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Journal of Operations Management 28 (2010) 144162

Contents lists available at ScienceDirect

Journal of Operations Management


journal homepage: www.elsevier.com/locate/jom

The impact of information technology use on plant structure, practices,


and performance: An exploratory study
Gregory R. Heim 1, David Xiaosong Peng *
Department of Information & Operations Management, Mays Business School at Texas A&M University, 320 Wehner Building, 4217 TAMU, College Station, TX 77843-4217,
United States

A R T I C L E I N F O A B S T R A C T

Article history: Firms have been investing millions of dollars on information technology (IT) in their manufacturing
Received 25 July 2008 plants. However, the research literature is unclear about the extent and scope of the impact of IT use on
Received in revised form 16 September 2009 plant operations. This study examines the impact of IT use on the structure, practices, and performance
Accepted 23 September 2009
of manufacturing plants. Drawing on information systems and operations management literature, the
Available online 1 October 2009
study differentiates between plant IT use (i) at the process level, (ii) due to internal process integration,
and (iii) due to customer and supplier collaboration, labeled as process intelligence, integration
Keywords:
intelligence, and collaboration intelligence, respectively. The study also accounts for intelligence
Manufacturing
gathering due to statistical process control (SPC) practices. The proposed impacts of IT use are examined
Process control
Information technology using data from a study sample of manufacturing plants from electronics, machinery and transportation
Regression component industries. Overall, the evidence suggests that SPC has a broader and more signicant impact
on many aspects of plant operations than the individual dimensions of IT use. However, the three
dimensions of IT use do exhibit distinct effects on plant structure, practices, and performance. Process
intelligence tends to be associated with plant size and productivity, while integration intelligence and
collaboration intelligence tend to be associated with work practices related to increased organizational
decentralization and a exible technology focus.
2009 Elsevier B.V. All rights reserved.

1. Introduction studies have largely studied IT performance impact at the rm


level (e.g., Cao and Dowlatshahi, 2005; Dehning et al., 2007;
The impact of information technology (IT) use on performance Hendricks et al., 2007) or the industry sector level (Shah and Shin,
and other organization outcomes is an important topic to both 2007). Another stream of the OM literature has examined a
practitioners and academics. During the 1970s and 1980s, focused type of IT such as new product development and project
manufacturers began adopting IT to automate plant operations. management tools (Bardhan et al., 2007; Malhotra et al., 2001),
Since the early 1990s there has been a rapid growth in IT enterprise resource planning (Masini and Van Wassenhove,
investments for enterprise resource planning and supply chain 2009), or supply chain collaboration (Hill and Scudder, 2002;
management in manufacturing industries. These information Saeed et al., 2005). However, few studies have examined a wide
technologies are believed to improve the efciency of manufac- spectrum of IT applications both within and across rm
turer shop oor operations, enhance integration across different boundaries.
functional areas, and facilitate inter-rm collaboration (Akker- In the Information Systems (IS) literature, a large number of
mans et al., 2003; Banker et al., 2006; Kelley, 1994). studies capture the level of IT adoption using highly aggregated IT
Despite increased adoption and use of advanced IT by investment measures that typically lump together all IT-related
manufacturing rms, to date there is still a lack of systematic spending, such as investments in computer hardware, software,
study of the impact of IT on manufacturing operations, particu- and telecommunication infrastructure (e.g., Dewan et al., 2007;
larly at the plant level (Banker et al., 2006). A review of the Harris and Katz, 1991). This approach to examining IT capital
Operations Management (OM) literature indicates that prior does not allow the isolation of the impact of specic IT
applications (Banker et al., 2006). However, assessing the impact
of specic IT use is important for improving plant operations
because building IT-based competence is an ongoing process that
* Corresponding author. Tel.: +1 979 845 6996; fax: +1 979 845 5653.
E-mail addresses: gheim@mays.tamu.edu (G.R. Heim), xpeng@mays.tamu.edu
requires incremental investments in new IT applications in order
(D.X. Peng). to improve the effectiveness and efciency of operational
1
Tel.: +1 979 845 9218; fax: +1 979 845 5653. processes at different levels.

0272-6963/$ see front matter 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2009.09.005
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 145

Over the past two decades, manufacturing rms have Jaikumar inductively derived a theoretical framework on the
witnessed increasingly individualized customer demands, leading evolution of process control by tracing historical events in the
to increased customization and proliferation of products and rearm industry (Fig. 1). He observed that information used to
services. As a result, modern-day manufacturing rms tend to have control processes was initially generated using paper-based and
multiple product lines targeting different markets and customer mechanical tools to provide static intelligence, and later generated
segments. Within a manufacturing rm, individual manufacturing using digital computer systems oriented toward dynamic intelli-
plants supplying different target markets and customers need to be gence. For each evolutionary period, Jaikumar also notes con-
supported by a tailored conguration of IT applications (Hender- temporaneous patterns of plant size and structure, work practices,
son and Venkatraman, 1999; Kathuria et al., 1999). While many operational processes, and performance. In summarizing the
rms strive to develop a common IT infrastructure, decisions on changes in the patterns over time, Jaikumar (2005, p. 112)
specic IT investments to some extent rest on plant management. presented a framework relating the evolution toward information
Thus, a plant-level analysis of IT use is expected to provide a ne- systems supporting dynamic intelligence to patterns of organiza-
grained understanding of the linkage between IT and organiza- tional structure, operational practices and performance.
tional outcomes. While Jaikumars theoretical framework is longitudinal in
Prior research suggests that IT use may not directly impact nature, it offers important implications about the cross-sectional
overall business or operational performance, but rather affects relationships between different dimensions of intelligence
certain intermediate variables such as process efciency and gathering (using various information systems) and plant
organization learning (Banker et al., 2006; Devaraj et al., 2007; structure, practices and performance. To examine these relation-
Tippins and Sohi, 2003). Simply examining overall performance ships, we analyze data from an international study sample of
impacts may miss important implications of the many roles IT can over 200 manufacturing plants in electronics, machinery, and
play. Thus, researchers need to consider dependent variables other transportation component industries. We view each plants
than performance. In some circumstances, adopting the effective- data on information technology use to represent a chosen
ness of business processes as a dependent variable may be more conguration of managerial practices and strategies supporting
appropriate than adopting overall organizational performance as a dynamic intelligence (Leonard-Barton, 1988; Itami and Numa-
dependent variable (Ray et al., 2004, p. 23). In this study we gami, 1992). In a randomly selected cross-sectional sample
examine a broad set of dependent variables encompassing measures of plants, plant IT systems are expected to vary considerably
for plant structure, operational practices, and performance. in terms of their sophistication and scope, therefore placing
In examining the impact of IT use, researchers have adopted sample plants at different stages along the evolutionary path
various theoretical perspectives such as the resource-based view, that Jaikumar proposed rms would follow to develop
transaction cost theory, and organization information-processing dynamic intelligence. We also expect plants to exhibit
theory. Most of these theories are borrowed from the management different process control characteristics along this path. We
or economics literature, whereas OM theories have barely been use the data to position the plant operations along the
adopted to examine IT use in manufacturing operations. In this dimensions of IT use. We nd some empirical results consistent
study, we draw on Jaikumars (1988) theoretical framework on the with the implications of the model, yet also observe some
evolution of process control as well as other relevant literature to results that differ from the proposed outcomes. The paper
study plant-level IT use and its impact. The key idea we draw from contributes to the literature by systematically examining the
this framework is that broad use of information technology will impact of IT use at the plant level.
enhance an organizations ability to process information and thus The paper is organized as follows. Section 2 reviews Jaikumars
change how production processes are managed and work theoretical framework and develops hypotheses. Section 3
organized, leading to changes in process scope and work practices. describes data, measurement and analysis results. Section 4

Fig. 1. Evolution of process control (Jaikumar, 1988); the right-most column is intended to show how the dynamic intelligence variables are related to Jaikumars framework.
These constructs are not part of Jaikumars framework.
146 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

concludes by discussing theoretical and practical implications and incorporating simple manual and hard mechanical mechaniza-
future research directions. tion. In contrast, dynamic technologies require softer machine
intelligence essentially computerized programmable intelli-
2. Background gence that substitutes for intelligent tasks ordinarily performed
by humans. For example, dynamically intelligent machines must
2.1. IT and evolution of process control be able to recognize a part they pick up, how to position that part
for processing, and how to adjust the part processing based on tool
Since the 1970s, manufacturing industries have observed wear. The scope dimension relates to the breadth of unique
growing adoption and use of advanced manufacturing technology production capabilities that a process is able to handle. Discretion
(AMT), enabled largely by modern information technology. relates to the ability of workers or machines to make autonomous
Technologies such as computer aided design (CAD), computer decisions regarding the production activities that they will
aided manufacturing (CAM), material requirement planning undertake.
(MRP), and exible manufacturing systems (FMS) have dramati- Subjectively, Jaikumars work seems to have predicted the
cally changed manufacturing processes and their outputs. AMT is subsequent industrial movement toward IT-based production
believed to deliver high production exibility, rapid responses to operations. During the 20 years since its publication, the world has
changes in demand and product design, greater control and experienced a continuing evolution toward IT-based production
repeatability of processes, faster throughput, reduced waste, and systems via (i) broad plant-level use of computerized production
distributed process capability (Boyer et al., 1996; Kelley, 1994). As technologies such as FMS, CIM, CAD/CAM, and CAPP, (ii) enterprise
such, the traditional tradeoff between exibility and efciency has information systems for CRM, ERP and SCM, and (iii) collaboration
been altered signicantly: one of the primary benets ascribed to via the Internet (Banker et al., 2006; Wu et al., 2003; Caldeira and
AMTs is the capability to combine traditional economies of scale Ward, 2002). As manufacturing rms have increasingly adopted a
with economies of scope in an ability to achieve both exibility and broad array of information technology, Jaikumars model has seen
efciency (Boyer et al., 1996, p. 298). Indeed, IT has been widely growing use by academics to motivate the need for new theoretical
acclaimed to enable mass customization since it provides efcient frameworks (Melcher et al., 2002) and operations tools (Brooking
exibility to help rms cope with the dual challenge of speed and et al., 1995).
exibility and low cost (Allen and Boynton, 1991, p. 436). Yet, rms today are using information technology in varieties
The impact of IT is not limited to core production processes. and to an extent that could not have been imagined in 1988, when
Broad adoption and use of IT within the rm and across rm Jaikumar proposed the framework. Thus, researchers may need to
boundaries also may stimulate new work practices and organiza- enrich the frameworks constructs based on present-day knowl-
tional forms, leading to changes beyond core production processes edge of how IT use has played out. Jaikumars (1988) work focuses
(Bresnahan et al., 2002). Recently, advances in Internet technology on how process-level IT affected plant activities at various levels. In
have enabled rms to monitor, improve, and control operational comparison, in todays manufacturing operations information
processes throughout the supply chain (Banker et al., 2006; Rai technology use can span from internal processes out to customers
et al., 2006). Interorganizational processes, when enabled by and suppliers. In this paper, we characterize a manufacturing
integrated IT systems, can create capabilities in demand sensing, plants IT use along three dimensions labeled process intelligence,
operations and work ow coordination, and global optimization of integration intelligence, and collaboration intelligence. These three
resources (Rai et al., 2006, p. 227). dimensions of IT use represent IT applications supporting
The historical use of IT for monitoring and controlling manufacturing operations, integration among different functions,
manufacturing processes is documented in detail in Jaikumars and collaboration and integration with suppliers and customers,
industrial history monograph on the evolution of process control respectively. This classication of IT use parallels the general
within rearm manufacturing (Jaikumar, 1988, 2005). In parti- history of the development of modern information systems
cular, the monograph describes how process scope and worker (Banker et al., 2006; Wu et al., 2003; Caldeira and Ward, 2002).
discretion changed over time in response to the adoption of tools Several studies have explored these factors individually (e.g.,
and information systems used to monitor and control the Bardhan et al., 2007; Hill and Scudder, 2002; Saeed et al., 2005;
production processes for gun manufacture. Jaikumar uses a model Masini and Van Wassenhove, 2009), but few have examined them
similar to the one presented in Fig. 1 to describe this evolution. The as separate factors jointly driving changes in plant structure,
model is a two-dimensional matrix built upon the dimensions of practices, and performance.
static (mechanization) vs. dynamic (intelligence) information sup- Jaikumars model (Fig. 1) suggests that after a period
porting the work process, and low process scope/low discretion vs. characterized by centralization, process automation and econo-
high process scope/high discretion in worker decision making. The mies of scale, rms should exhibit movement toward early
path of process control evolution follows a U-shaped pattern intelligence gathering via statistical process control (SPC), and
according to the numbered cells in Fig. 1, from cell 1 through cell 6. subsequent use of IT-based dynamic intelligence gathering. We
The model positions historical process types along an ordinal propose that SPC and various dimensions of dynamic intelligence
timeline spanning from the English system of manufacturing to should be observed in a cross-sectional sample of manufacturing
modern (late 1980s) exible manufacturing systems and compu- plants. Yet, at the same time, because rms have different internal
ter-integrated manufacturing (CIM). Underlying the model is a traits and operate in different task environments, each rm may
view that operations have been evolving from physical control evolve following its own unique path, which may begin in any of
toward digital control of production systems. Karmarkar and Apte the stages in Jaikumars framework or with any dimension of IT
(2007) characterize this phenomenon as an evolution from a use. As such, we expect that not all manufacturing plants have
material-based economy to an information-based economy (p. evolved through every stage, leading to different degrees of use of
438) and suggest that the challenges of managing these informa- SPC and IT-based dynamic intelligence. While the left-hand side of
tion-based operations will provide the bulk of interesting future Jaikumars model (Fig. 1) may be largely unestimable using
OM research topics. contemporary data since it relates to historical developments from
In Jaikumars (1988, p. 92) model, production evolves from a the rst half of the 1900s and before, we believe that the right half
static, unchanging world to a dynamic, information intensive of the framework can be analyzed since it relates to ongoing
world. Jaikumar characterizes mechanized technologies as manufacturing developments. Thus, we focus on empirically
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 147

estimating the impact of moving away from the left side of Fig. 1 by Table 1
Jaikumars proposed patterns across evolutionary timeline.
adopting statistical process control and systems for IT-based
dynamic intelligence. Operational Proposed direction of
characteristics change
2.2. Research model and hypotheses Size trends
Number of people Increase (+) followed by
A move toward centralization of job content and a loss of worker (minimum scale) decrease ()
Number of machines Increase (+) followed by
discretion within a manufacturing plant was an early indicator of a
decrease ()
movement toward large operations focused on scale economies Productivity increase Increases (+)
(Jaikumar, 1988). Centralization as a dimension of organizational Number of products Decrease () followed by
social structure has been studied frequently in prior literature, increase (+)
especially with respect to its causal impact at the rm level (e.g., Nature of work Standards for work Focus on absolute product
Parthasarthy and Sethi, 1992, 1993; Vickery et al., 1999). In the rst Focus on relative product
half of Jaikumars framework, as centralization increases, one should Focus on work standards
Focus on process standards
observe associated size and productivity increases, whereas
Focus on functional
decentralized worker practices and supporting technology should standards
be observed to decrease. However, by the 1980s the growing use of Focus on technology
competence-destroying IT was expected to reverse these historical standards
trends, leading to a lower degree of centralization and increasingly Discretionary work practices
decentralized practices. Jaikumars work suggests that certain Control of work Mechanical craft
operational patterns will be observed in manufacturing rms at Repetitive tasks/
different stages along this evolution path, presented from top to diagnostic skill
Experimental skill
bottom within each row in Table 1. For example, the control of work
was expected to evolve over time from a mechanical craft to using a Work ethos Perfection
Satised
skill set focused on diagnosis and experimentation.
Reproduce
Consistent with changing views on IT in the strategy literature Monitor
(Itami and Numagami, 1992), we expect decreased centralization Control
to be an outcome of information technology evolution rather than Develop
an input. In this study, we focus on the impact of using statistical Organizational change Break up of guilds
process control and information technology supporting plant Staff-line separation
intelligence to examine the proposed movement toward decen- Increase functional
tralized plant structures, discretionary work practices, and a specialization
Increase problem-
exible technology focus. We derive research propositions from
solving teams
the proposed pattern in Fig. 1, from the rows highlighted by the Increase cellular control
rightmost bold column in Table 1, and from knowledge about Increase product-process
modern-day information systems, which we view in terms of the collaboration/integration
three dimensions of dynamic intelligence (i.e., dimensions of IT Staff-to-line ratio Increases (+)
use). Our research framework and propositions are presented in Line workers/machine Decreases ()
Fig. 2 and the rest of this section. Technology keys Instrument of control From micrometer to
The rst research proposition relates to statistical process professional computer
control. We examine the impact of SPC at the plant level as a workstation
representative practice relating to information gathering that Technology focus
contributes to a more effective control of processes (Jaikumar, Process focus Accuracy
1988). Jaikumar suggests that the drive toward gathering SPC Precision:repeatability
information was an early movement toward dynamic intelligence Precision:reproducibility
Precision:stability
within-plant operations. In manufacturing operations, statistical
Adaptability
tools and techniques play an important role in monitoring and Versatility
controlling production processes (Benner and Tushman, 2003;
Focus of control Product functionality
Handeld et al., 1999; Rungtusanatham, 2001). Previous studies Product conformance
have found positive impacts of SPC or Total Quality Management Process capability
(TQM) (e.g., Anderson et al., 1995; Flynn et al., 1995), while other Product/process
studies report mixed results depending upon the outcome integration
Process intelligence
variables examined (e.g., Black and Lynch, 2001; Choi and Eboch,
1998). Overall, literature has documented the role of SPC for Rework Decreases ()
supporting JIT practices in standardized larger scale operations, (Source: Jaikumar, 2005, p. 13).
and the role of TQM in supporting new decentralized work Rows in italic are not empirically examined. The rightmost column contains
terminology used throughout the remainder of the paper.
practices within-plant operations. Thus, we state the following
proposition:
We break the theorized evolution along the right-hand side of
Proposition P1. Statistical process control: Plants exhibiting a higher Jaikumars model in Fig. 1 into three separate factors that represent
level of statistical process control will be positively associated with (i) the separate evolution due to use of information technologies
operations size, (ii) operations productivity, and (iii) discretionary supporting process intelligence, integration intelligence, and
work practices related to organizational change. Statistical process collaboration intelligence. Process intelligence represents the
control will be insignicantly or negatively associated with (iv) dis- extent to which information technology is adopted for tactical
cretionary work practices related to experimentation and develop- uses at the process level within manufacturing operations. In this
ment, and (v) technology focus. study, we consider a breadth of practices included within the scope
148 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

Fig. 2. Research model.

of process intelligence. These practices span from product design broad set of practices related to product design, procurement, shop
processes to material procurement activities, plant-oor opera- oor operations, and logistics. Since higher integration intelligence
tional control, and shipping processes. As a representative represents an increase toward higher dynamic intelligence, we
dimension of dynamic intelligence, we propose that the increased propose that the increased integration intelligence will be
use of information technologies supporting process intelligence associated with Jaikumars expected outcomes of smaller plant
will be associated with Jaikumars expected outcomes of smaller size, increased discretionary work practices, and technology focus
plant size, increased discretionary work practices, and technology changes leading to higher exibility and customization.
focus changes leading to higher exibility and customization. Thus,
we propose the following: Proposition P2b. Integration intelligence: Higher integration intelli-
gence will be negatively associated with (i) operations size. Higher
Proposition P2a. Process intelligence: Higher process intelligence integration intelligence will be positively associated with (ii) opera-
will be negatively associated with (i) operations size. Higher process tions productivity, (iii) discretionary work practices related to orga-
intelligence will be positively associated with (ii) operations produc- nizational change, (iv) discretionary work practices related to
tivity, (iii) discretionary work practices related to organizational experimentation and development, and (v) technology focus.
change, (iv) discretionary work practices related to experimentation
Extant literature, however, suggests that mixed outcomes may
and development, and (v) technology focus.
result from integration intelligence. Several studies report that ERP
Extant literature has found some of these impacts related to helps rms gain a competitive advantage over non-adopters
process intelligence. Studies report industry-level evidence that IT (Hunton et al., 2003; Mabert et al., 2003). However, the benet
investments are related to smaller rm size (Brynjolfsson et al., varies considerably across rms. Banker et al. (2006) observe
1994; Mitchell, 2002). At the rm level, IT investments are found to positive associations of integration IT with efciency, quality
relate positively to rm nancial performance (Bharadwaj et al., improvement, and time to market. Hitt et al. (2002) nd that ERP
1999), operational performance (Banker et al., 2006), and produc- adoption is positively related to production output and sales, yet
tivity (Black and Lynch, 2001; Mukhopadhyay et al., 1997; Bessen, negatively related to the cost of goods sold. Yet, Akkermans et al.
2002; Comin, 2002). At the process level, IT use is found to improve (2003) identify many shortcomings of ERP systems that directly
process efciency and conformance quality (Banker et al., 2006; impact intelligence gathering and dissemination, leading to
Kelley, 1994). IT use in new product development projects has the decreased process exibility and worsening performance. Because
potential to speed up the development process (Bardhan et al., 2007; the focus of many ERP systems is on standardizing processes, a
Mallick and Schroeder, 2005), reduce development costs, improve movement toward ERP may lead to ndings inconsistent with
customer satisfaction (Bardhan et al., 2007; Grifn and Page, 1993), Jaikumars framework.
and ultimately, help achieve new product success (Koufteros et al., Collaboration intelligence represents the extent to which a
2005; Mallick and Schroeder, 2005; Swink and Song, 2007). Finally, plant has adopted information technologies that allow them to
prior studies suggest that IT use stimulates organization changes communicate and collaborate with customers and suppliers. The
and innovation, and leads rms to use more skilled workers activities span from marketing and sales activities on the customer
(Bresnahan et al., 2002). side to planning, design, purchasing and supply activities on the
Integration intelligence represents the extent to which each of supplier side. Once again, since higher collaboration intelligence
the tactical information technologies at the process level is represents an increase in dynamic intelligence, we propose that
integrated into a single system, in this case an ERP system, in increases in collaboration intelligence will be associated with
order to provide plant and rm managers with a system-wide Jaikumars expected outcomes of smaller plant size, increased
intelligence about the activities taking place within operations. discretionary work practices, and technology focus changes
Again, for integration intelligence, we include the integration of a leading to higher exibility and customization.
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 149

Proposition P2c. Collaboration intelligence: Higher collaboration cultures (Europe, Asia, and North America). The sample plants
intelligence will be negatively associated with (i) operations size. represent three industries: machinery, electronics, and transpor-
Higher collaboration intelligence will be positively associated with tation components. These industries were selected because of their
(ii) operations productivity, (iii) discretionary work practices related signicant presence in the countries where the survey was
to organizational change, (iv) discretionary work practices related to conducted (Schroeder and Flynn, 2001). Details of the sample
experimentation and development, and (v) technology focus. plants are reported in Table 2.
The sample plants were randomly drawn from a master list of
Extant literature reports somewhat mixed results with respect manufacturing plants in each participating country, with approxi-
to collaboration intelligence. Demand chain and supply chain mately 10 plants in each of the three industries (electronics,
integration have been shown to be positively associated with rm machinery, and transportation components) for a total of
performance (Frohlich, 2002; Frohlich and Westbrook, 2002). approximately 30 plants per country. The main informant for
Barua et al. (2004) nd signicant positive links from supplier-side the dynamic intelligence variables was the information systems
to customer-side digital collaboration, and ultimately to nancial manager. Other informants for this study included accounting
performance. Likewise, Banker et al. (2006b) nd positive manager, direct labor, human resource manager, quality manager,
associations of collaboration IT with efciency, quality improve- inventory manager, plant manager, plant superintendent, product
ment, and time to market. In contrast, Malhotra et al. (2005) development manager and process engineer, who responded to
observe a negative correlation between partner-enabled market questions measuring plant structure, practice, and performance. A
knowledge creation and operational efciency measures. research coordinator at each participating plant distributed the
questionnaires to the named managers and randomly selected
3. Data and methodology workers and supervisors, and collected the completed question-
naires in sealed envelopes to protect condentiality. After all data
3.1. Data source were collected, the research team provided each participating
plant with a detailed prole of its own manufacturing operations
The data for our study were collected from 2005 to 2007 as part and benchmark data in its industry, as promised before the data
of the High Performance Manufacturing (HPM) project (Bozarth collection effort. Altogether 238 manufacturing plants responded
et al., 2009). The HPM project uses a stratied sample consisting of to the survey. Among the plants contacted by the research team,
traditional and high performance manufacturing plants. This 65% returned the survey questionnaires, representing a response
research design ensures a sufcient number of high performing rate of 65%.
plants in the sample along with more representative traditional
plants. Variation in plant characteristics is likely to be associated 3.2. Construction of variables
with different extent and scope of IT use, making it possible to
examine our propositions using data collected from the cross- Table 3 presents the independent and dependent variables
sectional sample of manufacturing plants in the HPM study. used in the study, including their data type, a description of the
Data were collected using a mail survey. Because data collection construct measures, respondents for the construct, and pub-
involved multiple countries, the questionnaires were translated lished studies that use the same or similar measures, where
into the native language of each country. The questionnaires were applicable. The content validity of the measurement items is
then translated back to English by a different person to check for established based on an extensive review of the relevant
accuracy. This process helps control for country level response bias literature. This study employs a mixture of indicator, integer,
due to inaccurate translation of the survey questions. dollar, ratio, percentage, and averaged scale variables. The
The sample includes plants in eight countries: Finland, Sweden, descriptive statistics and the correlation matrix of the variables
Germany, Austria, Italy, Japan, Korea, and the United States. These are presented in Table 4. In general, the correlations seem to be
countries were selected to obtain a broad representation of reasonable. No abnormally high correlations or counter-intuitive
developed economies across different geographical regions and correlations are present.

Table 2
Plant prole.

Number of plants Industry Total

Electronics Machinery Transportation components

Country Finland 14 6 10 30
Sweden 9 13 19 41
Germany 9 13 19 41
Italy 10 10 7 27
Austria 10 7 5 22
Japan 10 11 13 34
Korea 10 10 11 31
United States 9 11 9 29

Total 79 78 81 238

Annual sales revenue (median) $284 million


Number of employees (mean) 659
Average market share of main products 25.8%
Average product life time 7.21 years
Average number of product models 120

Percent of manufacturing cost


Direct labor 16.5%
Materials 59.6%
Overhead 19.9%
150 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

Table 3
Dependent and independent variables uses in analysis.

Variable Type/respondent Description

Statistical process control Mean (scale items) Processes in our plant are designed to be foolproof.c (0.49)
Naor et al. (2008), Peng et al. (2008) DL, PE, QMa A large percent of the processes on the shop oor are currently under statistical quality control
(0.89)
Rwg = 0.80b We make extensive use of statistical techniques to reduce variance in processes (0.89)
We use charts to determine whether our manufacturing processes are in control (0.68)
We monitor our processes using statistical process control (0.91)

Process intelligence Sum (0/1), IS See Appendix A, Table A.1


Integration intelligence Sum (0/1), IS See Appendix A, Table A.1
Collaboration intelligence Sum (0/1), IS See Appendix A, Table A.1
Electronics, machinery 0/1 Indicator variables for industry effect
USA, Japan, Italy, etc. 0/1 Indicator variables for country effect
Parent rm sales Dollar, PM Annual sales of parent corporation
Plant sales Dollar, AC Sales value of production ($000)
Labor Integer, AC Sum of hourly personnel and salaried personnel, averaged across present year and 2 years
previous
Facility size Integer, AC Space used by the plant (square feet) including production and warehouse space (omits South
Korean plants)
Labor productivity Ratio, AC Plant sales/labor
Capital productivity Ratio, AC Plant sales/plant size
Orders processed per month Integer, PM Orders this plant processes each month, on average
Number of nal product congurations Integer, PM Number of nal product congurations sold to customers last year

Centralization of authority Mean (scale items) Even small matters have to be referred to someone higher up for a nal answer (0.90)
Aiken and Hage (1966) DL, HR, SP This plant is a good place for a person who likes to make his own decisions (0.47)*
Rwg = 0.78 Any decision I make has to have my bosss approval (0.84)
There can be little action taken here until a supervisor approves a decision (0.76)

Flatness of organization structure Mean (scale items) Our organization structure is relatively at (0.78)
Nahm et al. (2003), Vickery et al. (1999) HR, PS, SP There are few levels in our organizational hierarchy (0.85)
Rwg = 0.93 Our organization is very hierarchical (0.799)*
There are many levels between the lowest level in the organization and top management (0.74)*
Our organizational chart has many levels (0.90)*

Cooperation Mean (scale items) We work as a partner with our suppliers, rather than having an adversarial relationship (0.66)
IM, PM, SP We encourage employees to work together to achieve common goals, rather than encourage
competition among individuals (0.73)
Rwg = 0.86 We work as a partner with our customers (0.48)
We believe that cooperative relationships will lead to better performance than adversarial
relationships (0.66)
We believe that the need for cooperative relationships extends to both employees and external
partners (0.54).
We believe that an organization should work as a partner with its surrounding
community (0.63)

Employee suggestions Integer, HR Suggestions per worker provided annually


Percent cross trained Percent, HR Percent of plant workers that have been cross-trained in more than one job

Multi-functional employees Mean (scale items) Our employees receive training to perform multiple tasks (0.77)
Ahmad and Schroeder (2003) HR, SP, PS Employees at this plant learn how to perform a variety of tasks (0.88)
Rwg = 0.84 The longer an employee has been at this plant, the more tasks they learn to perform (0.520)
Employees are cross-trained at this plant, so that they can ll in for others, if necessary (0.79)
At this plant, each employee only learns how to do one job (0.69)*

Percent employees on problem Percent, HR Percent of the workers in the plant involved in problem solving teams
solving teams
Small group problem solving Mean (scale items) During problem solving sessions, we make an effort to get all team members opinions
and ideas before making a decision (0.55)
Rungtusanatham et al. (2005) DL, QM, SP Our plant forms teams to solve problems (0.81)
Rwg = 0.80 In the past 3 years, many problems have been solved through small group sessions (0.83)
Problem solving teams have helped improve manufacturing processes at this plant (0.83)
Employee teams are encouraged to try to solve their own problems, as much as possible (0.63)
We do not use problem solving teams much, in this plant (0.78)*

Knowledge level engineering degrees Percent, HR Percent of salaried personnel having engineering or technical degrees

Developing unique practices Mean (scale items) We are known for developing innovative new practices (0.73)
PE, SP, PS We gain a competitive advantage from our unique practices (0.69)
Rwg = 0.81 When we adopt a new practice, our competitors can easily copy it (0.38)*

Willingness to introduce new products 5 point scale Which term best describes the plants posture toward new products?
PM 5-Leader in new products; 4-Among the rst to adopt new products, but not the leader
3-Adopts new products when it becomes more or less the general rule
2-Usually among the last to adopt new products; 1-Never adopts new products

New product congurations last year Integer, PE Number of new product congurations introduced last year
Average lifetime of product congurations, Real, PE Average lifetime of a product conguration, in number of years
Bozarth et al. (2009)
Volume exibility, Flynn and Flynn (2004) Percent change Average percent change in plant output dollars from one month to the next, over the course
month-to-month, IM of a year
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 151

Table 3 (Continued )

Variable Type/respondent Description

Customization orientation of process Weighted score, PE What percent of product volume falls into each category?
Cua et al. (2001) Weighted percent = OneOfAKind%  5 + SmallBatch%  4 + LargeBatch%  3 + LineFlow%  2 +
Continuous%  1

Integration between functions Mean (scale items) The functions in our plant work well together (0.87)
PE, PM, PS The functions in our plant cooperate to solve conicts between them, when they arise (0.77)
Rwg = 0.84 The marketing and nance areas know a great deal about manufacturing (0.45)
Our plants functions coordinate their activities (0.76)
Our plants functions work interactively with each other (0.79)

Inter-functional design efforts Mean (scale items) Direct labor employees are involved to a great extent before introducing new products or
making product changes (0.71)
Mishra and Shah (2009) PD, PE, SP Manufacturing engineers are involved to a great extent before the introduction of new products
(0.76)
Rwg = 0.79 There is little involvement of manufacturing and quality people in the early design or products,
before they reach the plant (0.70)*
We work in teams, with members from a variety of areas (marketing, manufacturing, etc.) to
introduce new products (0.78)

Scrap rate (Devaraj et al., 2004) Percent, QM Percentage of internal scrap and rework

Customer satisfaction with products Mean (scale items) Our customers are pleased with the products and services we provide for them (0.89)
and service (referred to as customer DL, QM, SP Our customers seem happy with our responsiveness to their problems (0.73)
satisfaction elsewhere) Rwg = 0.83 We have a large number of repeat customers (0.46)
Bozarth et al. (2009) Customer standards are always met by our plant (0.73)
Our customers have been well satised with the quality of our products, over the past 3 years
(0.85)
In general, our plants level of quality performance over the past 3 years has been low,
relative to industry norms (0.76)*
a
Respondents: AC, accounting manager; DL, direct labor; HR, human resource manager; IM, inventory manager; IS, information systems manager; PD, member of product
development team; PE, process engineer; PM, plant manager; PS, plant superintendent; QM, quality manager; SP, supervisor.
b
Rwg = ratio coefcient for assessing inter-rater agreement, Rwg > 0.80 indicates acceptable inter-rater agreement.
c
Conrmatory factor analysis loading.
*
Reverse coded items.

Because of the relatively high response rate (65%), non- of information technology within the scope of that dimension of
response bias does not appear to be a serious concern. Never- dynamic intelligence in the plant.
theless, for each variable with missing responses, we compared Because each IT item species a separate functionality
responding and non-responding plants for differences in plant size, supported by information technology, different IT items are not
measured by number of employees. The results suggest that interchangeable. Thus the IT items can be considered as formative
responding and non-responding plants do not exhibit signicant measures (Diamantopoulos and Winklhofer, 2001, p. 271). An
differences in plant size. important criterion for assessing the construct validity of the
In this study, we view each plants data to represent a chosen formative measures is their content validity (Diamantopoulos and
conguration of managerial practices that places their operations at Winklhofer, 2001; Petter et al., 2007). We chose the measurement
certain points along each of the dimensions of IT use. Thus, we use items based on our denition of the dynamic intelligence
the proposed dynamic intelligence dimensions as positioning constructs. The measurement items capturing the constructs are
variables, which allow us to examine whether the proposed well grounded in prior studies. A list of related articles upon which
relationships between dynamic intelligence and the outcome we built the dynamic intelligence measures can be found in
dimensions are exhibited in the empirical data set. The rst four Appendix A (Table A.1). Another important criterion for formative
rows in Table 3 present these key statistical process control and items is that they should not exhibit high multicollinearity
dynamic intelligence variables. The statistical process control (Diamantopoulos and Winklhofer, 2001). In our study, each
variable, representing the extent of process control intelligence, dynamic intelligence item has a Variance Ination Factor (VIF)
was constructed as the average of several items from a multiple item below 10, with only two items having a VIF greater than 5. Thus,
seven-point scale measuring SPC adoption. The dynamic intelli- multicollinearity does not seem to be a serious concern as the
gence variables are each constructed as the arithmetic sum of the set literature suggests that VIF below 5 (some suggest below 10) is
of individual IT application variables representing each dimension of acceptable (Haan, 2002; Hair et al., 2005).
dynamic intelligence. Appendix A (Table A.1) presents the IT We also performed Exploratory Factor Analysis (EFA) on each of
application areas included in each dynamic intelligence variable. the dynamic intelligence measures. Unlike the reective items,
Consistent with the literature (Banker et al., 2006; Barczak et al., formative items of the same construct do not have to load on a
2007; Hitt et al., 2002), we represent each implemented IT single factor (Diamantopoulos and Winklhofer, 2001). The EFA
application area within each dimension of dynamic intelligence as results indicate that the IT items measuring each type of dynamic
a binary (01) variable. An individual IT variable is assigned a value intelligence form logical groups representing plant operational
0 or 1, where 0 denotes that the represented IT functionality areas, except for a small number of item cross loadings. These
has not been implemented and 1 otherwise. Because each IT results to some extent provide support for the validity of the
variable represents whether a particular plant functionality is dynamic intelligence measures. The EFA factor loadings are
supported by information technology, the extent to which a plant presented in Appendix A (Tables A.2A.4).
uses IT should be reected in the total number of functionalities This study uses a number of multi-item scales, each scored
(processes and activities) supported by IT. Thus, to construct each along a seven-point scale. The majority of the multi-item scales are
dynamic intelligence variable, we summed together the values of evaluated by three different respondents who have relevant
the list of underlying dichotomous variables representing the use domain knowledge for the assigned questions (Table 3). Using
152
Table 4
Descriptive statistics and correlation matrix.

Mean Standard deviation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. Statistical Process control 4.68 0.94


2. Process intelligence 19.25 7.41 0.17
3. Integration intelligence 11.87 6.96 0.03 0.25
4. Collaboration intelligence 4.80 2.81 0.04 0.20 0.14
5. Parent rm size ($) 418,804,822 1,649,040,382 0.11 0.14 0.01 0.16
6. Plant sales ($000) 284,445.80 476388.73 0.01 0.01 0.12 0.19 0.24
7. Number of employees 659.39 918.82 0.17 0.18 0.01 0.03 0.05 0.53
8. Facility size 332,004.37 1,970,848.65 0.00 0.07 0.24 0.12 0.29 0.55 0.63
9. Labor productivity 473.62 590.62 0.10 0.13 0.08 0.12 0.28 0.86 0.06 0.18
10. Capital productivity 7.10 12.75 0.01 0.13 0.10 0.10 0.11 0.45 0.04 0.45 0.77

G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162


11. Orders processed per month 56,516.85 364,425.99 0.15 0.07 0.25 0.02 0.05 0.24 0.32 0.27 0.09 0.02
12. Number of nal products congurations 2,263.50 12,459.46 0.17 0.02 0.00 0.16 0.20 0.08 0.07 0.15 0.07 0.00 0.08
13. Centralization 3.34 0.73 0.16 0.12 0.29 0.01 0.22 0.09 0.11 0.25 0.02 0.20 0.27 0.01
14. Organizational structure atness 4.54 0.99 0.14 0.11 0.26 0.00 0.19 0.11 0.21 0.33 0.05 0.25 0.20 0.10 0.60
15. Cooperation 5.82 0.42 0.35 0.13 0.09 0.15 0.09 0.03 0.08 0.03 0.00 0.05 0.03 0.09 0.36 0.34
16. Employee suggestions 5.74 12.19 0.04 0.07 0.23 0.14 0.22 0.23 0.07 0.20 0.21 0.04 0.30 0.24 0.35 0.23 0.02
17. Percent cross trained (%) 54.55 32.73 0.19 0.08 0.05 0.01 0.15 0.23 0.01 0.08 0.23 0.30 0.13 0.09 0.35 0.29 0.26
18. Multi-functional employees 5.30 0.61 0.23 0.16 0.18 0.11 0.08 0.09 0.02 0.13 0.12 0.23 0.04 0.01 0.53 0.45 0.47
19. Percentage on problem solving team (%) 31.05 32.27 0.20 0.11 0.01 0.09 0.06 0.17 0.13 0.05 0.14 0.17 0.06 0.22 0.07 0.00 0.11
20. Small group problem solving 5.12 0.65 0.53 0.08 0.01 0.15 0.08 0.13 0.17 0.00 0.09 0.14 0.12 0.19 0.30 0.35 0.49
21. Percentage of engineer degrees (%) 28.51 24.78 0.07 0.09 0.05 0.09 0.03 0.07 0.05 0.09 0.05 0.10 0.08 0.07 0.06 0.10 0.03
22. Developing Unique practices 4.58 0.65 0.29 0.17 0.14 0.12 0.06 0.12 0.16 0.06 0.07 0.18 0.06 0.11 0.33 0.20 0.33
23. Willingness to introduce products 2.36 1.31 0.26 0.16 0.01 0.01 0.26 0.23 0.16 0.02 0.17 0.16 0.09 0.14 0.11 0.02 0.01
24. New products last year 43.12 95.53 0.08 0.29 0.11 0.07 0.00 0.03 0.11 0.22 0.10 0.23 0.01 0.12 0.06 0.02 0.09
25. Average product life time (year) 7.21 5.73 0.27 0.03 0.06 0.11 0.16 0.03 0.05 0.07 0.02 0.02 0.04 0.03 0.07 0.07 0.05
26. Volume exibility (%) 22.84 24.82 0.01 0.02 0.16 0.01 0.17 0.05 0.13 0.04 0.05 0.07 0.02 0.02 0.09 0.15 0.06
27. Process customization 3.28 1.24 0.25 0.09 0.13 0.09 0.18 0.30 0.29 0.14 0.21 0.17 0.17 0.13 0.02 0.02 0.01
28. Functional integration 5.13 0.60 0.38 0.14 0.05 0.20 0.02 0.11 0.12 0.09 0.01 0.06 0.20 0.02 0.25 0.22 0.39
29. Inter-functional design efforts 4.89 0.76 0.36 0.13 0.04 0.03 0.04 0.14 0.25 0.05 0.09 0.09 0.21 0.04 0.17 0.21 0.27
30. Scrap rate (%) 7.01 11.46 0.15 0.11 0.03 0.07 0.05 0.18 0.06 0.09 0.18 0.15 0.18 0.18 0.14 0.12 0.01
31. Customer satisfaction 5.32 0.53 0.32 0.11 0.14 0.17 0.00 0.12 0.16 0.20 0.04 0.13 0.10 0.16 0.42 0.39 0.38

Mean Standard deviation 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

17. Percent cross trained (%) 54.55 32.73 0.13


18. Multi-functional employees 5.30 0.61 0.06 0.49
19. Percentage on problem solving team (%) 31.05 32.27 0.04 0.03 0.17
20. Small group problem solving 5.12 0.65 0.11 0.32 0.48 0.26
21. Percentage of engineer degrees (%) 28.51 24.78 0.04 0.02 0.09 0.05 0.07
22. Developing Unique practices 4.58 0.65 0.01 0.04 0.38 0.19 0.39 0.00
23. Willingness to introduce products 2.36 1.31 0.04 0.04 0.09 0.04 0.10 0.11 0.00
24. New products last year 43.12 95.53 0.03 0.05 0.01 0.01 0.01 0.00 0.07 0.10
25. Average product life time (year) 7.21 5.73 0.03 0.05 0.04 0.06 0.17 0.01 0.08 0.04 0.30
26. Volume exibility (%) 22.84 24.82 0.01 0.08 0.03 0.02 0.01 0.09 0.09 0.07 0.07 0.09
27. Process customization 3.28 1.24 0.10 0.24 0.11 0.13 0.15 0.09 0.05 0.08 0.08 0.11 0.08
28. Functional integration 5.13 0.60 0.25 0.22 0.32 0.08 0.36 0.09 0.36 0.10 0.02 0.08 0.06 0.13
29. Inter-functional design efforts 4.89 0.76 0.09 0.21 0.34 0.20 0.47 0.00 0.32 0.16 0.05 0.07 0.02 0.24 0.42
30. Scrap rate (%) 7.01 11.46 0.11 0.06 0.09 0.14 0.07 0.03 0.08 0.19 0.09 0.02 0.09 0.11 0.12 0.04
31. Customer satisfaction 5.32 0.53 0.06 0.18 0.46 0.13 0.56 0.15 0.36 0.01 0.02 0.11 0.08 0.01 0.33 0.27 0.02

p < 0.01 in bold italic. p < 0.05 in bold. p < 0.10 in italic.
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 153

multiple respondents to evaluate the same scale questions has the We include control variables where warranted. Because the
advantage of mitigating Common Method Variance (CMV), a macro-economic environments and the cultural and socio-
widely cited concern for self-report surveys (Podsakoff et al., economic factors could contribute to cross-country variation in
2003). In our study, CMV is further mitigated by having different rm size and productivity (Bernard and Jones, 1996; Dewan and
respondents for the items measuring the independent and the Kraemer, 2000; Kumar et al., 1997), for operations size and
dependent variables. To assess inter-rater agreement among productivity regressions, we control for the impact of country-to-
multiple respondents, for each scale evaluated by multiple country differences by including indicator variables for the
respondents, we computed the Rwg coefcients according to the nationality of each plant. The base country against which the
ratio method (James et al., 1984). The resulting inter-rater other country controls can be compared is Austria. We do not
agreement coefcients range from 0.78 to 0.93 (Table 3), and include country as a control for the remaining regressions since the
are in line with the guidance on inter-rater reliability for dependent variables in these regressions capture within-plant
operations management research (Rwg > 0.80) suggested by Boyer practices, which are mainly inuenced by plant specic factors
and Verma (2000), thus indicating acceptable agreement among rather than country effects (Naor et al., 2008). We also use
different respondents. indicator variables to control for industry-to-industry differences
To establish the reliability and validity of the scale measures, we (Banker et al., 2006). The base industry for comparison is the
ran a Conrmatory Factor Analysis (CFA) including all of the multi- transportation component industry. Prior literature suggests that
item scales. The CFA t indices suggest acceptable model t larger rms tend to have larger plants (Bernard and Jensen, 2006).
(RMSEA = 0.052, x2/DF = 1.69, CFI = 0.091, IFI = 0.090). Except for Thus, for regressions on operations size, we control for sales of the
one factor loading for the construct developing unique practices, parent rm. Finally, because prior studies nd that organization
all factor loadings are greater than 0.50 (Table 3). The lone loading size and productivity are correlated (Dhawan, 2001; Haltiwanger
below 0.50 is 0.38, still above the threshold of 0.30 (Hair et al., 2005). et al., 1999), in productivity regressions we control for size of the
We used pair-wise Chi-square (x2) difference tests to examine the manufacturing plant, measured by the natural log of the total size
discriminant validity of the measurement scales (Bagozzi and of the labor force (Banker et al., 2006; Ettlie et al., 1984).
Phillips, 1982; Bagozzi et al., 1991). The x2 difference tests are all Because of missing responses in the data set, we performed
signicant at the 0.01 level, indicating acceptable discriminant Littles MCAR test using the SPSS 13 missing value analysis
validity among the scale measures. We also compared the squared procedure to check if the variables are Missing Completely At
correlation between each pair of variables measured by a multi-item Random (MCAR). The resulting p-value is insignicant at the 0.10
scale and variance explained for that pair of variables. No squared level, indicating the variables are MCAR. Thus, in each regression
correlation is found to exceed the corresponding values of variance we list-wise delete the plants having missing values.
explained (Fornell and Larcker, 1981), again suggesting acceptable After running each regression, we examined relevant diagnostic
discriminant validity. Next, we constructed the averaged scale statistics to rule out potential violation of regression assumptions.
variables using simple arithmetic averages of the multiple item We visually checked the distribution of each variable. The variables
scores related to a construct (MacDufe, 1995). all seem to have a bell shaped distribution (after transformation for
The non-scale variables are mostly objective measures such as some variables). For each regression, we examined variance ination
plant annual sales, plant total number of employees, and plant factor to rule out multicollinearity problems. The VIFs of the main
square footage. These variables are described in Tables 2 and 3. effects and interaction effects are all below 2. Some of the control
When necessary, we normalized the variables using a natural log variables, mostly country controls, have relatively higher VIFs.
transformation. However, none of the VIFs is above 5. Again, literature suggests that
VIF below 5 is acceptable (Haan, 2002; Hair et al., 2005). We checked
3.3. Empirical methodology various residual plots. The residuals seem to have a bell-shaped
distribution and also appear to be constant across the predicted
We test our propositions using multiple linear regression dependent values, ruling out the presence of heteroskedasticity.
models. We performed ve sets of regressions. In each set of Thus, the data appear appropriate for regression analysis.
regressions, SPC and the three dynamic intelligence variables are
entered as the predictor variables. For each set of regression 3.4. Results
models, the dependent variables represent a specic category of
the expected outcomes implied by Jaikumars framework (i.e., For ease of comparison, we condense our ndings into a
Table 1): operations size, operations productivity, organizational summary table. A summary of the regression results can be found
changes, experimentation and development practices, and tech- in Table 5. Detailed regression results are provided in Appendix A
nology focus. Operations size includes variables measuring plant (Tables A.5A.9).
annual sales, total number of plant employees, and size of the
facility. Operations productivity includes variables measuring 3.4.1. Proposition 1SPC
labor productivity (plant sales per employee), capital productivity Overall, we observe weak evidence indicating that SPC is
(plant sales/facility size), orders processed per month, and number positively associated with operations size and no evidence linking
of nal product congurations produced. Variables related to SPC to operations productivity measures. SPC has a marginally
organization changes include centralization of decision making, positive association with the total number of plant employees
atness of organization structure, cooperation between employ- (b = 0.126, p = 0.080) and with plant sales when we control for
ees, employee suggestions, employee training, and problem parent rm sales (b = 0.161, p = 0.074). The SPC variable is not
solving teams. Variables related to experimentation and develop- signicantly related to any of the productivity measures at the 0.10
ment practices represent the development of unique practices, level.
willingness to introduce new products, new product congura- In contrast, we observe fairly strong evidence of the positive
tions introduced last year, and an average products lifetime. effect of SPC on organization change. SPC is signicantly related to
Finally, variables that capture technology focus are volume seven of the eight outcome measures in this category, with all
exibility, customization orientation of processes, integration estimated parameters in the expected direction. As expected, SPC
between functions, scrap rate, and customer satisfaction with is positively associated with practices oriented toward process
product and service. improvement. SPC is negatively related to centralization of
154 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

Table 5
Summary of regression results.

Proposition 1 Proposition 2a Proposition 2b Proposition 2c Dependent


Statistical Process Integration Collaboration variables
process control intelligence intelligence intelligence

Size trends
Size (Appendix A, Table A.5)
0.161(0.074)y ln(Plant Sales)  Control for Firm Sales
ln(Plant sales)
0.031(0.005)** ln(Labor)  Control for Firm Sales
0.126(0.080)y 0.040(0.000)*** ln(Labor)
0.033(0.026)* ln(Facility Size)  Control for Firm Sales
0.037(0.009)** ln(Facility size)

Productivity (Appendix A, Table A.6)


ln(Labor productivity)
0.072(0.085)y ln(Capital productivity)
y
0.057(0.067) ln(Orders processed per month)
0.094(0.026)* ln(Number of nal product congurations produced)

Discretionary work practices


Organizational change (Appendix A, Table A.7)
0.163(0.004)** 0.031(0.000)*** Centralization
0.192(0.013)* 0.037(0.000)*** Flatness of organization structure
0.159(0.000)*** 0.018(0.058) y
Cooperation
0.079(0.003)** 0.171(0.008)** ln(Employee suggestions)
7.429(0.012)* Percentage of workers cross trained
0.161(0.001)** 0.014(0.018)* Multi-functional employees
7.692(0.005)** Percent employees on problem solving teams
0.341(0.000)*** 0.031(0.028)* Small group problem solving

Experimentation and development practices (Appendix A, Table A.8)


0.225(0.000)*** 0.012(0.077)y Knowledge level sqrt (% of workers with engineering degrees)
0.393(0.000)*** 0.026(0.055)y Developing unique practices
0.091(0.000)*** Willingness to introduce new products
0.181(0.005)*** ln(New product congurations introduced last year)
ln(Average lifetime of product conguration)

Technology keys
Technology focus (Appendix A, Table A.9)
0.012(0.076)y ln(Volume exibility)
0.233(0.020)* 0.031(0.017)* Customization orientation of process
0.265(0.000)*** 0.037(0.007) **
Integration between functions
0.262(0.000)*** Inter-functional design efforts
0.535(0.001)** ln(Scrap rate)
0.187(0.000)*** 0.009(0.097)y 0.025(0.039)* Customer satisfaction

VIF statistics range from 1.12 to 1.86 for main effects and interaction effects, and 1.994.84 for control variables. A block (representing regression coefcients from one
independent variable to a group of outcome variables) is shaded if there are three or more regression coefcients that have a p-value smaller than 0.10 within the block.
*
p < 0.050.
**
p < 0.010.
***
p < 0.001.
y
p < 0.100.

authority (b = 0.163, p = 0.004), and positively related to atness (b = 0.262, p = 0.000), and customer satisfaction (b = 0.187,
of organization structure (b = 0.192, p = 0.013). SPC also has a p = 0.000). Thus, SPC appears to support changes in technology focus.
positive relationship with cooperation (b = 0.159, p = 0.000),
employee training (b = 7.429, p = 0.012), and problem solving 3.4.2. Proposition 2aprocess intelligence
teams (b = 7.692, p = 0.005; b = 0.341, p = 0.000). Process intelligence exhibits positive associations with several
We observe mixed evidence with respect to our expectation operations size variables and two productivity measures. However,
that SPC would be insignicant or negatively associated with several of the parameter estimates go against expectations. Among
experimentation and development practices. SPC is negatively operations size variables, process intelligence positively relates to
related to willingness to introduce new products (b = 0.393, the total number of employees (b = 0.031, p = 0.005; b = 0.040,
p = 0.000) and insignicantly related to two other variables, p = 0.000) and facility size (b = 0.033, p = 0.026; b = 0.037,
providing support for Proposition 1. However, SPC also relates p = 0.009). Thus, the operations size variables appear to contradict
positively to developing unique practices (b = 0.225, p = 0.000) and expected associations. In contrast, process intelligence appears to be
negatively to the average lifetime of a product conguration partially consistent with the expectation for operations productiv-
(b = 0.181, p = 0.005). ity. Process intelligence exhibits a positive association with orders
Although we expected insignicant or negative associations, we processed per month (b = 0.057, p = 0.067) and number of nal
again observe mixed yet relatively strong evidence supporting an product congurations produced (b = 0.094, p = 0.026) but it is
association between SPC and changes in technology focus. As insignicantly related to other productivity measures at the 0.10
expected, an increased level of SPC is related to lower level of level. These ndings provide partial support for Proposition 2a.
customization orientation in processes (b = 0.233, p = 0.021). Process intelligence exhibits far fewer associations with the
Contrary to Proposition 1, we observe strong associations of SPC remaining sets of practices. Process intelligence does not have a
with improved scrap rates (b = 0.535, p = 0.001), inter-functional signicant effect on practices related to organizational changes or
integration (b = 0.265, p = 0.000), inter-functional design efforts technology focus. With respect to experimentation and develop-
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 155

ment practices, process intelligence exhibits mixed evidence systems, and computer-integrated manufacturing (CIM). In this
including a positive effect on new product congurations study, we broadly represent plant-level IT use with our dimension
introduced last year (b = 0.091, p = 0.000) but a negative effect of process intelligence, and break the movement toward intra-rm
on willingness to introduce new products (b = 0.026, p = 0.055). and inter-rm IT integration into two separate dimensions
In summary, we observe mostly positive associations between representing ERP-based integration intelligence and supplier/
process intelligence and operations size, which tends to contradict customer collaboration intelligence. We examine the impact of
Proposition 2a. We nd evidence supporting a positive link three dimensions of dynamic intelligence process, integration,
between process intelligence and operations productivity, sup- and collaboration on manufacturing plant outcomes represent-
porting Proposition 2a. Finally, we do not nd any signicant ing plant structure, practices, and performance. While it clearly is
relationship between process intelligence and discretionary work quite challenging to perform such a comprehensive examination of
practices or changes in technology focus. the IT impact on manufacturing plants, we believe our exploratory
efforts in this paper provide a useful starting point.
3.4.3. Proposition 2bintegration intelligence As a foundation for building dynamic intelligence, SPC
In contrast to SPC and process intelligence, integration repeatedly comes up signicant in ways that lead to better control
intelligence does not relate to any operations size or productivity and reduced process variability. Compared with each of the three
measures at the 0.10 level. However, the effects of integration dynamic intelligence variables, SPC tends to be associated more
intelligence on variables for discretionary work practices related to strongly with the outcome variables, particularly with variables
organizational changes are mostly consistent with our predictions: measuring organizational changes, experimentation and develop-
higher integration intelligence is related to a lower degree of ment practices, and technology focus. These ndings are consistent
centralization of decision making (b = 0.031, p = 0.000), high with prior literature that highlights the positive impact of SPC and
degree of horizontal organization structure (b = 0.037, p = 0.000), quality management practices in general. The impact of SPC and
and increased multi-functional training (b = 0.014, p = 0.018). The quality management practices can be quite broad and transcend
only exception is with the average number of employee sugges- multiple organization levels, from employee autonomy and job
tions (b = 0.079, p = 0.003). Integration intelligence also exhibits satisfaction to relationships among functional areas, and to overall
moderately positive relationships with three technology focus organizational performance and productivity (e.g., Flynn et al.,
variables: volume exibility (b = 0.012, p = 0.076), customization 1995; Rungtusanatham, 2001).
orientation of processes (b = 0.031, p = 0.017), and customer The three dimensions of dynamic intelligence collectively are
satisfaction (b = 0.009, p = 0.097). related to a broad array of outcome variables, although the effects
With respect to variables measuring experimentation and are not all consistent with our expectation and many of the
development practices or technology focus, integration intelligence relationships are somewhat weak. The three dimensions of dynamic
only exhibits a weak positive relationship with developing unique intelligence exhibit quite different effects on various groups of
practices (b = 0.012, p = 0.077). Overall, there is moderate evidence outcome variables. The effects of process intelligence are concen-
supporting the hypothesized links between integration intelligence trated on operations size and operations productivity. In contrast,
and the outcome variables, particularly discretionary work practices integration intelligence and collaboration intelligence mainly
related to organizational change or technology focus. impact organizational change and technology focus variables, with
integration intelligence exhibiting broader impact on these two
3.4.4. Proposition 2ccollaboration intelligence groups of outcome variables than collaboration intelligence. These
While collaboration intelligence is related to only a small ndings are perhaps due to the different objectives of the three
number of outcome variables, the directions of the relationships dimensions of dynamic intelligence. Integration intelligence and
are mostly consistent with predictions. Collaboration intelligence collaboration intelligence are mainly used to gather information and
is positively related to capital productivity (b = 0.072, p = 0.085), aid decision making, whereas process intelligence to a large extent is
cooperation (b = 0.018, p = 0.058), average number of employee used to automate manufacturing and administrative processes. The
suggestion (b = 0.171, p = 0.008), small group problem solving ndings may also occur because IT supporting collaboration
(b = 0.031, p = 0.028), integration between functions (b = 0.037, intelligence is the newest of the three dimensions of dynamic
p = 0.007), and customer satisfaction (b = 0.025, p = 0.039). Thus, intelligence, and therefore its impact on plant operations may not
there is weak support for Proposition P2c. yet be as pronounced.
Contrary to Jaikumars expectation that dynamic intelligence is
4. Discussion and conclusion associated with smaller minimal scale of efcient operations and
smaller operations size, we found that process intelligence is
4.1. Discussion of ndings associated with larger operations size. IT oriented toward process
intelligence is the initial stage of IT-based intelligence and has been
Over the past century, manufacturing process control has used mainly for automating manufacturing processes and stream-
changed profoundly due to the adoption of SPC and various forms lining workow. As such, process intelligence is likely to facilitate
of information technology. Jaikumars theoretical framework of the process standardization and large scale operations. Another
evolution toward dynamic intelligence brought these two factors potential reason we did not observe the expected relationship is
together. Yet, to date no one has empirically examined the impact the wide adoption of a plant-within-a-plant structure that
of IT use at the plant level after controlling for developments allows multiple different production lines housed in the same
related to SPC. We attempt to explore the extent to which IT use plant to share resources in order to achieve economies of scale and
impacts various aspects of plant operations drawing on Jaikumars scope. Due to the constraints of our data, we were not able to
theoretical framework. As in related studies, we observe sub- examine the operations size at the production line level.
stantial impacts due to intelligence gathering via SPC yet limited Overall, none of the three dimensions of dynamic intelligence
evidence related to the impact of adopting IT for process, appears to have much impact on discretionary work practices
integration, and collaboration intelligence. related to experimentation and development. Their effects are
In Jaikumars original model, advances in process control are mixed at best. Perhaps these practices are driven to a greater
described in terms of stages of adopting statistical process control, extent by factors other than IT. Although IT may facilitate
numerically controlled (NC/CNC) systems, exible manufacturing innovation practices, its effect may not be discernable unless
156 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

embedded in specic organization contexts. Also, product innova- regressions. To the best of our ability, we attempt to use reasonable
tion often takes place at a level higher than manufacturing plants modeling approaches to limit the extent to which endogeneity
(e.g., business unit level), thus the effects of plant-level IT on problems might crop up, while maximizing the ability to detect the
experimentation and development practices may not be highly impacts of technologies supporting dynamic intelligence. Second,
signicant. our measures of dynamic intelligence variables are adapted from
the existing HPM database and capture whether a plant adopted
4.2. Research contributions information technology to support specic plant processes. While
this approach is consistent with the existing literature (Bardhan
Our study makes two contributions to the literature. First, our et al., 2007b), it does not measure the extent to which each IT
ndings help enrich the literature by studying IT impacts on a broad application supports certain plant processes. Finally, it is difcult
set of organizational outcome variables, whereas prior literature has to appropriately control for potentially confounding factors in such
focused on examining IT impact on a limited set of performance models. Because plant size and information technology adoption
measures such as productivity, quality, and time performance, and are often very different in different contexts, it leads to issues of
generally at a higher level of aggregation (Brynjolfsson, 1993; how to model these relationships in order to obtain appropriate
Brynjolfsson and Hitt, 1996; Black and Lynch, 2001; Banker et al., parameter estimates for the dynamic intelligence variables. Also,
2006). Our study systematically investigates the impact of IT use on while using a multi-country sample improves the generalizability
plant structure, practice, and performance. The scope of the IT of the research ndings, country differences could potentially
application areas and the outcome variables examined, along with confound the research results. During the research design stage,
the manufacturing plant-level analysis, differentiate our study from the research team ensured the translation accuracy to eliminate
the existing literature. Second, we draw on IS literature and an country differences due to misinterpretation of survey questions
insightful theoretical operations management framework to exam- because of inaccurate translation. We also controlled for country
ine the IT impact on plant operations, whereas prior studies have effects in the regression analysis. Overall, the consistency of
typically taken a theoretical lens borrowed from management or parameter estimates across our regressions leads us to have
economics theories. Our ndings provide new insights about the condence in the ndings presented.
impact of IT on plant operations, as Jaikumars model did not envision We view our effort as a promising rst step in examining the
the impacts we nd concerning integration intelligence built around extent to which the implications of Jaikumars model hold for plant
enterprise resource planning systems, and collaboration intelligence structure, practices, and performance. Our ndings provide limited
related to Internet-based purchasing, supply chain, and marketing support for portions of the model. Future research should develop
activities. Our results demonstrate that the three different dimen- more rened measures of dynamic intelligence variables and retest
sions of dynamic intelligence gathering appear to impact different the research propositions. It would also be very interesting if
sets of variables related to plant structure, practices, and perfor- researchers having time-series panel data on these inputs and
mance. Yet, the ndings also suggest that SPC-related intelligence outcomes could perform a related analysis. Another direction for
perhaps has had an even stronger effect upon discretionary work future research is to examine the extent to which process,
practices than has IT-based dynamic intelligence. Thus, future integration, and collaboration intelligence drive performance in
studies probably should make sure to account for both. other production domains, particularly service operations. Because
Our study also provides useful managerial insights about using service operations have undergone similar IT-based transforma-
IT to achieve desired organizational outcomes. Because building IT- tions, we expect that Jaikumars model may apply to service
based competences to support manufacturing operations is an industries. In closing, we hope the present paper stimulates
ongoing process, managers must understand the contribution of researcher interest in further examining the impact of IT use on
each dimension of IT toward specic organizational outcomes in plant operations, as there are perhaps many interesting ndings
order to make the right IT investment decisions. The specicity of yet to be discovered.
our IT measures disentangles the effect of each dimension of IT use
upon a variety of organizational outcomes and performance, thus Acknowledgements
informing managerial decisions about IT investments in manu-
facturing plants. We gratefully acknowledge the helpful feedback from an Editor,
an Associate Editor, and two anonymous reviewers, as well as three
4.3. Limitations and future research anonymous reviewers for the 2008 Academy of Management
conference.
As an exploratory study, this paper exhibits certain limitations.
First, as a broad empirical analysis that includes a large number of Appendix A
variables, it is difcult to disentangle the extent to which
individual variables are endogenous or exogenous in each of the See Tables A.1A.9.

Table A.1
Dynamic intelligence measures.

Process intelligence Integration intelligence References

Please check application areas supported by software at the plant: Check if supported by software Check if integrated with ERP
Master production schedule 2
Rough cut capacity planning 2
Material requirements planning 1, 2
Capacity requirements planning 2
Finite capacity scheduling 2
Shop oor control 1
Inventory management 1
Purchasing 2, 6, 10
Forecasting 6, 10
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 157

Table A.1 (Continued )

Process intelligence Integration intelligence References

Demand planning 7
Order management 6, 10
Catalog and price management
Distribution management 6, 10
Transportation management 7, 10
Service management (after the sale)
Design (CAD, CAE) 1, 8
Product data management 2, 6
General accounting 6
Cost accounting 1
Budgeting 1
Human resource management 6
Maintenance management
Quality documentation management
Quality control and improvement
Performance measurement system
Project management 8
Workow management 5
Business intelligence (query and report, OLAP, data mining) 10
Simulation and optimization of production and logistics planning
Groupware tools (e.g., Lotus Notes) 6,7

Collaboration Intelligence References

For which of the following purchasing and supply activities does your plant use the Internet?
Scanning the marketplace for identication of potential sources 4, 6
Receiving and comparing suppliers offers 10
Providing dynamic pricing (negotiations and sellers bids) for purchased items 4
Transmitting orders to suppliers 4
Tracking/tracing supply orders 2, 4
Real-time integrated scheduling, shipping and warehouse management across the supplier network 2, 4
Supporting collaborative product design/improvement with suppliers 3, 4
Supporting collaborative process and technology design/improvement with suppliers 3, 4

For which of the following marketing and sales activities does your plant use the Internet?
Presenting information about your plant
Presenting your sales products catalog
Providing on-line customized customer service, where customers can congure the product within the constraints stated by the plant
Providing xed pricing offers to potential buyers 9, 10
Providing dynamic pricing offers to potential buyers 2, 10
On-line order entry
Customers can check delivery status of their orders 2, 10

(1) Boyer et al. (1996); (2) Banker et al. (2006); (3) Banker et al. (2006b); (4) Huang et al. (2008); (5) Nissen (2002); (6) Powell and Dent-Micallef (1997); (7) Rai et al. (2006);
(8) Rangaswamy and Lilien (1997); (9) Stegmann et al. (2006); (10) Subramani (2004).

Table A.2
EFA with process intelligence items.

Manufacturing Quality Forecasting Logistics and Capacity Product Other


and management and customer management development application
administration planning service

Master production schedule 0.7370 0.0093 0.1452 0.1772 0.3363 0.0386 0.1588
Material requirements planning 0.8967 0.0025 0.1804 0.1168 0.2196 0.1194 0.0574
Shop oor control 0.5355 0.308 0.3975 0.2436 0.0841 0.1236 0.1483
Inventory management 0.9417 0.0336 0.1634 0.1269 0.1323 0.116 0.0782
Purchasing 0.9027 0.0054 0.1682 0.1061 0.1953 0.1673 0.0215
Order management 0.8642 0.0332 0.0752 0.1251 0.165 0.1639 0.2099
Catalog and price management 0.6456 0.0995 0.3222 0.1397 0.0297 0.2533 0.2279
General accounting 0.9401 0.0903 0.032 0.0172 0.0671 0.0228 0.0454
Cost accounting 0.946 0.1087 0.054 0.0127 0.0211 0.1457 0.0876
Budgeting 0.6792 0.3557 0.1666 0.0515 0.0802 0.2659 0.2769
Human resource management 0.4522 0.4214 0.1404 0.092 0.0583 0.2441 0.3822
Maintenance management 0.0888 0.7246 0.2502 0.0121 0.0555 0.0445 0.2238
Quality documentation management 0.1241 0.7711 0.138 0.1014 0.1441 0.2203 0.2531
Quality control and improvement 0.1233 0.848 0.1995 0.1774 0.0152 0.0312 0.0484
Performance measurement system 0.1108 0.4008 0.593 0.0576 0.247 0.3438 0.078
Workow management 0.0132 0.5282 0.059 0.5531 0.2623 0.175 0.311
Forecasting 0.4166 0.0834 0.8105 0.1551 0.0933 0.1178 0.0264
Demand planning 0.5044 0.0399 0.6336 0.1489 0.1768 0.0427 0.3743
Business intelligence (query and 0.2756 0.2459 0.4739 0.1071 0.066 0.108 0.6405
report, OLAP, data mining)
Simulation and optimization 0.1017 0.342 0.4779 0.389 0.3515 0.1016 0.0361
of production and logistics planning
Distribution management 0.5476 0.0662 0.0675 0.5529 0.0919 0.076 0.1258
Transportation management 0.1882 0.2603 0.238 0.7424 0.0959 0.0584 0.0664
Service management (after the sale) 0.1844 0.0349 0.1776 0.7620 0.1219 0.1749 0.0729
Product conguration 0.2883 0.0016 0.0649 0.6212 0.0406 0.4093 0.0489
158 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

Table A.2 (Continued )

Manufacturing Quality Forecasting Logistics and Capacity Product Other


and management and customer management development application
administration planning service

Rough cut capacity planning 0.5542 0.1583 0.1131 0.0166 0.7024 0.2291 0.0508
Capacity requirements planning 0.5603 0.1814 0.0108 0.1457 0.6477 0.0045 0.1645
Finite capacity scheduling 0.3425 0.0145 0.3857 0.154 0.7127 0.0815 0.1172
Design (CAD, CAE) 0.3445 0.1109 0.1504 0.1219 0.011 0.7274 0.123
Product data management 0.5738 0.1863 0.0478 0.3081 0.1322 0.3580 0.0638
Project management 0.0066 0.4511 0.4108 0.123 0.2649 0.5584 0.0888
Groupware tools (e.g., Lotus Notes) 0.0157 0.1902 0.0163 0.1349 0.0943 0.1816 0.7872

Tetrachoric correlation matrix was used as the input matrix; seven factors emerged from the EFA using the process intelligence items. Six of the factors represent different
manufacturing plant activities as shown in the title of each column. The seventh factor consists of a single item measuring e-mail groupware, which is a broader IT application.

Table A.3
EFA with integration intelligence items.

Enterprise resource Product development and


planning quality management

Master production schedule 0.8176 0.2445


Rough cut capacity planning 0.695 0.3847
Material requirements planning 0.8644 0.3608
Capacity requirements planning 0.7434 0.402
Finite capacity scheduling 0.644 0.2743
Shop oor control 0.8304 0.1312
Inventory management 0.8337 0.4457
Purchasing 0.8018 0.4249
Forecasting 0.8319 0.0162
Demand planning 0.7623 0.1777
Order management 0.8593 0.3493
Catalog and price management 0.7233 0.0901
Distribution management 0.6258 0.3769
Transportation management 0.5471 0.4204
Service management (after the sale) 0.5389 0.5357
Product data management 0.7133 0.3257
General accounting 0.7283 0.4844
Cost accounting 0.7707 0.4707
Budgeting 0.5772 0.3301
Human resource management 0.3501 0.7409
Business intelligence (query and report, OLAP, data mining) 0.5793 0.3754
Simulation and optimization of production and logistics planning 0.6512 0.1611
Design (CAD, CAE) 0.2636 0.7379
Project management 0.2329 0.7591
Workow management 0.3121 0.6924
Groupware tools (e.g., Lotus Notes) 0.4194 0.5547
Maintenance management 0.2123 0.7060
Quality documentation management 0.2773 0.6612
Quality control and improvement 0.4057 0.5939
Performance measurement system 0.6236 0.2698

Tetrachoric correlation matrix was used as the input matrix; two factors emerged from the EFA using the integration intelligence items. Compared to process intelligence,
integration intelligence normally builds on enterprise resource planning system (ERP). ERP tends to be installed as a software package that supports many different
operational activities within a plant. This may explain why only two factors emerged from the integration intelligence items.

Table A.4
EFA with collaboration intelligence items.

Customer Sourcing and supplier Logistics


facing collaboration management

Presenting your sales products catalog 0.6098 0.4181 0.4642


Providing on-line customized customer service, where customers 0.8768 0.1553 0.0599
can congure the product within the constraints stated by the plant
Providing xed pricing offers to potential buyers 0.7399 0.2349 0.2738
Providing dynamic pricing offers to potential buyers 0.7689 0.1724 0.0615
On-line order entry 0.8649 0.0042 0.1109
Customers can check delivery status of their orders 0.8186 0.1073 0.1223
Scanning the marketplace for identication of potential sources 0.2028 0.6968 0.0287
Receiving and comparing suppliers offers 0.1072 0.8629 0.0682
Providing dynamic pricing (negotiations and sellers bids) for purchased items 0.2987 0.5213 0.2982
Supporting collaborative product design/improvement with suppliers 0.4213 0.6400 0.2679
Supporting collaborative process and technology design/improvement with suppliers 0.3324 0.7587 0.1427
Presenting information about your plant 0.2575 0.5272 0.392
Transmitting orders to suppliers 0.2096 0.0962 0.7405
Tracking/tracing supply orders 0.0987 0.068 0.8410
Real-time integrated scheduling, shipping and warehouse management across the supplier network 0.1978 0.2572 0.6457

Tetrachoric correlation matrix was used as the input matrix.


G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162 159

Table A.5
Regression results for operations size.

ln(Plant sales) ln(Plant sales) ln(Labor) ln(Labor) ln(Facility size) ln(Facility size)
** *** ** *** ***
Constant 3.130(0.001) 4.833(0.000) 3.917(0.000) 4.238(0.000) 8.228(0.000) 8.470(0.000)***
Statistical process control 0.161(0.074)y 0.011(0.934) 0.097(0.198) 0.126(0.080)y 0.010(0.922) 0.048(0.617)
Process intelligence 0.011(0.392) 0.003(0.867) 0.031(0.005)** 0.040(0.000)*** 0.033(0.026)* 0.037(0.009)**
Integration intelligence 0.008(0.545) 0.014(0.482) 0.002(0.875) 0.002(0.836) 0.005(0.711) 0.002(0.877)
Collaboration intelligence 0.037(0.186) 0.045(0.307) 0.008(0.746) 0.003(0.885) 0.008(0.792) 0.010(0.744)
ln(Parent rm sales) 0.072(0.014)* 0.104(0.000)*** 0.110(0.001)**
ln(Number of employees) 1.010(0.000)*** 0.799(0.000)***
ln(Facility size) 0.027(0.807) 0.077(0.645)
Electronics 0.033(0.864) 0.302(0.313) 0.050(0.753) 0.051(0.738) 0.437(0.041)* 0.391(0.061) y
Machinery 0.119(0.566) 0.030(0.925) 0.074(0.668) 0.012(0.943) 0.067(0.774) 0.138(0.535)
Finland 0.870(0.008)** 0.577(0.234) 0.116(0.673) 0.007(0.979) 0.204(0.578) 0.075(0.828)
Germany 0.566(0.070)y 0.399(0.411) 0.222(0.398) 0.244(0.344) 0.324(0.356) 0.440(0.197)
Italy 0.207(0.664) 0.408(0.429) 1.517(0.000)*** 0.288(0.293) 1.293(0.014)* 0.213(0.557)
Korea 0.878(0.002)** 1.050(0.000)***
Japan 1.721(0.000)*** 1.682(0.004)** 0.650(0.177) 1.538(0.000)*** 1.907(0.000)** 2.209(0.000)***
Sweden 2.446(0.000)*** 2.745(0.000)*** 0.711(0.059) 0.292(0.305) 0.642(0.194) 0.410(0.275)
USA 0.603(0.300) 0.984(0.127) 0.808(0.073) 0.634(0.022)* 1.628(0.008)** 2.927(0.000)***
R2 0.745 0.505 0.413 0.307 0.615 0.537
Adjusted R2 0.713 0.458 0.353 0.254 0.576 0.501
F (p-Value) 23.203(0.000) 10.652(0.000) 6.835(0.000) 5.754(0.000) 15.838(0.000) 15.244(0.000)
N 134 160 150 182 142 170

Note: Korean plants were excluded above due to too many missing values for plant size data.
***
p < 0.001.
**
p < 0.010.
*
p < 0.050.
y
p < 0.100.

Table A.6
Regression results for operations productivity.

ln(Labor ln(Capital ln(Orders processed ln(Number of nal product


productivity) productivity) per month) congurations)

Constant 4.956 (0.000)*** 0.095 (0.924) 3.857 (0.018)* 5.158 (0.019)*


Statistical process control 0.034 (0.778) 0.112 (0.428) 0.175 (0.382) 0.353 (0.177)
Process intelligence 0.007 (0.683) 0.005 (0.791) 0.057 (0.067)y 0.094 (0.026)*
Integration intelligence 0.004 (0.829) 0.010 (0.598) 0.009 (0.759) 0.001 (0.970)
Collaboration intelligence 0.053 (0.177) 0.072 (0.085)y 0.050 (0.467) 0.059 (0.497)
ln(Parent rm sales)
ln(Number of employees) 0.166 (0.443) 0.247 (0.412)
Electronics 0.354 (0.172) 0.140 (0.631) 0.640 (0.139) 0.683 (0.222)
Machinery 0.149 (0.593) 0.279 (0.377) 1.782 (0.000)*** 0.617 (0.314)
Finland 0.668 (0.134) 0.394 (0.449) 0.355 (0.610) 0.237 (0.802)
Germany 0.296 (0.496) 0.080 (0.874) 0.869 (0.219) 3.378 (0.000)
Italy 0.416 (0.360) 0.036 (0.946) 0.247 (0.744) 0.067 (0.946)
Korea 1.704 (0.000)*** 0.667 (0.225) 2.335 (0.004)** 0.283 (0.851)
Japan 0.378 (0.484) 2.791 (0.000)*** 1.281 (0.305) 1.273 (0.219)
Sweden 2.628 (0.000)*** 2.614 (0.000)*** 0.743 (0.341) 0.972 (0.339)
USA 0.919 (0.051)y 1.169 (0.039)* 0.833 (0.294) 0.676 (0.522)

R2 0.361 0.418 0.313 0.258


Adjusted R2 0.331 0.374 0.244 0.177
F (p-Value) 7.332 (0.000) 9.518 (0.000) 4.53 (0.000) 3.161 (0.000)
N 182 158 153 141
***
p < 0.001.
**
p < 0.010.
*
p < 0.050.
y
p < 0.100.

Table A.7
Regression results for discretionary work practicesorganizational change.

Centralization Flatness of Cooperation ln(Employee Percent cross Multi- Percentage of Small group
organization suggestions) trained functional employees on problem
structure employees problem solving teams solving

Constant 4.500 (0.000)*** 3.251 (0.000)*** 4.948 (0.000)*** 0.833 (0.465) 16.575 (0.312) 4.165 (0.000)*** 16.025 (0.280) 3.445 (0.000)***
Statistical 0.163 (0.004) 0.192 (0.013)* 0.159 (0.000)*** 0.037 (0.861) 7.429 (0.012)* 0.161 (0.001)** 7.692 (0.005)** 0.341 (0.000)***
process
control
Process 0.003 (0.660) 0.003 (0.719) 0.002 (0.671) 0.009 (0.744) 0.143 (0.694) 0.005 (0.337) 0.347 (0.286) 0.003 (0.574)
intelligence
*** *** ** *
Integration 0.031 (0.000) 0.037 (0.000) 0.004 (0.265) 0.079 (0.003) 0.223 (0.575) 0.014 (0.018) 0.133 (0.706) 0.001 (0.904)
intelligence
Collaboration 0.018 (0.308) 0.018 (0.453) 0.018 (0.058)y 0.171 (0.008)** 0.389 (0.690) 0.012 (0.424) 0.765 (0.388) 0.031 (0.028)*
intelligence
Electronics 0.105 (0.383) 0.007 (0.967) 0.028 (0.661) 0.445 (0.292) 0.882 (0.888) 0.103 (0.297) 0.988 (0.860) 0.028 (0.771)
160 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162

Table A.7 (Continued )

Centralization Flatness of Cooperation ln(Employee Percent cross Multi- Percentage of Small group
organization suggestions) trained functional employees on problem
structure employees problem solving teams solving

Machinery 0.162 (0.210) 0.045 (0.796) 0.045 (0.514) 0.644 (0.176) 2.604 (0.701) 0.129 (0.225) 7.722 (0.203) 0.059 (0.560)

R2 0.119 0.097 0.175 0.101 0.059 0.105 0.064 0.283


Adjusted R2 0.094 0.071 0.151 0.062 0.023 0.079 0.033 0.262
F (p-Value) 4.656 (0.000) 3.685 (0.002) 7.304 (0.000) 2.560 (0.022) 1.648 (0.137) 4.037 (0.001) 2.075 (0.058) 13.550 (0.000)
N 212 212 212 142 163 212 0.106 212
*
p < 0.050.
**
p < 0.010.
***
p < 0.001.
y
p < 0.100.

Table A.8
Regression results for discretionary work practicesexperimentation and development.

Knowledge level sqrt Developing Willingness to ln(New product ln(Average lifetime


(percent engineering unique introduce new congurations of product
degrees) practices products last year) conguration)

Constant 6.379 (0.000)*** 3.069 (0.000)*** 4.758 (0.000)*** 0.488 (0.637) 2.397 (0.000)***
Statistical process control 0.157 (0.447) 0.225 (0.000)*** 0.393 (0.000)*** 0.019 (0.917) 0.181 (0.005)**
Process intelligence 0.017 (0.514) 0.007 (0.264) 0.026 (0.055)y 0.091 (0.000)*** 0.011 (0.203)
Integration intelligence 0.011 (0.689) 0.012 (0.077)y 0.006 (0.704) 0.015 (0.542) 0.006 (0.472)
Collaboration intelligence 0.060 (0.373) 0.017 (0.301) 0.010 (0.779) 0.014 (0.814) 0.028 (0.184)
Electronics 0.143 (0.749) 0.090 (0.400) 0.011 (0.962) 0.138 (0.731) 0.161 (0.248)
Machinery 0.243 (0.612) 0.228 (0.049)* 0.384 (0.121) 0.375 (0.380) 0.123 (0.409)

R2 0.018 0.129 0.097 0.114 0.116


Adjusted R2 0.016 0.104 0.068 0.079 0.083
F (p-Value) 0.525 (0.789) 5.106 (0.000) 3.303 (0.004) 3.230 (0.005) 3.504 (0.003)
N 180 212 190 157 166
*
p < 0.050.
**
p < 0.010.
***
p < 0.001.
y
p < 0.100.

Table A.9
Regression results for technology focus.

ln(Volume Customization Integration Inter-functional ln(Scrap Customer


exibility) orientation of process between functions design efforts rate) satisfaction

Constant 0.911 (0.001)** 4.046 (0.000)*** 3.625 (0.000)*** 3.420 (0.000)*** 3.082 (0.001)** 4.196 (0.000)***
Statistical process control 0.074 (0.108) 0.233 (0.020)* 0.265 (0.000)*** 0.262 (0.000)*** 0.535 (0.001)** 0.187 (0.000)***
Process intelligence 0.003 (0.598) 0.015 (0.221) 0.005 (0.362) 0.010 (0.161) 0.029 (0.123) 0.000 (0.998)
Integration intelligence 0.011 (0.097)y 0.031 (0.017)* 0.006 (0.295) 0.003 (0.718) 0.002 (0.907) 0.009 (0.097)y
Collaboration intelligence 0.006 (0.689) 0.044 (0.142) 0.037 (0.007)** 0.000 (0.997) 0.062 (0.226) 0.025 (0.039)*
Electronics 0.036 (0.714) 0.924 (0.000)*** 0.066 (0.466) 0.142 (0.238) 0.164 (0.614) 0.060 (0.460)
Machinery 0.095 (0.383) 0.662 (0.004)** 0.132 (0.175) 0.126 (0.331) 0.769 (0.032)** 0.103 (0.241)

R2 0.044 0.175 0.217 0.126 0.098 0.145


Adjusted R2 0.013 0.148 0.194 0.101 0.068 0.120
F (p-Value) 1.401 (0.216) 6.312 (0.000) 9.458 (0.000) 4.954 (0.000) 3.249 (0.005) 5.801 (0.000)
N 188 184 211 212 165 212
*
p < 0.050.
**
p < 0.010.
***
p < 0.001.
y
p < 0.100.

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