2.2.4 Technology
acceptance model

model was originally proposed by Davis in 1986. Technology Acceptance Model is
derived from the Theory of Reasoned Action (TRA) and it offers an explanation
for user acceptance and usage behavior of information technology.  The theory of reasoned action was developed
by Martin Fishbein and Icek Ajzen in 1967 and was derived from previous
research that began as the theory of attitude. The theory aims to explain the
relationship between attitudes and behaviors within human action. TRA is used
to predict how individuals will behave based on their pre-existing attitudes
and behavioral intentions. An individual’s decision to engage in a particular
behavior is based on the outcomes the individual expects will come as a result
of performing the behavior.

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Acceptance Model theorizes that an individual’s behavioral intention to adopt a
system is determined by two beliefs, perceived usefulness and perceived ease of
use. Perceived usefulness is defined as “the degree to which an individual
believes that using a particular system would enhance his or her productivity”
while perceived ease of use is defined as ” the degree an individual believes
that using a particular system would be free of effort” Davis, Bagozzi & Warshaw (1989).

of TAM include its questionable heuristic value, limited explanatory and
predictive power, triviality, and lack of any practical value. Benbasat and
Barki (2007) suggest that TAM “has diverted researchers’ attention away
from other important research issues and has created an illusion of progress in
knowledge accumulation. Furthermore, the independent attempt by several
researchers to expand TAM in order to adapt it to the constantly changing IT
environments has led to a state of theoretical chaos and confusion.

 In general, TAM focuses on the individual ‘user’
of a computer, with the concept of ‘perceived usefulness’.  It brings in more factors to explain how a
user ‘perceives’ ‘usefulness’, and ignores the essentially social processes of
system development and implementation.

theory will explain the objective that covers the extent of adoption of the
ERPs by SME’s in Kenya.



2.2.5 SME’s In Kenya

(2015) defines small scale business as any firm, trade, service, industry or a
business activity, formal or informal, that it has an annual turnover that does
not exceed Kenya Shillings 500,000 and employing  1- 9 people. The total assets and financial
investment or the registered capital of the enterprise does not exceed Ksh 10
million in the manufacturing sector and does not exceed Ksh 5 million the
service and farming sector.

Medium  enterprises as those firms, trade, service,
industry or business activities that post an annual turnover of between Ksh500,
000 and Ksh5 million and have an employee list of 10 to 50.

A survey
by KNBS (2016) established that there
were about 1.56 million MSMEs licensed by the county governments while the
unlicensed businesses identified from the households were 5.85 million. The majority
of these MSMEs are in the service sector, with most operators in wholesale and
retail trade, repair of motor vehicles and motorcycles followed by
accommodation and food service activities and other service activities.
Wholesale and retail trade and repair of motor vehicles and motorcycles accounted
for more than half of the licensed (57.1 per cent) and unlicensed (62.9 per
cent) businesses.

all counties with the exception of Nairobi, micro sized establishments
constituted more than

percent of all licensed establishments. Nairobi County had the highest
proportion of small sized establishments at 14.8 per cent.

to KNBS (2016) Small and Medium
Enterprises (SMEs) play a vital role in the economic development of Kenya in a
number of ways including; by increasing competition, fostering innovation,
generating employment and an important source of goods and services.

The main constraints of
SME’S in Kenya include the requirement of multiple licenses for the same
business. These licenses are also expensive and cumbersome to get. There is
also interference from authorities; taxes are high and crippling; multiple
procedures in applying for business registration that are hectic and
restrictive. Other constraints include lack of capital, expensive loans, and a
lack of markets, stiff local competition, poor infrastructure (roads, power and
water supply) and insecurity.


2.2.6 Financial

traditionally, has been conceptualized in terms of financial measures, but some
scholars have proposed a broader view that incorporates non-financial measures
i.e. product, quality, company image etc.

to Richard (2009) organizational
performance encompasses three specific areas of firm outcomes: financial
performance (profits, return on assets, return on investment, etc.), product
market performance (sales, market share, etc.) and shareholder return (total
shareholder return, economic value added, etc.).

performance is a measure of a firm’s overall financial health over a given
period of time. Hamid (2016) says that
financial performance is an analysis conducted to see the extent to which a
company has conducted the rules of financial performance well and correctly.

performance measures are criticized for lacking neutrality and encouraging
short -termism. This measures are also criticized for lacking balance because
they are more concerned with physical assets and ignore other perspectives for
instance customer satisfaction.

on Assets (ROA) is considered as a major surrogate of the financial performance
of any firm because it represents both efficiency and profitability (Skousen et
al., 1998) thus ROA can be a useful performance indicator.

study considers using multiple measures in order to assess the performance of
the firms pre-implementation and post –implementation. Most of the measures
will be cost oriented.

2.2.7 ERP’s and
financial performance

Enterprise resource planning systems is a way to integrate business units,
provide real time data for timely decision making and improve performance of
the organization.

resource planning systems have become a game changer for a lot of organizations
all over the world due to its benefits. ERP’s also help companies to run their
businesses better by improving efficiency, providing accurate information and
improved customer and supplier relationship.

of the Small and Medium Enterprises aim to keep their operations cost at a
minimum to acquire a greater margin .Enterprise resource planning systems seek
to reduce operations cost by paying for the service rather than host their own
infrastructure and software. ERP systems directly improve financial performance
by decreasing IT infrastructure costs Shang and Seddon (2002).




of studies claim improved performance, whereas other studies report no or
negative impact of ERP’S in post implementation period.

2.3.1 No impact of ERP’s after

Hunton, Barbara & Jacqueline (2003)
researched on Enterprise resource planning systems: comparing firm performance
of adopters and non- adopters and results indicated that ROA, ROI, and ATO were
significantly lower for non-adopters than adopters, the third year after ERP
implementation. The results of this study was the performance of the adopters
did not change  significantly from pre-
to post-adoption, but the performance of non-adopters declined over the same
period of time. The survey results were drawn from 63 firms in Florida, USA.


respect to pre- to post-ERP adoption gains,
Poston and Grabski (2001)had similar results are similar to Hunton et al (2003) .This study focuses on
Enterprise Resource Planning (ERP) and its impact on firm performance. The
research finds, after accounting for within-firm variances, no significant
improvement associated with residual income or the ratio of selling, general,
and administrative expenses in each of the 3 years following the implementation
of the ERP system. However, a significant improvement in firm performance
resulting from a decrease in the ration of cost of goods sold to revenues was
found 3 years after the ERP system.

This corresponds to the work of Ali (2016), who
used the financial data of ERP adopters and non-adopters in Pakistan from 2000
to 2013 to  analyze the
impact of ERP implementation of the financial performance of the firm .The main
results of parametric tests showed no significant pre to post change in
financial performance of adopters. However the non-adopting firms experienced
significant performance impairment in, through and post implementation period
as denoted by ROA, ROIC, ROE and ROS. This confirms that ERP implementation
generates dual relative effects for adopters such as strategic benefit in term
of reduced relative COGS and operational benefit.

it can be concluded that the productivity paradox is supported in the mentioned
studies, if we consider the adopters only. One can conclude no support for the
productivity paradox if we take into account the relative performance of
adopters as compared to non-adopters because comparisons clearly indicates
better relative performance of adopters

2.3.2 Negative impact
after implementation.

study by Hitt, Wu & Zhou (2002)  conducted 
a study to investigate ERP investment and its business impact  and the results suggested that most of
the gains occur during the (relatively  long)
implementation period, although there is some evidence of a reduction in
business  performance and productivity
shortly after the implementation is complete.

Andres, Lorca, and Labra (2012) found a negative impact of ERP system implementation
on firm performance while reporting the Spanish firms’.

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