Compensation‐based incentives, ERP and delivery performance

Abstract

PurposeThe purpose of this paper is to investigate the role of compensation‐based incentives in relationships between enterprise resource planning (ERP) usage and delivery performance in manufacturing.Design/methodology/approachThe authors carry out two studies exploring links between ERP, incentives, and performance from alternative perspectives: first, of incentives tied to regular production activities, and their relationship with delivery performance advantage over competitors; second, of incentives tied to improvement activities and their relationship with delivery performance improvements. Statistical analysis is carried out on data from 698 metal‐working manufacturers from 22 countries, giving a broad cross‐sectional view of a global industry.FindingsThe studies indicate that ERP usage relates positively with both delivery advantage and delivery improvements. Furthermore, incentives tied to improvement initiatives may explain delivery improvements, both directly and as moderators in the relationship between ERP and performance.Research limitations/implicationsThe results suggest that ERP adoption can be framed as a principal‐agency phenomenon where performance outcomes are partially influenced by incentives.Practical implicationsThe results imply that incentives tied to improvement initiatives may foster employee engagement with the new ERP, leading to stronger delivery performance benefits.Originality/valueTo the best of the authors' knowledge, this is the first research to explore ERP usage as a principal‐agency problem, and to analyse its relationships with incentives under alternative performance perspectives. The results may significantly contribute to the knowledge of ERP‐performance relationships and the role of incentives.