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IIMB Management Review (2015) xx, 1e13

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Adoption of ERP system: An empirical study

of factors influencing the usage of ERP and
its impact on end user
Christy Angeline Rajan*, Rupashree Baral

Department of Management Studies, Indian Institute of Technology Madras, Chennai, India

KEYWORDS Abstract Complex information systems like the ERP integrate the data of all business areas
Enterprise resource within the organization. The implementation of ERP is a difficult process as it involves different
planning (ERP); types of end users. Based on literature, we proposed a conceptual framework and examined it
Technology acceptance to find the effect of some of the individual, organizational, and technological factors on the
model; usage of ERP and its impact on the end user. The results of the analysis suggest that computer
Computer self-efficacy; self-efficacy, organizational support, training, and compatibility have a positive influence on
Organizational support; ERP usage which in turn has significant influence on panoptic empowerment and individual per-
Compatibility; formance.
Panoptic ª 2015 Indian Institute of Management Bangalore. Production and hosting by Elsevier Ltd.
empowerment; All rights reserved.
Individual performance

Introduction system adoption from the user’s perspective to prepare

their employees to face new challenges and learn how to
Modern organizations are making significant investments in make good use of the technology to reap tangible benefits
complex information systems such as the enterprise (Chang et al., 2008). Indian organizations have been
resource planning (ERP) systems. Despite their avowed exposed to advanced use of information technology (IT) in
benefits, more than two thirds of ERP system projects organizations that are made possible through joint ventures
result in failure (Chang, Cheung, Cheng, & Yeung, 2008). A and technology transfer initiatives which in turn were
closer look at the nature of reported problems clearly facilitated by increased international trade and commerce.
suggests that the ERP implementation issues are not just Indian organizations have encountered organizational and
technical, but encompass wider behavioural factors (Skok & cultural problems during the adoption and implementation
Doringer, 2001). Organizations need to understand the of new IT in general (Dasgupta, Agarawal, Ioannidis, &
Gopalakrishnan, 1999). Thus, it is pertinent to understand
the influence of the various factors influencing the accep-
tance of ERP in the Indian context. Based on the review of
* Corresponding author.
extant literature, we conducted this study to identify some
E-mail address: [email protected] (C.A. Rajan).
Peer-review under responsibility of Indian Institute of Management of the factors that influence the acceptance of ERP in India
Bangalore. and their effect on the acceptance and usage of ERP. With
http://dx.doi.org/10.1016/j.iimb.2015.04.008
0970-3896 ª 2015 Indian Institute of Management Bangalore. Production and hosting by Elsevier Ltd. All rights reserved.

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
2 C.A. Rajan, R. Baral

little research existing to study the impact at the individual the complex implementation and adoption issues of stake-
level, this study also seeks to find the impact of usage of holders and end users (Amoako-Gympah and Salam, 2004).
ERP system on the end user. The technology acceptance model is based on the theory
of reasoned action (TRA) (Azjen & Fishbein, 1980) which
Literature review and hypotheses proposes that an individual’s behavioural intention to use a
system is determined by two beliefs: perceived usefulness
(PU) and perceived ease of use (PEOU) (Venkatesh & Davis,
ERP implementation
2000). Davis (1989) defined perceived usefulness as “the
degree to which a person believes that using a particular
Enterprise resource planning systems are extensive soft- system would enhance his or her job performance”.
ware systems that integrate a number of business pro- Perceived usefulness for the individual is most likely the
cesses, such as manufacturing, supply chain, sales, finance, result of improved job performance and user motivation
human resources, budgeting, and customer service activ- (Robey & Farrow, 1982). Studies have reported that
ities (Weinrich & Ahmad, 2009). They result in enormous perceived usefulness is positively associated with system
investments in software and in package customization usage (Thompson, Higgins, & Howell, 1991). Perceived ease
(Doom, Milis, Poelmans, & Bloemen, 2010). The other of use is defined as “the degree to which a person believes
benefits of ERP systems are its complete integration with all that using the system will be free of effort” (Davis, 1989).
the business processes, reduction in the volume of data According to TAM, perceived usefulness is also influenced
entry, upgradability of the technology, portability to other by perceived ease of use because, other things being equal,
systems, adaptability, and applying best practices the easier the system is to use, the more useful it can be.
(Saatcioglu, 2007). However, without successful imple- People who perceive ease of use are more likely to believe
mentation of the system, the projected benefits of in the ease and usefulness of the system (Robey & Farrow,
improved productivity and competitive advantage would 1982).
not be forthcoming (Addo-Tenkorang & Helo, 2011). This According to Davis et al. (1989) usefulness was more
requires changes not only in systems but also in processes strongly linked to usage than ease of use. In associative
and other social dimensions (Kwahk & Kim, 2008) and in the cultures, typically found among Africans, Asians and Arabs,
coordination among members of the organizations (Chang perceptions and behaviour are often diffuse i.e., they uti-
et al., 2008). The implementation of ERP systems in an lize associations among events that may not have a logical
organization is often accompanied by substantial changes in basis (Micheal, 1997). In view of this, Anandarajan et al.
organizational structure and ways of working (Kallunki, (2002) reasoned that individuals in associative cultures
Laitinen, & Silvola, 2011). Further, implementation of ERP might not connect perceptions of perceived usefulness with
systems in developing countries is faced with specific dif- usage behaviour and hypothesised that perceived useful-
ficulties over and above those faced by industrialized ness was not expected to influence usage, amplifying the
countries (Xue, Liang, Boulton, & Snyder, 2005). This sug- role of perceived ease of use as an influence on both usage
gests that information technology and management prac- and perceived usefulness. But contrary to this finding,
tices need to be modified for different cultural contexts perceived usefulness was significantly related to usage
(Ananadarajan, Igbaria, & Anakwe, 2002). (Fusilier & Durlabhji, 2005). In the Indian context, the
While previous research has examined aspects of busi- adoption of ERP needs to be further examined.
ness process change, little research has focussed on the
individual employee or studied the drivers of process
Role of external and contextual variables on the
adoption by employees on the factors influencing resis-
use of ERP
tance, or the impacts of process change on employees of
complex technology solutions like the ERP (Venkatesh,
2006). With the change in the Indian economy and conse- The technology acceptance model predicts that external
quent changes in the business environment, there is a need variables are expected to influence technology acceptance
to understand how different factors have influenced infor- behaviour indirectly by affecting beliefs, attitudes, or in-
mation system (IS) deployment in Indian firms (Tarafdar & tentions (Szajna, 1996). Orlikowski (1993) demonstrated
Vaidya, 2006). that adopting and using specific IT is not solely dependent
on the characteristics of the IT but is also dependent on
other external aspects such as organizational or social
Technology acceptance model context, and individual characteristics and attitudes. Based
on the fundamentals of human computer interactions and
There are several theoretical models that explain user socio-technical systems theory (Land & Hirschheim, 1983),
acceptance of information systems. These include the Brown (2002) in his study used technological and individual
technology acceptance model (Davis, 1989), computer self- user characteristics as determinants of perceived useful-
efficacy (Compeau & Higgins, 1995), tasketechnology fit ness and perceived ease of use. Chang et al., (2008), in
(Goodhue and Thompson, 1995) and theory of planned their study considered technology, organization, and user
behaviour (Ajzen, 1985). The technology acceptance model as important actors and predicted that factors relating to
or TAM is a widely applied IS model to explain end user individual and organization will together contribute to the
adoption of IT. It is a powerful model of user acceptance of adoption decision of the ERP users. In studies employing
computer technology (Igbaria, Guimaraes, & Davis, 1995). TAM, the variables were considered as independent vari-
Recently, TAM has been applied to ERP systems to explain ables that would influence the usage of ERP. The variables

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
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Usage of ERP and Impact on End user 3

in the present study have been categorized as individual, legitimacy of the implementation process and employee
organizational, and technological characteristics. The morale following the implementation (Venkatesh & Bala,
following are the external variables considered in this 2008).
study. Lee et al. (2010) found that organizational support was
positively associated with the factors of TAM. While orga-
Individual characteristics nizational support has been found to be crucial for suc-
Some individual characteristics of information system users cessful adoption of a new system, little work has been done
have been empirically shown to be associated with on the effect of internal technical support on technology
different levels of information system usage (Szajna, 1993). acceptance (Lee et al., 2006).
These are discussed below.
Training
Computer self-efficacy Education and training refers to the process of providing
Self-efficacy is a measure of a user’s confidence in his/her management and employees with the logic and overall
ability to use a technology (Taylor & Todd, 1995). It is the concepts of the ERP system (Yusuf, Gunasekaran, &
people’s judgements of their capabilities to organise and Abthorpe, 2004). Enterprise resource planning systems are
execute courses of action required to attain designated extremely complex and demand rigorous training; there-
types of performances (Bandura, 1986). In the context of fore, training is an important factor for successful imple-
using computers and IT, computer self -efficacy, therefore, mentation (Bingi, Sharma, & Godla, 1999). Lack of training
is defined as a judgement of one’s capability to use a has been one of the important reasons for failure of ERP
computer, and is an important antecedent of perceived systems (Somers & Nelson, 2001). Training and education
usefulness (Compeau & Higgins, 1995). Computer self- will reduce employees’ anxiety and stress about the use of
efficacy was found to play an important role in explaining the ERP system and provide better understanding about the
usage intention through perceived usefulness (Agarwal & benefits of the system for their tasks (Lee et al., 2010).
Karahanna, 2000). Venkatesh and Davis (1996) modelled Training and education influence user beliefs toward the
and empirically tested the determinants of perceived ease systems, and training programmes increase the users’
of use and found that an individual’s computer self-efficacy confidence in their ability to use them (Gist, 1987). Training
is a strong determinant of perceived ease of use and also provides managers with a mechanism to disseminate
behavioural intention. useful and pertinent information about the ERP system and
how it fits in with the existing and proposed system
Organizational characteristics (Amoako-gyampah & Salam, 2004).
Organizational support
In organizations which use a technical system, organiza- Technological characteristics
tional support affects behavioural intention to use the Technological complexity
system (Fishbein & Ajzen, 1975). Organizational support Enterprise resource planning systems, similar to other
was categorised by Lim et al. into technology support and management information systems, are often perceived as
management support (Lee, Kim, Rhee, & Trimi, 2006). very complex and difficult to implement (Xue et al., 2005).
Ralph (1991) defined technical support as people assisting Aiman-smith and Green (2002) defined technological
the users of computer hardware and software products, complexity as the extent to which a new technology is more
which can include hotlines, online support service, complicated for its user than the previous technology used
machine-readable support knowledge bases, faxes, auto- for the same or similar work, and represents an increase in
mated telephone voice response systems, remote control the number of things the user must do at once. The com-
software, and other facilities. Top management support is plex nature of ERP systems limits the amount of knowledge
defined as the willingness of top management to provide that users can absorb before actual usage (Yi & Davis,
the necessary resources and authority or power for project 2003). Higher complexity results in higher mental work-
success (Slevin & Pinto, 1987). In an ERP system environ- load and stress (Sokol, 1994). The complexity of the ERP
ment, if the organization provides sufficient support to system could negatively affect user’s attitudes towards
employees for their task, employees are more likely to using the system (Basoglu, Daim, & Kerimoglu, 2007; Chang
enjoy their work and improve their performance through et al., 2008).
usage of the new system (Lee, Lee, Olson, & Chung, 2010).
The implementation of an ERP system brings far reaching Technological compatibility
changes in an organization and its processes. Hence, top Common problems in adopting ERP systems are widely
management must realize that communication is essential recognized to be rooted in the poor fit between ERP sys-
to ensure that employees understand and accept the tems and business process (Chen, Road, & Chen, 2009). In
changes brought about by ERP (Balsmeier & Nagar, 2002). ERP implementation, systems are developed to support
Thus organization support is crucial for successful adoption business processes such as manufacturing, purchasing, or
of ERP. The implementation of systems often requires distribution, and so ERP implementation and business pro-
substantial changes to organizational structure, employees’ cess should be closely connected (Tsai, Chen, Hwang, &
roles and jobs, reward systems, control and coordination Hsu, 2010). Elbertsen and Reekum (2008) indicated that in
mechanisms, and work processes. Therefore, top manage- business process, the ERP system is significantly explained
ment support in the form of commitment and communica- by competitive pressure and systems compatibility. Rogers
tion related to system implementation is critical for the (1983) defined compatibility as the degree to which an

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
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4 C.A. Rajan, R. Baral

innovation is perceived as being consistent with existing (Rogers, 1995). Little research has addressed the link be-
values, needs, and past experiences of potential adopters. tween user acceptance and individual and organizational
Karahanna, Agarwal, and Angst (2006) brought forward four outcomes, and there has been no systematic investigation
dimensions reflecting the definition of compatibility: of the impact of technology on employee job characteris-
compatibility with existing work practices, compatibility tics (Venkatesh, Morris, Davis, & Davis, 2003). The following
with preferred work style, compatibility with prior experi- are some of the variables which are considered in this
ence, and compatibility with existing values. In this paper, study.
technological compatibility is considered as one of the
technological characteristics that affects the usage of ERP. Panoptic empowerment
It refers to the compatibility of ERP with the existing sys- The ERP system has not only increased the ability of orga-
tem in the organization. In technological compatibility, the nizations to gather more information in greater detail and
knowledge gained from past and present experiences with in real time, but has also brought about more widespread
technology are considered (Ortega, Martinez and Hoyos, dispersal of information throughout the organization. This
2008). expanded access to information not only gives the em-
According to Soh, Kien, and Tay-Yap (2000) procedural ployees the added flexibility, but also allows them to make
and data compatibility are crucial to the acceptance of the decisions which used to be formally referred upwards or to
system by the employee. Enterprise resource planning other departments due to lack of information (Sia, Tang,
packages are only compatible with the databases and Soh, & Boh, 2002). The central concept of empowerment
operation systems of some companies, and procedural and is the delegation of power to staff/employees in order to
data compatibility are crucial to the acceptance of the make and implement their own decisions (Psoinas, Kern, &
system by the employees (Zhang, Lee, Huang, Zhang, & Smithson, 2000).
Huang, 2005). Technology incompatibility will thus nega- The panopticon is an early nineteenth century design
tively affect system productivity, efficiency, employees’ for prisons developed by Bentham. The principal effect of
satisfaction, commitment, and motivation (Erensal & the panopticon is to induce in the prisoners a state of
Albayrak, 2008). Greater compatibility of the technology conscious and permanent visibility that assures the auto-
innovation with the existing technical systems, operating matic functioning of power, and they begin to act as if
practices, and the value and belief systems of the adopting they are being observed because they cannot tell when or
unit has been cited to be favourable to its adoption and whether they are being observed (Foucault, 1979). An ERP
diffusion (Cooper & Zmud, 1990; Ramamurthy & similarly employs a gaze because it records all user ac-
Premkumar, 1995). tions, which can be observed in real-time and also stored
for later observation. Thus, with no extra effort ERP
Impact of ERP usage surveillance is essentially continuous (Sia et al., 2002).
The greater visibility of information provided by the
System usage is considered as a dependent variable in many common shared database not only empowers workers to
empirical studies. According to Sun, Bhattacherjee, and Ma do their work more efficiently and effectively but also
(2009) current IT usage models do not venture into the makes them more visible to others in the organization,
outcomes of usage. But without studying outcomes, it who can then easily exercise process and outcome control
cannot be known if IT investments are successful or not (Elmes, Strong, & Volkoff, 2005). This is referred to as
(Sun et al., 2009). According to Ein-Dor and Segev (1978), panoptic empowerment which combines the concept of
usage is highly correlated with other criteria such as prof- empowerment and multidirectional visibility. There is
itability, application to problems in organization, quality of simultaneous increase in control and empowerment
decision making, performance, and satisfaction, and that occurring through the mediating effects of formation
an individual will use a system intensively only if it meets visibility (Elmes et al., 2005). This contrasts with Sia
some of these criteria. Users tend to use the system if it et al.’s (2002) study where there was greater emergence
improves their task performance or decision quality, of greater panoptic control without corresponding in-
otherwise they may avoid using a system unless its usage is crease in empowerment though the technology was
made mandatory (Bokhari, 2005). Since the adoption of an capable of both. Hence more research is required to
ERP system requires extensive efforts, both for the tech- generalize the findings to other organizations.
nological and business aspects of the implementation,
neither IT practitioners nor researchers have developed a Individual performance
deterministic method to evaluate the related impacts (Al- With the rapid growth in use of computing, academicians
Mashari, 2002). and practitioners have recognized that IT success can be
The impacts and the outcomes of the usage of ERP, measured by its impact on an individual’s work (Law &
therefore, should be investigated from different perspec- Ngai, 2007). Organizations that spend millions of dollars
tives especially with a view to study how the human factor on IT are primarily concerned about how their investment
influences success and how users can improve ERP’s per- will influence organizational and individual performance.
formance significantly (Botta-Genoulaz, Millet, & Grabot, The impact of IT on work at the individual level is a direct
2005). Hence, in addition to understanding the factors consequence of system use, which in turn is a major
which influence technology acceptance, it is also important factor in determining organizational impact (Torkzadeh &
to examine the impact of accepting or rejecting a tech- Doll, 1999). The way individuals use information systems
nology from an individual or social system perspective accounts for the differences in performance impact in

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
Usage of ERP and Impact on End user 5

case of complex technologies. Organizational users The acceptance of ERP is influenced by various external
cannot realize significant productivity or performance variables. In this study we have categorised the external
gains if they do not use IT adequately and appropriately variables as individual, organizational, and technological
(Sun et al., 2009). Users would adopt an ERP system if characteristics, and we hypothesise the following:
they perceived ERP would assist them to attain desired
performance outcomes (Amoako-gyampah & Salam, H1a: Computer self-efficacy will have a positive effect
2004). Goodhue and Thompson (1995) argued that IT was on the perceived usefulness of ERP system.
more likely to be used in organizational settings and H1b: Computer self-efficacy will have a positive effect
would have a positive impact on individual performance if on perceived ease of use of ERP system.
the capabilities of the IT matched the tasks that the user H2a: Organizational support will have a positive effect
had to perform. Some of these studies that have used on perceived usefulness of ERP system.
individual performance in their study have stated positive H2b: Organizational support will have a positive effect
relationships between IS and performance (Venkatesh, on perceived ease of use of ERP system.
2000) while a few other studies have stated that there H3a: Training will have a positive effect on perceived
is no relationship between the performance of the indi- usefulness of ERP system.
vidual and the usage of IS (Millman & Hartwick, 1987) H3b: Training will have a positive effect on perceived
which needs further examination. ease of use of ERP system.
H4a: Complexity will have a negative effect on
Research model and hypotheses perceived usefulness of ERP system.
H4b: Complexity will have a negative effect on
The review of literature shows that although there has been perceived ease of use of ERP system.
research on ERP, there has been little research to find the H5a: Compatibility will have a positive effect on
impact of the acceptance of ERP on the employees. Many of perceived usefulness of ERP system.
the existing research projects on ERP adoption are primarily H5b: Compatibility will have a positive effect on
undertaken in developed countries and very few in devel- perceived ease of use of ERP system.
oping countries like India. Though previous research has
considered external variables in the research, there was no The relationships between the TAM variables are repli-
clear pattern with respect to the choice of the external cated in our model in the context of ERP system.
variables considered (Legris, Ingham, & Collerette, 2003).
(The external variables used in this study were chosen from Hypothesis H6: There is a positive relationship between
previous research.) Based on this research gap, we propose the perceived usefulness of ERP system and the inten-
the following research model (Figure 1) to study the effects tion to use the ERP system.
of individual, organizational, and technological factors Hypothesis H7: There is a positive relationship between
affecting the usage of ERP and its impacts on employee the perceived ease of use and intention to use the ERP
attitude and behaviour. system.

Figure 1 Proposed research framework.

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
6 C.A. Rajan, R. Baral

Hypothesis H8: There is a positive relationship between

Table 1 Demographic details of the respondents.
perceived ease of use of ERP system and perceived
usefulness of ERP system. Demographic characteristics Frequency Percentage
HypothesisH9: There is a positive relationship between Age
the intention to use and usage of ERP. <25 25 16.2
26e35 67 43.5
Literature suggests that the acceptance and usage of 36e45 28 18.2
ERP will have an outcome at the individual level; however >45 34 22.1
little research has empirically examined this link. Hence Gender
panoptic empowerment and individual performance have Male 107 69.5
been considered as the outcome variables measured at the Female 47 30.5
individual level. The following are the hypotheses to be Experience
tested: between 2 and 5 yrs 40 26.0
between 5 and 10 yrs 48 31.2
Hypothesis H10a: There is a positive relationship be- more than 10 yrs 66 42.9
tween the usage of ERP and panoptic empowerment. Type of industry
Hypothesis H10b: There is a positive relationship be- Manufacturing 42 27.3
tween the usage of ERP and individual performance. Automobile 39 25.3
Banking and Finance 24 15.6
Research methodology IT/ITES 37 24.0
Others 12 7.8
Education
Sample and procedure
Graduate 66 42.9
Post graduate 84 54.5
To test the proposed model and hypotheses, a survey ques-
Doctorate 3 1.9
tionnaire was developed. The research targets were end
Others 1 0.6
users of ERP systems in select Indian organizations. The main
study was carried out in organizations that had implemented
ERP system within a time frame of less than five years. In
order to obtain accurate subjects for the study and also
was measured using four items from Premkumar and
owing to other constraints in getting data related to IS in an
Ramamurthy (1995). Technology acceptance model scales
organization, the data was collected through purposive
of perceived usefulness and perceived ease of use were
sampling. The list of organizations that had implemented
measured using four items adapted from Davis (1989) and
ERP was obtained from the client list of SAP, Oracle, and
Davis et al. (1989). Intention to use was measured using two
Ramco systems. Organizations that had implemented ERP
items from Azjen and Fishbein (1980). To measure panoptic
earlier than five years ago were excluded from the study. The
empowerment, 15 items of Sia et al. (2002) were used, and
questionnaires were administered in person to some orga-
for individual performance, two items of Goodhue and
nizations or sent through post. Some others were approached
Thompson (1995) were used. The operationalization of
through online questionnaires after seeking permission from
each measure is provided in Appendix A.
the respective organizations. The responses were obtained
only from employees who used ERP for their regular work. A
total of 181 responses were obtained from end users of ERP, Analysis and results
out of which 154 responses were usable. The respondents
were asked to indicate their age, gender, type of industry, The data was analysed using the partial least squares (PLS),
educational qualification and experience. Information was a multivariate path analysis statistical technique developed
also sought on the modules that the ERP users used. Out of by Herman Wold (1982). Partial least squares involves two
the 154 sample respondents that were obtained, most of the stages: (a) assessment of the measurement model,
respondents (43.5%) were in the age group of 26e35. About including the reliability and discriminant validity of the
69.5 percent of the respondents were male. The sample re- measures, and (b) assessment of the structural model.
spondents were from banking, manufacturing, automobile
and IT/ITeS sectors. The demographic profiles of the re- Measurement model
spondents are provided in Table 1.
The strength of the measurement model can be demon-
Measures strated through measures of convergent and discriminant
validity (Hair, Anderson, Tatham, & Black, 1998).
Computer self-efficacy was measured using the 10 items
developed by Compeau and Higgins (1995). Seven items to Convergent validity
measure organizational support were adopted from Igbaria Convergent validity was assessed by three criteria.
(1990) and Thompson et al. (1991). Training was measured
using five items which were adapted from Amoako-gyampah 1. The standardized path loadings, which are indicators of
and Salam (2004). Technology complexity was measured the degree of association between the underlying
using four items from Thompson et al. (1991). Compatibility latent factor and each item, and should be greater than

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
Usage of ERP and Impact on End user 7

0.7 and statistically significant (Gefen, Straub, & alpha values over 0.7. The results of convergent validity are
Boudreau, 2000). shown in Table 2.
2. The composite reliability (CR) must be larger than 0.7
(Hair et al., 1998). Discriminant validity
3. The average variance extracted (AVE) for each factor Discriminant validity indicates that “a construct should
should exceed 0.5 (Fornell & Larcker, 1981). share more variance with its measures than it shares with
other constructs in a given model” (Hulland, 1999). To
The majority of the loadings were significant except for establish discriminant validity, the square root of a con-
one item of computer self-efficacy (CSE1) and two items of struct’s AVE must be larger than the inter-construct cor-
panoptic empowerment (PE1 and PE2) which were less than relations (Fornell & Larcker, 1981). Table 3 shows the
0.4. The AVE values of the constructs computer self- results of discriminant validity. The diagonal elements
efficacy and panoptic empowerment, were less than the represent the square root of the average variance extrac-
recommended threshold of 0.5. Hence the items CSE1, PE1, ted. All constructs showed more variance with their in-
PE2 were removed as they did not satisfy the criterion. The dicators than with other constructs. The square root of AVE
CR values ranged from 0.8566 to 0.9561; all were above the exceeds the correlation between other constructs. These
recommended level of 0.7 for a reliable construct. The PLS results imply satisfactory discriminant validity. After
algorithm was run again to improve the CR and AVE of the testing the measurement model with all the parameters
constructs. An increase in CR was observed for the con- mentioned above, the model can be confirmed reliable and
structs whose items were excluded and the AVE values were valid.
above 0.5 for the constructs. The AVE values were between Multicollinearity is said to exist among the independent
0.5004 and 0.8625. Thus the convergent validity was variables if these independent variables are related to or
established. Additionally, the Cronbach’s alpha also re- dependent upon each other (Bowerman, O’Connel, & Hand,
flected a very high reliability for all of the constructs with 2001). Multicollinearity was assessed among the external

Table 2 Results of convergent validity.

Construct items AVE Composite reliability Cronbach’s alpha
Computer self-efficacy (CSE) 0.500 0.900 0.875
Compatibility (COMP) 0.714 0.909 0.867
Complexity (CX) 0.601 0.857 0.782
Individual performance (IP) 0.863 0.926 0.842
Intention to use (IU) 0.852 0.920 0.827
Organizational support (OS) 0.628 0.922 0.901
Training (TR) 0.799 0.952 0.936
Panoptic empowerment (PE) 0.500 0.927 0.916
Perceived ease of use (PEOU) 0.672 0.891 0.836
Perceived usefulness (PU) 0.845 0.956 0.939
Usage (USG) 0.818 0.900 0.777

Table 3 Results of discriminant validity.

Construct COMP CSE CX IP IU JS OS PE PEOU PU TR USG AVE
COMP 0.845 0.714
CSE 0.349 0.707 0.500
CX 0.193 0.140 0.775 0.601
IP 0.417 0.296 0.232 0.929 0.863
IU 0.507 0.399 0.281 0.463 0.923 0.852
OS 0.458 0.475 0.383 0.465 0.502 0.275 0.792 0.628
PE 0.473 0.376 0.262 0.651 0.484 0.612 0.488 0.707 0.500
PEOU 0.492 0.561 0.381 0.496 0.661 0.358 0.662 0.601 0.820 0.672
PU 0.522 0.555 0.375 0.566 0.721 0.473 0.696 0.585 0.763 0.919 0.845
TR 0.467 0.353 0.349 0.499 0.571 0.259 0.688 0.492 0.733 0.686 0.893 0.799
USG 0.386 0.195 0.205 0.446 0.453 0.281 0.393 0.310 0.456 0.456 0.451 0.904 0.818
Notes. COMP eCompatibility, CSE e Computer Self-Efficacy, CX e Complexity, IP e Individual Performance, IU e Intention to Use, OS e
Organizational Support, PE e Panoptic Empowerment, PEOU e Perceived Ease of Use, PU e Perceived Usefulness, TR e Training, USG e
Usage.

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
8 C.A. Rajan, R. Baral

variables which were categorized as individual, organiza-

Table 5 Collinearity statistics.
tional, and technological characteristics. Correlation coef-
ficient above 0.80 would suggest a problem of Collinearity statistics
multicollinearity (Hair et al., 1998). The correlation matrix Construct Tolerance VIF
of the independent variables given below in Table 4 does
Organizational support (OS) 0.443 2.257
not indicate multicollinearity concerns. Additionally the
Training (TR) 0.488 2.050
variance inflation factor (VIF) was assessed to check mul-
Complexity (CX) 0.837 1.194
ticollinearity. The collinearity diagnostics given in Table 5
Compatibility (COMP) 0.741 1.350
shows that VIF for the independent variables were less
Computer self efficacy (CSE) 0.762 1.313
than 3 and the tolerance level was above 0.4 which further
suggests that multicollinearity does not exist among the
independent variables.
p < 0.001) supporting hypothesis H9. Supporting hypothesis
Structural model
H10, intention to use was positively and significantly
related to usage of ERP (b Z 0.453, p < 0.001). Supporting
The structural model was examined to test the hypotheses. hypothesis H11a, the usage of ERP was significant and
The R2, which is generated for each regression equation, positively related to panoptic empowerment (b Z 0.302,
indicates the explanatory power or variance explained of p < 0.001). Finally, the usage of ERP was significantly
the latent endogenous variable. Paths are interpreted as related to individual performance (b Z 0.446, p < 0.001)
standardised beta weights in a regression analysis. As rec- supporting hypothesis H11b.
ommended (Chin, 1998), bootstrapping (with 500 sub- The external variables could explain 68.5 percent vari-
samples) was performed to test the statistical significance ance in perceived usefulness (R2 Z 0.685) and 67.2 percent
of each path coefficient using t-tests. The hypotheses tests variance in perceived ease of use (R2 Z 0.672). Perceived
were conducted by examining the signs (positive or nega- usefulness and perceived ease of use together could explain
tive) and assessing the statistical significance of t-values for 54.9 percent of the variance in intention to use ERP system.
the corresponding path estimates. The intention to use explained 20.5 percent of variance of
The PLS path analysis results showed that computer self- usage. The usage of ERP explained 9.6 percent and 19.9
efficacy was significantly related to perceived usefulness percent of variance of panoptic empowerment and indi-
(b Z 0.200, p < 0.001) and perceived ease use (b Z 0.297, vidual performance respectively.
p < 0.001) supporting hypotheses H1a and H1b. Organiza-
tional support was significantly related to both perceived
usefulness (b Z 0.201, p < 0.001) and perceived ease of use Discussion
(b Z 0.112, p < 0.05) supporting hypotheses H3a and H3b.
Consistent with hypotheses H4a and H4b training was The results of this research support most of the proposed
significantly related to perceived usefulness (b Z 0.202, relationships in the structural model. Most were consistent
p < 0.001) and perceived ease of use (b Z 0.474, with the previous study results. The relationship between
p < 0.001). Under technological characteristics, complexity the external variables such as computer self-efficacy,
had a negative significant effect on perceived usefulness organizational support, training, and compatibility and
(b Z 0.066, p < 0.05) and perceived ease of use the TAM variables were found to be significant and posi-
(b Z 0.103, p < 0.001) supporting hypotheses H5a and tively related. Computer self-efficacy was significantly and
H5b respectively and compatibility had a positive signifi- positively related to perceived usefulness and perceived
cant effect on perceived usefulness (b Z 0.105, p < 0.001) ease of use. Computer self-efficacy was the major deter-
and perceived ease of use (b Z 0.0801, p < 0.05) sup- minant of perceived ease of use which confirms the study
porting hypotheses H6a and H6b (Table 6). by Venkatesh and Davis (2000). Under organizational char-
The TAM variables such as perceived usefulness acteristics, both organizational support and training had a
(b Z 0.518, p < 0.001) and perceived ease of use significant positive effect on perceived usefulness and
(b Z 0.266, p < 0.001) were significantly related to perceived ease of use. These results are consistent with
intention to use thereby supporting hypotheses H7 and H8 previous research (Lee et al., 2010; Ngai et al., 2007).
respectively. Further perceived ease of use was also Organizational support was more strongly related to
significantly related to perceived usefulness (b Z 0.329, perceived usefulness than perceived ease of use while

Table 4 Correlation matrix between independent variables.

Construct Computer Self-Efficacy Organizational Training Complexity Compatibility
(CSE) support (OS) (TR) (CX) (COMP)
Computer self-efficacy (CSE) 1
Organizational support (OS) 0.475 1
Training (TR) 0.353 0.688 1
Complexity (CX) 0.14 0.383 0.349 1
Compatibility (COMP) 0.349 0.458 0.467 0.193 1

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 + MODEL
Usage of ERP and Impact on End user 9

Table 6 Results of structural model.

Relationship Path coefficient T statistics Hypothesis Support yes/No
CSE / PU 0.2008 6.2642 H1a Yes
CSE / PEOU 0.2975 9.3027 H1b Yes
OS / PU 0.2010 4.6687 H2a Yes
OS / PEOU 0.1122 1.9745 H2b Yes
TR / PU 0.2025 4.1088 H3a Yes
TR / PEOU 0.4741 9.7530 H3b Yes
CX / PU 0.0666 2.0546 H5a Yes
CX / PEOU 0.1032 3.5107 H5b Yes
COMP / PU 0.1052 2.9955 H4a Yes
COMP / PEOU 0.0801 2.2836 H4b Yes
PU / IU 0.5331 10.2476 H6 Yes
PEOU / IU 0.2517 4.2078 H7 Yes
PEOU / PU 0.2810 4.8811 H8 Yes
IU / USG 0.4506 8.1163 H9 Yes
USG / IP 0.4457 11.0173 H10a Yes
USG / PE 0.2847 6.7433 H10b Yes
Notes. COMP e Compatibility, CSE e Computer Self-Efficacy, CX e Complexity, IP e Individual Performance, IU e Intention to Use, OS e
Organizational Support, PE e Panoptic Empowerment, PEOU e Perceived Ease of Use, PU e Perceived Usefulness, TR e Training, USG e
Usage.

training on the other hand was more strongly related to Implications and conclusion
perceived ease of use when compared to perceived use-
fulness. This denotes that organization support will Enterprise resource planning systems are different from
encourage users to use ERP and realize the benefits that other innovations of IT because of the socio-technical
can be achieved with the use of ERP, and training will help challenges due to the complexity involved in the imple-
users to interact with the ERP system and remove any mentation process and the different types of end users.
negative perceptions and develop favourable attitude with This research has implications for managers as well as or-
regard to the use of the ERP system. ganizations. The findings of this study provide insights for
Among the technological characteristics, complexity had managers to efficiently manage the adoption of the ERP
a negative effect on perceived usefulness and perceived system across the organization. Organizations should un-
ease of use, supporting the hypotheses. Enterprise resource derstand and identify factors in terms of individual, orga-
planning is a complex information system and the nizational, and technological characteristics when a
complexity of ERP could negatively affect the user’s atti- complex information system such as ERP is implemented in
tude towards using the system (Igbaria et al., 1995). the organization. Technology acceptance models have been
Compatibility had a positive significant effect on perceived criticized for considering usage as an end in itself. The
usefulness and perceived ease of use. This means, if the present study tries to identify the impact of usage on the
implementation of ERP is compatible with the existing individual’s panoptic empowerment and individual perfor-
technical systems and operating practices, it will lead to a mance. Managers should have the goal of not just making
favourable attitude towards the acceptance of ERP by the use of the system but to make employees satisfied with
end users. using the system, to improve their performance, and also to
The relationships between the TAM variables were empower them to make decisions. Further research can be
replicated in this study in the context of ERP. Perceived done through a longitudinal approach for the study. This
usefulness and perceived ease of use significantly affect will help to understand how the factors vary at different
intention to use and in turn the usage of the ERP system. In stages in the implementation process of ERP.
this study perceived usefulness was more strongly related This study has a few limitations. The model required
to intention to use compared to perceived ease of use. This estimation of many variables and this requires a large
is consistent with the findings of Davis (1989). sample size. But the sample size of the present study was
Models considering usage as an end have been criticized small. The present study was a cross-sectional survey from
by researchers (Sun et al., 2009). In this study, it was found respondents. The influence of some factors on the intention
that the usage of ERP had significant impact on the end of using information technology might vary at different
users’ panoptic empowerment. The results show that due stages in the implementation process. Further research
to the visibility of information provided by the ERP there is should use a larger sample and take a longitudinal
increase of both control and empowerment through the approach. Future research can also explore the inter-
usage of ERP. The usage of ERP also had a positive signifi- relationships between individual, organizational and tech-
cant impact on individual performance. nological variables and their effect on the usage of ERP.

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
10 C.A. Rajan, R. Baral

Appendix A
Measures and operationalizations.

Construct Items Question items

Computer self-efficacy (CSE) I could complete the job using ERP,
CSE1 if there was no one around to tell me what to do as I go
CSE2 if I had never used a package like it before
CSE3 if I had only the software manuals for reference
CSE4 if I had seen someone else using it before trying it myself
CSE5 if I could call someone for help if I got stuck
CSE6 if someone else had helped me get started
CSE7 if I had a lot of time to complete the job for which the software was provided
CSE8 if I had just the built-in help facility for assistance
CSE9 if someone showed me how to do it first
CSE10 if I had used similar packages before this one to do the same job
Organizational support (OS) Technical support
OS1 I know where to turn to when I need any assistance with our ERP system
OS2 In my company we get good technical support for our ERP system
OS3 We have extensive support to help with problems related to our ERP system
Top management support
OS4 Management is aware of the benefits that can be achieved with the use of ERP
system
OS5 Management always supports and encourages the use of ERP for job-related work
OS6 Management provides most of the necessary help and resources to enable people
to use ERP
OS7 Management is really keen to see that people are happy with using ERP
Training (TR) TR1 The kind of training on ERP system provided to me was complete
TR2 My level of understanding was substantially improved after going through the
training programme
TR3 The training gave me confidence in the ERP system
TR4 The training on ERP system was of adequate length and detail
TR5 The trainers were knowledgeable and aided me in my understanding of the ERP
system
Complexity (CX) CX1 Using a ERP system takes much time from my normal duties
CX2 Working with ERP is so complicated, it is difficult to understand what is going on
CX3 Using the ERP system involves much time doing mechanical operations (e.g., data
input)
CX4 It takes too long to learn how to use a ERP to make it worth the effort
Compatibility (COMP) COMP1 Data captured in the ERP system and their format match my current data needs
COMP2 The ERP system matches my current processing procedure
COMP3 The changes caused by the adoption of ERP are compatible with the existing
operating practices
COMP4 The adoption of ERP is compatible with the firm’s IT infrastructure
Perceived usefulness (PU) PU1 Using the ERP system improves my performance in my job
PU2 Using the ERP system in my job increases my productivity
PU3 Using the ERP system enhances my effectiveness in my job
PU4 I find the ERP system to be useful in my job
Perceived ease of use (PEOU) PEOU1 My interaction with the ERP is clear and understandable
PEOU2 Interacting with ERP does not require a lot of my mental effort
PEOU3 I find the ERP to be easy to use
PEOU4 I find it easy to get the ERP system to do what I want it to do
Intention to use (IU) IU1 I intend to use the ERP system for performing my job as often as needed
IU2 To the extent possible, I would frequently use the ERP system in my job
Usage (USG) USG1 On average how frequently do you use ERP?
USG2 On average how much time do you spend per day using ERP for job related work
USG3 How do you consider the extent of your current ERP use?
(continued on next page)

Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008
 + MODEL
Usage of ERP and Impact on End user 11

(continued )
Construct Items Question items
Individual performance (IP) IP1 The company ERP environment has a large positive impact on my effectiveness
and productivity in my job
IP2 ERP and its services are important and are a valuable aid to me in the
performance of my job
Panoptic empowerment (PE) PE1 Management relies a great deal on me to ensure proper operation or processing
when I use the system.
PE2 Much is left to my discretion to ensure proper operation or processing when I use
the system
PE3 I have considerable autonomy in deciding how to carry out my work
PE4 Job descriptions in my organization are highly specific and very detailed
PE5 The procedures to carry out a task are spelled out very clearly
PE6 Employees are very closely supervised to ensure that they are conforming to the
standard procedures established
PE7 The ERP system provides very complete and comprehensive information about
how well or badly I have done my work
PE8 The ERP system provides very accurate information about how well or badly I
have done my work
PE9 The ERP system provides very immediate information about how well or badly I
have done my work.
PE10 The ERP system provides very reliable information about how well or badly I have
done my work
PE11 If there is an error, it is very easy for my supervisor to trace when, where, and by
whom it was committed through the ERP system
PE12 The ERP system provides the supervisor with very detailed information on the
source of error
PE13 It is very convenient for my supervisor to access the system to review my work
performance
PE14 My supervisor is constantly updated on the status of my work performance
PE15 My supervisor is highly aware of any mistakes I have committed in my work

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Please cite this article in press as: Christy Angeline Rajan, Baral, R., Adoption of ERP system: An empirical study of factors influencing the
usage of ERP and its impact on end user, IIMB Management Review (2015), http://dx.doi.org/10.1016/j.iimb.2015.04.008