Hui Wang

Summer 2005

Abstract

Through the lens of Organizational Information Processing Theory (OIPT), Enterprise Resource Planning (ERP) systems are considered as an information processing mechanism which increases organizations' information processing capacity. According to OIPT, an effective organization would match its information processing needs and information processing capacity. Therefore, we argue that an organization should adapt its structure to take full advantage of the increased information processing capacity as a result of ERP implementation. Prior research has shown that when the interdependency among subdivisions is high, ERP systems result in higher benefits than when the interdependency is low. Hence, we purport that as ERP systems reduce the barrier in communication and therefore in coordination, organizations should tighten their internal coordination among various divisions and start reaping deep level benefits made possible by ERP systems.