The Moderating Factors in the Relationship between ERP Investments and Firm Performance

Abstract

Information Technology (IT) investments, especially Enterprise Resource Planning (ERP) systems, are necessary in maintaining the vitality and competitiveness of firms, and are critical for their survival and development. Therefore, understanding the impact of ERP investments is important to managers and researchers. Few studies have focused on the moderating effect of ERP investments on firm performance. Using the samples of 137 listed companies in the US from 1998 to 2007, this paper employs the panel and hierarchical linear models to study the moderating effects of corporate governance, diversification, and industry growth on firm performance. The empirical results show that corporate governance has a positive moderating effect on the relationship between ERP investments and firm performance, and that firms with a higher level of diversification perform worse after ERP implementation. Furthermore, the results reveal that industry growth has a positive moderating effect.