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IT investments and business performance

improvement: the mediating role of lean
manufacturing implementation
a
Morteza Ghobakhloo & Tang Sai Hong
Department of Mechanical and Manufacturing Engineering, Universiti Putra Malaysia,

Selangor, Malaysia
Published online: 15 Apr 2014.
To cite this article: Morteza Ghobakhloo & Tang Sai Hong (2014) IT investments and business performance improvement: the
mediating role of lean manufacturing implementation, International Journal of Production Research, 52:18, 5367-5384, DOI:
10.1080/00207543.2014.906761
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International Journal of Production Research, 2014

Vol. 52, No. 18, 53675384, http://dx.doi.org/10.1080/00207543.2014.906761
IT investments and business performance improvement: the mediating role of lean

manufacturing implementation
Morteza Ghobakhloo* and Tang Sai Hong
Department of Mechanical and Manufacturing Engineering, Universiti Putra Malaysia, Selangor, Malaysia
Downloaded by [Northeastern University] at 20:39 09 October 2014
(Received 5 June 2013; accepted 6 January 2014)

The main purpose of this study is to examine whether the application of current information technology (IT) and different principles of lean manufacturing (LM) are interdependent and complimentary or they are mutually exclusive. This
study draws on the so-called IT-enabled organisational capabilities perspective to study the relationships between IT, LM
and business performance improvement. Using a questionnaire-based survey, the data come from 231 leading Iranian
and Malaysian auto-part manufacturers. The ndings suggest that LM and IT are mutually interdependent and value of
IT investments can be effectively transformed into business performance improvement for auto-part manufacturers
through the higher levels of lean manufacturing system (LMS) implementation. Advanced manufacturing technology
(AMT) competency is a valuable intermediate capability which links IT investments into LMS implementation. It was
found that IT investment is one of the minimum requirements of LMS implementation for surveyed business, and the
value of IT investment is truly transformed to LMS implementation when IT investments offer competent administrative
AMTs to effectively manage all production processes. Findings also recommend that managers should avoid isolating
the performance metrics only on areas such as net nancial measures, while assessing the business value of IT and LM.
Keywords: business performance: information technology; IT-enabled capabilities; lean manufacturing; lean production;
waste reduction
1. Introduction
The lean principles and techniques proved useful in many industries and business sectors, such as engineer-to-order
industries, and even in typical service sectors including healthcare (Riezebos, Klingenberg, and Hicks 2009). Lean in
the manufacturing environment, particularly in automotive industry, also refers to the Toyota production system established by the Toyota Corporation. Lean manufacturing (LM), aims at systematic elimination of wastes from an organisations operations through a set of synergistic work practices to produce products and services at the rate of demand
(Yang, Hong, and Modi 2011). Review of literature suggests that the use of various types of Information Technology
(IT) may facilitate leanness in manufacturing environments (Moyano-Fuentes, Sacristn-Daz, and Martnez-Jurado
2012). Prior research has provided evidence that IT facilitates the adoption/implementation of some LM practices such
as Just in Time (JIT). Nevertheless, question of whether or not, and to what extent, IT solutions have contributed to the
success of LM is unanswered (Riezebos and Klingenberg 2009), and the previous research is often inconsistent and
ambiguous in proving the positive impact of LM over sustainability of business performance (Lewis 2000). Given the
dynamic nature of both the lean manufacturing system (LMS) and IT applications, we do not exactly know whether the
application of current IT (which are more advanced and easy to access) and LM principles are interdependent and complimentary or they are mutually exclusive. Accordingly, we are not concerned with the question of whether IT helps to
apply/adopt LM concepts, rather the main question to be answered within this paper is: does recent IT increase the success of LMS? And does the success of LMS result in improvement of business performance?
To answer these questions, this study draws on the resources-based view (RBV) of the rm and tries to rationalise
IT investment in relationship to LMS success from the so-called IT-enabled organisational capabilities perspective. In
fact, the study of relationships between IT, organisational issues and business performance is a cutting-edge research
topic for IT scholars and practitioners (Benitez-Amado and Walczuch 2012; Liang, You, and Liu 2010).
A number of IT scholars attempted to analyse the direct contribution of IT to rm performance, but, the ndings
were mixed and inconclusive (Brynjolfsson and Hitt 1998; Caldeira and Ward 2002; Lucas 1999). The rubric of the
productivity paradox, indicating a weak direct relationship between IS investment and business/rm productivity was
*Corresponding author. Email: morteza_ghobakhloo@yahoo.com

2014 Taylor & Francis
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M. Ghobakhloo and T.S. Hong
culminated by the afrmations of Carr (2003) in his article IS Doesnt Matter. Carr (2003) noted that recent ubiquitous
and inexpensive ITs are available to all rms, which cannot be considered as a source of competitive advantage and performance improvement. Although prior studies revealed that ITs alone have not produced sustainable performance
advantages, but it was found that some rms have gained advantages by using ITs to leverage intangible, complementary human and business resources such as supplier relationships (Powell and Dent-Micallef 1997). Viewed from
IT-enabled organisational capability perspective, recent scholars increasingly consider the rms IT resources as complementary resources augmenting the value of other organisational resources and capabilities, which will further lead to
business performance improvement (Melville, Kraemer, and Gurbaxani 2004). Literature on IT-enabled organisational
capabilities suggests that proactive corporate environmental strategy (Benitez-Amado and Walczuch 2012), supply
chain process integration (Ghobakhloo et al. 2013; Rai, Patnayakuni, and Seth 2006), intrapreneurship culture
(Benitez-Amado, Llorens-Montes, and Perez-Arostegui 2010), knowledge management (Tanriverdi 2006) and new product development (NPD) capabilities (Pavlou and El Sawy 2006; Tang and Ghobakhloo 2013) are capabilities which can
transform the value of IT resources to business performance. Despite recent efforts to understand the mechanism by
which IT interacts with organisational issues and consequently creates performance improvement, we still have very
limited understanding of these relationships (Benitez-Amado and Walczuch 2012), and new IT enabled-organisational
capabilities are being introduced continuously into the IT business value background.
Accordingly, our study aims to provide a deeper understanding of the relationships between investments in IT
resources, higher levels of LMS implementation and business performance improvement, particularly in the context of
auto-part manufacturing.
2. Research model and hypotheses
RBV is the dominant theory within the literature on the link between IT and business performance (Melville, Kraemer,
and Gurbaxani 2004; Powell and Dent-Micallef 1997). RBV focuses on the idea of costly-to-copy attributes of the rm
(Tang and Ghobakhloo 2013) and explains that rms are characterised as compilations of resources or capabilities,
which can provide businesses with superior performance and competitive advantage (Benitez-Amado and Walczuch
2012; Tanriverdi 2006). These resources or capabilities which may include a collection of tangible/intangible human/
non-human assets controlled by rms such as organisational processes, information, knowledge, plant technology and
capital equipment (Tarafdar and Gordon 2007; Wade and Hulland 2004) assist rms to envisage and execute strategies
that enhance their efciency and effectiveness (Melville, Kraemer, and Gurbaxani 2004; Tang and Ghobakhloo 2013).
Accordingly, the unique capabilities of rms to accumulate, develop and deploy those resources and capabilities supply
and secure business with competitiveness through formulating and implementing value-enhancing strategies (Bharadwaj
2000). Organisations can achieve competitive advantage based on resources that are rm-specic, valuable, rare,
imperfectly imitable and not strategically substitutable by other resources (Barney 1991).
Consistently, our study builds on the conceptual foundations of the literature on IT-enabled organisational capabilities, and combines normative and critical philosophy from LM and RBV of the rm literature to propose the research
model of the study as shown in Figure 1.
Figure 1. Proposed research model.
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2.1 IT resources
Viewed from RBV, IT can be dened in terms of IT-based resources (Powell and Dent-Micallef 1997; Wade and
Hulland 2004). Our review of prior IS value studies suggests that RBV has been decient, to some extent, in providing
a one-size-t-all approach to thinking about IS resources, which has severely limited the comparability of prior works.
Many approaches have been used by IT business value scholars to formulate and analyse the IT resources (Melville,
Kraemer, and Gurbaxani 2004). Ross, Beath, and Goodhue (1996) divided IT resources into three assets of human asset
(e.g. IT personnel technical skills, business understanding and problem-solving capability), technology asset (e.g. technology architecture, data and platform standards) and relationship asset (e.g. partnerships with other divisions, client
relationships, top management sponsorship, shared risk and responsibility). Following the Grants (1991) classication
scheme for resources, Bharadwaj (2000) later modied Ross et al.s categorization and proposed that the tangible
resources including the physical IT infrastructure components, the human IT resources (HIRs) including the technical
and managerial IT skills and the intangible IT-enabled resources such as knowledge assets, customer orientation and
synergy are three different categories of IT resources. Melville, Kraemer, and Gurbaxani (2004) melded the existing formulation of IT resources such as IT resources suggested by Powell and Dent-Micallef (1997) with Barneys (1991) classication of rm resources into physical capital, human capital and organisational capital resources and constructed IT
resources as Technological IT Resources (TIR) and HIR. Consistently, we dened IT resources as investments in
both TIR and HIR which are consistent with prior studies in this context (e.g. Benitez-Amado, Llorens-Montes, and
Perez-Arostegui 2010; Tang and Ghobakhloo 2013). Investment in TIR, in this study, is concerned with (1) investment
in IT infrastructure such as shared technology and technology services across the rm and (2) investment in business
applications which utilise the infrastructure such as inventory management applications. Investment in HIR refers to (1)
investment in enhancement of technical IT skills across the rm such as programming, systems integration and database
development skills and (2) investment in enhancement of IT managerial skills such as IT project management, IT
planning, IT research and development competences.
2.2 Advanced manufacturing technology

Advanced manufacturing technology (AMT) was introduced when conventional manufacturing technology and computer-based control technology converged (Swamidass and Kotha 1998). AMT refers to a variety of technologies that
utilise the information and computer technologies in the manufacturing activities either directly or indirectly (Zhou et al.
2009). AMT is a multi-dimensional concept and majority of prior studies tend to agree on classifying AMT in three
sub-dimensions (e.g. Adler 1988): (i) design-related technologies; (ii) process-related shop oor technologies; and
(iii) information-related and control-related technologies1. In dening AMT, we follow the classication of Swink and
Nair (2007) and distinguish between administrative (controlling and planning) and non-administrative AMTs. We
accordingly limit our study to controlling and planning AMT since: (i) our focus is on the use of AMT in manufacturing
plant operations and its effects on LMS implementation, as opposed to the use of AMT in product development (technical side like prototyping) or other manufacturing activities; and (ii) design and manufacturing AMTs such as computeraided-engineering can be linked with computer-aided-manufacturing systems and utilised as tools to accomplish design
manufacturing integration as opposed to support LMS implementation.
Many scholars have highlighted the importance of the adoption and use of processing and planning AMTs for operational performance (Kotha and Swamidass 2000). Effectiveness of a production management directly depends on
employment of effective techniques to plan and control production (Grimsdell 1996). Administrative AMTs therefore
have been employed with the aim of efciently managing all activities performed in the manufacturing of products,
from the supply of raw materials and their components at the suppliers, to their delivery to the customer (Hicks and
Braiden 2000). Many IT applications, in the form of administrative AMTs, have been offered to enable controlling and
planning manufacturing operations (Riezebos, Klingenberg, and Hicks 2009). Some IT applications, in the form of standard or bespoke packages, particularly aim at support for planning such as master production scheduling and capacity
requirements planning applications (Higgins and Browne 1992; Oden, Langenwalter, and Lucier 1993). Inventory control, shop oor control and vendor measurement modules are example of IT applications used for the support of planning and control (Browne, Harhen, and Shivnan 1988). State-of-the-art Enterprise Resource Planning (ERP) solutions
are example of AMTs which can support management information (Spathis and Constantinides 2003) and increase speed
and quality of management decisions, whilst simultaneously reducing costs (Riezebos, Klingenberg, and Hicks 2009).
Consistently, we conceptualise AMT competency as effectiveness of any IT application used for controlling and planning
of any manufacturing operation. Accordingly, AMT competency in this study refers to the perceived effectiveness of IT
applications in aggregate planning and master production scheduling, material requirements planning, inventory control,
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work in progress control and order monitoring, shop oor and operation sequencing and shop oor data collection
(Browne, Harhen, and Shivnan 1988; Johnston 1995).
2.3 The effect of IT investments on LMS implementation and AMT competency
LM is an integrated and complex system composed of highly inter-related elements (Shah and Ward 2003). Shah and
Ward (2007) demonstrated that LM is not a singular concept, and it cannot be limited solely to JIT or total quality management (TQM). In fact, practices such as JIT, TQM and Total Productive/Preventive Maintenance (TPM) are underlying components to LM, which together constitute the LMS. In theory, LM principles and practices can be carried out
successfully in a simple way without using IT, however, the use of IT is indispensable for high level of LM sophistication (MoyanoFuentes et al. 2012; Riezebos, Klingenberg, and Hicks 2009). The review of literature reveals that IT is
crucial to higher implementation of different LM practices (e.g. Au and Choi 1999; Muller, Crespo Marquez, and Iung
2008), and the integrative nature of IT enables different LM practices to integrate and mutually support each other
(Ghobakhloo et al. 2013; MoyanoFuentes et al. 2012). For example, Ward and Zhou (2006) demonstrated that IT facilitates JIT as (1) IT effectively connects the different internal functions in organisations such as manufacturing, purchasing and materials management and (2) in an information-intensive supply chain in which business partners are more
closely connected both internally and externally, IT-enabled information sharing offers decreased information lead time
and decision-making process time, and thus, decreased total lead time in the entire supply chain. IT resources can also
enhance NPD effectiveness at different phases signicantly (Tang and Ghobakhloo 2013). Process management in NPD
is supported by IT tools (Elliott, Gill, and Nelson 2001). Moreover, IT tools can offer sophisticated project management
features that offer access to all NPD project information (Nambisan 2009). Current advanced IT can enhance NPD effectiveness as these tools better support data and information sharing within the rm itself and also with its supply partners
in a network-centric or collaborative innovation environment, since most NPD projects generate an extensive amount of
information and knowledge. Computer-mediated communication technologies are some of the most frequently used IT
tools by NPD teams that allow for effectiveness in coordinating work, obtaining feedback, and thus, enhanced information sharing and dissemination in NPD (Durmusoglu and Barczak 2011; Song et al. 2007). Moreover, current maintenance practice is usually heavily supported by IT. IT enables the precise and optimised monitoring of maintenance
activities, and efcient materials and spare parts management (Swanson 1997). IT can assist with minimising and optimally timing inspection and maintenance (Riezebos, Klingenberg, and Hicks 2009). The emergence of maintenance
management information systems has produced great opportunities for more advanced and effective types of maintenance such as condition-based maintenance and reliability-centred maintenance (Campos 2009; Gabbar et al. 2003).
Recent studies have shown that application of IT plays a critical role in the success of Quality Management (QM)
(Snchez-Rodrguez and Martnez-Lorente 2011). The implementation of QM, initiates a series of information-intensive
processes such as maintenance, continuous improvement of processes, prevention of defects and statistical control, and
there is evidence that IT is vital to the deep implementation of these activities (Perez-Arostegui, Benitez-Amado, and
Tamayo-Torres 2012). Similarly, TQM also benets from the fact that IT offers a powerful tool for the statistical management of processes through quality control charts (MoyanoFuentes et al. 2012). Taking into consideration all the
aforementioned arguments, we can consider that the high level of investment in IT would facilitate a deeper implementation of LMS as stated in the following hypothesis:
H1. Investment in TIR has a positive effect on LMS implementation.
It is evident that the advantages of the IT to different LM practices mentioned above cannot be achieved fully if the
employees are not skilled enough to effectively use these IT systems. Accordingly, investment in providing organisation-wide IT training required would be crucial to the effective use of IT tools to support LM practices (Tang and
Ghobakhloo 2013; Ward and Zhou 2006). Investment in HIR could also empower IT and/or business employees, and
support them to better access information and to more effectively collaborate with other workers and departments in the
rm (Benitez-Amado, Llorens-Montes, and Perez-Arostegui 2010). Likewise, it enables employees those engaged with
different LM practices to better use relevant computer and information systems to develop new ideas more easily to
better solve existing problems/deciencies and improve the efciency of tasks (Benitez-Amado, Llorens-Montes, and
Perez-Arostegui 2010; Chen and Tsou 2007).
H2. Investment in HIR has a positive effect on LMS implementation.
In general, acquisition and deployment dimensions of IT capability are largely based on the IT investment decisions
of IT executives (Pavlou and El Sawy 2006). Wu et al. (2006) argued that although higher level of IT investment
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does not necessarily imply better use of rm resources, however, higher investment on IT ahead of competitors
increases the possibility that the owning rm forms organisational capability that is unique and imperfectly mobile
across competitors, and it can provide the adopting rm with exclusive benets through higher efciency. This view
is consistent with the IT capability literature which suggested that various IT-related resources combine to form an IT
capability (AMT competency) that is valuable, rare, non-imitable and non-substitutable (Melville, Kraemer, and
Gurbaxani 2004). Consistently, we believe that higher investments in TIR and HIR are crucial to AMT competency.
First, high investment in TIR, per se, means the possession of potentially more efcient AMT subsystems (Zhou
et al. 2009), which would enhance the speed, quality and quantity of information transferred across the organisation
(Ghobakhloo et al. 2013), and speed up and optimise decision-making processes (Huber 1990). Second, increasing
AMT effectiveness via having more efcient system-wide, integrated AMT (which can easily interact with computerintegrated manufacturing systems) instead of different individual AMT subsystems generally requires signicant IT
investments (Thatcher and Oliver 2001; Xu, Wang, and Newman 2011). For example, businesses commit to huge
investment (e.g. $200,000 for small companies with a turnover $10m) to implement ERP to facilitate the standardisation of business processes throughout the organisation (Gefen and Ragowsky 2005; Riezebos, Klingenberg, and Hicks
2009). Furthermore, investment in advanced IT signicantly facilitates collaborative production management across
supply chains (Ghobakhloo et al. 2011; Wu et al. 2006). For example, unlike generic electronic data interchange,
new formats of Internet-based information systems such as Extended Markup Language (XML) allow businesses to
link with a large number of supply chain partners and exchange rich and timely information which goes beyond dayto-day transaction-related information, which facilitates effective IT cross-functional integration and alignment across
supply chain (Ghobakhloo et al. 2013; Jean and Sinkovics 2010).
H3. Investment in TIR has a positive effect on AMT competency.
Even the most effective and advanced AMT systems possible will not be benecial to a manufacturing rm if its
employees do not know how to use them (Hong and Kim 2002). Shortage of skills has been long identied as the main
problem in the effective use of AMTs (Arvanitis and Hollenstein 2001). This issue is more problematic among smaller
businesses due to their innate lake of IT skills (Lefebvre, Lefebvre, and Harvey 1996). Thus, manufacturers need to
commit to investment in HIR to increase the employees competence in the use of administrative AMTs. Employees
with high knowledge of information and computer technologies can more effectively and efciently use existing AMTs,
which will further increase the effectiveness of production control, planning and management (Arvanitis and Hollenstein
2001). Investment in HIR would also empower IT and/or business employees, and support them to better access information and to more effectively collaborate with other workers and departments in the rm due to better use of AMT
subsystems (Benitez-Amado, Llorens-Montes, and Perez-Arostegui 2010; Ghobakhloo et al. 2013). Above discussions
lead us to propose that:
H4. Investment in HIR has a positive effect on AMT competency.
2.4 AMT competency, LMS implementation and business performance improvement

We believe that AMT competency indirectly contributes to the improvement of business performance through the mediating role of LMS implementation. Although AMTs can provide a variety of operational benets, however, some studies
found that the use of AMT alone does not necessarily improve rm performance, especially tangible nancial metrics
(e.g. Swamidass and Kotha 1998; Swink and Nair 2007).
Despite the weak relationship between AMT implementation and performance improvement, the high competency of
AMTs instead can form a close t with LM practices and therefore performance improvement (Johnston 1995). LM primarily aims to achieve maximum efciency by developing operations at minimum cost and reducing any possible waste
(Shah and Ward 2007) and effective AMTs that are capable of superlative production management that will provide substantial support for LM to achieve its purposes. The literature explains that AMTs facilitate better coordination between
different departments, greater control of the processes and stable high-quality outputs (Zammuto and OConnor 1992).
Effective AMT systems are able to analyse any critical data and inform each production centre of how much product to
be produced and when, so avoiding human errors that can occur when using visual information (MoyanoFuentes et al.
2012). Viewed from the QM perspective, integrative AMTs such as ERP can support QM practices because communication and information management is inherent to QM (Snchez-Rodrguez and Martnez-Lorente 2011). Properly
designed AMT systems would enable businesses to effectively manage their production planning and scheduling, as well
as to analyse their maintenance history so as to effectively carry out cost analysis and produce future projections of
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failure trends (Nikolopoulos et al. 2003). More importantly, advanced and well designed, and therefore effective AMTs
have enabled businesses to no longer make principle and company-wide choices between push and pull. Recent
AMTs have enabled businesses to build hybrid environments and take advantage of aspects of both push and pull
systems possible (Riezebos, Klingenberg, and Hicks 2009).
Certain LM practices such as JIT and TQM, supplier development and continuous ow are particularly sensitive to
the integration of processes with suppliers, and advanced and well-designed AMT systems which support external integration can play an important role in their effective deployment (MoyanoFuentes et al. 2012; Shah and Ward 2007).
Integrated AMT systems enable rms to develop the higher-order capability of supply chain process integration which
enables rms to unbundle information ows from physical ows (Burgess and Gules 1998), and to share information
with their supply chain partners to create information-based approaches for superior demand planning, for the staging
and movement of physical products, and for streamlining voluminous and complex nancial work processes
(Ghobakhloo et al. 2013; Rai, Patnayakuni, and Seth 2006). These conditions particularly support effectiveness of JIT
manufacturing and enhancement of lead-time performance (Sun 2000; Ward and Zhou 2006; Wu et al. 2006). Dell and
Cisco are examples of leading companies which take advantage of integrated and effective AMT systems to support development of LM practices (Bruun and Mefford 2004). This discussion leads us to propose the following
hypothesis:
H5. AMT competency has a positive effect on LMS implementation.
Review of literature reveals that there are variations in LMs documented performance effects (Shah and Ward 2003,
2007; Wayhan and Balderson 2007). Cua, McKone, and Schroeder (2001) argued that variation in performance effects of
LM is due in part to managers piecemeal adoption of lean productions various components. Consistently, Shah and
Ward (2003) demonstrated that the synergistic effects of all LM practices are associated with better manufacturing performance. More recently, Fullerton and Wempe (2009) reported that the mixed results of prior studies of the LM/performance relationship may be due in part to a failure to account for non-nancial manufacturing performance measurement.
Despite variations in performance effects of LM, prior research has provided evidence that LM can potentially increase
nancial performance through improving organisational processes and cost efciencies (Fullerton, McWatters, and
Fawson 2003; Fullerton and Wempe 2009). Lean manufacturing practices can also enhance manufacturing productivity
by reducing set-up times and work in process inventory, improving throughput times, and thus improve market performance (Tu et al. 2006; Yang, Hong, and Modi 2011). Taking into consideration all the aforementioned arguments over
LM performance outcome, we can consider that effective implementation of different LM practices and synergies resulted
from their complementarity would improve nancial performance and non-nancial performance.
We also believe that LM implementation contributes to the improvement of nancial and marketing performances
through the mediating role of waste reduction.2 There are many evidences that waste reduction in terms of reduced
emissions and waste prevention leads to nancial gain (e.g. King and Lenox 2002). Waste reduction and prevention also
improved environmental performance, which will further lead to improved rms brand image, and thus market performance (Yang, Hong, and Modi 2011). Improved waste prevention may also improve marketing performance through
customer satisfaction and improved rm image (Luo and Bhattacharya 2009).
3. Research methodology
3.1 Operationalization of variables
Wherever possible, measurement items were adapted from existing scales. For new measures and for those signicantly
adapted or changed, we acted on the foundation of guidelines and exemplars in the literature (e.g. Churchill 1979). Four
well-established IT scholars having high experience in survey research and deep expertise in the subject domain were
asked to assess the instrument. The questionnaire and all scales were translated to Persian through assistance of native
professional English translators. Some native IT scholars further helped us with the process of back-translation of items
into English to ensure the validity of questionnaire. For Malaysian respondents, the original English questionnaire was
distributed due to their high English prociency. After incorporating suggested changes, and in order for testing and
assuring face validity of the questionnaire, we piloted the questionnaire on 20 (10 in each country) auto-part manufacturers (based on multiple key informant technique) through face-to-face interview. Based on the feedback from the pilot
study, few questions were rephrased to improve their clarity. As a result, some minor revisions were applied to the questionnaire before nal data collection.
The measurement items of the applied instrument are shown in Table A1. To avoid potential random errors and bias,
we avoided the use of perceptual measures wherever possible. Accordingly, AMT competency is the only variable
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which was measured with the use of a perceptual measure; seven-point Likert scale with 1 = strongly disagree and
7 = strongly agree. Following the previous works of Monniot et al. (1987), Tang and Ghobakhloo (2013) and Wu et al.
(2006), we dened the competency of AMT systems based on their adequacy, appropriateness and accuracy in different
production planning and control practices (Table A1), as perceived by the respondents.
Following Ray, Muhanna, and Barney (2005), investment in TIR was assessed through measuring the exact amount of
IT investment in any type of computer hardware and software, IT infrastructure, licencing, maintenance, security and services within the period of last ve years (20072011). Following Tang and Ghobakhloo (2013), we assessed the investment in HIR through measuring the exact amount of investment in any type of computer and IT training for all
employees, employing and maintaining in-house and external IT experts, information requirements analysis, IT
project management and employee encouragement within last ve years (20072011). Following Benitez-Amado,
Llorens-Montes, and Perez-Arostegui (2010) and to standardised level of IT investment between manufacturers surveyed,
we requested respondents to indicate their level of investments in terms of investment per employee. The use of a singleitem measure for investment in TIR and HIR would not be associated with any problem when respondents understand
clearly that the question refers to only one characteristic (Benitez-Amado, Llorens-Montes, and Perez-Arostegui 2010;
Tang and Ghobakhloo 2013).
Consistent with the previous works of Shah and Ward (2003, 2007), LMS implementation was conceptualised as a
multi-dimensional construct formed with ve sub-constructs: JIT implementation, QM implementation, Maintenance
Management (MM) implementation, Customer Involvement (CI) implementation and Human Resource Management
(HRM) implementation. For assessing the level of implementation of each of the LMS dimensions, we measured the
exact amount of increase in different sub-LMS practices in per cent (%) within the period of ve years (20072011).
For example, regarding the JIT implementation, our instrument measures the exact increase in (1) the number of key
suppliers delivering on JIT basis, (2) the number of shipments that are received daily from key suppliers and (3) the
number of sub-products that are produced when there is a specic customer order (pull system).
For the performance improvement, we acted based on the previous works of Shah and Ward (2003) and Yang,
Hong, and Modi (2011) and dened the nancial performance as the ve-year (20072011) improvement (increase
in %) in return on assets, return on investment and return on sales. Consistently, marketing performance improvement
was dened as the ve-year (20072011) improvement in market share of products, sale of products and product
delivery cycle time. By the same logic, and following the study of Yang, Hong, and Modi (2011), waste reduction was
measured as the exact amount reduction (decrease in %) in defect rates, non-value adding activities, scrap and rework
within the period of 20072011.
We also controlled for the effect of rm size by computing the natural logarithm of the total number of the rms
employees as this measure has been suggested as a reliable proxy of rm size (Benitez-Amado, Llorens-Montes, and
Perez-Arostegui 2010).
3.2 Data collection

The sampling frame of this study consists of all leading automotive part manufacturing rms located in the main industrial parts of Iran and Peninsular Malaysia. The data were collected by means of an electronic survey administered in
mid-2012 and through the multiple informant technique, which is consistent with prior studies on IT-created business
value. A sample of 948 leading Iranian and Malaysian auto-part manufacturers was identied from various sources and
through cooperation with provincial Administrations of Industries and Mines and the Enterprises of Industrial Cities in
different provinces in Iran, and through assistances of Federation of Malaysian Manufacturers and organisations from
Malaysia Ministry of Industry and International Trade. Because the study is concerned with the increase in level of
implementation of different LM practices within a period of ve years, only auto-part manufacturers with LM experience of more than ve years were selected as potential respondents. We identied the companies names, contact persons and their email addresses and telephone numbers. We rst sent an email including a cover letter explaining the
objectives of the study, and an ofcial request letter of participation to the potential respondents. After evaluating the
returned mails, undelivered mails and incorrect email addresses, instruction for participation to the electronic survey
were effectively mailed out to 738 available respondents. The contact persons were requested to ensure that different
parts of questionnaire to be responded or answered by the suitable informant having adequate knowledge. Consistent
with the procedures previously used in the IT literature (e.g. Ghobakhloo et al. 2013), we conducted the follow-up activities by sending some reminders through email and phone calls to encourage potential respondents to participate in
the study. Finally, 231 valid questionnaires (121 from Iranian and 110 from Malaysian auto-part manufacturers) were
received for a response rate of 24.37%.
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Non-response bias was assessed by comparing early respondents with late respondents. The rationale for this test is
that late respondents are likely to have similar characteristics to non-respondents (Tang and Ghobakhloo 2013). To compare early with late responses, we dened the rst 25% of the received questionnaires as early responses and the last
25% as late responses (Jean and Sinkovics 2010). The t-test results revealed no signicant difference on sample characteristics in two groups. Likewise, we made similar comparisons across participants who responded through email version
and those who completed the survey by web-based version of the questionnaire. The analysis suggested that the two
groups were statistically similar on all demographic and study variables.
3.3 Respondent characteristics

Table 1 lists the demographics of the study. A series of multiple independent-sample t-tests revealed that there is no specic difference in any of demographic variables of interest among Iranian and Malaysian manufacturers participated in
this study. We however noticed some difference between Iranian and Malaysian auto-part manufacturers regarding their
foreign customers. We observed that Iranian auto-part manufacturers usually supply to European automakers such as
Peugeot, Renault, Mercedes-Benz and Scania AB. It was, however, observed that Malaysian auto-part manufacturers
generally supply to Asian automakers such as Toyota, Mitsubishi, Honda, Hyundai and Isuzu. We believe that covering
these two different contexts may increase the generalizability of the ndings.
4. Data analysis
Data analysis was conducted with partial least squares (PLS); a structural equation modelling (SEM) technique that uses a
component-based approach for estimation. This technique is well suited for highly complex predictive models (Wetzels,
Odekerken-Schroder, and Van Oppen 2009) and has widely been used in the literatures on IT (Saraf, Langdon, and Gosain
2007) and marketing (Jarvis, MacKenzie, and Podsakoff 2003). Accordingly, SmartPLS 2.0 (Ringle, Wende, and
Will 2005) was used for the analysis, and the bootstrap re-sampling method with 500 subsamples (Rai, Patnayakuni, and
Seth 2006) was used to determine the signicance of the paths within the structural model.
4.1 Measurement model
Researchers spend major effort theoretically justifying structural relationships, however, the same effort should be done
for theoretically justifying measurement relationships, thus, both structural and measurement relationships should be
regarded as hypotheses to be conceptually justied and tested (Jarvis, MacKenzie, and Podsakoff 2003). In doing so, it
is imperative to correctly distinguish between formative and reective indicator measurement models to avoid measurement model misspecication (Petter, Straub, and Rai 2007). Jarvis, MacKenzie, and Podsakoff (2003) and MacKenzie,
Podsakoff, and Jarvis (2005) demonstrated that misspecifying formative constructs as reective results in signicant
Table 1. Demographic attributes of the respondents.
Number on employees
Less than 50
50100
100250
250500
Above 500
Type of products
Plastic parts
Rubber parts
Metal parts
Electronic parts
Other products
Company age
510 years
1015 years
1520 years
More than 20 years
Frequency
Cumulative (%)
25
51
74
44
37
10.82
22.08
32.03
19.05
16.02
10.82
32.90
64.94
83.98
100.00
48
35
89
31
28
20.78
15.15
38.53
13.42
12.12
20.78
35.93
74.46
87.88
100.00
63
84
41
43
27.27
36.36
17.75
18.61
27.27
63.64
81.39
100.00
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upward and/or downward bias. Jarvis, MacKenzie, and Podsakoff (2003) and Petter, Straub, and Rai (2007) noted that
the decision to dene a construct as formative or reective must be based on four key criteria: (1) direction of causality
from construct to indicators, (2) interchangeability of indicators, (3) covariation among indicators and (4) nomological
net of construct indicators. Accordingly, constructs must be modelled as formative when the direction of causality is
from indicators to constructs, the indicators need not be inter-changeable, covariation among indicators is not necessary
and the nomological net of indicators can differ. In this research, all constructs and sub-constructs, and indicators associated with each sub-constructs are modelled as formative as aforementioned decision rules strongly suggest the aptness
of formative constructs.
The rst step for analysing a formative measurement model is to ensure the content validity of formative constructs
(Petter, Straub, and Rai 2007). Content validity examines whether the researcher has chosen measures that appropriately
capture the full domain of the construct (Straub, Boudreau, and Gefen 2004). In this study, the content validity was
ensured as (a) we employed majority of measurement items adapted from existing and validated scales, (b) we acted
based on standard procedure previously established in the literature for new and signicantly changed measurements;
and (c) we rened the measurement instrument with four well-established IT experts and performed the pilot test on 20
respondents (rms). The next step is to examine construct validity, which is typically assessed by both convergent validity, which determines if the measures for a construct are more correlated with one another than with measures of another
construct, and discriminant validity, which detects if the measures are isolated as distinct constructs (Petter, Straub, and
Rai 2007). Fornell and Larcker (1981) suggest that convergent validity is adequate when constructs have an average variance extracted (AVE) of at least 0.5. The conrmatory factor analysis (CFA) results in the study, provide rm evidence
of convergent validity as AVE for all variables are signicantly higher than 0.5 (Table A1). Although few variable intercorrelations were relatively high, the items demonstrated satisfactory discriminant validity as well. For satisfactory discriminant validity, the AVE from the construct should be greater than the variance shared between the construct and
other constructs in the model (Chin 1998). This means that a construct is considered to be distinct from other constructs
if the square root of the AVE for it is greater than its correlations with other latent constructs (Barclay, Higgins, and
Thompson 1995). As in all cases, the square root of AVE for each construct is larger than the correlation of that
construct with all other constructs in the model (Table 2), the results satisfy the discriminant validity. The test of multicollinearity aimed at identication of all potential collinearity problems (having more than one predictor construct) and
revealed that the variance ination factor values for all the variables do not exceed the threshold generally accepted in
the literature with values of 3.3 (e.g. Petter, Straub, and Rai 2007). As a result, these ndings strongly support the
studys content validity, convergent validity and discriminant validity of the operational measures.
4.2 Structural model
The test of structural model includes estimates of the path coefcients, which indicate the strengths of the relationships
between the dependent and independent variables and the R2 values, which represent the amount of variance explained
Table 2. Correlation matrix.
ITIR
IHIR
AMTC
JIT
QM
MM
CI
HRM
WR
FPI
MPI
BS
ITIR
IHIR
AMTC
JIT
QM
MM
CI
HRM
WR
FPI
MPI
BS
1.00
.311**
.433**
.345**
.238*
.414**
.324**
.255*
.300**
.381**
.320**
.188
1.00
.532**
.268*
.304**
.132
.085
.346**
.302**
.176*
.278**
.426**
0.793
.513**
.385**
.310**
.409**
.330**
.358**
.414**
.204
.187
0.790
.470**
.144
.088
.255*
.583**
.462**
.310**
.074
0.767
.584**
.255*
.359**
.572**
.514**
.330**
.131
0.839
.013
.262*
.377**
.239*
.031
.012
0.803
.310**
.266*
.297**
.200
.118
0.753
.455**
.340**
.177
.324**
0.802
.479**
.447**
.353**
0.793
.376**
.268*
0.785
.246*
1.00
Notes: ITIR, investment in TIR; IHIR, investment in HIR; AMTC, AMT competency; WR, waste reduction; FPI, nancial performance; MPI, marketing performance; and BS, business size.The italic items on the diagonal represent the square roots of the AVE;
the values of 1.00 on diagonal are indicative of correlations between the similar items which have no AVE.
*
p < 0.05; **p < 0.01.
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Figure 2. Structural pass model with standardised path coefcient.

Notes: *p < .05; **p < .01; ***p < .001.
by the independent variables (Rai, Patnayakuni, and Seth 2006). Together, the R2 and the path coefcients (loadings and
signicance) indicate how well the data support the hypothesised model. Figure 2 explains the results of the test of the
hypothesised structural model (Petter, Straub, and Rai 2007).
Results of path analysis show that H1 and H2 receive strong support from the data. This means that both the investment in TIR ( = 0.269, p < 0.05) and investment in HIR ( = 0.187, p < 0.05) have a positive effect on LMS implementation. Likewise, investments in TIR and HIR have positive effects on the formation of AMT competency, which
indicate the acceptance of H3 ( = 0.297, p < 0.01) and H4 ( = 0.440, p < 0.001), respectively. As expected, AMT competency is positively related to LMS implementation ( = 0.402, p < 0.001), thus, H5 is accepted. Results indicate that
investments in TIR and HIR account for 36.2% of variance in AMT competency. Investments in TIR, HIR and AMT
competency explained 47.5% of the variance in LMS implementation.
Figure 2 shows that LMS implementation is positively and signicantly related to nancial performance improvements ( = 0.361, p < 0.01). However, results show that there is no signicant relationship between LMS implementation
and marketing performance improvement ( = 0.170, p > 0.05). The results also conrm that waste reduction is positively
and signicantly related to nancial performance improvement ( = 0.246, p < 0.05) and marketing performance improvement ( = 0.319, p < 0.01), respectively. Finally, the control variable of business size is only signicant for waste reduction ( = 0.182, p < 0.05), albeit barely. Results show that LMS implementation and business size explain 35.9% of the
variance in waste reduction. By the antecedent factors studied, 31.6% of the variance in nancial performance improvement and 22.0% of variance in marketing performance improvement are explained.
As the PLS approach aims at predicting the value of exogenous variables in a model, prediction accuracy is a second-important aspect of PLS structural equation models (Gtz, Liehr-Gobbers, and Krafft 2010). Therefore, we tested
the models predictive relevance using non-parametric Stone-Geisser test (Geisser 1975; Stone 1974). Prediction accuracy for each of the latent constructs can be assessed by the non-parametric Stone-Geisser test criterion (Q2) using a
blindfolding approach. It implies to what extent the actual data-set can be reconstructed by the structural model and the
parameters calculated by PLS (Tenenhaus et al. 2005). In other words, Q2 is a measure of the extent to which the prediction in structural model is successful (Urbach, Smolnik, and Riempp 2010). The non-parametric Stone-Geisser test
revealed that lowest Q2 is 0.146 (any value above zero conrms prediction accuracy) which signies the successful prediction and predictive relevance in our structural model.
4.3 Alternative models
The core logic for the proposed model is the perspective on IT-enabled organisational capabilities which suggest that
the value of IT resources in terms of performance gain should be accessed through the mediating role of IT-enabled
organisational capabilities. It is evident that our proposed research model is clearly a single construction and an ordering
of the factors that we have presented. It is logical to argue for alternative models that organise the factors under investigation in a different fashion. Accordingly, and to better assess the aptness of the proposed research model, we examined
5377
two alternative models to determine the degree to which each predicts and explains business performance improvement.
The rst alternative model examined whether TIR and HIR investments and AMT competency could directly create
business performance improvement. In doing so, the LMS implementation construct was removed. In this model, TIR
and HIR investments and AMT competency, collectively, accounted for only 22.7% of variance in nancial performance
improvement, 13.8% of the variance in marketing performance improvement and 16.8% of variance in waste reduction.
In the second alternative model, we examined a pragmatic model where, in addition to LMS implementation, TIR and
HIR investments and AMT competency were included as direct antecedents to nancial performance improvement, marketing performance improvement and waste reduction. By doing so, and compared to the original model, the explanatory powers for nancial performance improvement increased from 0.316 to 0.376, nancial performance improvement
increased from 0.220 to 0.256 and waste reduction increased marginally from 0.359 to 361. The results suggest that the
alternative models cannot provide much more explanatory power than the proposed research model, and more importantly, they may limit our understanding of the role of IT resources in developing organisational capabilities and subsequently performance improvement. Consistent with the underlying theory, our empirical evidence suggests that using
indirect-effect model to assess the business value of IT resources in LM context may indeed provide better justication
for IT investment among auto-part manufacturers.
5. Discussion
The role of IT investment in development of LM has not been studied extensively, and the empirical evidence available
does not provide conclusive results regarding the effect of IT on the development of LM practices (Moyano-Fuentes
et al. 2012; Ward and Zhou 2006). Viewed for RBV, this study explored whether IT and LMS implementations are
interdependent and complimentary, or they are mutually exclusive. Accordingly, we explored the role of AMT competency as a key mediator between IT resources and LMS implementations. Our study demonstrated that investments in
both TIR and HIR are associated with improvement of LMS implementation, albeit barely. We, however, found that the
construct of AMT competency which measures the effectiveness of administrative AMT system in production control
and planning is the most important determinant of LMS implementation in this study, which transforms the value of IT
investments into LMS implementation. Our nding suggests that although LM practices, on a conceptual level, can be
carried out without the help of IT, however, IT investments is crucial to higher levels of LMS implementation. Yet, it is
important to bear in mind that IT investment strategy should be primarily aligned with improvement of AMT competency. In general, LM practices are information-intensive (Perez-Arostegui, Benitez-Amado, and Tamayo-Torres 2012;
Riezebos, Klingenberg, and Hicks 2009). LM uses extensive amount of information to continuously identify unproductive processes and eliminate anything that fails to add value and that is therefore considered waste (Moyano-Fuentes
et al. 2012). IT resources and administrative AMTs therefore improve LMS effectiveness as they enable automated
information ow among internal processes, and interpreting operational, tactical and strategic information (e.g. information on inventory and sale specication, production and delivery schedule and demand forecasting and planning) in a
more timely and accurate way within the organisation and even across the supply network (Ghobakhloo et al. 2013;
Monniot et al. 1987; Rai, Patnayakuni, and Seth 2006; Wu et al. 2006).
Results of structural path analysis and the test of alternative models show that LMS implementation fully mediates
the impact of IT investments on business performance improvement which is consistent with the perspective of
IT-enabled organisational capabilities that perceives IT resources as impacting positively on business performance by
means of other organisational capabilities (Benitez-Amado, Llorens-Montes, and Perez-Arostegui 2010; Rai,
Patnayakuni, and Seth 2006; Tang and Ghobakhloo 2013). We observed that LMS implementation leads to signicant
improvement in waste reduction and nancial performance, and waste reduction signicantly mediates the impacts of
LMS implementation on nancial and marketing performance improvements, which provide support for the ndings of
a recent study by Yang, Hong, and Modi (2011). These ndings particularly contribute to the resolve of LMS productivity paradox. As we have aforementioned, there are some inconsistencies in performance improvement effects of LMS
within literature. This paradox is generally attributed to (1) piecemeal deployment of various LM practices by businesses
and (2) ignoring the use of non-nancial measures in capturing the performance effects of LMS. Our ndings provide
support for theses contentions by showing that:
(1) LMS is not a singular concept and cannot be equated solely to one practice. We found that all the LM
practices studied, signicantly contribute to the formation of a comprehensive and sophisticated LMS implementation, and LMS implementation, as a multi-dimensional construct, has a signicant positive impact on
the nancial performance improvement, and
5378
(2) the implementation of LM seeks, for denition, to reduce the waste. Thus, waste reduction is the most
important and expected outcome of LMS implementation which transforms the value of LMS implementation
to nancial, and in particular, marketing performance improvement. Thus, and consistent with Fullerton and
Wempe (2009), measuring non-nancial outcome of LMS implementation is crucial and it mediates the effects
that LM practices have on business protability.
6. Conclusions
6.1 Contributions to research
The relationship between IT and LM has received some attention by the scientic community, however, the literature
shows some major research gaps. Although few recent studies conceptualised LM as a multi-dimensional construct and
explored the relationship between IT and adoption of different LM practices, however, prior research has not studied the
key role that the direct IT investments could play in enhancement of LMS implementation. Accordingly, this study contributes to the IT literature by theoretically developing the constructs of AMT competency and LMS implementation.
We theoretically proposed, and empirically demonstrated that IT investment is one of the minimum requirements of
higher levels of LMS implementation for the surveyed business, and the value of IT investment is truly transformed to
LMS implementation when IT resources support the effective management, control and planning of all production processes. Moreover, IT is usually dened from an exclusively theoretical perspective, by analysing the infrastructures,
hardware and software that rms have or use (e.g. Durmusoglu and Barczak 2011; Wu et al. 2006) which may create
ambiguity in IT performance effects. To minimise the negative effects of this limitation over our study, we assessed the
exact amount of investments in TIR and HIR (for the latest ve-year reporting period of 20072011) and demonstrated
that IT investments and LMS implementations are not mutually exclusive; rather, they are interdependent and
complimentary.
As another important theoretical contribution, this paper, theoretically demonstrated how auto-part manufacturers, in
particular in developing countries, can generate business value from IT-enabled organisational capabilities, a topic that
has received little attention to date. The study revealed that LMS sophistication (known as higher levels of LMS implementation) is a tangible and valuable capability even for auto-part manufactures in developing countries which transforms the value of IT resources to business performance improvement. This nding in the context of LM is evidence to
empirically support prior contentions that IT enables organisational capabilities and yields signicant value to the
business.
6.2 Contributions to practice

The ndings also have important implications for practitioners and IT and business managers. Managers need to note
that according to RBV, IT resources offer value when they are embedded within specic organisational processes, thus,
the role of LMS implementation in realising the value of IT resources should be recognised. The theory of complementarities explains that a set of resources is complementary when the returns to a resource vary in the levels of returns to
the other resources. Practitioners and managers need to note that TIR and HIT are complementary, and while they are
distinct, they are also interdependent. TIR and HIT mutually support and reinforce each other and synergies arising from
the complementarity of these resources will develop more effective AMTs and LMS. Therefore, investment on both
technological and human aspects of IT resources aimed at increasing the effectiveness of production management, control and planning practices and LM activities imperatively. Moreover, and in justifying investments in different aspects
of IT, practicing managers should consider not the direct effects of IT resources on business performance improvement
but the indirect effects through intermediate organisational capabilities such as LMS implementation. It is imperative to
note that LMS implementation is a multi-dimensional concept, so that the complete and effective transformation of IT
resource for LM adopters into higher business value will be best achieved through the achievement of LMS implementation in all the different practices of LM. Due to the complementarities among different LM dimensions, an effective
LMS that simultaneously involves different lean practices creates super-additive value synergies, thus higher
performance improvements.
We need to bear in mind that both IT and LMS entail both costs and benets. Costs of dismantling some of previous
physical plant set-ups and systems, and costs of training employees are examples of many LMS costs. Alternatively,
effective IT and LMS would increase the employees morale and productivity; customer satisfaction due to reduced
defects, faster time to market and improved delivery. Additionally, LMS can considerably facilitate collaborative supply
chain management and improve administrative productivity with redundancies eliminated across supply network.
5379
Integrative IT and AMTs also help to eliminate many of the human handoffs and interventions that slow down the
manufacturing and delivery processes across the supply network. As many potential direct costs and indirect benets are
associated with IT and LMS, their effect on improvement of net nancial performance might be unclear. Thus, manager
should avoid isolating the performance metrics only on areas such as net nancial measures, while assessing the business value of IT and LMS. Managers should also use non-nancial metrics since our results demonstrated that waste
reduction signicantly transforms the value of IT investments and LMS implementations to nancial performance
improvement among auto-part manufacturers studied.
6.3 Limitations and future directions

Although this study uses a standard research design, it has some limitations that the reader should take into account
while interpreting the results. First and foremost, the context of this study is limited to the perspective of Iranian and
Malaysian auto-part manufacturers, which limits the generalizability of our ndings to the Asian-developing countries
context. Although the surveyed rms are leading manufacturers, those who supply to leading automakers, we cannot
ignore that the business environment for auto-part manufactures in developing and developed countries are largely different. Thus, future research that examines any extension of our model in other developed and developing countries or
business contexts may improve generalizability of our ndings. Secondly, the construct of IT resources in this study
only measures direct IT investments. As suggested by prior literature, IT resources can also be concerned with the frequency or the prociency of IT usage (Durmusoglu and Barczak 2011). Subsequent studies might incorporate IT usage
dimensions while assessing the impact of IT resources on LMS implementation and business performance. This will
enable us to assess whether heavy or more procient IT users differ in beneting from LMS implementation. Thirdly,
this study is cross-sectional in nature, while we acknowledge that the nature of IT resources, AMT competency and
LMS implantation is dynamic and continuous. Therefore, although this will add layers of complexity, collecting data
over time from the participating managers can offer richer implications. Thus, it would be interesting to validate the
ndings of this study using a time-series data in the future research. Finally, our research model is limited in the sense
that it only accounts for IT investments and AMT competency as the only determinants of LMS implementation. It is
imperative to consider that in the LMS context, the level of implementation of different LM practices may also depend
on the different intra- and extra-organisational determinants such as organisation-wide openness to change, supportive
organisational culture, teamwork and integration with customers and suppliers. Future studies need to also consider how
other determinates in conjunction with IT resources can facilitate higher LMS implementations.
Funding
This research was funded and supported by an International Graduate Research Fellowship (IGRF) from the University Putra
Malaysia [Ref No: UPM/SPS/GS30834].
Notes
1.
2.
Some scholars such as Swamidass and Kotha (1998) further separated information-related and control-related technologies into
two separate dimensions, namely: (i) logistics/planning-related technologies and (ii) information-exchange technologies.
The implementation of LM seeks, for denition, to reduce the waste. It is therefore expected that performance effects of LM
mainly go through waste reduction. We appreciate the comments and suggestions of anonymous reviewer on this matter.
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Appendix 1
Table A1. Operationalization of the constructs and CFA results.
Item
TIR investment
Investment in any type of computer hardware and software, IT infrastructure,
licensing, maintenance, security and services within last ve years
HIR investment
Investment in computer and IT training for all employees (including managers at
different levels), specic computer and IT training to improve technical skill of
IT group, employing and maintaining in-house IT experts, external experts (e.g.
consulting rms and IT vendors) for information requirements analysis, IT
project management and employee encouragement within last ve years
AMT effectiveness
Effectiveness in terms of adequacy, appropriateness and accuracy of existing AMTs
systems in
Aggregate planning and master production scheduling
Material requirements planning
Inventory control (raw materials, components and end products)
Work in progress control and order monitoring
Shop oor and operation sequencing
Shop oor data collection
Lean manufacturing system effectiveness
Improvement in percentage within last ve years
JIT implementation
Key suppliers delivering on JIT basis
Receiving daily shipments from key suppliers
Pull production
QM implementation
Quality improvement and control
Statistical quality control
Reducing process variance
Process design for quality
MM implementation
Planning and scheduling for maintenance
activities
Preventive maintenance during non-productive
time
Documenting maintenance activities record
Total productive maintenance
CI implementation
Receiving customers feedback on quality and
delivery performance
Accessing to customers current and future
demand information
Customer involvement in current and future
product development
Being in close contact with customers
HRM implementation
Shop oor employee involvement in problemsolving
Increasing the responsiveness of employees to
change
Providing cross-functional training for
employees
Empowering shop oor employees
Waste reduction
Improvement in percentage within last ve years
Factor Cronbachs Composite

loading
alpha
reliability
Average
variance
extracted
.0907
0.931
0.629
0.832
0.867
0.625
0.850
0.901
0.589
0.904
0.915
0.705
0.875
0.886
0.645
0.839
0.892
0.567
0.875
0.912
0.643
0.780
0.868
0.832
0.679
0.865
0.713
0.829
0.753
0.787
0.767
0.723
0.835
0.740
0.776
0.845
0.912
0.819
0.729
0.800
0.751
0.918
0.756
0.781
0.723
0.750
(Continued)
5384
Table A1.

(Continued)
Item
Reducing defect rates
Reducing non-value adding activities
Reducing scrap
Reducing rework
Financial performance improvement
Increase in percentage within last ve years
Return on assets (ROA)
Return on investment (ROI)
Return on sales (ROS)
Marketing performance improvement
Increase in percentage within last ve years
Market share of products
Sale of products
Product delivery cycle time
Factor Cronbachs Composite

loading
alpha
reliability
Average
variance
extracted
0.835
0.749
0.872
0.743
0.831
0.815
0.628
0.827
0.818
0.616
0.798
0.856
0.718
0.845
0.712
0.792

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