years after
the implementation of ERP. The study compared 50 adopters with 50 non-adopters.
It revealed that there were no significant improvements in profits, reduction of
expenditures, or productivity of the adopters. Only the sales cost ratio was improved in
the third year of implementation. It is also proved in Nicolaous (2004) study that
improvements in profits (e.g. return on assets (ROA), return on investment (ROI)) only
took place after the second year of implementation.
The objective of the study is to support ERP investments. The firm process will be
reengineered in the ERP implement because the adoption of ERP system reorganizes
operations activities. Thus, the performances of operational efficiency will be affected
by process reengineering. Process reengineering will directly or indirectly impact firm
performance when ERP implement. The research focuses on both the value of business
process and operational efficiency.
Both international ERP suppliers and local ERP suppliers may be have the same
modules, but global integration ability may have difference because international ERP
suppliers they have many ERP integration experiences. Some companies experienced
structural reform during ERP adoption. Also, the functions and modules offered by
different ERP suppliers may vary. On one hand, differences will inevitably occur in
performance, so it is not appropriate to compare various companies together. They did
not use quantification to test the result. On the other hand, Hendricks et al. (2007) only
examined the performance of using the SAP ERP. They did not compare the
performance of different ERP systems. This study compares the process efficiency
between the international and local ERP suppliers. Firm size may be another factor
affect process performance on ERP. Mabert et al. (2000) found big firms investment
more costly and attract additional resources than small firms. Whether firm size is a
key contextual factor to consider when postulating the impact of ERP on process
performance, it is another question.
Our purpose, first, mainly is to examine compare the performance of business
process, operational process efficiency and profitability from ERP pre- and
post-adoption for long term. Second, we examine the factors of ERP suppler types
and firm size in Taiwan. Our sample is the electronic industry because it is the major
role of the world and many firms were globalized. The international and local ERP
systems how to affect company performance, implies how to choice ERP suppliers in
Taiwan electronics industry. Another way, the study examines the firm size whether
the key factor affects company performance.
The remainder of the present paper is organized as follows. In Section 2, we develop
our hypotheses. In Section 3, the research design is described, and the results are
reported in Section 4. Section 5 concludes the paper and includes suggestions for future
research directions.

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2. Literature review
Traditional performance indicators, such as standard cumulative abnormal returns
(Hayes et al., 2001), ROA, return on sales, ROI (Hunton et al., 2003; Nicolaou, 2004;
Hendricks et al., 2007), cost of good sold, labor productivity (Poston and Grabski, 2001),
etc. were used in many studies to measure the effectiveness of ERP implementation.
However, both Vemuri and Palvia (2006) and Matolcsy et al. (2005) studies use the
leading indicators. These studies mainly focused on three aspects of operating efficiency:
reduction of inventory costs, production costs, and improvement of cash management
(inventory, cash and cash equivalents, inventory cost after depreciation, operating
revenue before depreciation, and general expenses). Although these studies focused on
daily operating efficiency, they did not measure the improvement of business processes.
Hammer and Champy (1993) defines on the other hand the business process is a
series of relative actives that create the company value (e.g. quality, responsiveness,
cost, flexibility, satisfaction, shareholder value, and other critical measures). For
example, order process includes below necessary actives: receive order, entry data,
check consumer credit, check inventory list, package and shipped product. When a
company implements ERP, business processes reengineering is the key factor to
maxim ERP utility (Kohli and Hoadley, 2006). The products of business process
reengineering are new work processes and new organizational structure.
In Vemuri and Palvia (2006), it is said that the implementation of ERP systems can
improve the day-to-day operations and business processes of enterprises. ERP can
automate many business processes and increase the work efficiency. For example, ERP
reduces the purchasing cost because it can automate to check the inventory safe stock
and order material. Most companies use ERP will change their business process to suit
the business of the ERP system to improve operation efficiency. We expect the ERP
implement can improve business process and add firm value.
Though business processes can reflect the intangible and long term benefits such as
improved customer responsiveness, improved customer satisfaction, and improved
decision making, etc. The structure capital value added (STVA) (Edvinsson and
Malone, 1997) can measure the intangible benefit of business processes. STVA is the
comprehensive indicator on structure capital. STVA considers the efficiency of
resource usage. If the firm uses the same resource to create more value, the valuation of
the company is higher which represents to improve working processes and special
techniques by ERP. Thus, this study takes STVA as an indicator for the measurement
of enterprises business processes. Another way, the operation expense will decrease
though make business process sample is effectively, we can use operational expense
ratio (operational expense/revenue) to measure process efficiency. Then, based on the
improvements to business process from ERP adoption, we hypothesize:
H1. The implementation of an ERP system leads to a significant improve in
business processes.
H1a. The implementation of an ERP system leads to a significant increase in
STVA.
H1b. The implementation of an ERP system leads to a significant decrease in
operation expense ratio.

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efficiency of the
ERP adoption
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1088

Prior researches have documented and operational improvements on technology

spending. Lea (2007) used activity-based costing in an ERP environment, and the costs
are calculate more accurately. Rantala and Hilmola (2005) showed ERP can enhance the
rate of inventory turnover. Helo (2004) indicated ERP can help electronics industry
manage operation process. Velcu (2007) indicated ERP can reduce business operating
and administration.
In ERP system, the sale module is often used, if the implementation of ERP is
effective, and the sale information will accurately be store. Account receivable
information will be obtain easily and timely for account receivable management, so the
account receivable turnover will increase. In the inventory module, ERP can set up the
repurchase point, so carry cost and inventory quantities will decrease. In the meantime,
the inventory turnover will increase. ERP, based on the improvements of operation
efficiency from ERP adoption, we hypothesize:
H2. The implementation of an ERP system leads to a significant increase in
operating efficiency.
H2a. The implementation of an ERP system leads to a significant increase
in account receivable turnover.
H2b. The implementation of an ERP system leads to a significant decrease in
inventory turnover.
Do ERP systems really help business profitability? Most scholars have had a positive
attitude. A study by Hunton et al. (2002) claimed that there was an increased
adjustment in profit forecasting after financial analysts knew that a company was
going to implement an ERP system.
In addition, Lin et al. (2004) made an evaluation of the relationship between continuous
investment in ERP systems and technical efficiency by using data envelopment
analysis. It showed that there was a significant effect on technical efficiency caused by
continuous investment in ERP-systematized companies. The expenses for ERP system
maintenance also have a positive effect on technical efficiency. This implies that if a
company allocates a higher budget for ERP systems, there will be a better performance.
Previous studies, as mentioned above, only discuss day-to-day operations. This
study considers ERP adoption as a critical factor in business processes. Profitability
will be improved if enterprises improve business processes and operating efficiency at
the same time. Only when an enterprise improves its day-to-day operations and
business processes simultaneously can improve its profits (e.g. ROI and return on
equity), even the market value of an enterprise will eventually be raised, regardless of
what kind of industry the enterprise is in. Based on the improvements in profitability
from ERP adoption, we hypothesize:
H3. The implementation of an ERP system leads to a significant increase in
profitability.
3. Methodology
3.1 Sample
We interviewed the Taiwan-listed companies of electronics industry at stock exchange
market, listed companies at over-the-counter market and listed companies at emerging

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stock market provided by SAP, Oracle, Data systems and other suppliers about their
duration of successful adoption by telephone. The testing period is set between January
1, 1994 and September 30, 2006, so that we can cover relevant information provided by
all sample firms. At the end, 25 samples were collected. These samples were chosen to
the final sample of firms using the following data filters:
.
Their ERP implementation started or ended was identified in the specific year.
.
Financial information was available through the Taiwan Economic Journal
database.

Process
efficiency of the
ERP adoption
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3.2 Measure term

Since, the actual adoption time of each company varies, and the industry experts
predict a four- to five-year return for ERP implementations (Knorr, 1999; Wah, 2000),
therefore we analyze the financial performance three years pre-adoption and five years
post-adoption based on the actual implementation year.
Prior studies found that it took about one to two years, or even four to five years
from the implementation to the completion of ERP systems (Hunton et al., 2003; Mabert
et al., 2000; Hendricks et al., 2007). However, we found that the average number of
months to implement ERP was only 10.37 for our sample companies, so we compare
the ERP performance excluding the implemented year.
3.3 Research method and variables definition
We compare performance of pre- and post-adoption. First, we will test overall samples.
Second, we compare the performance divided into international and local suppliers.
Finally, we compare the performance divided into large, medium, and small. Because
the sample has only 25 firms, we use Wilcoxon rank test to do the performance
comparison. The comparison has average three years pre-adoption and average three
years post-adoption, average three years pre-adoption and average four years
post-adoption, average three years pre-adoption and average five years post-adoption,
t 2 1 year and t 1 year, t 2 1 year and t 2 year, t 2 1 year and t 3 year, t 2 1
year and t 4 year, t 2 1 year and t 5 year.
We examine if there is any improvements in the six performance measures extended
from the three aspects using the three years pre-adoption and five years post-ERP
adoption. Our summaries are illustrated in Table I.
3.4 Firm size and ERP vendor
About the size: large, middle, and small firms. A large-sized enterprise represents a
company with over 200 employees. A mid-sized enterprise represents a company with
over 100 employees but does not exceed 200, and a small business represents a
Perspectives

Variables

Measures

Business processes

STVA
Operational expense ratio
Account receivable turnover
Inventory turnover
Continuing operating income
Net profit margin

Value-added (payment)/value-added
Operational expense/revenue
Net sales/average net receivables
Net sales/inventory

Process efficiency
Profitability

Net profit/revenue

Table I.
Performance measures

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company with under 100 employees according to the survey of domestic

manufacturing investments. About the international and local ERP vendors, the
international ERP vendors are used is SAP and Oracle and other ERP vendors all are
local ERP vendors in our sample in Taiwan.

1090

4. Results and analysis

4.1 Descriptive statistic
The descriptive statistics show the STVA a decreasing trend, t 2 1 mean 0.96 and
t 2 means 1.08. It seems increasing, but in the t 3, t 4, and t 5 years, these are
all lower than t 1and t 5 is the lowest 0.51. It shows maybe the process capital is
decreasing after implement ERP. Operational ratio, it is obviously a decreasing trend,
t 1 mean (19.12) to t 5 mean (14.37). In the descriptive statistics result, business
process seems improved (Table II).
In the process efficiency, account receivable turnover is no obviously change. The
ratio of t 2 1 to t 5 is almost close to 5.5. While inventory turnover is increasing
trend. The mean of t 2 1 (7.19) to t 5 (12.53), every year increase. The result shows
process efficiency seems improved.
About profitability, continuing operating income and net profit margin are
increasing, t 2 1 (73,467.44 and 8.19) to t 5 (1,964,219 and 22.03). It implies the
profitability increasing.
4.2 Performance of overall, firms
In the overall firms, for business process improvement, Table III shows that there is a
significant increase in STVA and significant decrease in operational expense ratio.
In the SVTA, average three years post-adoption and average five years post-adoption
are significant positive. ERP implementation is associated with no significant decrease
in SVTA in t 1, t 2, and t 3 year after implantation over the year prior to
implementation. Thus, H1a is supported. It implies the structure capital increases for
long term. For operational expense ratio, ERP implementation is found to be associated
with a significant decrease by average three years post-adoption, and has a significant
negative result. Thus, H1b is supported. Therefore, H1 is supported.
For account receivable turnover, ERP implementation is found to be associated with
a significant decrease by average four years post-adoption have significant negative
result. Thus, H2a is not supported. For inventory turnover, ERP implementation is
found to be associated with a significant increase by t 4 year post-adoption and
t 5 year post-adoption, and has a significant positive result. Thus, H2b is supported.
Therefore, H2 is partly supported.
For continuing operating income, ERP implementation is found to be associated
with a significant increase by average five years post-adoption have significant
positive result. Thus, H3a is supported. For net profit margin, ERP implementation is
found to be associated with a significant increase by average five years post-adoption,
and has a significant positive result, and a significant decrease in t 2 year
post-adoption has significant negative result. t 2 year could be explained that ERP
implementation has an adjective term. Thus, ERP implementation has bad
performance in short term and good performance in long term. H3b is supported.
Therefore, H3 is supported.

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N
One year before implementation
STVA
23
Operational expense ratio
25
Account receivable turnover
24
Inventory turnover
24
Continuing operating income 25
Net profit margin
25
One year after implementation
STVA
25
Operational expense ratio
25
Account receivable turnover
25
Inventory turnover
25
Continuing operating income 25
Net profit margin
25
Two year after implementation
STVA
25
Operational expense ratio
25
Account receivable turnover
25
Inventory turnover
25
Continuing operating income 25
Net profit margin
25
Three year after implementation
STVA
25
Operational expense ratio
25
Account receivable turnover
25
Inventory turnover
25
Continuing operating income 25
Net profit margin
25
Four year after implementation
STVA
25
Operational expense ratio
25
Account receivable turnover
25
Inventory turnover
25
Continuing operating income 25
Net profit margin
25
Five year after implementation
STVA
21
Operational expense ratio
21
Account receivable turnover
21
Inventory turnover
21
Continuing operating income 21
Net profit margin
21

Min

Max

Mean

SD

0.15
1.60
2.23
1.85
28,692,423
2 102

6.19
71.08
11.13
51.57
3,624,828
37.31

0.96
19.12
5.69
7.19
7,3467.44
8.19

1.17
14.80
2.32
9.81
2,013,856.11
28.79

2 1.33
2.02
1.77
1.39
2 325,409
2 29.89

3.68
41.34
13.27
102.04
7,412,566
27.12

0.78
17.15
6.01
9.22
557,811.16
5.85

1.02
9.63
2.81
19.61
1,603,205.92
14.50

0.04
2.18
2.27
0.82
21,625,232
2 110.23

7.17
68.11
11.66
119.67
10,330,859
36.65

1.08
19.09
5.62
9.82
898,996.88
1.67

1.38
14.33
2.54
23.06
2,428,205.12
29.64

0.26
1.79
2.33
1.30
2 429,605
2 84.13

4.17
40.64
12.70
134.14
13,080,399
36.86

0.95
17.02
5.86
10.98
1,029,213.24
3.93

0.76
10.31
2.84
25.87
2,697,948.50
25.86

2 0.02
1.71
2.76
1.95
21,294,621
2 77.80

2.98
35.95
11.22
105.96
16,886,059
54.69

0.90
16.12
5.52
11.34
1,160,525.16
8.00

0.64
10.55
2.25
20.80
3,459,460.59
24.31

2 2.56
1.56
2.90
2.59
2 95,695
2 7.50

0.94
36.13
11.82
92.70
22,828,510
120.94

0.51
14.37
5.46
12.53
1,964,219.67
22.03

0.75
8.67
2.34
20.12
5,000,732.52
28.97

4.3 Performance of firms on different size

Of the sample companies we collected, there are 25 electronics companies in accordance
with the standards for identifying a small or medium-sized enterprise by the
directorate-general of budget. The companies have 17 big, five middle, and three small.
The big companies are 68 percent.
In the big firms, for SVTA, ERP implementation is found to be associated with a
significant increase by average three years post-adoption and average five years

Process
efficiency of the
ERP adoption
1091

Table II.
Descriptive statistics

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AVG post three

years vs AVG
pre three years
N
AVG post four
years vs AVG
pre three years
N
AVG post five
years vs AVG
pre three years
N
t 1 vs t 2 1
N
t 2 vs t 2 1
N
t 3 vs t 2 1
N
t 4 vs t 2 1
N
t 5 vs t 2 1

Table III.
Wilcoxon test of the ERP
pre- and post-adoptions
of all firm

Continuing
Operational Account
receivable Inventory operating Net profit
expense
income
margin
turnover
turnover
ratio
SVTA
Level Level sum Level sum Level sum Level sum Level sum Level sum
2

29
107
(0.044) * *
16
60
76
(0.679)
16
9
69
(0.019) * *
12
146
130
(0.808)
23
143
133
(0.879)
23
139
137
(0.976)
23
128
148
(0.761)
23
129
61
(0.171)
19

115
138
(0.856)
22
200
53
(0.005) * *
22
101
70
(0.955)
18
173
152
(0.331)
25
164
161
(0.954)
25
181
119
(0.607)
24
187
138
(0.700)
25
187
45
(0.695)
21

91
100
(0.687)
19
164
26
(0.107)
19
59
61
(0.379)
15
116
184
(0.753)
24
152
148
(0.886)
24
132
168
(0.338)
24
164
137
(0.084) *
24
116
95
(0.004) * *
20

105
85
(0.856)
19
135
55
(0.005) * *
19
51
85
(0.955)
16
139
161
(0.331)
24
145
155
(0.954)
24
107
170
(0.607)
23
90
211
(0.700)
24
27
183
(0.695)
20

102
174
(0.274)
23
99
177
(0.236)
23
48
142
(0.059) *
19
161
164
(0.968)
25
174
151
(0.757)
25
117
208
(0.221)
25
119
206
(0.242)
25
43
188
(0.012) * *
21

102
174
(0.189)
23
99
177
(0.082) *
23
48
142
(0.586)
19
161
164
(0.143)
25
174
151
(0.025) * *
25
117
208
(0.158)
25
119
206
(0.757)
25
43
188
(0.414)
19

Notes: z-value significant at *0.1, * *0.05, * * *0.001 levels, respectively

post-adoption, and has a significant positive result. For operational expense ratio, ERP
implementation is found to be associated with a significant decrease by average four
years post-adoption and t 5 year post-adoption, and has a significant negative result.
For account receivable turnover, ERP implementation is found to be associated
with a significant decrease by average four years post-adoption, and has a significant
negative result. For Inventory turnover, ERP implementation is found to be
associated with a significant increase t 5 year post-adoption, and has a significant
positive result.
For continuing operating income, ERP implementation is found to be associated
with a significant increase by t 5 year post-adoption, and has a significant positive
result. For net profit margin, ERP implementation is found to be associated with a
significant decrease by t 2 year post-adoption, and has a significant negative result.

In the middle firms, only the continuing operating income and net profit margin have
significant result. For continuing operating income, ERP implementation is found to be
associated with a significant increase by t 5 year post-adoption, and has a significant
positive result. For net profit margin, ERP implementation is found to be associated
with a significant decrease by t 2 year post-adoption, and has a significant negative
result. In the small firms, all results not are significant (Tables IV and V).

Process
efficiency of the
ERP adoption

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4.4 Performance of firms on different ERP vendors
Of the sample companies we collected, there are 25 electronics companies. The
companies include 14 international ERP vendors (56 percent) and 11 local ERP vendors
(44 percent).
As shown in Table VI, in the international ERP vendors, for SVTA, ERP
implementation is found to be associated with a significant increase by average five
years post-adoption, and has a significant positive result. For operational expense
ratio, ERP implementation is found to be associated with a significant decrease by
average four years post-adoption and t 5 year post-adoption, and has a significant
negative result.
For account receivable turnover, ERP implementation is found to be associated with
a significant decrease by average four years post-adoption, and has a significant
negative result. For inventory turnover, ERP implementation is found to be associated
with a significant increase t 1, t 2, t 3, and t 5 year post-adoption, and has a
significant positive result.
For continuing operating income, ERP implementation is found to be associated
with a significant increase by average five years post-adoption and t 5 year
post-adoption, and has a significant positive result. For net profit margin, ERP
implementation is not found to be associated with a significant result.
As shown in Table VII, in the international ERP vendors, for SVTA, ERP
implementation is found to be associated with a significant decrease by t 5 year
post-adoption, and has a significant negative result. For operational expense ratio, ERP
implementation is found to be associated with a significant decrease by t 5 year
post-adoption, and has a significant negative result.
For account receivable turnover, ERP implementation is found to be associated with
a significant decrease by average four years post-adoption, and has a significant
negative result. Inventory turnover, ERP implementation is found to be associated with
a significant decrease by average four years post-adoption and t 1 year, and has a
significant negative result.
For continuing operating income, ERP implementation is not found a significant
result. For net profit margin, ERP implementation is found to be associated with a
significant decrease by t 2 and t 3 year, and has a significant negative result.
5. Conclusion
5.1 Summary of findings and implications
Based on the sample of 25 companies implementing ERP packages from 1994 to 2006,
results indicate a significant increase in SVTA until four years after the
implementation of the ERP system, and then a significant decrease in account
receivable turnover until four years after the implementation of the ERP system.
There are significant decreases associated with operational expense ratio, while there

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1094

AVG post three

years vs AVG
pre three years
N
AVG post four
years vs AVG
pre three years
N
AVG post five
years vs AVG
pre three years
N
t 1 vs t 2 1
N
t 2 vs t 2 1
N
t 3 vs t 2 1
N
t 4 vs t 2 1
N
t 5 vs t 2 1

Table IV.
Wilcoxon test of the ERP
pre- and post-adoption of
large firm

Level
2

Operational
expense
ratio
Level sum

Account
receivable
turnover
Level sum

Inventory
turnover
Level sum

Continuing
operating
income
Level sum

Net profit
margin
Level sum

11
65
80
71
(0.016) * *
(0.877)
13
16
36
111
55
25
(0.507)
(0.026) * *
13
16
9
62
57
43
(0.033) * *
(0.551)
11
14
75
87
78
66
(0.943)
(0.619)
17
17
58
70
95
83
(0.381)
(0.758)
17
17
55
73
98
63
(0.309)
(0.796)
17
17
63
77
90
76
(0.523)
(0.981)
17
17
80
94.5
40
25.5
(0.256)
(0.050) *
15
15

49.5
70.5
(0.551)
15
100
20
(0.023) * *
15
44
47
(0.917)
13
61
92
(0.463)
17
70
83
(0.758)
17
59
94
(0.407)
17
87
66
(0.619)
17
62.5
57.5
(0.887)
15

105
85
(1.000)
19
135
55
(0.394)
19
51
85
(0.551)
16
139
161
(0.586)
24
145
155
(0.478)
24
106.5
169.5
(0.179)
24
89.5
210.5
(0.113)
24
27
183
(0.015) * *
20

43
93
(0.196)
16
41
95
(0.163)
16
27
78
(0.109)
14
67
86
(0.653)
17
71
82
(0.795)
17
45
108
(0.136)
17
44
109
(0.124)
17
24
96
(0.041) * *
15

92
44
(0.215)
16
97
39
(0.134)
16
66
39
(0.397)
14
104
49
(0.193)
17
117
36
(0.055) *
17
107
46
(0.149)
17
91
62
(0.492)
17
62
58
(0.910)
15

SVTA
Level
sum

Notes: z-value significant at *0.1, * *0.05, * * *0.001 levels, respectively

are improvement in continuing operating income. There was a significant increase in

net profit margin.
The result shows the business process, process efficiency, and profitability were
almost were improved until four or five years after the implementation of the ERP
system It shows the ERP benefits are arisen from long term period due to complication
of ERP and organization characters. The ERP integrates company database, business
process and company structure. The employees need time to understand and
experiment with ERP through the employee education (Aasheim et al., 2009).
In the business process, SVTA had a significant increase result and operational
expense ratio had a significant decrease. It implied the business process improved
through ERP implementation. It added the structure capital add value and make the
business process simple to reduce the operational expense. Our sample is electronics

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Term
AVG post three
years vs AVG
pre three years
N
AVG post four
years vs AVG
pre three years
N
AVG post five
years vs AVG
pre three years
N
t 1 vs t 2 1
N
t 2 vs t 2 1
N
t 3 vs t 2 1
N
t 4 vs t 2 1
N
t 5 vs t 2 1
N

Operational
expense
SVTA
ratio
Level
Level sum
Level sum
2

1
2
(1.000)
02
3
0
(0.109)
02
0
1
(0.180)
01
10
5
(0.225)
05
13
2
(0.138)
05
13
2
(0.345)
05
13
2
(0.786)
05
7
3
(0.273)
04

2
8
(0.273)
04
7
3
(0.465)
04
2
4
(0.593)
03
5
10
(0.500)
05
5
10
(0.500)
05
10
5
(0.500)
05
9
6
(0.686)
05
7
3
(0.465)
04

Account
receivable
turnover
Level sum

Inventory
turnover
Level
sum

Continuing
operating
income
Level sum

Net profit
margin
Level sum

3
3
(1.000)
03
5
1
(0.285)
03
2
1
(0.655)
02
6
9
(0.686)
05
9
6
(0.686)
05
9
6
(0.686)
05
9
6
(0.686)
05
6
4
(0.715)
04

3
3
(1.000)
03
6
0
(0.109)
03
0
3
(0.180)
02
12
3
(0.225)
05
13
2
(0.138)
05
11
4
(0.345)
05
8.5
6.5
(0.786)
05
2
8
(0.273)
04

6
4
(0.715)
04
5
5
(1.000)
04
0
6
(0.109)
03
9
6
(0.686)
05
11
4
(0.345)
05
10
5
(0.500)
05
8
7
(0.893)
05
0
10
(0.068) *
04

8
2
(0.273)
04
8
2
(0.273)
04
3
3
(1.000)
03
9
6
(0.686)
05
14
1
(0.080) *
05
11
4
(0.345)
05
7
8
(0.893)
05
1
9
(0.144)
04

Notes: z-value significant at *0.1, * *0.05, * * *0.001 levels, respectively

industry companies, the industrys characters are largely production and fixed
production process. ERP system can automate and make the manufacture process
simple that fit the electronics industry process character to improve their business
process.
Part of process efficiency, inventory turnover has a significant increase, while the
account receivable turnover has a significant decrease. It implies ERP system
efficiently control inventory stock, and reduces material and manufacture cost. But for
account receivable management, it implies the financial module has no improvement.
Account receivable management, ERP may be linked with management relationship
management system. We can distinguish the inside process and outside process
efficiency. When operational activities are connected with external activities, it maybe
rely on other system support.

Process
efficiency of the
ERP adoption
1095

Table V.
Wilcoxon test of the ERP
pre- and post-adoption
of middle firm

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AVG post three

years vs AVG
pre three years
N
AVG post four
years vs AVG
pre three years
N
AVG post five
years vs AVG
pre three years
N
t 1 vs t 2 1
N
t 2 vs t 2 1
N
t 3 vs t 2 1
N
t 4 vs t 2 1
N
t 5 vs t 2 1

Table VI.
Wilcoxon test of the ERP
pre- and post-adoption of
international ERP vendor

Level
2

SVTA
Level
sum

Operational
expense
ratio
Level sum

Account
receivable
turnover
Level sum

Inventory
turnover
Level
sum

Continuing
operating
income
Level sum

Net profit
margin
Level sum

15
51
(0.110)
11
31
35
(0.859)
11
3
33
(0.036) * *
08
51
54
(0.925)
14
57
48
(0.778)
14
54
51
(0.925)
14
60
45
(0.638)
14
33
33
(1.000)
11

46
45
(0.972)
13
73
18
(0.055) *
13
34
21
(0.508)
10
66
39
(0.397)
14
55
50
(0.875)
14
49
42
(0.807)
14
67
38
(0.363)
14
52
14
(0.091) *
11

42
36
(0.814)
12
67
11
(0.028) * *
12
23
22
(0.953)
09
28
77
(0.124)
14
47
58
(0.730)
14
49
56
(0.826)
14
66
39
(0.397)
14
34
32
(0.929)
11

37
41
(0.875)
12
49
29
(0.433)
12
16
39
(0.241)
10
18
87
(0.030) * *
14
27.5
77.5
(0.116)
14
20.5
70.5
(0.081) *
14
19
86
(0.035) * *
14
1
65
(0.004) * *
11

31
60
(0.311)
13
31
60
(0.311)
13
9
46
(0.059) *
10
46
59
(0.683)
14
52
53
(0.975)
14
26
79
(0.096)
14
32
73
(0.198)
14
7
59
(0.021) * *
11

51
40
(0.701)
13
62
29
(0.249)
13
25
30
(0.799)
10
60
45
(0.638)
14
75
30
(0.158)
14
57
48
(0.778)
14
61
44
(0.594)
14
24
42
(0.424)
11

Notes: z-value significant at *0.1, * *0.05, * * *0.001 levels, respectively

Regarding profitability, it has obviously increases due to the business process and
inside process improvement. The result shows the SVTA, on one hand operational
expense ratio and inventory turnover improve in the fourth or fifth years. On the other
hand, the continuing operating income and net profit margin increase in the fourth or
fifth years. It implies the ERP implement can improve financial performance through
improving business process and inside process.
For size factor, result of the big size indicates significant improve in SVTA,
operational expense ratio, inventory turnover and continuing operating income in
fourth or fifth years. Over all, big firms improve their business process, inside process
efficiency and financial performance. Middle firms improve only continuing operating
income in the five year. Small firm have no improvement. The result shows first, the

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Term
AVG post three
years vs AVG
pre three years
N
AVG post four
years vs AVG
pre three years
N
AVG post five
years vs AVG
pre three years
N
t 1 vs t 2 1
N
t 2 vs t 2 1
N
t 3 vs t 2 1
N
t 4 vs t 2 1
N
t 5 vs t 2 1
N

Level
2

SVTA
Level
sum

Operational
expense
ratio
Level sum

Account
receivable
turnover
Level sum

Inventory
turnover
Level
sum

Continuing
operating
income
Level sum

Net profit
margin
Level sum

3
12
(0.225)
05
6
9
(0.686)
05
2
8
(0.273)
04
26
19
(0.678)
09
23
22
(0.953)
09
21
24
(0.859)
09
15
30
(0.374)
09
31
5
(0.069) *
08

17
28
(0.515)
09
35
10
(0.139)
09
21
15
(0.674)
08
32
34
(0.929)
11
34
32
(0.929)
11
44
22
(0.328)
11
35
31
(0.859)
11
47
8
(0.047) * *
10

11
17
(0.612)
07
24
4
(0.091) *
07
10
11
(0.917)
06
37
18
(0.333)
10
34
21
(0.508)
10
20
35
(0.444)
10
21
34
(0.508)
10
27
18
(0.594)
09

21
7
(0.237)
07
25
3
(0.063) *
07
11
10
(0.917)
06
50
5
(0.022) * *
10
43
12
(0.114)
10
33
22
(0.575)
10
25
30
(0.799)
10
11
34
(0.173)
09

23
32
(0.646)
10
21
34
(0.508)
10
17
28
(0.515)
09
41
25
(0.477)
11
41
25
(0.477)
11
39
27
(0.594)
11
31
35
(0.859)
11
16
39
(0.241)
10

36
9
(0.110)
09
35
10
(0.139)
09
26
10
(0.263)
08
51
15
(0.110)
11
53
13
(0.075) *
11
52
14
(0.091) *
11
35
31
(0.859)
11
23
32
(0.646)
10

Notes: z-value significant at *0.1, * *0.05, * * *0.001 levels, respectively

big firms have more capital to invest more cost and attract additional resources.
Second, the organizational structure and operational activities of big firms are more
complication than middle and small firms. ERP system integrates firm structure and
simple process that big firm needs. The middle and small firms in Taiwan electronics
industry, their main product line and organizational structure is not so complicated,
and the benefit of ERP implement result is not significant. It implies firms want to
implement ERP system must review their requirements to improve company
performance.
ERP vendor is an important factor to affect ERP implemented benefits. The result
shows the business process, inside process efficiency and profitability have significant
improvements in implementing international ERP vendors. Adversely, firms using
local ERP system have diminished overall performance. The results show:

Process
efficiency of the
ERP adoption
1097

Table VII.
Wilcoxon test of the ERP
pre- and post-adoption of
local ERP vendor

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International ERP vendor invest more capital in functional module than local
ERP vendors. International ERP vendor faces the different industries and
counties demands and other ERP vendors competition to develop more useful
ERP system and additional software, such as: Oracle develops Product Lifecycle
Management software linked with ERP.
International ERP vendors have more powerful integration power than local
ERP vendors. Taiwan electronic companies usually have supply chain
integration with foreign companies. International ERP supports supply chain
integration to create integration value.
International ERP vendor have more implementation successful experience.
They know what kind of industry needs what kind of module, and give
implementation suggestion.

The ERP implementation is a large investment, some managers will give up the
investment because of their self-interest behavior. Some managers want to raise the
annual return to add their bonus or they are worried about being fired. Our result can
indicate the evidence that ERP has good performance in fourth or fifth years. It is long
term for mangers. The study suggests when company implements ERP system, the
lower the performance ERP implementation must be excluded.
Our result indicates ERP implementation will add intangible assets. Huang et al.
(2006) used the questionnaire to demonstrate IT investment will affect financial
performance by intangible asset. Our study use archived data they use in the
questionnaire to demonstrate IT investment will produce intangible asset. When
company implement ERP system or other IT investment, manager should use and
manage intangible asset to produce company value.
5.2 Limitations of results
Only 25 samples of electronic companies provided complete data for analysis. In size
analysis, the sample has five middle firms and three small firms, so the result may
have bias. Prior study, such as Poston and Grabski (2001) investigated financial impact
of ERP in the USA. They sampled only 50 firms for all industries. It is difficult when
researching the ERP performance measure to collect large samples. Also, the study
does not examine the relation with business process, process efficiency and
profitability by regression or structural equation model because of the sample size. In
order to analyze long term performance (t 2 3 to t 5 year), variables with missing
data, the missing data ratio average 19 percent, and the results may have bias.
5.3 Future research
The impact on firm performance of ERP implementation within companies can be
examined, but the relation of business process, process efficiency, and financial
performance needs to be clarified and examined in the ERP implementation in the
single industry. In the supply chain, all firms use the same ERP system or not whether
impact company performance it is need examine because different ERP system have
compatible problems may reduce the operational efficiency.
Do the small and middle firms install over complicated ERP systems? It is needed to
be examined because operation activities and organizational structure are not

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complicated, whether install too much ERP modules to obstruct operational efficiency
and financial performance.
In our result, the account receivable turnover is significant negative. The impact of
customer relationship management system like with ERP system should be examined.
To examine whether customer relationship management system or customer focused
e-business model (Wei et al., 2009) will add account receivable turnover or reduce
customer complain ratio.
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Corresponding author
Shaio Yan Huang can be contacted at: actsyh@gmail.com

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