Exploring the influence of enterprise resource planning (ERP) implementation on corporate performance using a modified data envelopment analysis (DEA) approach

Abstract

The benefit of enterprise resource planning (ERP) system for corporate performance is almost ignored at earlier works. To advance earlier researches, this work employs financial data to explore factors of performance advance by illustrating the association between operation management and ERP installation. Atwo-stage analysis is made to achieve the aim. Firstly, input-output efficiency of a firm is evaluated based on a modified data envelopment analysis (DEA) approach, which controls the variations of macroeconomic prosperity among sample years. Secondly, exactly how the embedded modules of ERP systems enhance the input-output efficiency of a firm is then explored by performing Tobin regression analysis. Comparing the input-output efficiency between the pre-ERP and post-ERP periods, the input-output efficiency is proved to be higher in the post-ERP period since firms benefit from shorter turnover days of account receivable and inventories, as well as longer unpaid accounts turnover days after installing ERP. In addition, Tobit regression results indicate that acceleration of account collections, reduction of inventory levels and consulting support of leading vendors improve the input-output efficiency of the firms. This finding suggests that operational improvement owing to implementation of ERP systems increases the corporate performance. Key words: Enterprise resource planning (ERP), leading vendor, tobit regression, data envelopment analysis (DEA), turnover.