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Impact of supply chain linkages on supply chain performance


Pamela J. Zelbst Kenneth W. Green Jr Victor E. Sower Pedro Reyes

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To cite this document:
Pamela J. Zelbst Kenneth W. Green Jr Victor E. Sower Pedro Reyes, (2009),"Impact of supply chain
linkages on supply chain performance", Industrial Management & Data Systems, Vol. 109 Iss 5 pp. 665 682
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Impact of supply chain linkages


on supply chain performance

Impact of supply
chain linkages

Pamela J. Zelbst, Kenneth W. Green Jr and Victor E. Sower


Department of Management and Marketing,
College of Business Administration, Sam Houston State University,
Huntsville, Texas, USA, and

Pedro Reyes

665
Received 20 October 2008
Revised 16 January 2009
Accepted 27 January 2009

Department of Management and Entrepreneurship,


Hankamer School of Business, Center of Excellence for Supply Chain Management,
Baylor University, Waco, Texas, USA
Abstract
Purpose The purpose of this paper is to examine the impact of supply chain linkages on supply
chain performance (SCP). It aims to define and describe linkage constructs for power, benefits, and risk
reduction and develop multi-item scales for their measurement. It also aims to assess the relationships
of the linkages with SCP.
Design/methodology/approach A total of 145 manufacturing and services sector managers are
surveyed. The measurement scales are assessed for reliability and validity and further assessed within
a measurement model context. Study hypotheses are then tested using a multiple regression approach.
Findings Results for the combined sample indicate that power, benefits, and risk reduction
linkages positively and significantly impact SCP. Power is identified as the dominant linkage for
manufacturers, and risk reduction as the most important within the services sector.
Practical implications The key to effective supply chain management is the ability to establish
long-term, strategic relationships with supply chain partners. Practitioners should work to fully
develop power, benefits, and risk reduction linkages with partners within their specific supply chains
in order to maximize value to the ultimate customers of the supply chain.
Originality/value Through this study, previously discussed supply chain linkage constructs are
specifically defined, scales for measurement of the constructs are developed, and an initial assessment
of the relation of the constructs to SCP is provided.
Keywords Supply chain management, Business links, Risk management
Paper type Research paper

1. Introduction
Researchers have investigated supply chain performance (SCP) from many different
perspectives. Bichescu and Fry (2009) researched SCP in relation to decision making in
terms of power. Wang et al. (2009) investigated SCP in relation to product development
strategy focusing on efficiency but not necessarily the potential benefits sought by
supply chain members. Lau et al. (2008) looked at real-time supply chain control
in relation to risk reduction. Social exchange theory has been utilized in supply chain
research to examine stability and alliance performance (Yang et al., 2008), coordination
of supply chains (Holweg and Pil, 2008), as well as competitive and cooperative
positioning in supply chain logistics relationships (Klein et al., 2007).

Industrial Management & Data


Systems
Vol. 109 No. 5, 2009
pp. 665-682
q Emerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570910957641

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IMDS
109,5

666

We extend the work related to SCP within the social exchange context by examining
the exchange linkages within supply chain networks in terms of the relationships
created among supply chain partners. Previous research indicates that three variables
are important to these linkages and influence SCP. In particular, the supply chain
linkages will be examined in terms of power (Cook and Emerson, 1978; Emerson et al.,
1983; Lawler, 1992; Maloni and Benton, 2000; Cox, 2001), risk (Cook and Whitmeyer,
1992; Johannisson, 1987; Cannon et al. (2008) and benefits (Cook and Emerson, 1978;
Burke, 1997; Willer, 1999; Cannon et al., 2008; Polo-Redondo and Cambra-Fierro, 2008;
Im and Rai, 2008).
We propose a model in which power, benefits, and risk reduction linkages serve to
enhance SCP. The model is assessed using data collected from a national sample of
manufacturing and services sector managers. The measurement scales are fully
assessed for reliability and validity and further assessed within a measurement model
context. Study hypotheses are tested using a multiple regression approach for the
combined sample and also for the manufacturing and services sector sub-samples. We
extend the current literature by developing and assessing measurement scales for
power, risk reduction, and benefits linkages and providing an initial empirical
assessment of the relationships. The focus of this research is on the management of
existing supply chain linkages and SCP.
A review of the supporting literature and development of the study hypotheses
follows in Section 2. We then provide a discussion of the methodology used and report
the results of the scale assessment and regression analysis. Finally, a conclusions
section in which the results are discussed, limitations are delineated, future research is
suggested, and implications for management practitioners is provided.
2. Literature review and hypotheses
Past research tends to focus on the technological side of these linkages in terms of SCP. For
example, the prominent technologies studied in terms of SCP include radio frequency
identification (Lee et al., 2009; Bendavid et al., 2009; Ustundag and Tanyas, 2009),
communication technology (Duchessi and Chengalur-Smith, 2008; Swafford et al., 2008),
and enterprise resource planning systems (Forsiund and Jonsson, 2007; Zong, 2008). While
these are important streams of research there is a need for research investigating
the non-technical side of exchange linkages in terms of supply chain relationships and the
influence on SCP.
Bichescu and Fry (2009) examine questions related to when split decisions result in
the loss of SCP and the effect of power on performance loss. This research uses decision
making structure as a proxy for the relative division of channel power to determine the
effect on SCP. Our research takes a more direct approach and examines power as
influence over other supply chain members in relation to SCP. Wang et al. (2009)
developed an evaluation approach to measure SCP focusing on efficiency of various
product strategies made through group decisions. Our research focuses on the
effectiveness aspect in relation to the benefits sought in acquiring resources from
supply chain members and the standardization of procedures for supply chain
members. Lau et al. (2008) studied supply chain control in relation to adjustable
autonomy which is the ability to reduce risk through reacting to changes and having
dynamic collaboration. These authors identify that the weakness of their approach is

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the need to have experts in the area provide accurate information. Our research
examines risk reduction in terms of supply chain members.
Social exchange has been utilized in supply chain research to examine stability and
alliance performance (Yang et al., 2008), coordination of supply chains (Holweg and Pil,
2008) as well as competitive and cooperative positioning in supply chain logistics
relationships (Klein et al., 2007). Yang et al. (2008) examine the stability between supply
chain members in relation to alliance performance. They focused on benefits and trust.
For the supply chain to form, members must seek some benefit or reduction in risk that
the other supply chain members can provide. While trust is important it is not the focus
of this research. Trust is not initially in place and is an end result in the supply chain
context. These authors find that trust plays a role later in maintaining the supply chain
relationships. Our research is focusing on the benefits and risk reduction that is being
sought as well as the power that supply chain members use to influence each other
(Bichescu and Fry, 2009). Klein et al. (2007) address the issue of need fulfillment that
creates the relationship. Further, they state that this relationship is a mixture of
cooperation and competitiveness that will lead to performance gains. These
relationships are exchange linkages between organizations that are supply chain
members. A discussion of social exchange theory and its particular application to the
model as well as discussion of each of the model components (power, benefits, risk
reduction, and SCP) and support for the study hypotheses follow in this section.
2.1 Social exchange
Exchange theory is the conceptualization of interaction, structure, and order (Cook and
Whitmeyer, 1992). In terms of exchange relations, exchange theory has a long history
in anthropology and more recently has been adopted by some sociologists (Cook and
Whitmeyer, 1992). Markosky et al. (1993, p. 197) state that, exchange theory was
developed to predict negotiated distribution of resources in a class of networks
consisting of interrelated individual(s) or corporate actors. As such, exchange theory
should be relevant to supply chain management (SCM) since a supply chain is by
definition an interrelated network of suppliers and customers.
Exchange theory then will be used to examine structures created as a result of
activities, such as supply chain driven activities (Willer, 1999). The resulting structures
are effectiveness seeking (horizontal structure) and efficiency seeking (vertical
structure) depending upon the phase of development (Walters and Rainbird, 2004). The
linkage between activities and structures is the need that is created for some resource
as a result of the benefit that is sought by the supply chain members (Willer, 1999;
Burke, 1997; Cook and Emerson, 1978). According to Willer (1999, p. 21), exchange
theory recognizes the efficacy of structure and focuses its investigation on finding the
conditions in structures that produce different behaviors.
2.2 Supply chain performance
While organizational managers are ultimately held accountable for the performance of
their particular organizations, the success of their organizations depends heavily upon
the success of the supply chain in which the organization participates as a partner.
Success in this case is defined as customer satisfaction. Todays managers must both
manage efficiently and effectively at the organizational level and also at the supply
chain level. Heizer and Render (2006) propose that effective SCM depends on the ability

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to develop long-term, strategic relationships with supply chain partners. Such effective
SCM maximizes value to the ultimate customers of the supply chain in terms of both
satisfaction with the product and/or services and a relatively low total cost of the
product and/or service. For purposes of this study, we take the extended view of the
supply chain from suppliers supplier to ultimate customer and incorporate within
our measure of SCP the ability to satisfy the ultimate customer in terms of both quality
and cost.
2.3 Supply chain linkages
Stinchcombe (1975) found that units within a group can be identified or defined by
what they lack that the other members can furnish. Using Stinchcombes findings and
extrapolating from Levi Strausss (1969) study these units form into subgroups that
need each other and are a system of exchange such as supply chains. Stinchcombe
(1975) and Freeman (1977) both identify that these subgroups will have a point of
centrality and form a sort of boundary. These points of centrality act as a governing
body and will be balanced by the specialty of the desired resource (Stinchcombe, 1975).
Emerson (1972) identified a network of exchange as consisting of:
.
a set of actors (persons or corporate groups);
.
a distribution of valued resources among those actors;
.
for each actor a set of exchange opportunities with other actors in the network;
.
a set of historically developed and utilized exchange opportunities called
exchange relationships; and
.
a set of network connections linking exchange relations into a single network.
At minimum, an exchange network must be dyadic in nature with a point of centrality
and an upstream or downstream member (Freeman, 1992). Emerson (1972) stated that
exchanges are limited to actions contingent on rewarding reactions from others. This
implies that the relationship at a minimum is two sided, mutually dependent, and allow
for mutually rewarding transactions or exchanges. Further these mutually rewarding
transactions or exchange relationships are identified by Willer (1999) as a social
exchange.
2.3.1 Power. Cook and Emerson (1978) found that exchange theory includes the
level of power that the participants bring to the transaction. These authors define
power as the capacity to exploit while Lawler (1992) defines power as a control related
outcome of an exchange. Extrapolating from either of these definitions, the exploitation
of a valued resource can increase the power of the upstream or downstream member
possessing the resource.
Power is often a missing element in SCM. Prior to the advent of SCM, power was an
important aspect of channel management. In SCM the emphasis is on collaboration
rather than control. However, power is important and differentials in power can affect
the decisions made within the supply chain. While power was included in the classical
supply management literature (Cook and Emerson, 1978; Emerson et al., 1983; Lawler,
1992). Maloni and Benton (2000, p. 51) note that much of the recent power literature
examines power influences from the marketing channel perspective and caution that
It is not judicious [. . .] to extend the findings from such research to other industries.
They indicate that additional research is needed to ensure that the topic of power is

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rigorously and holistically covered by supply chain literature. Cox (2001) examines
buyer and supplier power from a conceptual perspective but does not examine the
power relationship empirically.
The purpose of an exchange is to improve an individuals or organizations welfare
(Hildenbrand, 1968). Hildenbrand (1968) identified two basic ingredients: commodities
and agents. The first ingredient is the commodities involved in the exchange.
Commodities are defined by Hildenbrand (1968) as anything that may be used or
consumed. The second ingredient identified is an agent. An agent is characterized by
three elements:
(1) the consumption set of an organization;
(2) preferences; and
(3) the organization ignition resources.
Further, groups are held together by the mutual benefit of the exchange (Spread, 1984).
Extrapolating from that finding, for a group to maintain its cohesiveness, the group
must enter into win-win situations. The win-win situation is identified as balance by
Cook (1987). According to Cook (1987, p. 217), exchange relations are balanced if the
two actors involved in (the) exchange are equally dependent upon one another.
However, as Johnsen and Ford (2008) propose these linkages (relationships) to be
characterized as asymmetric because some supply chain members are larger and more
powerful than others. Hamblin and Kunkel (1977, p. 120) state, an exchange relation is
a relation of mutual dependence and reciprocal (although not necessarily equal)
power. Extrapolating from these authors, a win-win situation is a relationship in
which the corporate actors are equally dependent upon each other and power is
reciprocal but not necessarily equal.
Freeman (1977) identified that the exchange relationship could be measured on the
basis of the linkages. Researchers (Cook and Emerson, 1978; Emerson et al., 1983;
Lawler, 1992) identified power as a measure of these linkages. Amaeshi et al. (2008),
Maloni and Benton (2000), and Cox (2001) further state that power is a critical factor in
supply chain relationships:
H1. Power positively impacts SCP.
2.3.2 Benefits. Supply chain activities are distinguished by linkages that are created
based on a need for a resource or service that the various organizations of the supply
chain provide. Cook and Emerson (1978) and Burke (1997) examined linkages and
looked at the exchange of resources in relation to the dependence that is created.
Willer (1999) argues that it is not necessarily a dependence that is created but a system
of mutual gain or benefit. One benefit that is sought is efficiency (Cannon et al., 2008).
While Polo-Redondo and Cambra-Fierro (2008) found that internal standardization of
an organizations processes can benefit supply chain relationships, it would stand to
reason that other benefits could be gained by standardizing within the supply chain
network. For example, supply chain members may benefit from gained efficiencies by a
standardization of policies and procedures within the supply chain network.
In addition, Im and Rai (2008) explain the potential benefits to inter-organizational
relationships of exploration and exploitation in order to sustain long-term performance,
which could then extend to successful supply chain relationships. For example,
knowledge gains, learning, and innovation are some of the benefits of these

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chain linkages

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relationships. These types of relationships can lead to benefits that result in win-win
situations for all supply chain members:

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H2. Benefits positively impact SCP.

670

2.3.3 Risk reduction. Sociologists explain the existence of groups such as channel
partners and supply chain members by examining the subject from the position that
most groups have a point of centrality which is thought to be in the more powerful
position (Cook and Whitmeyer, 1992). However, when viewed abstractly within the
realms of business, logistics or supply chain requirements or advantages may be
rationales that explain the existence of these groups.
According to Cook and Whitmeyer (1992), exchange theory focuses on the ties
between members of these groups or networks. These linkages are created by the need
to fulfill a requirement for some resource. These resources can be material,
informational or symbolic. Groups or networks are often used to gain access to
resources that might otherwise be difficult to obtain (Johannisson, 1987). These types
of resources are difficult or costly to obtain and thus create a need. This need, created
because of the scarcity of resources, is motivation for organizations to coordinate with
each other (Johannisson, 1987). Extrapolating from these findings, the scarcity of
resources creates a risk. Organizations may become members of a supply chain to
reduce risk. Cannon et al. (2008) further posit one of the linkages that impacts SCP is
the desire to reduce risk:
H3. Risk reduction positively impacts SCP.
Figure 1 shows the hypothesized supply chain linkages model that is examined in this
paper.
3. Methodology
3.1 Data collection process
Data were collected via an online data service during the summer of 2008. Of the 300
individuals who accessed the survey, 145 completed the supply chain linkages and
supply chain scales. Of the respondents 91 represented the manufacturing sector, and
the remaining 54 represented the services sector. Respondents have been in their
current positions for an average of 5.6 years and represent organizations with an
average of 27,533 employees and average annual revenues of $1.48 billion.
Power
H1: (+)

Benefits

Figure 1.
Supply chain linkages
model with hypotheses

H2: (+)

H3: (+)
Risk
reduction

Supply chain
performance

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3.2 Measurement scales


The supply chain linkages construct incorporates three dimensions: power, benefits,
and risk reduction. The power, benefits, and risk reduction scales were developed
specifically for this study. These scales were developed from the existing literature and
then reviewed by experts to ensure they were measuring power, benefits and risk
reduction. The theorized model incorporates a measure of SCP developed by Green and
Whitten (2008). The study scales are presented in Table I.
Supply chain linkages
Please indicate the extent to which you agree or disagree with each statement as the statement relates
to your organizations primary supply chain (1, strongly disagree; 7, strongly disagree)
Power
1. My company has a great amount of influence over the suppliers of resources for our company
2. My company has a great amount of influence over the buyers of our products
3. My company has a great amount of influence over the cost of resources received from our
suppliers
4. My company has a great amount of influence over our competitors
Benefits
5. My company receives benefits other than resources from our relationships with suppliers
6. My company receives benefits other than purchases from our relationships with buyers
7. My company benefits from standardization of procedures with our suppliers
8. My company benefits from the standardization of procedures with our buyers
Risk reduction (a 0.924)
9. My companys suppliers reduce the uncertainty we face
10. My companys buyers reduce the uncertainty we face
11. My companys suppliers reduce the risk we face
12. My companys buyers reduce the risk we face
Supply chain performance scale
Please indicate the extent to which you agree or disagree with each statement as the statement relates
to your organizations primary supply chain (1, strongly disagree; 7, strongly disagree)
1. This organizations primary supply chain has the ability to deliver zero-defect products to final
customers
2. This organizations primary supply chain has the ability to deliver value-added services to final
customers
3. This organizations primary supply chain has the ability to eliminate late, damaged and
incomplete orders to final customers
4. This organizations primary supply chain has the ability to quickly respond to and solve
problems of the final customers
5. This organizations primary supply chain has the ability to deliver products precisely on-time to
final customers
6. This organizations primary supply chain has the ability to deliver precise quantities to final
customers
7. This organizations primary supply chain has the ability to deliver shipments of variable size on
a frequent basis to final customers
8. This organizations primary supply chain has the ability to deliver small lot sizes and shipping
case sizes to final customers
9. This organizations primary supply chain has the ability to minimize total product cost to final
customers
10. This organizations primary supply chain has the ability to minimize all types of waste
throughout the supply chain
11. This organizations primary supply chain has the ability to minimize channel safety stock
throughout the supply chain

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Table I.
Measurement scales

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Non-response bias was assessed by comparing the responses of early and late
respondents using a common approach described by Lambert and Harrington (1990).
Of the study respondents 104 were categorized as early respondents and 41 were
categorized as late respondents based on whether they responded to the initial or
follow-up request to participate. A comparison of the means of the demographic
variables (years in current position, total number of employees in organization, and
total sales revenues for the organization) was conducted using one-way ANOVA. The
comparisons resulted in statistically non-significant differences. An additional
comparison of the means for the summary variables (power, benefits, risk reduction,
and SCP) indicated that the second wave means for the supply chain linkages variables
were significantly less than those for the first wave. The first wave is more heavily
weighted with respondents from the manufacturing sector than is the second wave. To
evaluate whether there are systematic differences in supply chain linkages in the
manufacturing versus the service sectors, responses from each sector were also
analyzed separately. There were no significant differences noted for the SCP summary
variable means. Based upon these results, there is some concern related to
non-response bias. Common method bias may lead to inflated estimates of the
relationships among variables, when data are collected from single respondents
(Podsakoff and Organ, 1986). As Podsakoff and Organ (1986) recommend, Harmans
one-factor test was used to examine the potential bias. Substantial bias is indicated
when either a single factor or one general factor explains a majority of the total
variance (Podsakoff and Organ, 1986). Results of the factor analysis with varimax
rotation identify three factors combining to account for 78 per cent of the total variance.
The first factor accounted for only 32 per cent of the total variance. While the SCP and
power related items loaded on separate factors, the benefits and risk reduction items
loaded on a third single factor. A x 2 difference test was subsequently conducted on the
benefits and risk reduction scales with a significant result indicating that while the
scales load together they exhibit discriminant validity. Based on this analysis, common
method bias is not a significant problem in this data collection.
3.3 Regression analysis
A multiple regression analysis approach, as opposed to an SEM approach, is adopted
due to the relatively small sizes of the manufacturing (n 91) and services (n 54)
samples. Hair et al. (2006, p. 741) recommend a sample size of 200 as a sound basis for
estimation based on a structural equation modeling approach.
4. Results
4.1 Measurement scale assessment
We have adopted the confirmatory factor analysis (CFA) approach recommended by
Gerbing and Anderson (1988) and Koufteros (1999) to assess unidimensionality of the
measurement scales. Koufteros (1999) recommends that the individual scales be
incorporated together in a measurement model and that this model be subjected to CFA
and that relative x 2, non-normed fit index (NNFI), and comparative fit index (CFI) values
to assess fit when the sample size is relatively small as is the case for this study. Relative
x 2 values of less than 2.00 and NNFI and CFI values greater than 0.90 indicate reasonable
fit (Koufteros, 1999). Results of the analysis indicate that the measurement model fits the
data well with an NNFI of 0.939, and a CFI of 0.952. The relative x 2 of 3.79 is somewhat

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higher that the recommended value of 2.00. Kline (1998) recommends relative x 2 values of
less than the 3.00, while Marsch and Hocevar (1985) discuss a somewhat less stringent
cut-off of 5.00. The root mean square error of approximation (RMSEA) is often reported as
an absolute fit measure (Garver and Mentzer, 1999). RMSEA is sensitive to sample size,
however, and is best suited for relatively large samples (n . 500) (Hair et al., 2006). The
standardized root mean residual (SRMR) is reported as an alternative absolute fit measure,
since its value is not significantly impacted by sample size, with lower SRMR values
representing better fit. In this case, the SRMR is 0.046. The individual measurement scales
are considered sufficiently reliable and valid and the fit of the confirmatory factor model is
considered sufficient to support further analysis. Table II displays the standardized
parameter estimates and associated t-values for scale items as well as reliability and
average variance extracted values for each scale.
Garver and Mentzer (1999) recommend computing Cronbachs coefficient a to
assess scale reliability, with a values greater than or equal to 0.70 indicating sufficient
reliability. a scores for all of the measurement scales exceed the 0.70 level. a values for
power, benefits, risk reduction, and SCP are 0.923, 0.897, 0.924, and 0.972, respectively.
The study scales are sufficiently reliable.
Ahire et al. (1996) recommend assessing convergent validity using the normed-fit
index (NFI) coefficient with values greater than 0.90 indicating strong validity.
Scale/item
Power
Item 1
Item 2
Item 3
Item 4
Benefits
Item 1
Item 2
Item 3
Item 4
Risk reduction
Item 1
Item 2
Item 3
Item 4
SCP
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 8
Item 9
Item 10
Item 11
Note: n 145

Standarized coefficients

t-value

0.92
0.90
0.88
0.85

14.23
13.90
12.50
12.63

0.69
0.80
0.92
0.93

9.236
11.41
14.32
14.72

0.82
0.91
0.88
0.89

11.88
14.13
13.37
13.70

0.86
0.87
0.89
0.95
0.92
0.90
0.90
0.84
0.89
0.87
0.89

12.92
13.22
13.64
15.25
14.40
13.82
14.00
12.45
13.71
13.20
13.65

Cronbachs a

Average variance extracted

0.923

0.775

0.897

0.708

0.924

0.765

0.972

0.789

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Table II.
CFA results based on full
sample

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Garver and Mentzer (1999) recommend reviewing the magnitude of the parameter
estimates for the individual measurement items to assess convergent validity. A strong
condition of validity is indicated when the estimates are statistically significant and
greater than or equal to 0.70. NFI values for the power (0.96), risk reduction (0.98), and
SCP (0.96) scales exceed the 0.90 threshold, and parameter estimates for each of the
individual items exceed the 0.70 threshold, with values of 0.84 or greater for all items in
the three scales. The NFI of 0.79 for the benefits scale does not meet the recommended
level. The four items in the benefits scale are, however, all significant with one
parameter estimate slightly below the recommended level at 0.69.
Discriminant validity was assessed using a x 2 difference test for each pair of scales
under consideration, with a statistically significant difference in x 2 indicating validity
(Garver and Mentzer, 1999; Ahire et al., 1996; Gerbing and Anderson, 1988). All
possible pairs of the study scales were subjected to x 2 difference tests with each
pairing producing a statistically significant difference.
Predictive validity was assessed by testing whether the scales of interest correlate
with other measures as expected (Ahire et al., 1996; Garver and Mentzer, 1999).
A review of the correlation matrix (Table III) for study summary variables indicates
that all variables are positively and significantly correlated, as expected, indicating
sufficient predictive validity.
4.2 Correlation and regression analyses results
A multiple regression approach was taken to test the three study hypotheses. First, the
combined (both manufacturing and service sectors) sample was analyzed with the
descriptive statistics, correlations, regression results are displayed in Table III.
The results support all three study hypotheses. All of the supply chain linkages
variables (power, benefits, and risk reduction) are positively and significantly
correlated with SCP at the 0.01 level. Results of the multiple regression analysis with
the three linkages variables as independent variables and SCP as the dependent
variable indicate that power and risk reduction are positively and significantly related
to SCP at the 0.01 level. The benefits variable is also positively and significantly related
but at the 0.05 level. The R 2 for the regression model is 0.613 indicating that the
linkages variables combine to explain 61 per cent of the variation in SCP.
Next, the manufacturing sector sample was analyzed with the results displayed in
Table IV. Again, all correlations of the linkage variables with SCP are positive and
significant at the 0.01 level. Results of the multiple regression analysis indicate that
only the power variable is significantly related (at the 0.05 level) to SCP. The R 2 for the
regression model is 0.435 indicating that the linkages variables combine to explain 44
per cent of the variation in SCP in the manufacturing sector.
Finally, the services sector sample was analyzed with results displayed in Table V.
All correlations are again significant at the 0.01 level. The multiple regression results
indentify only the risk reduction variable as significantly related to SCP at the 0.01
level. The R2 for the regression model is 0.784 indicating that the linkages variables
combine to explain 78 per cent of the variation in SCP in the services sector.
Multicolinearity among the independent variables is a concern when using multiple
regression analysis. Hair et al. (2006) recommend assessing multicolinearity by
reviewing correlation matrix for the independent variables and further by computing
tolerance and variance inflation factor (VIF) values. The correlation matrices are

1
0.743 *

BF
1
0.854 *
0.718 *
t-value
3.556
2.387
3.091

PW
1
0.683 *
0.725 *
0.685 *
Standardized coefficients
b
0.275
0.244
0.335

Sig.
0.001
0.018
0.002

RR

SD
1.43
1.27
1.29
1.41

Mean
4.52
4.37
4.36
4.68

Notes: *Correlation is significant at the 0.01 level (two-tailed); n 145; adependent variable SCP

Independent variables
Power (PW)
Benefits (BF)
Risk reduction (RR)

A. Descriptive statistics
Variable
SC linkages power (SCL-PW)
SC linkages benefits (SCL-BF)
SC linkages risk reduction (SCL-RR)
Supply chain performance (SCP)
B. Correlations
Variables
Power (PW)
Benefits (BF)
Risk reduction (RR)
Supply chain performance (SCP)
C. Regression resultsa

Collinearity statistics
Tolerance
VIF
0.459
2.179
0.263
3.805
0.233
4.285

SCP

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Table III.
Descriptive statistics,
correlations, and
regression results for
combined sample

Table IV.
Descriptive statistics,
correlations, and
regression results for
manufacturing sample
1
0.824 *
0.591 *
t-value
2.607
1.585
1.725

Standardized coefficients
b
0.266
0.229
0.255

Notes: *Correlation is significant at the 0.01 level (two-tailed); n 91; adependent variable SCP

1
0.603 *

BF

PW
1
0.571 *
0.598 *
0.549 *

Sig.
0.011
0.117
0.088

RR

SD
1.28
1.08
1.16
1.24

Mean
4.74
4.58
4.53
4.94

Collinearity statistics
Tolerance
VIF
0.624
1.604
0.311
3.213
0.297
3.369

SCP

676

Independent variables
Power (PW)
Benefits (BF)
Risk reduction (RR)

A. Descriptive statistics
Variable
SC linkages power (SCL-PW)
SC linkages benefits (SCL-BF)
SC linkages risk reduction (SCL-RR)
Supply chain performance (SCP)
B. Correlations
Variables
Power (PW)
Benefits (BF)
Risk reduction (RR)
Supply chain performance (SCP)
C. Regression resultsa

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1
0.873 *

BF
1
0.875 *
0.813 *
t-value
1.598
1.338
3.347

PW
1
0.767 *
0.844 *
0.799 *
Standardized coefficients
b
0.197
0.183
0.547

Sig.
0.116
0.187
0.002

RR

SD
1.61
1.49
1.44
1.58

Mean
4.17
4.02
4.06
4.25

Notes: *Correlation is significant at the 0.01 level (two-tailed); n 54; adependent variable SCP

Independent variables
Power (PW)
Benefits (BF)
Risk reduction (RR)

A. Descriptive statistics
Variable
SC linkages power (SCL-PW)
SC linkages benefits (SCL-BF)
SC linkages risk reduction (SCL-RR)
Supply chain performance (SCP)
B. Correlations
Variables
Power (PW)
Benefits (BF)
Risk reduction (RR)
Supply chain performance (SCP)
C. Regression resultsa

Collinearity statistics
Tolerance
VIF
0.284
3.527
0.232
4.317
0.162
6.180

SCP

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Table V.
Descriptive statistics,
correlations, and
regression results for
services sample

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displayed in the A panels for Tables II-IV, and the tolerance and VIF values are
reported in the C panels. Hair et al. (2006) identify correlations greater than or equal to
0.90, tolerance values less than 0.10, and VIF values greater than 10 as indicating
unacceptable levels of multicolinearity. All correlations are below 0.90, all tolerance
values are greater than 0.10, and all VIF values are less than 10 indicating that
multicolinearity is within acceptable bounds.
To summarize, all linkages variables (power, benefits, and risk reduction)
significantly impact SCP when the combined sample is considered. When the sample is
parsed, the power variable is identified as having the most significant impact in the
manufacturing sector, and the risk reduction variable as the most significant within the
services sector.
5. Conclusions
Heizer and Render (2006, p. 432) propose that the key to effective SCM is the ability to
forge long-term, strategic relationships with supply chain partners for the purpose of
maximizing value to the ultimate customer. The results presented support this
general proposition. More specifically, this study and the reported results identify the
supply chain linkage variables of power, benefits, and risk reduction as important to
the performance of the supply chain. The separate analyses of the manufacturing
sector and services sector samples provides insight into the importance of the variables
depending upon the type of organization and the organizations position within the
supply chain. For the manufacturing sector, power is the dominant linkage; within the
services sector, risk reduction dominates.
SCM emphasizes collaboration rather than control. Our research findings have
potential implications for both manufacturer and service sectors. For example,
consider at minimum a supplier-customer dyad. Alliances and long-term agreements
are valuable during peak demand time for holding lead times and getting preferential
delivery as compared to those who are on short-term purchasing cycle. In addition, a
manufacturing oriented supply chain is more likely to have a point of centrality, such
as the manufacturing organization, to which other supply chain members are solely
dependent upon for orders. The implication is that supply chain members with less
power might suffer when demand is low or may face competition from other suppliers
when demand is high.
Risk reduction is found to be the important variable in service oriented supply
chains. Service organizations have few tangible resources associated with them. As a
result service organizations are vulnerable to changes in demand and have fewer
assets to use as potential collateral. This implies that service oriented supply
chains may use membership as a way to reduce the risk associated with a change in
demand.
While the objective to investigate the relationships of the supply chain linkages
variables to SCP was accomplished, there are limitations to the study that should be
noted. First, because the same data collection was used to assess the new linkages
scales and to test the hypotheses, the study must be described as somewhat
exploratory. The benefits scale in particular will require some revision for subsequent
research applications. Additionally, some concern related to non-response bias should
be noted. Time and financial resource limitations precluded additional third and fourth
waves necessary to more clearly identify the presence of the bias.

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Future research to extend the investigation of the power, benefits, and risk
reduction linkages is necessary. While this study incorporated both the manufacturing
and services sectors, the sample sizes for each sector are relatively small. Additional
data collections are necessary in each sector to verify the results reported here. There is
also a need to investigate the impact of the linkages on other performance measures
such as operational performance and logistics performance. It will be important also to
more thoroughly develop and document best-practice methods for developing the
identified linkages with supply chain partners. Another area of future research
includes investigation of building and designing new supply chain linkages.
The results reported here serve to generally inform management practitioners of the
importance of establishing strong linkages throughout the supply chain with both
immediate and extended suppliers and customers. Practitioners must continue to
successfully manage their internal organizations while forging the long-term,
strategic relationships requisite for improved performance at the supply chain levels.
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Corresponding author
Pamela J. Zelbst can be contacted at: mgt_pjz@shsu.edu

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