Enterprise resource planning and efficiency

Abstract

Purpose – The purpose of this paper is to investigate the efficiency of Korean insurers that have adopted enterprise resource planning (ERP) system to improve their efficiency. Design/methodology/approach – The study uses Data Envelopment Analysis (DEA) with several inputs and outputs to measure both technical and scale efficiency. With the efficiency measures and using the ordinary least square with the hetereoscedacity consistent standard errors, the study further investigates the factors affecting efficiency, and the association between ERP and efficiency. Findings – This study finds a strong positive association between ERP implementation and the insurers’ efficiency and profitability. However, firms may experience a decrease in efficiency and profitability during the first and second year after ERP implementation. Research limitations/implications – Although the findings of this study are consistent with extant studies, the study’s findings may lack generalizability because the samples are limited small Korean Property/Casualty (P/C) insurers. Originality/value – This study investigates the impact of ERP implementation on P/C insurers in an emerging market.

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