Absorptive capacity and ERP assimilation: the influence of company ownership

Abstract

Purpose The purpose of this paper is to adopt two different perspectives of an organization’s absorptive capacity, namely, the asset perspective and the capability perspective, to examine its impact on enterprise resource planning (ERP) assimilation. While prior IT knowledge represents the asset perspective, organization’s combinative capabilities – formalization, cross-functional interfaces and connectedness – represent the capability perspective of absorptive capacity. Design/methodology/approach The study develops a hypotheses-based theory of absorptive capacity. Data for hypotheses testing are collected from Indian organizations using a cross-sectional survey method. Partial least-squares technique is used to test the proposed hypotheses. Findings The results reaffirm earlier work showing the importance of connectedness and cross-functional interfaces in ERP assimilation; other two factors (prior IT knowledge and formalization) were not found to be positively related to ERP assimilation. To obtain more insights regarding the latter unexpected results, the study checked the interaction effect of the nature of company ownership (private or state-owned). The results pointed to the existence of a negative relationship between prior IT knowledge and ERP assimilation particularly in the case of private organizations compared to state-owned organizations. Originality/value Previous studies on ERP have predominantly examined the influence of absorptive capacity on ERP implementation outcomes at the user level. The present study focuses on absorptive capacity at the organizational level using two perspectives. By utilizing two perspectives on absorptive capacity, namely, the asset perspective and the capabilities perspective, it illustrates how different aspects of absorptive capacity can be brought to light while studying its impacts.