Investigating the Moderating Role of Environmental Uncertainty between Institutional Pressures and ERP Adoption in Jordanian SMEs

Abdalwali Lutfi

doi:10.3390/joitmc6030091

Abstract

Small and Medium Enterprises (SMEs) are struggling to survive in the present competitive environment. Enterprise resource planning (ERP) technologies have great potential to facilitate firms in achieving sustainable competitive advantages and to survive in such situations. However, the adoption of ERP among Jordanian SMEs has been reported as relatively low, which, in turn, does not affect SMEs effectively. Therefore, this study aims to examine the roles of the external forces (mimetic pressure (MP), coercive pressure (CP), and normative pressure (NP)), and Environmental Uncertainty (EU) on the adoption of ERP. Through the use of institutional theory and contingency theory, this study includes the role of EU as a moderating variable in the relationships between institutional factors (MP, CP, and NP) and ERP adoption. Data were collected from small- and medium-sized enterprises operating in Jordan. A total of 741 questionnaires were distributed to the selected SMEs, of which 192 were returned and used for analysis. The empirical data were analyzed using Partial Least Square-Structural Equation Modelling (PLS-SEM). The results show that MP, CP, NP, and EU have significant direct relationships with ERP adoption; however, contrary to our expectations, EU did not moderate the relationships between institutional factors and ERP adoption. These findings provide important insights for managers, researchers, and policy makers, helping them to understand the importance of ERP system adoption in enhancing firm performance. One limitation of this study is that it is based only on SMEs. Therefore, future studies can concentrate on the development of such research not only in SMEs, but also using larger organizations.

Highlights

The employment of new technologies in Small and Medium Enterprise (SME) practice provides several functionalities and benefits, such as better management, reduced costs, effective services, fewer errors, and enhanced managerial functionalities [1,2]
This combination requires a path modelling approach to be employed, as several researchers have suggested that the Partial Least Square-Structural Equation Modelling (PLS-SEM) approach should be employed if a study is prediction-oriented or is an extension of an existing theory [82]
The positive impacts of the factors coercive pressure (CP), normative pressure (NP), and mimetic pressure (MP) were consistent with the results of other related studies in different regions, such as in the United States [24], Singapore [29], China [41], and Portugal [26]

Summary

Introduction

The employment of new technologies in Small and Medium Enterprise (SME) practice provides several functionalities and benefits, such as better management, reduced costs, effective services, fewer errors, and enhanced managerial functionalities [1,2]. One such technology is enterprise resource planning (ERP), which can be defined as “a software system with integrated functions for all major business functions across an organization such as distribution, production, sales, human resources management, and finance. Studies have reported that ERP systems deliver several advantages, such as improved productivity, cost decreases, structural changes, process facilitation, and better managerial decision making [5,6,7]

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