Effects of management practices for using the SaaS system on performance of hospitality firms in Norway

Abstract

The earlier literature either measured management practices in terms of the general management traits or did not account for the effects on firm performance. However, the transformation of the Enterprise Resource Planning (ERP) systems from general to more specific practices, the counteractive managerial goals and standardization and measurement issues requires the measures with more specific goals in a specific setting. The current paper aims at filling the gaps in measuring management practices and its effects on production costs and technical efficiency using daily data of 92 hospitality firms, i.e. chain hotels, in Norway from 2012 to 2014. We measured management practices in an index constructed from multiple criteria that capture managers' user patterns of the software-as-a-service (SaaS) systems. The empirical model identified inefficiency using a translog stochastic frontier input distance function (IDF). The findings show, on average, a 10% improvement in management practices increases production costs by 1.2%, but it improves efficiency by 0.9%. However, the marginal effect of improved management practices on the production cost is found to be U-shaped, while the marginal impact on inefficiency gradually declines to zero. The study also provides managerial implications on how to effectively use the ERP system and improve firm performance.