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Differentiating weak ties and strong

ties among external sources of
influences for enterprise resource
planning (ERP) adoption
a

Benoit Aubert , Pierre-Majorique Lger & Denis Larocque

a

Department of IT, HEC Montreal, Montreal, Quebec, Canada

Department of Management Science, HEC Montreal, Montreal,

Quebec, Canada
Available online: 07 Dec 2011

To cite this article: Benoit Aubert, Pierre-Majorique Lger & Denis Larocque (2012): Differentiating
weak ties and strong ties among external sources of influences for enterprise resource planning
(ERP) adoption, Enterprise Information Systems, 6:2, 215-235
To link to this article: http://dx.doi.org/10.1080/17517575.2011.638728

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Enterprise Information Systems

Vol. 6, No. 2, May 2012, 215235

Dierentiating weak ties and strong ties among external sources of

inuences for enterprise resource planning (ERP) adoption
Benoit Auberta, Pierre-Majorique Legera* and Denis Larocqueb
a

Department of IT, HEC Montreal, Montreal, Quebec, Canada; bDepartment of Management

Science, HEC Montreal, Montreal, Quebec, Canada

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(Received 7 March 2011; nal version received 29 October 2011)

Enterprise resource planning (ERP) systems represent a major IT adoption
decision. ERP adoption decisions, in the chemicals and allied products sectors,
were examined between 1994 and 2005. Networks of strong ties and weak ties
partners are investigated. Results show that neighbouring companies linked with
strong ties can have an inuence on organisations making such adoption decision.
Past decisions made by major trading partners have a signicant inuence on the
decision to adopt an ERP system for a given organisation. This reects the
complex nature of the knowledge required for such adoption.
Keywords: ERP; adoption; network externalities; ties; local mimemism

1.

Introduction

Enterprise Resource Planning (ERP) systems are software packages that enable the
integration of transaction-oriented data and business processes throughout an
organisation (Markus and Tanis 2000). ERP systems are a common type of
technology in large organisations (Liang et al. 2007). Their diusion was accelerated
during the 1990s because they were seen by many organisations as a way to solve the
Y2K problem, and slowed down signicantly after 2000 (Eschinger et al. 2000).
After a pause, the market returned to growth from 2004 until the nancial crisis in
2008. Growth is expected again in the coming years (Rizzuto et al. 2010). Several
suppliers are competing in this market. SAP and Oracle are the two largest players
(Sullivan 2006). It is sometimes dicult to understand why a specic ERP vendor is
selected. Each one has a history of dicult implementations as well as successes
(Bernard et al. 2004).
When implementing software, organisations must rst make the decision either
to adopt the commercially available software or to develop an in-house application,
and then proceed with its implementation. Usage starts once the software is
implemented. Past research on ERP adoption has mostly looked at the factors
explaining the usage of the system, thus focusing on elements at the individual level
inuencing users (Hwang 2005, Uzoka et al. 2008). The current research analyses the
initial decision of the organisation to adopt an ERP.
Previous researches have outlined that external sources of inuence (e.g. business
partners such as customers and vendors) are likely to inuence the decisions process
*Corresponding author. Email: pml@hec.ca
ISSN 1751-7575 print/ISSN 1751-7583 online
2012 Taylor & Francis
http://dx.doi.org/10.1080/17517575.2011.638728
http://www.tandfonline.com

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B. Aubert et al.

and outcome (De Burca et al. 2005). The adoption of ERP systems is considered to
be an organisational decision involving many stakeholders and the reliance on
dierent information sources (Chang et al. 2008). These authors looked at external
sources as a whole, without discriminating between them. The current study adds to
this line of research by investigating how dierent types of external sources of
information inuence the adoption of ERP software. Specically, the article answers
the following question: What are the respective eects of two types of external
sources of information on the probability to adopt ERP software?
Two types of external sources of information are likely to inuence the ERP
adoption decision process: weak ties and strong ties. The rst one represents
organisations with which a given rm has infrequent or distant linkages. The second
one encompasses organisations that may constrain the prots generated by the rm
(like clients or suppliers) (Strang and Soule 1998). This article uses a longitudinal
network analysis approach and survival analysis to assess the inuence of external
sources on the conditional probability of ERP adoption. Results show that strong
ties, measured by assessing the past decisions of the trading partners, have a
signicant inuence on the ERP adoption decision. However, weak ties, measured by
an ocer or an executive serving on the Board of Directors of multiple corporations also refer to as board interlocks or interlock directorat (Penning 1980) and
memberships to professional associations, do not show a signicant inuence. This
pattern of inuence is likely due to the characteristics of ERP systems: the selection
and implementation of these systems require complex and tacit knowledge, which is
more associated with strong ties relationships than weak ties ones. Therefore, results
suggest that the inuence of dierent sources of information might depend on the
type of technology considered.
Therefore, at the theoretical level, the article complements the research on
adoption conducted at the individual level by investigating organisational-level
elements. While all the inuences coming from the characteristics of the innovation
and the individual perceptions exist, the article shows that other external elements
are also at play when adopting an ERP system. Information coming from strong-ties
partners shows a signicant inuence on the probability that a rm will adopt an
ERP system.
The results are also relevant at a practical level. Managers have to be aware of the
dierent sources of information available to them, and how these are inuencing
their decisions. From a suppliers perspective, understanding how managers get
information is key to adequate targeting of marketing eorts.
2.

Theoretical background

As mentioned in Section 1, ERP adoption has been studied at dierent levels of

analysis and through various lenses. This study focuses on the organisational level of
analysis. The rst part of the theoretical section reviews the adoption decision itself,
underlying the fact that there are two decisions which a rm must make: the rst one is
to adopt the organisational innovation that is an ERP system (generic level), and the
second one is to adopt an ERP software package (specic level). The subsequent
sections present the development of the hypotheses. Section 2.2 outlines the research
suggesting that ERP technology adoption might be inuenced by imitation. Then,
Section 2.3 looks at the sources of external information that can also inuence the ERP
adoption decision. These sources are separated into two types: strong and weak ties.

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2.1.

217

The ERP adoption decisions

The investigation on an ERP adoption, at the organisational level, enables a

better understanding of initial decision to select and implement an ERP system.
This provides a dierent perspective than looking at the system usage and peoplecentred factor (Venkatesh et al. 2003, 2007, Benbasat and Barki 2007,
Vathanophas and Stuart 2009, Wickramasinghe and Gunawardena 2010). As
described by Markus and Tanis (2000), the implementation process of an ERP is
long, and the usage of the system happens much later than the decision to
implement an ERP and the selection of the software. For example, Aral et al.
(2006) describe the case of Scientic Atlanta which decided to purchase an ERP in
1992, while the implementation only started in 1995, and the go-live occurred in
1997. This suggests that one should consider the decision to adopt an ERP, and
the selection of a given ERP (rather than usage) to understand the early steps of
the ERP adoption process.
This implies that it is valuable to investigate the adoption of ERP systems at the
organisational level. Organisational level studies enable the examination of a
dierent decision than the system use, and provide understanding on a decision that
is precursor to use.
Looking at the adoption of an ERP system implies analysing two dierent
decisions. The rst one is the decision to adopt the innovation that represents an
ERP system. An ERP system is a type of organisational innovation (Chang et al.
2008), just like Total Quality Management (TQM) was a type of organisational
innovation (Ehigie and McAndrew 2005). The second decision is the software
purchase itself. Once a company has decided to adopt an ERP solution, it has to
decide which one to implement. There are several vendors oering ERP systems
(Violino 2008).
In order to understand these two decisions, it is important to consider the general
diusion pattern of the technology as well as the network in which the adopting
rms evolve. The network is one of the characteristics of the innovators (Wejnert
2002). Using a network perspective to characterise the diusion process does not
mean that the intrinsic characteristics of the innovation itself do not play a role in the
decision to adopt, or that an environmental context is not important (the other two
components of diusion research according to Wejnert 2002). However, understanding if specic types of networks have an inuence on the decision to adopt an
ERP system might explain the specic pattern of diusion observed in some
industries.
2.2.

Isomorphism

Research has shown that some level of isomorphism could be observed between
organisations. Organisations tend to imitate each others. This behaviour could be
attributed to the existence of network externalities or even simply to management
fashion.
Abrahamson (1996), looking at the adoption of quality circles, showed that
organisational innovations could be the object of management fashion. This was also
observed by Deephouse (1996) looking at the asset allocation strategies of banks.
The spread of these management trends could be encouraged by popular discourse
(Abrahamson and Fairchild 1999). The adoption of these fashionable management

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B. Aubert et al.

practices lead to increased reputation (more admired, perceived higher quality

management, perceived more innovative) for the adopting rms (Staw and Epstein
2000) and legitimacy (Deephouse 1996). However, it did not always lead to increased
performance (Staw and Epstein 2000). This suggests that the adoption of ERP
technology could be seen as fashionable at some point in time and that would
encourage diusion.
Another element that could encourage diusion is the existence of network
eects. Diusion of software products can be prone to network eect. This eect is a
tendency towards self-reinforcing and even extreme diusion pattern due to network
externalities (Abrahamson and Rosenkopt 1997, Shapiro and Varian 1998).
Network externalities occur when the perception of product utility is tied to the
number of adopters (Katz and Shapiro 1985). At the individual level, the role of
network externalities in the IT acceptance has well been established (Brynjolfsson
and Kemerer 1996, Wang et al. 2005). At the organisational level, the source and role
of network externalities in the adoption and usage have also been shown
(Gowrisankaran and Stavins 2004).
While all IT platforms are susceptible to positive network externalities, some
technologies are more prone than others (Fichman 2004). Susceptibility to positive
network externalities is dened as the extent to which a technology increases in value
to individual adopters with size of the adoption network. This susceptibility is
inuenced by factors such as scale economies in development and production,
learning eect, knowledge sharing, technological interrelatedness and standards.
These elements have been examined by a number of authors, such as Arthur (1988),
Schilling (1998), and Shapiro and Varian (1998).
ERP systems appear subject to positive network eects for several reasons. These
software packages have matured over the last 20 years and have rened their
industry-specic functionalities. The more ERP systems were implemented in a
specic industry, the better they might have become to support sophisticated
business process. Not only late ERP adopter should have beneted from more
robust and richer business applications, but also the earlier adopter should
eventually benet from these product innovations when they upgrade to newer
versions. Also, a community of users and consultants in ERP systems has grown
over the last two decades. They have developed tools, accelerators, and methods to
implement software more eciently, thus reducing the cost of acquisition of ERP
software (Tan and Soejarto 2010).
The elements presented above suggest that network externalities would be
stronger when selecting a specic ERP system rather than simply adopting an ERP
technology. A company choosing to implement ERP technology, but selecting an
unpopular ERP software package probably, would not benet from network
externalities as strong as one adopting a very popular one.
Therefore, ERP technology adoption is likely to be inuenced by imitation
behaviour and encouraged by the existence of network externalities. Organisations
observing their peers might adopt similar organisational innovations. This leads to
the rst two hypotheses: one assessing the generic characteristics, and one
investigating the adoption of an ERP software package specically.
H1a (Generic): The probability of adopting the ERP technology will be positively
inuenced by the number of companies having adopted the ERP
technology in the industry.

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H1b (Specic): The probability of adopting a specic ERP software package will be
positively inuenced by the number of companies having adopted this
specic ERP software package in the industry.

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2.3. Sources of inuence for ERP adoption

While pure isomorphism may exist, it seems that rms in an industry do not simply
follow each other in a herd-like manner (Garcia-Pont and Nohria 2002). Firms
watch the actions taken by organisation around them and adjust their behaviour to a
local reference group. This was labelled local mimetism (Garcia-Pont and Nohria
2002). The sources of inuence may be separated into two groups: weak ties and
strong ties. The possible inuences of these two groups, along with the
corresponding hypotheses, are detailed in the paragraphs below.
2.3.1.

Weak ties

The inuence of weak ties has been much studied in management. Weak ties have
been dened as ties for which there is low commitment between parties (Granovetter
1973), and ties that are non-contractual and not frequent (Bergenholtz 2011). Weak
ties are expected to be very informative because information coming from weak-tie
partners is presumed to be less redundant than information coming from partners
with whom the rm has strong ties (Granovetter 1973). Weak ties take dierent
forms: sharing one or more board members (board interlocks), professional
organisations, and other types of boundary spanning arrangements. Weak ties
have been shown to inuence the diusion of administrative innovations.
Board interlock has been widely studied as a communication mechanism
(Mizruchi 1996) and as a mechanism underlying interorganisational imitation
(Shropshire 2010). Board interlock emerges when an executive or a director is
appointed to the board of two or more rms (Burt 1980). Board interlock is
considered an information channel (Haunschild 1993), conduits of practices
(Shropshire 2010) and a way to access skills, resources and legitimacy (Pfeer and
Salancik 1978). The diusion of many organisational innovation has been studied
through the lens of board interlocking, such as multidivisional form (Palmer et al.
1993) and investor departments (Rao and Sivakuram 1999). Studies also report
evidence that rms imitate business practices of partners with which they share
board members: poison pills (Davis 1991), golden parachutes (Davis and Greve
1997), decision processes (Westphal and Fredrickson 2001) and stock repurchase
(Bohman 2006) are all examples of interorganisational imitations of business
practices.
Verville et al. detail the involvement of the Board, across several large
organisations, in the selection and approval of ERP providers (Verville and
Halingten, 2002, 2003, Verville et al., 2005). Austin et al. (2002) also describe the
importance of the board in the decision when legacy systems needed to be replaced
by an ERP at Cisco. The involvement of the Board supports the examination of
board interlocks since they represent a relevant source of information through weak
ties, since board members are generally involved in the decisions in order to adopt an
ERP system.
The second form of weak ties the professional organisations has also been
studied as a conduit for information and a factor explaining diusion of innovation.

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B. Aubert et al.

Swan and Newell (1995) showed that interorganisational networks (like professional
organisations) are kept by boundary spanners individuals, gathering information
and knowledge about the innovations. Firms belonging to the same professional
organisations tend to adopt similar management innovation, like production and
inventory control technology (Swan and Newell 1995). Boundary spanning
individuals have also been found to inuence new organistion forms like partnerassociate structure in Dutch professional service rms (Lee and Pennings 2002) and
charitable contributions practices (Galaskiewicz and Wasserman 1989).
In line with these ndings, we can post the following hypotheses (generic and
specic):

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H2a (Generic): The probability of adopting ERP technology will be positively

inuenced by the number of weak ties with companies having adopted
the ERP technology in the industry.
H2b (Specic): The probability of adopting a specic ERP software package will be
positively inuenced by the number of weak ties with companies having
adopted this specic ERP software package in the industry.

2.3.2.

Strong ties

Strong ties, under dierent forms, have been studied and showed an inuence on the
adoption of organisational innovation. Strong ties are ties that involve high
frequency, often contractual elements (Bergenholtz 2011), and that are associated
with a commitment (Granovetter 1973). For example, adoption of TQM was studied
in the veteran health administration. Hospitals are more likely to adopt when other
hospitals with which it has patient referral relationships have adopted TQM. These
relationships are a source of communication (Young et al. 2001). In a dierent
context, Basaglia et al. (2009) showed that normative pressure coming from other
rms with whom the organisation did business inuenced the likelihood of adopting
VoIP technology. These authors also found a coercive inuence coming from parent
companies for the same technology. Teo et al. (2003) found that coercive and
normative pressures from customers and suppliers positively increase the intention to
adopt nancial electronic data interchange. Greve (1998), looking at radio station
formats, also observed that adoption was inuenced by parent organisations and
found that events reported by corporate contacts seemed more relevant than mass
broadcasted events.
In line with these ndings, we can post the following hypotheses (generic and
specic):
H3a (Generic): The probability of adopting ERP technology will be positively
inuenced by the number of strong ties with companies having adopted
the ERP technology in the industry.
H3b (Specic): The probability of adopting a specic ERP software package will be
positively inuenced by the number of strong ties with companies having
adopted this specic ERP software package in the industry.

Two arguments are generally given to explain the inuence of ties on the decision
process: legitimacy and information conduit arguments. The legitimacy argument is
based on what is usually labelled institutional theory (DiMaggio and Powell 1983).
An institution can be dened as a socially shared pattern of behaviour (or thought)
(Dequech 2006). Institutions create pressure for individuals. The individuals enforce

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221

institutional patterns, which are reproduced, and reinforce the institution. This leads
to isomorphism. Benders et al. (2006) suggested that ERP systems might be a
candidate technology for isomorphic pressures. From the literature review, both
weak and strong ties seem to create similar types of pressure.
However, when looking at the information conduit argument, it appears that
strong ties and weak ties do not carry the same type of information. Because they are
not as frequently used, and because they might link parties that are less similar, weak
ties might carry more new information than strong ties (Strang and Soule 1998).
Strong-tie partners might relay very little new information compared to weak-tie
ones, who generally have access to dierent networks.
In addition, strong ties are expected to be more ecient to carry complex
information. Oerlemans and Knoben (2010) found that organisations with weak or
strong ties were signicantly more innovative than organisations with no ties. The
eect was stronger for organisations with strong ties. In a similar vein, Kijkuit and
van den Ende (2010) found that in the context of tacit and complex information,
strong ties were better than weak ties to ensure successful development of ideas.
Therefore, when assessing ERP adoption, a wide range of factors needs to be
taken into account, from the functionality of the system to the nancial strength of
the software provider. The complexity of ERP systems is high (Rettig 2007). The
tacit knowledge required for the ERP implementation is important (Jones 2005) and
the tacit knowledge required to implement the changes associated with ERP systems
is also important (Hislop et al. 2000). This would suggest that strong ties, better
adapted to complex and tacit information, would be more inuential than weak ties
when assessing ERP adoption. This suggests a last pair of hypotheses.
H4a (Generic): The eect of strong ties on the probability of adopting ERP technology
will be stronger that the eect of weak ties.
H4b (Specic): The eect of strong ties on the probability of adopting a specic ERP
software package will be stronger that the eect of weak ties.

3.

Research method

This article uses a longitudinal network analysis approach to investigate the

inuence of external sources on the diusion of enterprise system. Network data
diusion from the ERP systems chemicals and allied products sector, between 1994
and 2005, was used to test the hypotheses. Two outcomes are of interest: the time to
rst adoption of any ERP software packages and the time to rst adoption of a
specic ERP software package.
Building on the methodology proposed by Wasserman and Katherine (1997) and
Knoke and Yang (2008), the following sections describe the network population, the
boundary specication, the data collection and the operationalisation of the research
variables.
3.1. Network population and boundary specication
The chemicals and allied products sector (SIC code 28) was selected based on the
strong diusion rate of enterprise systems in this industry (Harte-Hanks 2008). This
sector was also chosen for its strong inter-organisational relationships and high
resources dependency between rms in this domain (Okamura and Vonortas 2006).

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For this study, we have selected public rms in the chemicals and allied products
sector with a minimum level of sales, as registered by CompuStat. A lter was set at
$100 million US to exclude rms that would not likely have enough resources to
implement one of the mainstream ERP systems (and it would make it impossible to
track which software these rms would select). Firms under that threshold were
more likely to adopt less known software packages, targeted towards small and
medium size companies, especially during the period of the data collection (Deep
et al. 2007). Taking into account mergers and acquisitions during the observed time
period, a total of 116 rms were considered for the investigation.
3.2. Data collection
Network and attribute data were collected using multiple archival sources. The lower
boundary for network data was set to 1994 as public nancial ling is not
electronically searchable before that date. The objective of this data collection was to
build a complete one-mode (i.e. only one type of entity across the network) and
undirected network with the population of 116 nodes for each year, between 1994
and 2005. The range of data used is wider than the one used by Chang et al. (2008).
As mentioned in the literature review, strong ties are frequent and usually
contractual (Bergenholtz 2011). Sustained client-suppliers relationships t this
denition. Strong ties were identied using EDGAR (Electronic Data-Gathering
Analysis, and Retrieval of the US Securities and Exchange Commission) and
SEDAR (System for Electronic Document Analysis and Retrieval of the Canadian
Securities Administrator). We have searched for evidence of strong ties relations in
nancial public ling from Mandatory disclosure of customer from whom more than
10% of revenues are derived. Annual ling of every company, between 1994 and
2005, was searched for evidence of customer dependencies.
Weak ties are not highly frequent and non-contractual. As mentioned in the
literature review, board interlocks have been used frequently to assess weak ties
between organisations, as well as membership to professional organisations (Swan
and Newell 1995). EDGAR and SEGAR databases were used to nd evidence of
board interlocks (i.e. director members from two dierent boards at the same
time). We have extracted from the denitive proxy statement (DEF 14a) and the
annual report required by the US Securities and Exchange Commission (10-K) the
list of board members for all rms for every year of the investigation. While
controlling homonyms (by using the date of birth of the directors) we were able to
identify board interlocks. Reliability of the board interlock was veried using other
data sources, such as the Directory of Directors, from the Financial Post.
Unstructured databases (source of data which mostly include free text) were also
used to gather evidence of both strong and weak ties. Using PR Newswire (available
through Thomson-Dialog), we have searched for co-occurrence in press release
companies in the network and extracted the press releases containing the names of at
least two companies, as well as the words agreement* or associate* cited in the
text. All resulting press releases (total 41,372) were extracted with an API provided
by Thomson-Dialog (http://www.dialog.com/), and following Cheney (1990) guidelines read by two persons to verify that there was evidence of an inter-organisational
relationship between two companies. A code book with denition and examples in
each of the categories was provided to the two persons. When evidence was found in
a press release, relationships were discussed by the two individuals until consensus on

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Figure 1.

223

Numbers of ties per year.

the classication between strong and weak ties was reached. Figure 1 provides the
number of strong and weak ties for every year between the 116 companies in our
population.
Finally, data was collected on the adoption of ERP systems by each of the 116
rms in the network. The collection was originally created by consulting the CI
Technology online database, made available by Harte-Hank. This database provides
a description of the IT landscape for each of the rms in the sample. It should be
noted that, because this is a modular technology, a rm may choose to adopt more
than one ERP. We choose to focus our investigation on the four ERP systems that
eventually became standards within the industry: SAP, Oracle, Peoplesoft, and JD
Edwards (Gaughan and Shepherd 2010).
To validate and complete this dataset, PR Newswire was again consulted. All
press releases, between 1994 and 2005, containing the co-occurrence of (1) the name
of one of the four technologies and (2) the name of one listed rms were extracted
and validated as previously dened. A validation with Google, Google News
Archive and ABI/Inform (ProQuest) was done. Sector experts were consulted to
validate the adoption data.
Figure 2 illustrates the cumulative ERP adoption in the network. Adoption is
dened here as the earliest year for which we found evidence of the intention of rms
to adopt an ERP. The adoption curves also take into account that multiple ERPs
can be adopted by the same rm at dierent points in time.
3.3.

Operationalisation of the research variables

The strong and weak ties inuences are measured by the network exposure to the
technology, as dened by Valente (1995). Valente (1995) denes exposure as the
proportion of adopters in a network at a given time. Therefore strong ties exposure
is measured as the proportion of adopters with which one has a strong tie
relationship at a given time. As for weak ties, it corresponds to the proportion of
adopters with which one has weak tie at a given time. Because the
network dynamically changes every year and that cumulative ERP adoption
increases over time, strong ties and weak ties will vary every year based on the state
of the network.

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B. Aubert et al.

Figure 2.

Cumulative adoption of the four main ERP systems.

To control for the intrinsic value of the technologies, we also took into account
the cumulative percentage of adopters. Because of the industrial specicity of this
technology, we calculated this percentage of adopters at the three-digit SIC level. To
account for rm size, the log of yearly sales will be also included in the models.
Finally, a control variable was introduced for time (linear, quadratic and cubic) to
control for the impact of unmeasured historical events.
4.

Results

Yearly data, between 1994 and 2005, were available for a nal sample provided by
113 rms. Among the rms that had not adopted an ERP at the beginning of 1995,
62 experienced a rst adoption by the end of 2005. Moreover, 52 rms experienced a
rst adoption of SAP by the end of 2005. Adoption of the other vendors products
were: 20 for Oracle, 9 for JD Edwards and 6 for Peoplesoft.
The time to rst adoption to any ERP system (model 1) and a specic ERP
(model 2) is the dependent variable. Based on the cumulative adoption of the 4 ERP
systems under investigation, the total number of adopters for Oracle, Peoplesoft and
JD Edwards is too small to perform a reasonable analysis; only SAP adoption will
therefore be used in model 2. One key characteristic of time-to-event studies is that
the event of interest is typically not experienced by all subjects. This is the case in our
study since some rms have not yet adopted by the end of the study period. The time
to rst adoption of such rms is said to be right-censored and proper care must be
taken to incorporate them in the analysis. This is why the study of time-to-event
outcome is usually performed with survival analysis modelling (Hosmer et al. 2008)
which, unlike usual linear regression models, can properly incorporate rightcensored observations. Moreover, the adoption status is assessed yearly and this is
why a discrete-time model is in order. Finally, the values of four covariates,
adopters, strong ties, weak ties and log of yearly sales, change with time (from year
to year in this study). This is why we need a model that can include such time-varying
covariates.
In this study, we will use a particular discrete-time survival analysis model,
specically, the discrete-time proportional odds (DTPO) model (Singer and Willett

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1993). This model is readily adapted to handle a time-to-event outcome measured on

a discrete scale when right censoring is present. Moreover, the DTPO model is very
exible to model the eect of time and can easily include time-varying covariates.
Assume that K is the number of time periods available. To dene the DTPO
model, let Ui be the real time-to-event (rst adoption), and hi(j) P(Ui j j Ui  j),
j 1, . . . , K, be the hazards for rm i. With discrete time data, the hazards are
simply conditional probabilities. More precisely, the hazard measures the probability
that the event occurs at time j, given it did not occur before. Assume that p covariates
are available and denote by Xri(j) the value of the rth covariate at time j for company
i. In its most general form, the DTPO model relates the hazards to the covariates as
follows:


hi j
Log
a1 D1i j    aK DKi j b1 X1i j    bp Xpi j
1  hi j
where the Dki(j) s are indicator variables indexing the time periods that are dened by
Dki(j) 1 if k j and 0 otherwise. The intercept parameters a dene the baseline of
hazard in each time period and the b coecients describe the eects of covariates on
the baseline hazard function. For instance, a positive (negative) value for a given b
means that the probability of experiencing the event at any given time, given it was
not experienced before, increases (decreases) with the value of the corresponding
covariate. These parameters can be estimated by maximum likelihood with logistic
regression software by using an appropriate transformed data set as explained in
Singer and Willett (1993). The GENMOD procedure of the SAS/STAT software was
used to t the model (SAS institute 2003).
In addition to variables modelling the eect of time, four covariates are included
in the models. One of them act as control variables; log of the yearly sales of the rm
(sales). The three others will be used to test the hypotheses of interests: (i) the
percentage of adopters of the ERP at the same SIC level for a given year (adopters),
(ii) the proportion of adopters with which one has weak ties a given year (weak ties)
and (iii) the proportion of adopters with which one has strong ties a given year
(strong ties). In order to reect more accurately the conditions of the rm, when a
decision about the adoption is made, the covariates are lagged by one period (year).
Thus the values of the covariates a given year are used to predict the adoption the
following year.
By incorporating one parameter for each time period, the general DTPO model
allows the eect of time to be exibly modelled. However, this modelling avenue is
impractical in this study. A more parsimonious specication is needed because of
the few numbers of events (62 for ERP adoptions and 52 for SAP adoptions).
Modelling the eect of time with a cubic polynomial produces models that are not
signicantly dierent from the ones with one parameter per time period. This reduces
by seven the number of parameters in each model and reduces the number of events
required to estimate the model. Consequently, the two models that were tted are
(the indices were omitted for simplicity but the covariates are obviously timevarying):


h
Log
a0 a1 time a2 time2 a3 time3 b1 logsales b2 adopters
1h
b3 weak ties b4 strong ties

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B. Aubert et al.

where h is the probability of a rst adoption of any ERP (rst model) or a rst
adoption of a specic ERP, i.e. SAP (second model) one year given that no such
adoption occurred before. The variable time is dened as (year-1993).
The parameters estimates for the two models are presented in Table 1.
The log (sales) control variable is not signicant in any model suggesting that
rm size has no eect on the probability of adoption. As for the adopters variable,
capturing the cumulative adoption, it is signicant (p 0.045 and 0.021) in both
models. In other words, the critical mass of existing adopters of ERP (SAP) has a
positive inuence on the adoption of ERP (SAP). The hypotheses H1a and H1b are
thus supported. Both models also show positive inuences of strong ties (p 0.007
and 0.008) on the probability of adoption of ERP (SAP), supporting hypotheses H3a
and H3b. Thus, an increase in the variable strong ties is associated with a higher
probability of adoption of any ERP as well as the specic ERP SAP. However, no
positive eects (in fact the estimated parameters are negatives) of weak ties
(p 0.651 and 0.835) on the probability of adoption of ERP (SAP) are found.
Consequently, hypotheses H2a and H2b are not supported. To verify hypotheses H4a
and H4b, tests that the eect (i.e. the b) of strong ties is greater than the one of weak
ties were performed for both models. The p-values are 0.044 and 0.031, indicating
that both hypotheses are supported.
From a statistical point of view, the ratio of number of events (62 and 52 for
models 1 and 2) to the number of parameters (8) is small. Nevertheless, signicant
eects were obtained for two out of three primary variables. However, the fact that
weak ties was not signicant should not mean that such a variable is not linked to the
ERP adoption process. It is plausible that a smaller eect exists and such an eect
could be detected with a larger sample size (especially one with more events).
5. Discussion
The objective of this article is to investigate, from a longitudinal perspective, the
dierent types of external sources of inuence behind the adoption of an innovation;
Table 1. Discrete-time survival models for the time to rst adoption of any ERP system and
the time to rst adoption of SAP.
Model 1 - Any ERP
(62 adoptions)

Model 2 - A specic ERP;

SAP (52 adoptions)

Beta

SE

p-value

Beta

SE

p-value

Intercept

74.881

1.390

0.001

77.112

1.707

50.0001

Control variables
Time (linear)
Time (quadratic)
Time (cubic)
Log (sales)

1.568
70.299
0.015
70.005

0.758
0.122
0.006
0.032

0.039
0.014
0.011
0.871

2.511
70.449
0.022
0.009

0.887
0.140
0.007
0.035

0.005
0.001
0.001
0.803

Primary variables
Adopters*
Weak ties*
Strong ties*

1.745
70.236
1.476

1.025
0.607
0.592

0.045
0.651
0.007

2.655
70.778
1.596

1.307
0.798
0.660

0.021
0.835
0.008

Note: For the three primary variables, the * indicates that the p-values are for the one-sided hypothesis of
a positive eect.

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in this case an ERP system. One of its original contributions, when compared to past
ERP adoption and diusion studies, is that it builds on a dataset of repeated
observation for the same rms over a 12-year period. Past researches, such as Davis
(1989), Venkatesh (2003, 2007), outlined the inuence on the characteristics of the
innovation and the perceptions of the individuals on the adoption decision, mainly
looking at the use of the system. While these factors have widely been studied, little
evidence of external sources of inuence on ERP adoption, coming from both
weak and strong ties, over an extended period of time, had been reported in the
literature.
5.1. Discussion of the results
Three main types of inuences were evaluated in this study: the overall adoption rate
in the industry, the weak ties with adopting organisations, and the strong ties with
adopting organisations. Both the overall adoption rate of the industry and the
presence of strong ties with adopting organisations were found to be signicant in
explaining the adoption of ERP technology (and specic software packages).
The rst set of hypotheses stated that organisations surrounded by other
organisations having adopted ERP technology will be more likely to adopt the
same technology. This adoption happens even if there is no specic linkage
between the organisations. This inuence has been found signicant for both the
decision to adopt ERP technology and the decision to adopt a specic software
package. This could be attributed to the eect of fashion in management practice,
as proposed by Abrahamson (1996). For example, ERP was seen by many
companies as the way to solve the Y2K problem (Brown et al. 2000); may be a
trend spread among organisations at dierent points in time explaining the
adoption of the innovation. This explanation is complemented by the likely
presence of network eects. Once adoption of the technology started, the
peripheral industries for software services, experienced integrators, support, and
complementary software could develop itself. Due to network externalities,
subsequent adoptions are more valuable than the rst ones since the abundance
of services were likely to make the ERP systems easier to implement, and more
useful because of the various complementary assets that were available for later
adopters. In fact, in the presence of strong network externalities, one could almost
see the adoption as a form of self-fullling prophecy. Once the market has started
to adopt a given technology, it becomes the most attractive and protable
technology because of the externalities created, even if it was not the best
technology when the rst adopter made its adoption decision.
When considering the inuence of strong ties on the adoption decision, the eects
were signicant for both the decisions to adopt an ERP system and for the decision
to select a specic software package. Strong ties are supply chain linkages. Davis
(1996) showed that these relationships had very little overlap with board interlocks
(weak ties). Therefore, these two sets of ties are really measuring a dierent set of
relationships. Organisations linked through supply chain relationships with partners
having adopted an ERP system had a signicantly higher probability of adopting
ERP technology, and a signicantly higher probability of adopting the same brand
of ERP system than their supply chain partners. In other words, it is likely that the
decision made by a trading partner plays a signicant role in the nal outcome of the
organisations adoption decision.

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B. Aubert et al.

This inuence of strong ties partners indicates that these partners are likely to
carry information that is not available in the public domain, or that is it valued
dierently. Because the eect of strong ties is signicant, we can suppose that these
communication channels provide information that was not available through general
information about adoption trends. This rst explanation would mean that the
strong ties provide additional information for ERP adoption decision.
The second explanation would be that these partners are considered more
credible than the generic sources of information. In this case, even if the information
relayed is not necessarily dierent from the information generally available, it has an
inuence on the adoption process because the source of information is considered
more reliable.
Finally, H4 conjectured that strong ties would be signicantly more inuential
than weak ties for explaining the adoption decision (for both the decision to adopt
ERP and a specic software package). H4 was supported. When trying to understand
this result, the characteristic of the information carried between the partners is the
most likely explanation. As mentioned before, the information required to make a
decision like an ERP adoption is complex and often tacit. It has long-term
implications. This type of information is best carried by strong-tie partners
(Bergenholtz 2011). In this case, the originality of the information provided by
weak-tie partners might not be as inuential.
This would suggest that the information required to inuence the adoption of
ERP technology may be about the ways to implement the technology (the how) as
much as information about the technology itself (the what). The information about
the technology is probably simpler, and could be transmitted by weak-tie partners.
However, it is reasonable to think that having an understanding of what an ERP can
do is not sucient to adopt it. A company would try to understand how to
implement the technology before undertaking such a risky venture. Understanding
how to implement an ERP system requires complex and tacit knowledge. Therefore,
the type of knowledge required might explain why the strong-tie partners were more
inuential than weak-tie ones.
The results summarised in Table 2 support most of the hypotheses. The
hypotheses associated with weak ties were not supported.
The analysis shows that many elements, in addition of the innovation
characteristics and the perceptions of the adopter, inuence the adoption decision.
The longitudinal approach used in this study has allowed the inclusion in the model
of the inuence of time underlying the diusion process.
These elements increase the strength of the results. By including a time eect in
the model, the signicance of the inuence of the overall adoption rate in the
industry (H1) and the inuence of strong ties (H3) means that external sources have a
signicant inuence on the adoption decision, over and above the inuence of
historical events (e.g. Y2K and Post-2000 investments slow down in IT).
The longitudinal network analysis has also allowed taking into consideration
the dynamic nature of the linkages between the rms. Because business
relationships are likely to change over time, looking at a cross section approach
to study external pressure might under evaluate or over evaluate the inuence of
certain business linkages on the overall adoption process. By building a complete
and dynamic network over the full window of analysis, for each year of the
sample, our results account for the dynamics evolution of the industry under
investigation.

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Table 2.

Summary of the results.

Hypotheses
H1a
H1b

H2a

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H2b

H3a
H3b

H4a
H4b

Results
The probability of adopting ERP technology will be positively
inuenced by the number of companies having adopted ERP
systems in the industry.
The probability of adopting a specic ERP software package
will be positively inuenced by the number of companies
having adopted this specic ERP software package in the
industry.
The probability of adopting ERP technology will be positively
inuenced by the number of weak ties with companies
having adopted ERP systems in the industry.
The probability of adopting a specic ERP software package
will be positively inuenced by the number of weak ties
companies having adopted this specic ERP software
package in the industry.
The probability of adopting ERP technology will be positively
inuenced by the number of strong ties with companies
having adopted ERP systems in the industry.
The probability of adopting a specic ERP software package
will be positively inuenced by the number of strong ties
companies having adopted this specic ERP software
package in the industry.
The eect of strong ties on the probability of adopting ERP
technology will be stronger that the eect of weak ties.
The eect of strong ties on the probability of adopting a
specic ERP software package will be stronger that the eect
of weak ties.

Supported
Supported

Not supported
Not supported

Supported
Supported

Supported
Supported

5.2. Limitations
There are some limitations in this study. First, only one industry was considered.
Therefore, it is impossible to assess if there are industry-specic eects. It is likely
that the strong ties inuence would be observed in all the industries in which the
value chains of clients and suppliers are strongly linked. Maybe there are industries
where companies would be less interconnected through strong ties. In this case, it is
not impossible to think that weak ties could play a signicant role. It would be
valuable to reproduce this study with a sample from an industry with dierent
characteristics.
The ties observed in this study were between rms in the same industry. While
such links exist and were in sucient number to study them, they are not the
only ones that could have been observed. It is possible that other companies,
outside the industry, have links with the companies in our sample (both strong
and weak ties). The links studies are therefore a subsample of the total number
of links for each company. It would be interesting to verify if links with rms
outside of the industry have dierent characteristics than the ones inside the
industry.
Finally, the sample size, constrained by the available data, limits the
renement of data analysis. For instance, it would be interesting to test if the
pattern observed for the rms selecting SAP as their software is the same as the
pattern observed for rms selecting dierent software providers. A larger sample

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B. Aubert et al.

size would also have enabled to test more nely the dierences between generic
ERP adoption and the choice of specic software packages. In addition, a larger
sample size would enable the separation of suppliers and clients among strong ties
into two dierent categories. It would reveal if the adoption decision is inuenced
dierently by upstream or downstream trading partners. It could help predict
future behaviours of rms, by rening the ow of adoption in a given industry.

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5.3.

Avenues for future research

The results also suggest many areas for future research. First, the adoption process
should be investigated. This research has shown the inuence of external factors.
However, it did not seek to understand how this inuence was operating in the
organisation. Case studies could reveal if this inuence is explicit, for instance if large
trading partners openly suggest the adoption of a specic technology to their
collaborators, or if it is an inuence that is occurring indirectly.
Second, other types of software adoption should be investigated. For instance,
one should investigate if this pressure could be in part related to, or strengthened by,
inter-organisational characteristics of some ERP extensions such as supply chain
management (SCM) software. The need for the type of software could inuence the
decision of trading partners who need to collaborate by exchanging information ow
at various levels and make collaborative decisions at the value chain level. On the
other hand, software that is not as tightly linked to business processes should be
studied. Maybe the inuence of strong ties relationships observed in this study is due
to the process orientation of ERP systems. It could generate pressure from trading
partners. If it is the case, software that is more independent from processes would
not be inuenced as much by supply chain relationships. This would enable the study
of the interactions between the innovation characteristics and the external sources of
inuence.
A third avenue of research would be the investigation of the diusion of less
complex software. While the inuence of weak ties has been demonstrated in the past
(as mentioned in the literature review), it was not signicant in the current study. At
least three possible explanations, not mutually exclusive, can be oered. The rst one
is the presence of the general mimetic eect (H1) in the model, which might erase
the inuence of weak ties. A possible explanation for the lack of signicant results
for H2a and H2b is the lack of t between the type of information carried by weak ties
and the characteristics of the innovation considered. As mentioned in the literature
review, ERP systems are complex (Rettig 2007) and their implementation requires
tacit knowledge (Jones 2005). In this case, it is possible that the type of information
carried by weak ties does not fulll the information needs of managers trying to
assess how to implement the changes associated with ERP systems. Strong ties are
reputed more ecient to carry this type of information. If this is true, a
dierent pattern could be expected for innovations requiring less complex
information. Looking at simpler technologies would enable the assessment of the
relationship between the complexity of the technology and the inuence of each type
of ties.
It would also be interesting to assess the adoption in very early stages of the
diusion process. It might be during these stages that weak ties, carrying information
that might be more original than other sources, show an inuence. This would mean
that the inuence of each type of source would vary depending on the stage of the

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231

diusion process. Such evaluation would require a large sample in order to have a
sucient number of adoptions even in early stages of the diusion process.
Finally, a larger sample and one in which there would be a more even distribution
of the adoption between the various software products would enable the
investigation of additional elements. For instance, it would be possible to measure
if the network externalities are stronger for specic software packages than for the
generic innovation. As described in the theoretical section, software products may be
more subject to network externalities than the generic innovation.

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6.

Conclusion

The contribution of this article at the theoretical level is diverse. First, the results
showed that the adoption of ERP technology (and specic software) was subject to
imitation behaviour. Companies had a higher probability to adopt ERP systems
when a large number of companies in the industry had adopted these systems. The
article contrasted the inuence of weak and strong ties in the adoption process. In
contrast to many studies on adoption, weak ties did not play a signicant inuencing
role in the diusion process of ERP systems. However, strong ties, represented by
buyersupplier relationships, had a signicant role in the diusion of the innovation.
This pattern, in which strong ties have more inuence than weak ones, is probably
due to the characteristics of ERP systems. These systems are complex and their
deployment requires extensive tacit knowledge. Complex and tacit information is
reputed easier to convey through strong ties relationships than weak ties ones. This
result suggests that dierent sources of inuence might have dierent impact
depending on the type of technology considered. It means that the characteristics of
the IT artefact might change the level of inuence of the dierent types of sources.
From a practical perspective, the results from this research could be used by
software providers on where to direct their marketing eorts in dierent stages of the
diusion process. It highlights the advantage of capturing key nodes of supply
networks that can have high inuential propensity on their trading partners. It also
suggests that creating a user base early in the diusion process is a key advantage. It
establishes the initial group that can lead to the creation of network externalities for
subsequent adopters.
The inuence of strong-ties partners, better adapted to the transmission of
complex information, has an additional implication for practice. It suggests that
marketing eorts might be more ecient if targeted towards forms that support rich
and complex information. It might be less useful to perform simple advertising
(raising awareness) and more rewarding to develop information-intensive mechanisms (like site visits) to promote such an innovation.
This research is based on the complete longitudinal network developed using
public data sources. It rests on the premise that strong and inuential business
relationships are public domain information as they must be disclosed to
shareholders. Non-public relationships could not be included in the analysis. This
study is based on a single sector, and future research is required to investigate if these
results are replicable in other sectors, with weaker client-supplier relationships
for instance. It would also be interesting to investigate simpler technologies, and
samples in which no dominant software provider is established, as well as
to investigate qualitatively the nature of information exchanges by weak ties and
strong ties.

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Acknowledgements
This research was supported by the National Sciences and Engineering Research
Council of Canada (NSERC) and by the Fonds Quebecois pour la Recherche Societe
et Culture (FQRSC).

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