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A prole of ERP adoption in manufacturing SMEs

Louis Raymond and Sylvestre Uwizeyemungu
` ` Institut de recherche sur les PME, Universite du Quebec a Trois-Rivieres, ` Trois-Rivieres, Canada
Abstract
Purpose This paper seeks to build and validate a typological prole of manufacturing small to medium-sized enterprises (SMEs) in regard to their eventual adoption of an enterprise resource planning (ERP) system, based on the predisposition of their environmental, organizational, and technological context. Design/methodology/approach Provides cluster analysis of secondary questionnaire data obtained from a benchmarking database of 356 Canadian manufacturing SMEs. Findings Three types of SMEs were obtained: 140 internally predisposed SMEs, 60 externally predisposed SMEs, and 156 unfavourably disposed SMEs. Originality/value Provides a valid framework for analysis that can serve ERP vendors and consultants, as well as SME owner-managers, the rst to better target their offer of products/services, and the second to better position their rm before contemplating the implementation of an ERP system. Keywords Manufacturing resource planning, Integration, Small to medium-sized enterprises, Computer integrated manufacturing, Advanced manufacturing technologies Paper type Research paper

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1. Introduction An analysis of the expanding roles being assigned to information systems (IS) shows that they have gradually spread to all organizational levels and to all forms of business management, affecting a greater number of users and managers. However, the development of IS has followed the different operational units or functions of the enterprise, each function developing its own applications to such an extent that various systems coexisted in the same business without there necessarily being communication between them. This meant the existence of informational fragmentation (Muscatello et al., 2003) or of functional silos (Beretta, 2002), with all that this implied in terms of dysfunction, redundancy, and waste. The need for IS integration thus became more and more urgent. This is when enterprise resource planning (ERP) systems, or more recently enterprise systems (ES), were perceived by various organizations as a solution to this problem. If the rst implementations of ERP occurred in large enterprises (LE), the demand for such systems in small and medium-sized enterprises (SME) has mushroomed in recent years (Everdingen et al., 2000; Greenemeier, 2001). However, these systems remain linked with large-scale organizations to such an extent that their adoption by the SME resembles an incursion into the world of the large rm, an incursion that requires some foresight. White (1999) speaks of ERP systems for the SME as a large
The authors would like to thank the Canada Research Chairs Program and the Canada Foundation for Innovation for their nancial support of this research.

Journal of Enterprise Information Management Vol. 20 No. 4, 2007 pp. 487-502 q Emerald Group Publishing Limited 1741-0398 DOI 10.1108/17410390710772731

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enterprise solution for small businesses, and Pender (2001) suggests that the challenge to SMEs confronting ERP is to learn how to deploy the technology of large enterprises without incurring their expenses. Even if we are aware of the evident interest shown by SMEs and ERP vendors for the development of enterprise systems that are better adapted (Gable and Stewart, 1999; Greenemeier, 2001), we do not know very much about the prole of SMEs likely to adopt them. We are also unaware of the typical traits of SMEs that would allow them to implement ERP with a good a priori chance of success. The answer to these questions is of obvious interest. First, the ERP system vendors and consultants will better adapt their offer to the SMEs who might eventually be interested. Moreover, to better prepare SMEs to adopt and effectively exploit ERP systems, it is necessary to target specically those that show the required prole. The SMEs for their part will know if they meet the essential conditions that would make the adoption and exploitation of an ERP system less risky. The aim of the present study is rst to propose the elements of the required prole for SMEs likely to successfully adopt an ERP system. It also initiates a partial test of this prole by comparing it to actual characteristics of the environmental, organizational, and technological context of 356 Canadian manufacturing SMEs. 2. Conceptual foundation There are potentially many factors that can motivate or persuade SMEs to adopt an ERP system. While the ERP phenomenon has long been associated with large enterprises, we do not nd many empirical studies dealing specically and in depth with the ERP adoption factors in SMEs. Indeed, Ariss et al. (2000) lament the absence and/or the fragmentation of the research on the factors that inuence the introduction of modern technologies in small businesses, despite the admittedly crucial role these factors play in the survival of these businesses. It is however possible to study these ERP system adoption factors by having recourse to the literature dealing with IT adoption factors in general, and on the incentives for ERP system adoption in particular. Examining the factors that inuence the decision to adopt advanced manufacturing technology in SMEs, Ariss et al. (200) proposed the following classication: . factors related to the product/market (improvement of product quality, improvement in product design); . nancial reasons (cash ow, availability of nancing, government programs of nancial assistance); . managerial and organizational reasons (strategic orientation with regard to technology, exposure of management to technology, relations between management and employees, competence of employees, increase in productivity); and . factors related to the sector of activity (competitiveness in terms of cost, environmental requirements). When compared to earlier classications (Grover and Goslar, 1993; Cooper and Zmud, 1990), the last one added certain interesting elements in the SME context: nancial considerations, given the often prohibitive cost of new technologies, especially ERP,

and the limited means of SMEs, and managerial factors such as the strategic orientation regarding technology and the exposure of management to this technology, factors that, in the case of SMEs, can be grouped with individual factors, given the concentration of decision-making vested in the entrepreneur or the owner-manager. As have already noted Cooper and Zmud (1990), most studies on the implementation of IT consider these technologies in a general fashion, and thus do not emphasize the specic technological characteristics of one IT in particular. It is to avoid this limitation that in the present study, which deals specically with ERP systems, the factors mentioned above are reanalyzed in a context of ERP system adoption by SMEs. In order to do so, reference is made to studies having to do with the motivations for ERP system adoption. Indeed, we could try to establish the prole of SMEs likely to adopt an ERP system by starting from the analysis of the reasons that lead to this adoption. The question of the motives for ERP system adoption has been taken up in different studies (Oliver and Romm, 2000; Ross, 1999), with some dealing specically with SMEs (Dolmetsch et al., 1998; Oliver and Romm, 1999; Gable and Stewart, 1999). Oliver and Romm (2000) divide the factors that determine the investment made in seeking out information with a view to an eventual ERP system adoption into three categories: (1) The need to improve the performance of ongoing operations. (2) The need to integrate data and systems. (3) The need to avoid a competitive disadvantage or to avoid that a business risk becomes critical. Ross (1999) classies the reasons for ERP system adoption into three categories: (1) Infrastructure. (2) Capability (improvement of processes, data visibility). (3) Performance (cost reduction, strategic decision making, adaptability to client requirements). Furthermore, she demonstrates the overlapping character of these reasons: the new integrated enterprise systems infrastructure makes it possible to acquire new capabilities, which in turn are supposed to allow the business to generate improved results. For Dolmetsch et al. (1998), the reasons for using standard integrated software packages can be traced back to corporate strategy, business processes, or IS applications. In a study having to do with medium-sized non-prot organizations, Oliver and Romm (1999) propose that these organizations adopt ERP systems for gains in efciency or for technical, economic, or strategic reasons. Caldas and Wood (1999) call for a broadened perspective to comprehend the ERP phenomenon, thereby removing it from the technological reductionism and determinism that have tended to characterize it previously. Hence, they propose three groups of factors that, either alone or in interaction in a complex dynamic process, inuence the adoption, the implementation, and the evaluation of ERP systems in an organization: . substantive factors; . institutional factors; and . political factors.

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Substantive factors include the actual requirements, problems, or opportunities that organizations face and for which ERP systems are an adequate response. Institutional factors refer to all external forces present in the organizational environment that apply pressure for the adoption of ERP systems, which are often presented as a panacea. Political factors reect the interests of the various power groups within the organization. With regard to the adoption of computer-integrated systems, a taxonomy has been developed by Forest (1999) who categorizes the rms system needs on the basis of its type of production. Firms whose production process is characterized by high input diversity (e.g. many kinds of raw materials) but low output diversity (e.g. few types of nished goods) will concentrate on better managing their supply chain, thus opting for MRP type systems. Those with low input diversity but high output diversity, requiring advanced manufacturing technology, will focus on better control of their manufacturing process and thus adopt production scheduling systems. Whereas rms who type of production is characterized as make-to-order must conciliate output diversity with a exible manufacturing process (Koh and Simpson, 2005), hence the need for an ERP type of system that integrates both supply chain management and production scheduling. The preceding review of the literature leads one to conclude that little is known as to the environmental, organizational, and technological factors that actually predispose SMEs to adopt an ERP system. While some insights can be gained from studies of IT adoption in general, the previously-cited studies of ERP adoption in SMEs have focused on the generic motivations or predispositions associated with the purported benets or advantages to be obtained from ERP systems. While these are the a priori or prescriptive reasons for which a SME is ready to adopt ERP, the a posteriori or empirical reasons such as pressure from customers, the availability of resources and expertise, and the existing level of computer-integrated manufacturing have yet to be examined in depth.

3. Research model While researchers have categorized in various ways the motivations that lead organizations to adopt an ERP system, an analysis of these categories shows that the motives put forward are quite similar from one study to another (Oliver and Romm, 1999; Ross and Vitale, 2000; Stewart et al., 2000). In the present study, these motivations are of interest to the extent that we can deduce from them, as a complement to IT adoption and assimilation factors, the characteristics of the manufacturing SMEs environmental, organizational and technological context that may lead it to adopt an ERP system. A number of studies have in fact successfully used Tornatsky and Fleischers (1993) technology-organization-environment (TOE) framework to explain the adoption and assimilation of information technology, emphasizing three groups of determinants or predictors: (1) Characteristics of the environmental context such as external pressures from the rms business partners. (2) Characteristics of the organizational context such as the rms structure and resources.

(3) Characteristics of the technological context, including the computer-integrated manufacturing technologies already implemented by the rm (Raymond et al., 2005). 3.1 Environmental context The adoption of an ERP system can be the result of pressure exerted on the enterprise by its environment. On this subject, the SME cases studied by Dolmetsch et al. (1998) are very revealing. A business that operates in a market very sensitive to price variations cannot afford high margins, and it depends on its IS for tight control of its production costs; it is a matter of cost transparency, and integrated systems are meant to satisfy this preoccupation (Dolmetsch et al., 1998). An enterprise operating in a strong growth market is made to reconsider its business processes in order to deal with its rapidly increasing size; the same is true of a business operating in a very dynamic sector, such as in high technology: the need to react rapidly to change accentuates the need for integration (Chalmers, 1999; Dolmetsch et al. 1998). That is similar to the environmental uncertainty construct, measured in its three components, heterogeneity, dynamism, and hostility (Grover and Goslar, 1993). The need to optimize the supply chain is one of the factors that lead to the adoption of an ERP system: large manufacturing companies exert pressure on their suppliers, mainly SMEs, so that they will meet world standards in terms of cost, efciency, and quality; this very often obliges these SMEs to restructure their processes, and in so doing they generally need an ERP system capable of real-time sharing of detailed information with their partners in the value chain (Chalmers, 1999). It is in fact the existence of very close logistical links between an SME and its business partners that creates an urgent need for integration (Dolmetsch et al., 1998). It is perhaps the absence of these links in the SMEs studied by Bernroider and Koch (2001) that may explain why these rms considered extra-organizational links with clients and suppliers less relevant in the process of selecting an ERP system, even though extended enterprise systems are specically meant to integrate these links (Mller, 2005). The status of a business expressed in terms of independence from or afliation with a group or network of rms is signicant in the adoption of technology (Julien and Raymond, 1994). For an SME to be part of a larger group leaves it practically no other choice than to adopt an integrated system of the same type as that adopted by the group (Dolmetsch et al., 1998). It also seems that the relational environment of small business managers exerts a dominating inuence on their decision on whether or not to adopt IT (Monnoyer-Longe, 2002): this inuence comes from individuals within communities marked by informality and trust rather than by structure as is the case for large rms. To summarize, we could express the effects of the environmental context as follows: . SMEs operating in a price-sensitive market will be more predisposed to adopt an ERP system. . SMEs operating in a very dynamic sector or in a high-growth market will be more predisposed to adopt an ERP system.

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Close logistical links between SMEs and their business partners (partnership-network) would necessitate the integration of information in the value chain, thus increasing their motivation to adopt an ERP system. Membership or afliation of SMEs in a network of business partners will motivate them to adopt an ERP system.

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3.2 Organizational context The introduction of an IS can be seen as the diffusion of technology in a social system (Stewart et al., 2000). It is then important that there be adequate alignment between the technological and organizational requirements. This explains why the congruence or t between an ERP system and the organizations processes heads the list of criteria in the selection of an ERP system for SMEs (Everdingen et al., 2000). This congruence allows the SMEs to avoid the shock of an in-depth process re-engineering. This suggests that the nature of business processes of in a SME will weigh heavily in its decision to adopt an ERP system: if business processes are very idiosyncratic, there is much less of nding ERP software on the market whose design ts the organization. Studies show that for SMEs, the affordable cost of software packages and short implementation times are among the most important selection criteria (Bernroider and Koch, 2001; Everdingen et al., 2000). Ariss et al. (2000) note the importance of cash ow and access to nancing, whether by way of nancial institutions or through government subsidies, in the decision to adopt advanced technologies for SMEs. In fact, Buonanno et al. (2005) found nancial constraints to be the main cause of the non-adoption of ERP systems among SMEs. In circumstances of acute scarcity of resources (qualied manpower, technical capacity, time), management is less inclined to invest in long-term IT projects, worried are they to obtain visible short-term gains from their investments in ERP (Gregory, 1993). In a study analyzing the differences between medium-sized enterprises and large ones in the matter of dening the needs and selection in the implementation of their ERP system, Bernroider and Koch (2001) report that criteria relative to exibility (e.g. increase in organizational exibility, improvement of processes, and improvement of the capacity for innovation) were judged aspects of lesser importance by SMEs, probably because these rms already have a tendency to be more exible and thus there is no need to resort to an ERP to achieve this. We could then conclude that the degree of organizational exibility plays a signicant role in the decision to adopt or not an ERP system. Size, centralization, formalization, and specialization are some of the elements listed in the category of organizational factors in studies on IT adoption. On size, we could suppose that the larger the organization, the greater will be its resources to facilitate the initiation, adoption, and implementation of new technologies (Grover and Goslar, 1993). Specialization is dened as the diversity of technical specialists within the organization: thus, it is taken into account in the availability of resources. Centralization, dened as the degree to which the decision-making power is concentrated, is taken up in the individual factors. Formalization would correspond to administrative or bureaucratic complexity (Gregory, 1993). The relation between formalization and IT adoption is ambivalent: on the one hand, the effect of the bureaucracy would handicap innovation initiatives (Gregory, 1993), but on the other, bureaucratic complexity would lead to the search for a solution through IT (Julien and

Raymond, 1994). Since enterprises are often motivated by the need for data visibility (Ross, 1999), the relationship between formalization and adoption in the specic case of the adoption of an ERP system tends to be considered, that is, in an institutional sense. To summarize, we could state the effects of the organizational context as follows: . SMEs having very idiosyncratic production processes will be less predisposed to adopt an ERP system. . SMEs in a situation of (human, technical, and nancial) resource scarcity will be less predisposed to adopt an ERP system. . SMEs with greater exibility will be less predisposed to adopt an ERP system. . Larger, more decentralized SMEs will be more predisposed to adopt of an ERP system. . Greater formalization will predispose SMEs to adopt an ERP system. 3.3 Technological context The need to improve the performance of ongoing operations is an important incentive for the adoption of ERP systems (Oliver and Romm, 2000; Ross, 1999). This need often follows an awareness of the limits of existing systems (inefciency, inexibility), as was the case with a good number of enterprises at the time of the Y2K bug (Dolmetsch et al., 1998) or the switch to the euro in the countries of the European Union (Kennerley and Neely, 2001). The expiration of a maintenance contract for an existing legacy system can also motivate a business to contemplate moving on to a more modern technology (Dolmetsch et al., 1998). The other incentive lies in the need to integrate data and systems: IS were historically developed as an answer to functional needs, which resulted in a multitude of applications with problems of incompatibility (systems that could not communicate with one another), of duplication (the same datum is entered several times), and of costly support (Oliver and Romm, 2000). The integration of data and systems then turns out to be an urgent necessity. Considering the preceding, the elements of the prole that can be extracted with respect to a technological context could be expressed as follows: . SMEs confronted with the obsolescence (inefciency, inexibility, disintegration) of their legacy manufacturing information systems will be more predisposed to adopt an ERP system. . SMEs that have implemented and assimilated more advanced and integrated manufacturing technologies and applications such as CAD/CAM, FMS, and MRP-II will be more predisposed to adopt an ERP system. 4. Research methodology In comparing the literature having to do with both the factors for adoption of IT and the motivations for adopting ERP systems, the present study has established a theoretical prole of SMEs likely to do so. The comparison of this prole with the characteristics of manufacturing SMEs in the PDG (performance, development, growth) database provides us with an outline of the actual ERP adoption prole of these SMEs. This database was developed by a university research laboratory in collaboration with an association of over 850 manufacturing SMEs. It now consists of data on 356 Canadian manufacturing SMEs, whose number of employees range from 7 to 405, with a median of 42. More than 15 industrial sectors are represented, including

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metal products (30 percent of the enterprises), wood (14 percent), plastics and rubber (9 percent), electrical products (8 percent), food (7 percent), and machinery (5 percent). These enterprises are fairly representative of Canadian manufacturing SMEs in so far as size and industry are concerned. The database was created by having the SMEs chief executive and functional executives such as the controller, human resources manager, and production manager ll out a questionnaire to provide data on the practices and results of their rm and add their rms nancial statements for the last ve years. Anonymity and condentiality is preserved by having the questionnaires transit through the industry association so that rms are known by the research center only by an alphanumeric identier assigned by the association. Once all the questionnaire data and nancial statements have been manually veried by the research centers personnel, they are typed in via validation software and entered in the PDG database as valid data, ready for benchmarking. In exchange for these data, the rms are provided with a complete comparative diagnostic of their overall situation in terms of performance and vulnerability (further information on the PDG diagnosis system and on data collection and validation can be found in St Pierre and Delisle, 2006). Figure 1 illustrates the research model based on the TOE framework and developed by taking into account variables of the theoretical prole that can be traced in one form or another in the PDG database. Hence, given the secondary nature of the research data, not all of the variables of the theoretical prole were included in the research model, and others are apprehended indirectly. As an example of such a variable, type of production (make-to-order mode as opposed to make-to-stock) gauges the exibility needed by a SME, in the absence of data on the nature of its sector of activity (e.g. dynamism, market growth rate, price sensitivity). To render operational the various variables retained, the present study, for obvious reasons of comparison, was limited to the denitions adopted in the PDG database. Table I presents the research variables retained, their operational denitions, and the principal source in previous empirical work from which they were taken or adapted. For the dependent variable, the study uses the advanced manufacturing technologies taxonomy developed by Brandyberry et al. (1999). In this taxonomy, the technologies are divided into three categories according to their degree of integration:

Figure 1. Research model

Variable Environmental context Commercial dependence Networking intensity

Operational denition (source) Percentage of sales to the three principal customers (Freel, 2000) No. of design/R&D, production, marketing, and distribution partnerships with prime contractors, customers, suppliers, competitors, research centers, colleges and universities, and other SMEs (DAmours et al., 1999; Sohal et al., 1998; Yuan-Chieh, 2003) No. of employees No. of managers/No. of employees (Damanpour, 1991) Percentage of production in make-to-order mode (Mechling et al., 1995) Perceived attainment of production objectives having to do with quality, exibility, and cost reduction (King and Ramamurthy, 1992) Percentage of sales attributable to new or modied products (Freel, 2000) Average net margin for the last three years (St Pierre, 1999) Prociency in the use of CAM, CAD/CAM, FMS, MRP, MRP-II, ERP (Brandyberry et al., 1999)

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Organizational context Size Administrative intensity Type of production Operational capacity Innovation capacity Financial capacity Technological context CIM systems assimilation

Table I. Operational denition of the research variables

the rst category comprises stand-alone technologies such as industrial robots, computer-assisted design (CAD), numerical control machines (NC), and automatic handling of materials; the second is that of the functionally-oriented technologies, that is, computer-assisted manufacturing (CAM) and exible manufacturing systems (FMS); and the third comprises integrated technologies and systems of the computer-integrated manufacturing (CIM) type, including CAD/CAM, MRP, MRP-II, and eventually ERP. We can see that an SME whose technologies are in the third category has already shown a clear interest for the advantages offered by an ERP system, integration being the principal feature of such systems. Table II illustrates the presence of different technologies in the SMEs studied, as well as their own estimation of the degree with which they have assimilated these technologies. ERP systems and preceding computer-integrated systems such as materials requirements planning (MRP), MRP-II (manufacturing resource planning), are not very present: in 18.5 percent of the sampled rms for MRP, 12 percent for MRP-II, and 8 percent for ERP. 5. Results and discussion Cluster analysis was used to group the SMEs on the basis of their principal motivations for adopting ERP. The SPSS TwoStep algorithm was used as it can handle a large number of cases and determine the optimal number of clusters, three here, as shown in Table III. Looking at the results presented in Table III, the rst cluster comprises 140 manufacturing SMEs that can be characterized as internally predisposed to adopt an ERP system. In terms of their environmental context, rms in this rst group are

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Manufacturing systems Manufacturing technologies Computer-aided drafting Computer-aided design (CAD) Programmable automata Numerical control machines (NC) Computer-assisted manufacturing (CAM) * * CAD/CAM * * Robotized operations Flexible manufacturing systems (FMS) * * Automated handling of materials Manufacturing applications Computer-based inventory management Computer-based production scheduling Computer-based bar-coding Electronic data interchange (EDI) Materials requirements planning (MRP) * * Computer-based maintenance management Manufacturing resource planning (MRP-II) * * Enterprise resource planning (ERP) * *

Presence (%) 61.2 40.7 37.9 34.6 33.1 27.0 21.1 19.4 17.4 62.4 34.6 26.1 24.2 18.5 16.6 11.8 7.8

Assimilation * 4.0 3.9 4.0 4.1 3.8 4.0 3.9 3.4 4.0 3.4 3.3 3.4 3.3 2.9 2.6 2.8 3.4

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Table II. Degree of presence and assimilation of CIM systems

Notes: *Perceived level of prociency in the technology or application used (low: 1, . . ., 5: high); * *Selected to determine the level of assimilation of computer-integrated systems Source: Brandyberry et al. (1999)

characterized on average by a higher level of commercial dependence than the other two groups, and by networking that is signicantly less intense than the second group and relatively similar to the third group. These SMEs distinguish themselves however by their organizational context, in that they show the greatest operational capacity among the three groups in terms of production quality, cost reduction, and exibility. Note that in the case of exibility, this difference is signicant with the third group whereas it is not with the second. Similarly, internally predisposed rms show the highest capacity for innovation in terms of designing new or modied products. Again, this difference is signicant with regard to the third group but not with the second. Finally, these SMEs have assimilated CIM systems to the same extent as the second group, but to a much higher extent than the third group. The second group comprises 60 SMEs characterized as externally predisposed to adopt ERP. These rms are on average signicantly less dependent on a few major customers than the second group, but more so than the third group. They show however a higher propensity for networking than the other two groups, having established a signicantly greater number of design/R&D, marketing, and distribution partnerships with business partners. Firms from this group are also of greater size than the other two, and are more decentralized than the third group with regard to administrative intensity. The 156 SMEs that constitute the third cluster are qualied as unfavourably disposed to adopt an ERP system. These are rms whose environmental, organizational and technological contexts make it less conducive to an ERP

Variables Environmental context Commercial dependence Networking intensity: design/R&D partnerships production partnerships mrkg./distrib. partnerships Organizational context Size Administrative intensity Type of production Operational capacity: quality exibility cost reduction Innovation capacity Financial capacity Technological context CIM systems assimilation

All SMEs mean (n 356) 43.1 0.9 1.1 1.1 59 13 26.7 33.2 30.9 23.3 33.9 0.041 3.1

Internally predisposed mean (n 140) 51.5a 0.6b 0.9b 0.7b 48b 0.140a 32.1a 40.1a 38.2a 32.4a 45.8a 0.043 4.4a

Externally predisposed mean (n 60) 43.0b 2.5a 2.7a 3.6a 100a 0.150a 33.2a 34.0b 36.0a 25.9b 35.1a 0.040 4.4a

Unfavorably disposed mean (n 156) 35.6b 0.4b 0.6b 0.7b 53b 0.109b 19.3b 26.2c 22.4b 14.2c 22.7b 0.041 1.5b

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ANOVA F
** ** ** **

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** ** * ** ** ** **

NS
**

Notes: *p , 0.01; * *p , 0.001; NS non signicant (p 0:91); Within rows, different subscripts indicate signicant ( p , 0.05) pairwise differences between means on Tamhanes T2 (post-hoc) test

Table III. ERP adoption proles resulting from cluster analysis of manufacturing SMEs

implementation in the short term. When compared with the other two groups, these rms have the lowest level of commercial dependence, that is, their customer base is more diversied, and they are the least networked in terms of marketing, product design, and R&D partnerships. Firms in this last group also require less exibility as a lower proportion of their production is done in make-to-order mode. In line with this environmental context is the signicantly lower operational capacity that characterizes these SMEs in terms of production quality, cost reduction, and exibility. Their organizational context is also characterized by less administrative intensity, that is, less delegation of decision-making, and a lower capacity for innovation, that is, a lower proportion of sales attributed to new or modied products. Finally, SMEs qualied as unfavorably disposed to adopt ERP show a much lower level of CIM systems assimilation; these rms are much less procient in the use of computer-integrated manufacturing technologies and applications such as CAD/CAM, FMS, and MRP-II. Returning to Table III, it is also worth noting that there is no difference in nancial capacity among the three groups. This could be tentatively interpreted as meaning that the availability of nancial resources is much less important than human resources and competencies in ascertaining a SMEs predisposition. In summary, the internally predisposed SMEs should be strongly inclined to adopt ERP, based on their commercial dependency, type of production, administrative intensity, strong operational capacity, strong innovation capacity, and high level of CIM systems

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assimilation. The externally predisposed manufacturers should also be rather strongly inclined, based on their networking intensity, type of production, size and administrative intensity, relatively strong innovation capacity, and strong prociency in the use of CIM technologies and applications. Whereas unfavorably disposed SMEs would be disinclined to adopt ERP on the basis of their low level of administrative intensity, type of production, weak operational capacity, weak innovation capacity, and low level of CIM systems assimilation. In synthesizing and grounding the results of this research within the broader literature on the role of IT and its adoption in contemporary enterprises, one arrives at certain conclusions. First, the three ERP adoption proles that were derived here can be seen as supporting a reconceptualization of the role of ERP within three different strategic perspectives. First, from complementary resource-based and competitive strategy perspectives (Rivard et al., 2006), the role of ERP for the internally-predisposed SMEs would be in building their operational capabilities and IT competence to lower manufacturing costs, increase the quality of products/services, and be more innovative. A second view on the role of ERP would be based upon the strategic value of IT as a platform for agility (Sambamurthy et al., 2003). Thus, externally-predisposed rms would not only enhance their operational agility through the greater integration of business processes brought about by adopting ERP, but would also enhance their networking or partnering agility through the collaborative platforms and the supply-chain/customer-relationship management systems made possible by an extended ERP (Jaiswal and Kaushik, 2005). Finally, the third perspective is based on institutional theory, that is, on the competitive and isomorphic pressures that bear upon manufacturing SMEs in their eventual adoption of ERP (Benders et al., 2006). For unfavorably disposed SMEs, whose manufacturing processes and practices are fundamentally different from the ones that are assumed by and embedded within an ERP system, these pressures would be a source of ERP-organisation misalignments if and when the organization is forced to adapt itself to the ERP and has neither the organizational nor the technological capacity to do so (Soh and Sia, 2004). 6. Conclusion In proposing a prole of manufacturing SMEs predisposition to adopt an ERP system, the present study offers a framework for analysis that can serve ERP vendors and consultants, as well as SME owner-managers, the rst to better target their offer of products/services, and the second to better position their rm before contemplating the implementation of an ERP system. To the extent that managers want to increase the competitiveness of their rms through eventual recourse to ERP systems, the empirical results obtained in the present study suggest that they could start by closely examining the current level of assimilation of their rms manufacturing systems within their organizational and environmental context. The identication of the technologies and applications that are assimilated versus those that are less so or not at all, on the one hand, and the technologies that are integrated with one another by opposition to those that are autonomous, on the other, would be essential in determining to what extent the SMEs manufacturing systems are in phase with its competitive environment, its strategy, and its resources. This could help answer the question asked of increasing number of manufacturing SMEs, i.e. whether they are

ready to implement computer-integrated manufacturing technologies and an ERP system. With the advent of globalization and the appearance of new forms of organization based on networks of closely cooperating rms, it seems clear that successfully implementing ERP systems will take on an increased signicance for the survival, growth, and competitiveness of many SMEs. Given existing empirical knowledge in this regard, the present study has contributed to a better understanding of the nature, state, and antecedents of ERP implementation in SMEs. It is known that these SMEs are highly exible and adaptable to change, whether they are environmental, organizational, or technological. Some already have implemented enterprise systems, and, in todays global context, they must follow suit by implementing manufacturing practices such as concurrent engineering, just-in-time, value-added production, and agile manufacturing to improve their competitive position. Enterprise systems should not be adopted unless they are in alignment with the competitive environment, the strategic objectives, and the structure of manufacturing SMEs. For this reason, these organizations must increase their ability to simultaneously manage production and information technologies and, in order to do so, they will need continuing support from researchers and practitioners.
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Klaus, H., Rosemann, M. and Gable, G.G. (2000), What is ERP?, Information Systems Frontiers, Vol. 2 No. 2, pp. 141-62. Konicki, S. (2000), Fast deployments at a price, InformationWeek, October 23. Marchesnay, M. (1991), La PME: une gestion specique, Economie Rurale, No. 206, pp. 11-17. Markus, M.L. and Tanis, C. (2000), The enterprise system experience: from adoption to success, in Zmud, R.W. (Ed.), Framing the Domains of IT Management: Projecting the Future . . . Through the Past, Pinnaex Education Resources, Cincinnati, OH. Rashid, M.A. and Al-Qirim, A.A. (2001), E-commerce technology adoption framework by new Zealand small to medium size enterprises, Research Letters in the Information and Mathematical Sciences, Vol. 2 No. 1, pp. 63-70. Scott, J.D. (1999), The FoxMeyer drugs bankruptcy: was it a failure of ERP?, Proceedings of the Association for Information Systems, Fifth Americas Conference on Information Systems, Milwaukee, WI, pp. 223-5. Stedman, C. (1999), Failed ERP gamble haunts Hershey, Computerworld, Vol. 33 No. 45, p. 38. Waarts, E., Everdingen, Y.M. and Hillegersberg, J. (2002), The dynamics of factors affecting the adoption of innovations, Journal of Product Innovation Management, Vol. 19 No. 6, pp. 412-23. About the authors ` Louis Raymond is Professor of information systems at the Universite du Quebec a ` Trois-Rivieres. His research has been published in journals such as the MIS Quarterly, Journal of Management Information Systems, Journal of Information Technology, Entrepreneurship Theory and Practice, International Journal of Electronic Commerce, International Journal of Operations & Production Management, and in international proceedings such as the International Conference on Information Systems and Frontiers of Entrepreneurship Research. Louis Raymond is the corresponding author and can be contacted at: louis.raymond@uqtr.ca Sylvestre Uwizeyemungu is a doctoral student in information systems at the Universite du ` ` Quebec a Trois-Rivieres.

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