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

The impact of information technology (IT) use on performance
and other organization outcomes is an important topic to both
practitioners and academics. During the 1970s and 1980s,
manufacturers began adopting IT to automate plant operations.
Since the early 1990s there has been a rapid growth in IT
investments for enterprise resource planning and supply chain
management in manufacturing industries. These information
technologies are believed to improve the efciency of manufac-
turer shop oor operations, enhance integration across different
functional areas, and facilitate inter-rm collaboration (Akker-
mans et al., 2003; Banker et al., 2006; Kelley, 1994).
Despite increased adoption and use of advanced IT by
manufacturing rms, to date there is still a lack of systematic
study of the impact of IT on manufacturing operations, particu-
larly at the plant level (Banker et al., 2006). A review of the
Operations Management (OM) literature indicates that prior
* 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
(D.X. Peng).
1
Tel.: +1 979 845 9218; fax: +1 979 845 5653.
level (e.g., Cao and Dowlatshahi, 2005; Dehning et al., 2007;
Hendricks et al., 2007) or the industry sector level (Shah and Shin,
2007). Another stream of the OM literature has examined a
focused type of IT such as new product development and project
management tools (Bardhan et al., 2007; Malhotra et al., 2001),
enterprise resource planning (Masini and Van Wassenhove,
2009), or supply chain collaboration (Hill and Scudder, 2002;
Saeed et al., 2005). However, few studies have examined a wide
spectrum of IT applications both within and across rm
boundaries.
In the Information Systems (IS) literature, a large number of
studies capture the level of IT adoption using highly aggregated IT
investment measures that typically lump together all IT-related
spending, such as investments in computer hardware, software,
and telecommunication infrastructure (e.g., Dewan et al., 2007;
Harris and Katz, 1991). This approach to examining IT capital
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
requires incremental investments in new IT applications in order
to improve the effectiveness and efciency of operational
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
Over the past two decades, manufacturing rms have
witnessed increasingly individualized customer demands, leading
to increased customization and proliferation of products and
services. As a result, modern-day manufacturing rms tend to have
multiple product lines targeting different markets and customer
segments. Within a manufacturing rm, individual manufacturing
plants supplying different target markets and customers need to be
supported by a tailored conguration of IT applications (Hender-
son and Venkatraman, 1999; Kathuria et al., 1999). While many
rms strive to develop a common IT infrastructure, decisions on
specic IT investments to some extent rest on plant management.
Thus, a plant-level analysis of IT use is expected to provide a ne-
grained understanding of the linkage between IT and organiza-
tional outcomes.
Prior research suggests that IT use may not directly impact
overall business or operational performance, but rather affects
certain intermediate variables such as process efciency and
organization learning (Banker et al., 2006; Devaraj et al., 2007;
Tippins and Sohi, 2003). Simply examining overall performance
impacts may miss important implications of the many roles IT can
play. Thus, researchers need to consider dependent variables other
than performance. In some circumstances, adopting the effective-
ness of business processes as a dependent variable may be more
appropriate than adopting overall organizational performance as a
dependent variable (Ray et al., 2004, p. 23). In this study we
examine a broad set of dependent variables encompassing measures
for plant structure, operational practices, and performance.
In examining the impact of IT use, researchers have adopted
various theoretical perspectives such as the resource-based view,
transaction cost theory, and organization information-processing
theory. Most of these theories are borrowed from the management
or economics literature, whereas OM theories have barely been
adopted to examine IT use in manufacturing operations. In this
study, we draw on Jaikumars (1988) theoretical framework on the
evolution of process control as well as other relevant literature to
study plant-level IT use and its impact. The key idea we draw from
this framework is that broad use of information technology will
enhance an organizations ability to process information and thus
change how production processes are managed and work
organized, leading to changes in process scope and work practices.
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.
145
Jaikumar inductively derived a theoretical framework on the
evolution of process control by tracing historical events in the
rearm industry (Fig. 1). He observed that information used to
control processes was initially generated using paper-based and
mechanical tools to provide static intelligence, and later generated
using digital computer systems oriented toward dynamic intelli-
gence. For each evolutionary period, Jaikumar also notes con-
temporaneous patterns of plant size and structure, work practices,
operational processes, and performance. In summarizing the
changes in the patterns over time, Jaikumar (2005, p. 112)
presented a framework relating the evolution toward information
systems supporting dynamic intelligence to patterns of organiza-
tional structure, operational practices and performance.
While Jaikumars theoretical framework is longitudinal in
nature, it offers important implications about the cross-sectional
relationships between different dimensions of intelligence
gathering (using various information systems) and plant
structure, practices and performance. To examine these relation-
ships, we analyze data from an international study sample of
over 200 manufacturing plants in electronics, machinery, and
transportation component industries. We view each plants
data on information technology use to represent a chosen
conguration of managerial practices and strategies supporting
dynamic intelligence (Leonard-Barton, 1988; Itami and Numa-
gami, 1992). In a randomly selected cross-sectional sample
of plants, plant IT systems are expected to vary considerably
in terms of their sophistication and scope, therefore placing
sample plants at different stages along the evolutionary path
that Jaikumar proposed rms would follow to develop
dynamic intelligence. We also expect plants to exhibit
different process control characteristics along this path. We
use the data to position the plant operations along the
dimensions of IT use. We nd some empirical results consistent
with the implications of the model, yet also observe some
results that differ from the proposed outcomes. The paper
contributes to the literature by systematically examining the
impact of IT use at the plant level.
The paper is organized as follows. Section 2 reviews Jaikumars
theoretical framework and develops hypotheses. Section 3
describes data, measurement and analysis results. Section 4
146 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162
concludes by discussing theoretical and practical implications and
future research directions.
2. Background
2.1. IT and evolution of process control
Since the 1970s, manufacturing industries have observed
growing adoption and use of advanced manufacturing technology
(AMT), enabled largely by modern information technology.
Technologies such as computer aided design (CAD), computer
aided manufacturing (CAM), material requirement planning
(MRP), and exible manufacturing systems (FMS) have dramati-
cally changed manufacturing processes and their outputs. AMT is
believed to deliver high production exibility, rapid responses to
changes in demand and product design, greater control and
repeatability of processes, faster throughput, reduced waste, and
distributed process capability (Boyer et al., 1996; Kelley, 1994). As
such, the traditional tradeoff between exibility and efciency has
been altered signicantly: one of the primary benets ascribed to
AMTs is the capability to combine traditional economies of scale
with economies of scope in an ability to achieve both exibility and
efciency (Boyer et al., 1996, p. 298). Indeed, IT has been widely
acclaimed to enable mass customization since it provides efcient
exibility to help rms cope with the dual challenge of speed and
exibility and low cost (Allen and Boynton, 1991, p. 436).
The impact of IT is not limited to core production processes.
Broad adoption and use of IT within the rm and across rm
boundaries also may stimulate new work practices and organiza-
tional forms, leading to changes beyond core production processes
(Bresnahan et al., 2002). Recently, advances in Internet technology
have enabled rms to monitor, improve, and control operational
processes throughout the supply chain (Banker et al., 2006; Rai
et al., 2006). Interorganizational processes, when enabled by
integrated IT systems, can create capabilities in demand sensing,
operations and work ow coordination, and global optimization of
resources (Rai et al., 2006, p. 227).
The historical use of IT for monitoring and controlling
manufacturing processes is documented in detail in Jaikumars
industrial history monograph on the evolution of process control
within rearm manufacturing (Jaikumar, 1988, 2005). In parti-
cular, the monograph describes how process scope and worker
discretion changed over time in response to the adoption of tools
and information systems used to monitor and control the
production processes for gun manufacture. Jaikumar uses a model
similar to the one presented in Fig. 1 to describe this evolution. The
model is a two-dimensional matrix built upon the dimensions of
static (mechanization) vs. dynamic (intelligence) information sup-
porting the work process, and low process scope/low discretion vs.
high process scope/high discretion in worker decision making. The
path of process control evolution follows a U-shaped pattern
according to the numbered cells in Fig. 1, from cell 1 through cell 6.
The model positions historical process types along an ordinal
timeline spanning from the English system of manufacturing to
modern (late 1980s) exible manufacturing systems and compu-
ter-integrated manufacturing (CIM). Underlying the model is a
view that operations have been evolving from physical control
toward digital control of production systems. Karmarkar and Apte
(2007) characterize this phenomenon as an evolution from a
material-based economy to an information-based economy (p.
438) and suggest that the challenges of managing these informa-
tion-based operations will provide the bulk of interesting future
OM research topics.
In Jaikumars (1988, p. 92) model, production evolves from a
static, unchanging world to a dynamic, information intensive
world. Jaikumar characterizes mechanized technologies as
incorporating simple manual and hard mechanical mechaniza-
tion. In contrast, dynamic technologies require softer machine
intelligence essentially computerized programmable intelli-
gence that substitutes for intelligent tasks ordinarily performed
by humans. For example, dynamically intelligent machines must
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
wear. The scope dimension relates to the breadth of unique
production capabilities that a process is able to handle. Discretion
relates to the ability of workers or machines to make autonomous
decisions regarding the production activities that they will
undertake.
Subjectively, Jaikumars work seems to have predicted the
subsequent industrial movement toward IT-based production
operations. During the 20 years since its publication, the world has
experienced a continuing evolution toward IT-based production
systems via (i) broad plant-level use of computerized production
technologies such as FMS, CIM, CAD/CAM, and CAPP, (ii) enterprise
information systems for CRM, ERP and SCM, and (iii) collaboration
via the Internet (Banker et al., 2006; Wu et al., 2003; Caldeira and
Ward, 2002). As manufacturing rms have increasingly adopted a
broad array of information technology, Jaikumars model has seen
growing use by academics to motivate the need for new theoretical
frameworks (Melcher et al., 2002) and operations tools (Brooking
et al., 1995).
Yet, rms today are using information technology in varieties
and to an extent that could not have been imagined in 1988, when
Jaikumar proposed the framework. Thus, researchers may need to
enrich the frameworks constructs based on present-day knowl-
edge of how IT use has played out. Jaikumars (1988) work focuses
on how process-level IT affected plant activities at various levels. In
comparison, in todays manufacturing operations information
technology use can span from internal processes out to customers
and suppliers. In this paper, we characterize a manufacturing
plants IT use along three dimensions labeled process intelligence,
integration intelligence, and collaboration intelligence. These three
dimensions of IT use represent IT applications supporting
manufacturing operations, integration among different functions,
and collaboration and integration with suppliers and customers,
respectively. This classication of IT use parallels the general
history of the development of modern information systems
(Banker et al., 2006; Wu et al., 2003; Caldeira and Ward, 2002).
Several studies have explored these factors individually (e.g.,
Bardhan et al., 2007; Hill and Scudder, 2002; Saeed et al., 2005;
Masini and Van Wassenhove, 2009), but few have examined them
as separate factors jointly driving changes in plant structure,
practices, and performance.
Jaikumars model (Fig. 1) suggests that after a period
characterized by centralization, process automation and econo-
mies of scale, rms should exhibit movement toward early
intelligence gathering via statistical process control (SPC), and
subsequent use of IT-based dynamic intelligence gathering. We
propose that SPC and various dimensions of dynamic intelligence
should be observed in a cross-sectional sample of manufacturing
plants. Yet, at the same time, because rms have different internal
traits and operate in different task environments, each rm may
evolve following its own unique path, which may begin in any of
the stages in Jaikumars framework or with any dimension of IT
use. As such, we expect that not all manufacturing plants have
evolved through every stage, leading to different degrees of use of
SPC and IT-based dynamic intelligence. While the left-hand side of
Jaikumars model (Fig. 1) may be largely unestimable using
contemporary data since it relates to historical developments from
the rst half of the 1900s and before, we believe that the right half
of the framework can be analyzed since it relates to ongoing
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
processes to material procurement activities, plant-oor opera-
tional control, and shipping processes. As a representative
dimension of dynamic intelligence, we propose that the increased
use of information technologies supporting process intelligence
will be associated with Jaikumars expected outcomes of smaller
plant size, increased discretionary work practices, and technology
focus changes leading to higher exibility and customization. Thus,
we propose the following:
Proposition P2a. Process intelligence: Higher process intelligence
will be negatively associated with (i) operations size. Higher process
intelligence will be positively associated with (ii) operations produc-
tivity, (iii) discretionary work practices related to organizational
change, (iv) discretionary work practices related to experimentation
and development, and (v) technology focus.
Extant literature has found some of these impacts related to
process intelligence. Studies report industry-level evidence that IT
investments are related to smaller rm size (Brynjolfsson et al.,
1994; Mitchell, 2002). At the rm level, IT investments are found to
relate positively to rm nancial performance (Bharadwaj et al.,
1999), operational performance (Banker et al., 2006), and produc-
tivity (Black and Lynch, 2001; Mukhopadhyay et al., 1997; Bessen,
2002; Comin, 2002). At the process level, IT use is found to improve
process efciency and conformance quality (Banker et al., 2006;
Kelley, 1994). IT use in new product development projects has the
potential to speed up the development process (Bardhan et al., 2007;
Mallick and Schroeder, 2005), reduce development costs, improve
customer satisfaction (Bardhan et al., 2007; Grifn and Page, 1993),
and ultimately, help achieve new product success (Koufteros et al.,
2005; Mallick and Schroeder, 2005; Swink and Song, 2007). Finally,
prior studies suggest that IT use stimulates organization changes
and innovation, and leads rms to use more skilled workers
(Bresnahan et al., 2002).
Integration intelligence represents the extent to which each of
the tactical information technologies at the process level is
integrated into a single system, in this case an ERP system, in
order to provide plant and rm managers with a system-wide
intelligence about the activities taking place within operations.
Again, for integration intelligence, we include the integration of a
broad set of practices related to product design, procurement, shop
oor operations, and logistics. Since higher integration intelligence
represents an increase toward higher dynamic intelligence, we
propose that the increased integration intelligence will be
associated with Jaikumars expected outcomes of smaller plant
size, increased discretionary work practices, and technology focus
changes leading to higher exibility and customization.
Proposition P2b. Integration intelligence: Higher integration intelli-
gence will be negatively associated with (i) operations size. Higher
integration intelligence will be positively associated with (ii) opera-
tions productivity, (iii) discretionary work practices related to orga-
nizational change, (iv) discretionary work practices related to
experimentation and development, and (v) technology focus.
Extant literature, however, suggests that mixed outcomes may
result from integration intelligence. Several studies report that ERP
helps rms gain a competitive advantage over non-adopters
(Hunton et al., 2003; Mabert et al., 2003). However, the benet
varies considerably across rms. Banker et al. (2006) observe
positive associations of integration IT with efciency, quality
improvement, and time to market. Hitt et al. (2002) nd that ERP
adoption is positively related to production output and sales, yet
negatively related to the cost of goods sold. Yet, Akkermans et al.
(2003) identify many shortcomings of ERP systems that directly
impact intelligence gathering and dissemination, leading to
decreased process exibility and worsening performance. Because
the focus of many ERP systems is on standardizing processes, a
movement toward ERP may lead to ndings inconsistent with
Jaikumars framework.
Collaboration intelligence represents the extent to which a
plant has adopted information technologies that allow them to
communicate and collaborate with customers and suppliers. The
activities span from marketing and sales activities on the customer
side to planning, design, purchasing and supply activities on the
supplier side. Once again, since higher collaboration intelligence
represents an increase in dynamic intelligence, we propose that
increases in collaboration intelligence will be associated with
Jaikumars expected outcomes of smaller plant size, increased
discretionary work practices, and technology focus changes
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
intelligence will be negatively associated with (i) operations size.
Higher collaboration intelligence will be positively associated with
(ii) operations productivity, (iii) discretionary work practices related
to organizational change, (iv) discretionary work practices related to
experimentation and development, and (v) technology focus.
Extant literature reports somewhat mixed results with respect
to collaboration intelligence. Demand chain and supply chain
integration have been shown to be positively associated with rm
performance (Frohlich, 2002; Frohlich and Westbrook, 2002).
Barua et al. (2004) nd signicant positive links from supplier-side
to customer-side digital collaboration, and ultimately to nancial
performance. Likewise, Banker et al. (2006b) nd positive
associations of collaboration IT with efciency, quality improve-
ment, and time to market. In contrast, Malhotra et al. (2005)
observe a negative correlation between partner-enabled market
knowledge creation and operational efciency measures.
3. Data and methodology
3.1. Data source
The data for our study were collected from 2005 to 2007 as part
of the High Performance Manufacturing (HPM) project (Bozarth
et al., 2009). The HPM project uses a stratied sample consisting of
traditional and high performance manufacturing plants. This
research design ensures a sufcient number of high performing
plants in the sample along with more representative traditional
plants. Variation in plant characteristics is likely to be associated
with different extent and scope of IT use, making it possible to
examine our propositions using data collected from the cross-
sectional sample of manufacturing plants in the HPM study.
Data were collected using a mail survey. Because data collection
involved multiple countries, the questionnaires were translated
into the native language of each country. The questionnaires were
then translated back to English by a different person to check for
accuracy. This process helps control for country level response bias
due to inaccurate translation of the survey questions.
The sample includes plants in eight countries: Finland, Sweden,
Germany, Austria, Italy, Japan, Korea, and the United States. These
countries were selected to obtain a broad representation of
developed economies across different geographical regions and
cultures (Europe, Asia, and North America). The sample plants
represent three industries: machinery, electronics, and transpor-
tation components. These industries were selected because of their
signicant presence in the countries where the survey was
conducted (Schroeder and Flynn, 2001). Details of the sample
plants are reported in Table 2.
The sample plants were randomly drawn from a master list of
manufacturing plants in each participating country, with approxi-
mately 10 plants in each of the three industries (electronics,
machinery, and transportation components) for a total of
approximately 30 plants per country. The main informant for
the dynamic intelligence variables was the information systems
manager. Other informants for this study included accounting
manager, direct labor, human resource manager, quality manager,
inventory manager, plant manager, plant superintendent, product
development manager and process engineer, who responded to
questions measuring plant structure, practice, and performance. A
research coordinator at each participating plant distributed the
questionnaires to the named managers and randomly selected
workers and supervisors, and collected the completed question-
naires in sealed envelopes to protect condentiality. After all data
were collected, the research team provided each participating
plant with a detailed prole of its own manufacturing operations
and benchmark data in its industry, as promised before the data
collection effort. Altogether 238 manufacturing plants responded
to the survey. Among the plants contacted by the research team,
65% returned the survey questionnaires, representing a response
rate of 65%.
3.2. Construction of variables
Table 3 presents the independent and dependent variables
used in the study, including their data type, a description of the
construct measures, respondents for the construct, and pub-
lished studies that use the same or similar measures, where
applicable. The content validity of the measurement items is
established based on an extensive review of the relevant
literature. This study employs a mixture of indicator, integer,
dollar, ratio, percentage, and averaged scale variables. The
descriptive statistics and the correlation matrix of the variables
are presented in Table 4. In general, the correlations seem to be
reasonable. No abnormally high correlations or counter-intuitive
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
Table 3
Dependent and independent variables uses in analysis.
Variable
Statistical process control
Naor et al. (2008), Peng et al. (2008)
Process intelligence
Integration intelligence
Collaboration intelligence
Electronics, machinery
USA, Japan, Italy, etc.
Parent rm sales
Plant sales
Labor
Facility size
Labor productivity
Capital productivity
Orders processed per month
Number of nal product congurations
Centralization of authority
Aiken and Hage (1966)
Flatness of organization structure
Nahm et al. (2003), Vickery et al. (1999)
Cooperation
Employee suggestions
Percent cross trained
Multi-functional employees
Ahmad and Schroeder (2003)
Percent employees on problem
solving teams
Small group problem solving
Rungtusanatham et al. (2005)
Knowledge level engineering degrees
Developing unique practices
Willingness to introduce new products
New product congurations last year
Average lifetime of product congurations,
Bozarth et al. (2009)
Volume exibility, Flynn and Flynn (2004)
G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162
Type/respondent Description
Mean (scale items) Processes in our plant are designed to be foolproof.c (0.49)
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)
Sum (0/1), IS See Appendix A, Table A.1
Sum (0/1), IS See Appendix A, Table A.1
Sum (0/1), IS See Appendix A, Table A.1
0/1 Indicator variables for industry effect
0/1 Indicator variables for country effect
Dollar, PM Annual sales of parent corporation
Dollar, AC Sales value of production ($000)
Integer, AC Sum of hourly personnel and salaried personnel, averaged across present year and 2 years
previous
Integer, AC Space used by the plant (square feet) including production and warehouse space (omits South
Korean plants)
Ratio, AC Plant sales/labor
Ratio, AC Plant sales/plant size
Integer, PM Orders this plant processes each month, on average
Integer, PM Number of nal product congurations sold to customers last year
Mean (scale items) Even small matters have to be referred to someone higher up for a nal answer (0.90)
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)
Mean (scale items) Our organization structure is relatively at (0.78)
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)*
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)
Integer, HR Suggestions per worker provided annually
Percent, HR Percent of plant workers that have been cross-trained in more than one job
Mean (scale items) Our employees receive training to perform multiple tasks (0.77)
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, HR Percent of the workers in the plant involved in problem solving teams
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)
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)*
Percent, HR Percent of salaried personnel having engineering or technical degrees
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)*
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
Integer, PE Number of new product congurations introduced last year
Real, PE Average lifetime of a product conguration, in number of years
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
Mishra and Shah (2009)
Mean (scale items) Direct labor employees are involved to a great extent before introducing new products or
making product changes (0.71)
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-
response bias does not appear to be a serious concern. Never-
theless, for each variable with missing responses, we compared
responding and non-responding plants for differences in plant size,
measured by number of employees. The results suggest that
responding and non-responding plants do not exhibit signicant
differences in plant size.
In this study, we view each plants data to represent a chosen
conguration of managerial practices that places their operations at
certain points along each of the dimensions of IT use. Thus, we use
the proposed dynamic intelligence dimensions as positioning
variables, which allow us to examine whether the proposed
relationships between dynamic intelligence and the outcome
dimensions are exhibited in the empirical data set. The rst four
rows in Table 3 present these key statistical process control and
dynamic intelligence variables. The statistical process control
variable, representing the extent of process control intelligence,
was constructed as the average of several items from a multiple item
seven-point scale measuring SPC adoption. The dynamic intelli-
gence variables are each constructed as the arithmetic sum of the set
of individual IT application variables representing each dimension of
dynamic intelligence. Appendix A (Table A.1) presents the IT
application areas included in each dynamic intelligence variable.
Consistent with the literature (Banker et al., 2006; Barczak et al.,
2007; Hitt et al., 2002), we represent each implemented IT
application area within each dimension of dynamic intelligence as
a binary (01) variable. An individual IT variable is assigned a value
0 or 1, where 0 denotes that the represented IT functionality
has not been implemented and 1 otherwise. Because each IT
variable represents whether a particular plant functionality is
supported by information technology, the extent to which a plant
uses IT should be reected in the total number of functionalities
(processes and activities) supported by IT. Thus, to construct each
dynamic intelligence variable, we summed together the values of
the list of underlying dichotomous variables representing the use
of information technology within the scope of that dimension of
dynamic intelligence in the plant.
Because each IT item species a separate functionality
supported by information technology, different IT items are not
interchangeable. Thus the IT items can be considered as formative
measures (Diamantopoulos and Winklhofer, 2001, p. 271). An
important criterion for assessing the construct validity of the
formative measures is their content validity (Diamantopoulos and
Winklhofer, 2001; Petter et al., 2007). We chose the measurement
items based on our denition of the dynamic intelligence
constructs. The measurement items capturing the constructs are
well grounded in prior studies. A list of related articles upon which
we built the dynamic intelligence measures can be found in
Appendix A (Table A.1). Another important criterion for formative
items is that they should not exhibit high multicollinearity
(Diamantopoulos and Winklhofer, 2001). In our study, each
dynamic intelligence item has a Variance Ination Factor (VIF)
below 10, with only two items having a VIF greater than 5. Thus,
multicollinearity does not seem to be a serious concern as the
literature suggests that VIF below 5 (some suggest below 10) is
acceptable (Haan, 2002; Hair et al., 2005).
We also performed Exploratory Factor Analysis (EFA) on each of
the dynamic intelligence measures. Unlike the reective items,
formative items of the same construct do not have to load on a
single factor (Diamantopoulos and Winklhofer, 2001). The EFA
results indicate that the IT items measuring each type of dynamic
intelligence form logical groups representing plant operational
areas, except for a small number of item cross loadings. These
results to some extent provide support for the validity of the
dynamic intelligence measures. The EFA factor loadings are
presented in Appendix A (Tables A.2A.4).
This study uses a number of multi-item scales, each scored
along a seven-point scale. The majority of the multi-item scales are
evaluated by three different respondents who have relevant
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
multiple respondents to evaluate the same scale questions has the
advantage of mitigating Common Method Variance (CMV), a
widely cited concern for self-report surveys (Podsakoff et al.,
2003). In our study, CMV is further mitigated by having different
respondents for the items measuring the independent and the
dependent variables. To assess inter-rater agreement among
multiple respondents, for each scale evaluated by multiple
respondents, we computed the Rwg coefcients according to the
ratio method (James et al., 1984). The resulting inter-rater
agreement coefcients range from 0.78 to 0.93 (Table 3), and
are in line with the guidance on inter-rater reliability for
operations management research (Rwg > 0.80) suggested by Boyer
and Verma (2000), thus indicating acceptable agreement among
different respondents.
To establish the reliability and validity of the scale measures, we
ran a Conrmatory Factor Analysis (CFA) including all of the multi-
item scales. The CFA t indices suggest acceptable model t
(RMSEA = 0.052, x2/DF = 1.69, CFI = 0.091, IFI = 0.090). Except for
one factor loading for the construct developing unique practices,
all factor loadings are greater than 0.50 (Table 3). The lone loading
below 0.50 is 0.38, still above the threshold of 0.30 (Hair et al., 2005).
We used pair-wise Chi-square (x2) difference tests to examine the
discriminant validity of the measurement scales (Bagozzi and
Phillips, 1982; Bagozzi et al., 1991). The x2 difference tests are all
signicant at the 0.01 level, indicating acceptable discriminant
validity among the scale measures. We also compared the squared
correlation between each pair of variables measured by a multi-item
scale and variance explained for that pair of variables. No squared
correlation is found to exceed the corresponding values of variance
explained (Fornell and Larcker, 1981), again suggesting acceptable
discriminant validity. Next, we constructed the averaged scale
variables using simple arithmetic averages of the multiple item
scores related to a construct (MacDufe, 1995).
The non-scale variables are mostly objective measures such as
plant annual sales, plant total number of employees, and plant
square footage. These variables are described in Tables 2 and 3.
When necessary, we normalized the variables using a natural log
transformation.
3.3. Empirical methodology
We test our propositions using multiple linear regression
models. We performed ve sets of regressions. In each set of
regressions, SPC and the three dynamic intelligence variables are
entered as the predictor variables. For each set of regression
models, the dependent variables represent a specic category of
the expected outcomes implied by Jaikumars framework (i.e.,
Table 1): operations size, operations productivity, organizational
changes, experimentation and development practices, and tech-
nology focus. Operations size includes variables measuring plant
annual sales, total number of plant employees, and size of the
facility. Operations productivity includes variables measuring
labor productivity (plant sales per employee), capital productivity
(plant sales/facility size), orders processed per month, and number
of nal product congurations produced. Variables related to
organization changes include centralization of decision making,
atness of organization structure, cooperation between employ-
ees, employee suggestions, employee training, and problem
solving teams. Variables related to experimentation and develop-
ment practices represent the development of unique practices,
willingness to introduce new products, new product congura-
tions introduced last year, and an average products lifetime.
Finally, variables that capture technology focus are volume
exibility, customization orientation of processes, integration
between functions, scrap rate, and customer satisfaction with
product and service.
153
We include control variables where warranted. Because the
macro-economic environments and the cultural and socio-
economic factors could contribute to cross-country variation in
rm size and productivity (Bernard and Jones, 1996; Dewan and
Kraemer, 2000; Kumar et al., 1997), for operations size and
productivity regressions, we control for the impact of country-to-
country differences by including indicator variables for the
nationality of each plant. The base country against which the
other country controls can be compared is Austria. We do not
include country as a control for the remaining regressions since the
dependent variables in these regressions capture within-plant
practices, which are mainly inuenced by plant specic factors
rather than country effects (Naor et al., 2008). We also use
indicator variables to control for industry-to-industry differences
(Banker et al., 2006). The base industry for comparison is the
transportation component industry. Prior literature suggests that
larger rms tend to have larger plants (Bernard and Jensen, 2006).
Thus, for regressions on operations size, we control for sales of the
parent rm. Finally, because prior studies nd that organization
size and productivity are correlated (Dhawan, 2001; Haltiwanger
et al., 1999), in productivity regressions we control for size of the
manufacturing plant, measured by the natural log of the total size
of the labor force (Banker et al., 2006; Ettlie et al., 1984).
Because of missing responses in the data set, we performed
Littles MCAR test using the SPSS 13 missing value analysis
procedure to check if the variables are Missing Completely At
Random (MCAR). The resulting p-value is insignicant at the 0.10
level, indicating the variables are MCAR. Thus, in each regression
we list-wise delete the plants having missing values.
After running each regression, we examined relevant diagnostic
statistics to rule out potential violation of regression assumptions.
We visually checked the distribution of each variable. The variables
all seem to have a bell shaped distribution (after transformation for
some variables). For each regression, we examined variance ination
factor to rule out multicollinearity problems. The VIFs of the main
effects and interaction effects are all below 2. Some of the control
variables, mostly country controls, have relatively higher VIFs.
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
various residual plots. The residuals seem to have a bell-shaped
distribution and also appear to be constant across the predicted
dependent values, ruling out the presence of heteroskedasticity.
Thus, the data appear appropriate for regression analysis.
3.4. Results
For ease of comparison, we condense our ndings into a
summary table. A summary of the regression results can be found
in Table 5. Detailed regression results are provided in Appendix A
(Tables A.5A.9).
3.4.1. Proposition 1SPC
Overall, we observe weak evidence indicating that SPC is
positively associated with operations size and no evidence linking
SPC to operations productivity measures. SPC has a marginally
positive association with the total number of plant employees
(b = 0.126, p = 0.080) and with plant sales when we control for
parent rm sales (b = 0.161, p = 0.074). The SPC variable is not
signicantly related to any of the productivity measures at the 0.10
level.
In contrast, we observe fairly strong evidence of the positive
effect of SPC on organization change. SPC is signicantly related to
seven of the eight outcome measures in this category, with all
estimated parameters in the expected direction. As expected, SPC
is positively associated with practices oriented toward process
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
of organization structure (b = 0.192, p = 0.013). SPC also has a
positive relationship with cooperation (b = 0.159, p = 0.000),
employee training (b = 7.429, p = 0.012), and problem solving
teams (b = 7.692, p = 0.005; b = 0.341, p = 0.000).
We observe mixed evidence with respect to our expectation
that SPC would be insignicant or negatively associated with
experimentation and development practices. SPC is negatively
related to willingness to introduce new products (b = 0.393,
p = 0.000) and insignicantly related to two other variables,
providing support for Proposition 1. However, SPC also relates
positively to developing unique practices (b = 0.225, p = 0.000) and
negatively to the average lifetime of a product conguration
(b = 0.181, p = 0.005).
Although we expected insignicant or negative associations, we
again observe mixed yet relatively strong evidence supporting an
association between SPC and changes in technology focus. As
expected, an increased level of SPC is related to lower level of
customization orientation in processes (b = 0.233, p = 0.021).
Contrary to Proposition 1, we observe strong associations of SPC
with improved scrap rates (b = 0.535, p = 0.001), inter-functional
integration (b = 0.265, p = 0.000), inter-functional design efforts
(b = 0.262, p = 0.000), and customer satisfaction (b = 0.187,
p = 0.000). Thus, SPC appears to support changes in technology focus.
3.4.2. Proposition 2aprocess intelligence
Process intelligence exhibits positive associations with several
operations size variables and two productivity measures. However,
several of the parameter estimates go against expectations. Among
operations size variables, process intelligence positively relates to
the total number of employees (b = 0.031, p = 0.005; b = 0.040,
p = 0.000) and facility size (b = 0.033, p = 0.026; b = 0.037,
p = 0.009). Thus, the operations size variables appear to contradict
expected associations. In contrast, process intelligence appears to be
partially consistent with the expectation for operations productiv-
ity. Process intelligence exhibits a positive association with orders
processed per month (b = 0.057, p = 0.067) and number of nal
product congurations produced (b = 0.094, p = 0.026) but it is
insignicantly related to other productivity measures at the 0.10
level. These ndings provide partial support for Proposition 2a.
Process intelligence exhibits far fewer associations with the
remaining sets of practices. Process intelligence does not have a
signicant effect on practices related to organizational changes or
technology focus. With respect to experimentation and develop-
 G.R. Heim, D.X. Peng / Journal of Operations Management 28 (2010) 144162
ment practices, process intelligence exhibits mixed evidence
including a positive effect on new product congurations
introduced last year (b = 0.091, p = 0.000) but a negative effect
on willingness to introduce new products (b = 0.026, p = 0.055).
In summary, we observe mostly positive associations between
process intelligence and operations size, which tends to contradict
Proposition 2a. We nd evidence supporting a positive link
between process intelligence and operations productivity, sup-
porting Proposition 2a. Finally, we do not nd any signicant
relationship between process intelligence and discretionary work
practices or changes in technology focus.
3.4.3. Proposition 2bintegration intelligence
In contrast to SPC and process intelligence, integration
intelligence does not relate to any operations size or productivity
measures at the 0.10 level. However, the effects of integration
intelligence on variables for discretionary work practices related to
organizational changes are mostly consistent with our predictions:
higher integration intelligence is related to a lower degree of
centralization of decision making (b = 0.031, p = 0.000), high
degree of horizontal organization structure (b = 0.037, p = 0.000),
and increased multi-functional training (b = 0.014, p = 0.018). The
only exception is with the average number of employee sugges-
tions (b = 0.079, p = 0.003). Integration intelligence also exhibits
moderately positive relationships with three technology focus
variables: volume exibility (b = 0.012, p = 0.076), customization
orientation of processes (b = 0.031, p = 0.017), and customer
satisfaction (b = 0.009, p = 0.097).
With respect to variables measuring experimentation and
development practices or technology focus, integration intelligence
only exhibits a weak positive relationship with developing unique
practices (b = 0.012, p = 0.077). Overall, there is moderate evidence
supporting the hypothesized links between integration intelligence
and the outcome variables, particularly discretionary work practices
related to organizational change or technology focus.
3.4.4. Proposition 2ccollaboration intelligence
While collaboration intelligence is related to only a small
number of outcome variables, the directions of the relationships
are mostly consistent with predictions. Collaboration intelligence
is positively related to capital productivity (b = 0.072, p = 0.085),
cooperation (b = 0.018, p = 0.058), average number of employee
suggestion (b = 0.171, p = 0.008), small group problem solving
(b = 0.031, p = 0.028), integration between functions (b = 0.037,
p = 0.007), and customer satisfaction (b = 0.025, p = 0.039). Thus,
there is weak support for Proposition P2c.
4. Discussion and conclusion
4.1. Discussion of ndings
Over the past century, manufacturing process control has
changed profoundly due to the adoption of SPC and various forms
of information technology. Jaikumars theoretical framework of the
evolution toward dynamic intelligence brought these two factors
together. Yet, to date no one has empirically examined the impact
of IT use at the plant level after controlling for developments
related to SPC. We attempt to explore the extent to which IT use
impacts various aspects of plant operations drawing on Jaikumars
theoretical framework. As in related studies, we observe sub-
stantial impacts due to intelligence gathering via SPC yet limited
evidence related to the impact of adopting IT for process,
integration, and collaboration intelligence.
In Jaikumars original model, advances in process control are
described in terms of stages of adopting statistical process control,
numerically controlled (NC/CNC) systems, exible manufacturing
155
systems, and computer-integrated manufacturing (CIM). In this
study, we broadly represent plant-level IT use with our dimension
of process intelligence, and break the movement toward intra-rm
and inter-rm IT integration into two separate dimensions
representing ERP-based integration intelligence and supplier/
customer collaboration intelligence. We examine the impact of
three dimensions of dynamic intelligence process, integration,
and collaboration on manufacturing plant outcomes represent-
ing plant structure, practices, and performance. While it clearly is
quite challenging to perform such a comprehensive examination of
the IT impact on manufacturing plants, we believe our exploratory
efforts in this paper provide a useful starting point.
As a foundation for building dynamic intelligence, SPC
repeatedly comes up signicant in ways that lead to better control
and reduced process variability. Compared with each of the three
dynamic intelligence variables, SPC tends to be associated more
strongly with the outcome variables, particularly with variables
measuring organizational changes, experimentation and develop-
ment practices, and technology focus. These ndings are consistent
with prior literature that highlights the positive impact of SPC and
quality management practices in general. The impact of SPC and
quality management practices can be quite broad and transcend
multiple organization levels, from employee autonomy and job
satisfaction to relationships among functional areas, and to overall
organizational performance and productivity (e.g., Flynn et al.,
1995; Rungtusanatham, 2001).
The three dimensions of dynamic intelligence collectively are
related to a broad array of outcome variables, although the effects
are not all consistent with our expectation and many of the
relationships are somewhat weak. The three dimensions of dynamic
intelligence exhibit quite different effects on various groups of
outcome variables. The effects of process intelligence are concen-
trated on operations size and operations productivity. In contrast,
integration intelligence and collaboration intelligence mainly
impact organizational change and technology focus variables, with
integration intelligence exhibiting broader impact on these two
groups of outcome variables than collaboration intelligence. These
ndings are perhaps due to the different objectives of the three
dimensions of dynamic intelligence. Integration intelligence and
collaboration intelligence are mainly used to gather information and
aid decision making, whereas process intelligence to a large extent is
used to automate manufacturing and administrative processes. The
ndings may also occur because IT supporting collaboration
intelligence is the newest of the three dimensions of dynamic
intelligence, and therefore its impact on plant operations may not
yet be as pronounced.
Contrary to Jaikumars expectation that dynamic intelligence is
associated with smaller minimal scale of efcient operations and
smaller operations size, we found that process intelligence is
associated with larger operations size. IT oriented toward process
intelligence is the initial stage of IT-based intelligence and has been
used mainly for automating manufacturing processes and stream-
lining workow. As such, process intelligence is likely to facilitate
process standardization and large scale operations. Another
potential reason we did not observe the expected relationship is
the wide adoption of a plant-within-a-plant structure that
allows multiple different production lines housed in the same
plant to share resources in order to achieve economies of scale and
scope. Due to the constraints of our data, we were not able to
examine the operations size at the production line level.
Overall, none of the three dimensions of dynamic intelligence
appears to have much impact on discretionary work practices
related to experimentation and development. Their effects are
mixed at best. Perhaps these practices are driven to a greater
extent by factors other than IT. Although IT may facilitate
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-
tion often takes place at a level higher than manufacturing plants
(e.g., business unit level), thus the effects of plant-level IT on
experimentation and development practices may not be highly
signicant.
4.2. Research contributions
Our study makes two contributions to the literature. First, our
ndings help enrich the literature by studying IT impacts on a broad
set of organizational outcome variables, whereas prior literature has
focused on examining IT impact on a limited set of performance
measures such as productivity, quality, and time performance, and
generally at a higher level of aggregation (Brynjolfsson, 1993;
Brynjolfsson and Hitt, 1996; Black and Lynch, 2001; Banker et al.,
2006). Our study systematically investigates the impact of IT use on
plant structure, practice, and performance. The scope of the IT
application areas and the outcome variables examined, along with
the manufacturing plant-level analysis, differentiate our study from
the existing literature. Second, we draw on IS literature and an
insightful theoretical operations management framework to exam-
ine the IT impact on plant operations, whereas prior studies have
typically taken a theoretical lens borrowed from management or
economics theories. Our ndings provide new insights about the
impact of IT on plant operations, as Jaikumars model did not envision
the impacts we nd concerning integration intelligence built around
enterprise resource planning systems, and collaboration intelligence
related to Internet-based purchasing, supply chain, and marketing
activities. Our results demonstrate that the three different dimen-
sions of dynamic intelligence gathering appear to impact different
sets of variables related to plant structure, practices, and perfor-
mance. Yet, the ndings also suggest that SPC-related intelligence
perhaps has had an even stronger effect upon discretionary work
practices than has IT-based dynamic intelligence. Thus, future
studies probably should make sure to account for both.
Our study also provides useful managerial insights about using
IT to achieve desired organizational outcomes. Because building IT-
based competences to support manufacturing operations is an
ongoing process, managers must understand the contribution of
each dimension of IT toward specic organizational outcomes in
order to make the right IT investment decisions. The specicity of
our IT measures disentangles the effect of each dimension of IT use
upon a variety of organizational outcomes and performance, thus
informing managerial decisions about IT investments in manu-
facturing plants.
4.3. Limitations and future research
As an exploratory study, this paper exhibits certain limitations.
First, as a broad empirical analysis that includes a large number of
variables, it is difcult to disentangle the extent to which
individual variables are endogenous or exogenous in each of the
Table A.1
Dynamic intelligence measures.
Please check application areas supported by software at the plant:
Master production schedule
Rough cut capacity planning
Material requirements planning
Capacity requirements planning
Finite capacity scheduling
Shop oor control
Inventory management
Purchasing
Forecasting
regressions. To the best of our ability, we attempt to use reasonable
modeling approaches to limit the extent to which endogeneity
problems might crop up, while maximizing the ability to detect the
impacts of technologies supporting dynamic intelligence. Second,
our measures of dynamic intelligence variables are adapted from
the existing HPM database and capture whether a plant adopted
information technology to support specic plant processes. While
this approach is consistent with the existing literature (Bardhan
et al., 2007b), it does not measure the extent to which each IT
application supports certain plant processes. Finally, it is difcult
to appropriately control for potentially confounding factors in such
models. Because plant size and information technology adoption
are often very different in different contexts, it leads to issues of
how to model these relationships in order to obtain appropriate
parameter estimates for the dynamic intelligence variables. Also,
while using a multi-country sample improves the generalizability
of the research ndings, country differences could potentially
confound the research results. During the research design stage,
the research team ensured the translation accuracy to eliminate
country differences due to misinterpretation of survey questions
because of inaccurate translation. We also controlled for country
effects in the regression analysis. Overall, the consistency of
parameter estimates across our regressions leads us to have
condence in the ndings presented.
We view our effort as a promising rst step in examining the
extent to which the implications of Jaikumars model hold for plant
structure, practices, and performance. Our ndings provide limited
support for portions of the model. Future research should develop
more rened measures of dynamic intelligence variables and retest
the research propositions. It would also be very interesting if
researchers having time-series panel data on these inputs and
outcomes could perform a related analysis. Another direction for
future research is to examine the extent to which process,
integration, and collaboration intelligence drive performance in
other production domains, particularly service operations. Because
service operations have undergone similar IT-based transforma-
tions, we expect that Jaikumars model may apply to service
industries. In closing, we hope the present paper stimulates
researcher interest in further examining the impact of IT use on
plant operations, as there are perhaps many interesting ndings
yet to be discovered.
Acknowledgements
We gratefully acknowledge the helpful feedback from an Editor,
an Associate Editor, and two anonymous reviewers, as well as three
anonymous reviewers for the 2008 Academy of Management
conference.
Appendix A
See Tables A.1A.9.
Process intelligence Integration intelligence References
Check if supported by software Check if integrated with ERP
2
2
1, 2
2
2
1
1
2, 6, 10
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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