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International Journal of Production Research ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage:
International Journal of Production Research ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage:

International Journal of Production Research

ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20

The match between efficiency/flexibility strategy and organisational culture

Zhongfeng Su , Dongtao Yang & Jianjun Yang

To cite this article: Zhongfeng Su , Dongtao Yang & Jianjun Yang (2012) The match between efficiency/flexibility strategy and organisational culture, International Journal of Production Research, 50:19, 5317-5329, DOI: 10.1080/00207543.2011.618149

Published online: 05 Oct 2011.

Published online: 05 Oct 2011.

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International Journal of Production Research Vol. 50, No. 19, 1 October 2012, 5317–5329

Research Vol. 50, No. 19, 1 October 2012, 5317–5329 The match between efficiency/flexibility strategy and

The match between efficiency/flexibility strategy and organisational culture

Zhongfeng Su a * , Dongtao Yang a and Jianjun Yang b

a School of Business, Nanjing University, Nanjing, Jiangsu, PR China; b School of Management, Xi’an Jiaotong University, Xi’an, Shaanxi, PR China

(Received 14 December 2010; final version received 24 August 2011)

A mismatch between efficiency/flexibility strategy and organisational culture results in production inefficiency within the firm, whereas a proper match leads to superior performance. This study tries to find out the proper match between them by investigating their joint effect on firm performance. Based on the data of 212 Chinese firms, this research finds that the proper organisational culture for efficiency strategy is characterised by individualism, high power distance, and low uncertainty avoidance, whereas the proper culture for flexibility strategy has the characteristics of collectivism, low power distance, and high uncertainty avoidance.

Keywords: efficiency/flexibility strategy; organisational culture; firm performance

1. Introduction

The internal consistency issue in the manufacturing strategy research indicates that a mismatch between manufacturing strategy and organisational culture results in production inefficiency and competition within the firm, whereas a proper match leads to a competitive advantage and superior performance (e.g. White 1986, Bates et al. 1995, Prajogo and McDermott 2005). Thus, the strategic fit between manufacturing strategy and organisational culture is an important research issue (Dangayach and Deshmukh 2001). But, what is the proper match between them? Although previous research found that manufacturing strategy and organisational culture are highly related, surprisingly few studies have investigated the proper match between them, which is a serious research gap (Maull et al. 2001, Metters et al. 2010). The purpose of this study is, therefore, to provide some insights into the strategic fit between manufacturing strategy and organisational culture. We achieve our objective in several steps. First, because manufacturing strategy can be classified by the type of product to be produced (Voss 1995, Morita and Flynn 1997), and firms can compete in the market by offering either standard products or made-to-order products (e.g. Filley and Aldag 1980, Lowson 2001), we highlight efficiency/flexibility strategy (standard products/made-to-order products) as a key manufactur- ing strategy. Second, we hypothesise how efficiency/flexibility strategy and three dimensions of organisational culture (specifically, individualism/collectivism, power distance, and uncertainty avoidance) interactively affect firm performance. Third, we empirically test our hypotheses using the data of Chinese firms. Finally, we discuss our contributions, limitations, and future directions. China is taken as the research setting of this study for three compelling reasons. First, although China is deemed as the ‘world’s factory’, only a few studies on manufacturing strategy have been conducted in China (Zhao et al. 2006, Li et al. 2010). The importance of ‘Made in China’ makes it critical to know more about what is going on there (Li et al. 2011). Second, more and more multinational corporations have transferred, are transferring, or are going to transfer their manufacturing departments to emerging economies such as China (Hahn and Bunyaratavej 2010). Improved knowledge about China has enormous practical implications for them to operate in China (Child and Tse 2001). Finally, the Chinese experience can shed light on other emerging economies (Su et al. 2009). Several theoretical values fuel this study. First, this study provides some insights into the critical research question: what is the proper match between manufacturing strategy and organisational culture? Second, by investigating the match between efficiency/flexibility strategy and organisational culture, this study joins a series of recent work on the internal consistency issue in the manufacturing strategy research (Voss 1995). Finally, this study responds to a critical call in the organisational culture literature that asks for identifying the associations between

*Corresponding author. Email: zhongfengsu@163.com

ISSN 0020–7543 print/ISSN 1366–588X online 2012 Taylor & Francis

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organisational culture and manufacturing strategy (Metters et al. 2010). In addition, insights in this study also have important practical applications because they help managers accomplish the match between manufacturing strategy and organisational culture and further enhance firm performance. Overall, the importance of the research topic and context suggests that this study is in a position to extend our theoretical understanding and to guide managerial implications.

2. Conceptual model and hypotheses development

2.1 Conceptual model

Since the publication of Skinner’s (1969) seminal article, manufacturing strategy has received a great deal of attention. 1 One of the most important research topics in manufacturing strategy research is the internal consistency (Voss 1995). The strategic fit perspective argues that the fit between strategy and infrastructure is critical to

achieving strategic goals (Miller 1992). ‘Manufacturing strategies are useful only to the extent that they

greater consistency among the elements which define operations’ (Bozarth and McDermott 1998, p. 428). Conversely, a failure to achieve internal consistency can ‘result in a mismatch between the various choices in manufacturing which will severely impair a company’s ability to be competitive’ (Voss 1995, p. 9). Herein, ‘there is general agreement in the manufacturing strategy literature that the decisions regarding the structure and infrastructure of an organisation should be in line with its manufacturing objective/competitive priorities’ (Dangayach and Deshmukh 2001, p. 910). Because of the importance of the internal consistency, scholars have highlighted several organisational elements, such as controls, procedures, communications, attitudes, experience and skills, and human resource policies (e.g. Skinner 1974, Hill 1989, Vokurka and Leary-Kelly 2000). 2 In addition to these elements, it is also crucial to realise the internal consistency between manufacturing strategy and organisational culture in that organisational culture defines ‘the way in which a firm conducts its business’ (Barney 1986, p. 657). Extant research indicates that a proper match between manufacturing strategy and organisational culture leads to competitive advantage and superior performance, whereas a mismatch results in production inefficiency and competition within the firm (e.g. White 1986, Bates et al. 1995, Prajogo and McDermott 2005). Thus, the ‘strategic fit between manufacturing strategy, organisational culture, and business performance’ represents an important research issue (Dangayach and Deshmukh 2001, p. 911). But, what is the proper match between manufacturing strategy and organisational culture? The proposition that manufacturing strategy and organisational culture are highly related has been well acknowledged in prior research, and several scholars have investigated the impact of organisational culture on manufacturing strategy. For example, McDermott and Stock (1999) find that organisational culture affects advanced manufacturing technologies implementation outcomes; Nahm et al. (2004) highlight the impact of organisational culture on time-based manufacturing practices; Prajogo and McDermott (2005) find that different subsets of total quality-management practices are determined by different types of culture; Prajogo and McDermott (2011) examine the relationships between the cultural dimensions of the competing values framework with product quality, process quality, product innovation, and process innovation; and Baird et al. (2011) conduct an analysis of the association between organisational culture with the use of total quality management. Although extant studies have enriched our knowledge of the association between manufacturing strat- egy and organisational culture, few studies have investigated what would be the proper match between them (Maull et al. 2001, Metters et al. 2010). The only study we are aware of that touches upon this issue is Bates et al. (1995), which finds that a manufacturer with a well-aligned and implemented manufacturing strategy exhibits a group-oriented organisational culture with coordinated decision-making, decentralised authority and a loyal work force. It is noteworthy that the research on manufacturing strategy can be divided into the process approach and the content approach (e.g. Leong et al. 1990). The process approach refers to the process of formulating and implementing manufacturing strategy, while the content approach concerns the content of manufacturing strategy (e.g. Adam and Swamidass 1989, Leong et al. 1990). Bates et al. (1995) focused on the manufacturing strategy process and left the content approach as ‘a topic for future research’ (Bates et al. 1995, p. 1568). Thus, to provide a more fine-grained picture on the internal consistency between manufacturing strategy and organisational culture, this study will highlight the content approach.

lead to

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2.2 Efficiency/flexibility strategy

The content approach identifies four manufacturing objectives: cost, quality, dependability, and flexibility (e.g. Buffa 1984, Wheelwright 1984). 3 Concerning the relations among these objectives, there are competing perspectives on whether or not there is an incompatibility among them. 4 The trade-off perspective argues that ‘important trade-offs must be made among these objectives’ because ‘it is impossible to excel in all of them simultaneously’ (Fine and Hax 1985, p. 29). In contrast, the cumulative model suggests that as the requirements for a basic level of quality are satisfied, firms will tend to use that base as a jumping-off point to improve other dimensions (Ferdows and DeMeyer 1990). The competing perspectives lead to it being difficult to clarify manufacturing strategy by manufacturing objectives (Swink and Way 1995). As a result, scholars suggest that it is a better choice to identify manufacturing strategy by the type of product to be produced (Voss 1995, Morita and Flynn 1997). Woodward’s (1965) study is the seminal research that classifies manufacturing strategy using the products as the criterion. Woodward (1965) classifies manufacturing production technologies as large batch/mass production and unit/small batch, and further indicates that ‘large batch/mass production firms focused on efficiencies, while unit/small batch firms were flexible in meeting customer needs’ (Ebben and Johnson 2005, p. 1250). Subsequently, the manufacturing literature suggests that a firm can compete in the market by offering either standard products or made-to-order products (e.g. Lowson 2001). Firms offering standard products compete on their organisational efficiencies, whereas firms offering made-to-order products compete on their flexibilities to meet individual customer needs (Filley and Aldag 1980, Ebben and Johnson 2005). Thus, manufacturing strategy can be classified as efficiency strategy or flexibility strategy, depending on the products the firm offers (e.g. Ebben and Johnson 2005, Tan and Wang 2010). Firms taking efficiency strategies ‘generally provide only a few products that are the core offerings of the firm, which combined with predictable demand allows for simpler production scheduling, inventory levels, and delivery’ (Ebben and Johnson 2005, p. 1252). In contrast, firms operating flexibility strategies are more responsive to individual customer needs by providing made-to-order products (Tan and Wang 2010). ‘The key to efficiency and flexibility strategies does not only come from the ability to meet variation in quantity of product provided, but also from the variation in types of products that are offered’ (Ebben and Johnson 2005, p. 1250). Extant research indicates that the organisational and operational requirements to achieve efficiency conflict with those to achieve flexibility (e.g. Filley and Aldag 1980, Fiegenbaum and Karnani 1991). For example, Stigler (1939) suggests that the technology needed for efficiency is entirely different from that required for flexibility. Thompson and Bates (1957) indicate that firms with flexible goals prefer skilled labour to specialised equipment; conversely, firms emphasising efficiency often invest in specialised equipment. A detailed presentation of the differences in organisational and operational requirements between efficiency strategy and flexibility strategy is summarised in Table 1. It is noteworthy that some firms try to mix efficiency strategy and flexibility strategy. Yet, the differences in the organisational and operational requirements lead to firms experiencing difficulties in achieving efficiency and flexibility synchronously (Doty et al. 1993). Thus, firms that try to mix efficiency strategy and flexibility strategy often suffer from an inability to provide standard or made-to-order products effectively (Tushman and O’Reilly 1999), and they are at a significant disadvantage to other firms and underperformed (Ebben and Johnson 2005). Tushman and O’Reilly (1999) suggests that a firm can only provide both standard and made-to-order products effectively if they are pursued in physically separate entities, with different organisation characteristics, such as structures, systems, and culture. As a result, it is impossible for a firm with only one entity to provide both standard

Table 1. Characteristics of efficiency strategy and flexibility strategy firms.

Manufacturing aspect

Efficiency strategy firms

Flexibility strategy firms

Equipment Assets Organisation structure Manufacturing line employees Decision-makers Control systems

Specialised equipment Heavy fixed assets Mechanistic Perform standard tasks Unskilled Feed forward

General-purpose equipment Light or medium fixed assets Organic Perform unique or alter tasks Skilled Feed back

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and made-to-order products synchronously. Hence, efficiency strategy and flexibility strategy are two ends of a continuum (Ebben and Johnson 2005), and they are taken together as efficiency/flexibility strategy to describe manufacturing strategy in this study. Regarding the impact of efficiency/flexibility strategy on firm performance, Filley and Aldag (1980, p. 305) indicate that ‘the survival of organisations seems to depend, on the one hand, upon creating efficiency of operations, or on the other hand, producing an outcome which is relatively made-to-order’. Thus, either efficiency strategy or flexibility strategy can lead to superior performance. For example, Ebben and Johnson (2005) find that both efficiency strategy and flexibility strategy contribute to firm performance, and there is no difference in their performance effects. Although extant research has improved our understanding of the performance implication of efficiency/ flexibility strategy, understanding its internal consistency with organisational culture can further enrich our knowledge on its performance implications (Dangayach and Deshmukh 2001). However, few studies have probed such an issue, which is a serious research gap (Maull et al. 2001, Metters et al. 2010). To address such a gap, we will investigate how efficiency/flexibility strategy and organisational culture interactively impact firm performance to find out the proper match between them. In the next section, we will briefly introduce organisational culture and then develop our hypotheses.

2.3 Organisational culture

‘Organisational culture typically is defined as a complex set of values, beliefs, assumptions, and symbols that define the way in which a firm conducts its business’ (Barney 1986, p. 657), and it is ‘a holistic construct that describes the complex set of knowledge structures which organisation members use to performance tasks and generate social behavior’ (Bates et al. 1995, p. 1568). As a driving force behind all the actions in the organisation, organisational culture has significant impacts on many aspects of the organisation (Barney 1986), including manufacturing strategy (Maull et al. 2001). But, what are the associations between organisational culture and manufacturing strategy? The organisational culture literature suggests that organisational culture not only directly impacts manufactur- ing strategy, but also affects its performance implication (Dangayach and Deshmukh 2001). As we have mentioned above, extant research has investigated the direct impact of organisational culture on manufacturing strategy (e.g. McDermott and Stock 1999, Nahm et al. 2004, Prajogo and McDermott 2005). Yet, little attention has been paid to the effect of organisational culture on the performance implication of manufacturing strategy, which leads to the critical research question: ‘what is the proper match between manufacturing strategy and organisational culture?’ (e.g. Maull et al. 2001, Metters et al. 2010). To better understand the proper match between manufacturing strategy and organisational culture, we will investigate the performance effects of the interactions of efficiency/flexibility strategy with individualism/ collectivism, power distance, and uncertainty avoidance. We highlight individualism/collectivism, power distance, and uncertainty avoidance for two reasons. First, they have been widely taken as key dimensions of organisational culture in extant research (e.g. Sitkin and Pablo 1992, Bochner and Hesketh 1994, Shane 1995, Wuyts and Geyskens 2005, Wang et al. 2011). Second, they have been used in previous research on the relationship between manufacturing strategy and organisational culture. For example, Bates et al. (1995) take individualism/collectivism and power distance to distinguish different types of organisational culture. Thus, to keep in accord with previous research, they are adopted in this study.

2.4 Hypothesis development

Individualism/collectivism refers to the extent to which the demand and interests of groups are taken over the desires and needs of individuals (Hofstede 2001). In an individualist culture, people are viewed as independent (Power et al. 2010). They believe in formal systems that explicitly define, control, and evaluate individual contributions (Bates et al. 1995). In contrast, people in a collectivist culture view themselves as inherently interdependent with the group to which they belong (Wuyts and Geyskens 2005). They are cooperative, enjoy working together, care about their partners, and perform better in close cooperation with others (Wagner 1995). Manufacturing line employees in firms operating flexibility strategies perform altering tasks (Filley and Aldag 1980). They need to cooperate and share knowledge with others because they lack all the knowledge and capabilities required to accomplish their tasks (Chen et al. 1998). Collectivism encourages close cooperation and knowledge

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sharing (Wagner 1995, Michailova and Hutchings 2006). Thus, it assists manufacturing line employees to perform their tasks and further enhance the performance implication of flexibility strategy. In addition, to facilitate cooperation and knowledge sharing, firms operating flexibility strategies would emphasise group or collective, rather than individual, contributions (Filley and Aldag 1980). Collectivism creates a socialisation mechanism that encourages organisational members to commit to group goals (Jaworski 1988, Li et al. 2010). Thus, flexibility strategy and collectivism are a proper combination and have synergistic effects on firm performance. In contrast, individualism emphasises independence (Power et al. 2010), which impedes cooperation and knowledge sharing (Michailova and Hutchings 2006). Moreover, people in an individualist culture believe in formal systems that explicitly define, control, and evaluate individual contributions (Bates et al. 1995), which are in opposition to the need of flexibility strategy. Thus, individualism does not fit with flexibility strategy. Regarding efficiency strategy, manufacturing line employees perform standard tasks (Filley and Aldag 1980). There is less need for cooperation and knowledge sharing among employees. In addition, efficiency strategy competes on organisational efficiencies (Filley and Aldag 1980, Ebben and Johnson 2005). The detailed formal systems that explicitly define, control, and evaluate individual contributions can significantly enhance organisational efficiencies (Ouchi 1979). Thus, efficiency strategy prefers individualism to collectivism. Therefore:

Hypothesis 1: The interaction between efficiency/flexibility strategy and individualism/collectivism has a positive impact on firm performance.

Power distance refers to the distribution of authority within a firm (Bates et al. 1995). It reflects the ‘practice of

inequalities in the distribution of

limits of authority and explicit definition of tasks, whereas low power distance emphasises equality and consultative decision-making (Hofstede 1980, Bates et al. 1995).

In this study, we suggest that the interaction between efficiency/flexibility strategy and power distance has a

negative impact on firm performance for three reasons. First, efficiency strategy involves simple and straightforward

decision-making (Lee et al. 2002, Ebben and Johnson 2005). Superiors in the firm are able to make these decisions

themselves. Thus, autocratic decision-making is suitable for efficiency strategy. In contrast, flexibility strategy often requires more complicated decisions (Lee et al. 2002, Dreyer and Gronhaug 2004). Superiors can hardly do it by themselves. Thus, consultative decision-making is a better choice. High power distance leads to an autocratic decision-making, whereas low power distance results in a consultative one (Hofstede 1980; Bates et al. 1995). Thus, high power distance and efficiency strategy is an appropriate combination, while low power distance and flexibility strategy is the other one. Second, the tasks and contributions of manufacturing line employees in firms taking efficiency strategies can be explicitly defined, controlled, and evaluated, whereas those of manufacturing-line employees in firms operating flexibility strategies are not able to be easily defined, controlled, or evaluated (Filley and Aldag 1980, Persentili and Alptekin 2000). High power distance leads to firms with explicit definition of tasks and tight control (Shane 1995); thus, it fits with efficiency strategy rather than flexibility strategy. Finally, as shown in Table 1, efficiency strategy works prefers a mechanistic organisation structure, whereas flexibility strategy prefers an organic one (Thompson and Bates 1957, Filley and Aldag 1980). Because the power distance of a mechanistic organisation is high, whereas that of an organic organisation is at a low level (Jennings and Seaman 1994, Sine et al. 2006), it is reasonable to conclude that low power distance is appropriate for flexibility strategy.

In summary, we argue that flexibility strategy and low power distance are an appropriate combination. In other

power and authority’ (Hofstede 1980, p. 72). High power distance focuses on the

words, the interaction of efficiency/flexibility strategy and power distance has a negative impact on firm performance. Therefore,

Hypothesis 2: The interaction between efficiency/flexibility strategy and power distance has a negative impact on firm performance.

A firm’s uncertainty avoidance reflects the extent to which the firm feels threatened by and tries to avoid

uncertain, ambiguous, or undefined situations (Hofstede 2001). Firms high in uncertainty avoidance believe that risks are dangerous and ambiguity is threatening (Sitkin and Pablo 1992). They value adaptability because adaptability aids in coping with the uncertainties and reduces the risks and ambiguity (e.g. Bright and Cooper 1993, Erramilli 1996). Because efficiency strategy and flexibility strategy are affiliated with different levels of uncertainty, uncertainty avoidance plays a critical role in the performance implication of efficiency/flexibility strategy. As shown in Table 1,

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a firm taking flexibility strategies holds general purpose equipments and light or medium fixed assets, which can easily be used for different purposes (Lowson 2001). In addition, its manufacturing line employees are able to perform altering tasks that further enhance its adaptability (Ebben and Johnson 2005). Thus, the firm operating flexibility strategy has a high level of adaptability. Uncertainty avoidance values adaptability (e.g. Bright and Cooper 1993, Erramilli 1996), and so there is a match between uncertainty avoidance and flexibility strategy. In contrast, in a firm operating efficiency strategy, the equipments are specialised and the assets are heavy fixed (Lowson 2001). They can hardly switch uses, which depress the adaptability of the firm. In addition, the manufacturing line employees also counteract the adaptability, in that they are only able to perform standard tasks (Filley and Aldag 1980). As a result, the firm operating efficiency strategy often faces high uncertainties. For this firm, it must be able to tolerate such high uncertainties. Otherwise, it would suffer a significant conflict between high uncertainties caused by efficiency strategy and the organisational culture with low uncertainty tolerance. Therefore,

Hypothesis 3: The interaction between efficiency/flexibility strategy and uncertainty avoidance has a positive impact on firm performance.

3. Methods

Different units of analysis have been used in various empirical studies on manufacturing strategy, such as manufacturing business unit, plant, and firm (Swink and Way 1995). Yet, ‘the appropriate unit of analysis depends upon the particular research questions to be addressed’ (Leong et al. 1990, p. 119). This study takes the firm level for two reasons. First, efficiency/flexibility strategy is a firm-level manufacturing strategy, and previous research on it is adopted at the firm-level (e.g. Ebben and Johnson 2005, Tan and Wang 2010). Second, organisational culture is a firm-level phenomenon (e.g. Bates et al. 1995, Wuyts and Geyskens 2005, Wang et al. 2011). To keep in accord with organisational culture, the manufacturing strategy should be measured at the firm level as well. Overall, the research question of this study suggests that the appropriate unit of analysis is the firm.

3.1 Sample and data collection

Data for this study were obtained through an interview survey instrument. Firms in the manufacturing industry were chosen to investigate manufacturing strategy. These firms were from several provinces of China, such as Beijing, Hebei, Jiangsu, Guangdong, Henan, and Shaanxi, so as to avoid any bias in certain regions. The data were gathered in three phases. First, we developed a questionnaire based on previous studies, and modified it according to the conditions that firms faced in China. A pilot test was conducted with 15 firms, whose responses were excluded from the final study. The questionnaire was revised using the feedback from the pilot study. The questionnaire was prepared in English and then translated into Chinese. The Chinese version was subsequently back-translated by a third party to ensure accuracy. The two translations indicated no substantial differences in the meanings of the scales. Second, we randomly selected 1000 firms from a list of firms provided by the local government and business research firms. The pre-commitment technique was used to increase the response rate. A telephone enquiry was performed before the formal survey, and 263 firms agreed to participate in the survey. Finally, we adopted the direct interview method to obtain the responses to our survey instrument. Because this method allowed us to clarify respondents’ queries on the spot, avoid the situation whereby a busy executive or senior manager delegated the task of filling out the survey to their secretary, and ensure the responses were complete and usable for data analysis, we chose it over a mail survey or online survey. All the interviewers were PhD students and teachers in Chinese universities, and most had taken part in an interview survey before. They received training covering background information, interview skills, and the exact meaning of every question in the questionnaire before embarking on the interview process. To reduce common method bias, the questionnaires on each firm were completed by two top managers (Zhou and Wu 2010). At the beginning, the interviewer showed the interviewee a letter that explained the intent of the survey and promised to keep all responses confidential. Then, two interviewers interviewed two executives separately. The final score of each item was the average of the responses from two top managers. We started the survey in October 2009 and had obtained 241 firms by March 2010. After deleting responses with missing data, firms that provided only responses from one top manager, and firms whose answers from two executives had distinct differences, we finally had 212 usable firms with an effective response rate of 21.2%.

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In addition, to avoid the possibility that a firm have several separate entities to pursue both standard and made-to-order products, we have checked all the usable firms. None of them met this criterion. Thus, the final sample included 212 firms. One issue commonly concerning survey methodology is non-response bias. To check it, we compared the responding and non-responding firms along major attributes such as firm age and ownership status using the t-test. All t-statistics were insignificant. Moreover, there were no significant differences between the 212 usable firms and the 29 deleted firms. In addition, the likelihood of non-response bias was further tested by splitting the total sample into two groups based on the time they agreed to be interviewed (Armstrong and Overton 1977). A comparison of the two groups revealed no significant differences, supporting the assumption that respondents were not different from non-respondents.

3.2 Variables and measures

Questionnaire items, unless stated otherwise, are measured using a five-point scale in which ‘1’ represented ‘strongly disagree’ and ‘5’ represented ‘strongly agree’. Firm performance was measured by eight items which were consistent with those of Li and Zhang (2007) ( ¼ 0.944). The respondent was asked to rate their firm’s performance relative to its principal competitors over the last three years on: (1) sales growth, (2) profit growth, (3) return on assets, (4) return on investment, (5) market share growth, (6) overall efficiency of operations, (7) return on sales, and (8) cash flow from operations. Following Ebben and Johnson (2005), efficiency/flexibility strategy was measured by seven items, which were shown in Table 2 ( ¼ 0.843). Having consulted Bates et al. (1995), Hofstede (2001), Wuyts and Geyskens (2005), and Wang et al. (2011), individualism/collectivism ( ¼ 0.805) was measured by: (1) our firm emphasises cooperation and collectivism; (2) our firm encourages jointly responsible for the successes and failures; and (3) close cooperation is preferred over working independently. Power distance ( ¼ 0.769) was measured by the following: (1) the hierarchical line is very distinct in our firm and it is not allowed to be bypassed; (2) the juniors are not allowed to against the superior, and they must follow the will of the superior; and (3) the superior has the last word, and the juniors can not discuss with them freely. Uncertainty avoidance ( ¼ 0.761) was measured by the following: (1) top managers encourage the development of innovative strategies, knowing well that some will fail (inversed); (2) we believe that a change in

Table 2. Measures of efficiency/flexibility strategy.

Items

Scores

Items

1. Our company provided standard products to all of our customers

1

2 3 4 5

Our company provided only made-to-order products and services to customer groups or individual customers Our products were priced based on the mod- ifications that were required by customers We utilised short products runs in manufacturing or produced in single unit batches

2. We invoiced our customers using a set price list

1 2 3 4 5

3. We utilised long product runs in manufacturing

1 2 3 4 5

4. Our manufacturing line employees performed standard tasks in completing the production/ assembly of products

5. Our manufacturing materials inputs did not vary greatly with production runs

6. Customers ordered our products from established descriptions or catalogues without product modification

7. We manufactured products and placed them in inventory for later sale

1 Our manufacturing-line employees were fre- quently required to perform unique tasks or alter products

1 Our manufacturing-materials inputs varied greatly with production runs or were spe- cially ordered for particular production runs

1 Customers often asked for modification in products when ordering or they ordered products specifically modified for their market segment

1 We manufactured products after they were ordered

2 3 4 5

2 3 4 5

2 3 4 5

2 3 4 5

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market creates a positive opportunity for us (inversed); and (3) we have a strong preference for high-risk projects with chances of high return (inversed). Firm size was adopted as the first control variable, which referred to the number of full-time employees. It was measured by a five-point scale (from 1 ¼ less than 50 to 5 ¼ more than 1000). Firm age was the second control variable. Because technological turbulence, market turbulence, and competitive intensity all affect firm performance (e.g. Jaworski and Kohli 1993), they were controlled as well. Their measures were adopted from Jaworski and Kohli (1993) and Zhou (2006). Technological turbulence ( ¼ 0.762) was measured by the following: (1) our industry is characterised by rapidly changing technology; (2) the rate of technology obsolescence is high in our industry; (3) it is difficult to forecast the technological changes in the next three years; and (4) technological changes provide big opportunities in our industry. Market turbulence ( ¼ 0.825) was measured by the following: (1) the volume and/or composition of demand are difficult to predict; (2) the evolution of customer preference is difficult to predict; (3) our demand fluctuates drastically from week to week; and (4) new demands in the market are significant difference from existing one. Competitive intensity ( ¼ 0.833) was measured by the following: (1) price competition is a hallmark of our industry; (2) any action that a company takes, others can make a response swiftly; (3) one hears of a new competitive move almost every day; and (4) competition in our industry is cut-throat.

3.3 Reliability and validity

Composite reliability was estimated by Cronbach’s alpha. All Cronbach’s alpha values were above the cutoff point 0.70 (Cronbach 1971). Thus, the theoretical constructs exhibited good psychometric properties. We conducted chi-square difference tests for all of the multi-item constructs in pairs to test discriminant validity (Fornell and Larcker 1981). The process involved collapsing each pair of constructs into a single model and comparing its E t with that of a two- construct model (Anderson and Gerbing 1988). The results indicated that in each case the difference in chi-square value was significant, providing evidence to discriminant validity. Because the dependent variable and independent variables were measured by the responses from two top managers, the potential dangers of common method bias should not be present in this study (Zhou and Wu 2010). In addition, we further examined it via Harman’s one-factor test (Podsakoff and Organ 1986). The test on all the items of independent and dependent variables extracted five distinct factors that accounted for 67.68% of the total variance, with the first one explaining 24.66%. Thus, no general factor was apparent, and a common method bias was not a serious issue in this study (Podsakoff and Organ 1986). As noted above, the score for each item was the average of those from two interviewers, thus the inter-rater reliability was tested as well. Inter-rater reliability can be tested by correlation coefficients (Shrout and Fleiss 1979). All the variables showed high correlation coefficients. Thus, our data had good inter-rater reliability.

4. Analysis and results

Table 2 lists basic information on each factor and correlations among them. The ordinary least-squares regression was used to test our hypotheses in four steps. First, we added control variables into the model; second, efficiency/flexibility strategy; third, the interactions of efficiency/flexibility strategy with three dimensions of organisational culture separately; and finally, the full model. Because the variables were entered in steps, we tested the incremental R-squares (Finkle 1998). The results are shown in Table 3. As can be seen, all incremental R 2 values are significant. Furthermore, we calculated variance inflation factors (VIF) statistic to check multicolinearity. All VIFs are below the cutoff point 10, which shows that there is no major threat of multicolinearity in this study (Neter et al. 1985). Regression results are reported in Table 4. Model 3a indicates that the interaction of efficiency/flexibility strategy and individualism/collectivism has a positive impact on firm performance is positive ( ¼ 0.222, p < 0.001). Thus, Hypothesis 1 is supported. Hypothesis 2 argues that the interaction of efficiency/flexibility strategy and power distance negatively affect firm performance, which is supported by the results of Model 3b ( ¼ –0.105, p < 0.10). Model 3c indicates that the interaction of efficiency/flexibility strategy and uncertainty avoidance has a positive impact on firm performance ( ¼ 0.205, p < 0.05). Thus, Hypothesis 3 is supported as well. In addition, our full model (Model 4) provides the same results as those of Models 3a, 3b, and 3c, which further supports our hypotheses.

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Table 3. Descriptive statistics and correlation matrix.

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1

2

3

4

5

6

7

8

9

10

1. Firm age

1

2. Firm size

0.360**

1

3. Technological turbulence

0.037

0.018

1

4. Market turbulence

–0.044

–0.112

0.428**

1

5. Competitive intensity

0.057

–0.008

0.509**

0.340**

1

6. Efficiency/flexibility strategy –0.017

0.071

–0.352** –0.284** –0.341**

1

7. Individualism/collectivism

–0.055

–0.018

0.398**

0.190**

0.298** –0.267**

1

8. Power distance

0.039

–0.064

0.286**

0.194**

0.339** –0.475**

0.223**

1

9. Uncertainty avoidance

0.047

0.049

–0.462** –0.244** –0.382**

0.507** –0.400** –0.273**

1

 

10. Firm performance Means SD

0.135*

0.196**

0.098

0.094

0.078

0.044 0.016

0.075

–0.051

1

10.15

1.49

3.30

3.02

3.70

2.79

3.86

3.17

2.62

2.33

12.04

0.91

0.74

0.85

0.71

0.71

0.53

0.80

0.77

0.73

Note: *p < 0.05, **p < 0.01.

Table 4. Results of regression analysis.

 
 

Model 1

Model 2

Model 3a

Model 3b

Model 3c

Model 4

Firm age Firm size Technological turbulence Market turbulence

0.190**

0.182**

0.187***

0.199***

0.192**

0.194***

0.263***

0.269***

0.220***

0.260***

0.296***

0.234***

–0.126*

0.179**

–0.134*

–0.198***

–0.158**

–0.210***

0.117*

0.125*

0.193***

0.164**

0.164***

0.216***

0.122*

0.069

0.131*

0.139*

0.150**

0.154**

Competitive intensity Efficiency/flexibility strategy (EFS) Individualism/collectivism (IC) EFS IC Power distance (PD) EFS PD Uncertainty avoidance (UA)

 

0.145*

0.077

0.158**

0.168*

0.180*

 

–0.032

 

–0.060

 

0.222***

0.294***

 

0.218***

 

0.236***

–0.105 þ

–0.140*

 

–0.150**

–0.136*

EFS UA R 2

 

0.205*

0.228***

0.178

0.195

0.220

0.224

0.214

0.248

F-value R 2 change F test for R 2 change

2.834***

2.954***

2.693***

1.966**

1.935**

1.990**

 

0.017

0.025

0.029

0.019

0.053

4.329*

3.253*

3.793*

2.454 þ

2.337*

Note: þ p < 0.10; *p < 0.05; **p < 0.01; ***p < 0.001. Model 2 compares the R 2 change with Model 1, Models 3a, 3b, 3c, and 4 with Model 2.

5. Discussion and conclusion

5.1 Contributions

Several theoretical contributions distinguish this study. First, this study provides some insights into the critical research question: what is the proper match between manufacturing strategy and organisational culture? The fit between manufacturing strategy and organisational culture is crucial to the overall effectiveness of a firm, and it is an important predictor of firm performance (White 1986, Bates et al. 1995, Prajogo and McDermott 2005). Yet, few studies have taken them together to analyse the proper match between them (Bates et al. 1995, Metters et al. 2010). The only study we are aware of that touches upon this issue focuses on the manufacturing strategy process and leaves the content issue as ‘a topic for future research’ (Bates et al. 1995, p. 1568). Following the context approach of manufacturing strategy, this study highlights efficiency/flexibility strategy as a key manufacturing strategy and explores how its interactions with organisational culture affect firm performance. The research finds that the proper organisational culture for efficiency strategy is characterised by individualism, high power distance, and low uncertainty avoidance, whereas the proper culture for flexibility strategy has the characteristics of collectivism,

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low power distance, and high uncertainty avoidance. The findings enrich our knowledge of the proper match between manufacturing strategy content and organisational culture. Second, this study contributes to the manufacturing strategy research. Extant research indicates that firms taking efficiency strategies have different organisational and operational requirements from firms operating flexibility strategies, and there is a significant diversity in organisational culture as well (Filley and Aldag 1980, Lowson 2001). Because the internal consistency between manufacturing strategy and organisational characteristics is one of the most important research topics in the manufacturing strategy research (Voss 1995), the ‘strategic fit between manufacturing strategy, and organisation culture, and business performance’ is an important research issue (Dangayach and Deshmukh 2001, p. 911). This study joins in a part of a series of recent work on such an issue. Thus, it has substantial contributions to the manufacturing strategy research. Third, this study is of importance to the organisational culture literature. The organisational culture literature indicates that it is critical for a firm to match its organisational culture with manufacturing strategy, because an ill-suited organisational culture can reduce the firm’s effectiveness and disable the firm from perceiving all its operational options, which, in turn, can prevent it from choosing options consistent with operational necessities (McLaughlin and Fitzsimmons 1996, Pun 2001). However, ‘the precise nature of culture’s significance is ambiguous’ and a question unanswered is: what are the associations between organisational culture and manufacturing strategy (Metters et al. 2010)? By investigating how efficiency/flexibility strategy and organisational culture interactively affect firm performance, this study enriches our knowledge of the influence of organisational culture on the performance implication of manufacturing strategy, which contributes to the organisational culture literature. Finally, this study improves our understanding of the values of manufacturing strategy and organisational culture. Although the performance implications of both manufacturing strategy and organisational culture have been empirically tested, there are also significant performance differences among firms taking the same manufacturing strategy or have similar organisational cultures (e.g. Newman and Nollen 1996, Corbett 2008). Because manufacturing strategy and organisational culture are highly related, studies that examine either manufacturing strategy or organisational culture alone can hardly explain such phenomena in that they suffer the omitted variable biases (Bates et al. 1995, Metters et al. 2010). This study finds that the proper combination of manufacturing strategy and organisational culture has synergistic effects on firm performance, whereas the improper combination impedes firm performance. Thus, a possible explanation for the phenomena is that the joint effect of manufacturing strategy and organisational culture on firm performance leads to the diversity in performance. Overall, the findings not only provide a possible explanation as to why there are significant performance differences among firms taking the same manufacturing strategy or have similar organisational cultures, but also enrich our knowledge of the values of manufacturing strategy and organisational culture.

5.2 Managerial implications

The findings of this study have important applications for managers. Our findings suggest that firms taking efficiency strategies should build the organisational culture characterised by individualism, high power distance, and low uncertainty avoidance; whereas firms operating flexibility strategies should build the organisational culture characterised by collectivism, low power distance, and high uncertainty avoidance. In addition, a firm that is suffering from the mismatch between manufacturing strategy and organisational culture should pay attention to both manufacturing strategy and organisational culture to eliminate the conflicts between them. And, if possible, it should adjust its manufacturing strategy and organisational cultures to improve the fit between them.

5.3 Limitations and future direction

Despite the contributions, this study has some limitations. First, the results of our study are limited to China and should be viewed cautiously when generalised to other contexts. Second, the cross-sectional data used in the study may cast doubt on causal statements derived from empirical findings. Finally, although we found little trace of common method bias, we cannot completely rule out its potential influence. Future research should use secondary data or combine survey data with secondary data to avoid this problem. We suggest three directions for future research. First, this study focuses on the proper match between efficiency/ flexibility strategy and organisational culture, but it is unable to illuminate how firms can accomplish the match and what firms suffering the mismatch should do. These questions call for further studies. Second, in addition to

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efficiency/flexibility strategy, other kinds of manufacturing strategy have been identified. Future studies should pay attention to them to paint a more comprehensive picture of the match between manufacturing strategy and organisational culture. Finally, there are several other taxonomies of organisational culture, such as clan, efficiency, hierarchy, and innovative cultures. Future studies need to investigate the match between them and a manufacturing strategy to further improve our understanding of such an issue.

Acknowledgements

We gratefully acknowledge the suggestions and comments received from the reviewers and the editor. We thank the Humanities and Social Sciences Research Foundation from the Ministry of Education of China (11YJC630184) and the Philosophic and Social Science Foundation from the Education Department of Jiangsu Province, China (2011SJD630012) for the generous financial support. All views expressed are those of the authors and not those of the sponsoring organisations.

Notes

1. Because there are several literature reviews on manufacturing strategy, we review relevant research in this study only briefly. For a more comprehensive literature review, see Leong et al. (1990), Swink and Way (1995), Voss (1995), and Dangayach and Deshmukh (2001).

2. Bozarth and McDermott (1998) provide an excellent literature review on this issue, and Leong et al. (1990), Swink and Way (1995), Voss (1995), and Dangayach and Deshmukh (2001) all pay attention to it. Thus, we have not reviewed the literature on such an issue in this article.

3. For a more comprehensive literature review on manufacturing objectives, see Leong et al. (1990) and Dangayach and Deshmukh (2001).

4. Rosenzweig and Easton (2010) have provided a much more comprehensive literature review on the relations among manufacturing objectives. Thus, we have not focused much attention to this issue in this study.

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