Understanding the local-level costs and benefits of ERP through organizational information processing theory

Using organizational information processing theory (OIPT), we suggest several factors that influence some of the enterprise resource planning (ERP) costs and benefits that organizations are experiencing. Though we do not attempt to address all important factors that contribute to an ERPs impact, we suggest two organizational characteristics that may have received insufficient attention in other ERP literature: interdependence and differentiation. High interdependence among organizational sub-units, contributes to the positive ERP-related effects because of ERPs ability to coordinate activities and facilitate information flows. However, when differentiation among sub-units is high, organizations may incur ERP-related compromise or design costs. We provide a case study that explores the viability of this framework. The case describes some local-level impacts of ERP and provides some evidence of the validity of the model. Unexpected findings are also presented.