erp systems as an enabler of sustained business process innovation: a knowledge-based view

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  • ERP systems as an enabler of sustained businessprocess innovation: A knowledge-based view

    tion, and extension. Academy of Management Journal 27 (2), 185203], a theoretical framework is

    * Corresponding author. Tel.: +66 2 231 1270 2; fax: +66 2 231 1273.E-mail addresses: (T. Srivardhana), (S.D. Pawlowski).

    1 Tel.: +1 225 578 2507; fax: +1 225 578 2511.

    Journal of Strategic Information Systems 16 (2007) 5169$ - see front matter 2007 Elsevier B.V. All rights reserved.developed to specify the relationships between ERP-related knowledge impacts and potential/real-ized absorptive capacity for business process innovation. The implication of the knowledge-basedanalysis in this paper is that ERP systems present dialectical contradictions, both enabling and con-straining business process innovation. The model highlights areas where active management haspotential to enhance the capabilities of a rm for sustained innovation of its business processes.Future research directions are also outlined. 2007 Elsevier B.V. All rights reserved.

    Keywords: Enterprise resource planning systems; Absorptive capacity; Business process innovationThongchai Srivardhana a,*, Suzanne D. Pawlowski b,1

    a Graduate School of Commerce, Burapha University, Bangkok Education Center, 14th Floor,

    United Center Building, Silom Road, Bangkok 10500, Thailandb Louisiana State University, Information Systems and Decision Sciences Department, 3185 CEBA,

    Baton Rouge, LA 70803-6312, USA

    Received 25 November 2005; accepted 20 January 2007Available online 6 March 2007


    This research examines the relationship between ERP systems and innovation from a knowledge-based perspective. Building upon the multi-dimensional conceptualization of absorptive capacity byZahra and George [Zahra, S.A., George, G., 2002. Absorptive capacity: a review, reconceptualiza-doi:10.1016/j.jsis.2007.01.003

  • 52 T. Srivardhana, S.D. Pawlowski / Journal of Strategic Information Systems 16 (2007) 51691. Introduction

    The research in this paper challenges conventional beliefs about the relationshipbetween enterprise resource planning (ERP) systems and business process innovation.While common views of ERP systems as constraining and inexible (like cement, the crit-ics say highly exible in the beginning, but rigid later (Davenport, 2000, p. 16) seemincommensurate with the notion of innovation, the analysis presented in this paper revealsa dierent picture. Rather than focusing exclusively on the structural constraints that thesesystems impose, we direct attention to the impacts of an ERP system on the knowledgecapabilities of the organization. In contrast to prevailing views, a knowledge-based per-spective reveals that ERP systems have the potential to signicantly enhance the capabil-ities of a rm for sustained innovation of its business processes. The implication of ouranalysis is that ERP systems present dialectical contradictions, both enabling and con-straining business process innovation. The theoretical model presented in this paper makesseveral important contributions. First, the model provides a foundation for understandingthe dialectical and often complex relationship between ERP systems and innovation.Moreover, the model highlights the ways that organizations can cultivate and leveragethe enabling elements to create enhanced business process innovation capabilities. Finally,the model provides a foundation for future empirical investigations to further explorethese relationships.

    For many rms, an ERP system is critical to ongoing operations of the company andalso represents their largest IT investment. For these same organizations, knowledge capa-bilities (generation, combination-recombination and exploitation of knowledge) can pro-vide a source of competitive advantage (Conner and Prahalad, 1996; Grant, 1996; Kogutand Zander, 1996). The objective of the research in this paper, then, is to carefully examinethe relationship between the technological and operational capabilities provided by anERP system and the knowledge capabilities of the rm for sustained business processinnovation. Broadly dened, the process of innovation is the development and implemen-tation of new ideas in an organization, including inventions, imitations and adaptations(Van de Ven, 1986; Webster, 2004). The premise of the research presented in this paperis that an ERP system provides the potential for enhanced knowledge capabilities for busi-ness process innovation. The realization of these capabilities, however, is dependent on thedevelopment of associated social integration mechanisms for knowledge sharing, integra-tion and creation, and routines for innovation, learning and renewal. The research pre-sented here develops a theoretical framework to explore these ideas and to provide afoundation for future research to better understand organizational strategies to: (1) reducethe gap between the potential and realized knowledge capabilities enabled by ERP sys-tems, and (2) develop routines to utilize these capabilities for sustained business processinnovation. To this end, we build upon and extend the model of absorptive capacity byZahra and George (2002) to introduce a new theoretical framework ERP Systems andBusiness Process Absorptive Capacity. In alignment with the original framework, businessprocess absorptive capacity is viewed as a dynamic capability inuencing the rms abilityto create and deploy knowledge to build its business processes. The framework also incor-porates insights from prior research on ERP systems from a knowledge perspective andstudies on boundary spanning/knowledge brokering and information systems (Levinaand Vaast, 2005; Pawlowski and Robey, 2004; Volko et al., 2004). The resulting

  • theoretical framework provides a more holistic picture of both the enablers and inhibitorsto process innovation related to ERP systems over the long term.

    Before beginning the exposition of these ideas, a caveat is in order. While the frame-work presents both ERP-related enablers and inhibitors to business process innovation,the primary focus in the discussion is to highlight the enabling elements. It is important,however, to keep in mind that some characteristics of ERP systems (e.g., tight coupling,diculty of customization) inherently create major challenges to some forms ofinnovation.

    The paper begins with an overview of the conceptualization of absorptive capacitydeveloped by Zahra and George (2002) and a review of prior work on ERP systems froma knowledge perspective. The proposed theoretical framework is described next, includingpropositions. Finally, directions for future research are oered.

    2. Background

    2.1. Business process innovation, knowledge transfer and absorptive capacity

    A business process is a set of logically related tasks performed to achieve a dened busi-ness outcome (Davenport and Short, 1990). Unlike product innovation, which is targetedtowards product development and commercialization activities, process innovation relatesto improving organizational processes, e.g., sequencing of work routines, informationow. Our understandings of business process innovation are informed by the growingresearch on organizational learning and knowledge management. While dierent assump-tions about knowledge and its management are reected in this research (Schultze and Sta-bell, 2004), information sharing/knowledge transfer (both within and across the boundaryof the organization) is seen as an essential element for innovation. Within an organization,cross-unit knowledge transfer can produce creative abrasion (Leonard-Barton, 1995),generate improvisational sparks (Brown and Duguid, 1991) and create new informationpatterns by rearranging information already in use and incorporating information previ-ously neglected (Isabella, 1990; Macdonald, 1995). Firms also actively seek externalknowledge, for example, by expanding their networks to learn about new practices andtechnologies (Kogut, 1988).

    The challenge confronted by rms seeking to stimulate innovation through knowledgetransfer is captured in the concept of knowledge stickiness (Szulanski, 1996). Knowl-edge is sticky, or dicult to transfer, the more it is embedded in individuals, contexts,or locations, causing transfer to be slow, costly and uncertain (Kogut and Zander, 1993).One of the primary knowledge-related factors found to inhibit knowledge transfer withinan organization is the lack of absorptive capacity the inability of the recipient to value,assimilate and apply outside sources of knowledge (Cohen and Levinthal, 1990; Szulanski,1996; Zahra and George, 2002). Absorptive capacity is also important in the transfer andadoption of knowledge from sources external to the rm. Drawing from the absorptivecapacity thesis, for example, a study on the role of alliances in the interrm transfer oftechnological capabilities found similar resource bases among partners (a source of rmabsorptive capacity) to be a critical element in successful transfer/adoption (Moweryet al., 1996).

    Absorptive capacity, the central concept in the model developed in this paper, was orig-

    T. Srivardhana, S.D. Pawlowski / Journal of Strategic Information Systems 16 (2007) 5169 53inated by Cohen and Levinthal (1990) and dened as a rms ability to recognize the

  • 54 T. Srivardhana, S.D. Pawlowski / Journal of Strategic Information Systems 16 (2007) 5169value of external knowledge, assimilate it, and apply it to commercial ends (p. 128). Theunderlying premise is that prior related knowledge is needed to absorb and utilize newknowledge. Initially applied at the level of the rm, the concept has also been appliedat the business unit and team level (see, e.g., Tiwana and McLean, 2005). Firms exhibita high degree of variance in the


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