1
THE ERP POST-IMPLEMENTATION IN CHINA: A
CULTURAL PERSPECTIVE
Master thesis, Msc, Supply Chain Management University of Groningen, Faculty of Economics and Business
June 22nd, 2015
Stu name: Yijun Xu Stu number: S2689944 Email: y.xu.19@student.rug.nl
Supervisor: Prof. Dr. J. (Jan) de Vries
Co-assessor: Dr. S.A. (Carolien) de Blok
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ABSTRACT
Purpose – This study aims to shed light on the ERP post-implementation, especially ERP usage and decision support benefits, in Chinese companies by taking the influence of one unique Chinese culture-Guanxi into consideration.
Design/methodology/approach – One single-case study is conducted to investigate the research question in depth. Both survey and individual interviews are employed within the selected company. Findings –Both ERP usage and Guanxi utilization positively influence the decision support benefits. Moreover, the reasons underneath these relationships are explored and the roles of ERP usage and Guanxi to support decision-making are identified.
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Table of Contents
ABSTRACT --- 2 1. INTRODUCTION --- 4 2. THEORETICAL BACKGROUND --- 6 2.1 ERP Usage --- 62.2 Decision Support Benefits --- 7
2.3 The Contingent Factor of Chinese Culture- Guanxi--- 8
2.4 The Conceptual Model --- 11
3. METHODOLOGY --- 12
3.1 Research Design Overview --- 12
3.2 Case Selection and Description --- 13
3.3 Survey --- 14
3.4 Individual Interviews --- 17
4. RESULTS --- 19
4.1 Results of Survey --- 19
4.2 Results of Individual Interviews --- 24
5. DISCUSSION --- 28
6. CONCLUSION --- 31
References --- 33
Appendix A: Constructs used in questionnaire --- 40
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1. INTRODUCTION
In recent years, China’s continuous economic expansion has been paralleled by a substantial growth in the application of Enterprise Resources Planning (ERP) systems (Zhang, Lee, Huang, Zhang & Huang, 2005). Despite the increasing implementation of ERP systems, many organizations still experience a gap between ERP implementation and realizing the desired benefits (Yan & Davison, 2011; Jonas & Bjorn, 2011). ERP systems have been proven to be strong supports for managers to their decision making in many studies (Shang & Seddon, 2003; Holsapple & Sena, 2005; Karim & Bhattacherjee, 2007). However, many researchers argue that Chinese culture, quite different from western culture, inherently influences ERP implementation and thus also effects the success of post-implementation of ERP systems (Zhu, Li, Wang & Chen, 2010; Ram, Corkindale & Wu, 2013). Holsapple and Sena (2005) even view Chinese culture as the only significant hindrance to using ERP systems to support decision-making. This contingent view is the main trigger of this research.
Decision-making is one of the essential activities of all managers (Yan & Davison, 2011). Holsapple and Sena (2005) as well as Karim and Bhattacherjee (2007) further prove that ERP usage is positively related to the decision support benefit of EPR systems due to the capability of ERP systems to collect, store, process, and further disseminate information. However, some researchers claim that Chinese employees tend to behave differently compared with their western counterparties under the influence of traditional Chinese culture (Martinsons & Hempel, 1998, Chen & Francesco, 2000; Kunnathur & Shi, 2001; Hofstede & Hofstede, 2001; Yen & Sheu, 2004).Within Chinese culture, Guanxi, which may be seen as a unique cultural factor in China with great emphasis on the personal network or relationships with other business partners, is highlighted as a critical issue to general ERP system implementation as well as post-implementation (Marble & Lu, 2007). Therefore, in the context of Chinese organizations the relationship between ERP usage and decision support benefits still remains to be verified due to the interference of Chinese culture.
Despite the growing attention to ERR implementation and post-implementation in China, few studies combine the Chinese cultural aspects of managers into the relationship between managers’ usage of ERP systems and according benefits (Ge & Voß, 2009; Yang & Bambacas, 2009). Achieving the desired ERP usage and according benefits is not automatic after successful ERP implementation (Jonas & Bjorn, 2011; Nwankpa, 2015). However, few researches have studied ERP
5 The aim of this research is to shed light on the influence of Chinese culture Guanxi on ERP post-implementation, especially the relationship between ERP usage and the benefits of supporting managers’ decision making. One in-depth case study is conducted to understand the relationship between ERP usage and decision support benefit under the influence of Chinese culture Guanxi. By taking cultural factors into account, the anticipated benefits of using ERP system in decision making can be better released (Popovič, Hackney, Coelho & Jaklič, 2012). Since China is gradually becoming one of the biggest economies in the world and thus drawing increasing interests of researchers
(Shenkar & Von Glinow, 1994; Zhu & Sarkis, 2004). A profound understanding in the influence of Chinese culture on ERP post-implementation is critical to management of Chinese enterprises as well as to other western partners who want to cooperate and even joint-venture with Chinese companies. Moreover, ERP vendors can also better customize their ERP software packages to fit Chinese
organizations and consequently increase their market shares in China (Xue, Liang, Boulton & Snyder, 2005). Based on all concerns described above, the main research question of this study is generated as follows:
RQ: How does Chinese culture influence ERP usage and decision support benefits in Chinese companies?
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2. THEORETICAL BACKGROUND
The focus of this study is to understand the success of ERP post-implementation, in particular the gap between ERP usage and benefits, which are also called ERP value and advantage in some articles, hence we ground our perspective on ERP life-cycle framework of Esteves and Pastor's (1999), as illustrated in Figure 1 below. The key objective of post-implementation stage is to assimilate the technical features of an ERP system into business routines and thus realize the expected benefits (Liang, Saraf, Hu & Xue, 2007). Within this focus, Chinese culture works as a contingent factor, since the successes of ERP post-implementation is highly contextual-dependent (Jones & Young, 2007).
Figure 1 Research focus on ERP life cycle framework (Adapted from Esteves & Pastor, 1999) According to this research focus, the following sections will describe EPR usage and the benefits expected to be attained, particularly the decision support benefits. The relationship between those two factors will also be discussed by considering the contingent factor of Chinese culture Guanxi.
2.1 ERP Usage
ERP systems are defined as “integrated, enterprise-wide, packaged software applications that impound deep knowledge of business practices accumulated from vendor implementations in many organizations” (Shang & Seddon, 2000: 1005). Under this definition, ERP usage is defined as “how users employ the features of the system to perform a task” (Burton-Jones & Gallivan, 2007: 658). Enterprise System usage has been proved to be a critical predictor of information system
implementation success (Nwankpa, 2015) and thus for relatively complex systems such as ERP systems, the usage is inherently critical to realize the desired benefits (Schwarz & Chin, 2007; Nwankpa & Roumani, 2014; Nwankpa, 2015). Today's managers tend to rely more than ever before on information and business data provided by Enterprises systems such as ERP to make critical decisions (Bendoly & Cotteleer, 2008; Bendoly, Rosenzweig & Stratman, 2009). Since EPR usage has been identified as one of the key factors that stimulate benefits resulted from ERP implementation, ERP usage has been considered as the most normally used measure of ERP implementation and post-implementation successes (Cruz-Cunha & Varajao, 2011).
Acuquistion Implementation Usage Benefit Organization performance
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2.2 Decision Support Benefits
An ERP system saturates an organization by deeply affecting a variety of business processes, thus generating the benefits at multiple levels. Shang and Seddon (2003) unprecedentedly classify the benefits derived from using ERP systems into five groups, namely operational benefits, IT infrastructural benefits, managerial benefits, strategic benefits and organizational benefits. Within these five categories, improved efficiency and effectiveness of ERP practitioners’ decision making are highlighted as a key managerial advantage brought from ERP usage (Shang & Seddon, 2003). This is mainly due to the capability of ERP systems to gather, store, process, and further propagate
information (Karim & Bhattacherjee, 2007). To be more specific, an ERP system can deliver decision-making support benefits by providing a central database, integrated data, and built-in data capabilities related to emergency handling, resource distribution and business transactions (Karim & Bhattacherjee, 2007). Moreover, an ERP system can ease business routines and programmatic managerial decisions, thus accelerating the decision-making process and strengthening decision quality simultaneously (Barua, Kriebel & Mukhopadhyay, 1995).
Decision support benefits have long been investigated by many researchers, although hardly in connection with ERP systems (Holsapple & Sena, 2005). Udo and Guimares (1994) conclude eight ways to measure decision support benefits such as user satisfaction with decision support system and degree to which the system enhances user productivity. Based on many concerning theories (e.g. Desanctis & Gallupe, 1987; Udo & Guimares, 1994; Holsapple, Whinston, Benamati & Kearns, 1996), Holsapple and Sena (2005) confirm that using ERP systems do provide significant decision support benefits. However, improved decision-making often fails to materialize during the usage of ERP system (Holsapple & Sena, 2005)
8 information sharing, closer collaboration and better forecasting play mediate roles between this
relationship (Byrne & Heavey, 2006). Furthermore, the study of Bendoly et al. (2009) suggests that managers would be well-served by examining how such data and information provided by ERP systems is used within their organizations. Later in the research of Ifinedo et al. (2010), the results demonstrate that ERP usage have greater impact on the individual decision-making benefit (β = 0.69) than organization decision making processes (β = 0.52) and higher levels of individual benefits for using ERP ultimately lead to an overall advantage for the ERP-adopting organization, which is in accordance with the conclusions of David (2002), Ko, Kirsch and King (2005), and Hwang and Xu (2008). Therefore, we mainly focus on individual decision support benefit of using ERP systems in this study.
2.3 The Contingent Factor of Chinese Culture- Guanxi
Many researchers have studied the importance of incorporating culture aspects into ERP
implementation (Alalwan, Thomas & Weistroffer, 2003; Ko et al., 2005), but few focus on the post-implementation success of ERP systems by considering cultural aspects. Martinsons and Hempel (1998) ascribe many cultural differences to the necessity for comprehensive reengineering efforts such as Business Process Reengineering (BPR) that western information technology has brought about in China. Later on, Kunnathur and Shi (2001) even cite cultural factors as the reasons why integrated management information systems such as ERP are not realizing their full potential in Chinese organizations. Chinese culture is quite different from Western countries according to the four dimensions of national culture developed by Hofstede and Hofstede (2001) and the dimension of uncertainty avoidance is highly relevant to Enterprise system implementation. Meanwhile, Pun, Chin and Lau (2000) conclude that Eastern culture tends to tolerate, accommodate or even adapt to
9 benefits. This assumption is in accordance to the suggestion of Holsapple and Sena (2005) that human issues (e.g. organizational culture, resistance to change, unwillingness to collaborate or share
information) are viewed as the only substantial hindrance to using the ERP systems for decision support. Due to the difference of culture and behaviour between westerners and easterners, the relationship between ERP usage and decision support benefits, which has already been widely proved in western companies, remain uncertain in the context of Chinese companies. Therefore, it is
reasonable to generate the first sub-question of this study:
1: What is the relationship between ERP usage and decision support benefits in the context of Chinese companies?
In Chinese culture, a highly collectivism culture, relationship commitment is reckoned more critical in maintaining relationships compared to that in an individualistic culture (Law, Wong, Wang & Wang, 2000). Peng and Heath (1996) advocate that Chinese companies, operating in a relatively dynamic transitional economy, are likely to rely more on personal network contacts and personal trust in order to decrease uncertainties in a rapidly changing environment. Also, Eastern countries are considered as highly-contextual cultures in which communication emphasizes on unspoken context as well as spoken (Lin, Peng, Yang & Sun, 2009). Within Chinese culture, Guanxi, which may be seen as a unique Chinese culture with strong emphasis on personal network or relationships with other business partners, is highlighted as a critical issue to general ERP systems (Marble & Lu, 2007). Actually, Fan (2002) categorized Guanxi into three groups, namely family Guanxi, helper Guanxi and business Guanxi. Since the focus of this research is in the context of Chinese company, we mainly focused on business Guanxi but beared the possible influences of the former two kinds of Guanxi in mind due to the compatibility of these three kinds of Guanxi. Business Guanxi is defined as “the process of finding business (rather than personal) solutions through personal connections” (Fan, 2002: 554). The word “Guanxi”, though sometimes expressed in English as “network”, is still slightly different form the network perceived by westerners that effect of favour exchange was more positive for Chinese Guanxi, whereas the effect of friendship was more distinct for westerners’ personal networking development (Chua, Morris & Ingram, 2009). Law et al. (2000) clarify the role of supervisor-subordinate Guanxi in the Chinese companies context that both Chinese supervisors and subordinate trend to make rational decisions when a good Guanxi exists between them. Furthermore, Zhao, Huo, Selen and Yeung (2011) validate that Guanxi has a significant influence on both external integration with suppliers and
10 of loyalty and solidarity and the willingness to take care of each other under all circumstances” (Chen & Chen, 2004: 315). Renqing is a form of social resources that offers leverage in interpersonal
exchanges of favours (Yang, 1994) and is further defined as “The special treatment of an individual, the allocation of resources to another party as a ‘gift’ in the process of a market transaction, to tighten up the bonds between parties” (Wong & Leung, 2001: 44). Fan (2002) even regards reciprocity as the core of the Chinese art- Guanxi management. Xinren means the mutual trust between one and another (Menkhoff, 1993).
Many articles suggest that Guanxi positively influences organizational performance. For instance, Peng and Luo (2000) validate that managers' micro interpersonal ties (Guanxi) with top management of other organizations and with government officials help improve macro performance. Similarly, Park and Luo (2001) state that some Chinese organizations develop Guanxi as a strategic mechanism to overcome competitive and resource disadvantages by cooperating and exchanging favours with outside stakeholders and government authorities. Despite the extensive connection to organizational performance by researchers, Guanxi is scarcely linked to decision support benefits. But some insights can be attained by considering information sharing between Guanxi utilization and decision support benefits (Cheng, Yip & Yeung, 2012). To be more specific, Guanxi is a valuable business tool to bridge gaps in information and resource flows between organizations and important outside
stakeholders (Park & Luo, 2001). This positive influence of Guanxi on information sharing is further reinforced by Shin, Ishman and Sanders (2007). Besides, a study of Venkatesh, Morris, Davis and Davis (2003) indicate that sufficient information helps decision-makers better identify the optimal decision. Following this logic, Guanxi might positively influence decision support benefits. But how this relationship actually performs still remains to be investigated. Therefore, the second sub-question of this research is generated as follows:
2: How does Chinese culture Guanxi directly influence decision support benefits?
On the other hand, Xin and Pearce (1996: 1643) characterized Guanxi as “substitutes for formal institutional support” due to reciprocity obligation since a person is regarded as untrustworthy and therefore will possibly experience undermined reputation if he or she refused to return a favour. Moreover, managers in Chinese companies tend to rely on insights from personal connections to judge situations and then make decisions, despite the implementation of ERP system (Martinsons &
11 Guanxi. On the other hand, the usage of ERP system, representing employing the capability of ERP systems (Karim & Bhattacherjee, 2007), are regarded as more professionalism rather than Guanxi utilization. Consequently, it is logical to infer that Guanxi may undermine the relationship between ERP usage and decision support benefits. But how the relationship actually is still unknown. Therefore, the third sub-question is raised as follows:
3: How does Chinese culture Guanxi affect the relationship between ERP usage and decision support benefits?
Figuring out how these relationships perform only provides limited implications to understand ERP post-implementation in Chinese companies profoundly since the internal factors causing these relationships are still unclear. Hence, the fourth sub-question is generated:
4. What factors contribute to the existence of these relationships in Chinese companies?
2.4 The Conceptual Model
Based on all the concerning theories discussed above, the conceptual model is displayed in Figure 2. As indicated in this figure, the first three sub-questions focus on the relationships among the three variables, namely ERP usage, decision support benefits and Guanxi. Hereby, we emphasis on the explorations of the second and third sub questions since the influences of Chinese culture Guanxi on decision support benefits directly and on the relationship between ERP usage and decision support benefits have hardly be
investigated. The first sub question works as a confirmation test of the relationship between ERP usage and decision support benefits which has already been adequately suggested in literature. The fourth
sub-question, though not shown in the conceptual model, intended to explore the factors which influence these relationships. With these four sub-questions in mind, we analysed our case material.
Figure 2 The conceptual model
ERP usage Decision support
benefits
Guanxi RQ2
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3. METHODOLOGY
3.1 Research Design Overview
In this research, one in-depth case study strategy was followed as this is seen as appropriate for the issues under discussion (Yin, 2003). One main reason to conduct a single case study is that the research question is exploratory in nature, intended to identify how Chinese culture Guanxi influence the relationship between ERP usage and decision support benefits. The question is a “how” question and the gap between ERP usage and decision support benefits is a current phenomenon in developing countries (Yin, 2003). Also, case research is especially suitable when some “soft” elements such as human element in operation management are investigated (Karlsson, 2009), and in this case, Chinese culture. Moreover, richer data of company can be obtained for the iterative process of theory building (Eisenhardt, 1989; Karlsson, 2009). As a research method, we should notice that case studies,
especially single-case ones, score low on generalizability of findings. However, the case selected itself has some particular features. First of all, the company is one of the biggest manufacturing companies in China. Also, the company has adopted ERP system for several years and are prone to become mature in ERP implementation and stepped into post-implementation stage. Furthermore, the company is a privately-owned one on which Chinese culture Guanxi has a profound impact (Liu & Almor, 2014).
The researcher had no control of events within the selected organization, and the focus,
post-implementation of ERP systems, was on a contemporary phenomenon within a real-life context (Yin, 2003). According to Walsham (1995), the role of the researcher in this study is that of an ‘outside observer’, since this role can best prevent the researcher from staking certain interpretations and outcomes.Nevertheless, a disadvantage is that the researcher may be denied access to some confidential data (e.g. documentation about the ERP system planning, implementation and use and financial report) because of his or her status as outsider of the company (Walsham, 1995).
13 Figure 3 Visualized methodology overview
3.2 Case Selection and Description
China takes a special role as different ownership structures can be found side-by-side. The ownership of Chinese companies generally includes collectively-owned enterprises (COEs), state-owned
enterprises (SOEs), privately-owned enterprises (POEs), Joint-ventures (JVs), and foreign-owned enterprises (FOEs) (Tan, 2002). In this research, the type of ownership is limited to only privately-held enterprises since a relatively underdeveloped legal framework makes privately-held company
executives more dependent on Guanxi than executives in state-owned enterprises or joint-venture companies (Xin et al., 1996; Liu & Almor, 2014). In addition, the influence of other confounding variables such as multi-national culture and local government can be best eliminated (Karlsson, 2009). Besides, the company size should be large enough to gain adequate data and the company has
implemented ERP system for several years and stepped into the post-implementation stage of ERP system. Hereby, we define the large size company as the company which has at least 500 FTEs (Full-time employees) and ERP post-implementation as has adopted ERP systems for at least 5 years. With those limits of studied company in mind, one company which meets those criteria was selected through the personal network of the researcher.
Since established in 1968, the Company M has grown from what was once a local workshop into a leading consumer appliances and heating, ventilation and air-conditioning (HVAC) systems
manufacturer. The company has entered the top 500 public companies in the world, according to The Forbes Global 2000. The company achieved a global revenue of US$23 billion and a year-on-year growth of 17 percent in 2014. Currently, Company M has over 126,000 FTE worldwide. The ERP systems used in this company is Oracle and the company have adopted the ERP system for 12 years.
Survey
RQ 1
RQ 2
RQ 3
Individual
interviews
RQ 4
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3.3 Survey
In order to answer the first three research questions, a cross-sectional survey was conducted by using online questionnaire instrument in Company M. The reason to limit the survey within one company is that the effects of other confounding factors such as firm size, industry type, types of ownership and different ERP systems can be best eliminated. The participants, the measures, data collection procedure and data analysis method as long as quality criteria will be described in this section. The potential participants in questionnaire is defined as decision-makers who work with an ERP system in the context of a Chinese company since the topic of this study mandates that respondents should be familiar with both EPR usage and decision-making in their daily working. Considering that collecting data from decision-makers who work with an ERP system in all Chinese companies is infeasible, we further confined the unit of analysis to the decision-makers who work with an ERP system in Company M. To meet the criteria of decision-makers who also work with an ERP system, the top management and supporting assistants are eliminated from the potential respondents. The human resource structure in Company M is pyramid-shape. The highest position is top management, followed by director, manager, specialist and assistant. Furthermore, the respondents are constrained to be those so called “boundary spanners” since Guanxi enhances more on inter-organizational operation than internal operation (Park & Luo, 2001). Cross and Parker (2004) characterize boundary spanners as vital individuals who facilitate the sharing of expertise knowledge by connecting two or more organizations separated by location, hierarchy, or function. Specifically, Su, Yang, Zhuang, Zhou and Dou (2009) argue that Guanxi, as a norm of socialization in China, affects those boundary spanner behaviour considerably. In this study, “boundary spanners” are constrained to those
employees in Purchasing, Sales and Finance departments who possibly utilize Guanxi with suppliers, customers and government officials in their decision-makings respectively. After communicating with Human Resource Manager in Company M, the target departments are further tailored to eight
departments in the context of Company M, as exhibited in Figure 4 below.
15 The questionnaire structure is designed mainly based on Chang et al. (2008). A complete overview of the English version of questionnaire is shown in appendix B. Some general questions such as
educational level and position are tailored to suit the specific context of Company M after contacting with Human Resource Manager of this company. The measures used in questionnaire are explained as follows.
a. ERP usage
In this survey, ERP usage was measured with three items derived from Nwankpa (2015). A seven-point scale ranging from strongly disagree (1) to strongly agree (7) was used to indicate the level of intense, frequency and total volume of ERP usage.
b. Decision support benefits
Overall, thirteen dimensions of decision support benefits were measured, adapted from Holsapple and Sena (2005). Three kinds of decision support benefits, namely better communication, better
coordination and greater satisfaction, are mulit-item constructs while others are measured with only one item. All items were rated on a seven-point scale ranging from strongly disagree (1) to strongly agree (7).
c. Guanxi
Guanxi is measured by the GRX scale developed by Yen et al. (2011).Three dimensions of Guanxi, which is Ganqing, Renqing and Xinren, are measured. Each dimension is a multi-item construct. It should be noted that two items belonging to Xinren are reverse scales, requiring recoding in data analysis stage. They were all rated on a seven-point scale ranging from strongly disagree (1) to strongly agree (7).
When it comes to data collection of survey, data were collected through online questionnaire by using a web-based survey tool “WENJUAN” during the period between 17th April to 30th April. In terms of questionnaire, it is a research instrument consisting of a series of questions for the purpose of gaining useful information from potential respondents. The online questionnaire approach has been noted for its relatively high speed, low cost and improved response rate and quality (Karlsson, 2009). Besides, bias due to group interaction could be avoided since online questionnaire can prevent some
participants from leading others in the data collection process by their reputation, authority and personality (Karlsson, 2009). Moreover, respondents remain anonymous and are free to give their email addresses, which to some extent provides them a sense of safety and therefore prevents them from being dishonest.
16 online questionnaire link opened for two weeks to ensure enough time for potential respondents to answer the questionnaire and a reminder email were sent to those potential respondents by Human Resources Manager to stimulate the response rate during the middle of this period. However, the intervention of Human Resources Manager can possibly cause some bias in the data collected at this stage and indirectly affect the generated results. For instance, he or she might send the email invitation to some unqualified respondents such as supporting staff in this organization. Judging from the data collected from questions, all respondents are qualified to meet the selection criteria mentioned earlier. But this is based on the assumption that all respondents are honest enough and didn’t try to “make up stuff”.
To analyse and interpret the quantitative data gathered by questionnaires, both Microsoft Office Excel and standard statistics software –Statistical Package for the Social Science (SPSS) were used. The first step in our analysis was to work out the demographic information of all participants by using the functions provided by Microsoft office Excel. Then two statistical methods, factor analysis and Cronbach’s alpha, were conducted to assess the used measures, aiming to check the discriminant validity as well as the internal consistency of data. To be more specific, Factor analysis was applied to demonstrate the reliability of the measurement scales whereas the values of Cronbach’s alpha
indicated the psychometric properties of those multi-item constructs. After measuring the construct reliability, the data for the same constructs were taken average to formulate new variables for later analysis. After that one way between subjects ANOVA, Pearson correlation analysis and regression analysis were conducted to investigate the collected data. One-way between subject ANOVA intended to figure out which confounding variables such as gender and age may affect the core variables in the research model by comparing mean and variances. Correlation analysis was conducted to measure correlations between constructs of interest. Linear regression analysis was computed to verify the direct relationship between independent variable (ERP usage) and dependent variable (Decision support benefits). For the moderator analysis, multiple regression analysis was employed to investigate the relationship between dependent variable (standardized Decision support benefits) and the
17 2002). The Cronbach’s alpha of all muti-item constructs were above 0.80, which means the items used were quite reliable. Factor analysis was used to provide construct validity and showed there was a two factor-analysis, which was also in accordance with our initial assumption.
3.4 Individual Interviews
Based on the results of survey which indicated the employees’ position might be a key factor influence different Guanxi utilization in decision-making, the decision-makers with a variety of positions, were selected and asked whether they were willing to participate the semi-structured interview or not based on the email address information gathered in survey. The unit of analysis in this case is decision-makers in Company M with different degree of Positions. Hereby, we define director, manager and specialist as high, medium and low in position. In potential interviewees selection, both literal replication logic and theoretical logic were employed (Karlsson, 2009). In practices, the interviewees on similar positions were selected to perform literal replication logic whereas the interviewees with different position represented the theoretical logic. The starting number of interviews was four and the ending signal was that nothing new can be found. The semi-structured individual interviews were conducted by virtual face-to-face ways (such as Skype, FaceTime and Tecent) due to the long distance between the researcher and those potential interviewees. Each individual interview lasted for 30 minutes approximately. Before the individual interviews, the outline of interview protocol had been sent to the interviewees by email in advance to let them properly prepare what would be asked (Karlsson, 2009). The interview protocol was firstly translated into Chinese by the researcher and the transcripts and notes were back translated into English for further data analysis. During the interviews, we asked interviewees to describe the decision support benefits provided by ERP usage, to recall examples of decisions they made in their daily work, to evaluate the extent of Guanxi utilization in their decision-makings, and to list the reasons for such actions. Both note check by the interviewees and tape recorder were applied to avoid any contingent conditions.
To investigate sub-question four, the data collected from interviews were first documented and then coded. The interview protocol works as foundation for documentation of all the evidence and information gathered in research (Karlsson, 2009). In order to prevent potential distortion of
18 manually because the total number of interviews (N=6) was relatively small, which made exploratory manual analysis of the data feasible (McLafferty & Farley, 2006).
It is particularly vital to pay attention to reliability and validity in case study research (Yin, 2003; Karlsson, 2009). First of all, construct validity is ensured in different ways. Firstly, multiple means of data collection were employed to build up the triangulation, which included document study, survey, and semi-structured interviews. Also, a chain of evidence was developed by taking notes of interviews and observations, taping the interviews and verbal report. Letting the interviewees review the written notes and check whether the meanings are correctly expressed is another tactic to reinforce construct validity. Furthermore, internal validity is mainly strengthened by doing the within-case analysis, which focuses on explanation building and pattern matching, before the cross-case analysis, which addresses rival explanations. Besides, external validity is sought by using replication logic in
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4. RESULTS
4.1 Results of Survey
Overall, 79 finished questionnaires were collected, reaching a respond rate of 48.46%. Due to the function of used online survey tool (WENJUAN) that the questionnaire cannot be submitted if there is any unanswered question (except the last question which asks for email address), there is no
unfinished or missing data. Therefore, all 79 collected data are valid and complete. But we should note that the response rate might be undermined since the respondents can close the website to quit
answering the questionnaire. 4.1.1 Demographic information
The demographic information of respondents is summarized in Table 1. Among 79 respondents, 44 are male and 35 are female. Most respondents’ age locates in the group of 20 to 30 years old, accounting for 63.29 percentage of the total respondents. Most of the respondents (72.15%) are “Specialist” in Company M, followed by “Manager” (21.52%) and “Director”(6.33%), which is also logical since the human resources structure in this company is pyramid-shape. Moreover, about 80 percent of the respondents have worked in Company M for more than 5 years. More than half of the respondents have been working with the ERP systems for more than 4 years. These demographic information will be further analysed in section 4.1.3 and investigated whether any one of these factors significantly influence either ERP usage, decision support benefits or Guanxi utilization.
Demographic Characteristics
Number count Percentage GENDER Male 44 55.70% Female 35 44.30% AGE <=20 1 1.27% 21~30 50 63.29% 31~40 25 31.65% 41~50 1 1.27% 51~60 2 2.53% >=61 0 0.00% POSITION Director 5 6.33% Manager 17 21.52% Specialist 57 72.15%
WORKING EXPERIENCE (YEAR)
<=2 5 6.33%
20
5~8 24 30.38%
8~10 16 20.25%
>10 21 26.58%
ERP USE EXPERIENCE (YEAR)
<=1 9 11.39% 1~2 9 11.39% 2~3 9 11.39% 3~4 6 7.59% 4~5 19 24.05% >5 27 34.18%
Table 1 Demographic information of respondents 4.1.2 Measures assessment
Exploratory factor analysis is one method to check dimensionality, thus factor analysis was conducted to measure the construct validity. We employ the KMO and Bartlett’s Test to analyse the 22 items belonging to the constructs of “ERP usage” and “Decision support benefits”. The results of KMO and Bartlett’s Test indicate that the sample size (N=79) is exclusively adequate for factor analysis (KMO = 0.916>0.6) and there is significant relationship between the items we included in the analysis
(Bartlett’s Test is significant, p = 0.000). The results of Factor analysis proves the 22 items belonged to 2 constructs as expected in our scales.
Besides, Cronbach’s alpha was computed for each multi-item measure. As shown in Table 2, the reliability coefficients range from 0.869 to 0.978, which are all higher than the good level of 0.8 for this kind of study (Nunnally, Bernstein & Berge, 1994), indicating that all multi-item constructs are reliable enough in this research (Flynn, Sakakibara, Schroeder, Bates & Flynn, 1990). Judging from the results of Factor analysis and Cronbach's alpha, we can safely conclude that the measures used in this research are highly-reliable.
Variables with multi-items Number of items Cronbach’s alpha
ERP usage 3 ,875
Decision support benefits 13 ,978
Guanxi 11 ,970
Ganqing 4 ,963
Renqing 4 ,964
Xinren 3 ,869
Table 2Cronbach’s alpha of multi-item constructs 4.1.3 Confounding variables exploration
21 usage, decision support benefits and Guanxi, in each different situations of those confounding
variables. The results of the conducted one-way between-subjects ANOVA analysis are presented in Table 3 below.
Factor ERP Usage Decision support Benefits Guanxi
Gender 0.054 0.165 0.233 Age 0.622 1.383 0.535 Department 0.443 0.592 0.576 Position 5.241** 9.147*** 3.577* Educational Level 0.447 0.677 0.385 Work Experience 0.193 1.204 0.718
ERP Use Experience 0.183 0.042 0.580
N=79
* p < 0.5
** p < 0.1
*** p < 0.01
Table 3 One-way between-subjects ANOVA
As illustrated in this table, all confounding factors fail to significantly influence the three variables except the factor “Position”. Take the effect of gender to ERP usage as an example, a one-way between-subjects ANOVA is conducted to compare the effect of gender on ERP usage in male and female conditions. There is no significant effect of gender on ERP usage at the p<0.5 level for the two conditions [F(1, 77) = 0.054, p = 0.817]. Since there is no significant effect of gender on ERP usage, there is no need to further conduct a post-hoc test. Similar situations can be found in other
confounding variables except for the different positions of respondents. Therefore, it can be concluded that there is no statistically significant difference in ERP usage, decision support benefits and Guanxi in different gender, age, department, educational level, work experience and ERP use experience respectively.
22 for the three conditions [F(2, 76) = 9.176, p = 0.000]. The post-hoc LSD-test suggests a significant difference between Director and Manager conditions, p=0.002. Also, there is a significant difference between Specialist and Manager conditions, p=0.000 whereas no significant difference between Director and Specialist conditions, p=0.198. Next, one-way ANOVA was again used to compare the effects of Position on Guanxi utilization. There exists significant effect of Position on Guanxi at the p<0.5 level for the three different position conditions [F(2, 76) = 5.241, p = 0.007]. The post-hoc LSD-test exhibits a significant difference between Director and Manager conditions, p=0.037 and between Specialist and Manager conditions, p=0.020. Once again, there is no significant difference between Director and Specialist conditions, p=0,366.
Then there exits two possibilities for these findings. One is that positions of respondents actually play a key role in affecting ERP usage, decision support benefits and Guanxi. Based on the results of Post-hoc LSD-test, we can safely conclude that managers’ levels of ERP usage, decision support benefits and Guanxi are statistically significant from directors respectively. Additionally, we can jump to the conclusion that the specialists’ levels of ERP usage, Decision support and Guanxi are neither statistically significant from directors nor from managers. The other reason is that the sample size of the category “Director” is relatively small (N=5), therefore the outcome is not reliable due to the bias caused by inadequate sample size, generating a Type I error in statistical analysis. Type I error means that we reject a null hypothesis that is in reality true. In this case, the null hypothesis is that Position insignificantly influence ERP usage, decision support benefits and Guanxi, which means different positions actually do not influence the degrees of ERP usage, decision support benefit and Guanxi utilization.
Since it’s still hard to judge whether different positions of participants really play important roles in ERP post-implementation and Guanxi utilization at this stage because of the inadequate simple size of Director position category. This will be further discussed after data collection of individual interviews. 4.1.4 Correlations and Regression analysis
In this research, Pearson correlation analysis and Regression analysis are used to investigate the relationship between core variables in research model.
23
Variables Mean Std. Deviation 1 2 3
1. ERP Usage 5,5021 1,38251 1
2. Decision
Support Benefits 5,1943 1,02146 ,435** 1
3. Guanxi 4,3548 ,79019 ,400** ,616** 1
**. Correlation is significant at the 0.01 level (2-tailed).
Table 4 Descriptive statistics and correlation of variables
In the linear regression analysis which is applied to test the direct relationship between ERP usage and Decision support benefits, the correlation is significant (p < 0.05). Therefore it can be concluded that ERP usage has a significant and positive effect on Decision support benefits (B = 0.321, p <.05). Similarly, it can be determined that Guanxi also has a significant and positive effect on Decision support benefits (B = 0.796, p <.05).
For the moderator analysis, The interactive effect of ERP usage (X) and Guanxi (M) on Decision support benefits (Y) is significant (B =0.248, p< .05). To test the form of this interaction, we further created Figure 5, which depicts the two-way interaction of ERP usage and Guanxi on Decision support benefits. As illustrated in this figure, the slope of the relationship between ERP usage and Decision support benefits for a high level of Guanxi is indicative of a strong and positive relationship, whereas the slope for low Guanxi indicates a relationship between ERP usage and Decision support benefits.
Figure 5 Moderator analysis
Based on the results of correlation and regression analysis, the first three research questions can be answered and the research model tested. The updated research model is displayed in Figure 6 below. According to the attained results, there is a significantly positive relationship between ERP usage and Decision support benefits in the context of the studied company. This means an increase in ERP usage will lead to an increase in gained Decision support benefits. Besides, the importance of Guanxi to the Decision support benefits is confirmed. Guanxi directly influences Decision support benefits
2,418 2,608 2,832 4,142 1 1,5 2 2,5 3 3,5 4 4,5 5
Low USAGE High USAGE
24 positively. Moreover, Guanxi succeeds to play a moderating role in the relationship between ERP usage and Decision support benefits in the context of Chinese company. Specifically, Guanxi moderates the positive relationship between ERP usage and Decision support benefits, such relationship becomes stronger when the degree of Guanxi is high rather than low. However, what factors contributing to the existences of these relationships still remain unknown. Therefore it is reasonable to perform more in-depth study through individual interviews.
Figure 6 Tested research model
4.2 Results of Individual Interviews
Overall, six individual interviews were conducted separately and the data collected from interviews are partially presented in Table 5. As shown in this table, it can be figured out that all interviewees generally agree that ERP usage provides them decision support benefits through advanced information centralization, information processing, information sharing and information accuracy. However, when it comes to Guanxi utilization, their attitudes varies dramatically. Interviewee A and D, who is director of Business Finance Department and Specialist of Purchasing Department respectively, admit a high Guanxi utilization in their own decision-making. Similarly, interviewee C and F express that they consider Guanxi “in some cases”. On the other hand, interviewee B and E deny utilizing Guanxi in their own decision-making, as interviewee B mentioned “I prefer to work in a quiet business-like manner”. But it should be noted that all interviewees may be not frank enough to tell the truth in reality since Guanxi utilization sometimes is a sensitive topic in organizations due to the stereotype of Guanxi which is often connected with bribery (Peng & Luo, 2000), corruption (Fan, 2002) and informality (Xin & Pearce, 1996). The reason to exclude Guanxi from decision-making of those two interviewees is quite similar that both of them regarded Guanxi as the opposite of professionalism. Additionally, interviewee B reveal that Guanxi may increase uncertainties due to the obligation to return a favour, and this may even lead to corruptions, especially when the decision-maker and the concerning outside stakeholder are good friends privately or relatives. Nevertheless, the reasons to include Guanxi of other interviewees mainly lie in the benefits brought from. A generally-agreed benefit is improved work efficiency as they have past corporation experience and therefore are familiar with each other’s way of doing business. Another benefit that needs to be highlighted is power of the stakeholder. If the stakeholder’s power is greater than the decision maker, the decision
ERP usage Decision support
25 maker can hardly ignore the factor of Guanxi when making decisions. Based on the information gathered in interviews, the stakeholder’s power generates from higher position over the decision-maker, having scare resources, good Guanxi with direct supervisor of the decision-maker and greater purchasing power. As to the scare resources, interviewee C gives an example that he or she expects the distributor will recommend him or her to other distributors. In this case, the scare resources represent the access to a much wider network of connections (Fan, 2002).
In all cases of those who utilized Guanxi in their decision-making except interview F, they consider that Guanxi provids them further selection criteria to potential solutions by providing more
infromation. For instance, interviewee A said “when other situations such as capital ability and transaction time are almost the same, then different degrees of Guanxi with bankers provide advanced selection criteria” when he or she gave an example of bank selection in funding. However, interview F revealed that the Guanxi with the outside stakeholder directly influenced the final decision due to the power of this stakeholder and the willingness to develop long-term relationship with this stakeholder.
Interviewe e Questions A B C D E F Positon, Department Director, Business Finance Department Manager, Overseas Sales Finance Department Manager, Domestic Sales Planning Department Specialist, Purchasing Department Specialist, Production Planning Department Specialist, Domestic Sales Planning Department How could decision support benefit provided by ERP usage? -Information centralizatio n -Information processing -Information sharing -Information accuracy -Information centralization -Information sharing -Information centralizatio n -Information sharing -Information centralizatio n -Information sharing -Information accuracy -Information centralization -Information sharing -Information sharing -Information accuracy Do you consider Guanxi with concerning stakeholder s in your decision-making?
Yes Hardly Sometimes Yes Hardly Sometimes
26
corruptions -Efficiency -Efficiency relationship
-Efficiency Does Guanxi support decision-making
Yes / Yes Yes / Yes
How could decision support benefit provided by Guanxi? -Provide further selection criteria -Provide further selection criteria -Provide further selection criteria -Direct influence the decision
Table 5 Descriptive coding of data collected from six individual interviews
Based on the information gathered from individual interviews, there are two kinds of decisions to be made in general, operational making and strategic making. Operational decision-makings such as place an order routinely and what’s the order quantity inherently need less decision processes and data to make up these decisions compared to those strategic decision-making such as banker selection and which distributors to develop long-term relationships with. For those strategic decision-making, more rounds of data collection are required, providing both tangible data as well as intangible data. Judging from the information of interviews, ERP usage mainly provides tangible data, where an actual number or ranking can be labelled on, for the early stage of data collection and therefore supports ERP users’ decision-making. Contrast to ERP usage, Guanxi mainly provides intangible data such as the degree of mutual trust and possible access to scare resources for the later data collection stage to make final decisions. However, we should notice that the boundaries between operational making and strategic ones are blurred in real life. Some operational decision-making may also need several rounds of data collection and even Guanxi can provide data and significantly influence the final decision outcomes. For instance, the example given by interviewee F- product distribution priority, it should be categorized into operational decision-making in most cases. However, when a customer asks for a rush order, Guanxi starts to interfere and refusing this rush order may destruct the long-term relationship development with this customer. From this perspective, it is reasonable that those employees positioning at Director indicate a higher level of Guanxi utilization in general than others both in survey and interviews because they tend to make more strategic decisions in their daily work (Amason, 1996).
27 interviewee E said in the interview: “we hardly make decisions, the boss makes decisions and we are the persons to operationalize them”, which is not true in fact. The word “decisions” in this sentence actually stands for important strategic decisions. This phenomenon can partially explain why Guanxi positively moderates the relationship between ERP usage and decision support benefits in the results of survey, at least exaggerating the fact.
To conclude, both ERP usage and Guanxi utilization provide data to support decision-making
28
5. DISCUSSION
The main aim of this study is to throw light on ERP post-implementation, specifically ERP usage and decision support benefits, in Chinese companies by incorporating one unique Chinese culture-Guanxi. Based on the results of survey and individual interviews together, we can draw a casual map indicating all the variables and their corresponding relationships. The casual map is given in Figure 7 below.
Figure 7 Casual map of Guanxi, ERP usage and decision support benefits Taken the results of survey and individual interviews together, we can first safely conclude the positive influence of ERP usage on attaining decision support benefits in the context of Chinese companies. This is in accordance to the point of views of many former researchers (O'Donnell & David, 2000; Bendoly et al., 2009; Ifinedo et al., 2010; Cruz-Cunha & Varajao, 2011; Nwankpa & Roumani, 2014; Nwankpa, 2015). Therefore, Chinese companies are not exceptions to gain decision support benefits from the usage of ERP system. Moreover, the attained decision support benefits from ERP usage are acquired from the functions provided by ERP systems, mainly information functions such as information centralization and improved information sharing, which is also in line with the claim of Byrne and Heavey (2006) who state that more information sharing, closer collaboration and better forecasting provided by ERP system play mediate roles between the relationship of ERP usage and corresponding benefits. Although there exits cultural difference between Chinese companies and western ones, the positive relationship between ERP usage and the decision support benefits expected to be derived from ERP usage is not diminished. This can be partially explained by other Chinese cultural characteristics- the ability to adapt to environment and the ability to manage paradoxes (Faure
ERP usage Infromation functions: -Information Centralization -Information Sharing -Information Processing -Information Accuracy Decision support benefits Guanxi Utilization Further selection criteria Decision outcomes Benefits: -Mutual Trust -Long-term relationship -Stakeholder's power -Decrease uncertainties -Efficiency
-Access to scare resources
29 & Fang, 2008). This conclusion challenges some researchers who claim the cultural difference is a key hindrance to realising ERP implementation potential (Yen & Sheu, 2004; Xue et al., 2005; Holsapple & Sena, 2005), at least for the cultural factor Guanxi. However, what should be noticed is that when participants were asked about decision-making, they are prone to recall those strategic ones based on the observations and analysis from individual interviews. Therefore, the influence of Guanxi might be exaggerated, resulting in a stronger positive relationship between ERP usage and decision support benefits than in reality since Guanxi positively moderates this relationship.
Furthermore, when it comes to Guanxi utilization, the influence becomes a little bit tricky since both benefits and drawbacks can be brought from it. But judging from the results of survey and interviews together, we can confirm the overall positive influence of Guanxi on supporting Chinese employees’ decision-makings. This is coherent with the statement of Park and Luo (2001) that Guanxi is used as a strategic tool to compensate competitive and resource weaknesses of organizations. Additionally, it is worth noting that the personal judgements of those Chinese decision-makers on the trade-off between perceived benefits and perceived drawbacks of Guanxi will eventually affect their behaviour whether to utilize Guanxi or not in their decision-making processes and therefore influence the final decision to be made. As clearly listed in Figure 7, some benefits brought from utilizing Guanxi such as mutual trust, decreased uncertainties and long-term relationship development whereas some possible drawbacks mainly lie in undermining professionalism and increasing uncertainties. The reason why uncertainties can be increased and decreased mainly lie in one of the essences of Guanxi, the
obligation to return a favour. On one hand, if a favour is given by an outside stakeholder to deal with some resources or competitive disadvantage, the uncertainties are reduced (Peng & Heath, 1996; Park & Luo, 2001). On the other hand, if a favour is asked by an outside stakeholder, then it possibly disturbs business routines and therefore increases uncertainties (Xin & Pearce, 1996). In most cases, when the overall perceived benefits of Guanxi utilization outperform the general perceived drawbacks, one could probably take Guanxi into account in his or her own decision-making and vice versa. Another important factor which influences the incorporation of Guanxi in decision-making is the decision type. In this study, we briefly categorize all decisions into two groups- operational decisions and strategic ones. Generally, ERP usage can adequately provide tangible information to support those operational decision-makings whereas to those strategic decision-making Guanxi provides more intangible information and serve as further selection criterion to potential solutions. This is in line with the suggestions of Venkatesh et al. (2003) that more sufficient information helps decision-makers to make the decision more efficiently and effectively. Moreover, it is verified that the positions of decision-makers also influence Guanxi utilization through decision type since those who in higher position are prone to make more strategic decisions compare to those who in lower position.
31
6. CONCLUSION
The purpose of this research is to shed light on ERP post-implementation, namely ERP usage and decision support benefits in Chinese companies by considering one unique Chinese culture-Guanxi into account. A single case-study is conducted to investigate the research question in depth. Within the selected company, both survey and individual interviews are employed to gather quantitative and qualitative date. According to the results of survey and individual interviews, a casual mapping is developed, indicating the relationships and internal factors in conceptual model.
It is proved that both ERP usage and Guanxi positively impact on the decision support benefits. The importance of Guanxi in Chinese companies is also verified. Guanxi utilization supports employees’ decision-makings by providing more information as further selection criteria to potential solutions and directly influencing the decision outcomes. Moreover, the benefits, drawbacks brought from Guanxi utilization as well as the decision type influence the behaviour of employees whether to utilize Guanxi in their decision-making. As to decision type, when a certain decision is more strategic rather than operational, Guanxi is prone to provide more information and play a more important role. From this perspective, positions of decision-makers also impact the degree of Guanxi utilization since those who in higher positions make more strategic decisions in their daily work. Last but not least, Guanxi actually works as a complementary factor to ERP usage, rather than a substitute factor, and both of them together contribute to gain more decision support benefits in the context of Chinese companies. This study provide implications for ERP post-implementation in Chinese companies both theoretically and practically. First of all, this research perform an in-depth case study to unprecedentedly throw light on the cultural influence on ERP post-implementation in China, especially filling in the gap how Chinese culture Guanxi affects ERP usage and decision support benefits. Also, the roles of ERP usage as well as Guanxi to support decision-making of Chinese employees are identified and the factors contributing to these relationships are explored. When it comes to the managerial implications, insights can be provided to three different parties. For ERP vendors, despite the positive influence of Guanxi to decision support benefits, hardly any ERP practitioner ascribes ERP usage as the key factor to support their decision-making when Guanxi interferes. Therefore, Guanxi actually poses a negative effect to the success of ERP post-implementation in China in ERP vendors’ perspective since most of the ERP software packages failed to incorporate Guanxi into the design of ERP system. Although ERP vendors have already built up some software packages to include customer - buyer relationship
32 software packages or good reputations in Chinese market from Chinese ERP practitioners. This point of viewed is supported by Xue et al. (2005) who stated that ERP vendors, especially foreign ones, should pay great attentions to the problems generating from cultural differences. Consequently, how to incorporate Guanxi into the design of ERP system and make it a more tailored product to Chinese companies remains a main challenge to ERP vendors. On the other hand, as for Chinese organizations, the success of ERP post-implementation is enhanced by the existence of Guanxi utilization in the perspective that Guanxi helps gain more desired decision support benefits which are expected to be derived from ERP implementation and usage. Therefore, it is suggested that Chinese managers should carefully evaluate the possible benefits and drawbacks Guanxi brought from in their own decision-makings. Besides, considering decision type can somehow help in judging whether to utilize Guanxi or not. Last but not least, for those western business managers who want to cooperate or even joint-venture with Chinese companies, the importance of Guanxi can hardly be ignored, especially when the Chinese partner has greater power. In this situation, how to build up a good Guanxi with Chinese partner become a critical issue.
Future research is suggested to conduct a case study in other kind of companies such as collectively-owned enterprises (COEs) or state-collectively-owned enterprise (SOE) to test whether the outcomes will be same from this study, contributing to enhance the generalizability of the conclusions gained from this study. Also, the interferences of other kinds of Guanxi such as family and helper will probably make the issues more complicated and therefore is expected to be investigated. Besides, the influences of other culture factors in China, either possibly strengthen or weaken the relationship between ERP usage and decision support benefits, can be figured out in future research to understand this relationship more profoundly.
However, a certain number of limitations unavoidably exist in this study. First of all, the
33
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