The Critical Success Factors For Erp Implementation An Organisational Fit PerspectiveDocument Transcript
Information & Management 40 (2002) 25±40
The critical success factors for ERP implementation:
an organizational ®t perspective
Kyung-Kwon Hong, Young-Gul Kim*
Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST),
207-43 Cheongryangri-Dong, Dongdaemun-Gu, Seoul 130-012, South Korea
Received 20 May 2001; accepted 1 September 2001
Since early 1990s, many ®rms around the world have shifted their information technology (IT) strategy from developing
information systems in-house to purchasing application software such as enterprise resource planning (ERP) systems. IT
managers responsible for managing their organization's ERP implementation view their ERP systems as their organizations'
most strategic computing platform. However, despite such strategic importance, ERP projects report an unusually high failure
rate, sometimes jeopardizing the core operations of the implementing organization. This study explores the root of such high
failure rate from an ``organizational ®t of ERP'' perspective. Based on the relevant literature, we de®ne the concept of
organizational ®t of ERP and examine its impact on ERP implementation, together with ERP implementation contingencies.
The results from our ®eld survey of 34 organizations show that ERP implementation success signi®cantly depends on the
organizational ®t of ERP and certain implementation contingencies.
# 2002 Elsevier Science B.V. All rights reserved.
Keywords: ERP implementation; Organizational ®t; ERP adaptation; Process adaptation; Organizational resistance
1. Introduction quality . Although application packages have these
bene®ts over custom design of applications, packaged
Under the pressure to proactively deal with the software has problems of their own: uncertainty in ac-
radically changing external environment, many ®rms quisition  and hidden costs in implementation .
have changed their information system (IS) strategies In a survey of the IT managers responsible for
by adopting application software packages rather than managing their organization's ERP projects, two-
in-house development [12,25]. An application pack- thirds of the respondents viewed their ERP systems
age such as enterprise resource planning (ERP) system as their organizations' most strategic computing plat-
is one solution to the information technology (IT) form . Despite such perceived importance, it was
industry's chronic problems of custom system design: reported that three quarters of the ERP projects were
reduced cost, rapid implementation, and high system judged to be unsuccessful by the ERP implementing
®rms . What makes ERP implementation so
* unsuccessful? Swan et al.  argued that the root
Corresponding author. Tel.: 82-2-958-3614;
of such high failure rate is the difference in interests
E-mail addresses: email@example.com (K.-K. Hong), between customer organizations who desire unique
firstname.lastname@example.org (Y.-G. Kim). business solutions and ERP vendors who prefer a
0378-7206/02/$ ± see front matter # 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 3 7 8 - 7 2 0 6 ( 0 1 ) 0 0 1 3 4 - 3
26 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
generic solution applicable to a broad market. Such of technology, task, people, structure, and culture .
con¯icting interests led us to explore an organizational Thus organizational resistance to change is identi-
®t perspective of ERP implementation. ®ed as a critical success factor for ERP implementa-
An important criterion used in selecting an ERP tion [26,34]. In this study, we de®ne the concept of
system is the ERP ®t with the current business organizational ®t of ERP and empirically examine its
processes . Although the ®t between ERP and impact on ERP implementation success along with the
the organizational context is believed to be critical moderating roles of ERP implementation contingency
for successful ERP implementation, few examined the variables such as ERP adaptation, process adaptation,
organizational ®t issues of ERP empirically. Soh et al. and organizational resistance.
 suggested that the organizational ®t of ERP This paper is organized in ®ve sections. First,
might be worse in Asia, because the reference process ERP related literatures are reviewed. The next section
model underlying most ERP systems is in¯uenced by introduces the research model and hypotheses.
European or US industry/business practices, which are Research methodology is then described, followed
different from Asian business practices. by the presentation of the results. The paper concludes
The relative invisibility of the ERP implementation with the discussion of the research ®ndings and impli-
process is also identi®ed as a major cause of ERP cations for future research and practice.
implementation failures . Markus and Robey 
attributed such invisibility to the unpredictably com-
plex social interaction of IT and organization. The 2. Theoretical perspectives
critical challenge of ERP implementation is believed
to be the mutual adaptation between the IT and user 2.1. Organizational ®t of ERP
environment . Such mutual adaptation process
brings the organization's existing operating processes Because of the multiplicity of the organizational
and the packaged software's embedded functionality dimension, researchers studying IS contingencies
into alignment through a combination of software have typically focused on the ®t between speci®c
con®guration and organizational change . But organizational dimension and IS [21,23]. In a review
there are con¯icting views on which type of adapta- of the IS contingency research, Weil and Olson
tion, package adaptation or organizational adaptation,  found that over seventy percent of the studies
is more desirable in the different contexts. followed a model assuming that the better the ®t
ERP diffusion agencies including ERP vendors and among the contingency variables, the better the per-
consulting ®rms recommend strongly that ERP pro- formance. They categorized the contingency variables
jects embody the universally applicable `best practice' of interest to IS researchers into strategy, structure,
and should be implemented without extensive adapta- size, environment, technology, task, and individual
tion of the packaged software . In contrast, some characteristics.
academics maintain that the notion of `best practice' is Attributing the inability to realize value from IT
illusory and potentially disruptive because ERP does investments to lack of alignment between the business
not provide models for every process of every industry and IT strategies, Henderson and Venkatraman 
and most ®rms usually recon®gure or add new func- developed the `strategic alignment model', emphasiz-
tionality to ERP systems for optimal use within their ing the multivariate ®t among business strategy, IT
unique context . strategy, organizational infrastructure and processes,
Besides, since ERP philosophy is process-based, and IT infrastructure and processes. With an explora-
rather than function-based, ERP necessitates disrup- tory survey of small business, Marius and Ashok 
tive organizational changes [17,49,50]. Successful hypothesized that packaged software implementation
ERP implementation must be managed as a program success is positively associated with the degree of
of wide-ranging organizational change initiatives vendor ®t with user organization and the degree of
rather than as a software installation effort . Such software ®t with user organization, respectively.
IT-driven initiatives require change of the organiza- In ERP research, Gattiker and Goodhue  sug-
tion's socio-technical system, which is intertwined gested that while inter-dependences among sub-units
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 27
give rise to better ®t of ERP with global operation to the package . ERP implementation also involves
needs, differentiation among sub-units develop poor business process change (BPC) and ERP adaptation to
®t of ERP with local operation needs. Soh et al.  align the software with the business processes .
also suggest that ERP mis®t stems from the ®rm-, or Which direction is desirable depends on one's point
country-speci®c requirements that do not match the of view and various implementation contingencies
capabilities of ERP. Swan et al.  argue that orga- [27,40].
nizational mis®ts of ERP exist due to the con¯icting Typically, ERP vendors recommend process adap-
interests of user organization and ERP vendors. Thus, tation and discourage ERP adaptation for fear of
the concept of organizational ®t seems to be the core potential performance and integrity degradation as
research construct to explain the implementation suc- well as maintenance and future upgrade dif®culties.
cess in diverse IT implementation contexts. In the ERP On the other hand, the user departments of the cus-
implementation context, however, the impact of orga- tomer organization would prefer ERP adaptation to
nizational ®t of ERP was not empirically tested. In this process adaptation which will necessitate the signi®-
paper, based on Markus and Robey  de®nition, we cant changes in their work environment.
de®ne organizational ®t of ERP as the congruence
between the original artifact of ERP and its organiza-
tional context and will examine its impact on ERP 3. Research model and hypotheses
implementation success empirically.
This study examines the relationship between the
2.2. ERP implementation contingencies organizational ®t of ERP and ERP implementation
success. The effects of three implementation contin-
Implementation of a technical innovation is viewed gencies on this relationship are explored as moderat-
as a dynamic process of mutual adaptation, that is: ing variables. The research model is illustrated in
``re-invention of the technology and simultaneous Fig. 1 and discussed below.
adaptation of the organization'' . Adaptation
may address the user' procedures, assumption, knowl- 3.1. ERP implementation success
edge, or relationships as well as physical aspects of the
technology . In the adaptation stage of IT imple- While some ®rms announced ERP implementation
mentation model, an IT application is developed, success, many others reported negative results of ERP
installed, and maintained; organizational procedures implementation [5,6]. An ERP implementation failure
are revised and developed; organization members are may be fatal to a ®rm: either wasting enormous sums
trained both in the new procedures and in the new IT of money or destroying the competitive advantage of
application . The adaptation concept is applicable the ®rm [5,6]. To manage ERP implementation suc-
not only to custom software but also to off-the-shelf cessfully, a high level ERP implementation success
packages . Most studies on the implementation of measure is required . Markus and Tanis 
application software packages emphasize the critical argued that a minimum set of success metrics includes
nature of the adaptation process [10,14,28]. project metrics, early operational metrics, and long-
From the duality perspective of technology, ERP is term business results. In this study, we de®ne ERP
a ``technological artifact bundling material and sym- implementation success from the ERP implementation
bolic properties in some socially recognizable form project perspective.
(e.g. hardware, software, practice)'' . The adapta- While there is a wide range of con®gurations avail-
tion of ERP and organizational processes is an iterative able in any major ERP product, ERP is frequently
process entailing on-going social action that is clearly unable to model some of the adopting ®rm's existing
constrained by both the structural properties of the procedures . A critical challenge in ERP imple-
organization and the built-in properties of the ERP . mentation has to do with ®rst identifying gaps between
There are two alternative approaches to the imple- the ERP generic functionality and the speci®c organi-
mentation of a packaged software: package adaptation zational requirement, and then deciding how these
to organizational needs and organizational adaptation gaps will be handled [1,44,49,50]. For the successful
28 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
Fig. 1. Research model.
implementation of ERP, organizational ®t of ERP adaptation, identifying eight ERP adaptation types.
is important, because organizational mis®t of ERP Glass  categorized ERP adaptation types into
requires massive changes in the adopting organization's customization, extension, and modi®cation. ERP cus-
business process, ERP systems, or both . Besides, tomization (also called con®guration) is to choose
while there must be the minimum organizational ®t among the reference processes and set the parameters
level which ERP implementation is destined to fail in ERP without changing the ERP source code. ERP
regardless of whatever adaptations, none of the ERP extensions utilize the ``user exit'' function for local
vendors acknowledge the fact or attempts to assess code, a specialized programming language and third-
the implementation feasibility based on the organiza- party bolt-on software to ®ll the gap between ERP
tional ®t of ERP. Laughlin  regarded matching functionality and organizational requirements. In con-
functionality with ERP as one of the major factors trast, ERP modi®cation changes the ERP source code.
for ERP implementation. This leads to our ®rst In this paper, we restrict ERP adaptation to extension
hypothesis. and modi®cation because customization does not
change the basic ERP identity.
Hypothesis 1. Organizational fit of ERP is positively In base relation, we hypothesize that organizational
related to ERP implementation success. ®t of ERP is positively related to ERP implementation
success. In the case of low ERP adaptation, we expect
3.2. ERP adaptation that organizational ®t of ERP will be more strongly
associated with ERP implementation success, because
Technological adaptation is referred to as the the low level of ERP adaptation would not affect the
adjustments and changes following the installation initial organizational ®t of ERP value signi®cantly.
of a new technology in a given setting . While But in the case of high ERP adaptation, we expect that
ERP vendors presume that ERP embodies the uni- organizational ®t of ERP will not be as strongly
versally applicable best practices, most organizations associated with ERP implementation success as in
adapt ERP to their unique organizational contexts low ERP adaptation because the high level of ERP
. ERP adaptation increases the feature-function adaptation would have reduced the gap between ERP
®t between ERP and the adopting organization, which and organization, mitigating the effect of organiza-
is likely to result in lower resistance, reduced training tional ®t of ERP. Thus, when the level of ERP adapta-
needs, less organizational adaptation . It is also tion is low, we expect a stronger the base relationship
argued that re-invention or adaptation of an innovation and expect the opposite when the level of ERP adapta-
might reduce mistakes resulting from the implemen- tion is high.
tation uncertainty .
Brehm et al.  contend that ERP implementation Hypothesis 2. There is an interaction effect of the
success depends on the type and extent of ERP level of ERP adaptation on the relationship between
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 29
organizational fit of ERP and ERP implementation implementation. In a political perspective, Markus
success.  explains resistance to IT implementation in terms
of power distribution mis®t of IS. She noted that the
3.3. Process adaptation political perspective appears to be primarily applic-
able for cross-functional IS. In an MRP study, Cooper
ERP implementation may cause radical organiza- and Zmud  suggested that organizational resistance
tional changes that need to be carefully managed and lack of MRP understanding had more explanatory
[2,17,18]. Unlike the design and development of a power of inhibiting MRP infusion within its work
custom software, implementation of a packaged soft- environment than the task ®t of MRP.
ware requires that its implementing organization adapt Since the organization and process changes induced
some of its organizational processes to ®t the basic by ERP implementation force involuntary changes
business practices that are embedded in such applica- and frequently lead to different power and resource
tion packages [8,28]. When ERP implementation allocations, ERP implementation usually triggers a
involves adapting the existing business processes to diverse group of overt and covert opponents within the
the standard business process of ERP, other organiza- organization. Based on this realization, we expect that
tional components (e.g. organizational structure, mea- organizational resistance will moderate the relation-
surement compensation, organizational culture, ship between organizational ®t of ERP and ERP
training, etc.) and their interactions must also be implementation success. When the level of organiza-
changed together . tional resistance is low, we expect the stronger base
The adaptation of organizational process in BPC relationship and expect the opposite when the level of
literature emphasizes the need to take account of the ERP adaptation is high.
management of organizational change. Grover et al.
 empirically found that change management is Hypothesis 4. There is an interaction effect of the
the most critical source of BPC implementation. Since organizational resistance on the relationship between
process adaptation induces the same effect on the organizational fit of ERP and ERP implementation
relationship between organizational ®t of ERP and success.
implementation success as ERP adaptation, based on
the same reasoning for hypothesis two, when the level
of process adaptation is low, we expect a stronger 4. Research method
relationship and expect the opposite when the level of
process adaptation is high. 4.1. Sample and data collection
Hypothesis 3. There is an interaction effect of the The target of this study was the organization that
level of process adaptation on the relationship between has implemented ERP. We used the key informant
organizational fit of ERP and ERP implementation method for collecting information on a social setting
success. by interviewing (or surveying) a selected number
of participants. Fifty ®rms were identi®ed from the
3.4. Organizational resistance lists provided by the ERP vendors. We contacted the
ERP project managers in charge of ERP implementa-
ERP implementation will affect most of the com- tion in each ®rm. About 350 survey questionnaires
pany's business functions and in¯uence users directly. were sent to the ERP project manager of each ®rm,
Resistance to a change stems from change in the who forwarded our questionnaires to his/her project
job content and uncertainty of the new system . team members in charge of individual process. In total,
Any ERP project team will face a certain level of one hundred and six questionnaires were collected
organizational resistance due to its disruptive change from 34 ®rms. One case was dropped due to incom-
. Previous IS research, based on different theore- plete data entry. Two missing values, one item for
tical perspectives, has made a substantial progress implementation success and another item for ERP
in understanding the resistance introduced by IS adaptation, were identi®ed and replaced with the
30 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
average value of the rest of the items. On the average, 4.4. Organizational ®t of ERP
three or four persons per ®rm participated in our
survey (Appendix A). ERP technological artifacts are basically character-
ized as integration of data and process within and
4.2. Measurement development across functions of an organization [6,24,34]. In a
traditional software application perspective, Soh et al.
We ®rst conducted a series of in-depth interviews  examined organizational ®t of ERP in terms of
with various ERP project managers and members to data, process, and output. Considering that user inter-
examine the external validity of our research model. face plays an increasingly critical role for the mission-
We then developed the questionnaire items based on critical enterprise systems such as ERP, we operatio-
the literature and the ®eld visits, as well as the nalized the organizational ®t of ERP construct in terms
comments gathered from the interviews. The survey of data, process, and user interface ®t of ERP before or
questionnaire was revised through four rounds of at the initial implementation period.
line-by-line discussion with the help of business
process experts with signi®cant ERP project experi- 4.5. Implementation contingencies
ence. To pretest the reliability and validity of the
instruments, we conducted a pilot study, using the 32 We identi®ed the type of ERP adaptation based on
questionnaire responses from six ®rms. Some items the industry expert interviews and developed the ERP
were revised on the basis of the pilot result. The adaptation measurement. We con®rmed that the ERP
operational de®nitions of the variables used are adaptation instrument was applicable to different ERP
summarized in Table 1. systems through a series of the project team's reviews
and pretests. Process adaptation and organizational
4.3. ERP implementation success resistance measurements were developed and evalu-
ated based on the relevant literature and validated
ERP implementation success, the dependent vari- through a series of in-depth discussion with different
able in this study, is different from the traditional IS ERP project teams.
success measure in that it is not evaluated by the
general users but by the project team members. Imple- 4.6. Characteristics of respondent ®rms
mentation project success is frequently de®ned in terms
of the achievement of some predetermined goals, Respondent ®rms consist of 25 manufacturing ®rms
which normally include multiple parameters such as and nine non-manufacturing ®rms, including service
time, cost, function . In this study, we measured and distribution ®rms. Firms were using four ERP
ERP implementation success in terms of the perceived products: SAP R/3 (14), UniERP (13), Oracle ERP (6),
deviation from the expected project goals such as Bann BPCS (1). Table 2 shows pro®les of the respon-
cost overrun, schedule overrun, system performance dent ®rms in terms of annual revenue and number of
de®cit, and failure to achieve the expected bene®ts. total employees.
Operational de®nitions of variables
Variable Operational definition
Implementation success The degree of deviation from project goal in terms of expected cost, time, system performance and benefits
Organizational fit of ERP The degree of alignment between ERP model and organization needs in terms of data, process and user interface
ERP adaptation The extent of efforts and time spending in ERP alteration to align with organizational process needs except for
Process adaptation The extent of efforts and time spending in process change to align with ERP
Organizational resistance The strength of negative organizational response to ERP implementation
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 31
Table 2 4.10. Construct validity
Pro®le of respondent ®rms
Range Frequency Percentage Construct validity is established by relating a mea-
suring instrument to a general theoretical framework
More than $1 billion and above 6 17.6 in order to determine whether the instrument is tied to
$100 million to below $1 billion 14 41.2 the concepts and theoretical assumption they are
$10 million to below $100 million 11 32.4 employing. In order to obtain evidence of the construct
Less than $10 million 3 8.8 validity of an instrument, a researcher must make use
Total 34 100 of both a convergent validity and a discriminant
Number of employees For convergent validity, we evaluated the item-to-
10,000 and above 2 5.9
1000 to below 10,000 8 23.5
total correlation, based on the correlation of each item
100 to below 1000 21 61.8 to the sum of the remaining items. This approach
Less than 100 3 8.8 assumes that the total score is valid and thus the extent
Total 34 100 to which the item correlates with the total score is
indicative of convergent validity for the item. Table 3
shows the correlations for each of research variables
4.7. Instrument validation whose item-to-total correlation score was greater than
0.4. Discriminant validity was checked by factor
Instrument validation is a prior and primary process analysis. In Table 3, discriminant validity was con-
in empirical research. We followed Straub's  ®rmed when items for each variables loaded onto
guidelines to validate the instruments used in our single factors with loadings of greater than 0.5 .
research. Since each variable was measured by the multi-item
constructs, we conducted factor analysis to check the
4.8. Content validity unidimensionality of the items. Table 4 provides the
factor pattern matrix that shows the loadings of each
Content validity means how representative and item on independent and dependent variables. Five
comprehensive the items were in creating the scale. factors emerged with no-cross construct loadings
The content validity of the instruments was estab- above 0.5, indicating good discriminant validity.
lished through the adoption of the relevant construct in The instrument also demonstrated convergent validity
the literature, a series of reviews with the help of with factor loadings exceeding 0.5 for each construct.
business process experts with deep ERP knowledge, These results con®rm that each of these construct is
and a pilot pretest. unidimensional and factorially distinct and that all
items used to operationalize a particular construct is
4.9. Reliability loaded onto a single factor.
Reliability is the accuracy or precision of a measur-
ing instrument, that is the extent to which the respon- 5. Results
dent can answer the same or approximately the same
questions the same way each time . The internal The correlation matrix between variables is pre-
consistency reliability was assessed by calculating sented in Table 5. A common concern of any regression
Cronbach's alpha values. The reliability results of analysis is the multi-collinearity that may exist among
the constructs are summarized in the ®fth column the independent variables . In our model, multi-
of Table 3. The internal consistency (Cronbach's alph) collinearity is not a problem since we have only one
of the construct ranged from 0.75 (for implementation independent variable. Correlations among the pro-
success) to 0.93 (for process adaptation). Given the posed moderating variables do exist but would not
exploratory nature of the study, the result seems pose a serious problem since their values are less than
acceptable. 0.5  and each of them will be analyzed separately.
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
Summary of reliability and validity of the measurement
Measure Items Mean S.D. Reliability Convergent validity Discriminant validity
(Cronbach's alpha) (correlation of item with total score-item) (factor loading on single factors)
Implementation success (R)a 4 4.06 1.60 0.75 0.451, 0.613, 0.590, 0.551 0.655, 0.799, 0.802, 0.773
Organizational fit of ERP 11 0.83 0.798, 0.806, 0.759, 0.746 0.890, 0.896, 0.865, 0.857
Process fit 4 3.49 1.32 0.90 0.620, 0.714, 0.595, 0.666 0.790, 0.854, 0.768, 0.823
Data fit 4 3.95 1.26 0.82 0.515, 0.637, 0.548 0.600, 0.737, 0.637
User fit 3 3.71 1.33 0.74 0.741, 0.826, 0.814, 0.767, 0.624, 0.603 0.822, 0.890, 0.881, 0.836, 0.724, 0.702
ERP adaptation 6 4.57 1.46 0.89 0.845, 0.842, 0.825, 0.830, 0.775 0.904, 0.903, 0.890, 0.894, 0.854
Process adaptation 5 4.63 1.36 0.93 0.682, 0.804, 0.797, 0.748, 0.603 0.798, 0.892, 0.889, 0.844, 0.726
Organizational resistance 5 4.33 1.50 0.89
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 33
The result of factor analysisa
Scale items Factors
1 2 3 4 5
ORGFIT1 0.745 À0.255 À0.003 0.070 0.187
ORGFIT2 0.752 À0.347 0.012 0.010 0.187
ORGFIT3 0.744 À0.250 0.018 À0.048 0.166
ORGFIT4 0.756 À0.217 À0.015 0.027 0.083
ORGFIT5 0.714 0.019 À0.203 0.059 0.090
ORGFIT6 0.754 0.063 À0.037 À0.156 0.079
ORGFIT7 0.629 À0.278 À0.055 À0.091 0.137
ORGFIT8 0.681 À0.196 À0.061 0.056 0.265
ORGFIT9 0.546 À0.228 0.048 À0.258 À0.294
ORGFIT10 0.585 À0.039 0.050 À0.446 À0.175
ORGFIT11 0.735 0.052 À0.060 À0.248 0.061
ERPADPT2 À0.189 0.669 0.270 0.066 À0.160
ERPADPT3 À0.172 0.806 0.220 À0.066 À0.177
ERPADPT4 À0.205 0.788 0.256 0.058 À0.237
ERPADPT5 À0.135 0.846 0.114 0.106 À0.169
ERPADPT6 À0.186 0.737 0.071 0.057 À0.087
ERPADPT7 À0.162 0.643 0.361 0.118 0.100
PROCADPT1 À0.113 0.260 0.838 0.128 À0.104
PROCADPT2 À0.081 0.165 0.848 0.203 À0.117
PROCADPT3 0.126 0.180 0.871 0.145 À0.069
PROCADPT4 À0.081 0.139 0.847 0.212 À0.027
PROCADPT5 À0.063 0.262 0.780 0.189 0.038
ORGRST1 0.079 0.083 0.217 0.745 À0.199
ORGRST2 À0.062 0.015 0.314 0.786 À0.191
ORGRST3 À0.168 À0.096 0.321 0.792 À0.035
ORGRST4 À0.192 À0.015 0.230 0.800 À0.068
ORGRST5 0.011 0.230 À0.030 0.778 0.023
PJTSUC1 0.115 À0.059 À0.124 À0.220 0.635
PJTSUC2 0.089 À0.235 À0.199 0.040 0.781
PJTSUC3 0.346 À0.357 0.049 À0.077 0.648
PJTSUC4 0.323 À0.216 0.184 À0.335 0.555
Eigenvalues 5.91 4.37 4.29 3.78 2.34
Percentage of variance explained 19.1 14.1 13.9 12.2 7.5
Cumulative percentage 19.1 33.2 47 59 66.7
Extraction method: principal component analysis; rotation method: varimax with Kaiser normalization.
The results from the normal probability plot and success was signi®cant (r 0:51, P < 0:002), support-
Kolmogorov±Smirnov test indicated no violation ing the Hypothesis 1. In simple regression of organiza-
of normality for the regression model (statistic tional ®t of ERP on implementation success, the value
0:54±0.72, P > 0:200). of R2 and adjusted R2 was 0.26 and 0.24, respectively.
It indicates that 24% of the implementation success
5.1. Testing the base relationship variance is explained by the organizational ®t of ERP.
Correlation analysis was used for testing the base 5.2. Testing the contingency relationships
relationship between organizational ®t of ERP and ERP
implementation success. The base relation between For analysis of the moderator variables, we will use
organizational ®t of ERP and ERP implementation the typology of moderator variables and the method
34 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
Table 5 criterion variables, implying a signi®cant interaction
Correlations matrix between variables
between the moderator and predictor variables.
(1) (2) (3) (4) Cell 3 is referred to as quasi-moderator, which not
only interacts with the predictor variable but is a
Implementation success (1)
Organizational fit of ERP (2) 0.51** predictor variable itself. Cell 4 is referred to as pure
ERP adaptation (3) À0.49** À0.58** moderator, which interacts with predictor variables
Process adaptation (4) À0.22 À0.18 0.36* while having a negligible correlation with the criterion
Organizational resistance (5) À0.46** À0.39* 0.42* 0.42* itself.
P < 0:05. To test the three contingency variables, we followed
P < 0:01. the four-step procedure for identifying moderator
variables  (described in Appendix B). The test
for identifying moderator variables developed by results of the three moderating effects are summari-
Sharma et al. . Fig. 2 depicts this typology, which zed in Table 6. While the ®rst line in each pair of
has two dimensions: whether the target variable is regression models of the table shows the results
related to a criterion (dependent) variable and whether of the regression run without interaction, the results
the target variable interacts with the predictor (inde- of the regression run with the interaction term are in
pendent) variable. the second line.
The target variable in cell 1 is referred to as an In the ®rst pair of regression models, it is found that
intervening, exogenous, antecedent, suppressor, or the interaction term was signi®cant at the level of 0.01.
predictor variable depending on its other character- In the correlation matrix of Table 5, ERP adaptation
istics. Variables in cells 2±4 are referred to as mod- was negatively correlated with both organizational ®t
erator variables. The target variable in cell 2 is referred of ERP (À0.58) and ERP implementation success
to as homologizer, which in¯uences the strength of the (À0.49) at the level of signi®cance 0.01. These two
relationship between the predictor and criterion vari- facts suggest that ERP adaptation is a quasi-moderator
ables across homogeneous subgroups. In contrast, of the base relationship between organizational ®t
moderator variables in cells 3 and 4 in¯uence the of ERP and implementation success, supporting the
form of the relationship between the predictor and Hypothesis 2.
Fig. 2. Typology of moderator variables.
The test results of the moderated regression effects
Regression modela b (interaction) p (interaction) R2 p (model) DR2
ORGFIT 0.26 0.002
ORGFIT ERPADPT interaction À0.58 0.006 0.47 0.000 0.21
ORGFIT 0.26 0.002
ORGFIT PROADPT interaction À0.50 0.005 0.44 0.000 0.18
ORGFIT 0.26 0.002
ORGFIT ORGRST interaction À0.25 0.243 0.37 0.003 0.11
ORGFIT, organizational ®t of ERP; ERPADPT, ERP adaptation; PROADPT, process adaptation; ORGRST, organizational resistance.
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 35
Summaries of the moderated regression analysis
Related to either criterion or predictor Not related to criterion and predictor
No interaction with predictor Organizational resistance is not moderator
Interaction with predictor ERP adaptation is quasi-moderator Process adaptation is pure moderator
In the second pair of regression models, it was also
found that the interaction term was signi®cant at the
level of 0.01. The correlation matrix in Table 5 shows
that process adaptation is neither associated with
organizational ®t of ERP nor associated with imple-
mentation success. So we believe that process adapta-
tion is a pure moderator of the base relationship
between organizational ®t of ERP and implementation Fig. 4. Family of base relationships across process adaptation.
success, supporting the Hypothesis 3.
In the third pair of regression models, there is no
interaction effect. And the correlation matrix in Table 5 ERP adaptation and process adaptation, respectively.
shows that organizational resistance is negatively We ®nd that the relationship between organizational ®t
associated with both organizational ®t of ERP and of ERP and ERP implementation success changes
implementation success. Based on these facts, we from ``positive'' to ``negative'' as the level of adapta-
suggest that organizational resistance is not a mod- tion (both ERP and process) intensi®es.
erator of the base relation but one of the intervening, In the range of ``above the in¯ection point'', in-
exogenous, antecedents, suppressor, or predictor vari- creasing each adaptation has a negative impact on
able types. Table 7 summarizes the results of these implementation success given the same level of orga-
moderated regression analyses. nizational ®t of ERP. In the range of ``below the
in¯ection point'', increasing each adaptation is pre-
5.3. Interpreting the moderating effects dicted to have a positive impact on implementation
success given the same level of organizational ®t of
To properly test a contingency hypothesis, it is ERP.
necessary to display interaction term graphically as
well as to examine it mathematically . We plotted
the joint effect of the main and interaction term in 6. Discussion
Figs. 3 and 4. Figs. 3 and 4 represent the family of the
base relationships between organizational ®t of ERP Although ERP implementation has been one of the
and implementation success for different values of most signi®cant challenges for IS practitioners in the
last decade, relatively little research has been con-
ducted about ERP implementation [49,50]. In the
previous section, we found that organizational ®t of
ERP has a signi®cant effect on ERP implementation
success. It was also found that while ERP adaptation is
a quasi-moderator of the base relationship between
organizational ®t of ERP and ERP implementation
success, process adaptation works as a pure moderator
of the base relationship. Organizational resistance was
not found to have a moderating effect. We will discuss
Fig. 3. Family of base relationships across ERP adaptation. these facts in detail below.
36 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
6.1. Organizational ®t of ERP tonically decreased in the higher range of organizational
®t of ERP and monotonically increased in the lower
In the simple regression, 26% of the implementa- range. Since ERP adaptation as a quasi-moderator has
tion success variance was signi®cantly explained by interaction effect as well as direct effect on ERP imple-
the organizational ®t of ERP. Lucas et al.  found mentation success while process adaptation has only the
some support for the role of organizational mis®t of interaction effect, we speculate that ERP adaptation may
production system package in the implementation have stronger explainability on ERP implementation
process. Besides, the extended models with interaction success than process adaptation. This speculation is
term (ERP adaptation and process adaptation) signi®- supported by the comparison of R2 change of the models
cantly explained 47 and 44% of the implementation one and two in Table 6 (0.21 and 0.18, respectively).
success variance, respectively. Because the organiza- From a resource dependence view, ERP adaptation
tional ®t of ERP was found to have a signi®cant effect might be more exposed to threats and risks than
on ERP implementation success, project managers, process adaptation, because ERP adaptation requires
before embarking on an ERP implementation project, heavier dependence upon uncontrollable resources
must evaluate organizational ®t of ERP and plan for such as consulting ®rms or ERP vendors than process
appropriate type and level of adaptation. adaptation. It might be interesting to explore ERP
Soh et al.  argue that mis®t analysis requires functionality enhancement process issues  for
both comprehensive understanding of critical organi- ERP implementation success.
zational processes and detailed knowledge of the
complex ERP. Before ERP adoption, thorough mis®t 6.3. Organizational resistance
analysis and resolution plan based on ERP knowledge
will mitigate the escalating project risk over the course Because organizational resistance did not interact
of implementation. To assure organizational ®t of with organizational ®t of ERP to explain ERP imple-
ERP, managers can also utilize the proof of concept mentation success but had signi®cantly negative asso-
methodology , where instead of developing and ciation with ERP implementation success, we conclude
evaluating the exhaustive list of functional require- that it is not a moderator variable. We investigated
ments, they can focus on the key process features of the potential mediating effect of organizational resis-
the organization in advance of ERP adoption. tance between organizational ®t of ERP and implemen-
tation success. Since organizational resistance also had
6.2. ERP adaptation and process adaptation a signi®cantly negative relationship with organizatio-
nal ®t of ERP, we believe it is an intervening variable
Despite the ERP vendor's caution, the practice of between organizational ®t of ERP and implementation
adapting software package has become increasingly success with very marginal effect (DR2 0:08) on
common in reality . This study found that there is a improving the predictive validity of the model.
signi®cant threshold interaction effect of ERP adapta-
tion on the relationship between organizational ®t of
ERP and ERP implementation success. The impact of 7. Limitation and conclusions
ERP adaptation on ERP implementation success was
negative in the organizational ®t range above 2.84 and There are many limitations in this study. First, we
positive in its range below 2.84. This might imply that, focus on a limited number of variables for ERP imple-
beyond a certain level of organizational ®t, the higher mentation success. More relevant variables associated
ERP adaptation only leads to the lower implementa- with ERP implementation, for example, project team
tion success. competence, may be added to improve the understand-
Since process adaptation was not associated with ing of ERP implementation success. Second, we only
organizational ®t of ERP or ERP implementation suc- used perceived project metrics in de®ning implementa-
cess, it was found to be a pure moderator of the base tion success, leaving out factual aspect of success out-
relation. Similar to the ERP adaptation, the impact of come in the IS research. This was due to the dif®culty
process adaptation on implementation success mono- in securing the factual data from the participating
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 37
organizations. Third, this paper has a common method 1. The cost of ERP project was signi®cantly higher
bias because the dependent variable and independent than the expected budgets.
variables rated by the same respondent. Again, this was 2. The ERP project took signi®cantly longer than
due to the dif®culty of securing data from both ERP expected.
project members and operating department personnel. 3. The system performance of ERP is signi®cantly
Despite the fact that more and more companies are below the expected level.
investing in ERP for replacing their custom-built 4. The anticipated bene®ts of ERP have not been
legacy systems, the research in organizational ®t of materialized.
ERP has been generally overlooked. While it is
Organizational ®t of ERP (seven-point Likert type
recognized that organizational ®t of ERP is a critical
selection criterion for ERP , the link between
organizational ®t of ERP and ERP implementation
success was not empirically validated. Many ERP
1. The processes built in ERP meet all needs
vendors just ignore the organizational ®t concept
required from organizational processes.
and urge blind trust on ERP from their clients.
2. The processes ¯ow built in ERP correspond to
In this study, we found that organizational ®t of ERP
¯ow of organizational processes.
is indeed critical in explaining ERP implementation
3. The processes built in ERP accommodate the
success. In addition, we found that both ERP and
change required from organizational processes.
process adaptations interact with organizational ®t of
4. The processes built in ERP correspond to the
ERP on ERP implementation success. We learned that
business practices of our company.
ERP and process adaptation are only effective when
organizational ®t of ERP is relatively low. Beyond a
5. The name and meaning of the ERP data items
certain level of organizational ®t, more adaptation will
correspond to those of the documents used in our
only lead to lower implementation success. We also
company (i.e. an sales order sheet, sales report).
learned that, since ERP adaptation also shows a sig-
6. The form and format data items of the ERP
ni®cantly negative direct correlation with implementa-
correspond to those of the documents used
tion success (while process adaptation only shows
in our company.
interaction effect), as many ERP vendors have claimed,
7. The output data items of the ERP correspond to
process adaptation may be a safe choice than ERP
those of the documents used in our company.
adaptation when organizational ®t of ERP is low.
8. The input data items of the ERP correspond to
Therefore, for successful ERP implementation,
those of the documents used in our company.
ERP implementation managers as well as top manage-
(User interface ®t)
ment should be able to assess the ®t between their
9. User interface structures of the ERP is well
organization and the target ERP system before its
designed to the work structure required for
adoption and, once adoption is decided, should mea-
conducting business in our company.
sure and manage the impact of ERP and process
10. User interface of the ERP is well designed to the
adaptations from a risk assessment approach as sug-
user capabilities of our company.
gested in Brehm et al.  to minimize the potential
11. User interface of the ERP is well designed to the
business disruptions and user resistance.
business needs of our company.
Appendix A. Survey instrument ERP adaptation (seven-point Likert type scale)
The different opinions are indicated by the numbers 1. Signi®cant time and effort have been required to
1: strongly disagree; 2: disagree; 3: somewhat disagree; alter ERP data items to align with our organiza-
4: neutral; 5: somewhat agree; 6: agree; 7: strongly tional process needs.
agree. 2. Signi®cant time and effort have been required to
Implementation success (seven-point Likert type append new ERP data items to align with our
reverse scale) organizational process needs.
38 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
3. Signi®cant time and effort have been required to the hypothesized moderator variable and independent
alter ERP processes to align with our organiza- variable. If a signi®cant interaction exists, go to step 2.
tional process needs. Otherwise, proceed to step 3.
4. Signi®cant time and effort have been required to Step 2: Determine if the moderator variable is
append new ERP processes to align with our signi®cantly related to the dependent variable. If it
organizational process needs. is, then the variable is a quasi-moderator. If not, the
5. Signi®cant time and effort have been required to variable is a pure moderator.
alter ERP input/output screens to align with our Step 3: Determine if the moderator variable is
organizational process needs. signi®cantly related to the independent variable. If
6. Signi®cant time and effort have been required to it is, then it is an exogenous, predictor, intervening,
alter ERP reports to align with our organizational antecedent, or suppressor variable. If not, proceed to
process needs. step 4.
Step 4: Develop subgroups based on the hypothe-
Process adaptation (seven-point Likert type scale)
sized moderator variable. Test for the signi®cance of
1. Signi®cant time and effort have been required to differences in predictive validity across subgroups.
alter elementary processes to align with the ERP. If the difference is signi®cance, the variable is a
2. Signi®cant time and effort have been required to homologizer operating the error term. If a signi®cant
alter our process ¯ows to align with the ERP. difference is not found, then the variable is not a
3. Signi®cant time and effort have been required to moderator.
standardize our organizational processes to align
with the ERP.
4. Signi®cant time and effort have been required to References
integrate our redundant organizational processes
to align with the ERP.  N.H. Bancroft, H. Seip, A. Sprengel, Implementing SAP
R/3, 2nd Edition, Manning Publications, Greenwich, CT,
5. Signi®cant time and effort have been required to
alter our document and data elements to align with  P. Bingi, M.K. Sharma, J.K. Golda, Critical issues affecting
the ERP. an ERP implementation, Information Systems Management
Organizational resistance (seven-point Likert type  L. Brehm, A. Heinzl, M.L. Markus, Tailoring ERP systems: a
scale) spectrum of choices and their implications, in: Proceedings of
the 34th Annual Hawaii International Conference on System
1. There have been many users resisting the ERP Sciences, January, 2001.
implementation.  R.B. Cooper, R.W. Zmud, Information technology imple-
2. There have been many cases blaming occurrence mentation research: a technological diffusion approach,
of business problem upon ERP. Management Science 36 (2), 1990, pp. 123±139.
 T.H. Davenport, Putting the enterprise into the enterprise
3. There have been many cases in which users persist
system, Harvard Business Review (1998) 121±131.
traditional business practice even though ERP  T.H. Davenport, Mission Critical: Realizing the Promise of
change the way of conducting business. Enterprise Systems, HBS Press, 2000.
4. There have been many cases in which user  G.B. Davis, M.H. Olson, Management Information Systems,
departments did not reply to the business request McGraw-Hill, New York, 1985.
 G.B. Davis, Commentary on information systems: to buy,
of the ERP project team.
build, or customize? Accounting Horizons (1988) 101±
5. There have been many people wishing ERP to fail. 103.
 Y. Everdingen, J. Hillergersberg, E. Waarts, ERP adoption by
European midsize companies, Communications of the ACM
Appendix B. Framework for identifying 43 (3), 2000, pp. 27±31.
 T.F. Gattiker, D.L. Goodhue, Understanding the plant level
cost and bene®ts of ERP: will the ugly duckling always
turn into a swan?, in: Proceedings of the 33rd Annual
Step 1: Using the moderated regression analysis, Hawaii International Conference on System Sciences,
determine if a signi®cant interaction exists between 2000.
K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40 39
 R.L. Glass, Enterprise resource planningÐbreakthrough and/  M.L. Markus, D. Robey, Information technology and
or term problem? Database 29 (2) (1998) 14±16. organizational change: causal structure in theory and
 L.L. Gremillion, P. Pyburn, Breaking the system develop- research, Management Science 34 (5), 1988, pp. 583±598.
ment bottleneck, Harvard Business Review 61 (2), 1983, pp.  M.L. Markus, C. Tanis, The enterprise systems experienceÐ
130±137. from adoption to success, in: R.W. Zmud (Ed.), Framing the
 T.L. Grif®th, R.F. Zammuto, L. Aiman-Smith, Why new Domains of IT Research: Glimpsing the Future Through the
technologies fail? Industrial Management (1999) 29±34. Past, Pinna¯ex Educational Resources Inc., Cincinnati, OH,
 P.H.B. Gross, M.J. Ginzberg, Barriers to the adaptation of 2000, pp. 173±207.
application software packages, Systems, Objectives, Solu-  C.F. Nachmias, D. Nachmias, Research Method in the Social
tions 4 (4), 1984, pp. 211±226. Sciences, St. Martin Press, New York, 2000.
 V. Grover, S.R. Jeong, W.J. Kettinger, J.T.C. Teng, The  W.J. Orlikowski, The duality of technology: rethinking the
implementation of business process reengineering, Journal concept of technology in organizations, Organization Science
of Management Information Systems 12 (1), 1995, pp. 109± 3 (3), 1992, pp. 398±427.
144.  R.E. Pereira, Resource view theory analysis of SAP as a
 J.F. Hair, R.E. Anderson, R.L. Tatham, W.C. Black, source of competitive advantage for ®rms, Database 30 (1),
Multivariate Data Analysis, Prentice-Hall, Englewood Cliffs, 1999, pp. 38±46.
NJ, 1995.  C. Prosser, D. Canty, Proof of concept: an ef®cient way
 M. Hammer, S. Stanton, How processes enterprise really to shop, APICSÐThe Performance Advantage (1998) 50±
work, Harvard Business Review (1999) 108±118. 52.
 M. Hammer, Up the ERP revolution, Information Week  L. Radosevich, Measuring up, CIO, Framingham 12 (23)
(1999) 186. (1999) 52±60.
 J.C. Henderson, N. Venkatraman, Strategic alignment:  E. Rogers, Diffusion of Innovation, Free Press, New York,
leveraging information technology for transforming organiza- 1995.
tions, IBM Systems Journal 32 (1), 1993, pp. 4±16.  C.B. Schoonhoven, Problems with contingency theory:
 C.P. Holland, B. Light, A critical success factors model for testing assumptions hidden within the language of contin-
ERP implementation, IEEE Software (1999) 30±36. gency theory, Administrative Science Quarterly 26, 1981, pp.
 J. Iivari, The organizational ®t of information systems, 349±377.
Journal of Information Systems 2, 1992, pp. 3±29.  S. Sharma, R.M. Durand, O. Gur-Arie, Identi®cation and
 J.J. Jiang, W.A. Muhanna, G. Klein, User resistance and analysis of moderator variables, Journal of Marketing
strategies for promoting acceptance across systems types, Research 18, 1981, pp. 291±300.
Information and Management 37, 2000, pp. 25±36.  J.E. Scott, L. Kaindl, Enhancing functionality in an enterprise
 P. Kanellis, M. Lycett, R.J. Paul, Evaluating business software package, Information and Management 37, 2000, pp.
information systems ®t: from concept to practical applica- 111±122.
tion, European Journal of Information Systems 8, 1999, pp.  C. Soh, S.S. Kien, J. Tay-Yap, Cultural ®ts and mis®ts: is
65±76. ERP a universal solution? Communications of the ACM 43
 K. Kumar, J. Hillegersberg, ERP experiences and evolution, (3), 2000, pp. 47±51.
Communications of the ACM 43 (3), 2000, pp. 22±26.  D.W. Straub, Validating instruments in MIS research, MIS
 K.C. Laudon, J.P. Laudon, Management Information Quarterly (1989) 147±169.
Systems: Organization and Technology, Prentice-Hall, Engle-  J. Swan, S. Newell, M. Robertson, The illusion of `best
wood Cliffs, NJ, 1996. practice' in information systems for operations management,
 S.P. Laughlin, An ERP game plan, Journal of Business European Journal of Information Systems 8, 1999, pp. 284±
Strategy (1999) 32±37. 293.
 D. Leonard-Barton, Implementation as mutual adaptation of  J. Sweat, ERP: enterprise application suits are becoming a
technology and organization, Research Policy 17, 1988, pp. focal point of business and technology planning, Information
251±267. Week (1998) 42±52.
 H.C. Lucas, E.J. Walton, M.J. Ginzberg, Implementing  M.J. Tyre, W.J. Orlikowski, Windows of opportunity:
packaged software, MIS Quarterly (1988) 537±549. temporal patterns of technological adaptation in organiza-
 R.K. Lynch, Implementing packaged application software: tions, Organization Science 5 (1), 1994, pp. 98±118.
hidden costs and new challenges, Systems, Objectives,  O. Volkoff, Enterprise system implementation: a process of
Solutions 4 (4), 1984, pp. 227±234. individual metamorphosis, American Conference on Informa-
 J. Marius, S. Ashok, Package software: selection and tion Systems, 1999.
implementation policies, INFOR (1996) 133±151.  O. Volkoff, Using the structurational model of technology to
 M.L. Markus, Power, politics, and MIS implementation, analyze an ERP implementation, in: Proceedings of Academy
Communications of the ACM 26 (6), 1983, pp. 430±444. of Management '99 Conference, 1999.
 M.L. Markus, D. Robey, The organizational validity of  P. Weill, M.H. Olson, An assessment of the contingency
management information systems, Human Relations 36 (3), theory of management information systems, Journal of
1983, pp. 203±226. Management Information Systems 6 (1), 1989, pp. 59±85.
40 K.-K. Hong, Y.-G. Kim / Information & Management 40 (2002) 25±40
Kyung-Kwon Hong is a doctoral can- Young-Gul Kim is an Associate Professor
didate at the Graduate School of at the Graduate School of Management of
Management of the Korea Advanced the Korea Advanced Institute of Science
Institute of Science and Technology and Technology (KAIST) in Seoul. He
(KAIST) in Seoul. He received his BS received his BS and MS degrees in
and MS degrees in Industrial Engineer- Industrial Engineering from Seoul National
ing from the Hanyang University and University, Korea and his PhD degree in
KAIST, respectively. He has worked for MIS from the University of Minnesota. His
Korea Telecom during 10 years. His active research areas are: Knowledge
research interests include Packaged Management, IT Management, Data and
Software Implementation, Information Process Modeling and Customer Relationship Management. He has
Systems Innovation, and Knowledge published in Communications of the ACM, Information and Manage-
Management. ment, Journal of MIS, Decision Support Systems, Database, etc.