Product and Process Characteristics, Advanced Manufacturing Initiatives, and Supply Chain Management Initiatives: Complementarities and Fit-Performance Consequences

Abstract

We test two hypotheses reflecting answers to the following questions: (1) Do manufacturing firms adopt advanced manufacturing initiatives and supply chain management initiatives in a complementary manner, consistent with a given set of product and process characteristics? and (2) If the adoptions of various advanced manufacturing initiatives and various supply chain management initiatives do represent complementary choices, in light of a given set of product and process characteristics, what performance consequences can be expected? The two hypotheses are derived based on the logic of complementarities from economics, the structural contingency perspective in organization theory, and the concept of "FIT" from strategic management and are empirically examined with secondary data from durable goods manufacturers. Results from applying the method of simultaneous equations and regression analyses indicate that manufacturing firms appear to make adoption decisions with respect to advanced manufacturing initiatives and supply chain management initiatives in a complementary manner and that the complementary nature of these choices (i.e., "FIT") improves manufacturing performance. Change decisions should, therefore, not be made in isolation without considering impact on "FIT" and performance. The overall empirical approach, moreover, demonstrates a "systems approach" to defining "FIT" and examining its implications.

Keywords: Supply chain management, Complementary, Contingency theory