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Flexibility and strategic alignment of enterprise resource planning systems with business strategies.. Taskin, Nazim 2011-12-31

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FLEXIBILITY AND STRATEGIC ALIGNMENT OF ENTERPRISE RESOURCE PLANNING SYSTEMS WITH BUSINESS STRATEGIES: AN EMPIRICAL STUDY by Nazim Taskin MBA, Texas A&M International University, 2007  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Doctor of Philosophy in The College of Graduate Studies (Interdisciplinary Studies) THE UNIVERSITY OF BRITISH COLUMBIA (Okanagan)  October 2011 © Nazim Taskin, 2011  Abstract This thesis examines relationships between strategic alignment, performance, and strategic Enterprise Resource Planning (ERP) flexibility. We have used different strategy perspectives to form our strategic alignment construct and chosen several significant variables of these constructs based on the literature. The alignment measurement methods were moderation and profile deviation, and several financial values have been used to form the performance construct. Using empirical data, we have showed that enterprise systems’ alignment with the business strategy can explain the change in their performance. Moreover, strategic flexibility of an enterprise system such as ERP has an additional positive effect on business performance, but it is mediated by the alignment of enterprise systems and business strategies. From a theoretical perspective, we have explained prior conflicting conceptualizations and empirical findings on strategic flexibility’s role by incorporating its indirect effects on business performance. In addition, we have offered a multi-dimensional measurement instrument for ERP alignment to practitioners specifically designed for the alignment of enterprise systems.  ii  Preface A version of this dissertation has been published and presented at a conference. Taskin, N., and Verville, J. “An Exploratory Study on Strategic Alignment of Enterprise Systems and Business Strategies, Performance, and Flexibility” In Proceedings of the 23rd ICESAL 2010, Rhodes Island, Greece.  I conducted the design, writing, and analysis of the manuscript. I have received the unlimited support and feedback from Dr. Jacques Verville during this thesis and for the preparation of manuscript. Although this dissertation examines alignment from several perspectives, in the conference paper, our perspective was based on the initial findings with a limited sample size and on general impacts of alignment on performance.  A Certificate of Approval from the University of British Columbia Okanagan Research Services, Behavioral Research Ethics Board has been received for the use of human subjects for collection of data through questionnaire survey with the UBC BREB number: H09-01133. The approval date of the certificate is May 15, 2009 with the principal investigator Dr. Jacques Verville.  iii  Table of Contents Abstract .................................................................................................................................... ii Preface ..................................................................................................................................... iii Table of Contents .................................................................................................................... iv List of Tables ......................................................................................................................... viii List of Figures......................................................................................................................... xii Acknowledgements .................................................................................................................xiv Dedication ................................................................................................................................ xv 1  Chapter: Introduction .........................................................................................................1  2  Chapter: Prior Research .....................................................................................................6 2.1  Business Strategies and ES Strategies .................................................................... 10  2.1.1  Strategy ............................................................................................................ 11  2.1.2  Business Strategy ............................................................................................. 12  2.1.3  ES Strategy....................................................................................................... 12  2.1.4  Benefits of ES Strategy..................................................................................... 13  2.1.5  Developing an ES Strategy ............................................................................... 14  2.1.6  Dimensions of ES Strategy ............................................................................... 15  2.1.7  Three Blocks of Business and ES Strategies ..................................................... 16  2.1.8  IS, IT, ES, and ERP .......................................................................................... 16  2.2  Overview of Alignment ......................................................................................... 19  2.2.1  Different Views Pertaining to Alignment .......................................................... 20  2.2.2  Perspectives on Alignment ............................................................................... 23  2.2.2.1 Direction of Alignment ................................................................................ 23 2.2.2.2 Dimensional Perspective of Alignment ........................................................ 24 2.2.2.3 Focus Perspective of Alignment................................................................... 25 2.2.2.4 Level Perspective of Alignment ................................................................... 25 2.2.3  Pros and Cons of Alignment ............................................................................. 26  2.2.4  Assessment of Alignment ................................................................................. 27  2.2.5  Types of Alignment .......................................................................................... 29  2.2.5.1 Business Alignment ..................................................................................... 31 2.2.5.2 Strategic Alignment ..................................................................................... 34 2.2.5.3 Structural Alignment ................................................................................... 39 2.2.5.4 Information Systems Alignment .................................................................. 42 iv  2.2.5.5 Cross-Dimensional Alignment ..................................................................... 44 2.2.5.6 Alignment Mechanisms ............................................................................... 45 2.2.6  Alignment Models ............................................................................................ 49  2.2.6.1 Strategic Alignment Model .......................................................................... 50 2.2.6.2 Derivatives of SAM ..................................................................................... 52 2.2.6.3 Strategic Alignment – Chan’s Model ........................................................... 54 2.2.6.4 Weill’s Alignment Model ............................................................................ 57 2.2.6.5 Benbya and McKelvey’s Co-evolutionary ES Alignment Model .................. 58 2.2.6.6 Alter’s Work System ................................................................................... 59 2.2.6.7 Raffa and Capaldo’s ES Process Alignment Model ...................................... 60 2.2.6.8 Reich and Benbasat Framework ................................................................... 60 2.2.6.9 Sabherwal, Hirschheim, and Goles’ Alignment Model ................................. 62 2.2.6.10 Baets Model............................................................................................... 63 2.2.6.11 Current Trends in Alignment Studies ......................................................... 64 2.3  Enterprise Resource Planning Systems ................................................................... 67  2.3.1  Evolution of ERP ............................................................................................. 67  2.3.2  Enterprise Resource Planning Overview ........................................................... 69  2.3.3  Phases of ERP Research ................................................................................... 76  2.3.3.1 Pre-Implementation ..................................................................................... 76 2.3.3.1.1 ERP Adoption Reasons ......................................................................... 77 2.3.3.1.2 ERP Adoption Models .......................................................................... 78 2.3.3.1.3 Acquisition of ERP ............................................................................... 80 2.3.3.1.4 Frameworks and Models for ERP Acquisition ....................................... 82 2.3.3.2 Implementation............................................................................................ 87 2.3.3.2.1 ERP Implementation Risks ................................................................... 88 2.3.3.2.2 ERP Implementation Strategies ............................................................. 88 2.3.3.2.3 Critical Success Factors of ERP Implementation ................................... 89 2.3.3.2.4 Models and Frameworks for ERP Implementation ................................ 94 2.3.3.3 Post-Implementation .................................................................................... 99 2.3.3.3.1 Maintenance of ERP ........................................................................... 100 2.3.3.3.2 Studies Pertaining to Maintenance of ERP .......................................... 101 2.3.3.3.3 Evolution of ERP ................................................................................ 102 2.3.3.3.4 Retirement of ERP .............................................................................. 103 2.4  Alignment of ERP Systems .................................................................................. 103 v  2.4.1  3  4  Misalignment ................................................................................................. 107  2.5  Flexibility and Strategic Flexibility ...................................................................... 108  2.6  Business Performance .......................................................................................... 111  2.7  Types of Measurement of Alignment ................................................................... 115  Chapter: Research Model ............................................................................................... 122 3.1  Business Performance .......................................................................................... 122  3.2  Alignment and Flexibility .................................................................................... 123  3.3  Strategy Attributes ............................................................................................... 124  3.4  Strategy Profiles .................................................................................................. 126  3.5  Calculation of Alignment ..................................................................................... 134  3.6  Mapping between Strategy Attributes and Profiles ............................................... 135  3.7  ERP Strategy ....................................................................................................... 137  3.8  Objectives of the Study ........................................................................................ 141  Chapter: Research Methodology .................................................................................... 146 4.1  Analysis ............................................................................................................... 151  4.1.1  Systems Approach .......................................................................................... 168  4.1.1.1 Alignment as Moderation .......................................................................... 168 4.1.1.2 Calculation of Alignment as Profile Deviation ........................................... 174 4.1.1.3 Alignment as Profile Deviation .................................................................. 185 4.1.2  Bivariate Approach......................................................................................... 188  4.1.2.1 Alignment as Moderation .......................................................................... 188 4.1.2.2 Alignment as Profile Deviation .................................................................. 190  5  4.1.3  Bivariate Examination of Alignment and Performance ................................... 192  4.1.4  Alternative Analysis ....................................................................................... 198  Chapter: Discussion, Conclusion and Implications........................................................ 201 5.1  Implications ......................................................................................................... 213  5.2  Study Limitations and Future Study ..................................................................... 216  5.3  Conclusion ........................................................................................................... 219  References.............................................................................................................................. 222 Appendices ............................................................................................................................ 251 Appendix A. Measurement Items..................................................................................... 251 Appendix B. Types of Fit and their Verbalization ............................................................ 257 Appendix C. Path Coefficients – Analytical Approach..................................................... 258 Appendix D. Sobel Tests for Alignment as Matching ...................................................... 259 vi  Appendix E. Bivariate Correlations ................................................................................. 262 Appendix F. Regression Analysis .................................................................................... 266 Appendix G. ANOVA Results ......................................................................................... 267 Appendix H. Individual PLS Analysis ............................................................................. 269 Appendix I. Alignment as Matching, Bivariate Approach ................................................ 272 Appendix J. E-mail to Join the Research .......................................................................... 273 Appendix K. E-mail to Remind to Join the Research ....................................................... 274 Appendix L. Survey Instrument ....................................................................................... 275  vii  List of Tables Table 1 Selected Antecedents and Outcomes of Alignment ...................................................... 23 Table 2 Alignment Types and Components .............................................................................. 30 Table 3 Business Alignment Studies......................................................................................... 34 Table 4 Strategic Alignment Studies......................................................................................... 39 Table 5 Structural Alignment Studies ....................................................................................... 41 Table 6 Information Systems Alignment Studies ...................................................................... 43 Table 7 Cross-Dimensional Alignment Studies......................................................................... 45 Table 8 Alignment Mechanisms ............................................................................................... 49 Table 9 Derivatives of SAM ..................................................................................................... 54 Table 10 Dimensions of STROBE and their Definitions ........................................................... 56 Table 11 Prior Studies about Alignment Models ....................................................................... 66 Table 12 Studies about Benefits and Advantages of ERP Software ........................................... 72 Table 13 Studies about Difficulties, Concerns, and Possible Costs of ERP Software ................ 76 Table 14 Selected Critical Success Factors of ERP Implementation.......................................... 94 Table 15 Fit Studies in Literature (extended from Bergeron et al. 2001) ................................. 121 Table 16 Business Strategy Attributes and their Main Characteristics ..................................... 125 Table 17 Mapping of Business Strategy Profiles and Business Strategy Attributes ................. 132 Table 18a Basis for Business Strategy Profiles from Selected Articles .................................... 133 Table 18b Basis for Business Strategy Profiles from Selected Articles (Cont.) ....................... 133 Table 19 Mapping of Business Strategy Profiles and Business Strategy Attributes ................. 136 Table 20 Mapping of ES Profiles and ES Attributes ............................................................... 140 Table 21 Levels of Alignment between ES and Business Strategy Profiles ............................. 140 Table 22 Approaches of Fit (Drazin & Van de Ven, 1985) ..................................................... 142 Table 23 Demographics about Job Title.................................................................................. 154 Table 24 Demographics about Sales Volume .......................................................................... 155 Table 25 Exploratory Factor Analysis and Reliabilities for Business Strategy Types .............. 156 Table 26 Corrected Item-Total Correlations and Reliabilities for Business Strategy Types ..... 158 Table 27 Confirmatory Factor Analysis for Business Strategy Types ...................................... 159 Table 28 Bivariate Correlations and Square Roots of Average Variance Extracted (AVE) Values for Business Strategy Types ......................................................................... 160 Table 29 Confirmatory Factor Analysis for ERP Strategy Types ............................................ 161 Table 30 Corrected Item-Total Correlations and Reliabilities for ERP Strategy Types ............ 162  viii  Table 31 Exploratory Factor Analysis and Reliability Values for Performance Measurement ........................................................................................................... 163 Table 32 Corrected Item-Total Correlations and Reliabilities for Performance Measurement ........................................................................................................... 164 Table 33 Bivariate Correlations and Square Roots of Average Variance Extracted (AVE) Values for Performance Measurements .................................................................... 165 Table 34 Factor Loadings and Reliability Values for Flexibility ............................................. 165 Table 35 Corrected Item-Total Correlations and Reliabilities for Strategic ERP Flexibility .... 165 Table 36 Descriptive Statistics for ES and Business Strategy Types, and Performance ........... 166 Table 37 Descriptive Statistics for Flexibility and Strategic Support Types Measurements ..... 166 Table 38 Illustration of Fit as Moderation ............................................................................... 167 Table 39 Sobel Test of Mediation for Alignment as Moderation with Systems Approach ....... 172 Table 40 Alternative Measurements of Mediation Effect for Alignment as Moderation with Systems Approach ................................................................................................... 172 Table 41 ANOVA Results for Business Strategy Types Based on Level of Flexibility............ 173 Table 42 ANOVA Results for Performance Based on Level of Flexibility .............................. 173 Table 43 Results for Alignment as Moderation Based on Flexibility Level ............................. 174 Table 44 Post Hoc Tests for Alignment as Moderation Based on Flexibility Level ................. 174 Table 45 Summary of Hypotheses and Their Status ................................................................ 174 Table 46 Exploratory Factor Analysis and Reliability Values for ES Strategic Support Types.......................................................................................................... 175 Table 47 Confirmatory Factor Analysis and Reliabilities for ES Strategic Support Types ....... 177 Table 48 Corrected Item-Total Correlations and Reliabilities for ES Strategic Support Types.......................................................................................................... 178 Table 49 Bivariate Correlations among the ES Strategic Support Types ................................. 179 Table 50 Goodness-of-Fit Indices for the General Constructs of the Study ............................. 180 Table 51 Correlations among Alignment, Performance, and Flexibility .................................. 187 Table 52 Sobel Test of Mediation for Alignment as Profile Deviation with Systems Approach ................................................................................................................. 187 Table 53 Alternative Measurements of Mediation Effect for Alignment as Profile Deviation with Systems Approach ........................................................................................... 188 Table 54 Path Coefficients for Bivariate Approach for Business Strategy Types and Performance and Flexibility ..................................................................................... 193 Table 55 Path Coefficients for Bivariate Approach for Business Strategy Types and Performance ............................................................................................................ 194 Table 56 Bivariate Correlations among Performance, Strategic ERP Flexibility, and Alignment Types ..................................................................................................... 195 ix  Table 57 Regression Analysis between Alignment as Moderation and Profile Deviation, and Performance and Flexibility .............................................................................. 196 Table 58 ANOVA Results for Alignment as Profile Deviation Based on Flexibility Level ...... 196 Table 59 Post Hoc Tests for Alignment as Profile Deviation Based on Flexibility Level ........ 197 Table 60 Correlation between Alignment (Profile Deviation) and Performance, and Flexibility: Systems Approach ................................................................................. 197 Table 61 Summary of Hypotheses and Their Status ................................................................ 198 Table 62 Path Coefficients and Significance Levels among Constructs on Moderation, Profile Deviation, Matching Type of Alignment with Systems Approach for Alignment, Performance, and Flexibility .................................................................. 199 Table 63 Path Coefficients and Significance Levels among Constructs on Moderation, Profile Deviation, Matching Type of Alignment with Bivariate Approach for Alignment, Performance, and Flexibility .................................................................. 200 Table 64 Summary of Recommendations/Findings ................................................................. 212 Table A 1 Defensiveness Construct under Business Strategy and Related Questions ............... 212 Table A 2 Analysis Construct under Business Strategy and Related Questions .................... 25198 Table A 3 Aggressiveness Construct under Business Strategy and Related Questions .......... 25198 Table A 4 Risk Aversion Construct under Business Strategy and Related Questions ............... 252 Table A 5 Futurity Construct under Business Strategy and Related Questions ......................... 252 Table A 6 Defensiveness Construct under ERP Strategy and Related Questions ...................... 252 Table A 7 Analysis Construct under ERP Strategy and Related Questions ............................... 253 Table A 8 Aggressiveness Construct under ERP Strategy and Related Questions .................... 253 Table A 9 Risk Aversion Construct under ERP Strategy and Related Questions ...................... 253 Table A 10 Futurity Construct under ERP Strategy and Related Questions .............................. 254 Table A 11 Relative Financial Performance Construct and Related Questions ......................... 254 Table A 12 Absolute Financial Performance Construct and Related Questions ........................ 254 Table A 13 Production-Service Innovation Construct and Related Questions .......................... 254 Table A 14 Strategic ERP Flexibility Construct and Related Questions ................................... 255 Table A 15 Operational Construct and Related Questions........................................................ 255 Table A 16 Managerial Construct and Related Questions ........................................................ 256 Table A 17 Market Information Construct and Related Questions ........................................... 256 Table A 18 Strategic Decision Support Construct and Related Questions ................................ 256 Table B 1 Types of Fit and their Sample Verbalizations (modified based on Bergeron et al. 2001) ................................................................ 257 Table C 1 Path Coefficients and Significance Levels among Constructs on Profile Deviation with Analytical Model with System and Bivariate Approaches for Alignment, Performance, and Strategic ERP Flexibility ............................................................. 258 x  Table D 1 Sobel Test of Mediation for Alignment as Matching (Matching 1) with Systems Approach .................................................................................................. 259 Table D 2 Alternative Measurements of Mediation Effect for Alignment as Matching (Matching 1) with Systems Approach ...................................................................... 259 Table D 3 Sobel Test of Mediation for Alignment as Matching (Matching 2) with Systems Approach .................................................................................................. 259 Table D 4 Alternative Measurements of Mediation Effect for Alignment as Matching (Matching 2) with Systems Approach ..................................................................... 260 Table D 5 Sobel Test of Mediation for Alignment as Matching (Matching 3) with Systems Approach .................................................................................................. 260 Table D 6 Alternative Measurements of Mediation Effect for Alignment as Matching (Matching 3) with Systems Approach ..................................................................... 260 Table D 7 Sobel Test of Mediation for Alignment as Matching (Matching 4) with Systems Approach .................................................................................................. 261 Table D 8 Alternative Measurements of Mediation Effect for Alignment as Matching (Matching 4) with Systems Approach ..................................................................... 261 Table E 1 Bivariate Correlations among Performance and Alignment Types ........................... 262 Table E 2 Correlations among Alignment, Bivariate Performance, Flexibility, and Bivariate Alignment of Matching Components ........................................................ 263 Table E 3 Bivariate Correlations among Alignment, Performance, Flexibility, and Bivariate Alignment Components ............................................................................ 264 Table E 4 Bivariate Correlations among Alignment, Bivariate Performance, Flexibility, and Bivariate Alignment (Moderation) Components ....................................................... 264 Table E 5 Bivariate Correlations among Alignment, Bivariate Performance, Flexibility, and Bivariate Alignment (Profile Deviation) Components .............................................. 265 Table F 1 Regression Analysis between Alignment, and Performance ..................................... 266 Table G 1 ANOVA Results for Alignment as Matching and Performance Based on Flexibility Level ...................................................................................................... 267 Table G 2 ANOVA Results for Alignment as Matching based on Flexibility Level ................. 267 Table G 3 ANOVA Results for Business Strategy Profiles Based on Flexibility ...................... 268 Table G 4 ANOVA Results for Alignment Types Based on Flexibility.................................... 268 Table I 1 Path Coefficients and Significance Levels among Constructs on Moderation, Profile Deviation, Matching Type of Alignment with Systems Approach for Alignment, and Performance.................................................................................... 272 Table I 2 Path Coefficients and Significance Levels among Constructs on Moderation, Profile Deviation, Matching Type of Alignment with Bivariate Approach for Alignment, and Performance.................................................................................... 272  xi  List of Figures Figure 1 Conceptual Map of the Study .......................................................................................5 Figure 2 Fit between “External Environment”, “Competitive Strategy”, “Financial Performance”, and “Strategic MIS Planning” (Das et al. 1991) ................................... 33 Figure 3 Alignment Model (Broadbent & Weill 1993) ............................................................. 43 Figure 4 Strategic Alignment Model (Henderson & Venkatraman, 1993) ................................. 52 Figure 5 Alignment Model (Chan 1992) ................................................................................... 57 Figure 6 Alignment Model (Weill 1990) .................................................................................. 58 Figure 7 Co-evolutionary ES Alignment (Benbya & McKelvey, 2006)..................................... 59 Figure 8 ES Process Alignment (Raffa & Capaldo, 2007)......................................................... 60 Figure 9 Alignment Model (Reich & Benbasat, 2000) .............................................................. 61 Figure 10 Evolutionary and Revolutionary Periods and Alignment (Sabherwal et al. 2001) ...... 62 Figure 11 Extended Alignment Model (Baets, 1992) ................................................................ 64 Figure 12 Current and Estimated ERP Revenues (in billion dollars) (AMR Research, 2008) .... 74 Figure 13 ERP Vendors and their Revenues (in million dollars) (AMR Research, 2008) .......... 74 Figure 14 A Model for ERP Adoption (Aladwani, 2001) .......................................................... 79 Figure 15 Framework for ERP Adoption Success (Tan and Pan, 2000)..................................... 80 Figure 16 AHP Hierarchy (Wei et al. 2005) .............................................................................. 84 Figure 17 Model of ERP Acquisition Process (Verville and Halingten, 2003) .......................... 85 Figure 18 Framework for Evaluating ERP Acquisition within SMEs (Ravarini et al. 2000) ...... 86 Figure 19 ERP Implementation Framework (Al-Mudimigh et al. 2001) .................................... 95 Figure 20 ERP Implementation Framework (Holland & Light, 1999) ....................................... 96 Figure 21 ERP Implementation Framework (Huang & Palvia, 2001) ........................................ 97 Figure 22 ERP Implementation Management Framework (Motwani et al. 2002) ...................... 98 Figure 23 ERP Implementation Framework (Hong & Kim, 2001) ............................................ 99 Figure 24 Decision Process for Building a Research about Alignment .................................... 143 Figure 25 Summary of Analysis in the Study.......................................................................... 144 Figure 26 Analysis Domain of the Study ................................................................................. 148 Figure 27 Theoretical Model as Part of a Structural Equation Model ...................................... 150 Figure 28 Alignment Research Model .................................................................................... 151 Figure 29 Path Coefficients in Structural Equation Model for Alignment (Moderation) and Performance ..................................................................................................... 169 Figure 30 Path Coefficients in Structural Equation Model for Flexibility and Performance with Systems Approach .......................................................................................... 169 xii  Figure 31 Path Coefficients in Structural Equation Model for Alignment as Mediator ............ 170 Figure 32 Abstract Level Representation of Analytical Approach to Profile Deviation ........... 183 Figure 33 Path Coefficients in Structural Equation Model for Alignment as Profile Deviation..................................................................................................... 185 Figure 34 Path Coefficients in SEM for Alignment with Profile Deviation – Alternative Model ................................................................................................... 186 Figure 35 Path Coefficients in SEM for Alignment as Moderation – Bivariate Approach ....... 189 Figure 36 Path Coefficients in SEM for Alignment as Moderation with Flexibility – Bivariate Approach ................................................................................................. 190 Figure 37 Path Coefficients in SEM for Alignment as Profile Deviation – Bivariate Approach ................................................................................................. 191 Figure 38 Path Coefficients in SEM for Alignment as Profile Deviation with Flexibility – Bivariate Approach ................................................................................................. 192 Figure H 1 Bivariate Approach for Business Strategy Types and Performance ........................ 269 Figure H 2 Bivariate Approach for ERP Strategy Types and Performance ............................... 270 Figure H 3 Bivariate Approach for Business and ES Strategy Types, Performance, and Flexibility .............................................................................................................. 271  xiii  Acknowledgements While completing this work, I am indebted to many people including a network of current and future academics. This thesis would not have been completed without the support and help of these people. It is an honor for me to acknowledge my advisor Dr. Jacques Verville for his supervision, inspiration, support, patience, and his trust. I thank my committee members, Dr. Ian Stuart and Dr. Ramon Lawrence for their continued support, valuable comments and guidance to build this work. I would like to thank Dr. Anne-Marie Croteau, Dr. Annamma Joy, Dr. Cigdem Eskicioglu, and Dr. Young Bong Chang for their directions to complete this work. In addition, I want to thank several faculty members such as Dr. Jacob Cho and Dr. Luc Audebrand deserve special thank for their support, advices and small chats when needed.  My deepest gratitude goes to my wife, Betul Taskin, and our daughter Elif Taskin for their unending love, support, patience and confidence in me; this dissertation would not have been completed without them. Also, Tayfun Keskin, my old friend, brother-in-law and colleague deserves special thanks for his support and feedback. I am indebted to my parents, Saime and Nazmi Taskin, my brother, Ismail Taskin, mother-in-law, Nermin Goren, and father-in-law, Tahir Goren, and other relatives who always supported me in all my pursuits. I would like to thank all my friends, friends called "asker arkadas", and yogi(ni) brothers and sisters for always being there for me.  Last but not least, I would like to sincerely thank especially to Jennifer Hewitt, Jane Fletcher, Carol Zuckerman, Christopher Gorman, and other members the FoM staff of UBC for their help and friendship.  I offer my gratitude to all those who supported me in any respect during the completion of this project.  xiv  Dedication  I dedicate this work to my family.  xv  1  Chapter: Introduction In a context of continuous change and intense competition, businesses either adapt to new  conditions or fail. To meet the new requirements of the increasingly dynamic environment of business, companies usually seek to expand their market share, reduce their consumption of resources, and improve the quality and efficiency of their products and customer service (Umble, Haft, & Umble, 2003). In a changing competitive environment, organizations need to improve their business practices and procedures as well as their outputs if they are to remain competitive (Umble et al. 2003).  Information Systems (IS) or Enterprise Systems (ES) technology has provided the opportunity for organizations to improve the way they do business. When ES was first introduced, businesses used it to automate information-based processes. Later, they began to use ES to enhance management efficiency. Most recently, businesses have used ES to improve competitive advantage (Ward & Peppard, 2002). Organizations tend to adopt systems that will allow them to gain a competitive advantage over other companies and many have found ES to be such a system.  In addition, many organizations are seeking ES systems to help them collaborate with other organizations. Current developments and trends in business, market pressure, and technological developments have all pushed organizations to improve their business practices and collaborate more; this collaboration sometimes even takes the form of mergers and acquisitions (Stefanou, 2001). Collaboration requires organizations to integrate their systems so they can better share resources and information with customers, suppliers, and distributors (Umble et al. 2003). While Enterprise Systems (ES) have been developed to address these needs and accomplish these goals, Enterprise Resource Planning (ERP) systems are a further development; ERP systems are designed to integrate business functions, improve the accuracy of information available to collaborating organizations, and improve decision making.  ERP systems enable business to integrate processes and functions by providing access to real-time data across different departments and units. They promise reduced resource  1  consumption; more accurate and efficient processes; and improved customer satisfaction, resource allocation, flexibility, information flow, and business performance (Hsu & Chen, 2004; Poston & Grabski, 2000). Several researchers state that ES are crucial for a competitive advantage (Das, Zahra, & Warkentin, 1991; Porter, 1987). Organizations that have adopted ERP systems cite a desire to improve infrastructure (e.g., by developing a common platform), capability (e.g., process improvement and data visibility), and performance (e.g., through advanced cost reduction, strategic decision making, and customer responsiveness) (Ross & Vitale, 2000).  ERP systems are different from traditional software because of their structure. Traditional software is usually relatively easy to choose and install, and users can begin gaining its benefits in a very short period of time. This is not the case for ERP systems. Research indicates just adopting or installing a system does not guarantee users will benefit from its capabilities or gain a competitive advantage (Muscatello, Small, & Chen, 2003). Successful ERP implementations have delivered the promised benefits, but successful implementations of ERP are very rare. Most ERP projects either fail or they conflict with organizations’ strategic objectives (Stefanou, 2001). ERP systems may require several changes in business practices or even in an organization’s overall strategy. ERP projects are more successful when managers understand their strategic importance and give high priority to alignment. According to Henderson & Venkatraman (1992), one of the main differences between traditional ES and ERP is the success of ERP depends on a high degree of strategic fit and functional integration. In other words, strategic alignment is a requirement for ERP systems (Esteves & Pastor, 1999; Gibson, Holland, & Light, 1999). Henderson and Venkatraman (1992) state that one of the main differences between traditional ES and ERP is the fact that success of ERP depends on a high degree of strategic fit and functional integration.  Researchers and practitioners have recognized the importance of alignment. During the last decade, managers seeking to add value to their business and improve its performance have made alignment one of their organization’s top priorities (Chan & Reich, 2007). Meanwhile, a variety of scholars have stated businesses need to align their strategies and processes if they are to fully benefit from ERP systems (Al-Mudimigh, Zairi, & Al-Mashari, 2001; Gable, Chan, & 2  Tan, 2001; Holland & Light, 1999; Rao, 2000; Bingi, Sharma, & Godla, 1999; Davenport, 1998, 2000a). When alignment is strategic, it has a direct positive impact on performance and also improves performance indirectly by increasing effectiveness and profitability (Avison, Jones, Powell, & Wilson, 2004; Sabherwal & Chan, 2001; Venkatraman, 2000; Weill & Broadbent, 1998; Luftman, 1996; Porter, 1987). In addition, some scholars suggest that businesses can enhance both the performance and the competitive benefits of ERP by aligning it with organizational goals (Kang, Park, & Yang, 2008; Siswanto & Utomo, 2008).  Literature shows that alignment has a direct and positive impact on performance (Sabherwal & Chan 2001; Chan et al. 1997). However, considering the complexity and broadness of the concepts, there are different aspects that have significant impact on both constructs. One of these significant aspects is the flexibility of ES. Duncan (1995) defines flexibility as “the ability of a resource to be used for more than one end product” (p: 42). Flexibility of ES enhances organizations ability to respond to the needs and changes in practices and strategies (Duncan, 1995; Clemons & Row, 1991). In a dynamic environment, such as today’s business world, flexibility is critical for the success and performance of organizations.  Although flexibility has been defined from different perspectives, even under business we examine flexibility from a strategic point of view under ERP concept. Therefore, in this study, flexibility has been called strategic ERP flexibility and addresses the capabilities of an organization to address the needs of a dynamic business environment through effective and supportive use of information systems. This type of strategic flexibility helps organizations generate innovative solutions, introduce new products or services when realizing a chance (Carignani & Seifert, 2000), closely observe competitors, identify and evaluate new business opportunities, accommodate efficient changes based on the business requirements and give learning opportunity (Tian et al. 2009; Bowman & Hurry, 1993).  The complex nature of the alignment and performance connection requires deeper examination because such concepts do not usually exhibit a simple independent-dependent 3  variable relationship. Considering the fact that ERP is a strategic enterprise system encompassing information technology or systems, flexibility of its nature from the strategic point of view would have an impact on alignment.  Researchers need to focus on lower-level (or more granule) models/frameworks about any type of ES alignment rather than focusing on a generic model in the dynamic, global, and competitive business environment (Loukis, Sapounas, & Aivalis, 2010). There is also a need for examining the "different types of strategic alignment of enterprise systems to various dimensions of business performance" (Loukis et al. 2010, p.50). This study examines alignment between business strategies and Enterprise Systems 1, and their relationship with the strategic ERP flexibility rather than focusing on whole ES. This study is a systematic extension of previous works of Venkatraman (1989), Chan (1992), Chan, Huff, Barclay, & Copeland (1997), Sabherwal & Chan (2001) and comprises four key objectives: (1) develop and validate an instrument to measure business strategy, ERP strategy, strategic fit between ERP strategy, business strategy and business performance, and see the relationships between these as well as the effects of enablers (i.e., strategic, organizational, and technical) to this relationship; (2) extend the strategic alignment concept by applying the combination of Miles and Snow and Porter’s typologies that will be mapped to strategy attributes as part of strategy; (3) identify the impact of strategic ERP flexibility on alignment of business strategies and ES as well as on business performance; and (4) finally examine two alternative perspectives of fit/alignment: (i) fit as moderation; and (ii) fit as profile deviation (Venkatraman, 1989).  When they are conducting ES planning, organizations need to consider the ERP strategy that will support and fit to their organizations' strategic orientation. This study with its instrument will provide the quantification for evaluation of ERP strategy and ERP strategic fit. While organizations can benefit from the guidance of this instrument for their organization regarding their ES planning efforts, they can also enhance their competitiveness to assess their business and ERP strategies (Chan, 1992). 1  This study focuses on Enterprise Resource Planning (ERP) systems which is a specific Enterprise Systems (ES). IS and ES are used interchangeably in this study. ES is enterprise wide information systems and refers to an umbrella term for several systems such as ERP, SCM, CRM, etc.  4  This thesis is organized as follows: the first section analyzes the alignment, strategic ERP flexibility, and performance literature as well as the theoretical model; in the second section the methodology mentioning the design of the study is followed by the results of our study. In the last section, the paper is finalized with a discussion and conclusion section. Figure 1 reveals the conceptual map of the study.  Figure 1 Conceptual Map of the Study  5  2  Chapter: Prior Research Although there are several studies pertaining to alignment, there is no agreed definition of  alignment. Based on previous definitions, for this study, we define alignment as a continuous and dynamic process that requires appropriate and supportive use of ERP with business strategies and objectives in order to contribute or enhance the business performance over time. In addition, alignment can also relate to the synergy, fit, and integration between business and ES strategies (Chung & Lewis, 2003; Hirschheim & Sabherwal, 2001). The objective of alignment is to support the business pertaining to its plans, missions, decisions, capabilities, and actions (Chan, 2002).  The literature has distinguished several types of alignment as well as several perspectives pertaining to alignment. Based on the literature, there are six types of alignment at the business unit level that involves business and ES components: (i) Strategic Alignment; (ii) Business Alignment; (iii) Structural Alignment; (iv) Information Systems Alignment; (v) CrossDimensional Alignment; and (vi) Alignment Mechanisms (Sabherwal et al. 2001). While the literature provides several examples for different types of alignment, the majority of the research has shown that alignment should be strategic in order to provide the highest benefits, such as improving competitive advantage and enhancing performance (Chan & Reich, 2007; Levy, 2000).  The benefits of aligning business and generic ES strategies have been recognized by several researchers and practitioners (Croteau & Bergeron, 2001; Sabherwal & Chan, 2001; Chan et al. 1997; Henderson & Venkatraman, 1993). Some benefits of aligning ES to business strategies include (1) increasing organizations’ return on ES investment; (2) improving companies’ competitiveness; (3) enhancing flexibility (Avison et al. 2004); and (4) profitability of organizations (Papp, 2001; Galliers, 1991). With the alignment, organizations can have the traditional benefits of IT/IS/ES in terms of having an organization’s operations accepted by executives (Huang & Hu, 2007) as well as obtaining top management support (Lederer & Mendelow, 1989). Studies also show that alignment is one of the critical issues for economic performance (Ciborra, 1997). Studies of Chan (Chan & Reich, 2007; Chan, Sabherwal, & Thatcher, 2006) also support the notion that alignment improves the performance by allowing 6  organizations to use ES more strategically. In addition, Papp (1999) states alignment is a key area managers focus on in order to improve financial performance. In a more current study, Ladley (2010) states "business-visible elements" of alignment include improved and more sophisticated relationship with customers and related third parties, improved workflow, content management and data quality, reengineered business processes appropriate to business goals, etc. (p.216).  Current trends in alignment research encourage granularity as well as enablers and antecedents of alignment. While the majority of earlier research on alignment was on the whole ES strategy or structure, several researchers have been encouraging increasing the specific components (granularity) on many aspects. For example, Hong & Kim (2002) identify the contingency variables of ES that researchers have tended to examine. These variables include strategy, structure, size, environment, technology, task, and individual characteristics. Studies focusing on each of these variables, separately and in more detail, would bring useful information, at least as much as examining all variables together. Considering the fact alignment is between business and ES, our focus will be on technology.  The motivations of this stream of research come basically from the growth and broadness of the technology field. The variety of technology products and systems and the integration of the systems, components, data, and processes into a unified system have led to development of new systems that are strategic to organizations. These new systems have been formed into new structures (i.e., ERP, SCM, and CRM) that emphasize their own logic to organizations’ strategy that traditional ES models may not capture. Therefore, while examining alignment, focusing on a specific technology rather than trying to cover all IS or ES would be more reliable.  Researchers also agree that increasing the granularity of research would bring more benefits to alignment research (Chan & Reich, 2007; Farrell, 2003). Palmer & Markus (2000) and Chan and Reich (2007) also state that "one-size fits all" type research is not an appropriate method for alignment. Chan (Chan & Reich, 2007; Chan et al. 2006) states that alignment should be examined in more detail than it has been done today. Therefore, they signal towards a more specific research related to alignment. In addition Chan (2002) states that: “Due to the complex 7  and daunting nature of overall business, IS [ES] alignment, perhaps successful alignment, is more likely by emphasizing the management of specific components of alignment, rather than aiming for seemingly unreachable target of multi-faceted, overall alignment. This is not to diminish the importance of maintaining a holistic view of alignment. It merely suggests that focusing on how individual components contribute to alignment may be more feasible, and yield better results, than tackling all the alignment challenges of the entire IS [ES] organization at once" (p.99).  Granularity can be based on many perspectives such as industry effect on alignment, effects of company size, country effect as well as specific technology effects on alignment. For example, Chan and Reich (2007) support Farrell’s (2003) study and suggest researchers should examine industry differences and effects of industry type on alignment rather than covering all industry types at once. In addition, in terms of granularity, Street (2006) and Chan and Reich (2007) recommend focusing on research based on specific firm sizes. In that sense, researchers also encourage examining specific technologies instead of whole ES while examining alignment. For example, Kang et al. (2008) use some components of Strategic Alignment Model (SAM) and measure alignment between organizational infrastructure and ES infrastructure by focusing on a specific technology, ERP, where ERP alignment is defined as a state where the business activities of departments are changed to meet the requirement of the ERP system in a way that there will be a harmony and internal coordination with overall organizational objectives. On the other hand, Wehmeyer (2005) apply strategic alignment model of Henderson and Venkatraman to distinguish database marketing and CRM. In this conceptual study the authors examine alignment from not only a specific technology perspective like CRM but also from a specific business unit perspective like marketing. Raymond & Bergeron (2008) examined the alignment between e-business capabilities such as e-communication, e-commerce, e-intelligence, and ecollaboration of SMEs in the manufacturing sector with business strategy through Miles & Snow (1978) typology. In a recent study, Ravishankar, Pan, & Leidner (2011) state the importance of examining a specific technology rather than the generic enterprise systems and focus on alignment of knowledge management systems and influence of subcultures (i.e., practices, interpretation, and various beliefs, etc.) on alignment at corporate and business unit levels.  8  Alignment has been studied from several perspectives by many researchers: duration (long term vs. short term (Reich & Benbasat, 2000)), the ways to achieve alignment, the methods to measure alignment, result of alignment (outcome vs. process or static vs. moving target), and level (firm level vs. process level (Tallon, 2008)). In addition, alignment studies can be grouped under three categories (Chan, Huff, & Copeland, 1998; Chan et al. 1997; Hambrick, 1980): textual description, deductive typologies, and empirical measurements. While textual descriptions are in the form of case studies, deductive typologies focus on classification of aspects, and empirical studies use measurement through scales (Chan et al. 1998).  Sabherwal & Chan (2001) examine the evolvement of alignment over time. The authors state that organizations go through some level of transformation. These transformations may be either revolutionary or evolutionary. While evolutionary changes refer to modifications, revolutionary changes refer to a major change, possibly into another business strategy. The revolutions are triggered by one or more of “environmental shifts, sustained low performance, influential outsiders, new leadership, and perception transformation” (p.194).  Zajac & Shortell (1989) state generic strategies should be expanded in order to match the changes in conditions such as environments, industry, etc. The authors also state that change in terms of strategy depends on two aspects: willingness to change and the ability to change. The main assumptions in attempting to change the strategy are: i) belief in doing the right move; and ii) minimal cost of changing (Zajac & Shortell, 1989). Zajac and Shortell (1988) find that organizations usually change their strategy or shift from one strategy type to another, in order to adapt the shifts in environment; previous experience of change have a strong impact on the attitude towards the new changes; this change of strategy may not always bring advantages (i.e. performance) to the organizations.  Ward & Peppard (2002) state ES strategy that enhances the business value should be applications focused. Parallel to these, we will focus on ERP, an ES, instead of focusing alignment with whole ES or IS. Following a generic perspective, which is covering whole ES on alignment may have several disadvantages. For example, Avison et al. (2004) argue that following a generic strategy may cause organizations to lose their flexibility. According to Klein 9  & Calderwood (1991), the more generic the research, the wider range of applicability, the more multi-purpose usage, the more common language and metric would apply. However, the assumptions (goals, choices, independence of utilities, and relationship between utilities) should be crucial while conducting a generic research. Generic ES models may have problematic assumptions that will not fit to specific technologies leading to less appropriateness, reduced sensitivity, abstractness or mismatch between the goals of specific technologies and the organization's elements. On the other hand, the more specific research would capture more details in terms of business processes (i.e., importance), flows, structure, etc. (Andersen & Fagerhaud, 2001).  In a more recent study, Loukis et al. (2010) states that "further research is required for the development of ‘lower-level’ and more practically applicable models/frameworks, which offer a more specific and complete guidance for directing and assessing enterprise systems strategic alignment, and also are adapted to the technological advances and the new globalized and highly competitive business environment" (p.49). Loukis et al. (2010) states that "further research is required in order to understand better the contribution of different types of strategic alignment of enterprise systems to various dimensions of business performance, in various types and sizes of enterprises and in various sectoral, national and cultural contexts, based on objective business performance measures… Also it is necessary to investigate the dependence of the contribution of enterprise systems strategic alignment to business performance on various external and internal environment factors (e.g. business strategy, competition, etc.) and to identify its main moderators" (p.50). Therefore, examining alignment from a specific technology perspective rather than an overall ES approach can provide more reliable results.  2.1  Business Strategies and ES Strategies The primary focus of alignment has been business and ES as a whole. Researchers have  examined their components such as structure and strategy, as well as combinations and relationships of these components. For instance; Chan et al. (1997) examine the alignment between business and ES strategies, called strategic alignment, Ein-Dor & Segev (1982) examine the structural relationship of ES and business, called structural alignment, Sabherwal et al. (2001) examine alignment between ES strategy and business structure, or ES structure and 10  business strategy, called cross-dimensional alignment, Broadbent & Weill (1993) examine alignment between ES strategy and ES structure, etc. In short, several alignment models have assessed alignment with different constructs, but by using two main domains: business and ERP, which are also examined from both strategy and structure perspectives.  2.1.1  Strategy Strategy has been defined by Chandler (1962) as “the determination of the basic long-  term goals of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out these goals” (p.13). Mintzberg (1978) distinguishes strategy as having both sides: intended strategy and realized strategy. The author defines strategy "strategies as intended, a priori guidelines as well as strategies as evolved, a posteriori consistencies in decisional behavior" (p.935). Hambrick (1983a) defines strategy as "a pattern in a stream of decisions (past or intended) that (a) guides the organization's ongoing alignment with its environment; and (b) shapes internal policies and procedures" (p.5). According to Hambrick (1983a) strategy has a crucial impact on an organization's alignment, policies, competencies, structure, and processes.  Strategy has mainly been examined from two separate perspectives in strategic management literature: corporate strategy and business unit strategy. According to Porter (1987) "a diversified company has two levels of strategy: business unit (or competitive) strategy and corporate (or companywide) strategy. Competitive strategy concerns how to create competitive advantage in each of the businesses in which a company competes. Corporate strategy concerns two different questions: what business the corporation should be in and how the corporate office should manage the array of business units" (p.43). Porter (1987) also identifies four concepts of corporate strategy such as portfolio management, restructuring, transferring skills, and sharing activities.  Strategy is related to long-term survival of organizations. Since the business is a dynamic environment, organizations and strategies need to evolve to adapt these changes (Tang & Walters, 2010).  11  2.1.2  Business Strategy One of the building blocks of alignment is business strategy. Business strategy deals with  the mission, strategy, and tactics of the organization, and identifies the resources and their allocation to achieve the goals. Hambrick (1980) and Chan et al. (1997) discuss four approaches in research for operationalizing business strategy. These strategies include (1) textual descriptions (mainly for theory building); (2) measurement of parts (mainly for theory building and testing as well as improving measurement reliability); (3) multivariate measurement (measure the theoretical dimensions of strategy); and (4) typologies. The forces that shape business strategy can be categorized as internal and external forces (Ward & Peppard, 2002; Treacy & Wiersma, 1992). While current resources, demands from stakeholders, and competencies drive the strategy internally; economic environment, market conditions, and rivals drive the strategy externally (Ward & Peppard, 2002; Treacy & Wiersma, 1992).  While analyzing the business strategy, one should consider several requirements. These requirements include identifying the newly emerged strategy components, analyzing the current strategy, and bringing the ES requirements into a strategic plan (Ward & Peppard, 2002).  2.1.3  ES Strategy ES strategy, as well as business strategy, has been studied by several researchers.  Therefore there are several definitions of both concepts. In a variety of studies, ES strategy has been defined as merely a supportive plan developed by ES to contribute to the organizational strategy (Hirschheim & Sabherwal, 2001). ES strategy has been examined from several perspectives such as role, process, sourcing, and infrastructure of IS. Henderson & Venkatraman (1992) define ES strategy as follows: "...we conceptualize IT [ES] strategy in terms of three dimensions: (1) information technology scope - the steps and range of IT [ES] systems and capabilities (e.g., electronic imaging systems, local and wide-area networks, expert systems, robotics) potentially available to the organization; (2) systemic competencies - those distinctive attributes of IT [ES] competencies (e.g., higher system reliability, interconnectivity, flexibility) that contribute positively to the creation of new business strategies or better support existing business strategy; and (3) IT [ES] governance - choice of structural mechanisms (e.g., joint ventures, long-term contract, equity partnerships, joint R&D) to obtain the required IT [ES] 12  capabilities" (p.100). We focus on the role of ES strategy and define ES strategy as a formation, plan of action that enhances the performance through synergy with business strategy.  ES strategy is considered a non-separable part of corporate strategy by some researchers because of its structure (Smaczny, 2001). Generally speaking, organizations include several components such as production, accounting, finance, etc. Each of these components usually has a technology system individually. According to Edwards (2001) the compatibility of these technologies is critical to the success of overall corporate goals. In addition, an effective ES strategy should address unit goals, type of technology, and match between the technology and business needs (Edwards, 2001).  Researchers state further examination of topics such as ES and ERP will bring more benefits to academia (Farrell, 2003; Chan & Reich, 2007) and encourage researchers to go beyond "one-size fits all" type research (Palmer & Markus, 2000; Chan & Reich, 2007). Therefore, in this research, we have examined the strategy concept from a more specific perspective and focused on ERP strategy rather than generic ES strategy. However, since ERP strategies can be a subset of ES strategy, many aspects of ES strategy can be applied to ERP strategy. The differences are based on the definition of ERP strategy. In this study, ERP strategy refers to strategic and supportive use of ERP systems to help the organization to gain or improve operational excellence, customer and supplier intimacy, competitive advantage, product/service development, improved decision making and meet the strategic objectives of business. Based on Luftman's (2004) argument, we can say the main goal of ERP strategy is to make sure the decisions made by ES management either enables or drives the business strategy.  2.1.4  Benefits of ES Strategy ES strategy is critical to the organization for several reasons. For example, ES strategy  allows organizations to determine strategic applications, gain competitive advantage, improve technology's contribution, provide better communication, improve processes, increase efficiency and effectiveness of resources, estimate ES requirements, etc. (Ward & Peppard, 2002).  13  ES strategy is expected to enhance the value of business. When Ward & Peppard (2002) define the components of ES strategy, they state ES strategy should be based on business and support the overall business strategy while addressing the demand and receiving directions from business.  Positive effects of having a strategy for enterprise wide information systems have been discussed in literature Ward & Peppard (2002) explained several reasons for the need of an ES strategy. Some of the consequences for the lack of an ES strategy include: (a) Decision and project evaluations would be made based on only financial indicators; (b) Integrating systems and units would be difficult or impossible; (c) Resource allocation would be more problematic; (d) Adapting to dynamic business environment and technology would be more difficult; (e) Increased misunderstanding between users and ES department, etc. (Ward & Peppard, 2002).  2.1.5  Developing an ES Strategy Organizations can adopt or develop their own ES strategy. According to Ward & Peppard  (2002) developing an ES strategy is not easy and in order to develop an ES strategy one needs to think strategically and plan for long-term effectiveness. The main reasons to adopt an ES strategy include (1) enhancing flexibility for future technology; (2) having ES aligned with business strategies; (3) building competitive advantage; and (4) better resources (Ward & Peppard, 2002).  Furthermore, the strategic use and importance of ES has followed an evolutionary path. Ward & Peppard (2002) examine the evolution of strategic use in five stages. 1.  Initially, organizations had IT departments developing projects separately based on the needs. In this stage ES had a limited role, and IT departments needed to convince the management in favor of the ES and its benefits to their business.  2.  In the second stage, management should have perceived the importance and benefits of ES and convinced to adopt key operational applications.  3.  In the third stage, the focus should have been on the planning, and implementation of the applications. The importance of having support should have been also recognized in this stage. 14  4.  In stage four, management may encourage for innovation by supporting ideas that have strategic potential.  5.  The final stage is the one where competitive impact of ES has been recognized and the alignment of ES strategies and business strategies is ensured (Ward & Peppard, 2002a).  While ES strategy had been examined as a supporting idea to the ES function such as cost leadership or differentiation, or in some it has been examined as a structure having several process and infrastructure dimensions by several researchers, Hirschheim & Sabherwal (2001) examine ES strategy from a dimensional perspective. The authors examined ES strategy as having three dimensions: ES role, ES sourcing, and ES structure. The components of ES role include efficiency, opportunistic, and comprehensive. ES source arrangement dimension was examined by the components such as outsourcing, selective sourcing, and in-sourcing while ES structure dimension can have three possibilities as centralized, shared, and decentralized (Hirschheim & Sabherwal, 2001).  2.1.6  Dimensions of ES Strategy Although ES strategy, like business strategy, can be examined from two levels as  intended strategy and realized strategy, many researchers have focused only on intended strategy (Chan et al. 1997). A number of studies also mainly focus on strategic planning (Gibson, 1996; Premkumar & King, 1994; Keen, 1991) by focusing on strategy statements and documents. Realized strategy has not been a focus for many researchers. In spite of this stream of research, whether it is realized or intended, measurement of ES strategy has not attracted much attention from scholars (Chan et al. 1998).  Luftman, Lewis, & Oldach (1993) state ES strategies should be aligned with business strategies in order to be able to utilize ES in an effective and efficient way. (Kearns & Lederer (2000) and Benbya & McKelvey (2006) state the stronger the alignment between ES and organizational strategies and objectives, the better performance and outcomes organizations have.  15  2.1.7  Three Blocks of Business and ES Strategies Scope, competencies, and governance are three blocks of strategy and these blocks have  been examined as part of both business, and ES strategies by Henderson, Venkatraman, & Oldach (1996). Scope of business strategy deals with the products and services and positioning of the organization. Competencies deal with how to differentiate and choosing the differentiation strategy (Maes, 1999). Business governance deals with making decisions as regards to using the resources, mergers, partnerships, etc. On the other hand, Maes (1999) summarized the ES strategy of Henderson et al. (1996) by using these three building blocks. The author states that ES scope of strategy deals with both external and internal strategies and allows an organization to position itself based on these external and internal ES strategies. ES competency deals with differentiating based on the use of knowledge. Finally, ES governance deals with strategic buying or making information decision and strategic partnerships (Maes, 1999).  2.1.8  IS, IT, ES, and ERP While examining the business strategy and ES strategy, researchers need to be aware of  the distinction between content and process (Sabherwal & Chan, 2001). Content addresses the question of "What strategy is the organization is pursuing?" and process addresses the question of "How does the organization develop its strategy?" (Sabherwal & Chan, 2001, p.12). Since this study's objective is not to examine how to reach alignment or how to develop a strategy, we will be focusing on the content part of the distinction. As Sabherwal & Chan (2001) stated, three strategies should be clarified about content: Information Systems strategy, Information Technology strategy, and Information Management strategy. Although these terms have been used interchangeably, there are slight differences among them. In addition to the fact there is a slight difference between IS and IT, the familiarity of organizations with IS is much older than their familiarity with IT (Ward & Peppard, 2002).  The concepts of IS and IT have changed over years and these concepts are not the same as they were ten years ago or more. The role of IS or IT has shifted from being a simple support tool for back-office operations in organizations (Tang & Walters, 2010) to a strategic component that integrates functional areas within organizations. As Tang & Walters (2010) states, the technology “has shifted from efficiency to effectiveness, and in the Internet era, to value 16  creation. On one hand, IT is playing a more active and important role in strategic management. On the other hand, strategic management concerns have influenced the development of IS” (p. 30).  Mortimer (2007) defines IS strategy as "the study of the methods and means by which information is processed and conveyed" (p.108). It "focuses on systems or business applications of IT, being concerned primarily with aligning them with business needs and using them to derive strategic benefits" (Earl, 1989; Sabherwal & Chan, 2001). The UK Academy of Information Systems define IS as "the means by which people and organizations, utilizing technologies, gather, process, store, use, and disseminate information." The domain of IS include the "study of theories and practices related to the social and technological phenomena, which determine the development, use and effects of information systems in organizations and society" (Ward & Peppard, 2002, p.3; UKAIS, 1999). On the other hand… “IT refers specifically to technology, essentially hardware, software and telecommunications networks” (Ward & Peppard, 2002, p.3; UKAIS, 1999) and can be defined as "the acquisition, processing, storage, and (delivery and sharing) dissemination of information and other digital content by means of computers and telecommunications" (Mortimer, 2007, p.108; Ward & Peppard, 2002, p.3; UKAIS, 1999) and be "best seen as the technology framework or architecture which drives, shapes and controls the IT infrastructure" (Earl, 1989, p.95). It is concerned with "technology policies, including such aspects as architecture, technical standards, security levels, and risk attitudes" (Sabherwal & Chan, 2001, p.12).  According to Earl (1989) IM strategy "is concerned with the role and structure of IT activities in the organization. It focuses on relationships between the specialists and users; between the centre and divisions or business units. It is concerned with management control for IT" (p.65) and aims at "putting the management into IT" (p.64).  17  In short, "Whereas the IS strategy is about ‘what’ and the IT strategy about ‘how,’ the IM strategy is about the ‘wherefores’ - which way? Who does it? Where is it located?, etc." (Earl, 1989, p. 65).  The terms Information System and Information Technology have been used interchangeably with other terms as well. Ward and Peppard (2002) state the term Information and Communication Technologies (ICT), which is commonly used in European Union Countries, is the corresponding term for North America’s Information Technology. Loukis et al. (2010) use the term “ICT” instead of IT and the term Enterprise Systems instead of Information Systems. Ward and Peppard use the term Enterprise Systems (ES) instead of Information Systems. ES refers to Enterprise wide Information Systems across several industries. In that sense, ES is used as a generic term for Information Systems with current technology. In other words, ES refers to the Information Systems of 21st century that includes enterprise wide strategic systems ranging from Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM), Supplier Relationship Management (SRM), Advanced Planning and Scheduling (APS), Product Life Cycle Management (PLM), Sales Force Automation (SFA), Call Centre Management (CCM), to Policy Administration (PA). Ward and Peppard (2002) states the main characteristics of these systems "affect a large number of organizational processes and functions, standardizing and integrating information and activities... and all have a significant influence on the overall IS strategy of the organization" (p.542).  Any type of application for IS has four main characteristics: strategic, high potential, key operational, and support (Ward & Peppard, 2002). Usually every application can be categorized under one of these characteristics. However, ERP can be categorized as a combination of these four characteristics rather than a single one (Ward & Peppard, 2002). Therefore, Enterprise Systems, with the most common application of ERP, are different than generic IS or ES.  The main differences between generic IS or ES and a specific system such as ERP are the nature of the system that is "the ambitious intentions, the application complexity and crossfunctional scope, the range of different stakeholders involved, and extent of business and 18  organization changes needed to accommodate the new business models" and the possibility of failing the whole business (Ward & Peppard, 2002, p.544). In this study, unlike previous studies, we will be using a specific system, ERP instead of the generic IT or IS concept and term ES instead of IS or Enterprise Wide Information Systems.  2.2  Overview of Alignment Alignment has been one of the top three issues and concerns of ES and business  executives for more than 20 years (Gutierrez, Orozco, & Serrano, 2009; Symons, 2005). There are several studies in the literature which discuss the benefits of alignment. Although the number of studies examining alignment is extensive, there are still several concepts that are not agreed on regarding alignment. For example, there is little agreement regarding the definition, purpose, benefits, and the ways to achieve alignment (Avison et al. 2004). There are different pseudonyms used by different authors to refer the phenomenon of alignment (Avison et al. 2004; Maes, Rijsenbrij, Truijens, & Goedvolk, 2000). Several terms used by authors include:   Balance (Henderson & Venkatraman, 1993),    Coordination (Lederer & Putnam, 1986),    Integration (King & Teo, 1997; Weill & Broadbent, 1998),    Linkage (in terms of domains) (Henderson & Venkatraman, 1989; Reich & Benbasat, 1993, 1996),    Harmony (Luftman et al. 1993),    Fit (between realized ES and business strategies) (Chan, 1992; Porter, 1996; Venkataramanan, 1989; Venkatraman, 1989),    Synergy (Sethi, 1988), bridge (Ciborra, 1997a; Ciborra, 1997b), and    Fusion (Smaczny, 2001).  Chan & Reich (2007) mention terms that are not common such as congruence and covariation that are equivalent of fit. Although these terms refer to the same phenomenon and try to explain it, Maes et al. (2000) and Avison et al. (2004) argue the amount of different terms is an indication of confusion regarding alignment.  19  There are several definitions of alignment; however, many of these definitions are vague and not comprehensive (Maes et al. 2000). Luftman, Lewis, & Oldach, (1993) define alignment as "a technique for continuously thinking about how to analyze and derive organizational direction" (p.207) and "applying IT[ES] in an appropriate and timely way and in harmony with business strategies, goals, and needs" (Luftman & Brier, 1999, p.109). Reich & Benbasat (1996) define alignment as “linkage” and as "the degree to which the IT [ES] mission, objectives, and plans support and supported by the business mission, objectives, and plans" (p.56). Maes et al. (2000) define alignment as "the continuous process, involving management and design subprocesses, of consciously and coherently interrelating all components of the business – IT [ES] relationship in order to contribute to the organization’s performance over time" (p.15). In a more recent study, Ladley (2010) defines alignment as “the direct linkage of IAM [ES] efforts to business strategies, and the measurement of information and knowledge projects against anticipated benefits... aligned means that business needs are directly fulfilled by information and content management when called for. Alignment gives us the ability to tie an IM project to a specific business objective, and measure results against that objective" (p.216). Huang & Hu (2007) state that "alignment is more than a passive matching operation of IT [ES] with business activities. It involves active design, management, and execution of the IT [ES] functions in accordance with company's goals and strategies. Alignment is not just a process, but a mindset of how IT [ES] can work for, a basic principle of interaction between IT [ES] and business" (p.174).  2.2.1  Different Views Pertaining to Alignment Maes et al. (2000) presents an overview of literature regarding different views about  alignment. For instance, two of these views are in regards to the continuity of alignment and the focus of alignment. The focus of these different views is primarily related to the perception of alignment as either the strategic fit between business and ES (Chan et al. 1997) or a more comprehensive linkage or integration (Henderson & Thomas, 1992) where the fitting is possible between technology and infrastructure (including processes, skills, and architecture).  The discussions regarding continuity of alignment have focused on whether alignment is a continuous process or just an end state. Benbya & McKelvey (2006) support the view that 20  alignment is a continuous interaction between both ES and business components. Meanwhile, the authors define alignment as “a continuous coevolutionary process that reconciles top-down ‘rational designs’ and bottom-up ‘emergent processes’ of consciously and coherently interrelating all components of the Business/ES relationships in order to contribute to an organization’s performance over time” (p.285). Similarly, Hirschheim & Sabherwal (2001) define and discuss alignment based on three arguments: "One, an organization's performance is related to its attaining the appropriate structure and capabilities to execute its strategic decisions. Two, alignment is a two-way street. As organizations enter an era of information superhighways, expanded electronic commerce, and ‘virtualness,’ executives increasingly realize that in addition to business strategy influencing IT [ES], IT [ES] now influences business strategy. Finally, it is evident that strategic alignment is not an event, but a process of continuous adaptation and change" (p.87). Today’s business environment and conditions such as dynamic nature of industries (Kearns & Lederer, 2004), new organizations through mergers, requirements of innovations and emerging technologies (Cegielski, Reithel, & Rebman, 2005), acquisitions (Wijnhoven, Spil, Stegwee, & Fa, 2006) and globalization are some of the reasons why alignment is not a state but a moving target (Ravishankar et al. 2011). In addition, Henderson & H. Venkatraman (1989), Broadbent & Weill (1993), Henderson & Venkatraman (1993), Barclay, Higgins, & Thompson (1995), Chan et al. (1997), Ciborra (1997), (Venkatraman, 2000) argue that alignment is a process rather than being a onetime activity or event unlike Porter & Millar (1985), and Earl (1989) who perceived alignment as an outcome.  Although a more common stream of research supports the idea that alignment is a process rather than being an outcome (Papp, 1999; Henderson & Venkatraman, 1993), another stream of research accepts alignment as an end state. The idea of being a state has brought the concepts of antecedents and outcomes to the discussion. Therefore, several researchers examine antecedents and outcomes of alignment (Chan & Reich, 2007). For example, (Chan & Reich (2007) state that alignment itself has outcomes as well as antecedents. Brown & Magill (1994) as well examined the antecedents of alignment. The authors found corporate vision and strategy, organization's structure, culture, IT's [ES’s] role, satisfaction with management of technology and use of it, and locus of control are among the antecedents for alignment. Other antecedents mentioned by Chan & Reich (2007) include shared knowledge, communication, implementation success, relationship 21  between ES and business planning (Reich & Benbasat, 2000) and size of organization (Chan et al. 2006). Among the hypothesis of Chan et al. (2006), planning sophistication and prior successes are mentioned as antecedents in addition to shared domain knowledge, size of organization, and environmental uncertainty. Several researchers also state the relationship between the ES department and other business units (Feeny, Edwards, & Simpson, 1992) in terms of support, confidence, objective awareness, etc. (Chan & Reich, 2007; Thompson & Ang, 1999) are among the antecedents of alignment (see Table 1). In addition, prior research shows shared understanding between the CIO and top management team (Preston & Karahanna, 2009) and support of the senior executives (Luftman & Brier, 1999) are prerequisites for alignment. Shared domain of knowledge has direct (Reich & Benbasat, 2000) and indirect, through shared understanding impact on strategic alignment (Preston & Karahanna, 2009). Other antecedents of shared understanding include shared domain of knowledge, shared language, and structural systems of knowing (Preston & Karahanna, 2009) that have impact on strategic alignment. On the other hand, research of Preston & Karahanna (2009) shows factors such as "social systems of knowing, representing informal social interactions between the CIO and TMT, and experiential similarity" (p.1) do not have any impact on strategic alignment.  Conversely, although there are many antecedents of alignment distinguished in literature, outcomes do not have that much variety. Outcomes of alignment can be grouped under two categories: (1) organizational performance; and (2) industry performance (Chan & Reich, 2007). In terms of organizational performance, Chan & Reich (2007) state profit of an organization (Chan et al. 1997) and business performance (Sabherwal & Chan, 2001) are enhanced with alignment. Chan & Reich (2007) argue that outcomes of alignment are not limited to organizational factors and even industries are affected by the alignment. The authors mention how an industry can be affected from well-aligned ES and provide the example regarding how Bank of America has succeeded in their Electronic Recording Method of Accounting (ERMA) project and the entire industry has been affected from this success. In addition, alignment behaves as a catalyzer for organizational transformation (Chan & Reich, 2007; Henderson & Venkatraman, 1992) in terms of establishing relationships, value recognition of ES, and practicing the theoretical concepts more efficiently (see Table 1).  22  Table 1 Selected Antecedents and Outcomes of Alignment  Antecedents of Alignment  Outcomes of Alignment  2.2.2  Items Corporate vision, corporate strategy, organization's structure, culture, ES’ role, satisfaction with management of technology and use of it, locus of control, etc. Shared knowledge, communication, implementation success, relationship between ES and business planning, support, confidence, objective awareness Size of organization, planning sophistication, prior successes, environmental uncertainty Relationship between ES department and other business units Support, confidence, objective awareness Organizational performance, Industry performance Organizational transform  Authors Brown & Magill (1994)  Reich & Benbasat (2000), Chan & Reich (2007) Chan et al. (2006) Feeny et al. (1992) Teo & Ang (1999) Chan & Reich (2007) Henderson & Venkatraman (1992)  Perspectives on Alignment Discussion regarding alignment has several perspectives. In this subsection, we provide a  short review of the literature regarding the studies that examine alignment from different perspectives. The main perspectives discussed are: (a) the direction of alignment, examining whether ES or business should be aligned to the other one (Kearns & Lederer, 2000); (b) dimensions of alignment such as strategic dimension, operational dimension, and individual dimension (Benbya & McKelvey, 2006) or strategic and intellectual, structural, social, and cultural (Chan & Reich, 2007); (c) focus of organization; and (d) levels (organizational and system) of alignment.  2.2.2.1  Direction of Alignment In alignment literature, business and Enterprise Wide Information Systems have been the  main domains of alignment. Researchers focused on the components of each domain in terms of strategy, structure, and even processes. While some researchers argue ES components should be aligned to business components (especially considering the processes level), several researchers argue the opposite and claim business components should be aligned to ES components. In addition several researchers argue that alignment is about ES and business working together in the same direction (Chan & Reich, 2007; Abraham, 2006; Campbell, Kay, & Avison, 2005). Based on the component, its characteristics, and the amount of required change the answer to this 23  question may change. For example Kearns & Lederer (2000) argue that aligning business strategy based on ES strategy can cause big losses in organizations. Ravarini, Tagliavini, Pigni, & Sciuto (2000) state organizations can align their business processes to ES requirements where they examined ERP. In this study, we perceive alignment as an interaction between business and Enterprise Systems and adherence to a profile, where strategic use of ES requires a support to business strategy and this interaction has an impact on business performance at the end.  2.2.2.2  Dimensional Perspective of Alignment In alignment literature, several authors examine alignment from different perspectives,  dimensions, or levels. For example, Benbya & McKelvey (2006) categorized alignment into three broad groups as strategic dimension, operational dimension, and individual dimension. Strategic dimension focuses on the strategy component and deals with alignment between ES and business strategies. Operational dimension focuses on the structure component and deals with the alignment of business and ES structures. Research dealing with operational dimension of alignment also includes studies, which focuses on responsibilities and deployment of employees, communication among and with executives, and decision making rights as well. On the other hand, individual dimension focuses on infrastructure and mainly deals with alignment of ES infrastructure and end user needs (Benbya & McKelvey, 2006).  According to Chan & Reich (2007) alignment has at least four dimensions: strategic and intellectual, structural, social, and cultural. 1. Strategic dimension refers to the fit between ES strategy and plans with business strategy and plans while intellectual dimension refers to interrelation between ES and business that results in higher quality (Chan & Reich, 2007; Reich & Benbasat, 2000). 2. Structural dimension is related to structures of ES and business. Several issues such as reporting relationships, deployment, decision-making rights, centralization (centralized, decentralized, federal, business unit, business venture (Chan & Reich, 2007; Chan, 2002; Earl, 1989), or hybrid (Chan & Reich, 2007; Brown & Magill, 1994) are among the components of this dimension. These authors also mentioned informal type of structure that has impact on performance. They define informal structure as "relationship-based structures that transcend the formal division of labor and coordination of tasks" (p: 5). 24  3. Social dimension refers to the executives' level of commitment to the organization's mission, and objectives (Chan & Reich, 2007; Reich & Benbasat, 2000). 4. Finally, the last dimension of alignment is the cultural dimension. This dimension includes the elements such as communication and business planning styles that would lead to enhanced effectiveness (Chan & Reich, 2007).  In this study, we focus on the strategic dimension perspective and ignore the other three dimensions.  2.2.2.3  Focus Perspective of Alignment Tallon, Kraemer, & Gurbaxani (2000) examine alignment based on the focus of  organizations. These authors group the focus types under four categories: unfocused, operationsfocus, market-focus and dual-focus. The main criterion to determine these types is the level of managers perception regarding how and where ES creates business value. Focused firms are the ones where the management's attention is on using ES in order to support business strategy. Operations-focused firms mainly focus on operational effectiveness and strategic positioning of use of ES in order to enhance performance. Firms with market-focus concentrate on enhancing value by using Enterprise Wide Information Systems for their customers. Firms with dual focus can gain more than operational effectiveness and strategic positioning towards building a new market (Tallon et al. 2000). According to Tallon et al. (2000) focused firms regardless of focus type can achieve better alignment than un-focused firms, which lack clear goals since the management is more willing to take advantage and create more value with a focused and goaloriented approach. In addition, the perception of executives regarding the benefits of ES as a strategic component is limited and the pay off for Enterprise Wide Information Systems is less in this type of organization compared to the focused ones.  2.2.2.4  Level Perspective of Alignment Alignment has been examined based on different levels in the organization as well as  different perspectives. Chan & Reich (2007) state that all levels of an organization, from individual to organizational level, including project, and system levels, should be aligned in order to take full advantage of alignment. In addition to the level perspective, Henderson and 25  Venkatraman (1993) state alignment can be examined not only internally but also externally. While industry and technology related issues drive the external factors, ES processes and infrastructure are the inner factors organizations need to take into consideration during alignment (Chan & Reich, 2007; Henderson & Venkatraman, 1993). Our focus in this study is the organizational level.  2.2.3  Pros and Cons of Alignment The benefits of aligning business and ES strategies have been recognized by researchers  and practitioners (Croteau & Bergeron, 2001; Sabherwal & Chan, 2001; Chan et al. 1997; Henderson & Venkatraman, 1993). Some benefits of aligning ES to business strategies include (1)  increasing  organizations  return on ES  investment;  (2)  improving  companies’  competitiveness; (3) enhancing flexibility (Avison et al. 2004); and (4) profitability of organizations (Papp, 2001; Galliers, 1991). With the alignment, organizations can have the traditional benefits of IT/IS/ES in terms of having an organization’s operations accepted by executives (Huang & Hu, 2007) as well as obtaining top management support (Lederer & Mendelow, 1989). Studies also show alignment is one of the critical issues for economic performance (Ciborra, 1997). Studies of Chan (Chan & Reich, 2007; Chan et al. 2006) also support the notion that alignment improves the performance by allowing organizations to use ES more strategically. In addition, Papp (1999) states alignment is a key area managers focus on in order to improve financial performance.  Studies in ES literature have revealed the highest benefit of information systems occur when the alignment is strategic (Chan & Reich, 2007; Levy, 2000). The authors define the concept strategic as being valuable and having competitive advantage.  Although the majority of researchers have agreed on the benefits of alignment, several researchers argue too much alignment may cause problems. Too much alignment would cause organizations to attach or be dependent to the components and this attachment causes difficulties in flexibility and adaptation to environment (Kathuria, Joshi, & Porth, 2007). Avison et al. (2004) argue too much alignment (fit) may have a negative effect on the strategic flexibility of the organization. According to Pascala (1999), the borderline for alignment should be based on 26  the notion of equilibrium, which refers to flexibility and adaptability to dynamic environment. According to these authors, organizations need to have adaptive systems and if the alignment or fit causes equilibrium in terms of losing flexibility and adjustability to dynamic environments, production of organizations would be affected negatively.  Maes (1999) argues alignment is inadvisable. There are differences between the way the real life strategy implications are and the way humans act in terms of structure (Avison et al. 2004; Avison, Cuthbertson, & Powell, 1999). In addition, alignment requires several difficult, if not impossible conditions such as full control by management (Avison et al. 2004; Newell, Huang, Galliers, & Pan, 2003). According to (Ciborra (1997), studies on alignment are too theoretical and this makes alignment non-practical. In support of this view, Chan & Reich (2007) mention the main reasons why alignment is not always successful. These reasons include: (1) the dynamic structure of business that requires continuous adaptation; (2) difficulties in accomplishing alignment under different and especially unknown strategies; (3) inability of alignment to capture real life; (4) inexperienced managers about business (Baets, 1996); and (5) the conflict between alignment and business regarding the priority.  2.2.4  Assessment of Alignment Although there are many studies examining alignment, there are only a few that mention  how to assess or achieve alignment. Papp (1999) suggests a method for managers to achieve alignment that will enhance profitability and improve financial performance. The steps to better performance include following an alignment model to determine the organization’s perspective, learning to leverage the benefits of ES, matching the appropriate financial measurements to alignment, clarifying the roles, and continuously reviewing the alignment process (Papp, 1999).  According to Chan & Reich (2007) both ES and business executives should feel responsible for working towards achieving alignment. Sharing the knowledge among managerial and ES departments and members of these departments, creating a culture emphasizing this, including both formal and informal structures, adapting any required changes (i.e., ES strategy) in environment are among the key requirements that organizations need to take into consideration in order to increase alignment (Chan & Reich, 2007). 27  The debates regarding alignment also have lead researchers to examine alignment from different research methods as well as different perspectives (Madapusi & D'Souza, 2005; Luftman, 2003; Prahalad & Krishnan, 2002; Sauer & Willcocks, 2002; Hirschheim & Sabherwal, 2001; Reich & Benbasat, 2000; Sabherwal & Chan, 2001; Luftman & Brier, 1999). Different methods are used to measure alignment because researchers want to find the best measurement tool so alignment would be more manageable for practitioners (Chan & Reich, 2007).  Symons (2005) states alignment is a continuous process and must be checked periodically and recommends three main categories for measuring strategic alignment: i) meetings regarding IT steering committee and IT/business planning; ii) projects that are measuring the percentage of projects directly linked to strategic objectives, that have a post-implementation audit, and have ROI by business; and iii) budget regarding the new initiatives (Symons, 2005, p.4). According to Symons (2005) there are five stages an organization can be at regarding the alignment (p.2):   “Nonexistent: There is a complete lack of any effort to align IT [ES] and business strategy. IT functions in a purely support role.    Ad hoc: There is evidence the organization recognizes the need to align IT [ES] and business strategy. However, there are no standardized processes. There are fragmented attempts, often on a case-by-case basis within individual business units.    Repeatable: There is awareness of alignment issues across the enterprise. Alignment activities are under development, which include processes, structures, and educational activities. Some strategy alignment takes place in some business units but not across the entire enterprise. Some attempts are made to measure and quantify the benefits.    Defined Process: The need for IT [ES] and business strategy alignment is understood and accepted. A baseline set of processes is defined, documented, and integrated into strategic and operational planning. Measurement criteria are developed, and activity is monitored. Overall accountability is clear, and management is rewarded based on results.    Optimized: There is advanced understanding of IT [ES] and business strategy alignment. Processes have been refined to a level of external best practices, based on results of continuous improvement and maturity modeling with other organizations. External  28  experts are leveraged, and benchmarks are used for guidance. Monitoring, selfassessment, and communication about alignment expectations are pervasive.” Sabherwal & Chan (2001) use questionnaire surveys as well as Miles and Snow typology to measure the strategy and assess the alignment, while (Reich & Benbasat (2000) and Hirschheim & Sabherwal (2001) use case studies in order to measure alignment. Tallon et al. (2000) measure alignment based on the level of support of ES strategy on business strategy. Sabherwal & Kirs (1994) use mathematic calculations, weighted Euclidean distance to measure misalignment. One of the highly cited and used tools, Strategic Orientation of Business Enterprise (STROBE), developed by (Venkatraman, 1989), has been extended by Chan et al. (1997) as Strategic Orientation of IS (STROIS) in order to model alignment. Burn (1993) developed the Organizational Cultural Audit (OCA) framework to measure alignment in three phases: organization, its strategy, and functional implementation of it. In addition, Chan & Huff (1993) state organizations pass through three stages to be aligned: Awareness, Integration, and Alignment. In Awareness stage, organizations realize their enterprise systems is not an ordinary back-office anymore; In Integration stage, management realizes their information systems should work together with their business operations; and finally Alignment where management works through integrating their systems with organizations strategic. In another study, Peak, Guynes, & Kroon (2005) propose a roadmap for assessing strategic alignment in an organization. The four business information dimensions ranging from strategic view and operational view of information such as business processes, information needs, and ES products or systems interact with each other and finally suggest ES solutions. These solutions, with information concerns, form the roadmap for assessing alignment.  2.2.5  Types of Alignment Although there has been an extensive amount of work on alignment, there remains  confusion on several aspects such as what is alignment, how it is achieved, does it really worth, etc. One plausible explanation of this confusion pertains to its definition, purpose, type, and the focus of alignment. This might be cleared by examining the evolution of alignment. In this study, we will build a similar, but more comprehensive categorization to studies of King & Teo (1997), Peppard and Breu (2003) and Sabherwal et al. (2001) regarding alignment between ES and business that is supported by more research studies. See Table 2 for the extended version of the 29  studies of Peppard & Breu (2003) and Sabherwal et al. (2001), summarizing the types of alignment, components of alignment and the supporting references in an evolutionary perspective. Tables 3-8 are detailed examination and extensions of Table 2.  Table 2 Alignment Types and Components  Type of Alignment Business Alignment Strategic Alignment  Components Business Strategy & Business Structure Business Strategy & ES Strategy  Structural Alignment (or Business – ES Structural Alignment)  Business Structure & ES Structure  Information Systems Alignment  ES Strategy & ES Structure (and sometimes Business Structure) Business Structure & ES Strategy, and Business Strategy & ES Structure  Cross-Dimensional Alignment  Authors Miles & Snow (1978), Das et al. (1991) Earl (1989), King (1978), Peters, Heng, & Vet (2002), Camillus & Lederer (1985), Segev (1989), Wiseman (1985), Henderson & Venkatraman (1989), Henderson & Venkatraman (1993), Hirschheim & Sabherwal (2001), Chan et al. (2006), Oh & Pinsonneault (2007), Tallon (2008), Raymond & Croteau (2009), Tallon & Pinsonneault (2011) Ein-Dor & Segev (1982), Brown, & Eisenhardt (1997), Brown (1997), Jelinek & Schoonhoven (1990), Croteau, Solomon, Raynold, & Bergeron (2001) Broadbent & Weill (1993), Brown (1997)  Brown & Magill (1998), Tavakolian (1989), Das et al. (1991), Henderson & Venkatraman 1989; Henderson & Venkatraman (1993) Alignment Mechanisms Mechanisms and Enablers Earl (1993), Keen (1993), Luftman & Brier (1999), Mata, Fuerst, & Barney (1995), Ross & Weill (2002), Huang & Hu (2007), Chan et al. (2006), Fabi, Raymond, & Lacoursiere (2009) Source: The table has been extended from the literature based on Sabherwal et al. (2001, p.183), and excerpted from Beyond Alignment: A Coevolutionary View of the Information Systems Strategy Process by Peppard & Breu (2003, p.744) studies (Adapted with Permission).  30  This categorization regarding evolution mentions the separate group of studies having focus on alignment from different perspectives that have evolved during the alignment studies in literature. However, this does not necessarily mean there is no overlap between categories. Several studies include some issues that may belong to two categories. In addition, some scholars have contributed to more than one perspective; therefore, their names have been cited under more than one category.  2.2.5.1  Business Alignment The first type of alignment is called Business Alignment (Sabherwal et al. 2001). In the  1970s, Strategic Information Systems had not evolved yet and Enterprise Systems were just used for determining what would be the business computing needs in the future (King & Teo, 1997). Business alignment mainly focused on the alignment between business strategy and business structure. The leading scholars in this research were Miles & Snow (1978) and Das et al. (1991) (see Table 3).  Miles & Snow (1978) examined strategy, structure, and process of an organization as well as their relationships in a way that identifies organizations and their integration with their own environments. Miles and Snow (1978) classify organizations into four theoretical categories: (1) defenders; (2) prospectors; (3) analyzers; and (4) reactors. Defenders refer to organizations that have a narrow product-market domain. In this type of organization, managers are usually experts in the organization and are not interested in opportunities external to their own domains. These organizations focus on cost saving, improving efficiency rather than adapting new technologies, structures, or operations, or product development. They follow a classical planning sequence of “plan-act-evaluate”. Management style and decision making in this type of organization is usually centralized and more autocratic (Tavakolian, 1989; Miles & Snow, 1978).  Prospectors refer to organizations that seek market opportunities and effectiveness. These organizations usually adapt to emerging environment trends quickly and initiate the change that others need to respond. They are product and market innovation centric and not as efficient as defenders. They follow “evaluate-act-plan” sequence in their planning process. Management 31  style and decision making in this type of organizations is decentralized, and more based on participation (Tavakolian, 1989; Miles & Snow, 1978).  Analyzers combine the strengths of Defenders and Prospectors. Under existence of stable business environments, Analyzers follow a certain structure and process. In other cases managers watch the competitors and adopt the most promising one. The main characteristic of Analyzers is to minimize risk while maximizing growth. They both use "plan-act-evaluate" and "evaluateplan-act" sequence of planning based on whether the environment is stable or more turbulent. The management style and decision making in this type of organizations is balanced and concerned with both efficiency and effectiveness (Tavakolian, 1989; Miles & Snow, 1978).  Reactors are the organizations that do not have a stable strategy-structure relationship. Although managers recognize the need for change, these organizations lack the ability to respond to these needs effectively. Environmental pressure is the main effect that makes Reactors adjust themselves (Miles & Snow, 1978).  The Miles and Snow typology is widely used in literature. For example, Hambrick (1983) examine Miles and Snow's typology to find how effectiveness varies among different industries and the effects of functional tendencies on strategic type choice. Burgelman (1983) examine the relationship between the Miles and Snow typology and strategies proposed by Mintzberg. Lately, Sabherwal & Chan (2001) examine strategic alignment by using Miles and Snow typology.  Das et al. (1991) developed a framework that integrates strategic ES planning with competitive strategy. Their framework includes competitive (business) strategy, strategic ES planning that focuses on content and process of the strategic planning, fit, competitive advantage, and financial performance. Das et al. (1991) proposed two dimensions to examine strategic planning based on literature: content, and process dimensions. The content dimension includes distinctive competences (in terms of flexibility, ability to provide required information), dominant ES technology (in terms of level and source of technology), system design, and infrastructure components (i.e., technical, administrative, and organizational). Process dimension include five components: formality, scope, participation, influence, and coordination. These 32  components refer to structure, comprehensiveness, contribution, power of management (either person or unit), and integration of ES planning respectively. The authors also employ Miles and Snow's typology of business strategy in their study (see Figure 2)  Figure 2 Fit between “External Environment”, “Competitive Strategy”, “Financial Performance”, and “Strategic MIS Planning” (Das et al. 1991, p.955)  The authors suggest that: 1.  Competitive advantage and superior company performance involves strategic ES planning with content and process.  2.  There is a positive correlation between strategic ES planning and competitive strategy fit.  3.  There is a positive correlation between a company's financial performances and fit among strategic ES planning dimensions within a particular business strategy.  4.  Financial performance is positively correlated with the success of match between defender, analyzer, and prospector and proposed theoretical profile.  33  Table 3 Business Alignment Studies  Discussion Their study focuses on business strategy and business structure. Their typology includes four types of organizations: (1) defenders; (2) prospectors; (3) analyzers; and (4) reactors. Their study integrates strategic ES planning with competitive strategy. While the authors examine strategic planning in terms of content and process dimensions, they examine business (competitive) strategy by using Miles and Snow typology.  2.2.5.2  Authors Miles & Snow (1978)  Das et al. (1991)  Strategic Alignment The second type of alignment is Strategic Alignment (Sabherwal et al. 2001). This type  of alignment refers to the alignment between business strategy and ES strategy. Luftman & McLean (2004) define strategic alignment as “applying IT [ES] in an appropriate and timely way, in harmony with business strategies, goals and needs” (p. 90). In strategic alignment, aligning ES investment with organization strategy is the main issue. Critical success factors, or value chain analysis type of techniques, are used to support the alignment process (Sabherwal et al. 2001). Alignment is usually considered as a process where the requirements are delivered with a top-down approach (Peters et al. 2002; Earl, 1989; Segev, 1989; Camillus & Lederer, 1985; King, 1978) (see Table 4).  Earlier studies accept alignment as a top-down strategic planning event where the business strategy is effective in planning ES strategy (Peters et al. 2002). Peters et al. (2002) suggest two approaches regarding how enterprise systems strategy is developed: The first approach is that ES strategy pertains to the business strategy while the second approach pertains to the changes in the environment as an evolutionary process. Earl (1989) considered ES strategies as business-led and demand-oriented whose aim is to support business strategies.  On the other hand, King (1978) examine strategic ES planning process and its components. Organizational strategy set is the main part of strategic ES planning and includes an informational set regarding organization's mission, objectives, strategies, and related attributes. ES strategy set can be shaped by the organizational strategy set and includes system objectives, constraints, and design strategies. The main objective of strategic ES planning is to ensure that Enterprise Wide Information Systems is an integral part of the organization and is developed 34  accordingly. Camillus & Lederer (1985) also support the idea and state enterprise systems should be designed as aligned to strategic management processes of the organization. Moreover, these authors suggest the design of the enterprise systems should be aligned with the organization's administrative system's structure, strategy, and style components in order to contribute to the effectiveness of the organization.  Segev (1989) examine two business-level strategic typologies: (1) Porter's Overall Cost Leadership, Differentiation, Focus, and 'Stuck in the Middle' cost leadership and growth, generic competitive strategies; and (2) Miles and Snow's typology of strategic types and compares and synthesizes these two typologies based on proximities among the strategies. The author finds the differences and similarities of two typologies and distinguishes the matching business and ES strategies that can be aligned. He finds defenders are a low cost strategy while analyzers are low cost, differentiation, growth, alliance, and innovation strategies, and prospectors are differentiation, growth, alliance, and innovation strategies.  Jarvenpaa and Ives (Jarvenpaa & Ives, 1994, 1990) examine ES strategy by using a taxonomy approach. The authors focus on generic ES strategies such as headquarter driven and independent ES strategies. Their suggestion is in favor of combination and integration of both of these strategies that interact with business strategies.  Hirschheim & Sabherwal (2001) examine strategic ES alignment, which focuses on the ES strategy affecting business strategy. The authors define strategic alignment based on three arguments: 1. Structure and the strategic decision capabilities are crucial for the organizations' performance, 2. There is an interaction between organizations and technology. While Enterprise Wide Information Systems is influenced by business strategy, business strategy is also influenced by Enterprise Wide Information Systems, 3. Alignment is a process rather than an event and it requires adaptation to change.  35  Strategic ES alignment deals with how ES objectives and plans are supported by business objectives and plans (Hirschheim & Sabherwal, 2001). The difference between Hirschheim and Sabherwal’s study and earlier works is primarily related to the direction of alignment. While earlier studies discuss alignment as aligning ES strategy to business strategy, Hirschheim & Sabherwal (2001) present how ES strategy affects business strategy. Hirschheim & Sabherwal (2001) use Miles and Snow typology (Defenders, Prospectors, and Analyzers) while defining business strategy and view ES strategy from a multi-dimensional perspective where the focus was on the ES role (efficiency, comprehensiveness, and opportunism), ES sourcing agreement (outsourcing, selective sourcing, and in sourcing), and ES structure (centralized, shared, and decentralized). The authors state that ES strategy and business strategy should be aligned in order to enhance the performance.  Henderson and Venkatraman (Henderson & Venkatraman, 1993; Henderson & Venkatraman, 1989) develop a model for conceptualizing strategic management of information technology called the Strategic Alignment Model (SAM). This model has four dimensions each having sub-dimensions. The dimensions of the model are: (1) business strategy (including subdimensions business scope, distinctive competencies, and business governance); (2) “information technology strategy” (including sub-dimensions technology scope, systematic competencies, and ES governance); (3) organizational infrastructure and processes (including sub-dimensions administrative infrastructure, processes, and skills); and (4) information technology infrastructure and processes (including sub-dimensions ES infrastructure, processes, and skills).  Henderson and Venkatraman (Henderson & Venkatraman, 1993; Henderson & Venkatraman, 1989) examine these dimensions from three main perspectives of strategic management: 1. Strategic fit between external (business strategy and ES strategy) and internal (organizational infrastructure and processes, and ES infrastructure and processes) components, 2. Functional integration between business (business strategy and organizational infrastructure, and processes) and ES (ES strategy and ES infrastructure and processes) components, and 36  3. Cross-dimensional alignment. Henderson and Venkatraman hypothesized that ES management would be more effective with ES planning, which focuses on strategic alignment.  Henderson & H. Venkatraman (1989) and Henderson & Venkatraman (1993) consider alignment as a process that adapts to changes rather than being a static event. They also include strategic and structural components as crucial parts for alignment. The alignment between business and strategic ES context should include both strategic and structural elements. Managers should consider those alignments and find a balance among choices while making decisions.  In more recent studies, Tallon & Pinsonneault (2011) examine the relationship between alignment, agility and performance while ES flexibility and environmental volatility moderates the relationship among the constructs. Their results reveal alignment and ES flexibility are two important predictors for agility and are positively associated with agility. At the same time, agility mediates the relationship between alignment and performance when the environment is not volatile. Tallon (2008) examines strategic alignment with value disciplines perspective at the process level. The author examines the value discipline through business strategy, operational excellence, customer intimacy, product leadership and business processes through supplier relations, production and operations, product and service enhancement, marketing and sales, and customer relations. The results of the study indicate alignment and business value are positively associated; unlike Tallon (2008), Oh & Pinsonneault (2007) who examine strategic alignment at firm level whilst examining ES based on a portfolio of applications. In spite of the different levels of alignment, their results also reveal that alignment improves profit while reducing costs. Raymond & Croteau (2009) examine alignment between business strategies and advanced manufacturing technologies for medium-sized enterprises through the categorization of organizations by Miles and Snow (1978) typology. The authors measured performance through productivity and profitability. Their results indicate alignment is positively associated with productivity for prospectors and defenders, where alignment positive association with profitability is significant for analyzers. The differences in results of Raymond & Croteau (2009) and Sabherwal & Chan (2001) indicate alignment is a complex issue as it is very critical for 37  organizations (Luftman & Ben-Zvi, 2010) and yet there is no universal formula for alignment (Raymond & Croteau, 2009).  There is a confusion regarding strategic alignment and traditional linkage. Strategic alignment is not the same as traditional linkage. The focus of ES function is different in two approaches (Henderson & Venkatraman, 1993): 1. While classical linkage focuses on internal orientation, strategic alignment focuses on the fit within the ES domain that includes not only internal orientation but also external orientation (i.e., marketplace that includes scope (product and market offerings, etc.), governance (mechanisms such as alliances, vendors, etc.), and competencies (flexibility, cost-performance, etc.), etc.). 2. Traditional management perception about ES functions includes linking ES activities with business requirements. On the other hand, strategic alignment allows management to choose the appropriate alignment perspective among four dimensions (strategy execution, technology transformation, competitive potential, and service level). 3. In traditional linkage, the performance criteria include cost and service considerations while strategic alignment expands these criteria with multiple goals such as operational and strategic ones. Strategic alignment model by Henderson & Venkatraman (1993) also deals with the shift among different alignment perspectives in terms of performance. 4. Finally, strategic alignment additionally deals with the roles of ES executives.  38  Table 4 Strategic Alignment Studies  Discussion Business strategy as well as the changes in the environment shapes the ES strategy. While business shapes the Enterprise Wide Information Systems, its objective is to support business strategies. Organizational strategy shapes ES planning. Strategic ES planning must ensure that Information Systems is an integral part of organization. ES should be designed as aligned to strategic management goals. Examines and matches the business and Enterprise Systems strategies of Porter's Overall Cost Leadership, Differentiation, Focus, and 'Stuck in the Middle' cost leadership and growth, generic competitive strategies; and Miles and Snow's typology of strategic types. Develop SAM that has four dimensions: business strategy, ES strategy, business infrastructure, and ES infrastructure. Alignment is considered to be a process. The model covers the dimensions as: Strategic fit between external and internal components; Functional integration between business and ES; and Cross-dimensional alignment. Alignment is a process and interaction between business and Enterprise Wide Information Systems strategies in “both” directions. Alignment and ES flexibility is positively associated with agility and agility mediates the relationship between alignment and performance. Examine strategic alignment with value disciplines perspective at the process level. Examine strategic alignment at firm level whilst examining ES based on a portfolio of applications. Examine alignment between business strategies and advanced manufacturing technologies for medium-sized enterprises through the categorization of organizations by Miles and Snow (1978) typology.  2.2.5.3  Authors Peters et al. (2002) Earl (1989) King (1978) Camillus & Lederer (1985) Segev (1989)  Henderson & Venkatraman (1989), Henderson & Venkatraman (1993)  Hirschheim & Sabherwal (2001)  Tallon & Pinsonneault (2010) Tallon (2008) Oh & Pinsonneault (2007) Raymond & Croteau (2009)  Structural Alignment The third type of alignment is called Structural Alignment (Peppard & Breu, 2003). This  type of alignment refers to alignment at the structural level (Ein-Dor & Segev, 1982). Structural alignment is the alignment between organizational/business structure and ES structure and stresses the structural fit between them. It may be concerned with ES decision-making rights as well (Chan, 2002). Structure alignment states that although strategy is important in alignment, structural alignment might complement it for a more successful alignment. Therefore, it emphasizes the importance of structure in alignment itself. Structural alignment mainly focuses on the fit when ES decision making rights, ES infrastructure, personnel and relationships are the main concerns (Peppard & Breu, 2003; Brown, 1997; Brown, and Eisenhardt 1997; Ein-Dor & Segev, 1982) (see Table 5).  39  Both business structure and ES structure have been examined from several perspectives such as Brown & Magill (1998), Al-Mashari & Zairi 2000, Al-Mashari & Zairi (2000), and (Broadbent, Weill, & Neo, 1999). One of the most common classifications for examining business structure includes three different views: (1) mechanistic or organic; (2) semi-structures or hybrid; and (3) centralized or decentralized (Sabherwal et al. 2001). Brown & Magill (1994) examine ES structure from a similar view point where they included whether it is shared in addition to being centralized or decentralized.  Brown (1997) also examines the alignment between structural variables regarding ES functions and business units. He examines how alignment of ES has evolved and/or adapted to the change of ES role. The findings indicated that organic decision making, high business unit autonomy, differentiation competitive strategy, and unstable industry environment are the main variables in the alignment. According to Chan (2002), structure can be formal and informal. Informal structure includes team work, organizational culture, and individual or departmental relationships, etc. and should be considered under structural alignment (Chan, 2002; Ravishankar et al. 2011).  Ein-Dor & Segev (1982) examine the relationship between ES structure and organizational context. In terms of organizational context, organizational size, structure, time frame, and psychological climate toward ES were included as the variables defining the organizational context. While examining the ES structure, because of its multi-attribute structure, several dimensions such as the degree of centralization of ES, degree of integration of ES, deployment of hardware, and place within the organizational hierarchy were included (Ein-Dor & Segev, 1982). Integration or alignment of Enterprise Wide Information Systems is discussed from two perspectives: integration of data and integration of models feeding into each other. Their result shows ES structure is associated with organizational structure, size of the organization as well as attitude to ES, the rank of ES manager and the relationship between implementer and user. Organizational structure is associated with degree of ES and hardware centralization, degree of ES integration, software properties, and rank of ES manager.  40  Ahituv, Neumann, & Zviran (1989), Earl (1989), and Clark (1992) with their empirical studies and King (1983) with his conceptual study examine the relationship between ES governance and organizational context (Brown, 1997). While Ahituv et al. (1989) focus on organizational size, industry, organizational structure (matrix, functional, etc.), and process distribution (centralized, integrated, decentralized) in the organizational context and degree of centralization, hardware distribution, and ES function as ES governance, meanwhile Earl (1989) focuses on organizational structure, control systems, organizational culture in organization context and degree of centralization (centralized, business unit, business venture, decentralized, and federal) as ES governance. Clark (1992) focuses on alignment between organizational structure and ES structure by examining only ES component in terms of the degree of centralization and organizational context in terms of industry and firm size.  Croteau, Solomon, Raynold, & Bergeron (2001) examine how organizations can improve their performance by focusing on aligning their business and ES structure. The authors measure business structure construct through cooperation, overall vision, adaptability, and authority while measuring ES/technology structure through user involvement, connectivity, flexibility, technology awareness, and distributed computing. Their results indicate a positive relationship between aligning business and Enterprise Wide Information Systems structure and performance.  Table 5 Structural Alignment Studies  Discussion Examines the alignment between ES structure and business units. Alignment is affected by organic decision making, high business unit autonomy, differentiation competitive strategy, and unstable industry environment. ES structure is associated with organizational structure. ES structure refers to degree of centralization of ES, degree of integration of ES, deployment of hardware, and place within the organizational hierarchy, while organizational structure refers to organizational size, structure, time frame, and psychological climate toward ES. Alignment between business structure (through cooperation, overall vision, adaptability, and authority) and ES/technology structure (through user involvement, connectivity, flexibility, technology awareness, and distributed computing) improves the business performance.  Authors Brown (1997)  Ein-Dor & Segev (1982)  Croteau et al. (2001)  41  2.2.5.4  Information Systems Alignment The fourth type of alignment is called ES Alignment (Sabherwal et al. 2001). ES  alignment refers to the dynamic alignment between ES structure and ES strategy. However, some studies have stressed the importance of ES structure while focusing on the alignment between business strategy and ES strategy. Most of the studies within this category focus on different aspects such as the variety of strategic choices, how these choices are related to each other, and how managers dealt with those choices under different circumstances. This type of alignment requires a continuous adaptation due to the high volatility of the conditions. Because of these conditions, this alignment has been seen as a process rather than an event (Peppard & Breu, 2003; Hirschheim & Sabherwal, 2001; Brown, 1997; Henderson & Venkatraman, 1993; Broadbent & Weill, 1993) (see Table 6).  The focus of Enterprise Wide Information Systems alignment has been mainly the overall ES structure and ES strategy rather than ES methodology (Broadbent & Weill, 1993). Broadbent & Weill (1993) examine alignment in the Australian banking industry in order to identify the organizational policies and practices that interact within alignment business and information strategies as well as structure. Based on their study, the authors developed a model and found support for 15 of their propositions. The propositions are grouped into four categories as follows: 1. Strategy Formation Process for the whole organization 2. Organizational Structure 3. ES Policies, Practices, and Responsibilities 4. ES Strategy  The Strategy Formation Process for the organization refers to how a strategy is developed for every unit of the organization. Participation, documentation, planning time frame, level of experience in planning, and the attitude of management towards ES strategy are the main issues. Organizational Structure refers to the responsibilities and reporting in the organization. ES policies, practices, and responsibilities refers to the arrangements in ES area while ES structure refers to more technical issues in order to decide the technology to be used in the organization (see Figure 3).  42  Figure 3 Alignment Model (Broadbent & Weill, 1993, p.175)  The study is consistent with Earl (1989), Henderson & Venkatraman (1989) findings. The findings related to alignment indicate focusing on the overall organizational ES structure rather than ES methodologies at the functional level is central to alignment. Other findings indicate the fact that ES strategy should be consistent with business needs and ES strategy should be a flexible and issue-oriented process.  Table 6 Information Systems Alignment Studies  Discussion Examine alignment between ES strategy and ES structure. Based on the framework: Strategy Formation Process (how a strategy is developed), Organizational Structure (responsibilities and reporting), ES policies, practices, and responsibilities, and ES structure (technical issues) are the essential components regarding alignment.  Authors Broadbent & Weill (1993)  43  2.2.5.5  Cross-Dimensional Alignment The fifth type of alignment is called Cross-Dimensional Alignment (Sabherwal et al.  2001). This alignment refers to alignment across dimensions: alignment between business structure and ES strategy, and alignment between business strategy and ES structure (Brown & Magill, 1998; Henderson & Venkatraman, 1993; Das et al. 1991; Henderson & Venkatraman, 1989; Tavakolian, 1989) (see Table 7).  Tavakolian (1989) examines the alignment between ES structure and business strategy. The author defines ES structure based on several aspects such as organizational decision making, organizational form (either functional organizational form or product organizational form), organizational size, and competitive strategy while using Miles and Snow typology with Defenders, Prospectors, Analyzers, and Reactors to define business strategy. The author divides the ES activities into three categories: (1) system development and maintenance; (2) systems operations; and (3) system administration by examining their degree of centralization. Tavakolian (1989) hypothesizes ES structure is related to business strategy and the strategic types of organizations differ based on the degree of centralization of ES activities. His findings support the idea that ES structure is strongly related to business strategy.  Brown & Magill (1998) examine how ES structure should be designed in order to contribute more to successful organizational strategies. Their study focuses on the level of centralization of decision responsibilities to accomplish a set of organizational activities. Their propositions clarified a business unit's whether centralized, decentralized, or compromise design based on (a) business-level strategy; (b) the degree to which extent the ES has strategic role on the business unit; (c) managers' level of ES knowledge; and (d) the degree to which extent the ES related opportunities are pursued. This study showed corporate level (opportunities for ESrelated cross-unit synergies) and business level (strategic ES role, line-manager ES knowledge) factors are predictors for strategy.  The model developed by Henderson and Venkatraman (Henderson & Venkatraman, 1993; Henderson & Venkatraman, 1989) deals with cross-dimensional alignment as well. While the authors define four perspectives, (1) technology exploitation; (2) technology leverage; (3) 44  strategy implementation; and (4) technology implementation, by focusing on three domains as (a) anchor domain; (b) pivot domain; and (c) impact domains, they also deal with crossdimensional alignment in addition to strategic fit and functional integration.  Table 7 Cross-Dimensional Alignment Studies  Discussion Examine the alignment between ES structure (in terms of organizational decision making, organizational form, organizational size, and competitive strategy) and business strategy (from Miles and Snow typology of Defenders, Prospectors, Analyzers, and Reactors perspective). He found that ES structure is strongly related to business strategy. ES structure should be designed to pursuit successful organizational strategies. In addition, authors found that opportunities for ES-related cross-unit synergies are essential for corporate level strategies while strategic ES role, line-manager ES knowledge are essential for business level strategies. Examine cross dimensional alignment and (1) technology exploitation; (2) technology leverage; (3) strategy implementation; and (4) technology implementation based on the four domains of SAM (business strategy, ES strategy, business infrastructure, and ES infrastructure).  2.2.5.6  Authors Tavakolian (1989)  Brown & Magill (1998)  Henderson & Venkatraman (1989), Henderson & Venkatraman (1993)  Alignment Mechanisms The sixth type of alignment within the evolution of alignment is called Alignment  Mechanisms (Peppard & Breu, 2003). This type of alignment supports the dynamism of the mechanisms and enablers of alignment by putting forth that process view does not provide enough information regarding the interaction of processes. Alignment is an active design that aims the managing of ES functions rather than being just a passive match between ES and business (Huang & Hu, 2007). Huang & Hu (2007) also indicate alignment is a process and propose alignment is a mindset regarding the way ES and business work. One stream of research, which defines alignment as unification of ES and business, challenge the statement of Henderson and Venkatraman by arguing that ES and business strategies are separate. The end goal for alignment is sustainable competitive advantage (Huang & Hu, 2007; Peppard & Breu, 2003; Ross & Weill, 2002; Keen, 1993; Luftman & Brier, 1999; Mata et al. 1995; Earl, 1993) (see Table 8).  45  Earl (1993) examines 27 companies and found there were five different strategic ES planning approaches companies use: (1) Business-Led; (2) Method-Driven; (3) Administrative; (4) Technological; and (5) Organizational. The author concluded organizational approach is the best among five in order to achieve alignment. Organizational approach is also found to be the most effective approach in an environment where Enterprise Wide Information Systems decisions are made through continuous harmony between organization's functions with ES.  Several researchers have agreed on the importance of aligning business and ES or ERP systems (Chen, 2009). However, there is no such agreement regarding how to achieve the harmony (Luftman & Brier, 1999). In order to fill this gap, Luftman (1996) and Luftman & Brier (1999) identify the key enablers, such as executive support, strategy development, partnership with business, setting right priorities, resource sharing, and understanding the business for ES and inhibitors, such as wrong prioritizing of ES projects, lack of close relationship with business, non-supportive executives for ES, etc. for achieving the strategic alignment. Some enablers and some inhibitors may exist in an organization and Luftman & Brier (1999) suggest a six-step approach in order to minimize inhibitors and maximize the enablers for alignment. These steps that will be worked by executives include: (a) setting goals and assigning each goal to teams; (b) recognizing the link between business and ES; (c) analyzing gaps and prioritizing them towards a solution; (d) taking the action (specifying deliverables, responsibilities, risks, and tasks); (e) determining success criteria; and (f) sustaining the alignment. ES will play an increasing role in achieving competitive advantage, therefore the executives should be cautious regarding the harmony and how to sustain it by focusing on enablers (Luftman & Brier, 1999). In another study, Luftman (2001) states enablers of strategic alignment include top management support, involvement of ES in strategy development, mutual understanding between ES and business (knowledge base, partnership), prioritization of ES projects, and leadership of ES (Luftman, 2001). Ward and Peppard (2002) state top management support is very important. The main reason for failure of ERP is the lack of management support or stakeholders, “different perceptions of the intent and benefits and extent of changes required between senior executives and operational line management and among the line managers in different functions or units” rather than the technology itself (p. 547).  46  Chan et al. (2006) examine the strategic alignment with its antecedents and its outcomes where these antecedents (i.e., shared domain knowledge, planning sophistication, earlier success of ES experiences, size of the organization, environmental uncertainty) and outcomes were examined based on strategy and organization types, based on Miles & Snow (1978) typology. Their results indicate a positive association between alignment and performance for most of the organizations, where industry, type and strategy of the organizations have significant impact on the relationship between alignment, antecedents of alignment and performance. In another study, Fabi et al. (2009) examine strategic alignment of Human Resource Management with strategic capabilities of product, market and network development in small-medium sized manufacturing enterprises through gestalt (multivariate profiles of coherence (p.19)) approach with Miles & Snow business strategy profiles. Their results indicate alignment is important for competitive advantage and for survival. Madapusi & D'Souza (2005) examine strategic alignment between ERP systems and international strategies in multinational enterprises, which can be identified based on different criteria such as rate of growth and structures. The authors argue that careful planning and configuration of ERP system, skilled employees, champion, and recognizing the relatedness and integration of ERP and strategy can bring success to organizations.  Literature also shows that managers have a unique impact on alignment. While their support is critical for a successful alignment, they can also be obstacles for the alignment, too. Awareness level of managers, their perceptions on technology and alignment, perceived benefits, as well as being short-term or long-term action/solution oriented are among the most common issues that determine the management attitude towards alignment (Ward & Peppard, 2002).  These differences in management styles are important components for achieving competitive advantage. Considering the case that ES resources are equally accessible by all organizations, these differences in management styles and strategies are the main elements that determine competitive advantage (Keen, 1993). While earlier studies pertaining to alignment were in favor of separating ES and business, later studies contradicted this view. For example, according to Keen (1993) business process, people, and ES should be considered together rather than being considered as separate elements. The author presents a framework that encourages and guides the executives for the fusion of ES and business. The framework includes two 47  dimensions: (1) business, people, and technology dimension; and (2) development (dealing with knowledge anchors, vision and strategic intent, and rules), and management of ES (dealing with strategy sourcing alliances, operations, and benefits) dimension. The developed fusion map can be used by executives in order to perceive the big picture of their businesses and focus to a specific area based on their role (Keen, 1993). Smaczny (2001) also suggests that ES should be meshed with business. Using the term fusion in order to describe alignment or integration shows the degree of integration that Smaczny suggests regarding business and ES.  These studies pertaining to ES and how it leads to sustainable competitive advantage have contributed to the research regarding alignment of business and ES (Peppard & Breu, 2003). For example, Mata et al. (1995) analyze organization, ES and competitive advantage from the resource side and identify several variables that will enhance the competitive advantage for organizations. These variables, which enable the alignment leading to competitive advantage include: (1) accessing capital for ES investments; (2) proprietary technology; (3) ES skills of firms; and (4) superior managerial skills such as the ability to develop ES applications that will support and enhance business functions (Mata et al. 1995). Ray, Barney, & Muhanna (2004), Mata et al. (1995), and Reddy (2006) also mention the rigidities that occur during the process to enhance for competitive advantage such as having capital risk, time and cost of adapting new systems, being easily imitated, etc. from the resource-based view. They also suggest applying a dynamic view which explains the evolution of resources and its capabilities in lieu of a static one in order to enhance the competitive advantage of organizations. Lee & Adams (1990) state if there is a simple method to determine how to use ES strategically, none of the companies would have a competitive advantage over others. According to Sammon, Adam, & Elichirigoity (2001), organizations need to react to new technologies as their strategic component, in spite of the fact that technology usually provides only a short term competitive advantage (Sammon et al. 2001; Vitale, 1986). Therefore, technology can be viewed as a competitive liability rather than competitive advantage (Sammon et al. 2001). Ross & Weill (2002) examine the factors affecting ES decisions and the importance of the leadership role of senior business executives in ES decisions to achieve alignment over time. The benefits of ES to an organization can be understood by the degree of ES managed rather than the technology itself (Huang & Hu, 2007). These authors also present the enablers, which include: (1) integration between ES and business 48  planning; (2) existence of effective communication channels between ES and other business units in the organization; (3) active relationships between ES and business including managerial level relationships; and (4) accepting alignment as part of organizational culture.  Table 8 Alignment Mechanisms  Discussion Examine five approaches regarding the fit for alignment: Business-Led, MethodDriven, Administrative, Technological, and Organizational. Findings show that organizational approach is the best one to achieve alignment. Suggest steps for executives to make alignment more efficient: Set goals; Recognize business-ES link; Analyze gaps; Take action; Success criteria; Sustain alignment. Business process, people, and ES should be considered together (fusion). Executives can develop a better understanding of the overall business as well as their role by following the fusion map, which includes two dimensions: (1) business, people, and technology dimension; and (2) development (dealing with knowledge anchors, vision and strategic intent, and rules), and management of ES Analyze organization, ES and competitive advantage from resource side. Accessing capital for ES investments, proprietary technology, ES skills of firms, superior managerial skills are critical for alignment and competitive advantage. Senior executives have critical leadership role in ES decisions to achieve alignment. The way Enterprise Wide Information Systems is managed is more important than just having latest technology. ES-business planning integration, communication channels and relationships between ES and other business units, attitude towards technology and alignment are critical in achieving and sustaining alignment. Antecedents of strategic alignment (i.e., shared domain knowledge, planning sophistication, earlier success of ES experiences, size of the organization, environmental uncertainty) have significant impact on performance for most of organization types categorized by Miles & Snow (1978). Alignment of HRM with strategic capabilities of product, market, and network development in manufacturing small-medium enterprises is critical for competitive advantage and survival.  2.2.6  Authors Earl (1993)  Luftman & Brier (1999) Keen (1993)  Mata et al. (1995)  Ross & Weill (2002) Huang & Hu (2007)  Chan et al. (2006)  Fabi et al. (2009)  Alignment Models A number of models for strategic alignment have been presented in the literature. In this  section, we will cover only the well-cited models and the ones we believe have a critical role within the evolution of alignment. In this review, we also want to present the fact that alignment has a variety of perspectives. We have described alignment from these different perspectives by combining separate well-known models that define alignment models in order to give a broader  49  understanding for alignment. Strategic Alignment Model (SAM), which is the most cited model will be the first model mentioned and then several models extending SAM will be explained. After SAM, a second highly cited model developed by Chan (Sabherwal & Chan, 2001; Chan et al. 1997; Chan, 1992) and a variety of well-known alignment model studies, such as Weill (1992; 1990), Benbya & McKelvey (2006), Alter (2002), Raffa and Capaldo (2007), Reich and Benbasat (2000; 1996), Sabherwal et al. (2001), and Baets (1992) will be examined briefly (see Table 11).  2.2.6.1  Strategic Alignment Model Strategic alignment literature has been built upon a series of studies and models. The  most notable studies are MIT90s by Morton (1991) and Strategic Alignment Model (SAM) by Henderson & Venkatraman (1989). The MIT90s model is important since it was the initial attempt to highlight the potential of ES as a strategic function. The model’s main objective is to determine how alignment would allow organizations to realize benefits from ES investments. The MIT90s model presents five levels: (1) localized exploitation; (2) internal integration; (3) business process redesign; (4) business network redesign; and (5) business scope redefinition for ES applications development. The model states as long as strategy, organizational structure, technology, individuals and roles, and management process are aligned, organizations benefit from the change (Chan & Reich, 2007). The MIT90s model had an influence for Henderson and Venkatraman to develop their model, SAM.  The Strategic Alignment Model (SAM) was developed by Henderson and Venkatraman (Henderson & Venkatraman, 1992; Henderson & Venkataramanan, 1991; Henderson & Venkatraman, 1989). The model defines different strategic choices and four different domain perspectives: (1) business strategy; (2) ES strategy; (3) organizational infrastructure and processes; and (4) ES infrastructure and processes.  SAM conceptualizes strategic alignment in terms of two dimensions: (1) strategic fit; and (2) functional integration (Henderson et al. 1996). Strategic fit is the ability to choose the external market position and the internal arrangements that lead to this external positioning decision. It is a harmony between business strategy and organizational infrastructure and 50  processes. One of the main assumptions of this model is overall business success depends on the strategic fit between external and internal domains (Henderson et al. 1996). Functional integration refers to the coherence between business strategy and ES strategy in an external environment or the coherence between organizational infrastructure and processes, and ES infrastructure and processes in an internal environment (Henderson et al. 1996) (see Figure 4).  Henderson & Venkatraman (1992) examine alignment from three different perspectives: (1) bivariate fit; (2) cross-domain alignment; and (3) strategic alignment. Bivariate fit is a simple relationship or congruence between two domains either horizontally (i.e., between business strategy and ES strategy, and between organizational infrastructure and processes, and ES infrastructure and processes) or vertically (i.e., between business strategy, and organizational infrastructure and processes, and between ES strategy, and ES infrastructure and processes). Cross-domain alignment is between multiple domains linked sequentially (Henderson & Venkatraman, 1992).  Organizations may define alignment perspective by drawing a line through three separate lines passing three different domain types: (1) anchor domain; (2) pivot domain; and (3) impacted domain (Luftman, 1996). Anchor domain is the strongest among the three and is the initiator for the change. Pivot domain, the middle domain between anchor domain and impacted domain, is also affected by the change initiated by the anchor domain. Impacted domain is the end element within the perspective and is affected the most since it is the final node in the action of change. Based on the anchor domain and its direction, the authors called four perspectives on ES planning as technology exploitation (ES strategy as anchor domain and over business strategy), technology leverage (business strategy as anchor domain and over ES strategy), strategy implementation (business strategy as anchor domain and over organizational infrastructure and processes), and technology implementation (ES strategy as anchor domain and over ES infrastructure and processes). The final type of relationship among domains is the strategic alignment. This alignment refers to organizational transformation across multiple domains via single (weak) or double (strong) loop simultaneously or concurrently (Luftman, 1996).  51  Figure 4 Strategic Alignment Model (Henderson & Venkatraman, 1993, p.476)  2.2.6.2  Derivatives of SAM The SAM has been widely used to this day. Although only a few researchers argue that  SAM was useful at the time it was developed, and it is questionable that the model addresses the needs for today's business needs (Smaczny, 2001), a majority of researchers have proven that SAM model still addresses the current business and ES situation, and have been using and extending SAM from different perspectives (see Table 9). For example, Luftman et al. (1993) use SAM in order to describe the transformation of an organization. The authors define the steps regarding how to scope, design ES strategy and planning, and transform business activities by following their framework. Luftman (1996) also expand the research by focusing on enablers and inhibitors to alignment. This study confirms the importance of communication among executives within the organization. Weill & Broadbent (1998) expand the SAM by adding a theory regarding the ways to support business strategies by investing on ES infrastructure. However, 52  this model also has some critique about strategic planning process regarding whether it is suitable for building the technology infrastructure or not (Smaczny, 2001). Smaczny (2001) also expand SAM and proposed a fusion model that integrates the ES role in an organization. According to the fusion view, the changes in external and internal conditions create a new strategy. The author claims there should be only one strategy where ES strategy and business strategy are seen as integrated and inseparable. Therefore, the strategy development for ES occurs while the strategy for business is being developed. This view opposes the need for alignment. Maes (1999) and Maes et al. (2000) expand the model and develop the unified framework. This framework adds new layers to both strategic integration and functional integration layers. This generic framework added a third vertical layer to functional integration by separating business and technology layers called information/communication. This layer indicated the importance of communication, interpreting, and delivering information, or in other words information sharing as well as highlighting the importance of customer oriented thinking. The horizontal layer separates strategy and operation layers and adds a third layer infrastructure. This layer shows the long term architectural infrastructure, core competencies, and management of resources.  Luftman (2000) developed an instrument in order to measure the maturity of strategic alignment. The instrument involves five levels: (a) initial ad/hoc process; (b) committed process; (c) established focused process; (d) improved/managed process; and (e) optimized or aligned process. The author also determined six criteria for aligning ES and business maturity of communications, value measurement, governance, partnership, scope and architecture, and skills that are part of each level.  According to Luftman (2000) alignment is evolutionary and the Strategic Alignment Maturity Assessment instrument provides a tool for evaluating the location and direction within the alignment process. The author examines the alignment process in six steps: (a) goal setting; (b) good understanding of the linkage between business and ES; (c) analyzing the gaps; (d) choosing the right action; (e) determining the success criteria based on the goals; and (f) sustaining alignment.  53  While there are several empirical and theoretical supports for SAM, there are some critiques of the model as well. Some of the critiques for SAM include being inflexible, technically dated, and having hardware bias (Avison et al. 2004). Burn & Szeto (2000) also argue the model may not be applicable based on the ES-intensiveness of the industry.  In a recent study Chevez (2010) improves SAM by developing a model that combines four of the most visited alignment models: Strategic Alignment Model (SAM), Strategic Alignment Maturity Model (SAMM) (Luftman, 1999), information system strategic alignment model by Chan and an operational model of strategic alignment by Bergeron et al. (2003). The author ranks the individual elements of the model that has all the elements of aforementioned alignment models based on perceptions of according managers, ES Directors and ES experts. Gudas & Brundzaite (2006) propose a model as extension to SAM where the authors place knowledge management system in among the four domains of SAM. The authors argue knowledge management of ES and business should be the central focus of strategic alignment.  Table 9 Derivatives of SAM  Authors Luftman et al. (1993) Luftman (1996), Luftman (2000) Smaczny (2001)  Weill & Broadbent (1998) Maes (1999), Maes et al. (2000)  Chevez (2010) Gudas & Brundzaite (2006)  2.2.6.3  Argument and/or Extension Modify SAM in order to describe transformation of organization Extend SAM to include enablers and inhibitors Presented Strategic Alignment Maturity Assessment instrument Extend SAM to build a fusion model that state the existence of an integrated ES and business strategy because of external and internal factors Extend SAM to include the ways to support business strategies by investing on ES infrastructure Develop unified framework that add new layers as vertical (information/communication) and horizontal (infrastructure) in order to emphasize the importance of communication and long term architectural infrastructure, core competencies, and management of resources respectively. Proposes a unified model as the combination of SAM, SAMM, Chan’s model, as well as Bergeron et al. (2003) alignment model. Extend SAM to include Knowledge Management system between the four domains of SAM.  Strategic Alignment – Chan’s Model Chan has developed a model for strategic orientation and alignment and examined the  relationship among business strategy, ES strategy, and performance through this model. The 54  model developed in the studies of Chan (Sabherwal & Chan, 2001; Chan et al. 1997; Chan, 1992) is a comprehensive one that combines different models and instruments from different studies. The studies of Chan focus on the relationship between Enterprise Wide Information Systems strategic alignment, fit between business and ES strategic orientation, ES effectiveness, and business performance. The authors find that alignment and performance are positively correlated for prospectors and analyzers, while no significant correlation is found for defenders. Their studies show that business success and performance are improved by the alignment in many organizations.  Several instruments for different areas such as business strategies, ES strategies, effectiveness, and business performance were used simultaneously in her studies. The first area for business strategy is called Strategic Orientation of Business Enterprises (STROBE). The dimensions of STROBE include aggressiveness, analysis, internal defensiveness, external defensiveness, futurity, pro-activeness, and risk aversion. See Table 10 for the dimensions and their definitions. In addition Chan used and extended SAM by adding an Information Systems feature.  55  Table 10 Dimensions of STROBE and their Definitions  Dimension/Attribute Aggressiveness  Analysis  Defensiveness Futurity  Proactiveness  Risk aversion  Definition by Venkataramanan (1989, p.948 and 949) "The posture adopted by a business in its allocation of resources for improving market positions at a relatively faster rate than the competitors in its chosen market." "The trait of overall problem solving posture ... including tendency to search deeper for roots of problems and to generate the best possible solution alternatives." In addition, internal consistency, comprehensiveness, and resource allocation are among the concepts that "analysis" is related to. "Defensive behavior ... with emphasis on cost reduction and efficiency seeking methods." "Temporal considerations reflected in key strategic decisions, in terms of the relative emphasis of effectiveness (longer-term) considerations versus efficiency (shorter-term) considerations." "Proactive behavior in relation to participation in emerging industries, continuous search for market opportunities and experimentation with potential responses to changing environmental trends." Opposite of “riskiness” that is related to “"resource allocation decisions as well as choice of products and markets."  The second area concerns business performance. There are multiple measures of business performance (Venkatraman & Ramanujam, 1986). STROBE uses market growth and profitability to measure performance. Chan et al. (1997) found four dimensions to measure performance. These measures were market growth, profitability, product-service innovation, and company reputation. All these measures were determined based on respondents' perceptions and previous studies such as White (1986), and Venkataramanan (1989) regarding the link between business strategy and performance.  The third area pertains to ES effectiveness. This area is built on user information satisfaction and organizational impact. The instrument used in this area regarding ES effectiveness and business performance is developed based on studies such as Ives & Learnmonth (1984), Johnston & Vitale (1988), and Sethi (1988).  The fourth area relates to the ES strategy. This area deals with measuring strategic orientation of current ES applications, named Strategic Orientation of the Existing Portfolio of Information Systems (STROEPIS). The instrument of STROEPIS was built parallel to the STOBE instrument. The instrument used in this area regarding business strategy and ES strategy is built based on studies such as Bakos & Treacy (1986), Das et al. (1991), Henderson & 56  Venkatraman (1992), King (1978), McFarlan (1984), and Parsons (1983). Meanwhile, instruments to measure ES strategy and effectiveness was built on Lederer & Putnam (1986) and ES strategy and business performance is built on studies such as Earl (1989) and Weill (1990).  The final area relates to strategic ES alignment. The importance of strategic alignment is addressed by many researchers (Drazin & Van de Ven, 1985; Venkatraman & Camillus, 1984; White, 1986) in literature. The alignment or fit was measured data collected via STROBE and STROEPIS and combined each of these instruments as a bivariate model (see Figure 5).  Figure 5 Alignment Model (Chan 1992, p.34)  Chan's model has been widely used with its original way (i.e., small manufacturing firms by Cragg, King, & Hussin (2002)) and with some modified versions as well. For example, Hale and Cragg (1996) use Chan's model to examine alignment in small sized firms. The authors state the model and proposed instruments are valuable in terms of building a measurement on alignment. On the other hand, Byrd, Lewis & Bryan (2006) use the same model in order to examine how Enterprise Wide Information Systems investments as well as the strategic alignment affect performance. The findings reveal performance is positively affected by the synergy between investments in Enterprise Wide Information Systems and strategic alignment where it is used as a moderator between ES investment and business performance. The more aligned firms the more benefits organizations will get (Byrd et al. 2006).  2.2.6.4  Weill’s Alignment Model Weill (Weill, 1992; Weill, 1990) developed a model that examines the relationship  between performance goals of an organization, business strategy, ES strategy, and firm 57  performance by studying sixty-eight manufacturing firms. He also studies how investments in ES affect the firm’s performance related to goals and business strategy. The author develops an instrument that focuses on performance from investment point of view and examines strategy by using Porter's (Porter, 1980) typology based on cost leadership, differentiation, and niche concentration strategy. He uses sales growth, profit, return on assets, cost minimization, and technical excellence in order to measure organization performance (see Figure 6).  Several researchers have examined the model developed by Weill empirically and theoretically that has lead to the development of more comprehensive models and studies as mentioned during the discussion of evolution of alignment.  Figure 6 Alignment Model (Weill, 1990)  2.2.6.5  Benbya and McKelvey’s Co-evolutionary ES Alignment Model Benbya & McKelvey (2006) develop a framework where the authors examine alignment  and its emergent nature from co-evolutionary and complexity theory perspectives. These authors consider alignment with the perspective of co-evolution theory as a sequence of three level adjustments: (1) individual; (2) operational; and (3) strategic. In the strategic dimension, the focus was on interaction of business and ES strategies. The relationship between ES and business departments through shared understanding and communication such as responsibilities, decisionmaking rights, communication among group members, and values are examined in the operational dimension. Finally the third dimension includes the relationships between ES, ES infrastructure, and users. The authors also examine the principles of adaptation and scale-free 58  dynamics as enablers of alignment. They proposed that: (a) ES alignment is the domain of organizational effectiveness; (b) co-evolutionary dynamics over three dimensions is the domain of ES alignment; (c) McKelvey's (McKelvey, 2004) five 1st Principles is the domain of coevolution; (d) Nine scale-free dynamics is the domain of McKelvey's 1 st Principles; and (e) scale-free dynamics initiate the ES alignment (see Figure 7).  Figure 7 Co-evolutionary ES Alignment (Benbya & McKelvey, 2006, p.288)  2.2.6.6  Alter’s Work System Alter (2002) proposes a "work system" that focuses on understanding, analyzing, and  improving organizational systems. The method uses both a static view that is based on "work system framework" and a dynamic view that is based on "work system life cycle model" views for examining the adaptation process for changes. While the elements, opportunities, problems, and possible impacts of changes in a system are defined under the static view, the dynamic view helps to reveal the evolution that takes place over time (Alter, 2002). The framework proposed by the author does not necessarily require an ES domain involvement. In spite of this fact, Jaffar, ElKhatib, & Radaideh (2007) used the model to examine the needs, opportunities, and strategies and processes for both ES and business domain for a specific food (dates) industry.  59  2.2.6.7  Raffa and Capaldo’s ES Process Alignment Model Raffa & Capaldo (2007) examine alignment of ES from an implementation perspective.  The authors propose a process model for alignment. The model deals with implementation process, technology acceptance, roles, activities, and strategies in a three phase approach as part of business and ES alignment. In the first phase, the organization may be forced to adopt a new ES in order to adapt to the change by internal or external drivers such as suppliers, competitors, or regulators. The second phase is the one that the technology and organization are aligned to each other in adaptive cycles. In the third phase, the firms conduct trade-off analysis to assure that alignment is reached after several cycles of adaptation (see Figure 8).  Figure 8 ES Process Alignment (Raffa & Capaldo, 2007, p.17)  2.2.6.8  Reich and Benbasat Framework Reich & Benbasat (2000; 1996) develop a framework that identifies alignment from  social and intellectual dimensions based on a cause and effect relationship. While the intellectual dimension dealt with techniques and methodologies for formulating the strategy specifically for ES and business planning approaches and plans' content from causal perspective, this dimension focuses on the consistency and validity of ES and business objectives from the effect perspective. Social dimensions of the framework were designed to examine factors such as involvement, choice of actors, and communication methods for decision making from causal perspective, and how management of both ES and business units perceive the objectives and plans of others from the effect perspective.  60  In their later study, Reich & Benbasat (2000) examine the antecedents of alignment. They propose four factors that affect alignment such as knowledge sharing (domain knowledge) among ES and business units, communication among management of units, the way ES and business planning are connected, and implementation results for ES. The effects of these issues allow alignment to be categorized as a short term and long term alignment (Reich & Benbasat, 2000). While examining the enterprise architecture and its effects in business and ES alignment, Gregor, Hart, & Martin (2007) use and extend the model developed by Reich & Benbasat (1996) and Reich & Benbasat (2000). They examine both social and formal mechanisms of alignment and provided empirical support regarding how formal architecture mechanism can be part of the alignment process (see Figure 9).  Reich and Benbasat (Reich & Benbasat, 1996; Reich & Benbasat, 2000) focus on alignment more from the managerial perspective and examine how understanding objectives help measuring the linkage/alignment. This study is worthy while examining alignment from a knowledge management perspective.  Figure 9 Alignment Model (Reich & Benbasat, 2000, p.85)  61  2.2.6.9  Sabherwal, Hirschheim, and Goles’ Alignment Model Another framework pertaining to alignment has been developed by Sabherwal et al.  (2001). Their study focuses on how alignment between business and ES strategies and structure is achieved. The authors examine alignment from a holistic perspective and viewed dimensions of alignment with relationships among each other. They examine strategic alignment, structural alignment, and cross-dimensional alignment with their specific elements in their framework. The authors accept alignment as being dynamic and with capability of adjusting to changes. Therefore, instead of using a Darwinian model that sees through accelerated evolution, they highlighted the value of the punctuated equilibrium model (Sabherwal et al. 2001). Based on the model, each stable period will be followed by a shorter period where the organization will face revolutionary change. Punctuated equilibrium model would prevent deep effects on strategic ES profile by allowing organizations to make the appropriate strategic and structural arrangements in business and ES domains (Sabherwal et al. 2001). In other words, the authors show that, based on the changes in evolutionary and revolutionary periods, the organization adopts them with different strategies. Additionally, revolutionary periods need to have some combination of five triggers such as environmental shifts, outsiders, low performance, new leadership, and perception transformation (Sabherwal et al. 2001) (see Figure 10).  Figure 10 Evolutionary and Revolutionary Periods and Alignment (Sabherwal et al. 2001, p.184) (Adapted with Permission)  62  2.2.6.10 Baets Model Baets (1992) presents an approach for achieving alignment by combining the models of MacDonald (1991) Strategic Alignment Process and Parker, Benson, & Trainor (1988) Enterprise Wide Information Model, based on the argument that business strategy is unknown or inadaptable. MacDonald's (1991) model includes the relationships between ES and business strategies, infrastructure, and process as well as effects of buyers and vendors on these components (Chan & Reich, 2007). Baets (1992) argues alignment should be examined from a broader perspective, which should include several factors such as change, implementation, and competition to the model. The model also addresses several needs such as: (1) the need for alignment between ES strategy and business strategy; (2) need for middle management to be involved in ES strategy; (3) need for determining the economic value of ES implementation; (4) need for improving the understanding among middle managers; and (5) need for clarifying the right information for decision making. One of the main differences between SAM and Baets’ model is that Baets does not assume members in the organization are aware of the strategy and economic environment unlike SAM (Chan & Reich, 2007).  The advantages of this approach include: (1) allows defining, adapting, or improving an overall strategy even if there is no corporate strategy; (2) improves communication between functions and hierarchical layers; (3) allows the development of shared cultural values within organization; and (4) allows for new knowledge creation (see Figure 11).  63  Figure 11 Extended Alignment Model (Baets, 1992, p.207)  2.2.6.11 Current Trends in Alignment Studies There is a substantial amount of studies in literature regarding alignment of ES and business and business performance (Stoel & Muhana, 2009; Velcu, 2010). In addition to the highly used and cited models of alignment, there are several studies that have been mentioned throughout the literature review chapter. In short, the current trend on alignment studies include examining alignment from process level (Sledgianowski & Luftman, 2005), ontological work aiming to combine several models to provide a more comprehensive approach to alignment phenomena (Plazaola, 2008; Chevez, 2010; Sakka, 2011), examining alignment concept and related constructs with a more detailed approach (Chou and Chang, 2008; Raymond & Croteau, 2009), and examining alignment from dynamic business environment perspective (Street, 2006). In addition, researchers propose and test several models as well. For example, Velcu (2010) examines alignment between ERP strategy and business strategy during implementation of ERP  64  systems. After the implementation organizations have effects of changed or reengineered business processes. The author states these changes have a positive impact on internal efficiency. Velcu (2010) proposes a model in which strategic alignment and motivation for ERP systems affect the management of the ERP project. Management of the ERP project has direct and indirect effects through changes in business process, on the process benefits of alignment, which leads to improved customer benefits and enhanced financial benefits that are measured through a balanced scorecard approach.  In this research, we have been following the current trend in literature based on the current needs of alignment studies and examine alignment as dynamic process within the dynamic business environment. This study allows researchers or practitioners to measure their alignment level as well as identifying their realized business and ERP strategy, which can change over time (Sabherwal et al. 2001; Street, 2006). We also focus on specific aspects on alignment as Chan and Croteau suggests in different studies and provide an initial set of elements, perspectives, constructs, etc. that need to be considered for ontology studies.  65  Table 11 Prior Studies about Alignment Models  Authors Henderson & Venkataramanan (1991), Henderson & Venkatraman (1989), Henderson & Venkatraman (1992)  Discussion  Presented SAM. The model has four domains as: (1) business strategy; (2) ES strategy; (3) organizational infrastructure and processes; and (4) ES infrastructure and processes. Examine alignment as (1) bivariate fit; (2) cross-domain alignment; and (3) strategic alignment. Derivatives of SAM include: Luftman et al. (1993): contributed to transformation of organization. Luftman (1996, 2000): added enablers and inhibitors, and presented Strategic Alignment Maturity Assessment instrument. Smaczny (2001): introduced fusion model Weill and Broadbent (1998): how to support business strategy through investing in IS. Maes (1999), Maes et al. (2000): developed unified framework. Chan (1992), Examine the relationship between ES strategy, business strategy, and Sabherwal & Chan (2001) performance. Main focuses of their model are ES strategic alignment, fit between business, and ES strategic orientation, ES effectiveness, and business performance. Weill (1990), Weill (1992) The present model examined the relationship between performance goals of an organization, business strategy, ES strategy, and firm performance. Benbya & McKelvey (2006) Examine alignment based on coevolutionary and complexity theories. Alignment is a sequence of individual, operational, and strategic adjustments. Alter (2002) The model does not require ES domain. The “work system” has both static and dynamic views that examine adaptation process. Raffa & Capaldo (2007) Their process model examines alignment based on ES implementation and is limited to only issues regarding implementation. Reich & Benbasat (1996), Reich Examine alignment based on social and intellectual dimensions as & Benbasat (2000) well as antecedents of alignment. Sabherwal et al. (2001) Examine alignment, strategic, structural and cross-dimensional based on punctuated equilibrium model. According to the authors, alignment occurs in phases, which follows a series of evolutions and revolutions. Baets (1992) Combines MacDonald's (1991) Strategic Alignment Process and Parker et al.'s (1988) Enterprise-wide Information Model. Their model allows improving an overall strategy and communication between functions and hierarchical layers; development of shared values; and knowledge management. Source: The table has been extended from the literature based on Chan (1992), Sabherwal et al. (2001), Peppard & Breu (2003) studies.  66  2.3  Enterprise Resource Planning Systems This subsection explains Enterprise Resource Planning (ERP) Systems as how they have  evolved, and the phases of ERP research. The subsection concludes with the alignment of ERP systems.  2.3.1  Evolution of ERP Literature provides several definitions of ERP. For example, Markus, Axline et al. (2000)  define ERP systems as "commercial software packages that enable the integration of transactions oriented data and business processes throughout an organization" (p.245). O'Leary (2002) defines ERP as "software that can integrate across multiple functional areas by focusing on processes, rather than the individual functions" (p.100). We define ERP as a strategic business software package that enhances the efficiency and business value of the organization by exchanging real time data and integrating processes among business functions and within the whole organization. In today’s competitive business world, information has gained more and more importance. In addition, access to the “right” information at any desired time as well as capturing, storing, and modifying information has become critical. While there are a number of applications in the market, organizations have become more interested in an application that integrates many of these separate applications/processes used within the whole enterprise. Therefore, organizations have begun selecting and implementing enterprise-wide systems such as Enterprise Resource Planning software. ERP systems promise the integration of back office operations and a flow of information such as financial and accounting, human resource, manufacturing, customer and the like, throughout the company (Davenport, 1998; Verville, 2000). This allows organizations to access the most accurate information from one integrated source.  ERPs are valuable and important for organizations. When understanding the evolution of ERPs it is important to understand these facts. ERPs roots can be traced back to Material Requirement Planning (MRP). MRPs are developed in order to automate the master production schedules for planning and controlling production (Abdinnour-Helm, Lengnick-Hall, & 67  Lengnick-Hall, 2003; Chen, 2001). Organizations usually faced problems about MRPs, and the majority of these problems were caused by people (Belt, 1979). Managers did not see the link between manufacturing and the competitive strategy (Miller, 1981) as well as the benefits stemming from MRPs. Another disadvantage of MRPs was their limited application areas. For example they did not fully address the needs of organizations about capacity, space, capital, engineering change, and cost (Huang, David, David, & Yurong, 2003).  In the mid 70s, MRP was extended from a simple material planning and control tool to a company-wide system to become Manufacturing Resource Planning (MRP II). These systems are more sophisticated compared to MRPs in terms of technology and capabilities. They include separate modules for each type of process or function (Abdinnour-Helm et al. 2003). These capabilities allowed easier integration of systems (McGaughey & Gunasekaran, 2007). One of the main objectives of MRP II was to automate business processes in an organization. Although some of these automation and integration of systems/processes were located separately, they were still within the company (McGaughey & Gunasekaran, 2007). Early trend was single site implementations. This trend has shifted towards multi-site and also even integration of global operations (Ghosh, 2002). Therefore, MRP II was not fully satisfying this need.  While the benefits of such systems attracted more and more attention, several production control systems such as Just-in-Time (JIT) and Theory of Constraints (TOC) were developed after MRP II. Abdinnour-Helm et al. (2003) state that ERP is an extension of MRP II that promises to address the similar needs. An advantage of ERP over MRP II is it can integrate business processes and ES concepts so the synergy contributes to efficiency of organization and business (Al-Mashari, Al-Mudimigh, & Zairi, 2003; Chung & Snyder, 1999). Ptak & Schragenheim (2000) state ERP is not a different name for MRP II but it is a "next level of logical sophistication" within an evolution. The main difference between MRP II and ERP stems from the point of focus for planning and scheduling. While the focus is only on internal resources for MRP II, the focus of ERP includes suppliers’ resources, too (Chen, 2001).  The journey of ERP is not finished yet. It is still evolving and moving towards an Internet-based architecture (McGaughey & Gunasekaran, 2007). Gupta (2000) mentions ERP has 68  evolved from MRP and this evolution is still continuing parallel to developments in technology and needs. The authors also state in the future, ERPs will focus more on web-based applications. ERP will benefit from all the advantages of the Internet such as browsing the product online, checking availability, etc. (Gupta, 2000). Outsourcing programs to small and midsized companies will be another trend that ERP vendors might focus on (Gupta, 2000).  2.3.2  Enterprise Resource Planning Overview Organizations usually make huge investments on ERP by hoping that ERP will: (a)  reduce the ES and support costs in the long run; (b) reduce the dependency on the MIS department with the real time data; (c) simplify business processes and their integration in different business units; (d) easily exchange the information and decrease the related cost; (d) ensure synergy and enhance performance in the organization (Holsapple & Sena, 2003; Lonzinsky, 1998).  As the nature of ERPs is to support business functions by integrating various information from different departments there are numerous benefits of ERPs for organizations mentioned in literature (Al-Mashari et al. 2003; Calisir & Calisir, 2004; Gupta, 2000; Hsu & Chen, 2004; Koch, Slater, & Baatz, 1999; Light, 2001; Shang & Seddon, 2000). These benefits would vary based on the strategic objectives of an organization. Therefore categorizing these benefits would help to highlight the benefits of ERP in a better way (Hsu & Chen, 2004).  The benefits are also grouped under several categories by different researchers (see Table 12). For example, among those, Hsu & Chen (2004) and Poston and Grabski (2000) categorize benefits of ERPs as tangible and intangible. Some of tangible benefits of ERPs include accurate market forecasting, enhancing manufacturing flexibility, product development cycle and product quality, decreasing inventory cost, order cycle, supporting production capacity planning, personnel, technology costs, procurement, maintenance, and inventory reduction. Intangible benefits include better resource allocation, enhanced communication, information flow, response time to inquiries, service quality and customer satisfaction, business performance, supply/demand chain, standardization, improved process, and information integration.  69  Shang & Seddon (2000) propose a framework to examine the benefits of ERP systems. Their framework includes five main dimensions with several sub-dimensions of each. The operational dimension deals with cost reduction, enhancing quality, productivity, and customer services, and cycle time reduction. The managerial dimension includes the benefits such as enhancing performance, decision making capability, and better resource management. Strategic benefits include building cost leadership, innovations, and linkages with other parties, and supporting business growth and alliance. Benefits regarding ES infrastructure include increased capacity, reduced cost of ES, and increase flexibility of business. Finally organization benefits of ERPs include empowerment, supporting organizational change and business learning, and creating common visions. Markus (Markus, Axline, Petrie, & Tanis, 2000; Markus, Tanis, & Fenema, 2000) state the main objective of ERP systems is the integration. They integrate data with different business units in order to price the products, prepare financial statements, and manage resources in an efficient way. Based on these views, ERP is multi-functional, integrated, and modular software, respectively. In addition, Davenport (2000) states ERP has strategic value to the organizations. While organizations use ERP as a tactical tool first, in time they recognize the strategic importance of the software regarding how ERP enhances their business values. As we have mentioned above, ERP systems are different from traditional software systems. More precisely, ERP systems are strategic tools for organizations (Davenport, 2000b). Literature mentions several criteria for being considered as strategic. Porter’s (1980) study was one of the first studies that examined ES from the strategic point of view. Several other works followed his footsteps and examined further criteria of being strategic. Loukis et al. (2010) mentions several of these criteria. For example, if an application or system is used "to change the products, services, markets or production economics of an industry, to affect the buyers and suppliers of the enterprise, to prevent customers from buying products and services from competitors, to preclude new competitors, to alter the degree of rivalry, or to support one of the Porter’s generic strategies (differentiation, cost leadership and focus)" (Loukis et al. 2010, p.44), have impact on internal operations and functions (Loukis et al. 2010; Benjamin, Rockart, Scott Morton, & Wyman, 1984), help organizations to distinguish themselves by their products and 70  services (Loukis et al. 2010; Ives & Learnmonth, 1984), improve the organization's relationships with other parties such as customer, suppliers, competitors, etc. (Loukis et al. 2010; Wiseman, 1985), and used in at least one of the primary activities (inbound logistics, operations, outbound logistics, marketing and sales, after-sales support and services) or one of the support activities (human  resources  management,  technology  development,  infrastructure  management,  procurement) of the value chain (Porter & Millar, 1985)" (Loukis et al. 2010, p.44), then it is considered to be strategic.  71  Table 12 Studies about Benefits and Advantages of ERP Software  Benefits of ERP System Tangible: Accurate market forecast, enhancing manufacturing flexibility, product development cycle and product quality, decreasing inventory cost, order cycle, supporting production capacity planning, personnel, cost of technology, procurement, maintenance, and inventory reduction. Intangible: Better resource allocation, enhanced communication, information flow, response time to inquiries, service quality and customer satisfaction, business performance, supply/demand chain, standardization, improved process, and information integration. Operational dimension: Cost reduction, enhancing quality, productivity, and customer services, and cycle time reduction. Managerial dimension: Enhancing performance, decision making capability, and better resource management. Strategic dimension: Building cost leadership, innovations, and linkages with other parties, and supporting business growth and alliance. ES infrastructure dimension: Increased capacity, reduced cost of ES, and increased flexibility of business. Organization dimension: Empowerment, supporting organizational change and business learning, and creating common visions. Integrating financial and customer order information, reducing inventory, and standardizing and speeding up manufacturing and HR processes. Process improvement, data visibility, reduced operating cost, use of common platform by different departments, enhanced decision making capabilities, and customer response. Improved query capability and integration plans, adaptability in realigning businesses, better disaster recovery management. Reduction in inventory, administrative, and operational costs, and improved schedule compliance. Operational benefits: Improving process efficiency through cost reduction, improved productivity, and better address customer needs (i.e., reduced response time, errors). Tactical benefits: Enhanced decision making capabilities through having more employees involved in decision making, increased revenue, customer satisfaction. Strategic benefits: Enhanced capability to adapt changes in environment (i.e., technology, regulations, etc.).  Authors Hsu & Chen (2004), Poston & Grabski (2000)  Shang & Seddon (2000)  Koch et al. (1999)  Ross & Vitale (2000)  Verville & Halingten (2002) Jutras (2007) Chand, Hachey, Hunton, Owhoso, & Vasudevan (2005)  Irani & Love (2001) and Ng, Gable, & Chan (2002) state that ERP systems help companies to have the required infrastructure and technology in order to adapt and advance their businesses. According to Koch et al. (1999) the reasons why organizations buy ERP include benefits such as integrating financial and customer order information, reducing inventory, and standardizing and speeding up manufacturing and HR processes. According to Vitale (Ross & Vitale, 2000; Vitale, Ives, & Beath, 1986) the motivational reasons behind the ERP 72  implementation are process improvement, data visibility, reduced operating cost, use of common platform by different departments, enhanced decision making capabilities, and customer response. According to Verville & Halingten (2002) some other benefits include improved query capability and integration plans, adaptability in realigning businesses, better disaster recovery management, etc.  Findings of Mabert, Soni, & Venkataramanan (2003) reveal that regardless of size, ERP provides benefits to all companies. Although the cost is high for ERP implementation (Tarn, Yen, & Beaumont, 2002), tangible and intangible benefits can balance these costs. In addition to that, by simplifying and standardizing the processes and systems, ERPs allow easier upgrades for the future. Aberdeen Group 2007 report by Jutras (2007) also reveal some benefits of ERP software such as reduction in inventory, administrative, and operational costs, and improved schedule compliance.  Gupta (2000) discusses the advantages and disadvantages of ERP systems. Some of the advantages include reduced inaccuracies for planning, improved decision making and process time, providing additional options such as Internet, online communication among suppliers and customers, and tailored implementation. ERP systems provide benefits by integrating various functions; however, they are still easy to use. In addition, Poston & Grabski (2001) examine how ERP systems affect firm performance. Their study reveals that ERP enhances firm performance by reducing the costs (ratio of cost of goods sold to revenues) and enhancing decision making process. The authors also explain the main benefits of adopting an ERP system.  The benefits and advantages of ERPs are well-recognized and users of ERP have increased around the world. Different software packages have been developed in the market in order to address the increasing and different needs. According to AMR Research’s 2008 report, the revenue for ERP applications was $34.4 billion in 2007 and $38.2 billion in 2008. They estimated the revenues of ERP applications would increase over the years and 2009 revenues would be $41.2 billion, 2010 revenues would be $46.2 billion, 2011 revenues will be $50.8 billion, and 2012 revenues will reach to $55.9 billion. The report also states the main ERP vendors are SAP with $14,033 million, Oracle with $7,853 million, Infor with $2,208 million, 73  Microsoft with $1,215 million, Lawson with $810 million, Activant with $295 million, QAD with $263 million, and CDC Software with $245 million revenues (see Figure 12 and 13).  60 50 40 30 20 10 0  2007  2008  2009  2010  2011  2012  Figure 12 Current and Estimated ERP Revenues (in billion dollars) (AMR Research 2008)  16000 14000 12000 10000 8000 6000 4000 2000 0  Figure 13 ERP Vendors and their Revenues (in million dollars) (AMR Research 2008)  In some cases, organizations may not be willing to adopt ERP software. One reason may be the fit between organization needs and the products available in the market (M. Lynne Markus & Tanis, 2000). According to Markus and Tanis (2000) criteria such as type of decision making (decentralized), growth, and strategic flexibility may lead organizations not to adopt ERP systems. Other reasons for non-adoption of ERP include the number of alternative ways for system integration, cost, and resistance to change (Markus & Tanis, 2000).  Costs and difficulties of ERPs are also well-recognized by researchers and practitioners (see Table 13). According to Gupta (2000) and Ghosh (2002), the organizational resistance from 74  end users and functional area managers and conflicts in interests may be obstacles for an organization to implement a new ERP system. Also the changeover may take a longer time than anticipated and this may cause an increase in the cost. Previous errors in data may be carried to the new system. In addition, maintenance also costs are high for the organization and may take a lot of time (Gupta, 2000). Finding experienced implementers is also another challenge for organizations (Ghosh, 2002). Soh, Kien, & Tay-Yap (2000) mention the cultural misfit regarding ERP. These huge and global software packages are not fully able to fit with the local laws and practices (Rolland & Prakash, 2000). ERPs also require a high amount of internal resources, and also the alignment procedure to requirements is not easy (Rolland & Prakash, 2000).  The cost of ERPs to companies is high. Companies need to make huge investments for their ERP under different categories. The categories of costs identified by Meta Group are related to software, hardware, and service (customization, maintenance, integration, data conversion, testing and training). Koch et al. (1999) state the average cost of ownership of an ERP system with the hardware, software, and staff costs reaches $15 million (ranging between $400,000 and $300 million based on a 63 company survey). A later report by Jutras (2007) from Aberdeen Group focuses on the cost based on the company size. Their report has revealed that companies with annual revenues less than $50 million spend an average around $13,854 per user (average number of users is 38). While the largest companies with over $5 billion annual revenues spend $2,068 per user (average number of users is 3365), companies with revenues between $100 million and $250 million spend the highest per user (average number of users is 195) fee, $18,175 for ERP software.  Koch et al. (1999) and Soh et al. (2000) argue there are also some hidden costs for ERPs. These hidden costs include training of staff, consultancy cost (excluding installation consultant fee), integration of the software after purchase and related testing, customization, data conversion from the old system, data analysis that will most likely require a data warehouse, changing roles in the organizations among employees, the ongoing work of implementation teams unlike other software projects, waiting for return on investment (ROI) that does not come right after the installation, and post-ERP depression in the organization.  75  Table 13 Studies about Difficulties, Concerns, and Possible Costs of ERP Software  Discussion Organizational resistance from end users, management, conflicts in interests, increase in cost due to unexpected delays in changeover time, carried previous errors from old system, finding experienced implementers. Cultural misfit. Difficulties with fit with the local laws and practices, requires high amount of internal resources, requires alignment. Training of staff, consultancy, integration and testing, customization, data conversion, data analysis and data warehouse, changing roles among employees, implementation costs, delayed return on investment (ROI), and post-ERP depression. Need-product fit, available alternative for integration, cost, resistance to change, concerns about strategic flexibility, decision making style, and growth.  2.3.3  Authors Gupta (2000), Ghosh (2002) Soh et al. (2000) Rolland & Prakash (2000) Koch et al. (1999), Soh et al. (2000)  Markus & Tanis, (2000)  Phases of ERP Research There are few studies that provide an overall view of phases of ERP research. Esteves &  Pastor (2001) developed a framework, called ERP Life Cycle, involving four dimensions and six phases. The dimensions are named as change management, people, process, and product dimensions. Product dimension of this framework deals with functionality that must exist while considering alignment ERP with business strategy (Esteves & Pastor, 2001). Process dimension includes the re-engineering processes for the organization to adapt new business models. Human resources, skills, roles, and the ways to adapt the new organizational culture and structure are the main topics covered in the people dimension. Change management dimension deals with issues regarding acceptance and how ready the system is (Esteves & Pastor, 2001). On the other hand, the phase of ERP research is examined under adoption decision, acquisition, implementation, use and maintenance, evolution, and retirement phases (Esteves & Pastor, 2001). Verville (2000) examines ERP under only three main phases with a broader overlook for each phase: preimplementation, implementation, and post-implementation. In this study, we will follow Verville’s (2000) approach that is highly accepted and examine ERP under three phases: preimplementation, implementation, and post-implementation. While pre-implementation involves acquisition, or selection, the post-implementation phase involves maintenance and evolution.  2.3.3.1  Pre-Implementation Pre-implementation includes the adoption decision and acquisition phases. During the  adoption decision phase, managers decide whether the organization needs a new ERP system to 76  improve the organizational strategy or not. Important concepts managers deal with include defining the requirements, goals, business challenges, and the ways adoption of the new ERP system will improve at business and organization levels (Esteves & Pastor, 1999). Flexibility assurance, which deals with the way the system is reconfigurable to new business models and processes (Al-Mashari, 2002) and standardization are critical concerns in ERP adoption.  ERP adoption has been examined from several perspectives in literature. The common themes of ERP adoption research are generally the ways ERP systems are adopted, the risks, and pros and cons of adopting. While some studies just focus on specific aspects of ERP adoption, several studies include comparisons among different vendors (Esteves & Bohorquez, 2007). Light, Holland, & Wills (2001) examine the differences based on a single vendor. Several studies also examine the user side of adoption. Bagchi, Kanungo, & Dasgupta (2003) examine the user participation and involvement by extending the theory of reasoned action. Beard & Sumner (2004) examine whether adopting an ERP really provides competitive advantage to the companies and allows sustaining it in an environment where many organizations follow similar approaches or paths, from a resource-based approach. The authors also examine the mobility of the ERP system, and whether the organization exploits the full potential of their system compared to other organizations. He (2004) also uses resourced-based approach to examine challenges on ERP adoption in China.  Buonanno et al. (2005) examine the factors that have effects on ERP adoption. They hypothesize that business factors such as company size, market area, group memberships, availability of branch offices, diversification level, functional extension degree, and organizational change factors such as the size of planned changed have effects on ERP adoption. While the hypothesis regarding company size, and size of planned change were verified, hypothesis regarding the effects of group memberships, market area, availability of branch offices, diversification, functional extension on ERP adoption were rejected.  2.3.3.1.1  ERP Adoption Reasons  Reasons of adopting ERP have been examined broadly in literature. Benders, Batenburg, & van der Blonk (2006) discuss some of these reasons as: (1) information integration; (2) 77  following the trend; (3) pressure from either ES department or head office, (4) follow the competitors; (5) internal political reasons, influencing from media or consultants; and (6) external pressure from clients. According to (Charalambos & Sylvia, 2004) reducing costs and cycle times, and increasing customer satisfaction are among the reasons of adopting ERP. Chand et al. 2005 group the ERP adoption reasons as: (1) technical ones such as reducing outsourcing for maintenance, eliminating data entry and reducing errors, reducing operating costs and software maintenance burden, improving ES architecture, and integrating applications; and (2) business reasons such as allowing business growth, providing multi-language capability and integrated multi-currency ES support, enhanced business processes, standardized procedures, reduced administrative expenses, improving decision support, etc. With a similar categorization, Markus & Tanis (2000) distinguish the differences between small companies/simple structures and large companies/complex structures in terms of business and technical aspects. According to the authors, one of the main differences between small and large organizations regarding technical reasons is the fact large organizations require multiple similar systems for consolidating (i.e., general ledger packages). The additional business reasons for large organizations include better financial consolidation, single common interface to customers, and worldwide "available to promise capability" (Markus & Tanis, 2000). For small companies, while technical reasons of ERP adoption include reducing software maintenance cost via outsourcing, integrating applications, reducing operating costs, etc., business reasons include eliminating errors and delays for orders, reducing operating costs, business process improvement, etc. (Markus & Tanis, 2000).  2.3.3.1.2  ERP Adoption Models  Aladwani (2001) proposes a model to be tested empirically regarding successful ERP adoption. This model shows factors such as management support, benefits of ERP, impacts of ERP on quality, etc. have impact on ERP adoption (see Figure 14).  78  Figure 14 A Model for ERP Adoption (Aladwani, 2001, p.54)  Tan & Pan (2002) identify a success framework for ERP systems adoption. This framework differentiates success themes under three areas: infrastructure success, info-structure success, and knowledge success. According to the author, infrastructure success deals with project success (ERP selection, scope, training, etc.) and system quality (system usability, software updates, data scalability, etc.). Info-structure success deals with information quality (i.e., ability to do real time transaction), perceived usefulness (i.e., information sharing), and user satisfaction. Knowledge success deals with knowledge transfer (knowledge conflicts, best practices, change management, etc.) (Tan & Pan, 2002). The perceived benefits and strategic impacts of benefits of ERP adoption increases from infrastructure to knowledge success as well as from an internal to a more external orientation (see Figure 15).  79  Figure 15 Framework for ERP Adoption Success (Excerpted from ERP Success: The Search for a Comprehensive Framework by Tan and Pan, 2000)  2.3.3.1.3  Acquisition of ERP  In case organizations decide adopting ERP, the next stage is the acquisition of ERP system. Acquisition is considered to be a management issue (Kumar, Maheshwari, & Kumar, 2003). The main objective in this phase is to find a product that matches with the requirements (Esteves & Bohorquez, 2007).  Selecting the most suitable ERP solution is critical in ERP success (Somers & Nelson, 2001). There are several studies examining the criteria for acquisition of ERP. For example, Baki & Cakar (2005) identify 15 criteria that are important for firms. First criterion is the functionality of the software. The authors examine functionality based on comprehensiveness. Acquired ERP should include enough modules (possible more modules for future use) so it can address the organization’s requirements. A second criterion, technical criteria deals with whether the ERP vendor follows the latest trend in ES. Third criterion for ERP acquisition is the cost. Organizations need to consider all types of costs such as the hardware, software, consultancy, 80  training, implementation costs (Mabert, Soni, & Venkaturamunan, 2003b), maintenance, and upgrades (Baki & Cakar, 2005). Sometimes ongoing costs may exceed the initial costs of software; organizations need to be careful about service and support, which is the fourth criterion to consider during selection process. Vendor related factors such as reputation (Kumar et al. 2003), strength in the market, financial stability, and even vision of the vendor are among important issues to be considered for acquisition (Baki & Cakar, 2005; Verville & Halingten, 2002). System reliability is considered as the fifth important criterion for the selection process (Kumar et al. 2003). While selecting a system, companies should consider how long the vendor has been in market, market position of the vendor (i.e., reputation), and how satisfied the customers are about the vendor. The amount of references regarding success projects for the vendor is also a plus to consider during selection process. Another criterion should be related to compatibility of the software with other systems. Since a company should use more than one application to address its needs, the management should consider how compatible or easy to integrate with other systems, and how well it fits with organizational structure. Although organizations need minor customizations, this issue should be considered during acquisition (Baki & Cakar, 2005; Mabert et al. 2003b). Since the real benefit of ERP is the level of integration the software provides, cross-module integration needs to be considered in order to avoid negative effects on effectiveness of the system (Kumar et al. 2003). Baki & Cakar (2005) and Mabert et al. (2003b) state that implementation time and scope are also important for the selection process. Domain knowledge of the vendor as well as the effectiveness of methodology (in terms of required and unnecessary activities, since they will affect the amount of change in the organization) that vendor suggests should be considered during the acquisition. The last criterion that Baki & Cakar (2005) mention is consultancy. Companies should take the experience, comprehensive knowledge, analysis capability, etc. factors into consideration while selecting the consultant (Baki & Cakar, 2005; Somers & Nelson, 2001).  Bernroider and Koch (2001) examine ERP acquisition in small/medium and large organizations and how the characteristics differ based on the size of organizations. The authors identify twenty-nine criteria for decision making. Their results indicate organization size has an effect on decision making about ERP acquisition. For example, while adaptability of software, support, and customer and supplier needs were ranked highest for small companies, quality of 81  support and market position of vendor ranked highest for larger organizations. Another research by Rao (2000) identifies ERP acquisition criteria as affordability, domain knowledge of suppliers, local support, technically upgradable, and use of latest technology.  Verville, Bernadas, & Halingten (2005) summarize ten critical success factors for ERP acquisition. These factors include: planned and structured process, rigorous process, definition of all the requirements, establishment of selection and evaluation criteria, accurate information, clear and unambiguous authority, carefully selection of the acquisition team members, partnership approach, user participation, and user buy-in.  2.3.3.1.4  Frameworks and Models for ERP Acquisition  Wei & Wang (2004) and Wei, Chien, & Wang (2004) propose a comprehensive framework that can be used for selecting an ERP. The steps in the proposed framework are as follows (Wei & Wang, 2004): 1. “Form a project team and conduct the business process re-engineering (BPR). 2. Collect all possible information about ERP vendors and systems. Filter out unqualified vendors. 3. Establish the attribute hierarchy and assign weights to the attributes. 4. Interview vendors and collect detailed information. 5. Analyze the data obtained from the external professional reports to obtain the objective ERP suitability. 6. Assign subjective ratings to the ERP projects on the basis of data acquired in interviews to calculate the subjective ERP suitability. 7. Combine the evaluations of both data sources and aggregate the decision-making assessments to determine the final fuzzy ERP suitability. 8. Utilize the fuzzy integral value ranking method to obtain the rank of each ERP project. 9. Analyze the results of indices λ and k. Observe the change in the final ERP suitability and the final ranking value or evaluating the system with AHP method. 10. Select the ERP project with the maximum ranking value. 11. Finalizing the decision after discussion. 12. Implement the selected ERP project” (p.162). 82  The benefits of this stepwise framework include: (1) providing a simple and stepwise procedure for decision makers to be able to select an ERP project; (2) providing a simple method that allows users to integrate personal opinions and expert comments; (3) allowing user to set the priorities for decision making.  Wei et al. (2005) discuss different methodologies for selection such as mathematical optimization, scoring, ranking, and multi-criteria decision making. They also propose an AHPbased approach for the acquisition. This method basically helps in decision making for ERP acquisition by assigning priorities to alternatives and weights (Wei et al. 2005). AHP hierarchy has four levels. The first level states the "strategic objective", which is ERP acquisition. The second level includes two "main objectives" such as system related goals in order to choose "most appropriate system" and vendor related goals such as choosing the "best vendor" available. The third level includes the attributes related to the main goals. These attributes regarding system factors, as the author names, are total cost (in terms of price, maintenance cost, consultant expenses, and infrastructure costs), functionality (in terms of module completion, function fitness, and security), flexibility (in terms of ease of integration, ease of in-house development, and upgradability), user friendliness (in terms of ease of learning and operation), reliability (in terms of stability, and recoverability) and regarding vendor factors are reputation (in terms of financial condition, scale of vendor, and market share), technical capability (in terms of R&D capability, technical support capability, and implementation ability), and service (in terms of warranties, consultant service, training, and service speed). The final level indicates the different ERP systems that are available as alternatives. This framework allows users to identify the criteria to acquire ERP. This framework also allows organizations to: (a) see the different objectives in different levels; (b) decompose the complex elements of ERP acquisition into smaller and manageable attributes; (c) adapt to additional attributes for decision making with its expandable structure; and (d) adjust the attributes according to strategies systematically (Wei et al. 2005) (see Figure 16).  83  Figure 16 AHP Hierarchy (Wei et al. 2005, p.57)  Verville & Halingten (Verville & Halingten, 2003a; Verville & Halingten, 2003b) examine acquisition process under six stages that are distinct, interrelated and iterative: Within the planning process, main tasks include identifying the dimensions, complexities, risks, and uncertainties regarding the buying process and the software. The authors identify seven categories of the planning process as: (a) forming acquisition teams; (b) developing strategies of acquisition; (c) defining requirements; (d) determining selection and evaluation criteria (i.e., customization, interfaces, scalability of system, performance, etc.); (e) acquisition issues; (f) analysis of marketplace; and (g) deliverables. The second stage is the information search process. Authors define two elements under this stage as information screening and information sources where the objective is to find the key factors of information (i.e., credibility, type, reliability, references, etc.). The main objective of the selection process, the third stage, is two-fold: evaluating the Request for Proposal (RFP) responses and short listing vendors and/or technologies. The evaluation process includes three areas: vendor evaluation, functional 84  evaluation, and technical evaluation (Verville & Halingten, 2003a; Verville & Halingten, 2003b; Verville, 2000). Examples of vendor evaluation criteria include financial strength, market share, annual growth rate, customer support, reputation, vision, cost, training, quality of proposal, etc. (Verville, 2000). Functional evaluation criteria include customization, ease of use, interface, global business requirement, etc. (Verville, 2000). Alternatively, some examples of technical evaluation include system architecture, database and solution integrations, performance, security, etc. (Verville, 2000). Fifth stage, choice process is the end product of the evaluation process. The final stage; the negotiations process has two components: business and legal. In addition, each process can be iterative and recursive (except choice), embedded, and simultaneous. There is a flow of information among each phase (Verville & A. Halingten, 2003b). This model can be used by managers for the acquisition of complex package software (Verville & Halingten, 2003b) (see Figure 17).  Figure 17 Model of ERP Acquisition Process (Verville and Halingten, 2003, p.598)  Ravarini et al. (2000) propose a framework for evaluating ERP acquisition in SMEs. The framework is composed of four sections: (1) simplified approach; (2) traditional approach; (3) enterprise system check-up; and (4) Business Process Reengineering (BPR). In first position, organizations do not redesign their business processes because of high complexity of their processes. In second position, business complexity is still high and organizations prefer redesigning their business processes. In third position, business complexity is low and ES managers prefer reducing dependency to other software. With this purpose in mind ES managers would focus on existing applications and how effective and adjustable they are with current strategies. In the fourth position, organizations prefer redesigning their business processes in spite of the low level of business complexity. According to the authors, acquisition affects the performance of business processes as well as the ways to conduct business. The transition can be 85  small or big, ranging from local automation of independent procedures to redefinition of company boundaries through internal integration (in order to create competitive advantage), BPR (partial or full), and business network design (Ravarini et al. 2000) (see Figure 18).  Figure 18 Framework for Evaluating ERP Acquisition within SMEs (Ravarini et al. 2000)  In addition, Umble et al. (2003) suggest several steps to form an ERP acquisition process: (a) defining a vision by organization's objectives and strategy as well as establishing crossfunctional teams; (b) building a function list by teams of experienced individuals; (c) developing a list of candidate software through search, interviews, etc; (d) eliminating the candidate to four to six serious candidates by conducting preliminary analysis; (e) creating the request for proposal (RFP); (f) reviewing the proposals and requesting additional information if required; (g) identifying finalists; (h) have finalists present their demo of their packages; (i) identifying the winner; (j) compare the benefits (tangible and intangible) and costs; (k) negotiations; (l) run a pilot before real implementation and (m) make the final decision.  86  2.3.3.2  Implementation The implementation phase refers to the stage in which ERP packages are customized or  adapted to an organization's needs generally with the help of a consultant or a third party organization. In general, implementation focuses on adapting ERP system to the specific needs of the organization. However, sometimes just the opposite, adapting business processes to ERP functionalities may be the case (Esteves & Pastor, 1999).  Implementation has been examined under several phases with several tasks and subtasks within each phase. For example, Parr and Shanks (2000) explain ERP implementation in three phases: planning, project, and enhancement. Planning phase deals with "selection of an ERP, assembly of a steering committee, determination of high-level project scope and broad implementation approach, selection of a project team manager and resource determination" (p.291). This phase is similar to Ross and Vitale's (2000) design phase. Project phase includes installation. This phase is composed of five subtasks such as set-up, re-engineering, design, configuration and testing and installation (Parr and Shanks 2000). Setting the project teams and establishing the integration of these teams are the main tasks in set-up subtask. Main tasks of reengineering subtask are BPR, installation, matching the business processes with ERP functions. Design stage is the one where detailed design is developed. The fourth subtask, configuration and testing deals with configuration of system, interface, and testing with real data. The final subtask deals with technological aspects (network, PCs, etc.) and support for the system. The enhancement phase includes the post-implementation stages such as repair, extension, transformation. This phase is similar to Ross and Vitale's (2000) "stabilization" and "continuous improvement" and Markus and Tanis' (1999) "onwards and upwards" phases (Parr & Shanks, 2000). Meanwhile, Esteves and Pastor (1999) state that implementation involves several tasks such as hardware and software installation, business process modeling, training, and data conversions from different systems. Huang et al. (2001) examine the implementation of ERP and knowledge management system with their synergetic benefits to organization. The results showed the synergy between these complementary systems allowed companies to have more flexibility and efficiency.  87  2.3.3.2.1  ERP Implementation Risks  The risk of implementation should be well analyzed at the beginning of implementation. Esteves & Pastor (1999) mention three types of risks to be analyzed: technical risks, business risks, and organizational risks. Technical risks are mainly related to the products whereas business risks are related to processes. Organizational risks refer to the case that the new system will not be fully used. Esteves & Pastor (1999) also state that one of the most common reasons implementations do not succeed is the lack of alignment between organizational goals and the processes.  Risk factor in generic ES projects that are relevant for ERP projects are identified in several studies. Sumner (2000) summarizes the literature regarding risk factors under eight categories. Based on this study, organizational fit that deals with the environment, resources, and changing objectives, and management structure and strategy dealing with agreements on goals, and involvement are among the most important risk factors. Lack of technical expertise and knowledge, called skill mix, lack of agreements on change requirements, technology planning, project management, and social commitment are other risk factors for generic ES projects that affect ERP projects (Sumner, 2000).  2.3.3.2.2  ERP Implementation Strategies  Organizations may choose different strategies for implementing ERPs. Some organizations may choose implementing ERP with its full functionality. The implementation may even involve a multi-national company. All the required modules may be implemented and linked to the legacy system at once (Parr & Shanks, 2000). This comprehensive approach is the most ambitious one to implement an ERP system. Some organizations may be less ambitious, called middle-road, and prefer implementing merely the core ERP modules or some selected ERP modules (Parr & Shanks, 2000). The least ambitious and least risky approach is the vanilla method. In this approach, only core ERP functionalities are implemented on one site. This is the least complex approach for implementing an ERP system (Parr & Shanks, 2000).  Literature can be grouped into three in order to examine ERP implementation strategies. These main groups are: (a) organizational strategies; (b) technical strategies; and (c) people 88  strategies (Adel, 2001). Organizational strategies include project management, change management, structure and resources of organizational, communication, and ES functional characteristics. Installation issues, technical expertise, and ERP complexity are some of technical strategies. Strategies regarding people include involvement, training, and attitudes of staff (Adel, 2001).  Ghosh (2002) distinguishes two main strategies for implementing ERP. The first approach requires handling each business unit as a new implementation. The cost in this approach is quite high since reuse is not considered. The second approach suggested conducting a pilot project as the first phase of implementation involving every functional unit in the organization (Ghosh, 2002).  2.3.3.2.3  Critical Success Factors of ERP Implementation  Critical success factors are one way to begin studying the technology from a strategic perspective (Laurindo, Carvalho, & Shimizu, 2010). The term Critical Success Factor (CSF) has been defined by Laurindo et al. (2010) as "a widespread method used for linking IT [ES] applications to business goals, and for planning and prioritizing information systems projects" (p.21). Rockart (1979) states "if they (CSF) are satisfactory, will ensure successful competitive performance for the organization" (p.85). Since CSF requires several analyses regarding organizational goals, strategy, industry, etc., (Laurindo et al. 2010), the process of CSF building should be scheduled for a specific time period (Laurindo et al. 2010; Rockart, 1979). This way, organization will have a better understanding of the current situation with surrounding business environment and proceed based on their strategic objectives more efficiently.  Strategic importance of ERP systems to business and the low success rate lead to a vast amount of research focused on success factors for ERP implementation. In ERP literature success of ERP was measured from several dimensions (Markus, Axline et al. 2000). Several researchers consider success in technical, economic, financial, or strategic business terms. Some view success from the organization's staff (managers and employees) perspective while others view success from customer, supplier, and stakeholder perspective (Markus, Axline et al. 2000).  89  According to the authors, another common perspective to assess success is related to how smooth the business operations are running in the organization.  The literature clarifies the cost of software is not cheap and may include some risks to the organization. Cliffe (1999) and Umble et al. (2003) state 65% of executives have concerns ERP implementation may harm their businesses. Because of these, it is important to identify the factors that determine ERP implementation success. Meanwhile, (Markus & Tanis, 2000, p.186– 187) discuss about success as "Optimal success refers to the best outcomes the organization could achieve with enterprise systems, given its business situation, measured against a portfolio of project, early operational, and longer term business results metrics. Optimal success can be far more or less than the organization’s goals for an enterprise system. Further, optimal success can be dynamic; what is possible for an organization to achieve may change over time as business conditions change."  Markus & Tanis (2000) examine success in four different phases called "ERP experience cycle." The phases are called chartering, project phase, shakedown phase, and onward and upward phases. In chartering phase, the decision to acquire or proceed with the enterprise system is examined. Project phase is the one that ERP system is configured and processes are redefined. The success factors related to this phase deal with cost, completion time, the finished system functionality relative to budget, schedule, and scope respectively. The third phase, shakedown phase, refers to the transition period that the organization goes to normal operations from initially going live. Success factors related to this phase deal with short-term impacts of external parties (i.e., customers, suppliers, etc.), the duration of achieving "normal" level of performance, and short-time changes in business performance. The final phase refers to the period in which organizations receive the benefits from the ERP system. Process improvement is one of the major activities in this stage. Success factors related to this phase deal with achievements and improvements in business in addition to expected achievements regarding ERP project, and adoptability and alignment of ERP system to business practices, and decision making (Markus & Tanis, 2000).  90  In literature, several factors that lead to the success of an ERP implementation have been identified. Some of the most highly mentioned factors include management support, change management, BPR, teams, training, customization, communication, project champion, clear goals, project management, support, and external expertise. 1. Management support is important throughout the whole implementation (Nah, Lau, & Kuang, 2001). While approval from the management has to be received at the beginning, management should continue actively backing the project. It is one of the main driving forces in implementation success (Somers and Nelson 2001). Details about the project, structure, roles, responsibilities, resource allocation, and policies should have been approved by the management (Nah, Lau et al. 2001; Somers and Nelson 2001). 2. Change management refers to managing the change in culture, people, organization, and structure throughout the enterprise (Nah, Lau et al. 2001). This change may include training the users and staff as well as user involvement in design and implementation (Nah, Lau et al. 2001; Holland and Light 1999). 3. BPR: Generally, existing structure, information needs, and business processes are incompatible with ERP systems even in most flexible ERPs (Umble et al. 2003; Somers & Nelson, 2001). Therefore, business processes are required to be aligned or reengineered to fit the system (Nah, Lau et al. 2001; Somers & Nelson, 2001). With aligned or reengineered processes, organizations have better performance (Somers & Nelson, 2001; Bingi et al. 1999). 4. Team: Importance of teams to implementation success has been recognized from several perspectives. Project team competence (Akkermans & Helden, 2002), selecting best people in the organizations (Nah, Faja, & Cata, 2001; Nah, Lau et al. 2001; Bingi et al. 1999), roles and responsibilities of members for implementation (Nah, Faja et al. 2001; Nah, Lau et al. 2001) knowledge, skills, and expertise of team members (Somers & Nelson, 2004; Umble et al. 2003; Somers & Nelson, 2001) are among the important criteria for selecting members of teams for implementation success. 5. Training: ERP systems cause changes in organizations and in order to get the support of employees, organizations need to train them about the long-term perspectives and goals (Somers & Nelson, 2001). In addition, training should be provided in order to improve the understanding of employees and end users about new systems and processes (Umble 91  et al. 2003). Without proper training, organizations cannot fully realize the benefits of EPR systems (Umble et al. 2003). 6. Customization: Minimum customization refers to using the ERP system as it is bought from the vendor (Somers & Nelson, 2001; Robinson & Dilts, 1999). Organizations want to spend less resources, time, and effort in customizing their ERP system. Organizations can minimize the scope of ERP system and reduce the customization (Shanks, 2000). 7. Communication refers to communication among different departments and business functions (Akkermans, Bogerd, Yücesan, & van Wassenhove, 2003) as well as team members and organizational members (Somers & Nelson, 2001). Since the main objective of ERP is the integration of different business functions, communication is a critical issue for ERP implementation (Akkermans et al. 2003; Davenport, 1998). 8. Project champion: A champion should have enough authority, power, and experience to perform the transformations and set goals, therefore a champion is usually chosen among the senior level executives (Akkermans et al. 2003; Nah, Faja et al. 2001; Nah, Lau et al. 2001; Falkowski, Pedigo, Smith, & Swanson, 1998). The role and responsibilities of a champion include "communicating the vision, maintaining motivation in the project team and the business, fighting political battles, and remaining influential with all stakeholders, including senior management" (Willcocks & Sykes, 2000, p.37). 9. Clear goals, business plan, and vision provide guidelines to the project (i.e., how to operate (Holland & Light, 1999), scope, time and cost (Somers & Nelson, 2001) throughout all the phases in ERP life cycle (Nah, Faja et al. 2001; Nah, Lau et al. 2001; Buckhout, Frey, & Nemec, 1999). This allows an organization to focus in business benefits (Nah, Lau et al. 2001). 10. Project management refers to a clear and detailed project plan that describes the objectives (Umble et al. 2003; Shanks, 2000). ERPs are complex systems because of their structure, hardware, software, human and political issues, etc. (Somers & Nelson, 2001) and one way to deal with complexity may be using a calculated management (Akkermans & Helden, 2002; Soliman & Youssef, 1998). According to contingency approach, project management deals with project planning and size, experiences with the technology, and project structure as the functions of the project’s characteristics (Somers & Nelson, 2001, p.3). An effective project management should deal with the scope, time, and cost 92  (Sumner, 1999). Milestones (Holland & Light, 1999), deadlines and tasks (Nah, Lau et al. 2001) are some of the key elements that should be identified under project management.  In addition to these factors, there are several success factors mentioned in literature. For example, vanilla ERP (Parr & Shanks, 2000; Rao, 2000), empowered decision makers (Parr & Shanks, 2000), data accuracy, focused performance measures, understanding of strategic goals (Umble et al. 2003), vendor support, data conversion, architecture choice (Akkermans et al. 2003), use of consultants (Somers & Nelson, 2004; Akkermans & Helden, 2002; Somers & Nelson, 2001; Brown & Vessey, 1999), conversion strategy (Brown & Vessey, 1999), software development, testing, and troubleshooting, ES legacy systems (Nah & Delgado, 2006; Nah, Zuckweiler, & Lau, 2003; Nah, Lau et al. 2001), employee satisfaction and involvement (Barker & Frolick, 2003), package selection (Somers & Nelson, 2004; Al-Mashari et al. 2003; Akkermans & Helden, 2002; Somers & Nelson, 2001), vendor customer partnerships, interdepartmental cooperation (Somers and Nelson 2001; 2004), technical compatibility, competitive pressure (Bradford & Florin, 2003), human resource planning, strategic decision on centralized vs. decentralized implementation (Rao, 2000), ES maturity, business size, government, economy and economic growth (Huang & Palvia, 2001), discipline and standardization (Sumner, 1999), realistic expectations in regards to ROI and reduced IT/IS/ES costs (Murray & Coffin, 2001) are among the other mentioned critical success factors.  Although the ranking orders were different, Akkermans et al. (2003), Finney & Corbett, (2007), and Somers & Nelson (2001) highlight the same variables being critical for the ERP implementation success in their empirical studies. These factors include top management support, project team competence, interdepartmental communication and cooperation, clear goals and objectives, project management, interdepartmental communication, management of expectations, project champion, ongoing vendor support, careful package selection, data analysis and conversion, dedicated resources, steering committee, user training and education on new business processes, Business Process Reengineering (BPR), minimal customization, architecture choices, change management, vendor/customer partnership, vendor’s tools, use of consultants, and steering committee (see Table 14).  93  Organizations invest huge amounts of resources in terms of time, money, and effort for implementing ERP systems. A typical ERP project may take around 2-3 years of time, based on the size of the organization and type of implementation (i.e., vanilla or in house, etc.) may cost millions of dollars. After that amount of investment, management wants to see the benefits of ERP systems. Although there are several risk factors for ERP systems such as skills mix or expertise, structure of the management, user involvement, training, software systems design, technology planning, project management as well as commitment (Sumner, 2000), the most critical factor for not failing the ERP system is alignment. Failing to align may harm the organization or even cause organizations to bankrupt.  2.3.3.2.4  X X X X X X X X 100  X X X X X  X X  X X  X X  X X  X X  X 62  46  Project Management  X  X  X  X  X X  X  X  X  X  X  X X  X  X  X X  X X X  X 62  X X 54  X X  X  Communication  Customization  Training  Importance of Team  BPR X  X X X X  Clear goals  X X X X X  Project champion  Parr and Shanks (2000) Umble et al. (2003) Akkermans and Helden (2002) Brown and Vessey (1999) Nah et al. (2001), Nah et al. (2003), Nah and Delgado (2006) Sarker and Lee (2003) Barker and Frolick (2003) Somers and Nelson (2001; 2004) Bradford and Florin (2003) Rao (2000) Huang and Palvia (2001) Sumner (1999) Shanks et al. (2000) Percentage (%)  Change Management  Top Management Support  Table 14 Selected Critical Success Factors of ERP Implementation  X  X  X X X 31  39  X X 46  X 46  Models and Frameworks for ERP Implementation  Based on the framework for ERP implementation by Al-Mudimigh et al. (2001) there are three levels within the ERP system implementation: strategic level, tactical level, and operation level. Strategic level is the one where management determines the overall goals and steps to 94  X X 54  follow in order to achieve these goals. In the strategic level, there must be a strategy that reflects the business vision to follow and decision making is the responsibility of top management (Turban, McLean, & Wetherbe, 1999). ERP specific planning for the organization is realized under tactical level. Middle managers play an important role in this level. Process monitoring is part of this level where middle level managers ensure whether resources are used properly, or whether goals are being accomplished. The decision regarding the vendor and software selection is also one responsibility done under this level (Al-Mudimigh et al. 2001). Operational level involves installation, business process involvement, making the configurations, and going live. In many times, companies may need to use other packages from different vendors and the integration of these packages also a crucial step before realizing the benefits of an ERP system (Al-Mudimigh et al. 2001) (see Figure 19).  Figure 19 ERP Implementation Framework (Al-Mudimigh et al. 2001, p.218)  ERP implementation includes business process change and alignment with software (Holland & Light, 1999). Based on this fact, the authors propose a framework about critical success factors that will ensure a successful ERP implementation. The proposed framework is composed of two factors: strategic and tactical. Strategic factors include legacy systems (business processes, organization structure, culture, and information technology), business vision, ERP strategy (i.e., fast-track vs. adopting a skeleton, complete functionality vs. single module implementation, custom development, etc.), support from top management, and plans; while  tactical  factors  include  client  consultation,  personnel,  configuring  software, 95  communication, trouble shooting, and feedback. Finney & Corbett (2007) provide a similar categorization of critical success factors. The additional factors Finney & Corbett (2007) propose include project and management, managing cultural change, implementation strategy and timeframe, and vanilla ERP as strategic factors and balanced team, team motivation, ES infrastructure, software configuration, testing system, training, data conversion, and postimplementation evaluation as tactical factors. Esteves, Casanovas, & Pastor (2003) examine the same success factors, both strategic and tactical ones. The authors also state that examining ERP implementation from organizational and technological dimensions would contribute a lot to ERP implementation literature (see Figure 20) for the framework developed by Holland and Light (1999).  Figure 20 ERP Implementation Framework (Holland & Light, 1999, p.31)  Huang and Palvia (2001) propose a framework to examine ERP implementation and the factors affecting ERP implementation in developed and developing countries. According to Huang  and  Palvia  (2001),  ERP  implementation  is  affected  by  two  categories:  national/environmental and organizational/internal. These categories are composed of five elements. The variables included in national/environmental category are infrastructure (basic and IS), economy and economic growth of the nation, manufacturing strengths, regional environment, and government regulations. On the other hand, organizational/internal variables include ES maturity (in order to have more efficient strategic decision in acquiring and deploying ES), computer culture (i.e., attitude and dependence on computers), business size, management commitment, and BPR experience (see Figure 21). Their study indicates there are differences in developing and developed countries in ERP implementation. These difference stems from the economic, cultural, and basic infrastructure issues that are different in both types of countries. 96  Figure 21 ERP Implementation Framework (Huang & Palvia, 2001, p.277)  Motwani, Mirchandani, Madan, & Gunasekaran (2002) examine critical success factors of ERP implementation as well as the actions needed to take in order to control the troubled ERP projects. The authors use Kettinger and Grover's (1995) model to explain the implementation. According to this model, strategic initiative is required for any business process change that will be lead by managers. Process management and change management that are components of ERP implementation management are facilitated by the organizational environment that includes cultural readiness, willingness and capacity to learn and share knowledge, and relationship balancing (see Figure 22). Unlike the hierarchical revolutionary project scopes, the authors propose an evolutionary and bureaucratic implementation process that will give priority to cultural readiness, change management, network relationship, and sharing in order to have improved business processes and quality of work life.  97  Figure 22 ERP Implementation Management Framework (Motwani et al. 2002, p.85)  Hong & Kim (2001) examine critical success factors of ERP implementation with an organizational fit perspective. The authors examine only a limited amount of CSFs for ERP implementation. Their model propose that: (a) organizational fit of ERP (i.e., data, process, and user fit) positively affects the ERP implementation success (match between the goals and actual cost, time, performance, and benefits); and (b) contingency variables such as ERP adaptation level, process adaptation level, and organizational resistance has interaction effect between organizational fit of ERP and ERP implementation success (see Figure 23). Their findings state organizational fit is a critical factor for success of ERP implementation and also ERP and process adaptations has interaction effect between organizational fit of ERP and ERP implementation success.  98  Figure 23 ERP Implementation Framework (Hong & Kim, 2001, p.28)  Several other studies propose or test models related to ERP. For example Amaoka & Salam (2004) extend Technology Acceptance Model (TAM) and examine ERP implementation based on this model. The study examines the impacts of shared belief, training, and communication on perceived usefulness and ease of technology implementation. Scott (2004) examines how the climate for ERP implementation and ERP-values fit affect ERP implementation effectiveness with their model. Sedera, Gable & Chan, 2003) develop and test a model for their empirical study where they assess the impact of knowledge management as a success factor for ERP systems. The authors determine information and system quality, satisfaction, and individual and organizational impact as criteria for the success. Meanwhile, CSF models also have been used for project management problems (Slevin & Pinto, 1987), and reengineering (Bashein, Markus, & Riley, 1994) as well.  2.3.3.3  Post-Implementation Post-implementation is the phase which begins right after installation and goes until  retirement through a set of evolutions. There is limited amount of work regarding postimplementation in the literature (Bernadas, 2007; Yu, 2005). Current studies mainly focus on implementation, and evolution of ERP systems. Although the final stage of post-implementation phase is retirement, there is either none or very limited research on this stage.  99  2.3.3.3.1  Maintenance of ERP  A credible definition of maintenance is “post-implementation activities related to the packaged application software undertaken by the client-organization from the time the system goes live (i.e. successfully implemented and transported to the production environment) until it is retired from an organization’s production system" (Ng et al. 2002, p.88). Maintenance phase refers to the optimum use in a way that benefits are maximized while deficiencies are minimized. Maintenance phase comes after the installation of any specific software or a system. Maintenance is required for all installed systems in order to address the needs regarding correcting malfunctions and providing optimizations as well as system updates (Esteves & Bohorquez, 2007). Functionality, and sufficiency of the systems to business processes are among the key issues need be taken care during maintenance phase (Esteves & Bohorquez, 2007).  There are three different strategies for ERP maintenance: pseudo in-house maintenance, outsourcing to a vendor, and outsourcing to a third party (Bernadas, 2007) Pseudo in-house maintenance is the case where the ERP user does not have the total control over the system maintenance. This strategy is known to be the most common one among the users (Bernadas, 2007). Companies need highly skilled employees in order to accomplish a successful maintenance. Outsourcing to a vendor can be thought of as renting the system from a vendor. In this case, the vendor would be dealing with all development and maintenance of the system. It is known as quasi-complete outsourcing (Bernadas, 2007). It requires fewer resources for maintenance but the dependency to vendor is high. The last proposed strategy by the researcher is outsourcing the maintenance of the system to a third party rather than the vendor. In this stage, while relationship with the vendor is important, relationship with the third party is crucial.  Several facilitators may be helpful in maintenance of ERP. In this end, Bernadas (2007) identifies some facilitators of maintenance. These facilitators include: (a) cross-departmental communication and cooperation; (b) top management and end user supports; (c) use of maintenance tools and standards, technology experiences of organization and the ES department, and training. Other factors that affect maintenance success include size of an organization, skilled personnel, and the budget available for the system are factors that are determinant for maintenance strategy (Gable et al. 2001; Huang & Palvia, 2001). Perception of the management 100  and stakeholders is considered to be another key determinant for the maintenance of ERP systems (Kim & Westin, 1988).  2.3.3.3.2  Studies Pertaining to Maintenance of ERP  Kung & Hsu (1998) propose a life cycle for software maintenance that can be applied to ERP systems as well. This life cycle has four stages such as introduction, growth, maturity, and decline stages. Introduction stage is the period just after implementation. In this stage, usage is relatively low. In growth stage, users become more familiar with the functionality of the system with the increased usage. If the usage is voluntary, the amount of usage would be based on the satisfaction during the introduction stage. In the maturity stage, enhancement in projects based on functionality can be observed. In decline stage, the limits of system are faced. Management needs to decide whether continuing with the current system, or upgrading it, or abandoning it (Nah, Faja et al. 2001; Kung & Hsu, 1998).  Nah, Faja et al. (2001) and Ng et al. (2002) identify the maintenance activities through multiple case studies. The authors use the very-well known categorization of maintenance proposed by Lientz & Swanson (1978) and Swanson (1976). The proposed categories of maintenance include corrective maintenance that deals with correcting design, coding, implementation errors, processing and performance failures, adaptive maintenance that deals with meeting or adapting the new requirements in terms of processing, data, and user, and perfective maintenance that deals with enhancing the current processes efficiency, performance, and requirements, rewriting documentation, and improving maintainability.  Burch & Grupe (1993) introduce preventive maintenance that deals with preventing potential problems by conducting regular inspections or monitoring (i.e., workflow). The main idea of this study is that even a small recognized problem may turn into a big one if no precautious action has taken place. Abran & Nguyenkim (1991) examine maintenance of ERP in terms of user support and the roles of training users and building an effective help desk in maintenance stage. Hirt and Swanson (Hirt & Swanson, 1999a; Hirt & Swanson, 1999b) discuss the importance of external parties such as vendors, and consultants in the maintenance.  101  Several studies in maintenance literature include measuring the satisfaction from usage of ERP systems (Sedera & Tan, 2005; Hess & Hightower, 2002; Barbara McNurlin, 2001), the change and importance of change after implementing ERP system (Lee & Lee, 2004), the effects of post-implementation concepts such as documentation, usability, presentation on users (Scott, 2005), and structuring ERP outsourcing contracts in a way that both sides gain (Bryson & Sullivan, 2002). Other studies focus on benefits, limitations, effects of ERP implementation in post-ERP era, return on investment on ERP, effect of size of the organization, comparisons between companies that have adopted ERP and that have not, outsourcing and its effects, and life cycle proposals for ERP maintenance (Esteves & Bohorquez, 2007).  2.3.3.3.3  Evolution of ERP  The second stage of post-implementation is evolution. This stage includes the studies regarding extending the capabilities of ERP thorough integration of capabilities to ERP systems (Esteves & Bohorquez, 2007). Esteves & Bohorquez (2007) groups the studies into two as upwards evolution and outwards evolution. Upwards evolution refers to integration with applications such as advanced planning and scheduling, data warehousing, and business intelligence systems in order to improve the decision making (Esteves & Bohorquez, 2007). Outwards evolution refers to integration with applications such as customer relationship management, supply chain management, inter-organizational workflow, and electronic commerce (Esteves & Bohorquez, 2007).  In general, the studies in evolution phase have focused on technology, including development and new functionalities, extensions, and integration of customer relationship management, supply chain, data warehouse, web technologies, and knowledge management modules to current ERP systems.  Literature also includes several studies regarding evolution of ERP systems with different focuses. For example, Ash & Burn (2001) examine the antecedents of e-business change management in organizations that adopted ERP systems. In another study, Ash & Burn (2001) examine the international dimension of a similar study. Bendoly (2003) examines knowledge discovery and data mining extensions also known as upwards evolution of ERP systems. 102  Holsapple & Sena (2003) examine the relationship between ERP and decision support based on fifty-three companies that adopted ERP systems. Also the objectives of ERP planning and its effects on decision making are examined in the same study. Wagner & Bergin (2001) mention the limitations of ERP systems and how these limitations regarding strategy management can be improved. Ndede-Amadi (2004) examines how strategic alignments help to redesign business processes in enterprise-wide systems. The authors also address the benefits of collaboration with supply chain. Shafiei & Sundaram (2004) propose a framework to examine ways to integrate ERP and decision support systems at enterprise and cross-enterprise level.  2.3.3.3.4  Retirement of ERP  The final stage of post-implementation is retirement. The retirement stage is the one in which management decides to substitute the current ERP system. Possible reasons for this replacement may include strategic changes in organization, issues with vendor or third party implementer, or the unsatisfactory experience with current system or its phases (Esteves & Bohorquez, 2007). We could not find any study regarding the retirement phase. The main reason for the lack of research regarding retirement phase may be the fact that ERP implementation takes a long time. However, it is highly possible there will be many studies regarding this phase in the near future.  2.4  Alignment of ERP Systems Although literature has an extensive amount of studies regarding ERP, there is very  limited research regarding alignment of ERP systems. One exception of this statement is the studies regarding ERP alignment with the focus on process alignment. Therefore, there is a need for research about ERP alignment.  Because of the nature of alignment and the broadness of ERP concepts, these limited studies focus on only several aspects. For example, Bendoly & Jacobs (2004) examine ERP alignment with process requirements of the organization. The authors state that alignment of ERP solutions with operational needs have a perceived impact on performance. Their study is built on the framework developed by Jacobs & Whybark (2000). The authors suggest the alignment/fit between ERP solution strategies lead to better performance. Flexibility and 103  decentralization are the selected strategies used in the framework for alignment. Flexibility can be used in operational perspective in ES to state the "adaptability of the system to a range of changing internal and external conditions" (Jacobs & Whybark, 2000). Al-Mashari (2001) considers flexibility regarding ERP from two perspectives: industrial and organizational demands. Industrial demand refers to tailoring ERP based on the organization's needs. On the other hand, organizational demand refers to adaptability of the system. Decentralization refers to the business units' ability of making decisions independently. As the level of flexibility increases, the number of alternative transactions and processes within the ERP solution increases. When the decentralization is low, the number of databases or accounting systems is lowered as well as to a single one (Bendoly & Jacobs, 2004; Jacobs & Whybark, 2000). The authors state the lack of alignment of ERP solutions strategies based on flexibility and decentralization lead to ineffective results and therefore causes the decline of performance.  Kang et al. (2008) examine how aligning ERP affects business performance in Korean business environment. In order for an organization to improve business performance, there should be an adjustment between the usage level of integration modes, such as people, standardization, and centralization, of ERP and the purpose of ERP systems (Grabowski & Lee, 1993; Kang et al. 2008). This means ERP should allow organizations to have reduced peoplebased integration level while providing enhanced coordination since the nature of ERP promises these benefits (Kang et al. 2008). Their results indicate integration modes are important determinants of the level of alignment where better alignment leads to better performance. One of the limitations of this study is the limited focus of performance measurement: the operational efficiency. In addition, the authors did not focus on measuring alignment, but accepted the alignment between ERP and organizational integration modes (which is defined as "an organization simultaneously coordinates and controls the activities of different departments within the same organization, using primarily the modes of people, standardization, and centralization" (p.25)).  Welch & Kordysh (2007) explain alignment of ERP with business including the agreement of executives is a critical factor among seven key factors leading to ERP success and a better performance. The signs of lack of alignment would be lack of coordination between ERP 104  plan and changes in business strategy, lack of commitment from the management, and lack of directions to adapt to the organization's change process. The other factors leading to ERP success include having the right governance model, stressing the business process transformation, continuous ERP support, focusing on organizational needs, keeping the business mission as high priority, and managing ES infrastructure (Welch & Kordysh, 2007).  Although research, regarding alignment of a specific technology has not been studied extensively yet, among those limited amount of studies different scholars focus on different perspectives of alignment. For example, Yurong & Houcun (2000) examine alignment of ERP with business processes. Yurong & Houcun (2000) mention the impacts of new technologies such as data warehousing and Internet on ERP systems, and how business processes can be affected from these technologies. According to the authors, alignment also has some prerequisites that involve the processes of implementation, outsourcing, training and hiring new staff. In each stage, alignment should be considered as a goal in mind for a better performance. Willcocks & Sykes (2000) also state that aligning the business processes with business footprint is among the crucial steps for ERP systems.  Gattiker & Goodhue (2002) examine how organizations react when they have packaged systems. The authors state organizations attempt to adapt their business unit to software, more specifically ERP software. In this case, organizations align their business processes based on the software. When the existing process of business unit and capability of ERP do not match or the ERP-imbedded process is deemed superior to business process, organizations may change their processes so that they fit to ERP (Gattiker & Goodhue, 2002).  ERPs have effects on organizational strategy (Saccol, Pedron, Cazella, Macadar, & Neto, 2003). Even during adoption of alignment, organizations may need to align their organizational strategy. During this period, relationships between buyers and sellers may be affected. Organizations may also need to adjust their strategies in internal, competitive, and business portfolio levels (Saccol et al. 2003). The internal level is where the efficiency and effectiveness of organizational structure is determined. While issues related to competitiveness are determined  105  in the competitive level, the strategic choices are determined in the business portfolio level (Saccol et al. 2003; Bakos & Treacy, 1986).  Davis (2005) examines how customization of ERP affects the strategic alignment. The author divides the customization into two areas: strategic customization and consistency customization. Strategic customizations support business strategy and help to achieve strategic alignment. This study contributes to the understanding of critical success factor regarding customization of ERP systems and its impacts on strategic alignment. However, this study does not go beyond theorizing the relationship.  Hunton, Lippincott, & Reck (2003) examine the relationship between ERP adoption and performance. Their results indicate that size and financial health of the firm are significantly correlated with the performance for the companies that adapted ERP systems. Financial health is measured by return on assets (ROA), return on investment (ROI), return on sales (ROS), and asset turnover (ATO) and these measures are found to be better for ERP adaptors than nonadaptors. Kang et al. (2008) argue that ERP systems must be strategically aligned with business to provide superior performance. Last but not the least, in a recent study, Loukis et al. (2010) state strategic alignment between ERP and business strategies allow "the mission, goals, competitive strategy, future directions and action plan of the enterprise, and also the analysis of its external environment (e.g. competition, opportunities, threats) and the analysis of its internal environment (e.g. resources, capabilities, strengths, weaknesses), which are basic elements of its business/strategy plan, to be taken into account for the formulation of its enterprise systems plan" (p. 43). This alignment aims to provide the highest strategic potential of the ERP (Loukis et al. 2010). The focus of this research is regarding only the relationship between Information and Communication Technologies (ICT) capital, non-ICT capital and strategic alignment on labor productivity. In addition, Chou & Chang (2008) identify how to achieve more benefits from ERP. The authors state that “ERP benefits are affected not only by the original features of a firm (such as interdependence and differentiation of one plant) [8], but also by managerial interventions (i.e. organizational mechanisms (OM) or alignment). To improve ERP benefit, we proposed performing two complementary tasks – customization and OM. The former emphasizes performing the alignment of ERP software itself, whereas the latter focuses particularly on the 106  organizational acceptance of alignment” (p.154). In addition, in a recent study, Velcu (2010) states “ERP systems may make an increased contribution to business performance when implementing companies strive for alignment between their strategic needs and the ERP system” (p.158).  Although the topics of ERP and alignment are broad topics individually, only a limited amount of work has been done about alignment of specific enterprise systems (i.e., ERP, SCM, CRM, etc.). However, as mentioned above, researchers have pointed out the need for the research on these areas. The studies mentioned in this section are some of the few results in this area and in spite of the fact both previous research and this research are going to the same direction, because of the methodology and constructs, this study is different from other studies in this area.  2.4.1  Misalignment In literature, the amount of studies regarding misalignment of ERP is even less than the  works regarding ERP alignment. Hong & Kim (2002) and Swan, Newell, & Robertson (1999) state one of the reasons for the misfit between ERP and organizational goals is the conflict between the organization and the ERP vendor. Soh et al. (2000) and Wei, Wang, & Ju (2005) add lack of match between ERP capabilities and country, sector, or firm specific issues or requirements are the main reasons of misalignment of ERP in terms of data, functions, and output.  Organizations can choose business process change, tailoring the ERP systems or both in order to handle the misalignment issue (Wei et al. 2005; Gattiker & Goodhue, 2002; Brehm, Heinzl, & Markus, 2001; Soh et al. 2000). Change in business process may take place either incremental or radical (Wei et al. 2005; Luo & Strong, 2004). Incremental changes are related to workarounds (manual and finding alternative ways for any ERP function) and accepting the limitations of ERP systems (Soh et al. 2000). On the other hand, adopting new functionalities of ERP systems is called radical changes. Brehm et al. (2001) examine the alternative ways of tailoring an ERP system. The types of tailoring an ERP system include configuration, bolt-ons,  107  screen masks, extended reporting, workflow and ERP programming, user exits, interface development, and code modification.  2.5  Flexibility and Strategic Flexibility As discussed previously, the majority of current research reveals alignment has a positive  impact on performance. The complex nature of these concepts requires more detailed examination about the subject matter. Considering the fact that ES is a system that is related to information technology, in other words ERP is a strategic ES component, flexibility (either strategic or structural) of this technology; use of technology in a flexible manner, and its structure (ES structure) would have an impact on alignment.  Evans (1991) states although flexibility has been studied under several disciplines, the majority of these researches belong to the management discipline. Because of the variety of the disciplines that examine flexibility, flexibility has had different meanings under different disciplines. However, those studies have usually addressed a similar problem: "… that of adjusting available means to better achieve current and anticipated future ends" (Evans, 1991, p. 73). In the literature, flexibility has been examined from several perspectives such as product and product development flexibility, procurement flexibility, usage flexibility, operations systems flexibility, market flexibility, organizational flexibility, ERP flexibility, manufacturing flexibility, etc. (Fantazy, Kumar, & Kumar, 2009). In this research, we will examine flexibility from ES and strategy perspectives.  Although this study's focus regarding flexibility is through ERP and strategy perspective, we will briefly mention the more common perspective of flexibility in ES literature: ES structure. Duncan (1995) defines ES structure as the combination of technology components and management factors. Regarding technology component, the author defines ES structure as "a set of shared, tangible, ES resources that provide a foundation to enable present and future business applications" (p.39) while she includes ES plans, alignment, and skills as part of management factors. Byrd and Turner (2000) use three qualities as connectivity, compatibility, and modularity to describe ES structure. The authors define connectivity as "the ability of a technology component to attach to any of the other components inside and outside the organizational 108  environment"; compatibility as "the ability to share any type of information across any technology component"; and finally modularity as "the ability to add, modify, and remove any software, hardware, or data components of the infrastructure with ease and with no major overall effect" (p.171). Considering the nature of business world in knowledge-era in which unplanned events may occur often, keeping the flexibility of ES structure is critical for organizations (Duncan, 1995).  Our perception of flexibility is a combination of Langdon (2006) and Evans (1991) definitions of flexibility where the authors named it as ES flexibility and strategic flexibility, respectively. Evans (1991) perceives strategic flexibility as "the contemporary term for a classical principle of strategy" (p. 69). Strategic flexibility allows an organization to modify the course of action based on the encountered situations, whether they are expected or unexpected (i.e., "technical innovations, market upheavals, ecological shocks and political revolutions" (p. 69)). The importance of the strategic flexibility is undeniable under today's business world. Considering the importance of high technology in today's business world, strategic flexibility would be more critical because of the speed of the change in business processes, production, manufacturing, logistics, etc. (Evans, 1991).  Evans (1991) states "Strategic flexibility provides an enterprise with the capability to modify strategies ... practical adaptation" (p.77). The author examines strategic flexibility through four maneuvers: Pre-emptive maneuver, protective maneuver, corrective maneuver, and exploitive maneuver. The motivation behind the pre-emptive maneuvers is precipitating transformation. Organizations that want to change the rules of the game with a surprise effect may choose this way. The rules and domain can be changed dramatically by a radical innovation. Protective maneuvers allow organizations to become cautious. Organizations can be cautious when they are facing high risk situations, such as entering a new business. Examples of this action might be arranging secondary sources in a supply chain in case a problem with a supplier or potential growth chance. Corrective maneuvers allow organizations to regenerate or recover from an irrepressible trauma. Exploitive maneuvers refer to organizations finding them rapidly expanding. This usually happens to high technology companies where suddenly there is a high demand for their product and they become the "de facto" standard (Evans, 1991). 109  On the other hand, Langdon (2006) defines ES flexibility as "the ready capability of an information system [enterprise systems] to be adapted to new, different, or changing business requirements. Examples of such changes are rapid sales growth, new product offerings, and new business relationships." (p. 6). By combining these two researches, we can understand the current ERP flexibility concept more in depth. Based on these definitions as well as the literature, we define ERP flexibility as “the capability of an organization to adapt or react to the expected or unexpected conditions of business requirements through effective and supportive use of enterprise systems” and because of the strategic perspective on flexibility, we call it strategic ERP flexibility. Strategic ERP flexibility allows organizations to speed up operation (Tian, Wang, Chen, & Johansson, 2009), generate innovative solutions, introduce new products or services when realizing a chance (Carignani & Seifert, 2000), closely observing competitors, identify and evaluate new business opportunities, accommodate efficient changes based on the business requirements, give learning opportunity (Tian et al. 2009; Bowman & Hurry, 1993), etc. A flexible Enterprise Wide Information Systems or ERP can allow organizations to give better and quicker response (Tian et al. 2009) to customers and suppliers changing demands and needs. Since the structure of ES plays a key role in performance (Byrd & Turner, 2000; Broadbent, Weill, & Neo, 1999; McKenney, 1995), flexible ERP can enhance the competitive performance of firms. Byrd and Turner (2000) state in order for ES to provide competitive advantage, ES must be strategic, and have impact on the "goals, operations, products, or environmental relationships of organization" (p.43).  Literature has several studies that provide conflicting results about flexibility. For example, Byrd and Turner (2000) report a positive relationship between ES structure and competitive advantage that generally leads to enhanced performance. On the other hand, Chung et al. (2005) do not find any direct impact of ES structure on the performance and suggests that ES structure may have impact on “intermediate performance variables and not overall business performance variables like ROI or market share (Barua, Kriebel, & Mukhopadhyay, 1995)” (p.39). In terms of functionality of technology, a flexible ES provides more opportunities for 110  sharing, and reuse of resources, innovation (Duncan, 1995) as well as reengineering of business processes (Broadbent, Weill, & Neo, 1999). These opportunities allow organizations to reduce their costs, increase the number of possible strategic options, maintain or enhance the competitive advantage, and at the end, create a positive impact on their performance. Therefore, in this study we will measure both direct and indirect effects (through alignment) of ERP flexibility, which is a subset of ES, on performance.  Henderson and Venkatraman (1993) argue that alignment and flexibility are related and mainly state alignment is critical to the ES structure. On the other hand, Duncan (1995) states although alignment will have positive impacts on the business and strategy, its impact on flexibility would be limited. In addition, Chung et al. (2003) state the positive relationship between flexibility and alignment, they hypothesize that flexibility has the impact on alignment, more specifically the strategic alignment of business and ES.  In this study, we will be examining alignment at the organizational level rather than the process level. We will measure alignment in terms of a synergy between business strategies and ERP strategies as well as profile deviation based on Venkatraman’s (1989) fit measures. In addition, because of the fact alignment can be affected by several factors (Peppard & Breu, 2003; Chan, 2002; Luftman, Papp, & Brier, 1999), we will examine the flexibility of ERP and the relationship between alignment, flexibility, and performance. In this study, for the rest of the thesis, flexibility and strategic ERP flexibility has been used interchangeably. 2.6 Business Performance Performance is a generic term and has been used in many disciplines and fields. Because of this variety, there are different perspectives to measure performance. Neely, Gregory, & Platts (1995) define performance measurement as "the process of quantifying the efficiency and effectiveness of action" where "effectiveness refers to the extent to which customer requirements are met, while efficiency is a measure of how economically the firm’s resources are utilized when providing a given level of customer satisfaction" (p.80). In the alignment and business literature, business performance has been studied as one of the most widely used constructs that is positively associated with alignment (Joshi, Kathuria, & Porth, 2003; Byrd et al. 2006; 111  Boulianne, 2007; Velcu, 2010; Schneiderjans & Cao, 2009; Cao & Hoffman, 2011; Cao, Baker, & Hoffman 2011).  In the management literature, performance has been examined from several perspectives (Bergeron, Raymond, & Rivard, 2004; Marr & Schiuma, 2003; Neely, Richards, Mills, Platts, & Bourne, 1997). In this study, our focus is about business performance. Business performance, too, has been examined by several disciplines such as accounting (Ittner & Larcker, 1998; Bromwich & Bhimani, 1989), finance (Jacobson, 1990; Mehran, 1994), economics, organizational behavior (Meyer & Gupta, 1994), strategy (Chakravarthy, 1986), human resource management (Wall & Wood, 2005), operations management (Fitzgerald, Johnston, Brignall, Silvestro, & Voss, 1991), marketing (Fornell, 1992; Phillips, Chang, & Buzzell, 1983), psychology (Edward, 1967), and sociology. In addition, several authors have presented different approaches for measuring performance (Chenhall, 2005; Neely et al. 1995). For example Performance Pyramids and Hierarchies (Lynch & Cross, 1995), and Balanced Scorecards (Kaplan & Norton, 1992) are among the highly used measurement techniques for performance.  Dossi and Patelli (2010) group the performance indicators under four categories: financial perspective, customer perspective, internal process perspective, and people perspective. The indicators of financial performance are sales revenue, operating income, contribution margin, gross margin, net income, cash flow, net working capital, days sales outstanding, return on investment, return on equity, residual income, and economic-value added while other perspectives include sales volume trend, market share, trade partner and customer satisfactions, market coverage indicators (customer), employee turnover, people training expenses, people productivity rate, time to market, innovation rate (people), process quality and productivity rate, product/service quality, service indicators, flexibility rate, and internal customer satisfaction rate (internal process) (p.511). While Kalehmainen (2010), also categorizes growth, profitability, and productivity as measures of financial performance, the author categorizes market share and customer satisfaction as static measures of financial performance since they are considered as “drivers of economic value added (EVA) growth” (p.532).  112  Based on the discipline or field (not even mentioning the researchers' experiences with the topic and choice) researchers examine or measure the perspective with different dimensions (therefore with different questions and methodology (Neely, 1999)). For example quality, reliability and speed of delivery, and cost might be very important for measuring manufacturing performance (Neely et al. 1995; Leong, Snyder, & Ward, 1990). In their meta analysis, Capon, Farley, & Hoeing (1990) state most of the research use growth in sales and assets, market share, advertising intensity, and capital investment as the indicators of financial performance. Other less commonly used financial performance indicators listed by the authors include geographic dispersion of production, research and development, debt, imports and exports, growth based on production, shipments, demand, and value added, diversification, industry minimum efficient scale, quality of business product and services, relative price, capacity utilization, entry barriers, vertical integration, marketing expenses, economics of scale, firm social responsibility, consumer vs. industrial sales, firm variability in return, inventory, and control. Moreover, Neely et al. (1995) identifies the common dimensions on how performance has been measured. These dimensions include quality, time, cost (process view by Oge and Dickinson (1992)), customer satisfaction, and flexibility (product view by Oge and Dickinson (1992)).  In spite of all the variations about performance, Neely (1999) states there is a common goal behind all these research studies: "As one would expect, the research stance adopted by these individuals differs in terms of the questions being addressed and the methodology adopted. In essence; however, they are all seeking to address one of the two fundamental questions associated with business performance measurement, namely: what are the determinants of business performance; and how can business performance be measured?" (Neely, 1999, p. 221).  Business Performance can be examined through two approaches: based on financial data or objective data (Weill & Olson, 1989) and based on perceptions (Chan et al. 1997; Chan, 1992). In ES literature, perception based, therefore subjective measurement of performance is more common (Bergeron et al. 2004; Bergeron et al. 2001; Sapienza, Smith, & Gannon, 1988). Performance measurement based on financial data is not recommended since it is difficult to get and there are several limitations, such as being unreliable and unavailable at times. One benefit of examining business performance through perception is to be able to capture realized 113  performance rather than intended performance. An organization may have planned on their performance; however, these goals are not always achieved. Therefore, examining realized performance provides more reliable results while measuring performance of organizations. As suggested by researchers, we have examined business subjective performance which is based on financial facts.  In addition, a recent and well respected method for measuring performance is examining performance over different components such as profitability, productivity, and growth (i.e., market share, cash flow, net profits, sales growth rate, return on sales, return on investment, revenue growth, etc. (Chan, 1992; Sabherwal & Chan, 2001; Raymond & Croteau, 2009), asset turnover, profit margin, return on equity and sales markup (Tallon, 2007)). This method is also a complementary approach while examining flexibility (Barua et al. 1995; Chung et al. 2005). Several researchers, Chan (Sabherwal & Chan2001; Chan et al. 1997; Chan, 1992), Cragg et al. (2002), Raymond & Croteau (2009), Croteau & Raymond (2001), etc., have stated examining performance through these variables is an acceptable approach and therefore adapted this approach for their studies. Therefore, we have adopted this approach for this study and expanded it through two dimensions: relative financial performance and absolute financial performance. Both these approaches use the elements suggested by researchers such as revenue growth, financial liquidity, market and share gains, net profits, return on investment, and overall performance relative to their competitors. There is also their actual cash flow, net profits, return on sales and return on investment. Another extension of performance measurement is the addition of product and service innovation which is also suggested by Chan.  In summary, for this study, among various types of performance definitions and performance measurement, we follow the approach of Chan et al. (1997) and Chan (1992) and focus on the perception of respondents regarding performance. Therefore, we are measuring realized business performance based on perceived business performance supported with financial facts.  114  2.7  Types of Measurement of Alignment There are few studies in literature that include methods about alignment in general. For  example, Richardson, Taylor, & Gordon (1985) use measured alignment (congruence) through a congruency scoring matrix where they assigned low, medium, or high values for their corporate missions and manufacturing tasks. At the end, they use this value for their regression analysis where they estimate profit through measure of corporate focus, level of congruency, and cost orientation. Cleveland, Schrder, & Anderson (1989) identify nine areas – strategic profiles (adaptive manufacturing, cost-effectiveness of labor, delivery performance, logistics, production economies of scale, process technology, quality performance, throughput and lead time, and vertical integration) (p.657-658) that would identify the competence via categorization of perceived weakness and strength that would mean success or failure. Their processes include classifying the organization's business strategy, ranking the performance areas, assigning a competence index based on strengths and weaknesses of each performance area, and assessing the relative business performance with respect to competitors. Vickery, Droge, & Markland (1993) measure the production competence ("the degree to which manufacturing performance supports the strategic objectives of the firm" p. 436) through strategic importance, manufacturing responsibility, and performance from 31 components. The authors state in order to be able to assess the production competence, the necessary factors include: measurement of performance, accurately identifying the strategic profile of the organization, and a method that accurately assign the weight of manufacturing responsibility to the strategic profile. Schroeder and Pesch (1994, p. 77) measure alignment (degree of focus) through five criteria: i) Number of competitive priorities should not exceed two; ii) A match between plant's competitive priorities and business strategy should be established; iii) Internally consistent decision making in the plant; iv) Match between manufacturing lot size and product line; and v) Similar manufacturing requirements. In this study, we adapt the measurement of alignment approach from Venkatraman’s (1989) study. Venkatraman’s alignment types are the most well known, empirically tested, and conceptually robust and are also the most suitable method for alignment. Venkatraman (1989) identifies six perspectives to measure fit/alignment: (a) fit as moderation; (b) fit as mediation; (c) fit as matching; (d) fit as gestalts; (e) fit as profile deviation; and (f) fit as covariation. The 115  mathematical formulation must be adequate with the concept in order to get consistent results and the researchers should question the validity of their choices (Venkatraman, 1989; Drazin & Van de Ven, 1985; Blalock, 1965). Verbalization of these perspectives are in Appendix B.   Fit as Moderation (Interaction): Refers to the case where the impact of one variable to another one, a predictor variable and a criterion variable, is dependent on a third variable; moderator. In this case, both predictor and moderator and their fit have an effect on the criterion variable (Venkatraman, 1989). An example may be a model where strategy is an independent variable, managerial characteristics are moderator, and the performance is defined as the dependent variable (Shin, 2003; Zigurs & Buckland, 1998). Analysis of variance, subgroup analysis, and moderated regression analysis (MRA) can be used to measure the fit of this type (Venkatraman, 1989). The representation of MRA is as follows:  (1)  , and ,  Where X refers to Strategic Orientation of Business Enterprise (STOBE), Z refers to Strategic Orientation of Enterprise Systems or ERP (STROES), XZ refers to the joint or interactive effect of both X and Z, while  ,  , and  are the coefficients and  is the  error term. Compared to other methods, Chan (1992) finds the loss of information for "moderation" is less than the loss in "match". Fit as moderation has been suggested as an appropriate method for examining the link between typologies such as Miles and Snow typology and performance (Guest, 1997).   Fit as Mediation: Refers to the case where variables have indirect effect to independent/antecedent variable and dependent/consequent variable. This type of fit is based on intervention of two or more variables. An example might be the direct and indirect effects of national economy on organizational performance (Shin, 2003; Zigurs & Buckland, 1998). Path analysis can be used for testing this type of fit (Venkatraman, 1989).  116    Fit as Matching: Refers to the match between two variables independent of any anchor (Venkatraman, 1989). In other words, the basics of this method are regarding the difference between each related pair. An example may be alignment between current and ideal specifications of an ES (Shin, 2003). Analytical schemas such as analysis of variance (interaction effect), deviation scores (use of absolute difference), and residual analysis (regression of one variable on another) can be used for testing this type of fit. The equation of “fit as matching” is as follows:  (2)  Where X refers to STOBE, Z refers to STROES, and used as deviation scores, while  ,  , and  is the difference that will be  are the coefficients and  is the error term.  Alternative match types include the followings (Chan 1992): i)  Fit as matching with signed difference; (3)  ii)  Fit as matching with squared, summed difference; and (4)  iii)  Fit as matching with summed interaction. (5)  Chan (1992) proves the first type of matching (matching as absolute difference) provides better results compared to the other three matching types.   Fit as Gestalt: Refers to the case where there is internal congruence among multiple variables and fit is considered as a pattern. Descriptive and predictive validities are two critical issues about gestalt method (Venkatraman, 1989). Descriptive validity refers to the interpreting the gestalt from theoretical framework (Bergeron, Raymond, & Rivard, 2001) and predictive validity refers to requirement of the match between performance implications and the strategy types (Venkatraman, 1989; Bergeron et al. 2001). Gestalt approach seeks for “simultaneously at a large number of variables that collectively define a meaningful and coherent slice of organizational reality” (Miller, 1981, p.8). Factor analysis or cluster analysis can be used for testing this type of fit.  117    Fit as Profile Deviation: Refers to “adherence to specified profile” (Venkatraman, 1989, p.439). This type of fit is based on adherence of multiple variables. Euclidean distance in an n-dimensional space with standardized scores as well as weights for each dimension can be used to calculate deviation from the ideal profile. While deviation from the ideal profile implies misfit (weakness of context and design (Shin, 2003, p.5)), the opposite means better fit.    Fit as Covariation: Refers to internal consistency among theoretically related variables. In this perspective, the effect of the degree of covariance of all variables on criterion variable is examined. Although fit as gestalt and fit as covariation are similar, there is a slight difference between them. Based on Venkatraman (1989) definition, Shin (2003) states "Fit as gestalts can be regarded as a product of cluster analysis, in which a grouping of observations is made upon a set of attributes; covariation is the result of factor analysis, in which the grouping of attributes is also made from a set of observations. Covariation, therefore, indicates a logical linkage (alignment) among considered independent variables" (p.5). Confirmatory factor analysis can be used for testing this type of fit (Venkatraman, 1989).  Choice of the method of analysis should be based on the concept, theory, and the complexity of model (Bergeron et al. 2001). Therefore, following the literature about alignment, our data type, model complexity, as well as the appropriateness of the concept with the methodology, we decided to use fit as moderation and fit as profile deviation. Literature shows that moderation approach is superior to matching approach (Sabherwal & Chan, 2001; Chan et al. 1997). Alternatively, there are more discussions regarding profile deviation. Generally literature has several studies supporting, and in favor of, profile deviation approach (Klaas, Lauridsen, & Hakonsson, 2006; Bergeron et al. 2001; Chan et al. 1997; Bergeron & Raymond, 1995; Chan, 1992; Venkatraman & Prescott, 1990). Klaas et al. (2006) state “profile deviation perspective reflects best the theoretical proposition of performance effects” (p.145). Venkatraman (1989) states fit as profile deviation and fit as moderation complement each other.  The profile deviation approach requires a profile, called ideal profile that is a set of dimensions built based on particular conditions (Klaas et al. 2006; Venkatraman, 1989). This 118  ideal profile can be build based on two approaches: theoretical approach (i.e., Sabherwal & Chan, 2001; Naman and Slevin 1993) or empirical approach (i.e., (Bergeron et al. 2001; Zajac, Kratz, & Bresser, 2000; Bozarth & Berry, 1997; Venkatraman & Prescott, 1990; Drazin & Van de Ven, 1985). Although theoretical method is the stronger approach, empirical approach has been the popular approach for profile deviation method (Klaas et al. 2006; Bergeron et al. 2001; Bozarth & Berry, 1997). There are several disadvantages of empirical approach (Klaas et al. 2006; Drazin & Van de Ven, 1985) of determining the ideal profile: "the profiles of the high performing organizations in the calibration sample may well be less than ideal or optimal; if this is the case, the empirical results will accordingly underestimate the negative performance implications from misfits, i.e. deviations from the ideal profile" (Klaas et al. 2006, p.144) and difficulty in identifying the impact of ideal profile on performance. The authors report three issues where the empirical studies lack in that sense: i) the measurement of individual deviations from internal and external profile and their aggregation; ii) weights of each individual elements of a profile; and iii) the effect of the directions (i.e., “underestimating negative impact on performance”, p. 144) of deviations from the profile.  The size of deviation from the ideal profile represents the misfit. Klaas et al. (2006) identify three types of misfit regarding profile deviation: i) external and internal fit; ii) critical misfits; and iii) overfit and underfit. For example, while underfit is negatively associated with effectiveness, overfit is negatively associated with efficiency (Klaas & Donaldson, 2009). Similarly, comparison of external and internal misfits, and underfit and overfit would give managers the idea what they should focus on for a better alignment.  Calculation of fit or misfit through profile deviation approach is more complex than other approaches. In profile dimension, as mentioned earlier, researcher needs an ideal profile or pattern on dimensions (Bergeron et al. 2001; Drazin & Van de Ven, 1985). The end deviation from this profile represents the misfit while subtraction of this score from 1 (considering that the range of ideal profile is between -1 and +1) gives the fit or alignment. The more the distance calculated through Euclidian distance, the lower the fit between the constructs.  119  Literature has few alternatives for building the ideal profile: using a calibration sample of the top 10% of firms in terms of performance (Bergeron et al. 2001; Venkatraman & Prescott, 1990); calculation through a series of empirical analysis (Bozarth & Berry, 1997), or a theoretical approach (Sabherwal & Chan, 2001). As mentioned earlier, empirical methods raise many concerns about their robustness and validity. Narasimhan and Wang (2000) examined Bozarth and Berry's (1997) approach and found methodological errors in their approach. Therefore the authors suggest using a 10% calibration instead of a set of complex empirical methods for the ones who insist on using an empirical method for building the ideal profile. Another alternative approach for empirical method is to use either equal weights or beta coefficients from regression analysis.  Another critical problem with this empirical approach is the assumption of equal weight of constructs or dimensions on performance. Since it is just an empirical method based on data, there is no theoretical or empirical reasoning to justify a different weight (Bergeron et al. 2001). Table 15 presents the fit or alignment studies in the ES literature.  120  Profile Dev.  Covariance  Gestalt  Mediation  Moderation  Author(s)  Matching  Table 15 Fit Studies in Literature (extended from Bergeron et al. 2001, p.1005)  Bergeron & Raymond (1995), Bergeron et al. (2001) Y Y Chan (1992) Y Y Y Y Y Y Chan et al. (1997) Y Y Sabherwal & Chan (2001) Y Bergeron et al. (2001) Y Y Y Y Y Y Bozarth & Berry (1997) Y Teo & King (1996) Y Brown & Magill (1994) Y Fiedler, Grover & Teng (1996) Y Raymond, Paré & Bergeron (1995) Y Bergeron et al. (2004) Y Raymond & Bergeron (2008),Raymond & Croteau (2009) , Y Chan et al. (2006) Croteau & Bergeron (2001) Y Croteau & Raymond (2004) Y Tallon (2008) Y Y Studies focuses are as follows:  Bergeron & Raymond (1995) - Aligning business strategic orientation with strategic ES management to performance.  Chan (1992) – Performance impacts of business and ES strategy.  Chan et al. (1997) - Performance impacts of alignment of strategic orientation and ES strategic orientation.  Bergeron et al. (2001) - Fit in strategic ES management with comparison of types of fit measurement.  Bozarth & Berry (1997) – Fit between market requirements and manufacturing.  Teo & King (1996) - Performance impacts of administrative, sequential, reciprocal, and full integration between business planning and ES planning.  Brown & Magill (1994) - Alignment of ES structure and organization.  Fiedler, Grover & Teng (1996) - ES and formal organizational structure taxonomy.  Raymond, Paré & Bergeron (1995) - Alignment of ES management sophistication and formal structure.  Bergeron et al. (2004) - Identifying ideal patterns of alignment and business performance through gestalt approach.  Raymond & Bergeron (2008) - Strategic alignment between e-business capabilities and business strategy of SMEs in manufacturing industry.  Raymond & Croteau (2009) – Strategic alignment between manufacturing strategy and advanced manufacturing technology.  Croteau & Bergeron (2001) – Alignment between business strategy, technological deployment, and organizational performance.  Croteau & Raymond (2004) – Alignment between ES competencies and strategic competencies.  Tallon (2008) – Strategic alignment of ES and business strategy, at the process level.  Chan et al. (2006) – Alignment between ES and business strategies with Miles & Snow typology. 121  3  Chapter: Research Model This section explains the constructs of the proposed model in details.  3.1  Business Performance The third construct in our model is the business performance. Performance concept has  long been debated in business and enterprise systems literature. Two common performance measurements exist in the literature (Bergeron et al. 2001): i) performance measurement based on an objective approach through financial ratios (Weill & Olson, 1989); and ii) performance measurement based on a subjective approach (Chan et al. 1997; Venkataramanan, 1989). In ES research, most researchers prefer subjective measurement of performance over objective measurement since objective measurements generally have serious limitations such as focusing "only on the economic dimensions of performance, neglecting other important goals of the firm; also, the data are often unavailable or unreliable" (i.e., avoidance of corporate and personal income taxes) (Bergeron et al. 2004, p.1009; Bergeron et al. 2001; Sapienza, Smith, & Gannon, 1988, p. 131). In addition, Venkatraman and Ramanujam (1987) and Chan (1992) state there is a positive correlation between objective measurement of performance and subjective measurement of performance; therefore subjective measurement of performance can be used instead of objective measurement of performance.  There are several ways and types of metrics to measure performance. In this study, performance has been measured through subjective perception of several financial ratios. In this perspective, we have followed Chan’s (1992) approach and have identified three types of performance measurements: absolute financial performance, relative financial performance, and product and service innovation. Relative financial performance (relative to competitors) is related to market growth (revenue growth, market share gains), profitability (net profits, relative return on investment (ROI)), financial liquidity, and overall performance; absolute financial performance has been measured through cash flow, net profits, return on sales and return on investment; and last but not the least, product-service innovation has been measured through the frequency of product, service, and technology development and introduction. In addition, Dossi 122  & Patelli (2010) state that non-financial indicators such as productivity, customer retention, and employee satisfaction can be used in measurement of relative performance.  3.2  Alignment and Flexibility  Based on the definitions of business performance, alignment, and flexibility, the relationships among them can be hypothesized. Regardless the type (i.e., strategic alignment (Sabherwal & Chan, 2001; Chan et al. 1997), structural alignment (Croteau et al. 2001), business alignment (Das et al. 1991), ES alignment, cross-dimensional alignment, and mechanisms of alignment) and direction (i.e., business strategy follow ES strategy vs. ES strategy follows business strategy, vs. they interact, etc. (Hirschheim & Sabherwal (2001)) of the alignment, studies in literature reveal alignment improves the business performance.  Despite of the general view of alignment improving business performance, we cannot argue the same about flexibility. In the literature, there are different studies with conflicting results about alignment, flexibility, and performance. For example, while Byrd & Turner (1999) stated the positive association between ES structure and performance, the Chung et al. (2005) study reports no significant relationship between ES structure and performance, but states ES structure may have an impact on “intermediate performance variables and not overall business performance variables like ROI or market share” (Barua et al. 1995, p.39; Chung et al. 2005). Researchers do not agree on the direction of relationship either. For example, Duncan (1995) states alignment has positive impacts on the business and strategy; it does not have such an impact on flexibility. Chung et al. (2003) state that flexibility has positive impact on strategic alignment.  Considering that i) alignment has related appropriate and supportive use of ERP with business strategies and objectives whilst having the objective to support the business pertaining to its plans, missions, decisions, capabilities and actions (Chan, 2002) and improve performance; and ii) ERP flexibility is related to adaptation or reaction to changes in business environment, we can expect that alignment and flexibility are positively associated with business performance. Therefore, based on the definitions and aforementioned characteristics of alignment (strategic 123  alignment), flexibility (strategic ERP flexibility), and performance (business performance), we can hypothesize that:  Hypothesis 1: There is a positive relationship between alignment and business performance. Hypothesis 2: There is a positive relationship between flexibility and business performance through alignment. Hypothesis 3: The level of strategic ERP flexibility is positively associated with alignment.  3.3  Strategy Attributes The constructs used for this study come from the studies of Venkatraman (1989), Miles  and Snow (1978), and Porter (1980), where the selection and combination of the factors have been done based on several studies such as Segev (1989), Chan (1992), Sabherwal & Chan (2001), Cragg et al. (2002), etc. The constructs have been grouped under four categories: Business Strategy Attributes, ERP Strategy Attributes, and Performance Attributes in addition to the strategic ERP flexibility construct used in this study. Business Strategy Attributes are based on Venkatraman’s (1989) study, where the author examined business strategy under seven categories (see Table 16 for the summary):   Company aggressiveness whose objectives include dominating the market and prices even if it required reducing financial ratios, prices, profitability, etc.;    Company analysis focuses on detailed analysis, effectiveness of ES, sophisticated outputs and planning for decision making;    Company defensiveness focuses on quality, effective relationships with supply chain network, performance monitoring, defending market share as well as a distinguished bargaining power over buyers/suppliers;    Company futurity focuses on the ways to be more competitive in the future through forecasts, trend and “what-if” analysis;    Company pro-activeness focuses on developing new products and services, acquiring businesses, and seeking new opportunities;    Company riskiness focuses on those who do not hesitate to take risk for businesses and projects (major decisions may require more conservativeness); 124    Company innovativeness focuses on development of solutions through experimentation and creativity.  Table 16 Business Strategy Attributes and their Main Characteristics  Attribute Aggressiveness  Main Characteristics Dominating the market and prices even if it requires reducing financial ratios, prices, profitability, etc. Analysis Detailed analysis Effectiveness of ERP Sophisticated outputs and planning for decision making Defensiveness Quality Effective relationships with supply chain network Performance monitoring Defending market share Bargaining power over buyers/suppliers Futurity Enhance competitive in the future through forecasts, trend and “what-if” analysis Proactiveness Developing new products and services Acquiring businesses Seeking new opportunities Riskiness Take risk for businesses and projects Innovativeness Development of solutions through experimentation and creativity Source: The table has been developed based on Venkatraman (1989), Sabherwal & Chan (2001).  ERP Strategic Attributes have been developed through a mirroring approach for alignment as moderation approach (Cragg et al. 2002; Sabherwal & Chan, 2001; Chan et al. 1997; Chan, 1992) and involves the same categories. The categories include ERP Support for aggressiveness, analysis, defensiveness, futurity, pro-activeness, riskiness (or risk aversion), and innovativeness. These attributes refer to the extent which current ERP provide support for the company strategy attribute for each business strategy attribute. As Chan et al. (1997) argue, this way we can focus on activity regarding the ERP rather than plans. Therefore, for each question for business strategy, there is one question corresponding to that question in the ERP section. For example, a question of defensiveness would be in ERP part as a corresponding attribute to determine whether the ERP systems support that strategy (see example below).  125  We develop strong relationships with our major customers Strongly Disagree Neutral Agree Strongly Disagree Agree 1 2 3 4 5  NA 0  The Enterprise Systems used in the business unit enable us to develop stronger ties with major customers Strongly Disagree Neutral Agree Strongly NA Disagree Agree 1 2 3 4 5 0 For instance consider two organizations: one organization wants to penetrate new markets through new product development. This organization may score high for pro-activeness and analysis, aggressiveness, and riskiness while scoring low on defensiveness. On the other hand, another organization may focus on what they are doing best and keeping records of every activity. This organization may score high on defensiveness and analysis while scoring low for aggressiveness, and pro-activeness.  With the mirroring technique, each question for the business part will be modified and placed for the ES section. Therefore, a question answering about defensiveness will be matched with another question in ES section where the respondent is asked to answer to what extent they agree regarding the support that ES support for the defensiveness strategy of the organization.  3.4  Strategy Profiles In our research, we have come up with three highly cited typologies in strategy literature.  These typologies are Miles and Snow (1978), Mintzberg (1983, 1979), and Porter (1980). These typologies have been highly studied from several perspectives. Among those, Doty et al. (1993) compare two theories of Miles and Snow (1978) and Mintzberg (1983, 1979) in order to eliminate concerns about the comprehensiveness of these theories and conclude that Miles and Snow's theory is more powerful for predicting organizational effectiveness, comprehensive than Mintzberg's theory and has been used by several ES researchers (Sabherwal et al. 2001; Brown & Magill, 1998; Chan et al. 1997; Camillus & Lederer, 1985). In addition, Sabherwal et al. (2001) stated Miles and Snow's typology addresses both corporate level and business level strategies. 126  Miles and Snow (1978) examine strategy, structure, and process of an organization as well as their relationships in a way that identifies organizations and their integration with their own environments. Miles and Snow (1978) classify organizations into four theoretical categories: i) defenders; ii) prospectors; iii) analyzers; and iv) reactors. Defenders refer to organizations that have a narrow product-market domain. In this type of organizations, managers are usually experts in the organization and are not interested in opportunities external to their own domains. These organizations focus on cost saving, improving efficiency rather than adapting new technologies, structures, or operations, or product development. They follow a classical planning sequence of “plan-act-evaluate”. Management style and decision making in this type of organization is usually centralized and more autocratic (Tavakolian, 1989; Miles & Snow, 1978).  Prospectors refer to organizations that seek market opportunities and effectiveness to some degree. These organizations usually adapt to emerging environment trends quickly and initiate change so that others need to respond. They are product and market innovation centric and not as efficient as defenders. They follow “evaluate-act-plan” sequence in their planning process. Management style and decision making in this type of organizations is decentralized, and more based on participation (Tavakolian, 1989; Miles & Snow, 1978).  Analyzers combine the strengths of Defenders and Prospectors. Under existence of stable business environments, Analyzers follow a certain structure and process. In other cases managers watch the competitors and adopt the most promising one. The main characteristic of Analyzers is to minimize risk while maximizing growth. They both use "plan-act-evaluate" and "evaluateplan-act" sequence of planning based on whether the environment is stable or more turbulent. The management style and decision making in this type of organizations is balanced and concerned with both efficiency and effectiveness (Tavakolian, 1989; Miles & Snow, 1978).  Reactors are the organizations that do not have a stable strategy-structure relationship and are unpredictable (Doty, Glick, & Huber, 1993). Although managers recognize the need for  127  change, these organizations lack the ability to respond to these needs effectively. Environmental pressure is the main effect that makes Reactors adjust themselves (Miles & Snow, 1978).  The Miles and Snow typology is widely used in literature. For example, Hambrick (1983b) examines Miles and Snow's typology to find how effectiveness varies among different industries and the effects of functional tendencies on strategic type choice. Burgelman (1983) examines the relationship between the Miles and Snow typology and strategies proposed by Mintzberg. Sabherwal & Chan (2001) examine strategic alignment by using Miles and Snow typology. Alternatively, Porter’s typology includes four successful and one failure strategy as Cost Leadership, Differentiation, Cost-Focus, Differentiation-Focus, and Stuck in the Middle, respectively. Cost leadership refers to companies, whose objective is to increase their relative market share through several methods such as cost minimization in R&D, advertising, etc., controlling overhead, efficient facilities, etc. The returns from the operations are invested in new supplies that will contribute to cost leadership objective. Differentiation focuses on a unique product or service (i.e., brand, technology, etc.) and gains the loyalty of customers. Cost-focus also focuses on cost minimization, efficient facilities etc. as cost leaders do. The difference is companies following cost focus strategy perform in a narrower sense such as a region, segment or a customer group rather than the industry. Differentiation focus is also limited form of differentiation but on a unique product or service. Stuck in the middle strategy lacks a specific strategy, internal consistency, and are incompatible (Vickery et al. 1993; Segev, 1989; Snow & Hambrick, 1980).  Literature has different arguments regarding use of Miles & Snow (1978) typology Porter’s (1980) typology. For example, White (1986) stated these two typologies do not exactly correspond to each other. They are not entirely two different perspectives; yet they focus on different and maybe complementary aspects of a complex phenomenon. There is also Segev (1989) who stated these two typologies complement each other and several researchers have adapted this method. For example Segev (1989) mentions the Hawes and Crittenden (1984) study where the authors used some of Porter’s variables from his original work and examined the 128  results with Miles and Snow’s typology. According to Hambrick (1983), the elements of two typologies are overlapping. For example, i) prospectors and differentiation; ii) defender and differentiation or cost leader; and iii) reactor and stuck-in-the-middle are addressing to the same aspects and can be considered as same. These two typologies have been widely used in marketing research as well. For example, Walker & Ruekert (1987) recognized the limitations of these typologies as well as their inherent strengths that can be improved upon by combining them and proposed a hybrid model that has the elements from both typologies such as Prospectors, Low Cost Defenders and Differentiated Defenders. In another study, Slater & Olson (2007) added Analyzer strategy type to Walker & Ruekert (1987) typology. Their results demonstrated the validity of this new typology.  Govindarajan (1986) uses both Miles and Snow, and Porter typologies in order to categorize business unit. Segev (1989) examines Miles and Snow typology and Porter (1980) typology in order to address the gaps between two typologies. Segev (1989) states “Porter’s typology focused mainly on more concentrated industries with larger business units while Miles and Snow’s typology focused on industries with more competitors” (p. 500). Literature shows these two typologies are similar in some sense, yet focus on different aspects of business (Segev, 1989), compatible with each other (Segev, 1989; White, 1986; Hambrick, 1983a) and a combination of these strategies would address more complex phenomenon regarding business and strategy. With this purpose, Segev (1989) compares the two typologies based on thirty-one different attributes and found these two typologies complete each other and proposed a framework to combine them. Segev (1989) also states that the combination of these two typologies form a new typology and states “the outcome of this synthesis is a typology incorporating the relevant components lacking in Porter’s typology, i.e. the environmental components of Uncertainty, Dynamism, and Complexity; Level of Risk; and Size of Strategy making Team. At the same time, some information (albeit marginal) missing from Miles and Snow’s typology on liquidity rate is provided.” (Segev, 1989, p.500).  In this study, since the complementary natures and not the linearity of these typologies are important, in addition to the suggestion of researchers in literature, we have followed Segev’s (1989) approach in terms of ERP and business strategies where the author combined Miles and 129  Snow (1978) and Porter (1980) typologies. The elements of the typologies used as business strategy profiles are as follows:   Prospector – Seek market opportunities, first-in in new products, flexible, quick adaptation, broad and continuously developing product and service domains, less formalized and decentralized control, aggressive competition strategy, and profit making orientation.    Differentiation (focus) - Unique product or service offering (technology, brand, customer service, quality, product performance, reliability, and technology, accessibility, features, etc.), satisfactory meeting with customer needs, has high loyalty from customers, low price sensitivity, creates high entry barriers for competitors.    Analyzer - Focus on maintaining stability, cost-efficiency, limited product and service offer, second-in in new products, imitation of product after proven viability, seek for combination of both effectiveness and efficiency, and hybrid domain as well as same distance to centralization and decentralization (between defenders and prospectors).    Cost focus/leadership - Cost leadership through a favorable access to raw material, high importance of efficient scale facilities, control over costs and overhead, tendency to minimize cost through reduction in R&D, advertising, etc. costs, target may be narrow. Keep attention on cost reduction and meanwhile do not ignore the quality, service, etc.    Defender - Niche, works in stable domain, limited range of products/services or market domain (segment), focuses on quality, lower prices, etc., aims to do the best, centralized decision making and control, high bureaucracy, high cost-efficiency, market penetration, conservative in competition, follow "plan-act-evaluate" approach.  The categorization does not include all the items from the typologies because of the problems stemming from the definitions of these items. For example, as mentioned earlier, the forth type of strategy defined by Miles and Snow (1978) is Reactors. Characteristics and problems of organizations having this type of strategy include lack of a consistent productmarket orientation, unclear strategy definition, unable to shape its structure to any strategy, lack of response to needs. In addition, the fifth element Porter's typology "stuck in the middle" is also removed from the analysis because of several reasons found in other studies (Cragg et al. 2002; Sabherwal & Chan, 2001; Chan et al. 1997). These firms do not have specific market share or 130  investments. They also lack the low-cost focus or differentiation focus unlike aforementioned firms. Table shows the summary of strategy attributes and strategy profiles with their key characteristics (see Table 17 for summary of the mapping between business strategy profiles and attributes).  131  Table 17 Mapping of Business Strategy Profiles and Business Strategy Attributes  Strategy Prospectors  Typology Miles and Snow  Selected Key Characteristics Seek market opportunities Flexible First-in in new products Quick adaptation and decision making Lack of formalization Differentiators / Porter Unique product or service offering Differentiation Focus Satisfactory meeting with customer needs High loyalty from customers Analyzers Miles and Snow Focus on maintaining stability Cost-efficiency Limited product and service offer Second-in in new products Imitation of product after proven viability Seek for combination of both effectiveness and efficiency Hybrid domain Seek for integration Same distance to centralization and decentralization High level of analysis Cost Leaders / Porter Favorable access to raw material Cost Focus High importance of efficient scale facilities Control over costs Minimize cost via reduction in R&D, advertising, etc. costs Narrow target Defenders Miles and Snow Niche Stable domain Efficiency Limited range of products/services or market domain Focus on quality, lower prices, etc. Aims doing the best Centralized decision making and control High bureaucracy High market penetration Conservative in competition Follow "plan-act-evaluate" approach Long term planning Stuck in the Middle Porter Lack specific market share or investments Lack the low-cost focus or differentiation Reactors Miles and Snow Lack of a consistent product-market orientation Unclear strategy definition Unable to shape its structure to any strategy Lack of response to needs Source: The table has been developed based on Miles & Snow (1978), Porter (1980), Segev (1989), Doty et al. (1995), Chan (2001) studies.  Table 18 represents the strategy attributes and compares the studies of Segev (1989), Doty et al. (1995), Sabherwal & Chan (2001) and this study. 132  Aggressiveness  Risk Aversion  Defensiveness  Attribute  Table 18a Basis for Business Strategy Profiles from Selected Articles  Business Profile  S1  S2  S3  S4  Justification  Prospectors  Low  -  Low  VeryLow  Differentiators  -  -  -  Low  Analyzers  Medium -  Medium Medium  Cost Leaders  -  -  -  High  Defenders  High  -  High  VeryHigh  Prospectors  High  -  Low  VeryLow  Differentiators  -  -  -  Medium  Analyzers  Low  -  High  VeryHigh  Cost Leaders  -  -  -  VeryHigh  Defenders  Low  -  High  VeryHigh  - Venkatraman (1989), and Sabherwal & Chan (2001) identify defensiveness as the key attribute of defenders, which is higher than Prospectors and Analyzers. - Segev (1989) study places differentiation and cost leader before and after analyzers in terms of defensiveness, respectively. - Consistent with Venkatraman (1989), Sabherwal & Chan (2001), and Segev (1989). - Consistent with Sabherwal & Chan (2001) and Segev (1989). - Miles and Snow (1978) define prospectors as high risk takers, while defenders avoid risk. The authors place analyzers between prospectors and defenders. - Segev (1989) identifies differentiation and cost leader between prospectors and defenders.  Prospectors  High  High  High  Differentiators Analyzers Cost Leaders Defenders Prospectors  Proactiveness  Differentiators Analyzers Cost Leaders Defenders  VeryHigh - Consistent with Doty et al. (1993), Shortell & Zajac (1990), and Sabherwal & Chan (2001). High - The authors define prospectors as aggressive compared to analyzers and Medium Medium Medium Medium defenders, where defenders are reported as less aggressive and play Medium safe than analyzers. - Segev (1989) places differentiation Low Medium Medium Medium and cost leader before and after analyzers in terms of aggressiveness. High High VeryHigh - Consistent with Segev (1989) and Sabherwal & Chan (2001). - Proactiveness is the key attribute of High prospectors while this characteristic is less and less significant for analyzers Medium Medium Medium and defenders, respectively (Venkatraman 1989; Sabherwal & Low Chan 2001). - Segev (1989) identifies Low Low VeryLow differentiation and cost leader between prospectors and defenders in terms of proactiveness. 133  Attribute  Table 18b Basis for Business Strategy Profiles from Selected Articles (Continued)  Business Profile  S1  S2  S3  S4  -  Medium Medium  Justification  - Consistent with Miles & Snow (1978), Segev (1989) and Sabherwal & Chan (2001). High Differentiators - Analysis is the key characteristics of High VeryHigh analyzers while prospectors and Analyzers / defenders show the analysis characteristics to some degree. High Cost Leaders - Segev (1989) identifies differentiation and cost leader Medium Medium Defenders / between prospectors and defenders in terms of analysis. Medium Medium Medium - Consistent with Doty et al. (1993), Prospectors Sabherwal & Chan (2001). - Defenders are more stable and focus Medium Differentiators on improving current conditions for future. Although prospectors are more Medium Medium Medium Analyzers quick profit making oriented, they do invest for long term R&D (Sabherwal High Cost Leaders & Chan, 2001; Miles & Snow, 1978). Cost leaders have higher High High VeryHigh Defenders concentration in long term cost reduction. - Based on Segev (1989) differentiators are close to prospectors and analyzers. Source: This table is an extension of Sabherwal & Chan (2001, p.27-28)’s table of “The Basis for the Ideal Business Strategy Profiles” (Adapted with Permission). Notes 1:  S1 refers to Segev (1989) work;  S2 refers to Doty et al. (1993) work;  S3 refers to Sabherwal & Chan (2001) work;  S4 refers to this study. Notes 2: I refers to Internal; E refers to External for each and . /  Futurity  Analysis  Prospectors  3.5  Calculation of Alignment Another critical issue for the analysis is the calculation of alignment. Literature does not  provide much variety of measurement for alignment. However, Venkatraman (1989) describes six types of calculation for alignment: Fit as Moderation (Interaction), Fit as Mediation, Fit as 134  Matching, Fit as Gestalt, Fit as Profile Deviation, and finally, Fit as Covariation. Each type of measurement requires specific type of data and objectives. For our analysis, three analyses are suitable: fit as moderation, fit as matching, and fit as profile deviation. Studies of Chan (Cragg et al. 2002; Sabherwal & Chan, 2001; Chan et al. 1997; Chan, 1992) show fit as moderation, which examines the interaction as well, is superior to matching in terms of explaining the outcome. Profile deviation complements the moderation type of alignment (Venkatraman 1989b). Therefore, in this analysis we use fit as moderation and profile deviation approaches to measure alignment. In addition, in order to show the robustness of our study and allow readers to compare the different types of measurements, we conducted analysis of fit as matching. These summary tables can be found at the end of the analysis section and in Appendices (Appendix I).  3.6  Mapping between Strategy Attributes and Profiles Alignment with profile deviation requires profiles and attributes about ERP and business  strategies. The profiles for this study have been developed based on careful examination of previous literature about Miles and Snow Typology, Porter’s typology and several studies from related literature (i.e., Sabherwal & Chan, 2001; Doty et al. 1993; Segev 1989; Zajac & Shortell, 1989; Camillus & Lederer, 1985). Ideal profiles for both ERP and business are the elements of two typologies by Miles and Snow (1978), and Porter (1980). This approach is similar to Sabherwal and Chan’s approach while we also used Segev’s suggestion about the combination of these two typologies.  The attributes of business strategy are defensiveness, risk aversion, aggressiveness, proactiveness, analysis, and futurity (Venkataramanan, 1989). While Sabherwal & Chan (2001) match these attributes with only three of the business strategy profiles of defenders, prospectors, and analyzers, we use the same attributes with an extension of five business strategy profiles suggested by Segev (1989). Therefore, the business strategy profiles used for this study are defenders, differentiations, analyzers, cost leaders, and prospectors. We have used differentiation and cost leader but have not used differentiation focus and cost focus since differentiation and differentiation focus, and cost leader and cost focus are on the same level in terms of consistency. As mentioned earlier in text, the only difference between them is the focus: while differentiation and cost leader have a broad focus (such as industry), differentiation focus and 135  cost focus have more limited focus (such as a specific segment in product line, specific consumer group, etc.). For example, a prospector (a company, whose business strategy is prospector) would be very high on aggressive and proactive attributes; meaning a prospector company would be expected to do extraordinary acts such as reducing financial ratios, prices, profitability, etc. in order to dominate the market and these companies, in addition, would be willing to develop new products and services, always in search of new opportunities, and even acquiring businesses. This is not surprising when considering the opportunistic and flexible characteristics as well as willingness to be the first in new products and services of prospector organizations. At the same time, the prospector companies would be medium on analysis and futurity attributes. In other words, the prospectors companies would do detailed analysis for forecasting future with the effective use of ERP. However, although they use these activities, their focus and application on these would be at a medium level. Conversely, prospector companies would be showing much less characteristics of defensiveness and risk aversion. Prospector companies would not be interested in defending their market position and avoiding risks for their business more than other business attributes. A defender organization would be very interested in defending their market position, therefore focusing on quality, avoiding business risk as much as possible, and doing analysis at a medium level while heavily relying on forecasts; therefore be very high on defensiveness, risk aversion, and analysis. In addition, defenders would not be interested in developing new products, or acquiring new business (therefore very low on pro-activeness). Table 19 shows the mappings among business strategy profiles and business strategy attributes.  Table 19 Mapping of Business Strategy Profiles and Business Strategy Attributes (Adapted and Modified with Permission by Sabherwal & Chan, 2001, p.15)  Business Strategy Attrib. Defensiveness Risk Aversion Aggressiveness Proactiveness Analysis Futurity  Prospectors  Differentiation Analyzers  Very Low Very Low Very High Very High Medium Medium  Low Medium High High High Medium  Medium Very High Medium Medium Very High Medium  Cost Focus / Leadership High Very High Medium Low High High  Defender Very High Very High Medium Very Low Medium Very High  136  3.7  ERP Strategy Enterprise systems, therefore ERP systems provide integration, flexibility, efficiency,  process orientation and effectiveness to organizations. After detailed examination of literature, we have grouped the ERP strategy attributes as operational support, market information, organizational purposes, strategic decision support, and managerial purposes (Jutras, 2007; Poston & Grabski, 2000; Shang & Seddon, 2000; Su & Yang, 2010). In this study, ERP strategy refers to strategic and supportive use of ERP systems to help the organization to gain or improve operational excellence, customer and supplier intimacy, competitive advantage, product/service development, improved decision making, and meet the strategic objectives of business. Based on Luftman's (2004) argument, we can say the main goal of ERP strategy is to make sure the decisions made by ES management either enables or drives the business strategy.  Based on the literature (i.e., Su & Yang (2010), Chand et al. (2005), Al-Mashari et al. (2003), Grant (2003), Sabherwal & Chan (2001), Ali (2000), Shang & Seddon (2000), Bowersox, Closs, & Stank (1999)) ERP strategy attributes or ERP strategic support types that are built based on the benefits of ERP can be categorized as follows:   Operational: From an operational perspective, organizations use ERP in order to support and improve their transaction-processing ability, improve organizational information quality and visibility, enhance decision support capabilities, increase productivity, customer service, control their expenses regarding business operations, order entry and fulfillment processes in manufacturing and production functional area, and improve their operational efficiencies. During the operational use/support of ERP, organizations gain additional benefits from their systems such as reduction in operational costs, cycle times, level of inventories, as well as significant reduction in errors through standardization of cross-functional procedures.    Market Information: Use of ERP for market information purposes allows organizations to improve effectiveness, processing power across the organizational network and ERP infrastructure capability. Meanwhile organizations benefit from several reductions in ERP costs and the amount of system challenges. Market information helps organizations to develop competencies, even ERP competencies, through standardization of operations (including ERP operations). This attribute contributes to organizations' attempts to keep 137  or improve their competitive capabilities and market position that will come through satisfying customers and searching each avenue to accomplish that goal. In addition, with the support of market information attribute, organizations can minimize their operational and commercial risks regarding their businesses.   Strategic: Use of ERP in order to support strategic components of the business helps organizations to adapt to changes, support their business growth (strategic alliances, mergers, acquisitions), supply chain (including e-business), and consolidation of ERP infrastructure across business units, to have integrated and real time information. This way, organizations can build and maintain external linkages and business innovations. Organizations using their ERP with strategic purposes can improve their market opportunities, responsiveness to competitive pressure through a flexible structure, and improved business planning, and decision and forecasting capabilities. These organizations are open to use of technologies that will give them advantage over others.    Managerial: Managerial use of ERP allows organizations to improve and monitor resource management, performance, decision making and planning, quality management and control, market value and share through creativity and adaption of relevant technologies. Organizations can expand their operations through these characteristics (step by step detailed planning, improved resource management, use of relevant technology, etc.).    Organizational: Use of ERP to support organizational components allows organizations to create a platform for business process and partner (i.e., supplier) integration and build common vision. These organizations can easily support operational configurations for diverse market segments and organizational change, introduce of best practices, and rationalize their organization. While organizational support of ERP facilitates business learning, organizations can improve coordination and communication among business units, capabilities to facilitate segmental strategies and processes, as well as information sharing.  Based on the literature (Su & Yang, 2010; Jutras, 2007; Poston & Grabski, 2000; Shang & Seddon, 2000; Doty et al. 1993; Segev, 1989; Venkataramanan, 1989; Camillus & Lederer, 1985) and aforementioned characteristics of ERP, business strategy profiles and attributes, we 138  have modified the Sabherwal & Chan (2001)’s mapping. Therefore, we can say that for Prospectors, ERP for Flexibility will be appropriate with Strategic Decision Support; for Differentiators, ERP for Process Orientation will be appropriate with Managerial Support; for Analyzers, ERP for Integration will be appropriate for Organizational Support; for Cost Leaders, ERP for Effectiveness will be suitable for Market Information Support; and finally for Defenders, ERP for Efficiency will be suitable for Operational Support. For example, literature supports a prospector company with its new market opportunity seeking, flexibility focus, intention to be the first one to develop new products or services, and lack of formalization, they are classified as very high in improving effectiveness, standardization of cross-functional procedures (market information attribute), improving the market opportunities, supporting growth (strategic decision support attribute); medium in improving their business processes, and source management (managerial attributes), improving coordination among business units (organizational); and low in reducing the operational cost (operational) (Su & Yang, 2010; Jutras, 2007; Poston & Grabski, 2000; Shang & Seddon, 2000; Venkataramanan, 1989; Segev, 1989; Camillus & Lederer, 1985). On the other hand, a defender who focuses on being efficient, lowering cost, improving quality, planning in long term business, etc. would be very high on improving operational efficiency and reducing operational cost (operational attribute), facilitate business learning, improving coordination and communication among business units (organizational), improving market opportunities (strategic decision support attribute), and improving business processes (market information attribute), while only medium in improving effectiveness and reducing ES cost (market information attribute) (Su & Yang, 2010; Jutras, 2007; Poston & Grabski, 2000; Shang & Seddon, 2000; Doty et al. 1993; Venkataramanan, 1989; Segev, 1989; Camillus & Lederer, 1985). The mapping between ERP profiles and attributes are shown in Table 20 (Adapted and Modified from Sabherwal and Chan (2001) with Permission).  139  Table 20 Mapping of ES Profiles and ES Attributes  Prospectors ES Strategy Attributes Operational Market Info Organizational Strat. Dec. Sup. Managerial  ES for Flexibility Very Low Very High Medium Very High Medium  Differentiation / Focus ES for Process Orientation Low Very High High Very High Very High  Analyzers ES for Integration Medium Very High Very High Very High Very High  Cost Focus / Leadership ES for Effectiveness High Very High Very High Very High Very High  Defender ES for Efficiency Very High Medium Very High Very High Very High  The final step for calculating the alignment as profile deviation is the mapping between ERP and business strategy profiles. Table 21 reveals the mapping regarding which type of attribute is compatible with which profile. This table is crucial for the wording of hypotheses of this study (Adapted and Modified Sabherwal and Chan (2001) with Permission).  Table 21 Levels of Alignment between ES and Business Strategy Profiles  ES for Prospectors Differentiations Analyzers Cost Leaders Defenders Flexibility High Low Low Low Low Process Orientation Low High Low Low Low Integration Low Low High Low Low Effectiveness Low Low Low High Low Efficiency Low Low Low Low High Source: The table has been developed based on Sabherwal & Chan (2001), Segev (1989), and Doty et al. (1998).  The hypotheses of the study related to ERP strategy, business strategy attributes and profile and business performance are as follows:  Hypothesis 4: For Prospectors, there is a positive relationship between business performance and the alignment of ERP strategy and ERP for Flexibility. Hypothesis 5: For Differentiators, there is a positive relationship between business performance and the alignment of ERP strategy and ERP for Process Orientation. Hypothesis 6: For Analyzers, there is a positive relationship between business performance and the alignment of ERP strategy and ERP for Integration. Hypothesis 7: For Cost Leaders, there is a positive relationship between business performance and the alignment of ERP strategy and ERP for Effectiveness. Hypothesis 8: For Defenders, there is a positive relationship between business performance and the alignment of ERP strategy and ERP for Efficiency. 140  3.8  Objectives of the Study This study examines alignment between business strategies and Enterprise Resource  Planning (ERP) systems rather than focusing on whole Information Systems (IS) or Enterprise Systems (ES) in order to broaden our understanding about alignment concept. This study comprises three key objectives: (1) Extend the strategic alignment concept by applying the combination of Miles and Snow and Porter’s typologies that will be mapped to strategy attributes as part of strategy; (2) Operationalizing the constructs and identifying the relationship between alignment, strategic ERP flexibility, and performance; and (3) Finally examine the model through fit as moderation and profile deviation (Venkatraman, 1989).  We can write our hypotheses from two common perspectives (Drazin & Van de Ven, 1985; Fry and Schellenberg 1984): congruent approach and contingency approach. In congruent approach, hypotheses are formed from the variables with an unconditional association (i.e., the more the ERP and business are aligned, the higher the performance, etc.). Unlike congruent approach, contingency approach is more complex in that it hypothesizes the relationship between one dependent variable and more than one independent variables (i.e., ERP and business strategies interact to effect the performance) (Drazin & Van de Ven, 1985).  Fit is the critical element of contingency approach. The most common approaches to fit are selection (assumption), interaction (bivariate), and systems (Drazin & Van de Ven, 1985) (Van de Ven & Drazin, 1985). Selection approach accepts fit as a prerequisite for structure and context. Drazin and Van de Ven (1985) define interaction and systems approaches of fit as: "the interaction of parts of organizational context-structure factors; it affects performance" and "the internal consistency of multiple contingencies and multiple structural characteristics; it affects performance characteristics" (p. 515). Selection approach requires the examination of contextstructure relationship to assess fit and does not require a dependent variable (Chan et al. 1997; Drazin & Van de Ven, 1985). Interaction approach focuses on the effects of the interaction between structure and context on performance in terms of the variations. Models are analyzed through disaggregation of the elements of theory and their interaction with performance. While the advantages of integration include more detailed and accurate analysis, disadvantages include 141  the reductionism and lack of capturing the whole aspect of the theory as well as being unstable because of their non independent structure with other constructs or elements of constructs. In addition, Chan et al. (1997) argue based on Venkatraman’s (1989) study and state “This lends us support to the view that examining isolated components of strategy and performance can be misleading” (p. 139) regarding the disadvantages of bivariate approach (see Table 22).  Table 22 Approaches of Fit (Drazin & Van de Ven, 1985, p.515)  Literature