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The Mediation Effect of Transfer activities in ERP

Knowledge Transfer
Xuqing1, MaQingguo1, Zhang Caijiang2, Ye Xuhong1, Sumin1
1. Center of technology innovation & industry development, School of management,
Zhejiang University, Hangzhou, PR China
Xuqing@zju.edu.cn
Maqingguo369@zju.edu.cn
xhye@zju.edu.cn
Sumin0628@zju.edu.cn
2. School of business administration,
South China University of technology, PR China
zcj@scut.edu.cn
Abstract
Prior studies on knowledge transfer had investigated numerous contextual
factors affecting knowledge transfer success, such as the characteristics of
knowledge transferred, source, recipient, and context. Cummings introduced
transfer activities into the knowledge transfer model, and proved the
intervening nature of transfer activities. Based on a cross-section sample 85
ERP implementation, the study empirically investigates the simultaneous
effects of transfer activities and its antecedentssources transfer
motivation, recipients acquisitive motivation and absorptive capacity--on
ERP knowledge transfer between implementation consultant and key users
In contrast to past research that generally assumed a direct relation
between these explanatory variables and transfer success, this studys
findings highlight the critical role played by transfer activities as a full
mediator of sources transfer motivation, recipients acquisitive motivation
and absorptive capacity on ERP knowledge transfer.
Key words: knowledge transfer, transfer activities, ERP
1. Introduction
Enterprise resource planning (ERP) integrates the core operations of a business,
including finance/accounting, production; order management, procurement, inventory,
and human resources management. ERP has played important role during the
informatization of organization. According to RESERACHANDMARTETS, the scale
of Chinas SMB (small and medium business) ERP revenue increased from RMB1.31
billion in 2003 to RMB 1.61 billion in 2004.
ERP implementation is more complex due to cross-module integration, data
standardization, adoption of the underlying business model, compressed
implementation schedule, and the involvement of a large number of stake holders (Soh,
et al.,2000). Lack of in-house expertise, outsourcing services offered by ERP vendors
or their partners has made ERP outsourcing an attractive option for many
organizations(Basu and Lederer,2004). Organizations usually implement ERP with
outsourcing professional service from ERP consultant partners.
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Many prior researches point out the knowledge gap between consultant and
client(Basu and Lederer,2004;Soh, et al.,2000). Few client users understand the
functionality of ERP enough to appreciate the implications of adoption. But the
consultant partner has deep understanding of ERP theoretical philosophy, the proven
implementation methodology, and professional technical knowledge. Thats the
necessary ERP knowledge to maintenance and upgrade ERP system independent of
consultant partner. The knowledge gap takes a chance for client to acquire and learn
from the consultant partner during ERP implementation. The successful knowledge
transfer is critical for meeting the perceived needs of the client organization(Dong-Gil,
et al.,2005).
The field of outsourcing research has grown very fast in the past five decades. But
theres very little empirical evidence on the knowledge transfer in ERP implementation
context(Dong-Gil, et al.,2005;Haines and Goodhue,2003). Many researchers have
offered various frameworks to clarify the factors affecting knowledge transfer in
various fields(Cummings and Teng,2003;Dong-Gil, et al.,2005;Galbraith,1990;Gupta
and Govindarajan,2000;Simonin,2004;Szulanski,1996;Yong Suhk and Young-ryeol,
2004; Zander and Kogut,1995). Within the accessible database, Cummings(2002) first
introduces transfer activities into knowledge transfer model, and proves the intervening
nature of transfer activities. Hardly any research has conducted on the mediation effect
of transfer activities in ERP knowledge transfer.
Based on data from 85 ERP implementation project and 109 questionnaires of key
users, hierarchical regression analysis is used to test the critical role played by transfer
activities as a mediator of sources transfer motivation, recipients acquirement
motivation and absorptive capacity and knowledge transfer.
2. Literature overview and research model
Knowledge has emerged as the most strategically significant resource of the firm.
In ontological dimension, knowledge has four level of social interaction: individual,
team, organization, and interorganization (Hedlund,1994;Kogut and Zander,1992;
Nonaka,1994). So knowledge transfer can be studied at the same level. Knowledge
transfer is the process through which one unit (e.g., group, department, or division) is
affected by the experience of another(Argote and Ingram,2000).
The topic of knowledge transfer (or technology transfer) has long received
attention in cross-border context such as international joint ventures(Inkpen,1998;
Kogut and Zander,1992; Yong Suhk and Young-ryeol,2004; Zander and Kogut,1995),
strategy alliance(Galbraith,1990;Simonin,1999), research and industry(Knut,2002),
and vertical partnership(Kotabe, et al.,2003). Others explored knowledge transfer
within organization such as best practice(Berta and Baker,2004; Szulanski,1996,2003;
Timbrell, et al.,2001) and R&D transfer(Cummings,2002; Cummings and Teng,2003).
In individual level, scholars mainly investigate the knowledge transfer between team
members, such as face-to-face team(Dong-Gil,2002; Dong-Gil, et al.,2005;Joshi, et
al.,2004), virtual team(Sarker, et al.,2005). This research explores ERP knowledge
transfer from implementation consultant to key user in individual level.
Lots of scholars have presented various sets of factors of knowledge transfer.
Argote(2003) classifies the properties of the context affecting knowledge management
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outcomes into three sets: units (e.g., individual, group, and organization), relationships
between units, and knowledge itself. Szulanski(1996) suggests four sets of factors
influencing the difficult of knowledge transfer: characteristics of the knowledge
transferred, of the recipient, and of the context in which the transfer takes place. Based
on communication theory, Gupta and Govindarajan(2000) conceptualize knowledge
flows in MNC to be a function of five factors: value of the source units knowledge
stock, motivational disposition of the source unit, existence and richness of
transmission channels, motivation disposition of the target unit, and absorptive capacity
of the target unit. Simonin(1999) focuses on the significant mediating effect of
knowledge ambiguity on knowledge transfer. He investigates the characteristic of
knowledge, participants, culture and organization distance as the antecedents of
knowledge ambiguity. Yong and Young-Ryeol(2004) construct a framework of
knowledge transfer within an IJV (International Joint Venture) of two constructions:
relation-specific determinants and knowledge-specific determinants. Dong-Gil(2002)
proposes an integrated model of ERP knowledge transfer affected by three sets of
factors: knowledge-related, communication-related, and motivational factors.
Cummings(2002) first introduces transfer activities into knowledge transfer model,
and proves the interaction of transfer activities and other antecedents of knowledge
transfer. Transfer activities in ERP implementation include formal training, business
process meeting, system configuration and testing et al. The author of this study
participated in an ERP implementation project full timely in 2004 fall. For the
significant role of transfer activities in learning technology knowledge and ERP system
skills, Figure 1 constructs transfer activities as the mediation variable of knowledge
transfer and antecedents.

Figure1. ERP knowledge transfer conceptual model.

3. Research variable and hypothesis development
3.1 ERP knowledge transfer: the dependent variable
The dependent variable in the research model is ERP knowledge transfer.
According to SAPs implementation skill profiles of role in ASAP, this study develops
an integrated ERP knowledge profiles in ERP theoretic philosophy, implementation
Table 1. ERP knowledge profiles.
ERP knowledge Description
ERP theoretic philosophy Process orientation, integration
Implementation planning, milestone control, monitor, risk
implementation methodology
management
integration knowledge, testing knowledge, configuration
technical know-how
knowledge and programming knowledge
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methodology, and technical knowledge. As table 1 showed, the ERP technology

knowledge includes integration knowledge, testing knowledge, configuration
knowledge and programming knowledge.
3.2 Absorptive capacity and ERP knowledge transfer
Cohen and Levinth(1990) first give the most widely cited definition of
absorptive capacity as the ability to recognize the value of new information, assimilate
it, and apply it to commercial ends. Kim(1998) conceptualizes absorptive capacity as
learning capability and problem-solving skills that enable a firm to assimilate
knowledge and create new knowledge. Lane and Lubatkin (1998) further propose that
absorptive capacity is a dyad-level constructdenoted relative absorptive capacity
rather than a firm level construct. Zahra and George(2002) differentiate two types of
absorptive capacitypotential and realized, where the former consists of acquisition
and assimilation and latter of transformation and exploitation. This paper focuses on
potential absorptive capacity of key user by defining it as a set of interrelated individual
capabilities of acquiring, disseminating, and assimilating external information and ERP
related knowledge.
Lots of studies prove the positive relationship between absorptive capacity and
knowledge transfer(Galbraith,1990;Mowery, et al.,1996;Szulanski,1996;Yong Suhk
and Young-ryeol,2004). IS researchers have proved the important determinant of
absorptive capacity on positive IS project outcomes(Aladwani,2002;Dong-Gil, et
al.,2005;Nelson and Cooprider,1996). Therefore,
Hypothesis 1: Absorptive capacity is positively related with ERP knowledge
transfer.
3.3 Transfer activities and ERP knowledge transfer
Cummings (2002) first introduces transfer activities into knowledge transfer model.
They suggest that the greater the involvement of the parties to a knowledge transfer
through various forms of activities, the greater the likelihood that the recipient will be
able to internalize the knowledge. Transfer activities are measure in the number of
times used and the number of people participated of eleven transfer mechanisms
identified in prior research. This paper mainly measures transfer activities in training,
business process meeting, system configuration, testing, and main data collecting.
Hypothesis 2: transfer activities are positively related with ERP knowledge transfer.
3.4 Mediation effect of transfer activities
Transfer activities are introduced as the mediator of ERP knowledge transfer and its
antecedents: sources transfer motivation, recipients acquirement motivation and
absorptive capacity.
1) Absorptive capacity and transfer activities
Hypothesis 3: transfer activities can mediate the effort of absorptive capacity on
transfer success.
2) Acquirement motivation
The Not-Invented-Here (NIH) syndrome is well-known and has gained many
scholars attention to explore the causes and effects of NIH in organization theory and
learning. The NIH syndrome is a major barrier to the inflows of knowledge into
recipient(Gupta and Govindarajan,2000). Lack of motivation may result in foot
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dragging, passivity, feigned acceptance, hidden sabotage, or outright rejection in the

implementation and use of new knowledge (cf. Szulanski, 1996). Therefore,
Hypothesis 4: transfer activities can mediate the effort of recipients acquirement
motivation on transfer success.
3) Transfer motivation
A unit with uniquely valuable know-how is likely to enjoy an information
monopoly within the corporation (cf. Gupta and Govindarajan,2000). Szulanski(1996)
argue a knowledge source may be reluctant to share crucial knowledge for fear of losing
ownership, a position of privilege, superiority; he may resent not being adequately
rewarded for sharing hard-won success; or he may be unwilling to devote time and
resources to support the transfer. Simonin(1999) explores the willingness of external
sources to transfer in the point of partner protection in strategy alliances. This study
investigates the effect of sources transfer motivation on ERP knowledge transfer.
Therefore,
Hypothesis 5: transfer activities can mediate the effort of sources transfer
motivation on transfer success.
3.5 Project size: control variable
Size has been the most frequently examined structural characteristic in studies by
organizational theorists(Liao, et al.,2003). But the size of organization implemented
ERP vary dramatically from tens to thousands. In Dong-Gil (2002)s research model,
project size is a control variable measured by the total number of consultant and
business client full-time participating the project. This study measures project size
following the approach by Dong-Gil.
4. Methodology
4.1 Sample
During the period from 5 December, 2005 to 22 March, 2006, the researcher
collected data from 119 key users who had participated fulltime in 85 ERP
implementation projects. There are 112 completed, usable questionnaires in all. 66.7%
of the respondents are male with 74% at the age of 26-36 and 69.5% bachelors. The
average years from ramp-up day to questionnaire collecting is 1.17. SAP and Oracle
are the main ERP system in the sample (94.1%).
4.2 Measurement
To insure the reliability and validity of the measurement system, wherever
appropriate multi-item scales are developed for each construct in the model, most using
validated 7-point Liker-type scales ranging from to very little agree to to very large
agree.
The fundamental theme of the research model in this study is that sources transfer
motivation, recipients acquisition motivation and absorptive capacity can increase the
efficiency of transfer activity, and thereby decrease the difficulty of ERP knowledge
transfer from consultant to key user. At the same time, absorptive capacity has a direct
effect on ERP knowledge transfer.
Argote(2000) argues knowledge transfer can be measured by measuring changes in
knowledge or changes in performance and be assessed through measuring changes in
the knowledge of the recipient unit. At the same time, the measurement of knowledge
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transfer could be divided into objective way and subjective way. In consisting with
Dong-Gils research, this paper measures changes in ERP knowledge of the recipient
unit in subjective way using 9-item scale about the three aspects of ERP knowledge,
including three items adapted from Dong-Gil (2005) to measure technical know-how.
With respect to the four independent variables, 3-items drawn from Szulanski (1996)
ask respondents the willingness of consultant to share and teach ERP knowledge with
them, 3-items drawn from Dong-Gil (2005) ask respondents rated their own
willingness to acquire knowledge from consultant, 6-items drawn from both Szulanski
(1996) and Dong-Gil (2005) ask respondents measure their absorptive capacity, and
6-items drawn from Cummings (2003) and Dong-Gil (2005) test the efficiency of
transfer activity.
5. Data analysis and results
Hierarchical regression analysis is employed to test the formulated hypotheses. The
statistical testing procedures are as follows. First, control variable and transfer activities
are entered in regression model. Second, each four antecedents and control variable are
entered in regression model to test their direct effect on transfer success. Third, transfer
activities are entered into the second block of each hierarchical regression model. The
significant R-square change and T-test would indicate significant mediator effects of
transfer activities. The analysis results are reported in Table 2.
Table2. Result of hierarchical regression analysis
variable ERP Knowledge transferstandardized
Project size -0.030 0.003 -0.053 -0.061 -0.031 -0.106 -0.032
Transfer activities .703***
0.655***
.565***
0.694***
Transfer motivation .049** 0.111
Absorptive capacity .542*** .245**
Acquisition motivation .282** 0.026
R2 0.501 0.108 0.511 0.302 0.542 0.089 0.501
*** ** *** *** *** **
F 47.143 5.980 32.338 21.408 36.692 4.818 31.168***
***
p<0.001, **p<0.01,*p<0.05
As indicated in Table 2, transfer activities (R2=0.501, =0.703, p<0.001) and
absorptive (R2=0.302, =0.542, p<0.001) capacity are both statistically significant
with transfer success in each general regression model. When both transfer activities
and absorptive capacity are entered into multiple regression model, R-square increases
from 0.501 to 0.542. Transfer activities (=0.565, p<0.001) and absorptive capacity
(=0.245, p<0.05) are both still statistically significant, lending strong support for H1
and H2.
H3, H4 and H5, stating the mediation effect of transfer activities of transfer success
and its antecedents, were partially supported. As analysis above, When both transfer
activities and absorptive capacity are entered into multiple regression model, both are
still statistically significant, indicating that transfer activities cannot mediate the effect
of absorptive capacity on transfer success. Thus, H3 is not supported. As indicated in
Table 2, recipients acquisition motivation (=0.282, p<0.01) is statistically significant
with transfer success. When both transfer activities and transfer motivation are entered
into the regression model, transfer activities is still statistically significant (=0.694, p<
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0.001) with R-square standing at 0.501, but transfer motivation is not statistically
significant any more (=0.026, p>0.05). Thus, the effect of acquisition motivation on
knowledge transfer can be mediated by transfer activity, lending support to H4. With
the same reason, H5 is supported.
6. Discussion and conclusion
This study examines the mediation effect of transfer activities in ERP knowledge
transfer, as well as the effects of absorptive capacity and transfer activities on transfer
success. The five hypotheses formulated from a conceptual model of ERP knowledge
transfer are partially supported.
6.1 Findings and implications
The study obtains findings that are consistent with several prior empirical studies.
Szulanski(1996) proves absorptive capacity is one of the most important origins of
stickiness in best practice transfer within firm. Dong-Gils empirical research suggests
absorptive capacity is important for minimizing barriers to effectively transfer
knowledge. This study also finds evidence that key users absorptive capacity is
positively with transfer success.
A key feature of this study is the suggestion that transfer activities can mediate the
effect of sources transfer motivation, recipients acquirement motivation and
absorptive capacity on knowledge transfer. The results show that transfer activities
indeed can replace the effect of sources transfer motivation and recipients
acquirement motivation on transfer success, but it cannot mediate the effect of
absorptive capacity on transfer outcome.
This study also yields important managerial implications for ERP project managers
and key users. The findings sensitize project managers to the importance of developing
more transfer mechanism and auditing the efficiency of transfer activities in ERP
implementation. For key users, the findings remind them the importance of transfer
activities such as business process meetings to realize more knowledge transfer from
consultant.
6.2 Limitations of the study
The results of this study are of course subject to a number of limitations. First, there
are much more constructs affecting knowledge transfer proved by prior researchers.
The research model only explores the relationships between ERP knowledge transfer
and four antecedents, thereby providing a relatively simplified perspective of ERP
knowledge transfer. Second, the studys small sample size limits the findings statistical
power. Moreover, the desired respondent of questionnaire is key user. That means
recipient rates subject himself in knowledge transfer, acquisition motivation, and
absorptive capacity, which may brings the problem of single information and common
method. Future research on the factors affecting knowledge transfer could benefit from
following Dong-Gils (2005) approach in which matched-pair survey instruments were
developed with sources measuring recipients characteristic and recipient measuring
sources characteristics.
Acknowledgement:
The research was funded by a grant from National Natural Science Foundation of
China (70471086 and 70571069).
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