ERP implementation decisions under the condition of (A)symmetric information: An agency approach

The optimization investment policy decision of an ERP implementation has been analyzed under symmetric and asymmetric information conditions. For both conditions, ERP implementation options' decision optimizing models have been developed. In these models, both clients and vendors try to pursue their own benefits. Based upon the principal-agent theory, the models show to what extent a principal (a client) needs to pay more to an agent (a vendor) in a context of asymmetric information. For the client, it is important to understand the extra costs to be able to adopt effective strategies to stimulate a vendor to perform an optimal implementation of an ERP system. The results of a simulation experiment regarding ERP implementation options illustrate and verify the theoretical findings and confirm the general notion that the less informed party is obliged to pay an information rent to the better informed party.