Toward valuable prediction of ERP diffusion in North American automotive industry: A simulation based approach

Abstract

Recent researches suggest that the decision to adopt an ERP system has implications outside of firm boundaries, and is likely to impact the adoption decision from stakeholders in the same industrial network. Being able to consider such phenomena, to reproduce the whole dynamic of the diffusion process and to validate empirical evidences can be determinant in the success of a new product introduction. This paper is intended to propose and validate a propagation model for the diffusion of enterprise resource planning (ERP) systems among the North American automotive business network. Based on empirical evidence from the adoption of ERP by top 50 firms in the automotive sector from 1994–2005, a micro quantitative diffusion model is proposed. A simulation-based approach is employed to estimate the parameters of the proposed model to represent faithfully the observed diffusion phenomenon. The results show a robust diffusion model with a mean error less than 4% and up to 92% of similarity between the real ERP adopters data gathered through publicly available secondary databases and those obtained via simulations. Finally, the conducted validation experimentations show that when we progress in time the cumulative historical data minimizes the effort of estimation and future adopters’ prediction is more effective. Discussion about the usefulness of the proposed model for ERP systems editors to test different strategies for market penetration is also conducted.