The role of social and intellectual capital in achieving competitive advantage through enterprise resource planning (ERP) systems

Enterprise resource planning (ERP) software merges a firm's data, information flows and business processes into a single package. Vendors argue that ERP provides an extremely useful strategic resource to enhance competitiveness and make it possible for a firm to leverage its other resources more effectively and efficiently. In addition, they allege that ERP encourages a system-wide perspective that is a basis for collaboration and a systems orientation. However, an examination of ERP systems using criteria established in research on resource-based views of the firm and chaos/complexity theory indicates that these claims are overstated. Observation suggests that even if ERP is necessary to coordinate complicated, multifaceted operations, it is far from sufficient to promote a strong competitive position over the long term. Moreover, ERP systems fit best within mechanistic, clockwork organizations dominated by routine, highly programmed technologies and operations, yet it is the non-routine learning and change processes found in complex, self-organizing systems that enable firms to create distinctive competitive advantages from ERP outputs. ERP makes possible deep changes in relationships, culture, and behaviors that can be crucial sources of advantage in the knowledge economy, but the structures and cultures most able to achieve this level of change are a poor fit with ERP requirements. To reconcile this paradox, we propose a dual-core, loosely coupled organization that views ERP as an enabling technology to build and augment social and intellectual capital, rather than as an information technology (IT) solution for organizational inefficiencies. Propositions for using ERP as a foundation for social and intellectual capital formation are introduced. Implications for research and practice are discussed.