Do Enterprise Systems Necessarily Lead to Innovation? Identifying the Missing Links with A Moderated Mediation Model

Background: Despite widely implemented, enterprise systems remain an unsettled role in organizational innovation. This study purposes to address the effects of enterprise systems (ES) on firm innovation by adopting resource-based theory and capability building theory to focus on ES-enabled competence, rather than ES investment or implementation. ES-enabled competence is proposed to mediate the effect of ES integration on innovation performance. We further propose that continuous improvement moderates (1) the relationship between ES integration and ES-enabled competence, and (2) the relationship between ES-enabled competence and innovation performance. By examining these effects, we aim to discover how ES enables innovation at operational and strategic levels separately. Method: A survey method is conducted to explore the relationship between enterprise systems (ES) and innovation. Data are collected from manufacturing companies in 10 countries of three regions, i.e., Europe, Asia-Pacific, and the USA, and analyzed by using structural equation modeling technique. Results: We confirm the roles of enterprise systems as a resource and a capability and the effects of these roles on innovation—including the operational outcome, new product development performance, and the strategic one, innovation uniqueness. We demonstrate that continuous improvement moderates the mediation paths, namely “ES integration – ES-enabled competence – innovation performance”. The moderated mediation effect exists among continuous improvement, ES integration, ES-enabled competence, and innovation uniqueness. Conclusion: This study contributes to the ES and innovation research by uncovering the micro-foundation underlying ES-enabled innovation from a capability-based framework and elaborating the moderating role of continuous improvement in enhancing innovation.