Enterprise Systems and Innovations

Enterprise systems, i. e. company-wide packages of enterprise software for planning, calculating and managing business processes, are widely used in various industry branches throughout many countries. In general employed to replace firms’ usually poorly connected legacy software, enterprise systems might yield improvements in operational integration affecting the entire organization. On the one hand, Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) systems may provide information for process innovations by reducing idle times, saving data mining or identify bottlenecks and shortages. Customer Relationship Management (CRM) systems, on the other hand, yield a database to identify customer preferences which might be a useful source for product innovations.

This paper studies the relationship between enterprise systems and firms’ innovational performance. The analysis is based on a knowledge production function and employs a two step estimation procedure which takes into account the bias due to potential self selection during the firms’ decision to innovate. The basis of the analysis builds a German enterprise data set, containing enterprises of different industry branches from the manufacturing and service sector.

The results are twofold. On the one hand, adoption of ERP and SCM systems increases the propensity to realize process innovations. In addition, ERP system usage positively affects the number of realized process innovations. These impacts are not only short-term based, in fact they remain stable during two to four years. On the other hand, only CRM influences firms’ product innovational performance as it increases the propensity to acquire product innovations, although this positive effect is only short-term based.

Engelstätter, Benjamin (2009), Enterprise Systems and Innovations, ZEW Discussion Paper No. 09-086, Mannheim.