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Article

Antecedents and Impacts of Enterprise Resource Planning System Adoption among Jordanian SMEs

by
Abdalwali Lutfi
1,*,
Ahmad Farhan Alshira’h
2,
Malek Hamed Alshirah
3,
Manaf Al-Okaily
4,
Hamza Alqudah
2,
Mohamed Saad
1,
Nahla Ibrahim
1 and
Osama Abdelmaksoud
1
1
Department of Accounting, College of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
2
Accounting Department, Faculty of Administrative and Financial Sciences, Irbid National University, Irbid 21110, Jordan
3
Department of Accounting, Faculty of Economics and Administrative Sciences, Al al-Bayt University, Al-Mafraq 25113, Jordan
4
School of Business, Jadara University, Irbid 21110, Jordan
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(6), 3508; https://doi.org/10.3390/su14063508
Submission received: 27 January 2022 / Revised: 17 February 2022 / Accepted: 10 March 2022 / Published: 16 March 2022
Browse Figure
Versions Notes

Abstract

:
Businesses need accounting information to support their decision-making. In this regard, the extensive use of Information Technology (IT) has enhanced the effectiveness and efficiency of accounting functions that support accounting-related information. Specifically, an enterprise resource planning (ERP) system ensures reporting accuracy, large amounts of transaction processing, and the generation of reports for analysis. Regardless of the numerous benefits that an ERP system provides, small and medium-sized enterprises (SMEs) have yet to catch up with their system usage. Hence, this study draws upon the technology-organisation-environment (TOE) framework to propose an integrated model that includes diffusion of innovation (DOI), institutional factors, and TOE to examine ERP adoption antecedents in the context of SMEs in Jordan. A mixed method is applied in this work, and it uses a self-administered questionnaire survey as the main data collection instrument along with interviews. Quantitative data are obtained from 102 respondents through the questionnaire, after which the research model is validated using SMEs in Jordan. The survey results show that relative advantage, top management support, organisational readiness, training, competitive pressure, government support compatibility, and service provider support significantly influence ERP adoption among the SMEs. The findings are expected to shed light on the way SMEs can enhance their ERP adoption for optimum performance, as well as extend the literature dedicated to the antecedents of information system, IT adoption, and their impact.

1. Introduction

Businesses need accounting information for short-term and long-term issue management, with such information providing the knowledge required to support business control and oversight in different areas, including cash flow, costs, and expenditures [1,2]. Accounting information also brings about long-term strategic business planning, particularly for those whose market environment is rife with competition [3]. On this basis, past studies [4] claimed that the use of solutions based on Information Technology (IT), to support accounting information collection and communication, has to be viewed as a top priority to enhance the competitive edge and productivity of a business. In the current era, IT has a key and integral role to play in the performance of accounting functions [5]. IT investment has become necessary for businesses, and this holds true for small and medium-sized enterprises (SMEs), given that the enhancement of their accounting functions rests on their IT innovation [6]. In other words, using IT innovation enables timely and accurate reporting and furnishing of accounting and financial information required for firm management, those that affect their decision-making, and ultimately, the operational performance of firms [7,8]. In addition, considering the importance of SMEs to national economies, their survival remains an issue of ongoing concern. SMEs form the economic pillars of the majority of nations all over the globe, and they should, therefore, become pro-active in enhancing their competitiveness and productivity [9]. Addressing such issues, Dyt and Halabi [10] stressed the differences between SMEs’ successes and failures in the way accounting information is used.
In literature, accounting and financial reports have been hailed as the major information sources of SMEs. In this regard, enterprise resource planning (ERP) is an integrated information system (IS) that firms can utilise to manage resources, data, and functions from shared data stores [11]. Many firms of different sizes all over the globe have utilised ERP systems, as a major part of their organisational architecture, to support their daily operations and decision-making [12] and ensure seamless process integration throughout functional areas [13]. Moreover, IT resources generally bring about streamlined and integrated internal business processes for firm efficiency [14]. Therefore, having a sophisticated accounting information and financial reporting system enables the firms to pursue its goals in an effective and efficient manner [15,16]. Evidently, IT potentialities have extended in the manifold, and the ERP system, in particular, has changed the way accounting and financial information is manipulated and presented.
In contrast to their large counterparts, SMEs often have a limited budget and low business process engineering and business network design. Thus, they opt for ERP packages to mitigate customisation costs via enhanced vertical solution (add-ons) availability, as well as depend on the same technology platform to guarantee the scaling up of their ERP package [17]. ERPs have been employed in SMEs for several years, but studies on the ERP implementation of SMEs are still few, and they are rarely taken into consideration [18,19]. Studies in the literature, dedicated to ERP, are concerned with its comparisons in terms of selection, implementation, duration, and total ownership cost [20,21], with only a few examining the way ERP products can enhance the value of the system and when firms can make use of the system [9,22]. Moreover, only one of the previous studies [22] conducted an empirical examination of ERP value in the context of SMEs’ commercial packages.
Prior studies also highlighted the requirement among SMEs to adopt and use ERP systems for enhanced performance [19,22]. Studies of the same calibre reported that the lack of technology adoption (e.g., ERP) among SMEs has affected their performances [23,24]. Similarly, AlMuhayfith and Shaiti [25] found that ERP use and adoption are useful in assisting departmental coordination for a single database within organisations, eventually making the decision-making process easier and improving the quality of services and products.
SMEs have long been established as economic drivers in the majority of countries all over the world. However, ERP studies have only been dedicated to large firms and have focused, mainly, on the pre-adoption phase and adoption stage; only a few studies have been carried out on the system implementation value and its impact [22]. The lack of an analytical framework that determines measures to evaluate the ERP system adoption was highlighted by Ouiddad, Okar, Chroqui, and Hassani [26], as well as Cereola, Wier, and Norman [27], while AlMuhayfith, Shaiti [25], and Lutfi [9] found few studies that analysed ERP’s impacts among SMEs, with even fewer ones in the context of emerging economies. Clearly, literature has yet to establish a business case of ERP adoption among SMEs, and a framework based on the metrics of academic studies, to identify the effects of ERP adoption on the performances of such establishments, has yet to be proposed [21,28]. Hence, there exists the need to examine the complete impact of ERP adoption on SMEs, through its full-scale use in the post-adoption phase, and its effects on business performance in an emerging economy (e.g., Jordan), so as to contribute value to IT literature.
With the growth of the ERP system environment, it is crucial for practitioner and researcher circles to acknowledge how the system can contribute value to a business and influence its performance. Accordingly, this study tackles this issue by developing and proposing a comprehensive ERP adoption research framework, to examine the impact of ERP adoption on business performance, from the perspective of the organisation. The key research questions are as follows. (1) What are the antecedents of ERP adoption? (2) What is the impact of ERP adoption on firm performance?
The remaining part of the research is organised in the following way. Section 2 provides a thorough review of literature concerning ERP and the value it contributes. Section 3 contains the research model and hypotheses, and Section 4 presents the method adopted in the research. Section 5 explains the results of data analysis, and Section 6 presents the discussion of results and the conclusions drawn. Lastly, Section 7 contains the implications, limitations, and recommendations for future studies.

2. Literature Review

ERP Systems and Business Performance

The association between an ERP system and a business’s performance has been examined extensively in literature, with mixed results reported. The studies indicated that ERP influences firm performance in both positive and negative ways, but the majority reported a positive influence of the ERP system on performance, with measured changes in the business aspects. For instance, Li, Wu, Zong, and Li [29] stated that, regardless of the many studies dedicated to implementing ERP, the major issue lies with the lack of studies tackling failed implementation, which could be attributed to the resistance of firms in sharing their failure to do so. This position is clear in the case of Dell Computer, which cancelled its ERP project implementation, citing its lack of flexibility to address the company’s increasing operations around the globe [30]. Business performance enhancement through IT tools is the generally adopted procedure, and thus, organisations are increasingly investing in IS to enhance their performances. Li et al. [29] revealed that the majority of such organisations invest in ERP to enhance their decision-making capabilities and overall performances, while Hailu [31] stated that IS plays a key role in enterprise functions, performance, and productivity. ERP system adoption has brought about significant improvements in organisational performance, in the areas of real-time information and more timely production cycle [32], as well as market value and business performance enhancement [33].
In a related study, Ouiddad, Okar, Chroqui, and Hassani [26] adopted a quantitative approach, and based on the IS success model of DeLone and McLean [34], they showed that system and information quality positively influence the overall user experiences with the ERP, leading to improvements in the decision-making quality. AlMuhayfith and Shaiti [25] concluded that successful ERP adoption was a very significant factor that contributed to, and improved, the performances of Saudi SMEs. Kallunki et al. [35] revealed ERPs to be firms’ long-term strategic investment that affects their entirety, although the effects appear only after several years. Schlichter, Klyver, and Haug [36] found that, whether business growth and performance increased or decreased, the profitability of SMEs depends strongly on the ERP system implemented in the firms. Added to this, Li [37] reported the high positive influence of ERP investment on the businesses’ process results, and Ruivo, Oliveira, Johansson, and Neto [18] commented that businesses implementing ERPs should anticipate the improvement of their performances. Aremu, Shahzad, and Hassan [24] examined the role of ERP usage on the medium enterprises’ (MEs) performances. The authors proposed a framework to explore the mediating role of ERP usage on the association between ME performance and eight factors, including organisational culture, communication process, organisational structure, IT readiness, technological changes, information access, government policies, and the support of technology infrastructure. The findings revealed that ERP adoption would improve the performances of MEs. However, ERP investment does not always lead to positive outcomes when it comes to business performance [38], as researchers failed to provide robust confirmation that investing in technology contributes value to the firms [33]. In the case of the ERP system, although it provides operational benefits, studies failed to carry out quantitative assessments of its impact on a firm’s financial performance [39].
Poston [40] investigated the post-implementation performances of 50 firms that used an ERP, within a three-year period, to recognise the adverse effect of ERP implementation on performance. The author concluded that no significant development in the ratio of selling, or the revenue, managerial, and general costs, to revenues occurred over the period of implementation; instead, a significant decline was noted in the employees’ ratio to income and the enhancement of costs ratio of goods sold to revenues in the year before. Generally, firms that implemented ERPs obtained efficiency throughout numerous years, but they also increased their expense, and thus, such earnings were offset.
In a study of the same calibre, Hunton et al. [33] compared the 63 organisations in Hayes with those of peer organisations that were non-implementers of ERP. The authors found the ERP users’ performances to be greater than that of non-users. Moreover, Wieder, Booth, Matolcsy, and Ossimitz [41] examined ERP’s implementation and its effects on the organisations’ performances, and they provided significant implication for the relationship between supply chains management, ERP, and the performances. The authors conducted a questionnaire survey among 2170 firms in Australian that adopted SCM or ERP systems. Their findings revealed that firms adopting systems such as ERP and SCM, with experience and knowledge, had increases in their performances.
Evidently, ERP systems have been increasingly gaining attention among scholars, but only a few have addressed their adoption value and influence over SMEs’ performances in the Jordanian context. Hence, this study is an attempt to minimise the literature gap, concerning the antecedents of ERP adoption among Jordanian SMEs, and examine the ERP adoption–business performance relationship in the same context.

3. Research Model and Hypotheses

In the proposed model, both the technology-organisation-environment (TOE) framework and the DOI are included as the main theories in the IS/IT adoption [42,43], and the present study adopts their assumptions to examine the impact of ERP adoption among Jordanian SMEs. The literature review assists in examining the antecedents of ERP adoption of SMEs based on their performance. Previously examined variables are used to develop the model, which is then used as a guide to direct the research process (Figure 1). The model houses three contexts of factors, namely technological factors, organisational factors, and environmental factors. The next sections detail the factors and their postulated relationships.

3.1. Technological Factors and ERP Adoption

According to Henderson, Sheetz, and Trinkle [44], technological factors reflect the characteristics of the technologies to be adopted, and based on Rogers [45], innovation has features that may influence its adoption. This description is made clear through the relative advantage feature, which refers to the level at which an innovation is perceived as providing higher benefits compared to its alternatives. With regard to ERP, it has distinct features that make it stand out from alternative IS technologies, and it can collect, store, and process financial and accounting data that are valuable for the decision-making of management [46]. Past studies indicated that relative advantage is a top factor in IS/IT use [47,48], and it has a positive effect on IS adoption [49,50]. Therefore, the current research formulates the following hypothesis for testing:
Hypothesis H1. 
Relative advantage has a positive effect on ERP adoption.
Another ERP feature, compatibility, is described as the alignment of the ERP with the firm’s current values and practices [45]. It is measured by the level at which the IS technology is consistent with the IT features (e.g., hardware and software) [19]. Compatibility of ERP is referred to as the similarity between the existing process and the process necessary for ERP adoption and implementation. Jeyaraj, Rottman, and Lacity [51] reported that one of the main reasons the majority of firms are unable to realise the full potential of IS technology is the incompatibility of their computer hardware and software systems. Technology use, by definition, calls for novel skills and methods for adoption and usage, and any incompatibility will prevent such adoption or create an adoption lag [52,53]. This construct is also viewed as the top antecedent that incites technology adoption [54,55]. Thus, the current study suggests the following hypothesis:
Hypothesis H2. 
Compatibility has a positive effect on ERP adoption.

3.2. Organisational Factors and ERP Adoption

According to Tornatzky and Fleischer [56], organisational factors are the firm characteristics that influence technology implementation and adoption, and they exist within the organisation, relating directly to its policy regarding resources and work environment resources, to fulfil its mission and targets [56,57]. One of the major organisational characteristics that affect IS/IT use among SMEs is organisational readiness [58,59]. Thus, for ERP capitalisation, organisations conduct procedures involving data gathering, transfer, analysis, and storage, with each process requiring funding to supply the needed material, workforce, and ability to mitigate the unexpected risks. Notably, lack of organisational readiness may lead to the failure to implement ERP in firms. Organisational readiness is also needed for system acquisition, payment incentives, security, and obtaining equipment; more often than not, however, firms lack organisational readiness to use IS/IT or lack knowledge necessary to bring about its successful use. This holds true for complex technologies, as evidenced by Mehrtens et al. [59]. Furthermore, prior studies, such as Chwelos, Benbasat, and Dexter [60], as well as Lutfi et al. [15], revealed that organisational readiness plays an important role in technological innovation usage. In the same way, organisations that are more prepared have a higher likelihood of engaging successfully in IT/IS activity. Therefore, this study proposes the following hypothesis for testing:
Hypothesis H3. 
Organisational readiness has a positive effect on ERP adoption.
The organisational factor, top management support, is the level of support, commitment, and active engagement of management, when it comes to the planning and adoption of technology systems in the organisation, to ensure technology usage among staff [57]. Top management holds the decision-making process in SMEs, and as such, it is crucial to ensure that their commitment is directed towards providing the right resources for ERP implementation success, preventing adoption resistance, or overcoming it [61,62,63]. IS technology success is largely dependent on top management support, which positively impacts such success among SMEs. In other words, management support is the key to ERP adoption success [50]. The following hypothesis is thus anticipated:
Hypothesis H4. 
Top management support has a positive effect on ERP adoption.
Another factor under the organisational dimension is training, referred to as the level at which a company provides quality and quantity instructions to its employees concerning tool usage [64]. ERP is a complex IS type, and as such, firms need to provide education and training to their employees, concerning ERP adoption and usage, prior to its actual adoption, as to minimise the stress and anxiety that employees hold about it and shed light on its benefits for their tasks. Training also mitigates challenges and confusion while assisting in knowledge development for effective and successful system implementation [65]. Thus, the present research proposes the following hypothesis:
Hypothesis H5. 
Training has a positive impact on ERP adoption.

3.3. Environmental Factors and ERP Adoption

External factors, existing outside SME management’s control, are called environmental factors [51,66]. One such factor is competitive pressure, which is the level of pressure that competitors in the industry place on SMEs. According to Alshirah et al. [67], the strategic rationales behind competition pressure are as innovation-diffusion drivers that assume, through new innovation adoption, that firms may modify competition rules, influence the industrial structure, and leverage new ways to perform better than their rivals, all of which essentially change the competitive scenario. Such analyses may be projected towards ERP, with existing IS studies reporting that firms feel pressure when their industry gets saturated with firms that adopt technology, and thus, the need arises to adopt the same technology to remain in competition [15,68]. Specifically, based on Lutfi’s [9] contention that contextual factors can facilitate/inhibit the adoption behaviour of firms towards embracing an innovation, competitive pressure puts pressure on SMEs to move towards ERP adoption. Thus, this research seeks to confirm past study results and contribute to literature by conducting an empirical examination of competitive pressure, as a predictor driver, on ERP adoption among Jordanian SMEs. The study proposes the following hypothesis:
Hypothesis H6. 
Competitive pressure has a positive influence on ERP adoption.
Another environmental factor is government rules, which may prohibit or support businesses in adopting specific technology types [6,56,69]. Government policies and regulations, in light of technological standards, legislation, and encouragement, have a supporting role in firms’ decisions to move towards ERP adoption [9,67]. This was evidenced by Lutfi et al. [15], who found that businesses receiving high pressure and regulation levels from the government have a higher likelihood of adopting cloud-based technologies. The present study follows this assumption of ERP adoption and considers government support, regulations, and incentives to encourage ERP adoption. Thus, the following hypothesis is proposed:
Hypothesis H7. 
Government support has a positive effect on ERP adoption.

3.4. ERP Adoption and Business Performance

ERP adoption is best referred to as the level at which the ERP system is used, with related activities, to improve firm performance. Generally speaking, business performance is divided into financial performance (FP) and market performance (MP) [70], where the former is related to profitability and revenue growth, and the latter is related to business position elevation in the market place, to achieve and maintain a competitive edge [71].
Firms have been known to leverage ERP adoption over their rivals to mitigate costs and enhance growth, profitability, innovativeness, timely delivery, and market share growth [72]. The business value of ERP directly impacts business performance [18], and a positive relationship was reported, by past studies, between ERP adoption and business performance value [22,73].
Specifically, Ouiddad, Okar, Chroqui, and Hassani [26] contended that an ERP-obtained capability would assist in achieving competitiveness of firms through decreasing costs. This assertion may be clarified through the system’s support in mitigating the amount of waste and fraud, while contributing to the enhancement of decision-making capabilities. In relation to the classic IS success model proposed by DeLone and McLean [34], there is a strong relationship between system usage and system impact. In the same way, the TOE framework assumes that the technology impact is largely dependent on the level at which it is used for business transactions and activities [55].
In addition, firms making effective use of ERP tend to report positive effects on their performance compared to those who use ERP in a limited manner [19,74]. Hence, it is pertinent for firms to use the ERP system effectively to have a fruitful and positive impact on their performances.
Moreover, ERP enables businesses to avail opportunities for obtaining administrative clarity, from the hidden information, for agile business development, and those that successfully adopt ERP proved to be more capable of transforming data into meaningful information in various company departments [75]. They were also more capable of facilitating several processes, including marketing improvement, human resource development, product/service development, enhancement of operations, and promotion of innovativeness within the organisation. Therefore, it is expected that the in-depth and extensive usage of ERP has the likelihood to result in impacts that are inimitable by rivals, as well as valuable and sustainable, with time. Based on the above, this study proposes to test the following hypotheses:
Hypothesis H8. 
ERP adoption has a significant influence on the financial performance of SMEs.
Hypothesis H9. 
ERP adoption has a significant influence on the market performance of SMEs.

4. Methods

In this research, a mixed approach research method using quantitative and qualitative data was applied through two stages. The two stages were as follows: (1) identification of antecedents and firm performance measures of ERP adoption, based on the previous literature, and (2) verification of the empirical study, using inputs from in-depth interviews, in different manufacturing SMEs in Jordan. This mixed approach is thought to be suitable to achieve this research objective and aim [76,77]. Moreover, it prevents limiting the research to only confirming previously identified findings [77,78]. Qualitative approaches have also been widely applied in ERP systems research [79].

4.1. Quantitative Method Results

In this research, the quantitative approach was adopted using the survey questionnaire, which was developed through three stages. First, the TOE factors, ERP adoption, and impact on firm performance measures, in prior studies, were reviewed. The literature review resulted in 43 close-ended questions, measuring 10 constructs, in the study model. The measurement items of each construct were adopted from literature and tweaked to align with the context of the research. The items were gauged on a five-point Likert scale that ranged from 1 (strongly disagree) to 5 (strongly agree). In the second stage, the authors had meetings with the SME owners/managers to confirm the content validity of the items in the questionnaire. Finally, in the third stage, the questionnaire was pre-tested, using 45 samples, to further confirm its validity and overall reliability. The 45 sample SMEs were not included in the main survey, and some changes were made to the instrument based on the results obtained from the pilot test.
As mentioned, SMEs play an invaluable role in the economic development of Jordan. Accordingly, the questionnaire was administered to SME owners/managers who are key decision-makers, occupy senior-level positions, and are privy to every nuance and aspect of their businesses. They were chosen on the basis of their knowledge and inclination to take part in the survey. Accidental sampling method (non-probability sampling) was used to select the samples based on their availability and inclination [80,81]. This method was selected, owing to its ease and timely management, compared to other methods that require more technical resources and time. Sharma, Al-Badi, Govindaluri, and Al-Kharusi [82] stated that accidental sampling is often used to collect data in technology adoption studies. The survey was carried out from June 2020 to September 2020, during which copies were distributed to 300 respondents. From the distributed copies, 109 were retrieved, indicating a response rate of 36.33%, and from the 109 retrieved copies, 7 were found to have incomplete answers (not filled or missing/irrelevant answers), with the remaining 102 deemed useable, complete, and ready for further analysis. The useable copies met the least requirement for further analysis through the use of partial least squares structural equation modelling (PLS-SEM), where 90 responses are considered adequate for seven independent variables [83].

4.1.1. Data Analysis and Results

PLS-SEM, a multivariate statistical technique, was used to test the proposed hypotheses. It allows the evaluation of several variables at the same time, in one single model, and works efficiently with complex models that contain several latent variables, moderating variables and relatively lower sample sizes [83,84,85,86,87]. On the basis of the above, PLS was used, in this study, to test the hypothesised relationships in the model, given that the proposed model tests the moderating variables and has high complexity. In addition, the study sample was 102, which is lower than the required thresholds in alternative methods. Lastly, this is an explorative study that applies both DOI and TOE, thus requiring a path modelling approach based on the statement that, in a prediction-oriented study or one that extends existing theory, PLS-SEM is the appropriate technique to use [83,88,89,90].

Assessment of the Measurement Model

Following Hair et al.’s [83] recommendation, the measurement model evaluation is a crucial PLS-SEM step to determine the reliability of the observed indicator constructs, or lack thereof, and if they are found to be unreliable, this limits the structural model evaluation. The item and construct validity and reliability are confirmed in the evaluation of the measurement model.
The indicators of the measurement model are tabulated in Table 1, and based on the obtained data, the entire constructs’ reliability and validity scores were higher than the threshold values established for Cronbach’s alpha coefficient, composite reliability, and average variance extracted (AVE) (i.e., 0.7, 0.7, and 0.5, respectively) based on Hair et al. [83]. All the items also illustrated convergent and discriminant validity, with factor loadings on corresponding constructs exceeding 0.40 [83]. With regards to the discriminant validity of the factors, they were tested by comparing the squared roots of AVEs and correlation coefficients between constructs through the use of the Fornell–Larcker analysis.
The AVE square roots in Table 2 are placed on the diagonal line and exceed the correlation coefficients between constructs, indicating construct-level discriminant validity. Considering all the presented indicators, it can be concluded that the measurement model satisfied the requirements of reliability, convergent validity, and discriminant validity at both levels (construct and item). Thus, structural model assessment and hypothesis testing could be conducted.

Assessment of the Structural Model

In PLS-SEM, the next step, following the measurement model analysis, is the structural model assessment. This step involves testing the nature of the effects between independent and dependent variables, for different models, with the presence/absence of a moderator [83]. The main objective of the present study is to examine the significance of the effects between ERP adoption and firm performance. Thus, the PLS algorithm and bootstrapping method were applied with 5000 re-samples to identify such significance in path coefficients and conduct hypothesis testing. The standardised path coefficients are presented in Table 3, along with the critical ratios (t-values) and p-values (in light of the hypotheses that are supported) of the formulated hypotheses.
The fundamental acceptance/rejection criteria are based on several values, including β-values, confidence intervals, and matching t-values [90]. Hair et al. [83] related that the acceptance of a hypothesis is based on significant p-values from 0.001–0.005 and t-values that exceed 1.645. Table 3 summarises the results of the criteria used to test the hypotheses.
Overall, of the nine formulated hypotheses, eight were supported at the 95–99% confidence level; specifically, the effects of ERPA on business performance were the strongest, accepting hypotheses H8 and H9. With regard to technological factors, RA was found to have a significant and positive effect on ERPA (β = 0.267, t = 4.730, p < 0.05), but CO had a positive, but insignificant, effect on the same (β = 0.092, t = 0.712), indicating that H1 is supported, but H2 is rejected. Moving on to organisational factors, all three constructs (OR, TMS, and TRAI) had significant and positive effects on ERPA with the following values, respectively (β = 0.381, t = 3.047, p < 0.05; β = 0.657, t = 9.763, p < 0.01; β = 0.235, t = 3.983, p < 0.05), indicating the acceptance of H3, H4, and H5.
Lastly, for the technological factors, GS had a positive and significant effect on ERPA (β = 0.312, t = 3.415, p < 0.05), and similarly, CP had a significant relationship with ERPA (β = 0.208, t = 3.580, p < 0.05), indicating support for H6 and H7.

4.2. Qualitative Method Results

In this section, we present the results of the interviews, as a part of the qualitative approach, to investigate the factors affecting ERP adoption and its impacts among SMEs. The results are associated with the aim of identifying the antecedents that may encourage Jordanian SMEs towards the adoption of ERP systems, as well as the impacts of ERP adoption on business performance. The interviews were conducted with practitioners and owners/managers from Jordanian SMEs, i.e., those who decide the adoption of ERP systems. In this stage, interviews were conducted to describe and confirm/validate the empirical findings from the first stage. These interviewees consisted of six participants from Jordanian manufacturing SMEs.
For the purpose of data collection, the interview’s script was written in a way that reflects the influence of the selected antecedents on ERP’s adoption in Jordanian SMEs. The inquiries were established in a way that highlights all factors of the TOE model, and they specify the influence of ERP adoption on the businesses’ performances. All the developed questions were reviewed and revised before conducting the main semi-structured interviews. Subsequently, apart from two telephone in-depth interviews with the participants, the rest of the interviews were conducted online via zoom. The semi-structured interviews lasted from 30 to 100 min. The questions incorporated in the interviews were divided into two main parts; the main focus of the first group is the influence of TOE antecedents on the ERP system adoption, while the second group focuses on the impact of ERP adoption on business performance. After conducting the personal interviews, every interview was documented in detail.
The key observations from the interviews carried out in the second phase are depicted in Table 4. Since these semi-structured interviews were targeted at validating the significance of proposed antecedents for ERP system adoption, as well as exploring the impacts of ERP adoption on business performance, key observations are presented, concentrating on those parts. The participants were owners/managers with extensive experiences in their relevant fields. Thus, their observations and feedbacks were instrumental in offering a deeper understanding of the perceptions of antecedents and the impacts of ERP adoption.
Table 4, above, showed that all interviewees have ranked all the antecedents of ERP systems adoption to be essential and important, and ERP adoption has a vital role in improving business performance. Analysing the qualitative semi-structured interviews showed and revealed new enabling factors that affect ERP systems adoption through the interviews with participants of SMEs. These factors, such as awareness, have been classified towards ERP systems adoption by the interviewees. The participants confirmed, “High familiarity with ERP systems significantly impact its implementation, and high level of ERP systems awareness by users as a driver toward adoption”. Another important factor that was mentioned by informants is perceived values, as it plays a substantial role in the user’s decision on whether or not to adopt an ERP system. The ERP system is useful and relevant since it allows users to access all their businesses activities and information anytime and anywhere.

5. Discussion

Considering the lack of a theoretical foundation for ERP at the organisation level, this study primarily aimed to examine business performance (perceived value) and its components from this level, and it proposed an integrated model, underpinned by the TOE framework, to shed light on ERP adoption and the relationship between such adoptions and perceived impacts. On the basis of the statistical analysis results, all the TOE factors, namely relative advantage, top management support, organisational readiness, training, competitive pressure, and government support, with the exception of compatibility, were found to be significant antecedents of ERP adoption.
Beginning with the technological factors, relative advantage was found to have a significant effect on ERP adoption, consistent with the DOI theory prediction and that of prior studies that supported the construct on several IS/IT applications [48,55]. Added to this, the level to which the ERP system can minimise costs, while extending efficiency, can influence the decision-making of organisations towards its adoption [9]. Owners/managers generally adopt technology if they are convinced that it can minimise a perceived performance gap, leverage a business opportunity, or enhance the possibility of meeting a need [91,92]. However, the findings on compatibility and its insignificant effect on ERP adoption were unexpected, contradicting those reported by Lutfi et al. [15] and Morteza et al. [93]. Nevertheless, SMEs are generally adept at making adjustments and changes within their culture, business practices, procedures, and values, compared to their larger counterparts, because their size gives them more flexibility. This is probably why compatibility between their current practices and ERP is not a big deal to SME managers and owners.
With respect to the organisational factors, statistical analysis findings indicated that top management support, organisational readiness, and training had significant effects on ERP adoption for the SMEs examined. This finding is aligned with that reported by extant research concerning top management support and organisational readiness as core elements that promote high IS/IT adoption [15,92,94]. Past studies showed that firms with higher top management support tend to have higher ERP adoption levels, and those with higher levels of organisational readiness tend to show extensive ERP adoption [6,55]. Relative advantage boosts the adoption of ERP among businesses, and the availability of resources, in the form of financial and technical resource readiness, confirms the effective deployment of ERP. Accordingly, SMEs that are prepared and ready with their human and equipment resources reflect a higher level of ERP adoption. As for employee training, this factor facilitates employees’ understanding of ERP functions and technical perspectives, as well as first-hand information and experience of the system. Training makes for a well-educated, experienced, responsible, and knowledgeable workforce ready to adopt ERP effectively, as it becomes easy for them to understand and implement ERP in relation to their task achievements. Management that creates robust ERP training modules can make it easier for their employees to adopt the ERP system by enhancing their technical knowledge and developing their ERP use.
Lastly, with regard to the environmental factors, the findings revealed that competitive pressure has a significant effect on ERP adoption among SMEs, a finding that is aligned with TOE assumptions and past studies’ findings [15,43,55], which supported the significant effect of competitive pressure on IS/IT adoption among SMEs. SMEs appear to make use of such adoption to satisfy the needs of a competitive environment and outperform their rivals. Thus, there is a need to adopt ERP, specifically, when the benefits and advantages of ERP can be leveraged over market rivals. The present study supported a significant government support–ERP adoption relationship, in that the existing laws and regulations can play a role in the adoption of new technologies. In this line of argument, government support can work towards or against the adoption of ERP among businesses; in cases where the government requires businesses to adhere to specific standards and protocols, firms will have a higher tendency towards ERP adoption.
Interestingly, based on the results of this study, ERP adoption has a substantial role with respect to both the MP and FP of SMEs. In past related studies, ERP adoption in varying domains of IS/IT contributed significantly to creating values for firms and their capabilities [18,26]. Innovation positively affects market performance, allowing firms to design products/services that offer superior customer value and differentiate the firms from their rivals. ERP also enables the firm to enhance profitability and decide on the optimum outcome, as the ERP-generated information is accurate and insightful [18,26].

6. Implications

This study provided a detailed examination of the variables that directly impact ERP adoption while optimising the adoption value of ERP through enhanced firm performance. The literature, dedicated to ERP system adoption, focused less on its impact and value, and as such, this study’s findings present contributions to both the theory and practice of ERP adoption among SMEs.
The major theoretical implication of the study is the proposal of a validated model, in light of the antecedents of ERP adoption and its impact, in that the findings confirm and support the underpinning theories’ (TOE and DOI) assumptions at the level of the organisation. This sets a precedent basis for studies concerning the effect and value of ERP and extends prior research on the use of IS/IT evaluation, as well as the overall impact of the innovations. Considering TOE and DOI in one model, to examine ERP usage and impact, enhances both the explanatory and predictive power of the model to generate accurate findings for practitioner and academic circles. The current research also contributes through suggesting a distinct framework regarding the TOE and DOI enabling factors’ roles on ERP adoption systems. Based on the interviewee’s observations and obtained results, RA, TMS, TRAI, OR, CP, and government support have substantial roles in convincing SME’s managers and practitioners to adopt ERP systems, whereas compatibility had no such impact because of its insignificant influence.
As for the implication to practice, SME managers and practitioners, policy-makers, and industry leaders who are inclined towards understanding the reason behind SMEs lagging behind larger firms in Jordan, when it comes to ERP usage, can take reference from the findings. The developed, proposed, and validated model can also assist SME managers in identifying the factors that are crucial to promoting effective ERP adoption and its impact on firm performance. Systems provider plays a vital role in implementation decisions, as he provides SMEs with key information and feedback about ERP services, explains the importance of improving the businesses’ competitiveness and how ERP systems could improve the work processes in order to boost users’ satisfaction, and offers the necessary training courses to employees to use and adopt ERP systems effectively. The model highlights the potential impacts of such adoption on the firm, to assist in decision-making, when it comes to ERP initiatives. This study found that a high level of competitiveness in the environment can be maintained through ERP adoption, among the employees of firms and their rivals in Jordan, which is a developing economy. Firms can benchmark successful firms that adopted ERP, through effective information sharing and collaborative efforts, among departments and trading partners. This highlights the advantages and enhancements that can be realised through ERP and the shift from the intention to adopt to a successful ERP adoption. The ERP adoption success of competitors can be used as an example, with a proper preparation of extensive initiatives, concerning the value and importance of ERP to the enterprises. The advantages of ERP usage include minimised costs and enhanced quality, productivity, customer service, decision-making and planning, resource management, and organisational empowerment.

7. Limitations and Recommendations for Future Studies

Limitations inevitably exist in any research, and because of this, they need to be considered when interpreting the findings. On the bright side, such limitations can pave the way for future studies to explore opportunities. In this study, the first limitation is related to the focus on Jordanian manufacturing SMEs, which constrains the generalisation of results to SMEs in Jordan and other similar developing countries and economies. Future studies can replicate the present work in other sectors and countries, which could lead to similar or comparable findings and provide in-depth insight into the use and impact of ERP. Another limitation is the basis of the study findings on a dataset comprising 102 responses. Despite the adequacy of the sample size, for testing the model fit and statistical inferences, future studies may confirm the findings through a larger-sized sample, by employing covariance-based SEM, to generate accurate and robust results. A larger-sized sample may enrich the understanding of the latent variables’ relationships and provide higher confidence in the results. The third limitation pertains to the employed cross-sectional data, where a causal relationship among the factors could not be confirmed. Longitudinal data would be appropriate to address this limitation.
The next limitation pertains to this study’s sole focus on TOE variables, regardless of other theoretical perspectives, which can be integrated with that of TOE to determine additional ERP adoption antecedents. It can be contended that such an integrated and strong model, covering TOE and other theories, would be able to provide a deeper understanding of the adoption/use of IS/IT. In the same line of argument, the integration of characteristic-related factors would further clarify ERP adoption as well. Finally, this study examined the relationship between TOE factors and ERP adoption, as well as between ERP adoption and firm performance. Future studies can extend this investigation and test the direct influences of TOE factors on the impact of technology to determine potential relationships.

Author Contributions

Conceptualization, A.L. and A.F.A.; Formal analysis, A.F.A.; Investigation, M.A.-O.; Methodology, M.H.A.; Project administration, N.I.; Resources, N.I. and M.S.; Software, M.H.A.; Supervision, A.L.; Writing—original draft, A.L.; Writing—review & editing, M.A.-O., H.A., M.S. and O.A. All authors have read and agreed to the published version of the manuscript.

Funding

This research was funded through the annual funding track by the Deanship of Scientific Research, vice presidency for graduate studies and scientific research, King Faisal University, Saudi Arabia [project no. AN000220].

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data presented in this study are available on request from the corresponding author.

Conflicts of Interest

The authors declare no conflict of interest.

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Sustainability 14 03508 g001 550
Figure 1. Model of the Current Study.
Figure 1. Model of the Current Study.
Sustainability 14 03508 g001
Table
Table 1. Relevant Indicators of the Measurement Model.
Table 1. Relevant Indicators of the Measurement Model.
Latent ConstructItemsInitial LoadingModified LoadingCronbach’s Alpha Composite Reliability AVE
>0.7>0.7>0.5
Financial Performance (FP)FP10.8810.8810.9350.950.838
FP20.9330.933
FP30.9290.928
FP40.9170.917
Market Performance (MP)MP10.9020.9030.7920.870.634
MP20.9060.906
MP30.7960.798
MP40.5190.516
ERP Adoption (ERPA)ERPA10.8140.8140.8080.8870.723
ERPA20.8380.838
ERPA30.8970.897
Relative Advantage (RA)RA10.7810.8130.8580.9030.7
RA20.8320.837
RA30.8440.849
RA40.287Deleted
RA50.8170.848
Compatibility (CO)CO10.8820.8830.7960.880.709
CO20.7950.793
CO30.8470.848
Top Management Support (TMS)TMS10.8270.8270.8620.9060.708
TMS20.8380.838
TMS30.870.87
TMS40.8290.829
Organisational Readiness (OR)FS10.7920.7920.8860.9220.747
FS20.8960.896
FS30.9010.901
FS40.8620.862
Training (TRAI)TRAI 10.7660.7650.7870.860.608
TRAI 20.6990.699
TRAI 30.7950.795
TRAI 40.850.851
Competitive Pressure (CP)CP10.8740.8740.8410.9040.758
CP20.8780.878
CP30.860.86
Government Support
(GS)		GS10.890.890.8650.9170.787
GS20.8780.878
GS30.8940.894
Table
Table 2. Fornell–Larcker Analysis (AVE Square Root).
Table 2. Fornell–Larcker Analysis (AVE Square Root).
FPMPERPACPCOGSTRAIORTMSRA
FP0.743
MP0.3830.738
ERPA0.4510.3470.794
CP0.2880.3860.3170.733
CO0.2610.3710.2110.3050.828
GS0.1460.1600.1960.0250.1280.723
TRAI0.3720.3060.2470.6590.2800.0880.832
OR0.0850.2760.1640.4240.6020.0600.2920.792
TMS0.4110.2820.3610.3360.1140.1580.3260.1230.793
RA0.6820.2570.5270.3290.1510.1720.2690.1130.3840.737
Note: The diagonal values represent the square root of the AVEs.
Table
Table 3. Results of Hypothesis Testing of the Direct Relationship Model.
Table 3. Results of Hypothesis Testing of the Direct Relationship Model.
Hypothesis No.Relationshipβ-ValueT-Valuep-ValueDecision
H1RA → ERPA0.2674.7300.006Accepted
H2CO → ERPA0.0920.7121.202Not accepted
H3OR → ERPA0.3813.0470.005Accepted
H4TMS → ERPA0.6579.7630.000Accepted
H5TRAI → ERPA0.2353.9830.048Accepted
H6CP → ERPA0.2083.5800.010Accepted
H7GRs → ERPA0.3123.4150.021Accepted
H8ERPA→FP0.67317.2360.000Accepted
H9ERPA→MP0.68618.7260.000Accepted
Table
Table 4. Key observations from interviews.
Table 4. Key observations from interviews.
FactorsObservations
Relative Advantage (RA)Most of the participants were conscious about the advantages of ERP adoption such as in interviewees 2, 5 and 6. interviewees 5 asserted that ERP systems have many benefits that supports and enhance their firms works especially for multiple branches businesses. Other participant as interviewees 3 decided to adopt ERP system because of its great advantages and underlined “our firm has several opponents and know nothing about their work details, that force us to adopt an advanced and new technologies to maintain competitiveness”. Interviewees 4 and 1 both of them concurred the fact that several businesses were convinced and committed to embrace ERP system after deliberating the unlimited advantages and benefits of adopting such systems.
Compatibility (CO)high level of ERP systems compatibility motivate and encourage SMEs to adopt it, if the ERP is compatible with the SMEs work practices and needs, a businesses are more to be expected to adopt it (all interviewees). Interviewees 1, 3 and 4 also confirmed that it is anticipated that SMEs in Jordan are more willing to adopt ERPs smoothly and more likely to diffuse it if ERPs possesses the attributes of compatibility.
Top Management Support (TMS)All participants confirmed that strong support from management guarantees the necessary allocation of resources (whether financial or technical) for the smoothly ERP adoption. Additionally, it could reduce organizational or users resistance to adopt it by building an appropriate environment. In this regards, they also agreed that SMEs in Jordan with a greater management commitment and support should be predictable to be more likely to adopt ERP systems.
Organisational Readiness (OR)Readiness of organization is another important factor and it plays a salient role towards ERP adoption as mentioned by all interviewees. They also argued that potential advantages alone may not be sufficient for SMEs decision makers to decide to adopt ERP systems. Rather, actual ERP adoption is only probable when SMEs are ready. As far as firms are anxious, the SME‘s hesitancy to adopt ERP may be due to a readiness lack in dealing with the possible threats from adopting it.
Training (TRAI)The responses of the participants showed concord on the importance role of the training in ERP systems adoption. According to the interviewees, involving the users in training sessions is essential and required for the efficiently operation of ERP. Generally, training is conducted and presented by firm staff (executives or/and expert users) and more sometimes it provided by the system teams and/or seldom by the supplier or integrator staff. It is frequently carried out on all the modules and functionalities to be adopted. It’s very necessary for every employee who is going to apply ERP systems to be trained well on how to use it efficiently and how to be able to link businesses process early in the adoption process.
Competitive Pressure (CP)Interviewee 1 agreed with this point and mentioned that “in the context of ERP systems, the competitive pressure role rests in forcing and pushing SMEs to accelerate ERP adoption. The adoption of ERP systems amongst SMEs is expected to be generated by their opponents that have in progress adopting it already. Likewise, in competing with other SMEs, managers and decision makers may adopt ERP if they be certain of that it could differentiate them from the others and support them in reaching better influence”. This statement is agreed and reflected all participants’ opinions. This demonstrates that competitive pressure is an important enabling factor of ERP adoption, and it plays a significant role in forcing businesses to look for best and greater practices in the future.
Government Support (GS)The government‘s role and their efforts to coach and educate SMEs on the ERP systems importance for their businesses operations was the main focus of most of the participants. They have generally agreed that the support shown by government plays a vital role in terms of its impact on ERP adoption. By implementing guidelines and offering financial assistance, SMEs decision makers can facilitate ERP adoption in their firms. All Interviewees confirm that governments can inspire the adoption of ERP by providing and promoting technical support, independent advices, incentives and training, and government can offer SMEs capital, laws and policies to guarantee trust and security in ERP system services.
ERP Adoption (ERPA)The semi-structured interviewees showed that the ultimate goal of adopting system such as ERP is to improve the businesses performance of SMEs. Particularly, when ERP is adopted in effective way, the effective adoption can produce and provide timely, proper financial information and process accounting reports that can update SMEs managers and decision makers about the results of their operations on business performance. ERP adoption is important for SMEs as it helps to increase businesses productivity, maintain competitive position, saves transaction cost over time and growth in the revenue.
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Lutfi, A.; Alshira’h, A.F.; Alshirah, M.H.; Al-Okaily, M.; Alqudah, H.; Saad, M.; Ibrahim, N.; Abdelmaksoud, O. Antecedents and Impacts of Enterprise Resource Planning System Adoption among Jordanian SMEs. Sustainability 2022, 14, 3508. https://doi.org/10.3390/su14063508

AMA Style

Lutfi A, Alshira’h AF, Alshirah MH, Al-Okaily M, Alqudah H, Saad M, Ibrahim N, Abdelmaksoud O. Antecedents and Impacts of Enterprise Resource Planning System Adoption among Jordanian SMEs. Sustainability. 2022; 14(6):3508. https://doi.org/10.3390/su14063508

Chicago/Turabian Style

Lutfi, Abdalwali, Ahmad Farhan Alshira’h, Malek Hamed Alshirah, Manaf Al-Okaily, Hamza Alqudah, Mohamed Saad, Nahla Ibrahim, and Osama Abdelmaksoud. 2022. "Antecedents and Impacts of Enterprise Resource Planning System Adoption among Jordanian SMEs" Sustainability 14, no. 6: 3508. https://doi.org/10.3390/su14063508

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