A Virtual Integration Theory of Improved Supply-Chain Performance PDF

A Virtual Integration Theory of Improved Supply-Chain Performance
Author(s): Eric T. G. Wang, Jeffrey C. F. Tai and Hsiao-Lan Wei

Source: Journal of Management Information Systems, Vol. 23, No. 2 (Fall, 2006), pp. 41-64
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A VirtualIntegration
Theoryof
ImprovedSupply-ChainPerformance
ERIC T.G.WANG,JEFFREYC.F. TAI,AND HSIAO-LANWEI
Eric T.G. Wang is Dean and Professor
in theSchoolof Management
at National
Taiwan.He receivedhisPh.D. in BusinessAdministration,
CentralUniversity,
speandinformation
fromtheWilliamE. SimonGraduate
cializingincomputer
systems,
Schoolof BusinessAdministration,
of Rochester.
His researchinterests
University
includeelectronic
commerce,
supply-chain
management,
outsourcing,
organizational
His researchhas
economics,andorganizational
impactsof information
technology.
Information
Systems,
appearedin theJournalofManagement
Information
Systems
JourResearch,
Science,DecisionSupport
Management
Systems,
Information
Systems
& Management,
nal,Information
EuropeanJournalofInformation
Systems,
Omega,
Research,andothers.
EuropeanJournalofOperational
JeffreyC.F.Tai is a seniorindustry
Centerofthe
analystintheMarketIntelligence
forInformation
He
Institute
Taiwan.
received
his
MBA
and
Ph.D.
inInforIndustry,
mationManagement
fromNationalCentralUniversity,
Taiwan,RepublicofChina.
His research
interests
includesupply-chain
economics,
management,
organizational
His researchhas appearedin Information
andindustry
innovation.
& Management,
International
JournalofInformation
JournalofInformation
Management,
Manageandothers.
ment,
Professor
intheDepartment
Hsiao-Lan Wei is anAssistant
ofInformation
Manageof Scienceand Technology.
mentat NationalTaiwanUniversity
She receivedher
MBA andPh.D. inInformation
fromNationalCentralUniversity,
TaiManagement
interests
includeenterprise
resourceplanning,
wan,RepublicofChina.Herresearch
andsupply-chain
Herresearch
hasappearedin
organizational
learning,
management.
theEuropeanJournalofInformation
International
JournalofProjectManSystems,
andothers.
agement,
andmaintaining
a competent
Abstract: Organizing
andflexiblesupplychainis a
in today'sincreasingly
anduncertain
majorchallengeto manufacturers
competitive
thesubstitution
environments.
Virtualintegration
ofownership
withpartrepresents
a
set
of
information
(IT) fortighter
byintegrating
suppliers
through
nership
technology
collaboration.
Fromthesystemsand controlperspectives,
thisstudy
supply-chain
ofvirtualintegration
withan empirical
modeltoexaminetherole
developsa theory
thatvirtualintegration
manufacturers
to achievegreater
manuplaysin facilitating
and
cost
Based
on
a
of
Taiwanese
flexibility comparative advantage.
facturing
survey
ourresultsshowthatenvironmental
tendstomotifirms,
manufacturing
uncertainty
vatemanufacturers
toincreasetheirmanufacturing
withbothvirtual
inteflexibility,
grationand supplierresponsivenessplayinga vital enablingrole. The results
theimportance
ofsupplier
demonstrate
formanufacturers
togainmanuresponsiveness
andcomparative
costadvantagein supply-chain
Enfacturing
flexibility
operations.
JournalofManagement
/Fall 2006,Vol.23, No. 2, pp.41-64.
Information
Systems
2006 M.E. Sharpe,Inc.
0742-1222/2006 $9.50 + 0.00.
DOI 10.2753/MIS0742-1222230203
42
WANG, TAI, AND WEI
but
vironmental
thus,mightfirstappearas a threatto a manufacturer,
uncertainty,
withthehelpofIT andmoreresponsive
couldbe transformed
sucha threat
suppliers,
intoa competitive
inthemanufacturer's
higherlevelsofmanufacedge,as reflected
and
cost
turing
flexibility comparative advantage.
Key words and phrases: competitiveadvantage,environmental
uncertainty,
structural
information
supply-chain
equationmodeling,
interorganizational
systems,
management.
The study of manufacturingflexibility has longbeena centralthemein the

literature
information
[7,20,37,67,78],
(IT) andoperations
management
technology
industries
in
as itis an important
to
survive
[22]. Many
capability
hyper-competitive
onfirms'
manufacturenvironment
studieshaveexamined
theimpactsoftheexternal
andtechnology
characteristics,
[7,52,
adoption
practices
ingstrategies,
organizational
Virtual
74],whichall arewaystoachievehigher
integration
flexibility.
manufacturing
a setofsuppliers
withpartnership
tosubstitute
allowsa firm
byintegrating
ownership
andconand
execution
IT
for
collaborative
processplanning
operation
through
tighter
structure
trol[19,47]. Vertical
hasbeenproposedas a usefulgovernance
integration
and
lower
forcountering
reduced
environmental
price
uncertainty
uncertainty
through
adminislow
and
incur
additional
but
it
also
can
result
in
transaction
costs,
flexibility
trative
andproduction
costsassociatedwithrequired
[11,39,41]. In conadaptability
as an alternative
market
transactions
andoutsourcing
havealso beenrecognized
trast,
shortforfirms
toachievemanufacturing
capacity,
flexibility
byleveraging
production
the
and
the
firm's
resource
base
curve,
risks,
ening learning
through
reducing
expanding
collaboration
withqualifiedsuppliers
interfirm
collaboration
seemsto
[35].Although
a firm's
needsina dynamic
be
environment
[36,39],itmayactually
satisfy
adaptation
morecostlythanvertical
We
virtual
as
an
alternative
integration. propose
integration
whichcan achievebothmanufacturing
and cost
mechanism,
governance
flexibility
internal
andexternal
control.
advantage
byincreasing
Virtualintegration
is similarto verticalquasi-integration
in lean supply,which
offers
thebenefits
thatitwas assumedvertical
should
integration
provide[6, 18,36].
Clemonsetal. [19] arguethatthecombination
ofreduction
ofcoordination
costand
transaction
riskwillleadtopartnership
andthustheemergence
ofelecoutsourcing,
tronic
rather
thanmarket
thesameresults
arealso suggested
hierarchies,
outsourcing;
workofMaloneetal. [42].Outsourcing
of
bythetheoretic
mayreducetheinfluences
environmental
but
it
can
also
a
new
demand
for
uncertainty
facingfirms,
generate
withsuppliers[27, 71].
flexible,smooth,and well-coordinated
ensuring
operations
themanagement
ofexternal
becomesanimportant
sourceof
Consequently,
suppliers
firmcompetitiveness
the
is
most
effective
[61],andIT-enabledintegration
probably
andefficient
mechanism
[40].
Thisstudydevelopsandtestshypotheses
therelationships
betweenvirregarding
tualintegration
andflexibility
andcostadvantage
inuncertain
environments.
Wecon-
A VIRTUAL INTEGRATION THEORY OF IMPROVED SUPPLY-CHAIN PERFORMANCE
43
andempirically
thecritical
roleofvirtual
tribute
totheliterature
bytheorizing
testing
andinenablingsupinmediating
theeffect
ofenvironmental
uncertainty
integration
ina supplychain,andtheresultant
and
manufacturing
flexibility
plierresponsiveness
corroborate
our
theoretical
ofthebuyer.
Ourempirical
costadvantage
model,
findings
in supply-chain
theimportance
operations.
highlighting
andModel
Theoretical
Background
theoretical
The study of flexibilityhas been criticized as lackinga substantial
worksstillprovideus withintheoretical
foundation
[23]. Yet severalpreliminary
andflexibility
betweenenvironmental
uncertainty
(e.g.,
sightsintotherelationship
[72]).
attheFirmLevel
Flexibility
as an
seekstohandleuncertainty
thata manufacturer
viewsuggests
Theopensystems
as a competitive
andthengenerates
advantage
flexibility
inputfromitsenvironment
its
intheenvironment
[23]. (See Figure1.) A manufacturer's
adaptability
represents
manufacturits
environment:
from
influences
the
control
to
originated
insensitivity
is a wayto achievecontrol[72]. Forexample,Sanchez[57] suggests
ingflexibility
is better
for
andcoordination
withresources
thata manufacturer
flexibility
prepared
incompetition.
offlexibility
future
andenjoysthebenefits
an uncertain
is demand
sourceofenvironmental
Theprimary
uncertainty
facingmanufacturers
a
a
and
be
distorted
tends
to
which
along supplychain, phenomamplified
volatility,
orthebullwhip
calledtheForrester
enoncommonly
[38]. Thebullwhip
effect
effect
todemandforecast
behaviors
be causedbya manufacturer's
effect
responding
might
andshortage
andrationing
orderbatching,
gaming[38].
pricefluctuations,
updating,
is
firms
Another
sourceof environmental
industry
clockspeed,
facing
uncertainty
whichalso tendstobe amplified
amplification
alonga supplychain[25]. Clockspeed
declinein theprice/perforfacea remarkable
describesthefactthatmanufacturers
closerto the
of productlifecycleas theyare situated
manceratioand compression
in
increase
of
an
.
As
the
rates
chain
of
the
end
consumer
[46]
industry
change
supply
and competitionso does
consumer
preferences,
especiallychangesin technology,
needtoadjustthe
firms
insuchanindustry
To compete,
oftheindustry.
theclockspeed
the
external
to
meet
of
their
internal
clockspeed[46].
accelerating
operations
speed
envito
or
accommodate
to
firms
with
canprovide
ability adapt
greater
Flexibility
to
defined
as a firm's
ronmental
[20,31].Manufacturing
flexibility,
ability
uncertainty
to
mix
of
and
handle
a
new
adjust
according
production
products,
products,
develop
in
its
end
can enhancea manufacturer's
demandseffectively,
performance meeting
whichencompassesthoseareaswhereflexibility
customers'
speedily,
requirements
toservecustomers.
Theseincludeproduct
candirectly
ability
impacta manufacturer's
to
launch
andresponsiveness
mix
volume
flexibility,
flexibility, flexibility,
flexibility,
The
rationale
markets
[37,71].
manufacturing
underlying
connecting
flexibility
target
44
WANG, TAI, AND WEI
Environment
Uncertahity
DemandVolatility
Indiistry
Q&tejxgg1
(Environmental
Influences)
of mana facturer
Competitiveness
Manufacturing
Flexibility
(Adaptation)
Manufacturer
as a Controlled,
Autonomous
Figure1.TheManufacturer
System
withenvironmental
is obvious,becausetheenvironment
affects
a firm's
uncertainty
in
techits
and
investment
and subsequent
design
operational
manufacturing
strategy
the
ofwhether
[74].Regardless
nology,
thereby
shapingitsmanufacturing
capabilities
it
firm
is proactively
in
ordefensively
may
flexibility,
manufacturing
investing greater
moreorganically
andinvestinflexible
tofunction
technologies
designitsorganization
are
foraccommodating
[57,67].Thus,thisstudyholdsthatmanufacturers
uncertainty
in responding
to uncertain
environable and motivated
to increasetheirflexibility
ments[13].
1 (TheUncertainty-Flexibility
ThegreatertheenvironHypothesis
Hypothesis):
the
mentaluncertainty
a
facedby manufacturen greaterwillbe itsmanufacturingflexibility.
Flexibilityat theSupply-ChainLevel
As demandvolatility
and industry
clockspeedincrease,whichtendto be amplified
the
a
manufacturer
canhardly
byonlyfocusalong supplychain,
competeeffectively
and
alone[78],andconstructing
flexiblemanufacturing
ingoninternal
competencies
a flexibleand competent
maintaining
supplychainbecomescritical.Supply-chain
whichmakesthechainagilebyobtaining
integration,
timelyfeedbackfromsuppliinflubecomes
an
for
a
manufacturer
to
deal
withenvironmental
ers,
important
way
as
ences.Becauseall systems
arehierarchical
innature,
canbe considered
anysystem
therea subsystem
in somesupersystem
anditssuppliers,
[1]. A focalmanufacturer
interaction
in theirsupply-chain
fore,are subsystems
systemwithself-referential
In
a
a
in
one
element
such
(See Figure2.)
usuallyis coupled
patterns.
system,change
withchangeselsewhere,
andthesechangesmaycreateinfluences
thatgo backtothe
initialelement[1, 23, 75]. The focalmanufacturer
can be viewednotonlyas a controlledsystembutalso an autonomous
a dual controlperspective
system,
framing
seekstoresistoradapt
one
a
focal
manufacturer
within
a
chain
On
hand,
[23].
supply
On theother
to thethreats
fromtheexternalenvironment
flexibility.
byenhancing
hand,beingan autonomous
system,thesupplychainevolvesand seeksto absorb
45
Environment
i <
Ctepctfemsstffecalmantfutuw
Manufacturing
Flcblty
CostAdvantage
<fe
Control)
(Adaptation
Uictrtataty
DemandVlatttty
Industry
Qeb&Si
(SmqgmS^^1^^^
Focal Manufacturer
Virtual
Integration.
Collaborait)*
execution
operation
Collaborative
c
process
planning
control
(Control
Feedback)
'>
Supplier
Responsiveness
Suppliers
SupplyChain
2. A Controlled-Flexibility
Framework
ofa Supply
Chain
Figure
environmental
disturbances
tocreateneworders.Therefore,
thefocusofouranalysis
is directed
towardthedimensions
ofa supplychainthatcan helpthechainmaintain
itsidentity
or counteracting
fluctuations
[23]. High
by accommodating
threatening
within
the
chain
to
the
extensive
coordination
andconflexibility
supply
corresponds
trolcapacitiesofthemanufacturer
withrespectto itssuppliers.
We proposethattwo
criticalsupply-chain
characteristics
influence
virtualintesupply-chain
flexibility:
and
as
in
2.
gration supplierresponsiveness, depicted Figure
VirtualIntegration
in SupplyChains
Fromthedualcontrol
offered
[23],theinternal
perspective
flexibility
bya controlled
focuses
on
a
hierarchical
of
system
creating
composition looselycoupledsubsystems
tofacilitate
itsadaptability.
A supplychain'ssubsystems
possesssomeuniquepropertiesofstability
torealizeeffective
whichkeepdisturbances
loreactions,
independent
cal. So thesupply-chain
as
a
will
whole
be
less
sensitive
to
local
environmental
system
theexternal
is createdfor
changes.In thecase of an autonomous
system,
flexibility
itscapacitytoinfluence
environment.
Vertical
is an exampleof
enhancing
integration
external
structures
forinputor demanduncertainty
control[23]. However,
changing
46
WANG, TAI, AND WEI
vertical
alsomaycreateinflexible
attheriskoflosingassetvalue
structures
integration
and
andfirmcapabilities
as circumstances
change[66,72]. To achievebothinternal
togainmorecontrol
willenablea manufacturer
external
virtual
flexibility,
integration
itssuppliers.
over
control
overtheenvironment
without
to
exert
ownership
having
useIT toimpleto
which
Virtual
here
the
extent
partners
trading
integration captures
inthesupplychain:collaboraandcontrol
menttwoaspectsofvertical
coordination
tiveoperationexecutionand collaborativeprocessplanningand control[47].
common
towhichIT facilitates
refers
totheextent
Collaborative
execution
operation
and
as
such
between
production, logispurchasing,
supply-chain
partners,
operations
theextent
andcontrol
ticsoperations,
whilecollaborative
represents
processplanning
control
collaborative
decisionmakingandperformance
towhichIT is usedtosupport
and
communication
the
information
With
capabilities,
processing
by partners. greater
controlandfeedbackmechanisms
as wellas better
partners
providedbyIT, trading
commonownership
without
interfirm
collaboration
areabletoachievegreater
[9, 16].
its
interfirm
BecauseIT canfacilitate
jointdecisionmakingandcoordination,
timely
their
to
should
manufacturers
supplygreater
ability manage
give
properapplications
withsuppliers
andcontrolandcoordinate
chainoperations,
[31,43].
better
Virtualintegration
createsan abilityon thepartofthefirmtoeffect
process
to
better[43],allowingmanufacturers
controlandalso to managedemandvolatility
for
utilization
resource
andthereby
substitute
"information
forinventory"
improving
canbe seenas
bothmanufacturers
andsuppliers
[24,54,73]. Thus,virtual
integration
interofenvironmental
a strategy
toreducetheinfluences
uncertainty
byimproving
itis
andcontrol[28,43]. Consequently,
firminformation
coordination,
processing,
when
firms
to
be
that
virtual
will
more
observed
be
operintegration
likely
suggested
ateinuncertain
environments.
Thegreater
theenvi2 (TheEnvironmental
Uncertainty
Hypothesis
Hypothesis):
to
will
be
the
extent
ronmental
a
the
uncertainty
facedby manufacturer, greater
whichitis virtually
with
its
integrated
suppliers.
in SupplyChains
SupplierResponsiveness
is a localadaptation
theextent
towhicha
Supplierresponsiveness
concept,
reflecting
in procurement
and supplyoperations
[15].
suppliermeetscustomer
requirements
Manufacturers
collaboration
withsuppliersto
tryto increasetheircontrolthrough
makethemmoreresponsive,
to
also makingthemanufacturers
thereby
responsive
environmental
The
of
manufacturers
will
increase
tocontrol
changes. ability
suppliers
whenthemanufacturers
andrelacollaboration
adoptpracticessuchas operational
it is expectedthatmanufacturers
will applymore
tionshipbuilding.Consequently,
suchpracticesfortighter
coordination
withtheirsuppliersundera moreuncertain
environment,
leadingtogreater
supplier
responsiveness.
3 (The Uncertainty-Supplier
ThegreatertheenvironHypothesis
Hypothesis):
mentaluncertainty
a
the
facedby manufacturer,greaterwillbe thedegreeofits
'
suppliersresponsiveness.
47
variancecontrol),
To dealwithprocess-oriented
problems
(e.g.,throughput
supplidemandpatwithbuyersto obtaininformation
ers have to coordinate
concerning
buffers,and productioncapacity.To ensureproperinterfirm
terns,inventory
embeddedin theworkcontrol
andoperational
knowledge
integration,
performance
to
be
shared[30]. Viralso
needs
of supply-chain
sufficiently
partners
ingpractices
mechanism
forpartners
toexchange
as anintegration
canbe regarded
tualintegration
interfirm
foreffective
information
[60]. Of course,
learningand mutualadaptation
butthe
itsdirecttranslation
intodigitalform,
thetacitnatureofknowledge
prohibits
be
can
nonetheless
between
of
tacit
partners
supply-chain
transferability knowledge
facilitated
interactions
by IT. Becausejointactionsand
frequent
through
improved
subactivities
all
information-intensive
are
and
resource
requiring
sharing
planning
should
be
virtual
and
interfirm
stantial
coordination,
integration
learning, adaptation,
activities.
With
usefulin increasing
capabilitiesforhandlingsuch
trading
partners'
canmore
material
information
flows,suppliers
(IS) tosynchronize
systems
integrated
to
customer
customers
and
from
their
to
react
requests
adjust
messages
dynamically
[63]. An electronically
supplychainallowsthesuppliersto havegreater
integrated
manufacthusgivingthemgreater
downstream
abilitytomeetdownstream
visibility,
conditions.
market
turers'
varying
Thegreaterthedegree
4 (TheSupplierResponsiveness
Hypothesis):
Hypothesis
with
its
thegreaterwillbe
is virtually
thata manufacturer
suppliers,
integrated
its
theextent
of suppliers'responsiveness.
Competitiveness
Supply-Chain
butit
is themostimportant
uncertainty,
againstenvironmental
capability
Flexibility
flexManufacturing
mayalso requiremuchcostfora firmtorealizethiscapability.
manufacturers
to
for
are
two
and
cost
purcompetitive
goals
major
advantage
ibility
sue [75]. Fisher[26] proposesthatsupply-chain
actuallymanagestwo
management
and
costs:physicalcosts(e.g.,manufacturing,
distinct
transport, cyclestockcost)and
andlostsales).Marketmediacosts(e.g.,safety
market
mediation
stock,markdowns,
of supplyand
as thematching
in uncertain
tioncostspredominate
environments,
well
A
manufacturer
demandis moredifficult
[26, 33].
mayperform in handling
mediato reducemarket
with
its
suppliers
physicalcosts,butitneedsto coordinate
marketenvironments.
uncertain
tioncostsby controlling
Hence,forcreatingcost
and supplierrevirtual
well
as
as
flexibility,
integration
manufacturing
advantage
within
the
enablers
two
are
system[31].
supply-chain
important
sponsiveness
a supply
canbringaboutformanaging
thatvirtual
Themajoradvantage
integration
channelsconnectedto
chainis enhancedvisibility
[2]. Withseamlessinformation
can more
manufacturers
level
of
thus
a
and
visibility,
high
supply-chain
suppliers,
and
in
variations
track
levels,
delivery
inventory
product
quality,
production,
easily
in a moretimelyway,manusuchinformation
ofsuppliers.
By receiving
capability
andthereby
morerapidly,
achieve
canplanandadjusttheirownoperations
facturers
the
other
events
caused
On
to
hand,
bysuppliers.
adaptability anyunexpected
greater
with
information
their
own
of
regarding
byproviding
suppliers timely
changes plan,
48
WANG, TAI, AND WEI
to suchchangesmore
manufacturers
also allowtheirsuppliers
to adjustthemselves
manuofcertain
is criticaltotheimplementation
Besides,virtual
integration
rapidly.
For
inincreasing
as important
flexibility.
manufacturing
facturing
practices
regarded
IT
in
faciliof
role
the
demonstrates
van
Hoek
[69] empirically
important
example,
manufacturThisstudyholdsthata manufacturer's
manufacturing.
tating
postponed
towhichitsprocessesand
affected
shouldbe significantly
bytheextent
ingflexibility
linkedwithitssuppliers.
areelectronically
activities
decision-making
5 (TheManufacturing
Flexibility
Hypothesis):ThegreaterthedeHypothesis
will
thegreater
withitssuppliers,
a
is
that
integrated
manufacturervirtually
gree
be itsmanufacturing
flexibility.
achievea low-costadvantagein
also can helpmanufacturers
Virtualintegration
andsupply-chain
inproduction
resourceutilization
termsofefficient
[17,
operations
costscan be lowandusage,supply-chain
IT investments
32]. Throughappropriate
canbe increased,
correction
ered,speedoffeedbackanderror
agilityofsupply-chain
can be enbetween
and
can
be
trading
partners
improved, relationships
operations
andvaribe
removed
chain
can
in
the
hanced.As such,existingbottlenecks
supply
flowsleveled.Accordingto thetheoryof swift,evenflow,
abilityof production
manuleadtobetter
in
processescan,inturn,
improvementsprocurement/production
intevirtual
with
cost
such
as
reduced
Thus,
production [59].
facturing
performance
and
function
of
a
manufacturer's
theperformance
supply-chain
production
gration,
of wastein time,invendue to theelimination
can be greatly
improved,
operations
andtransportation
[24,44].
tory,
6 (The CostAdvantageHypothesis):Thegreaterthedegreethata
Hypothesis
thegreaterwillbe itscost
is virtually
withitssuppliers,
manufacturer
integrated
to
advantagecompared competitors.
is influenced
ina looselycoupledsystem,
A manufacturer,
as a component
system
as
on
interaction.
of
by itssuppliersbased somepatterns
Supplierresponsiveness,
one of themanufacturer's
resources[53], maysignificantly
flexiblemanufacturing
conditions.
affect
howquicklythemanufacturer
can reactto newmarket
Thus,with
avoid
a
manufacturer
can
coordinated
and
many
effectively
responsivesuppliers,
includingthedelayof orders,lowerquality,highin-transit
operational
problems,
lead times,and productobsolescence[47, 61].
processinventories,
longcustomer
we
shouldhavebeneficial
effects
believe
that
Consequently,
responsiveness
supplier
on a manufacturer's
manufacturing
flexibility.
7 (The Supplier-Flexibility
Hypothesis
Hypothesis):Thegreaterthedegreeof
a
s suppliers,
thegreaterwillbe itsmanufacturresponsiveness
of manufacturer
ingflexibility.
is an imthatsupplierresponsiveness
Moreover,
manystudieshavedemonstrated
of buyers'purchasing
determinant
For example,Stanleyand
portant
performance.
Wisner[64] suggestthata supplier'sservicequalitycan directly
affectthequality
of
its
function.
Of
the
course, qualityperformance
performance buyers'purchasing
49
function
of a buyer'spurchasing
can, in turn,impactits operational
performance
firms
onaveragespendmorethanhalfofeverysales
Becauseindustrial
considerably.
shouldhavesignificant
dollaronpurchased
supplier
responsiveness
products,
impact
ofmanufacturers
allow
on thecoststructure
[68]. Indeed,moreresponsive
suppliers
risk
of
more
thus
the
theirbuyerstoreacttomarket
changes
rapidly, reducing
producThanksto supplierresponor holdingdevaluedinventories.
ingoutdatedproducts
ofproduction
canbe moreeasily
andresolution
siveness,
problems
earlyidentification
to
contain
their
costs.
achieved,givingmanufacturers
ability
greater
8 (The Supplier-Cost
AdvantageHypothesis):ThegreaterthedeHypothesis
a
thegreaterwillbe itscost
suppliers,
of manufacturer's
greeofresponsiveness
to
advantagecompared competitors.
thename,antecedent,
and
ofthehypotheses,
Table1 providesa summary
including
outcomeofeachhypothesis.
Methodology
SurveyProcedure
datafrom
ranA cross-sectional MAILsurveyWASadministratedforcollecting
firms
in
A
draft
surTaiwan.
medium-sized
and
selected
manufacturing
large
domly
in
literature
as
that
were
identified
the
based
on
measures
was
vey
developedlargely
versionof the
suitableforthecurrent
study.Aftercompilingan English-language
intoChinesebya bilingualrethesurveyitemswerefirsttranslated
questionnaire,
fortranslation
andrefined
searchassociate.The surveyitemswereverified
accuracy
two
and
seniordoctoralstuinformation
a
(MIS) professor
systems
by management
with18 seniormanagers
dents.The Chineseversionofthedraftwas thenpretested
andCEOs) for
and
IS
sales,
managers,
marketing,
operation,
(including
purchasing,
of
in
modifications
of
the
faceandcontent
resulting
wording somesurvey
validity,
from
theYear2000 directory
firms
selected
980
We
items. randomly
manufacturing
of theTop5000 LargestFirmsin Taiwan,publishedby ChinaCreditInformation
to thesenior
ServicesLtd.,andthenthefinalversionof thesurveywas distributed
the
function
firms.
Because
of
these
playsa critical
operation
manager
operations
firmanditsseniormanagersshouldalso havea goodunrolein anymanufacturing
we believethatsenior
inbothsalesandmanufacturing,
oftheconditions
derstanding
andreliableinformants
within
shouldbe themostknowledgeable
managers
operations
a companyto answeroursurvey.
Sample
in total,with149 having
Afterone follow-upmailing,153 surveyswerereturned
an effective
dataavailableforsubsequent
analysis,yielding
responserate
completed
of 15.2percent.
theresponserateis nothigh,itis stillacceptableandcomAlthough
the
parabletootherstudiesin supply-chain
management
(e.g.,[56,65]). We present
50
WANG, TAI, AND WEI
Table 1. Summary
ofHypotheses
name
Hypothesis
Uncertainty-flexibility
hypothesis (H1)
Environmentaluncertainty
hypothesis (H2)
Uncertainty-supplier
hypothesis (H3)
Supplier responsiveness
hypothesis (H4)
Manufacturingflexibility
hypothesis (H5)
Cost advantage
Antecedent
Environmental
uncertainty
Environmental
uncertainty
Environmental
uncertainty
Virtualintegration
Virtualintegration
Virtualintegration
hypothesis (H6)
Supplier-flexibility
hypothesis (H7)
Supplier-cost advantage
hypothesis
(H8)
Supplier
responsiveness
Supplier
responsiveness
All thehypothesespostulatea positiverelationship.
Outcome
Manufacturing
flexibility
Virtual
integration
Supplier
responsiveness
Supplier
responsiveness
Manufacturing
flexibility
Cost advantage
Manufacturing
flexibility
Cost advantage
characteristics
of theresponding
firmsin Table 2. As theproduction
value of the
and
electronics
has
contributed
one-third
of
Taiwan'sgrossdocomputer
industry
mesticproduct,
34.2 percent
oftherespondents
arefromthisindustry.
Metal,textile,
andautomobile
industries
arearound10 percentin thesample.In addition,
46 percentoftheresponding
firmshaveassetsof less thanNT$1.2 billion,butfirmswith
fewerthan100 employeesare scarce.Around43 percentof theresponding
firms
haveover500 employees.Therefore,
thesampleconsistsofmedium-sized
to large
firms
inTaiwanbutwithmoremedium-sized
firms
thanlargeones.Theaveragenumberofyearsintheinformants'
current
is
4.3.
The informants
also averaged
position
13.4yearsinthefirm.
Thisindicatesthatinformants
aresufficiently
knowledgeable
toanswerthesurvey.
We conductedtwostatistical
bias
analysesto ensuretheabsenceof nonresponse
the
and
firms
in
terms
of
[5]. Wefirst
compared responding nonresponding
company
assetsandnumber
ofemployees.
Theseareavailablefromthe2002 CommonWealth
differences
betweenthetwogroupswerefoundbased
Magazine,andno significant
on theindependent
Then,theresponsampler-test
(p = 0.17 and0.32,respectively).
dentsweredividedinhalfbasedon thedatesofreturn.
Thecomparison
on company
assetsandemployeenumbers
betweenthetwogroupsagainshowedno significant
differences
basedon theindependent
sampleMest(p = 0.13 and0.12,respectively).
bias shouldnotbe a problemin thisstudy.
Accordingly,
nonresponse
51
Table2. Demographic
oftheResponding
Firms(n = 149)
Characteristics
offirms
Percentage
Industry
Automobile
Chemical
Computerand electronics
Food
Machineand tool
Mental
Textile
Others
Totalassets (NT$)
Less than$0.8 billion
$0.8-$1 .2 billion
$1 .3-$2 billion
$2. 1-$3 billion
$3. 1-$5 billion
$5.1-$8 billion
$8.1-$10 billion
Over$10 billion
No response
Numberofemployees
Fewerthan100
101-500
501-1,000
1,001-3,000
Over3,000
No response
8.7
4.0
34.2
4.7
8.1
15.4
10.7
14.2
26.2
20.1
12.1
13.4
11.4
5.4
1.3
9.4
0.7
2.0
53.7
20.1
15.4
8.1
0.7
Measures
Environmental
(EU)
Uncertainty
andindustry
Demandvolatility
clockspeedarethetwomainsourcesofenvironmenencountered
tal uncertainty
by companiesin whichthesupplychainoperates.Deof market
demand.The
thevariability
and unpredictability
reflects
mandvolatility
to
oftheproduct
linehavebeensuggested
rateofdeclinein priceandthefreshness
We
items
these
on industry
haveinfluences
clockspeed[45,46].
adopted
reflecting
fromMendelsonandPillai [46] and van
twosourcesof environmental
uncertainty
Hoek [69].
VirtualIntegration
(VI)
as thebasisfordeveloping
meaon supply-chain
We use priorliterature
integration
to IT-basedinterfirm
surementitemscorresponding
activities.
The
integration
52
WANG, TAI, AND WEI
execution
measurement
itemscovertwoaspectsofinterfirm
collaboration:
operation
sharinformation
market
order
andprocessplanning
andcontrol,
tracking,
including
formalevelcoordination,
support
inventory
ing,production
capacitycoordination,
forqualitycontrol[4, 29, 47, 49].
terialorcomponent
design,andsupport
(SR)
SupplierResponsiveness
basedon CarrandSmeltzer[15] byasWe operationalized
supplierresponsiveness
toits
as responsive
a
extent
to
which
manufacturer
the
perceivesitssuppliers
sessing
matematerial
include
Thefocalaspectsmeasured
quality,
purchasing
requirements.
involumechanges.
material
rialdelivery,
price,andflexibility
(MF)
Flexibility
Manufacturing
shouldbe prophowmanufacturing
A consensusis stilllackingregarding
flexibility
have
been
and
numerous
51]. The au[7,
proposed
approaches
erlyoperationalized
tothe
relevant
of
different
thorsfocusonmeasuring
flexibility
aspects manufacturing
studies
in
effectiveness
ofsupplychains.Suchan approachhasbeensuggested prior
[8, 71]. Based on theseworks,we assess fiveimportant
aspectsof manufacturing
launchflexibility,
mix
volume
flexibility, flexibility,
flexibility:
productflexibility,
as a
We operationalized
and responsiveness
to targetmarkets.
productflexibility
Volumeflexibilmanufacturer's
designsrapidly.
abilitytodevelopormodify
product
Mix
atdifferent
levelsofoutput.
ityis a manufacturer's
abilitytooperateefficiently
mix
simultato
a
varied
is
a
manufacturer's
product
flexibility
ability produce widely
is a manufacturer's
designs
abilitytolaunchnewproduct
neously.Launchflexibility
markets
is a manufacturer's
intoproduction
totarget
ability
speedily.
Responsiveness
to respondto theneedsof itstargetmarkets.
This could also be consideredas an
market
demands.
overallassessment
ofthemanufacturer's
abilityto satisfy
CostAdvantage
(CA)
Costadvantagewas operationalized
basedon Beamon[8] andScanneletal. [58] by
the
extent
to
which
is comparable
tothat
a
manufacturer's
costperformance
assessing
ofitsmajorcompetitors
inthefollowing
cost,and
cost,inventory
aspects:production
distribution
cost.Becausethemajorcostdimensions
manrelevant
to supply-chain
are
we
should
be
indicabelieve
that
this
variable
measured,
agement simultaneously
tiveoftheresourceutilization
andoperational
ofthesupplychain.
performance
Results
We conducted the data analysis in two parts- measurement
analysisandhyAnderson
and
themeaGerbin's
[3]
pothesistesting.
Following
two-step
approach,
suresweresubjectedto confirmatory
factoranalysis(CFA) and reliability
teststo
53
ofthescaleswerepresent.
measurement
ensurethatdesirable
Then,a strucproperties
The software
constructed
for
turalequationmodel(SEM) was
testing.
hypothesis
analyseswas EQS forWindows.
packagethatwe usedforthestatistical
Model
Measurement
The
We firstusedCFA [10] to validatethemeasures[12]. Table3 givestheresults.
modelfitforCFA was reasonable,witha %2of 338.97 (degreesof freedom[df]=
fitindex(CFI) of
199),a rootmeansquareerror(RMSE) of0.07,anda comparative
atp < 0.01. This
andaresignificant
0.90.All loadingsareofa reasonablemagnitude
evidenceof scale validity.
of strongloadingsprovidedpreliminary
Further,
pattern
werein a reasonablerange,between0.74 and0.95. Except
reliabilities
theconstruct
theaveragevarianceextracted
forenvironmental
(AVE) oftheremaining
uncertainty,
results
these
In
than
0.5.
was
constructs greater
suggestacceptableunidigeneral,
forthesemeasures.
andadequatereliability
internal
consistency,
mensionality,
was suffibetweentheconstructs
As shownin Table4, noneof thecorrelations
we ran
further
To
discriminant
to
evidence,
validity. provide
cientlyhigh jeopardize
for
Where
discriminant
to
assess
seriesofCFAs
an additional
validity.
possible, each
correlation
thefitof theCFA modelwiththeinterconstruct
pairof theconstructs,
CFA model.%2
to unitywas comparedwiththefitof an unconstrained
constrained
modelprovideda sigthatin eachcase,theunconstrained
testsindicated
difference
sufficient
further
the
of
moreaccuraterepresentation data,
demonstrating
nificantly
discriminant
amongtheconstructs.
validity
Model
Structural
As shownin Figure3, theoverallmodelfitindexCFI (0.90) andthe%2degreesof
ratio(1.70) showthatourproposedmodelfitsthedataacceptablyandthe
freedom
0.90 threshold
belowtherecommended
fitindex(NNFI) is onlyslightly
nonnormed
thevarianceexplained(R2)bytheother
at 0.88.Also,exceptforvirtualintegration,
threeendogenousvariablesis reasonable(R2 > 0.20), so mostof theendogenous
variablesarereasonably
proposedinthestudy.So, we conexplainedbythefactors
can be usedfor
cludethattheoverallmodelfitis acceptableandthepathestimates
tocost
from
virtual
the
that
shows
3
integration
only path
Figure
testing.
hypothesis
be
atthe
fails
to
the
that
Cost
(H6),
significant
Hypothesis
Advantage
advantage, is,
0.05 level.
Discussion
Following the electronic hierarchy concept of Malone et al. [42] and the
ofITtheimportance
"moveto themiddle"hypothesis
[19],thisstudyinvestigates
on
The modelis based the
in supply-chain
enabledvirtualintegration
performance.
54
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56

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A VIRTUALINTEGRATION
THEORYOF IMPROVEDSUPPLY-CHAIN
PERFORMANCE 57
| VII| |v| IVI311V14||vi5 ||vi6 [

/
J
0.23 (H2)
I1
Tln^rtTintv
I
Uncertainty L--^
'
Virtual
'
Integration '
y
^7
I
x^^_^-^^,0.02(H6)
V^^^Vi*2
- "
1EU2IIeU3IIeU4I ^K
|EUl|
|fcUl||fcU2|pU3||fcU4|
0.22"(H5)
..
0.21 (H4)
N^^^-^^-^./
Supplier ^V^^^^^
[
-^
Manufacturing
'
Flexibility }
0.32,D - 0.40)7
'/|mFi||mF2||mF3||mF4||mF5|
II
II
II
II
I
A '
CostAdvnt8e
'
(^-0.27, D -0.20)
N.
l (2D=0.15)J -61**(H8) J^"] "'

0.22,
ICAII |CA2J
|CA3|
^^^^
^S
ISRI11SR2|| SR31|SR41
3. Structural
ModelwithPathEstimates
Figure
Equation
withthecovariance
between
theerror
of
variances
Notes:Themodelwasestimated
estimated.
Thecovariance,
andcostadvantage
manufacturing
flexibility
beingfreely
inthefigure.
forthepathfrom
is notsignificant
andthusis notshown
however,
Except
at
the
to
the
are
0.05
level.Theresult
cost
virtual
integration advantage, paths significant
inmediating
environmental
into
ofvirtual
showstheimportance
uncertainty
integration
andsupply-chain
characterized
bymanufacturresponsiveness
performance
supplier
greater
ofthebuyers.
CFI = 0.90;#2/df:
andcostadvantage
RMSEA:0.07;Bentler's
ingflexibility
= 1.70;Bentler
andBonet'sNNFI:0.88.**p < 0.05,one-tailed
test.D is error
340.13/200
variance.
themediating
effectof virtualintegration
dual controlperspective
[23], theorizing
andsupply-chain
betweenenvironmental
uncertainty
performance.
Results
EnvironmentalEffects
The Uncertainty-Flexibility
Hypothesis(HI) and the Uncertainty-Supplier
Hypothenvironments
tendto motivatebothbuyersand supthat
uncertain
esis (H3) suggest
pliers to search for responsivenessand flexibilityin the supply-chaincontext.HI
are likelyto implementtechnologiesand mechanisms
pointsout thatmanufacturers
forfacilitatingflexiblemanufacturing
operations,in additionto IT. AlthoughPagell
unand Krause's [50] studyshows no significantassociationbetweenenvironmental
at the shop floorlevel, our recertaintyand operationalflexibilityof manufacturers
58
WANG, TAI, AND WEI
suitsshowotherwise.
H3 suggests
withgreater
environmental
Further,
uncertainty,
inordertomake
willcollaborate
thatmanufacturers
moretightly
withtheirsuppliers
themmoreresponsive
to environmental
changes.The twomainsourcesofenvironmentaluncertainty
andindustry
(i.e., demandvolatility
clockspeed)aretwoimportantdriversformotivating
firmsto implement
IT-basedsupply-chain
integration
as indicatedby theEnvironmental
mechanisms,
(H2). Our
Uncertainty
Hypothesis
resultstherefore
integrating
operations,
suggestthathavingflexiblemanufacturing
withsuppliers,
and developingresponsivesuppliersall are waysfor
electronically
environments.
manufacturers
todeal withuncertain
VirtualIntegration
Effects
theCostAdvantage
Ourresultsfailto support
(H6). Theresultsindicate
Hypothesis
costadvantagedicontribute
to
manufacturers'
is
to
thatvirtual
integrationunlikely
and
bothsupplierresponsiveness
itis important
forinfluencing
Nonetheless,
rectly.
as
the
Hypothesis
Responsiveness
flexibility, suggested
by
Supplier
manufacturing
indi(H5). The latter
(H4) andtheManufacturing
hypothesis
Flexibility
Hypothesis
be
observed
is likelyto
in a manufacturer's
catesthattheimprovement
flexibility
withsuppliersthrough
information
whenit exchangestimelyproduct/process
IS. Such information
exchangeenabledby IT, as suggestedby
interorganizational
also
to
makes
the
H4,
suppliersresponsive thebuyerdynamicrequests,indicating
is a usefulmechanism
forenhancing
thatIT-enabled
responsivesupplier
integration
theCostAdvantageHypothesis
nessto changingenvironments.
(H6) asAlthough
for
with
the
sertsthatvirtual
can
manufacturers
achieving
capability
integration provide
costadvantage,
it is notsupported
greater
by ourdata.However,becausesupplier
as suggested
is beneficial
tomanufacturers
forgainingcostadvantage,
responsiveness
stillcan posi(H8), virtualintegration
bytheSupplier-Cost
AdvantageHypothesis
should
be usecost
virtual
manufacturers'
Thus,
tivelyimpact
indirectly.
integration
in gainingcomparative
fulformanufacturers
costadvantage,
butsuchan effectis
thehelpofresponsive
largelyachievedthrough
suppliers.
Effects
Mediating
Virtual
andsupplier
arethetwomediating
variablesinour
integration
responsiveness
model.Thecombination
oftheEnvironmental
(H2) andManuUncertainty
Hypothesis
thatwhenoperating
inuncertain
envi(H5) suggests
facturing
Flexibility
Hypothesis
manufacturers
tend
to
use
IT
to
with
their
for
ronments,
integrate
suppliers manufacturing
H2 andtheSupplierResponsiveness
also imply
(H4) together
flexibility.
Hypothesis
intosupplier
thattheuncertainty
can be transformed
experienced
by manufacturers
andcontrolsupported
coordination
responsiveness
bya
through
tighter
supply-chain
level
of
virtual
that
the
Given
(H7)
high
integration.
Supplier-Flexibility
Hypothesis
it
of supplierresponsiveness
on manufacturing
suggestsa positiveeffect
flexibility,
withtheSupplier-Cost
(H8) showsthatvirtual
together
integraAdvantage
Hypothesis
tioncanstillimpactbothmanufacturing
andcostadvantage
indirectly.
flexibility
59
Implications
shouldbe an integral
Ourfindings
partofmanusuggestthatIT-enabledintegration
for
firms'supply-chain
efforts,
especially supplierdevelopmanagement
facturing
arecriticalforbothmanufacturing
whileresponsive
mentandinvolvement,
suppliers
This impliesthatthe
environments.
and costadvantageunderuncertain
flexibility
coordinato supply-chain
channelsenabledbyIT can be beneficial
communication
whenfacing
betweentrading
mutualadaptability
in greater
tion,resulting
partners
as an imshould
be
valued
virtual
events
[14].
integration
Consequently,
unexpected
in
uncertainties
environmental
and
for
strategy mitigating accommodating
portant
of
what
no
matter
Ofcourse,
managetypes supply-chain
management.
supply-chain
ofsuppliers
itstillneedsthecooperation
choosestoimplement,
a firm
mentprograms
time.
amounts
attheright
intheright
andcomponents
indelivering
qualitymaterials
With
of
is
the
such
to
Thus,complementary programs responsivenesssuppliers. greater
canraiseitsownability
a firm
enabledbyvirtual
integration,
responsiveness
supplier
withgreater
to counterexternalinfluences
Indeed,supplierresponsiveflexibility.
inourmodel,
costadvantage
factor
inaffecting
nessappearstobe themostsignificant
IT-based
and
that
in
role
critical
its
[61]
buyerperformance
improving
suggesting
IT might
Eventhough
suchaneffect.
forrealizing
instrument
is a powerful
integration
notbe theonlymeansforimproving
managersshould
performance,
supply-chain
of
Firmslaggingbehindintheinvestment
insuchan endeavor.
realizeitsimportance
at
themselves
IS
could
especially
disadvantage,
competitive
put
interorganizational
totakefuller
arestriving
ofIT hasbeenso rapidandmanyfirms
as thedevelopment
advantageofthetechnologies.
Conclusions
modelin
This study contributes to the literature by buildinga theoretical
ofsupplytwodimensions
whichvirtual
playsa pivotalroleingenerating
integration
- manufacturing
cost
and
chainperformance
advantage.
flexibility comparative
Contributions
forimofvirtualintegration
fora theory
thisstudysetsa foundation
Theoretically,
We
environmental
under
uncertainty. arguethat
performance
provedsupply-chain
butwithproper
to
thefirm,
as
a
threat
first
environmental
uncertainty
might appear
coordiefficient
andflexiblesupply-chain
andIT thatsupport
practices
supply-chain
intocompetitive
can be transformed
edge via higherlevelsof
nation,sucha threat
costadvantage.Exceptforthedirectefandcomparative
flexibility
manufacturing
oftherestofthe
thedataaresupportive
on
cost
fectofvirtual
advantage,
integration
proposedin ourmodel.
hypotheses
ofthesupply-chain
theimportance
evidencealso demonstrates
Ourempirical
syscanforma looselycoupledsystem
anditssuppliers
temconcept:a manufacturer
governedby IT to enhancesupplierresponsiveness,
leadingto greatermanufacturing
60
WANG, TAI, AND WEI
advancostadvantage
is theotherimportant
Wealso suggestcomparative
flexibility.
such
obtained
a
advantageis
system.But,
integrated
supply-chain
tage
by virtually
atthe
flexibility
manufacturing
gainedbya firmalonewhenitpursuesgreater
hardly
forimproving
is veryimportant
sametime.Infact,havinga setofresponsive
suppliers
theconceptoffitas mediaa manufacturer's
By invoking
performance.
supply-chain
with
to
tend integrate
thatmanufacturers
tion[70],ourresultsconfirm
electronically
fittheirenvironments,
in orderto havetheirsupply-chain
theirsuppliers
operations
Theeviand
better
in
more
performance.
supply-chain
resulting
suppliers
responsive
that
the"moveto themiddle"hypothesis
dencealso seemsto support
[19]
supplywithout
coordination
vertical
chainfirms
canuseIT toachievebetter
control,
ownership
of
insteadof a market
close to an electronic
a verticalstructure
hierarchy
forming
and
their
with
electronic
transactions.
suppliers
integration
Through
tight
arm's-length
costadvantage
and comparative
resultant
flexibility
manufacturing
responsiveness,
theenvironback
to
counteract
feed
can
thatmanufacturers
appearto be something
tothedualcontrol
mentalinfluences,
[23].
perspective
support
preliminary
providing
Limitations
This studyhas severallimitations.
First,becausewe adoptedthesingle-informant
bias is possible.Second,
respondent
perspective,
approachfromthemanufacturer's
theobjectiveorreal
reflect
notaccurately
whichmight
we usedperceptual
measures,
ofmanagThe
examined.
theoretical
constructs
the
perceptions
relationships
among
limitation
so
such
a
and
erslargelydetermine
theiractions decisions,
mightnotbe so
and validationof themeasuresutilized
serious.Nonetheless,
further
development
commitsuchas trust,
hereareneeded.Third,manyotherinterorganizational
factors,
IS
been
shown
to
influence
and
have
ment,power, dependence,
interorganizational
This
business
ofstrategic
[55,77].
by
partners
flexibility
adoptionandtheattainment
on virtual
uncertainty
mightexplainthelow explanatory
powerof environmental
and
well
as
other
These
factors
as
management
practices
supply-chain
integration.
of
on
dimensions
also
have
supply-chain
technologies
might
significant
implications
inthecurrent
butwerenotincorporated
performance,
study(e.g.,[21, 34,48]). Fourth,
thepossibiltheresponserateofthesurveymayappearsomewhat
low.Eventhough
the
of
bias
was
checked
and
ruled
out
statistically, representativeness
ity nonresponse
ofthesample,andthusthegeneralizability
oftheresults,
couldstillbe limited.
FutureResearch
Forfuture
we offerthefollowing
research,
First,we didnotexplicitly
suggestions.
the
be
to improvesupplier
virtual
could
distinguish ways
integration
implemented
We
ofIT on enhancexamined
the
differential
effects
[31].
responsiveness
possibly
oversupandonincreasing
thebuyer'scontrol
ingsupplier
responsiveness
capability
such
withoneanother
inthisstudy.
Futureresearch
canclarify
pliersincombination
factors
differential
effects
andhindering
andotherfacilitating
effectiveness.
Second,thisstudyfocuseson manufacturing
affecting
supply-chain
61
and costin supplychains.Futureresearchmayextendourmodelto inflexibility

costandriskconsiderations
cludetransaction
[19, 62, 76]. Third,becausethepura comprehensive
setofvariablesthataffect
the
pose ofthestudywas notto identify
facof
electronic
and
other
performance,
integration supply-chain
many
application
effects
and
themotivation
torsmight
[31] orinfluence
generate
flexibility-enhancing
of thefirmto utilizeIT forinterfirm
[62]. Some of them
integration
requirement
Butwedidnotexplicitly
variablesinourtheoretical
servedas intervening
arguments.
reducedform.
themin ourmodel,whichwas specifiedin a somewhat
incorporate
and
cost
into
the
manufacturof
back
Theeffect feeding
flexibility
greater
efficiency
either.
andtesting
wasnotexplicitly
environments
ers'market
investigated
Constructing
framework
or conducting
a
a modeltakingfulleraccountof thecontrol-flexibility
for
future
be
a
valuable
direction
should
Fourth,
theory
development.
study
longitudinal
A qualitative
is inherently
functional.
orinterpretathecontrol-flexibility
perspective
worksof
oftheinternal
tiveresearch
understanding
designmight
helpus gaina fuller
we
to
for
because
chains
Fifth,
attempted
responsible flexibility
generation.
supply
effects
ofinduswe didnotcontrolforpossibleconfounding
obtaingeneralresults,
betweensupply-chain
tries.Futureresearchmayexaminethedifferences
manageindustries
andcompare
mentandflexibility-enhancing
adoptedindifferent
practices
businessesappearto be takingadacrossindustries.
theireffects
Further,
although
and
the
Internet
forinterfirm
communicasoftware
of
advanced
applications
vantage
seamlesscommunication
and
tion,incompatible
technologiesare stillhindering
inlanguages
Thedevelopments
acrossorganizational
boundaries.
commonvisibility
suchas RosettaNet,
suchas XML andintechnical
dictionaries,
mayprovidea partial
number
of
vendors
areoffering
an
solutiontotheproblem.
Also, increasing
supplyeasier.However,
whichmakessupply-chain
chainmanagement
software,
integration
thus
moreimitable,
also makea firm'ssupply-chain
thesedevelopments
strategies
IT.
of
sustainable
its
chances
competitive
advantagethrough Fuobtaining
reducing
to
a
microeconomic
take
turestudymay
approach analyzetheeffectof electronic
andindustry
on market
structure,
possiblyat
performance
integration
supply-chain
IS
enable
more
thelevelofchain-to-chain
Finally,
interorganizational
competition.
butitis theinternal
IS thatprovidethe
andcontrol,
interfirm
coordination
efficient
of
thealignment
basisfora firmtooperateas an extended
enterprise.
Consequently,
shouldhavea profound
IS withinterorganizational
a firm'sinternal
systems
impact
on thefirm'scoordination
alongthesupplychain.Future
capabilitiesandvisibility
ofsuch
viewtoassesstheimplications
orcompetence
research
maytakea capability
and
on supply-chain
flexibility performance.
alignment
ScienceCounciloftheReThisresearch
wassupported
bytheNational
Acknowledgments:
number
contract
NSC93-2416-H-008-002.
publicofChinaunder
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A Virtual Integration Theory of Improved Supply-Chain Performance

Author(s): Eric T. G. Wang, Jeffrey C. F. Tai and Hsiao-Lan Wei

WANG, TAI, AND WEI

The study of manufacturingflexibility has longbeena centralthemein the