Blackwell Science, LtdOxford, UKISJInformation Systems Journal1365-2575Blackwell Publishing Ltd, 20042004142153167Original ArticleThe ERP challenge in ChinaX He

Info Systems J (2004) 14, 153–167 153

The ERP challenge in China: a resource-

based perspective
Xin (James) He
Department of Information Systems & Operations Management, Dolan School of Business,
Fairfield University, Fairfield, CT 06824, USA, email: xhe@mail.fairfield.edu

Abstract. This paper introduces a resource-based perspective (RBP) model on

enterprise recourse planning (ERP) challenges to help make ERP decisions in
China. While ERP aims at integrating functional-area information systems within
a company into a coherent, enterprise-wide, and web-enabled network, its
implementation is especially challenging to enterprises in China because of high
implementation costs, technical complexity, lack of information technology infra-
structure, lack of well-trained employees, lack of incentives to state-owned enter-
prises, and a corporate culture different from that in the West. A RBP of a firm,
however, posits that firms should compete on the basis of unique corporate
resources that are valuable, rare, difficult to imitate, and unsubstitutable. Thus, this
research assesses major ERP challenges in China based upon a three-tier deci-
sion process in pursuit of a sustainable competitive advantage. This RBP model is
then embedded with data from a survey research to illustrate potential applications
and managerial implications.

Keywords: ERP implementation, ERP challenges, China, resource-based per-

spective, sustainable competitive advantage

1. INTRODUCTION

Enterprise recourse planning (ERP) is multimodule application software that allows a company
to manage its business with potential benefits of improved process flow, reduced inventories,
better data analysis, better customer service, and improved profit margins (Fan et al., 2000).
ERP aims to integrate functional-area information systems within a firm into a coherent, enter-
prise-wide, web-enabled network (Palaniswamy & Frank, 2000). While most large companies
in the developed nations have implemented ERP, horror stores regarding ERP implementation
are not uncommon. According to the Conference Board (2001),

• USA companies typically take 6 months longer than anticipated to implement ERP.
• 20% of implementations are cancelled prior to completion.
• 75% of companies suffer from moderate to severe post-implementation productivity dip.
• Average implementation is 25% over budget.
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 154 X He

• Post-implementation support costs are underestimated by 20%.

• Post-ERP support costs usually increase rather than decrease.
ERP implementation requires considerable financial and personnel resources. Large firms
typically spend 5.6% of their annual revenues, whereas smaller firms spend up to 50% of their
annual revenues on an ERP project (Mabert et al., 2000). ERP is especially challenging to
small- and med-size enterprises (SMEs) in China because of high implementation costs, tech-
nical complexity, lack of information technology (IT) infrastructure, lack of well-trained employ-
ees, lack of incentives to state-owned enterprises (SOEs), and a corporate culture different
from that in the West. According to AMR Research Inc. (2001), while most large USA com-
panies have completed their initial implementation of ERP, ERP may lose favour to small and
medium size firms because of high risk and uncertainty associated with ERP implementation.
Although the annual growth rate of ERP implementation was as high as 23%, early ERP imple-
mentation in China was mainly concentrated in a few large SOEs, such as Haire Group, China
Airlines, and China Telecom (CCID, 2001). Major ERP challenges to SOEs in China include
weaknesses in IT infrastructure and in human IT resources (Liu & Zhou, 2001).
Anecdotal evidence and case studies indicate that achieving competitive advantage via ERP
implementation is a key element that differentiates successful firms from their less successful
counterparts. A resource-based perspective (RBP) has potential for augmenting the concep-
tual analysis of ERP effects on firm performance, as RBP links the performance of the units to
resources and skills that are firm-specific and difficult to imitate or substitute (Barney, 1991).
A variety of factors (e.g. value chain, cost advantages, differentiation, and technology) have
been shown to have an important impact on the ability of firms obtaining sustainable compet-
itive advantages (Porter, 1980; Porter, 1985; Porter & Millar, 1985; Kogut, 1988; Rumelt et al.,
1991).
In this paper, we introduce an empirical RBP model to help assess major ERP challenges in
China and, consequently, to help make the right ERP decisions in pursuit of a sustainable com-
petitive advantage. This model is then embedded with data from an executive survey in China
to illustrate potential applications with managerial implications. Section 2 provides a literature
review. Section 3 discusses ERP practices in China. Section 4 derives the empirical RBP
model and discusses its managerial implications. Section 5 summarizes the research findings
and points out future research directions.

2. LITERATURE REVIEW

ERP implementation

Studies on ERP implementations are mainly focused on large companies in Europe and USA,
but very few are focused on enterprises in developing nations, such as China. To facilitate the
comparison between the existing literature and the research findings of this paper, we classify
the ERP implementation literature into three categories: ERP benefits, critical success factors
(CSFs), and ERP obstacles.

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 The ERP challenge in China 155

ERP benefits

ERP has been widely used to integrate legacy information systems across functional areas in
an organization to plan, co-ordinate, and control manufacturing and enterprise resources (Dav-
enport, 1998). Because of the emergence of new information technologies and awareness of
changing organizational forms, such as networked enterprises, ERP makes it possible to
develop and implement a variety of flexible supply chain options that can create significant cost
and value advantages (Hayes et al., 2001). As a result, ERP standardizes a firm’s data and
manages them real time, so that it can perform the required functions throughout an entire sup-
ply chain, from the upstream raw materials supplies to the downstream finished goods distri-
bution, and from data entry to accounting to purchasing (Mabert et al., 2000).

CSFs

Although ERP has been implemented in a number of organizations in the USA and other indus-
trialized nations over the past decade, there have been mixed reports concerning a universally
successful outcome. Scores of studies focus on CSFs to ensure a high success rate of ERP
implementation (Bingi et al., 1999; Hollan & Light, 1999; Somers & Nelson 2001; Nah & Lau,
2001; Akkermans & Helden, 2002):

• top management support;

• business plan & vision;
• change management & culture;
• business process re-engineering (BPR);
• education & training; and
• vendor selection & support, etc.
However, the priority of these CSFs may change over the course of ERP implementation
because of the dynamics of project life cycle and, consequently, they may not be winning tools
at any time (Deloitte Consulting, 1999). Top management support, for instance, is particularly
important throughout the entire project life cycle (Bingi et al., 1999), whereas a clear business
plan & vision, which embeds the corporate strategy with tangible objectives, makes ERP benefits
more specific and measurable (Nah & Lau, 2001). By the same token, change management &
culture involves a fundamental rethinking and redesign of business processes to achieve high
levels in critical measures of performance, such as cost, quality, customer service, and speed
to market (Bingi et al., 1999). BPR has long been considered one of the key success factors
in implementing major IT projects, such as ERP, especially in firms that have a strong corporate
culture or that rely on legacy systems (Grover et al., 1995). Thus, ERP implementation is a ‘Triple
Play’ that combines people, technology, and processes (Norris et al., 2000, p. 119).

ERP obstacles

Cliffe (1999) reports that numerous companies have abandoned their ERP projects before
completion or have failed to deliver expected benefits. Despite of great market potential, ERP

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 156 X He

implementation is facing many challenges and obstacles to small- and mid-size companies
and to developing nations as the vast majority of enterprises in these countries are small and
medium in size. Consequently, the high cost of ERP implementation is by far the biggest obsta-
cle (Everdinggen et al., 2000). Moreover, as the top five multinational ERP vendors – such as
SAP, Oracle, Peoplesoft, JD Edwards, and Baan – account for 57% of the global ERP market
(AMR, 2001), the technical complexity of ERP implementation is the second biggest obstacle
(Soh et al., 2000). Other obstacles, such as IT infrastructure, employee training, and corporate
culture, varies by country, industry, and even by specific company.

A RBP

Rooted in the management strategy literature, a RBP believes that firms compete on the basis
of unique corporate resources that are valuable, rare, difficult to imitate, and non-substitutable
(Barney, 1991; Peteraf, 1993). Viewed from a RBP, one of the key issues in ERP application is
how to achieve a sustainable competitive advantage in light of major ERP challenges and
obstacles, such as high implementation costs, technical complexity, lack of integration between
ERP systems and supply chain management (SCM)/customer relationship management
(CRM), and lack of essential BPR and change management (Sprott, 2000).
To simplify, we divide the RBP literature into two distinct but complementary schools. The
first focuses on the classification of resources; the second aims at a resource-based IT invest-
ment decision process. In search of a sustainable competitive advantage, the resource clas-
sification theory views a firm’s resources in three different categories (Bharadwaj, 2000):

• IT infrastructure;
• human IT resources; and
• IT-enabled intangibles.
The IT infrastructure comprises the computer and communication technologies, and the
shareable technical platforms and databases that form the core of a firm’s overall physical
assets (Ross et al., 1996; Weill et al., 1996). Human IT resources include: (1) technical IT
skills, such as programming, systems analysis and design, and competencies in emerging
technologies; and (2) the managerial IT skills, such as ability in the effective management of
information systems, co-ordination, and interaction with the user community, and project man-
agement and leadership skills (Capon & Glazer, 1987; Copeland & McKenney, 1988). IT-
enabling intangibles include know-how (Teece, 1998), corporate culture (Barney, 1991), and
corporate reputation (Vergin & Qoronfleh, 1998).
Figure 1 illustrates an IT investment model with four possible outcomes: competitive disad-
vantage, competitive parity, temporary competitive advantage, and sustained competitive
advantage. These outcomes are determined by evaluating three different conditions (Mata
et al., 1995). The first condition determines whether the IT investment is valuable to the firm.
If yes, the firm proceeds to check the second condition. If no, the firm may end up with a com-
petitive disadvantage for such an IT investment. The second condition, however, evaluates
whether the IT resource is heterogeneously distributed. A ‘no’ implies that the firm’s IT

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 No Is the IT Yes
valuable?

No Is it Yes
heterogeneously
distributed?

No Is it imperfectly Yes
mobile?

© 2004 Blackwell Publishing Ltd, Information Systems Journal 14, 153–167

Competitive Competitive Temporary Sustained
disadvantage parity competitive competitive
advantage advantage

Figure 1. A framework of sustainable competitive advantage.

The ERP challenge in China
157
 158 X He

resource can be obtained or duplicated by numerous other competing firms. As a result, that
IT resource can at best be a source of competitive parity. A ‘yes’ to the question, on the other
hand, indicates that the IT resource cannot be currently possessed or imitated by competing
firms. Consequently, the firm can at least obtain a temporary competitive advantage, even if it
fails to pass the third and most important condition, which verifies whether the IT resource is
imperfectly mobile. An IT resource is said to be mobile if firms without such a resource face no
cost disadvantage in developing, acquiring, and using that resource compared with firms that
already possess and use it. In other words, a mobile resource can at best be labelled a tem-
porary competitive advantage, whereas an immobile resource may eventually help achieve
sustainable competitive advantage (Barney, 1991; Conner, 1991).
The empirical RBP model in this paper is based on the framework described in Figure 1. The
empirical RBP model we are going to derive is supported by the resource classification concept
and embedded with the data from an executive survey.

3. ERP PRACTICES IN CHINA

The survey research was conducted in July 2001 on a group of executives from 150 enter-
prises over 20 provinces in China. Of the 79 usable returns, 10 were large SOEs with annual
sales over $1 billion, whereas the remaining 69 were small- or medium-size companies with
annual sales ranging from $1 million to less than $1 billion. Because at the time of the survey
only 2% of the largest SOEs implemented ERP although the annual growth rate of ERP imple-
mentation in China was estimated to be twice the average worldwide growth rate (IDC, 2001),
we focused our research on ERP challenges in China by asking research questions in the fol-
lowing four categories:

• Basic ERP concepts;

• ERP benefits;
• Critical success factors (CSFs); and
• ERP obstacles.
‘Basic ERP concepts’ above was included to reflect the fact that few companies had imple-
mented ERP in China and, unlike in Europe and USA, China was in transit from a planned
economy to a more open market economy. However, subsequent statistical analysis indicates
that ‘Basic ERP concepts’ highly correlated with ‘CSFs’ with a unidemensional factor. The fol-
lowing summarizes the survey result in terms of ERP benefits, CSFs, and ERP obstacles in
China, where ‘Basic ERP concepts’ is considered a subset of CSFs.

ERP benefits

Table 1 shows the top 10 benefits of ERP implementation in China, in descending order by the
means. A Cronbach’s alpha of 0.908, which exceeds the decision criterion of 0.7, confirms that
the data are reliable and consistent (Cronbach, 1951). Factor analysis confirms that these ben-

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Table 1. Ten ERP benefits in China

Factor ERP benefits Mean Factor loading

ERP benefits 1. SCM would reduce costs and improve quality and speed 6.04* 0.809
2. ERP and SCM implementations support business strategies 5.96* 0.830
3. ERP would enhance the efficiency of SCM 5.94* 0.719
4. ERP aims to improve overall performance 5.81* 0.723
5. ERP would improve internal communication and co-ordination 5.78* 0.791
6. ERP would strengthen strategic planning 5.62* 0.739
7. ERP would help reduce variance in suppliers’ lead times 5.59* 0.678
8. ERP would improve the labour productivity 5.59* 0.714
9. ERP would streamline business processes 5.58* 0.692
10. ERP would improve management decision-making 5.54* 0.709
Cronbach’s alpha = 0.908; number of factors = 1.
*The mean is statistically greater than scale 4 (neutral) at the 0.05 significance level.

Table 2. Critical success factors (CSFs) of ERP implementation in China

Factor ERP CSFs Mean Factor loading

ERP CSFs 1. Executive support is the key success factor for ERP (Executive support) 6.10* 0.853
2. SCM is an important component of ERP (ERP-SCM vision) 6.05* 0.815
3. ERP is more of a concept than software (ERP concept) 5.96* 0.860
4. BPR is one of the key success factors in implementing ERP (BPR) 5.86* 0.824
Cronbach’s alpha = 0.859; number of factors = 1.
*The mean is statistically greater than scale 4 (neutral) at the 0.05 significance level.

efits are unidimensional with a single factor as the corresponding eigenvalue exceeds the
acceptable level of 1.0 significantly with factor loadings greater than 0.5 (Hair et al., 1987, p.
249), which validates that these 10 ERP benefits belong to the same construct. While these
ERP benefits are in line with those in the literature, the fact that the top three ERP benefits are
all SCM-related indicates that Chinese executives seem to pay more attention to enhancing
SCM via ERP implementation than any other benefits in Table 1. It follows that SCM is poised
to play a more important role as China moves from the traditional planned economy to a new
market economy.
All these ERP benefits, together with CSFs and ERP obstacles, will be embedded into the
empirical RBP model on ERP challenges in China in the next section.

CSFs

Table 2 lists the key CSFs that are statistically significant to ERP implementation in China with
a Cronbach’s alpha of 0.859: Executive support, ERP-SCM vision, ERP concept, and BPR. A
single factor, with all its factor loadings greater than 0.7, validates that all four CSFs belong to
the same construct.
It is seen from Table 2 that CSFs 1 (Executive support) and 4 (BPR) are consistent with the
mainstream ERP literature explicitly, whereas CSFs 2 (ERP-SCM vision) and 3 (ERP concept),

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 160 X He

which were originally classified in the category of ‘Basic ERP Concepts’, may not be obvious
at the first glance. A more careful analysis on enterprises in China reveals that ERP-SCM
vision is in fact a China-specific CSF of business plan & vision (Nah & Lau, 2001), which seeks
to extend ERP with an improved SCM as large majority of Chinese firms are still state-owned
and they desperately need to improve their SCM ability in order to stay competitive in the new
market economy. In fact, ERP-SCM vision is also consistent with the top three ERP benefits in
Table 1. Similarly, ERP concept is a China-specific CSF of change management program &
culture (Bingi et al., 1999), which calls for changes via ERP implementation in terms of people,
organization, and culture. Because most business executives under centralized economic envi-
ronment in China tend to think ERP more of a pure computer software package than of a
unique business opportunity, the ERP concept will not only help integrate a firm’s information
system and streamline business processes but also pursue a sustainable competitive
advantage.

ERP obstacles

Table 3 presents seven major obstacles to ERP implementation in China, with a significant
Cronpach’s alpha of 0.814. These obstacles may not necessarily be common or firm-specific
to all enterprises in China. However, factor analysis confirms that there exist two distinct factors
among the major obstacles in Table 3 as both factors have significant factor loadings with
respect to their corresponding variables. Factor 1 consists of two common obstacles: (1) too
expensive; and (2) too complicated, which are consistent with the global ERP trends, espe-
cially in the mid-size market (BCG, 2000; Soh et al., 2000; Ricadela & Maselli, 2002); Factor
2 comprises of five firm-specific obstacles: (3) IT infrastructure; (4) lack of well-trained workers;
(5) lack of incentives for SOEs; (6) different corporate culture; and (7) language barrier. We find
that obstacle 3 (IT infrastructure) is consistent with that in the literature as a firm-specific
resource (Ross et al., 1996; Weill et al., 1996; Bharadwaj, 2000), whereas obstacles 4 and 5
(lack of well-trained workers and lack of incentives for SOEs) are more China-specific than in
USA and in other developed nations. Moreover, obstacles 4 and 5 are often labelled, in the

Table 3. Major ERP obstacles in China

Factor
Factor Major ERP obstacles Mean loading

1. Common obstacles 1. ERP is too expensive for most Chinese enterprises 5.63* 0.941
2. ERP is too complicated for most Chinese enterprises 5.57* 0.926
2. Firm-specific obstacles 3. The main obstacle to ERP is IT infrastructure in China 5.39* 0.538
4. The main obstacle to ERP in China is lack of well-trained workers 5.14* 0.734
5. The main obstacle to ERP in China is lack of incentives for SOEs 4.77* 0.816
6. The main obstacle to ERP in China is different business culture 4.46* 0.689
7. The main obstacle to ERP in China is language barrier 3.71 0.755
Cronbach’s alpha = 0.814; number of factors = 2.
*The mean is statistically greater than scale 4 (neutral) at the 0.05 significance level.

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 The ERP challenge in China 161

resource classification theory, as human IT resources (Capon & Glazer, 1987; Copeland &
McKenney, 1988). Finally, both obstacles 6 and 7, different culture and language barrier, fit well
into the category of IT-enabled intangibles of the resource classification theory (Barney, 1991;
Teece, 1998; Vergin & Qoronfleh, 1998). Nonetheless, the insignificant mean of obstacle 7 at
the 0.05 significance level signals that business executives in China do not believe language
barrier is one of the main obstacles, and consequently is eliminated from the empirical RBP
model.
Now that overcoming an obstacle is equivalent to gaining a resource or strength, these
obstacles will be embedded into the empirical RBP model as the third-tire condition, in terms
of common or firm-specific obstacles to test the imperfect mobility of ERP resources.

4. THE EMPIRICAL RBP MODEL

Figure 2 illustrates an empirical three-tier RBP model on ERP challenges of ERP in China. The
first-tier condition evaluates if a firm aims at one or more of the 10 major ERP benefits, as
opposed to that of the IT investment model in Figure 1. Because statistically all 10 ERP ben-
efits belong to the same construct, such an assessment would help provide valuable guidelines
and focus on measurable objectives for enterprises facing ERP decisions. Logically, if none of
the 10 ERP benefits were feasible and practical to the firm, an ERP investment would undoubt-
edly lead to a competitive disadvantage. However, as enterprises in China were traditionally
operating under the centralized economy and the government, not the firms, was responsible
for raw materials supply and finished goods distribution, this first condition will help them set
up more realistic goals and objectives before they commit themselves into ERP implementa-
tion. In addition, while China is now in the process of reforming its planned economy to a more
open market economy, lack of adequate SCM infrastructure hinders most SOEs from achieving
operational efficiency and financial profitability. The managerial implication is that improving
SCM via ERP implementation is one of the most tangible objectives in China.
Nonetheless, satisfying the first condition alone does not guarantee a successful ERP imple-
mentation. The model proceeds to examine the next condition.
The second-tier condition comprises of four CSFs: Executive support, ERP-SCM vision,
ERP concept, and BPR, which examines the heterogeneity of ERP resources. The rational of
this condition is that CSFs are more tangible and practical than abstract heterogeneous def-
initions. In theory, the question for heterogeneity of ERP resources may fall into one or more
of three broad categories: the role of history, the role of causal ambiguity, and the role of social
complexity (Barney, 1991).
History plays two roles in increasing the cost of imitating a successful firm’s ERP resources
and capabilities. First, a firm’s ability to develop or acquire low-cost ERP systems may depend
on its being in the right place at the right time. Second, a firm’s ERP-specific resources, such
as IT infrastructure and managerial know-how, can only be developed over a long period of
time. Consider Haire Group’s ERP resources, for example. It would be very expensive for other
companies in China to imitate Haire’s successful ERP implementation story because of the

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 162

Major ERP Benefits

1. SCM would reduce costs and improve quality and speed 6. ERP would strengthen strategic planning
2. ERP and SCM implementations support business strategies 7. ERP would help reduce variance in suppliers’ lead times
3. ERP would enhance the efficiency of SCM 8. ERP would improve the labour productivity
X He

4. ERP aims to improve overall performance 9. ERP would help streamline business processes
5. ERP would improve internal communication and co-ordination 10. ERP would help improve management decision-making

Critical Success Factors

No Yes 1. Executive support is the key success factor for ERP (Executive support)
Is ERP
2. SCM is an important component of ERP (ERP-SCM vision)
beneficial?
3. ERP is more of a concept than software (ERP concept)
4. BPR is one of the key success factors in implementing ERP (BPR)

Does the firm

No Yes
have essential
CSFs?

No Are obstacles Yes

firm specific?

Temporary Sustained
Competitive Competitive competitive competitive
Disadvantage Parity advantage advantage

Common Obstacles Firm Specific Obstacles

1. Too expensive (Capital) 3. Lack of IT infrastructure
2. Too complicated (Technical) 4. Lack of well-trained workers
5. Lack of incentives for SOEs
6. Different corporate culture

Figure 2. A resource-based perspective on ERP challenges in China.

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 The ERP challenge in China 163

role that history plays, such as preferential treatments of investment funds and other scarce
resources by the Chinese government. Causal ambiguity prevents an imitating firm from know-
ing what to copy from a successful firm’s ERP resources. There are at least two reasons why
causal ambiguity exists. First, ERP resources may be taken for granted and are unspoken, tacit
attributes of a firm (Reed & DeFillippi, 1990). Second, these resources may depend on a large
number of small decisions and actions, instead of a few large decisions. For example, a suc-
cessful ERP implementation may rely on BPR that involves hundreds of thousands of small
decisions made by workers, middle managers, and executives. Social complexity, such as a
firm’s culture and its reputation among customers and suppliers, would be very costly to imitate
in the context of ERP implementation in China. Most socially complex ERP resources and
capabilities evolve and change over time, some of which are even unique in China. The coex-
istence of various ownership forms and SOEs, for instance, is a unique by-product of the
undergoing reform in China from planned to market economy.
Thus, if the firm does possess all four CSFs, it would have a great chance to have a suc-
cessful ERP implementation. Otherwise, if the firm does not possess any of the CSFs, such an
ERP implementation may yield, at best, a competitive parity with high risk of failure and low
probability of integration. However, as the vast majority of Chinese enterprises may only pos-
sess a few of the four CSFs at various degrees, the first two CSFs, Executive support and
ERP-SCM vision, are strongly recommended for a successful ERP implementation although
the other two CSFs, ERP concept and BPR, cannot be underestimated. In other words, the
more CSFs a firm possesses, the more likely it will obtain a long-term competitive advantage.
Finally, the third-tier condition investigates if ERP resources are imperfectly mobile in terms
of common or firm-specific ERP obstacles, as ERP obstacles are more tangible than the
abstract concept of imperfect mobility. According to Mata et al. (1995), access to capital and
technical skills per se are not sources of competitive advantage and, consequently, they are not
imperfectly mobile. On the one hand, if a firm overcomes only the common obstacles, such as
having access to capital and being able to handle technical complexity, it may at best achieve
temporary competitive advantage. If a firm not only overcomes the common obstacles but also
conquers firm-specific obstacles (adequate IT infrastructure, well-trained workers, good inven-
tive for SOEs, and preferred corporate culture), on the other hand, such ERP implementation
may lead to a sustainable competitive advantage. That is, firm-specific resources are much
more difficult and costlier for the competitors to imitate
The two-way arrows linking the two categories of obstacles on the bottom of Figure 2 indicates
that common and firm-specific obstacles may be interrelated and interchangeable in the short
run under special circumstances, such as preferential treatments to certain SOEs by the gov-
ernment and uneven IT infrastructure as a result of various regional policies. While firms may
solve technical complexity (or capital funds) by hiring IT professionals and consultants (or by
obtaining one time loan from the government) in the short run, firm-specific obstacles, many of
which are related to human IT resources or managerial skills, may not be resolved simply by
hiring a new CEO or by reinventing a favourable corporate culture. The ultimate objective of ERP
implementation is to integrate information systems across all functional areas and to pursue a
long-term sustainable competitive advantage. Firms with strong human IT resources are able to:

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 164 X He

1 integrate the ERP databases and business processes more effectively;

2 conceive and develop reliable and cost-effective applications, such as SCM and other
e-business solutions, that support the ERP implementation;
3 communicate and work with business units more efficiently; and
4 anticipate future business needs of the firm and innovate valuable new ERP features before
its competitors do.

5. CONCLUSIONS

Summary of research findings

The RBP model on ERP challenges in China introduced in this research provides a three-tier
decision procedure: ERP benefits, CSFs, and ERP obstacles in pursuit of sustainable com-
petitive advantage. Of the 10 ERP benefits, the top three are:

1 SCM reduces costs and improves quality and speed;

2 ERP and SCM implementations support business strategies; and
3 ERP would enhance the efficiency of SCM,

which aim at improving SCM via ERP implementation. This first condition is essential as the
majority of large Chinese companies are still state-owned and, consequently, the ERP choice
may not be a bona fide business decision if they cannot achieve any of the potential ERP ben-
efits. In addition, this condition advocates that firms in China should be given enough autonomy
to make independent decisions in the best interest of the companies without unnecessary gov-
ernment interferences.
Of the four CSFs with the second-tier condition:

1 Executive support is the key success factor for ERP (Executive support).
2 SCM is an important component of ERP (ERP-SCM vision).
3 ERP is more of a concept than software (ERP concept).
4 BPR is one of the key success factors in implementing ERP (BPR).

The first two, Executive support and ERP-SCM vision, are especially important although enter-
prises in China are encouraged to possess all four CSFs. Whereas CSFs 1 and 4 are con-
sistent with those in the literature, CSFs 2 and 3 are China-specific and reflect the need of SCM
improvements and of fundamental social, economic, and cultural changes. These CSFs sug-
gest that the more CSFs a firm possesses, the more likely it will have a successful ERP imple-
mentation and eventually a sustainable competitive advantage.
The third-tier condition differs a temporary from a sustainable competitive advantage by clas-
sifying major obstacles into either common or firm-specific challenges:

Common: 1 ERP is too expensive for most Chinese enterprises.

2 ERP is too complicated for most Chinese enterprises.
Firm-specific: 3 The main obstacle of ERP is IT infrastructure in China.

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 The ERP challenge in China 165

4 The main obstacle of ERP in China is lack of well-trained workers.

5 The main obstacle of ERP in China is lack of incentives for SOEs.
6 The main obstacle of ERP in China is differing corporate culture.

While overcoming such common obstacles as capital and technical difficulties will provide firms
with temporary competitive advantage in theory, enterprises in China should pay more atten-
tion to firm-specific obstacles. That is, enhancing IT infrastructure, training, incentives for
SCEs, and cultural values would lead firms to a more sustained competitive advantage through
ERP implementation.
Viewed from a RBP, this empirical model highlights three fundamental decision procedures
in dealing with ERP challenges in China: value assessment, implementation prerequisite, and
sustainability. Value assessment and implementation prerequisite are essential and necessary,
but they may not be sufficient in pursuit of sustainable competitive advantage. Sustainability,
however, is often overlooked in China for two reasons. First, firms in China often focus their
attention more on common obstacles than on firm-specific resources regarding ERP chal-
lenges. Consequently, they tend to overemphasize the difficulties of capital availability and
technical complexity, but not to improve firm-specific resources as they should. Second, the
current corporate compensation scheme, coupled with the economic reforms and various
ownership forms, discourages business leaders from positioning themselves for long-term
strategic competitive advantages over their competitors, as it takes years to achieve such firm-
specific resources as IT infrastructure, employee training, incentives for SOEs, and corporate
culture.

Limitations and future research directions

The resource-based model on ERP challenges discussed in this paper has two limitations.
First, it has a relatively small sample size, i.e. it is based upon an executive survey of 150 enter-
prises in China with 79 usable returns. Thus, the resulting RBP model may not represent all
companies in China. Second, as the RBP model is derived specifically for enterprises in China,
it may not be applicable to firms in other nations. As a result, what works in China may not nec-
essarily perform well in a different country.
Future research may focus on: (1) verifying the research findings with large sample sizes; (2)
validating the framework of the RBP model via case studies in selected industries; and (3)
expending the studies to include various countries or for a multinational comparison.

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The ERP challenge in China 167
Biography
Xin (James) He received his PhD in Business Administra-
tion from the Smeal College of Business Administration,
Pennsylvania State University. He is currently Associate
Professor in the Department of Information Systems &
Operations Management, Dolan School of Business, Fair-
field University, USA. Prior to joining Fairfield University in
2000, Dr He had been a faculty member at South Carolina
State University for 9 years. His research interests include
Supply Chain Management, Enterprise Resource Planning
implementation, Just-in-time Production, Total Quality
Management, and Business Process Re-engineering. He
has published in Operations Research, Stochastic Models,
Total Quality Management, American Asian Review, and
Harvard Business School Cases, among others.