Enterprise systems standardization, IT investment, and firm performance: an organizational information processing theory perspective

Firms have increasingly standardized their enterprise systems (ES) to streamline operations, reduce costs, and improve coordination across business units. However, how ES standardization, defined as implementing the same enterprise system modules across business units, affects firm performance remains unexplored. To advance our understanding of the value implications of ES standardization, we draw upon organizational information processing theory (OIPT). Using a sample of 1728 firm-year observations from the United States, we find that ES standardization has a negative influence on firm performance. However, this effect can be attenuated when firms make greater IT investments, leading to superior performance in the presence of both greater ES standardization and increased IT investment—two key moderators in our model. Furthermore, our analyses reveal that environmental uncertainty—specifically, industry dynamism and complexity—amplifies the moderating role of IT investment in the relationship between ES standardization and firm performance. Our theoretical framework and empirical findings underscore the importance of considering ES standardization as a critical factor in assessing the business value of IT.