Enterprise Resource Planning & Non-Financial Performance Incentives: The Joint Impact on Corporate Performance
36 Pages Posted: 19 May 2005
Some research suggests that the implementation of enterprise resource planning (ERP) systems improves corporate performance (Hayes et al. 2001; Hunton et al. 2003) while other research indicates that the inclusion of non-financial performance incentives (NFPI) in executive compensation contracts also enhances performance (HassabElnaby et al. 2004). Since ERP systems are designed to capture key performance indicators that are both financial and non-financial in nature, the primary research question examined herein asks: Does the joint adoption of ERP and the use of NFPI yield a synergistic effect on corporate performance? In the current study, performance is reflected by return on assets (ROA) and return on stocks (ROS). Overall, study results indicate that the combined use of ERP and NFPI yields significantly higher (1) short-term and long-term ROA and ROS than ERP-only firms, and (2) short-term ROA and ROS and long-term ROS than NFPI-only firms. Research findings offer valuable insights into the theoretical and practical implications of jointly adopting ERP and NFPI.
Keywords: Enterprise resource planning, non-financial performance measures, executive compensation contracts, corporate performance
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