Compensation-based incentives, ERP, and delivery performance: analysis from production and improvement perspectives
SubjectEnterprise Resource Planning
human resources management
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AbstractPurpose – This research investigates the role of compensation-based incentives in relationships between Enterprise Resource Planning (ERP) usage and delivery performance in manufacturing. Design/methodology/approach – We carry out two studies exploring links between ERP, incentives, and performance from alternative perspectives: (i) of incentives tied to regular production activities, and their relationship with delivery performance advantage over competitors, and (ii) of incentives tied to improvement activities, and their relationship with delivery performance improvements. Statistical analysis is carried out on data from 698 metal working manufacturers from 22 countries, giving a broad cross sectional view of a global industry. Findings – The studies indicate that ERP usage relates positively with both delivery advantage and delivery improvements. Furthermore, incentives tied to improvement initiatives may explain delivery improvements both directly and as moderators in the relationship between ERP and performance. Research implications – The results suggest that ERP adoption can be framed as a principal-agency phenomenon where performance outcomes are partially influenced by incentives. Practical implications – The results imply that incentives tied to improvement initiatives may foster employee engagement with the new ERP, leading to stronger delivery performance benefits. Originality/value – To the best of our knowledge, this is the first research to explore ERP usage as a principal-agency problem, and to analyse its relationships with incentives under alternative performance perspectives. The results may significantly contribute to the knowledge of ERP-performance relationships and the role of incentives.
Article deposited according to publisher policy posted on SHERPA/ROMEO, April 3, 2012