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The Role of ERP Implementation in Enabling Digital Options: A Theoretical and Empirical Analysis

Many firms are transforming themselves from vertically integrated organizations into digitally enabled organizations. As firms become more innovative in their technical infrastructures and more competitive in their respective industries/verticals, their extended enterprise models include using their previous enterprise resource planning (ERP) investments as foundations for prioritizing additions and for longer-term strategies. The key issue for many firms is how to leverage their ERP implementation to become better partners and collaborators by enabling digital options to exploit business opportunities. This paper ascertains the contextual conditions under which ERP system implementations have the greatest impact on intention to adopt digital options. Using empirical data, it finds that the impact of ERP implementation on digital-options adoption intention is moderated by a firm's digital-resource readiness. For information systems (IS) practice, the study suggests that firms should view ERP divisibility as an option value generator for supporting new customers and revenue opportunities. For IS research, it relates digital-options theory to specific measurable constructs and to the firm's digital-resource readiness. Theoretical and practical implications are discussed.