1

Supply chain integration and logistics performance: the role of

supply chain dynamism
1. Introduction
Narrow conceptions of logistics have broadened to embrace all actors from suppliers
to customers and now include the entire value chain system (Zailani and Rajagopal,
2005). Nowadays, manufacturers and their corresponding supply chain partners
including suppliers, customers and distributors strive to co-create increased customer
value and even collaborative advantage by adopting supply chain management (SCM).
The concept of SCM is predicated by the integration of various processes such as
manufacturing, procurement, distribution and warehousing with supply chain partners
(Richey et al., 2009).
Extensive research has examined the relationship between supply chain integration
(SCI) and performance, arguing that SCI has a positive impact on performance
(Mostaghel et al., 2015; Tsanos et al., 2014; Mellat-Parast and Spillan, 2014; Danese
and Romano, 2013). However, this link is largely influenced by the specific current
situations which confront participating firms, which deflect the research-focus from
justification of its value towards an understanding of the contextual conditions under
which it is effective (Wong et al., 2011; Liu et al., 2013; Fynes et al., 2005). The
question relating to how one firm acquires better logistics performance than other firms
which similarly pursue SCI still remains vague. To this end, Contingency Theories offer
a new framework with an assumption that there is no universal set of choices that is
optimal for all businesses (Gingersberg and Venkatraman, 1985). Thus, consideration of
various contingency factors which affect the impact of SCI on logistics performance
would be an important and timely contribution.
Supply chain dynamism (SCD), defined as the pace of change in both products and
processes (Zhou and Benton, 2007) has become increasingly important as the
importance of knowledge has grown. Vital in the SCM context, it can significantly
affect information sharing such as information quality, manufacturer information,
customer information and information sharing support technology, and supply chain
practices (Zhou and Benton, 2007). Nonetheless, empirical corroboration for SCD
remains otherwise anecdotal. Because knowledge is typically dispersed and
organizational specialization drives innovation, one firm cannot develop product and
process innovations in isolation (Svahn and Westerlund, 2007). Accordingly, when a
firm recognises the characteristics of its supply chain including SCD this may assist it to
perform better by becoming more flexible and acquiring superior information-
processing capabilities (Fisher, 1997; Svahn and Westerlund, 2007). Despite its
importance, SCD may cause uncertainty due to the preparation of innovative products
and services which can influence performance (Zailani and Rajagopal, 2005). However
SCM literature does not examine how SCD, a contextual variable, moderates a SCI-
logistics performance link. Whether the interaction between SCI and SCD can have a
positive impact on logistics performance by taking the contingency approach to SCI-
performance relationships (Flynn et al., 2010) is overlooked. As Lee (2002) and Fisher
(1997) illustrate, an organization which focuses on manufacturing innovative products
with highly unpredictable demand and evolving supply processes, is more likely to have
different supply chain strategies compared to one producing stable, low-margin
functional products. Differing levels of SCD which they encounter may yield differing
results on the link SCI-logistics performance. Thus, investigating how SCI influences
logistics performance contingent upon SCD would shed new light on understanding the
 2

underlying mechanisms which influence logistics performance.

This study assumes that the need for internally and externally integrating supply
chains is heightened when there are high levels of demands for innovation in
production, services or operational processes from customers. High SCI may increase
responsiveness to the volatility of SCD due to improved supply chain visibility and
operational knowledge. Under such circumstances, manufacturers may need to focus on
monitoring the flow of products, forecasting and information through the use of
integrated information systems, which facilitate quick adjustments and decision-
making. This is less critical in environments where demands for innovation are low. In
short where SCD is high, SCI will be positively related to logistics performance. Where
SCD is low, SCI and logistics performance will not be related. The important role of
South Korean manufacturers in the world economy emanating from their innovation and
modern technologies (Nelson and Pack, 1999) presents an authoritative content in
which to explore SCI-logistics performance links and the role of SCD in moderating
them.
The objective of this work is to evaluate how SCD moderates the influence of SCI on
logistics performance in Korea. Reviews of prior research guide the development of
research hypotheses in section 2 and precede the research methodology. The results of
hierarchical moderated regression analysis in section 4 determine the contribution of
this work and directions for future research.

2. Literature review and hypotheses development

Contingency Theory contends that because no theory or method offers a universal
panacea, there is no one best way to design an organization (Lawrence and Lorsch,
1967). Rather, the optimal path of action is contingent upon the internal and external
situation. Since the environment that an organization operates within shapes its
structures and processes, organizations should match their structures and processes to
their environment so as to maximize performance (Donaldson, 2001). Application of
this theory to SCI implies that the level of association between SCI and logistics
performance varies with the level of SCD. Accordingly this work tests the moderating
effects of SCD on the relationships between SCI and logistics performance, especially
the impact of each component of SCI, namely internal, supplier and customer
integration (Figure 1). This section reviews prior research and develops hypotheses.

2.1 Supply chain integration

SCI measures the degree to which a firm collaboratively manages intra- and inter-
organizational processes and activities to accomplish efficient flows of products,
services, information and money. Flows progress from the raw material stage through to
end users with the aim of delivering maximum value to end users (Liu et al., 2013). SCI
incorporates information integration, logistics integration, distribution integration,
purchasing integration, internal integration, supplier integration, customer integration,
process integration and product integration (Das et al., 2006). It requires a high degree
of interdependence whereby supply chain partners coordinate various exchange and
production processes striving towards joint problem solving (Huang et al., 2014). In
particular, effective integrated information systems to monitor the external environment
and to facilitate rapid information exchange underpin SCI. Recent technological
developments in such systems present opportunities to foster collaboration amongst
supply chain partners or inter-functional teams, which imply virtual integration of entire
supply chains.
 3

SCI comprises internal, supplier and customer integration (Swink et al., 2007),
although some academics focus independently on examining integration with suppliers
(Das et al., 2006) or customers (Fynes et al., 2004) to isolate their separate effect on
performance. Internal integration refers to the extent to which functions within a firm
work together in a collaborative manner and interact to solve problems and achieve
mutually acceptable outcomes (Danese et al., 2013). External integration depicts the
extent to which a manufacturer develops collaborative relationships, exchanges
information and jointly plans supply chain activities or processes with both suppliers
and customers (Danese et al., 2013). Internal integration is mainly concerned with a
comprehensive integrated planning and control system (Stevens, 1989). It helps cross-
functional teams to utilize each others resources and capabilities to reduce duplicated
tasks, improve product quality and jointly design products (Flynn et al., 2010; Huo et
al., 2014).
Supplier integration is a state of syncretism among the supplier, purchasing and
manufacturing constituents of an organization (Das et al., 2006). When developing new
product, supplier integration helps to decrease time-to-market, quality problems and
cost (Quesada et al., 2008). Customer integration occurs when firms work closely with
customers and consider them as a crucial part of the supply chain (Zailani and
Rajagopal, 2005). It entails firms to engage in their customers activities with frequent
contact to certify high product quality, low price and operational effectiveness (Danese
and Romano, 2013). Interaction with customers to obtain feedback on the output
delivered for better customer satisfaction is vital for customer integration (Zailani and
Rajagopal, 2005).

2.2 Supply chain dynamism

As new product introduction has increased dramatically in many industries many
firms have attempted to turn traditionally functional products into innovative products
to increase profits. This may increase dynamism (Fisher, 1997), which is an
environmental change which is difficult to predict (Dess and Beard, 1984). Supply
chains may encounter environmental dynamism which includes volatile or stable
demand (Fisher, 1997). SCD differs from technological uncertainty in that it focuses on
changes in both products and processes in terms of innovation rather than technology,
offering a broader concept than technological uncertainty. SCD can be measured by (1)
the degree of new products accounting for a high fraction of total revenue; (2) the
degree of the innovation frequency for products and service; (3) the innovation rate of
operating processes (Zhou and Benton, 2007). Technological uncertainty is measured
by (1) the difficulty in predicting the evolution of the core technology in the industry;
(2) the difficulty in predicting the evolution of the core technology of the focal customer
(Huang et al., 2014). Collectively, SCD may create a demanding and volatile market
environment (Das et al., 2000). In turn, the firm is required to continuously monitor
market shifts and flexibly modify innovative product plans through shared endeavour
with supply chain partners, since such innovative products, service and processes are
likely to need more modifications due to supply chain partners preferences. Innovative
products tend to depend on state-of-the-art technologies that need quicker clarification
and more assistance when supply chain partners share information (Fynes et al., 2005).

2.3 Logistics performance

Logistics generates value through the accommodation of clients delivery requests.
Thus, logistics performance should indicate the organizations ability to deliver goods
 4

and services when required at acceptable cost in the quantities required by customers
(Green et al., 2008). There are hard measures of logistics performance such as net
income and soft measures such as customer satisfaction, each of which has strengths
and weaknesses (Chow et al., 1994). This study employs various logistics performance
indicators which have been frequently used by a large number of studies, including (1)
ability to provide desired quantities on a consistent basis; (2) flexibility to modify order
size, volume or decomposition during logistics operation; (3) customer lead time and
load efficiency; (4) reliable delivery performance; (5) inventory visibility; and (6) total
logistics cost (Boon-itt and Wong, 2011; Green et al., 2008; Li et al., 2009; Stank et al.,
2001)

2.4 Supply chain integration and logistics performance

Many studies empirically corroborate a positive effect of SCI on performance (Alam
et al., 2014; Seo et al., 2014; Li et al., 2009; Fabbe-Costes and Jahre, 2008; Swink et
al., 2007; Min et al., 2005; Bagchi et al., 2005). Iyer et al. (2009) note that the impact
of SCI on performance drops in the case of product turbulence but increases in the case
of demand unpredictability. Jayaram et al. (2011) note an association between supplier
integration and quality performance, finding that customer integration and flexibility
performance is negatively moderated by firm size, whilst the relationship between
supplier integration and flexibility performance is positively moderated by clock-speed.
Gimenez et al. (2012) note that integration in buyer-supplier relationships is only
effective in yielding a higher level of performance under high supply complexity, which
measures the complexity of the process in which buyers orders are switched into the
suppliers manufacturing orders. Huo et al.s (2014) examination of the moderating role
of competitive strategy on the association between SCI and firm performance, noted
that competitive strategy had no moderating effect. In terms of logistics performance,
Boon-itt and Wong (2011) find that technological and demand uncertainties moderate
the relationships between SCI and customer delivery performance. Stank et al. (2001)
empirically examine the impact of internal and external collaboration on logistical
service performance. Similarly, Green et al. (2008) discover that SCM strategies
positively influence logistics performance within the manufacturing sector.
SCI assists firms to re-shape their resources and capabilities internally and externally
to optimize their supply chain, which can raise logistics performance (Huo et al., 2014).
A highly integrated supply chain allows the supply chain partners to reduce net costs of
conducting business and total delivered costs to customers by obtaining, sharing and
consolidating information and knowledge with supply chain partners outside the
immediate organization (Quesada et al., 2008). Internal integration can lower functional
barriers and stimulates collaboration between cross-functional teams or departments for
fulfilling customers requirement rather than operating within the functional silos
(Flynn et al., 2010). It builds a closer link between manufacturing and distribution
processes to provide products and services in a timely and effective manner, which may
enhance logistics performance.
External integration catalyses communicating, learning, transferring and applying
knowledge which has been acquired within the firm or from suppliers and customers, to
the supply chain partners (Das et al., 2006). For example, external integration through
Collaborative Planning, Forecasting and Replenishment (CPFR), Enterprise Resource
Planning (ERP), Vendor Managed Inventory (VMI) and Continuous Replenishment
(CR) considerably facilitates production, procurement, logistics and distribution plans
by easily sharing necessary information, which can improve logistics performance.
 5

Supplier integration enables firms and supply chain partners to reduce production costs
through economies of scale and scope (Das et al., 2006). Also, it enables the focal firm
and supplier to share information, diminishing information asymmetry and the potential
for opportunism (Rosenzweig et al., 2003). Customer integration promotes openness of
communication and a problem-sharing attitude, so manufacturers can receive feedback
on quality, logistics and delivery performance (Danese and Romano, 2011). This creates
opportunities to leverage the intelligence embedded in both focal firms and customers
when seeking solutions to solve customer problems (Swink et al., 2007). Moreover,
sharing demand information with customers can enhance accurate forecast and order
quantity decisions in multi-stage serial systems, lowering total inventory costs. Both
supplier and customer integration enable firms to gain greater supply chain benefits
overall since integration enhances the visibility of supply and demand in supply chains,
making it possible to plan and execute adequate operations (Richey et al., 2009).

H1: Internal integration is positively associated with logistics performance.

H2: Supplier integration is positively associated with logistics performance.

H3: Customer integration is positively associated with logistics performance.

2.5 Moderating effects of supply chain dynamism

To date most studies of the SCI-performance link have overlooked the context of
supply chains. Some studies report that the link is insignificant under contextual factors
such as technological uncertainty (Huang et al., 2014), demand uncertainty (Huang et
al., 2014), supply network structure (Danese and Romano, 2013), competitive intensity
(Fynes et al., 2004) and market orientation (Liu et al., 2013). Another study argued that
the effect of SCI on performance is stronger under high environmental uncertainty
(Quesada et al., 2008).
This work focuses on examining how the context of SCD moderates the association
between SCI and logistics performance. Research acknowledges that South Korean
manufacturers are embracing state-of-the-art innovation and technology as dynamic and
technology-intensive manufacturers and multinational corporations such as Samsung,
LG, Hyundai and Kia (Nelson and Pack, 1999). These issues may impel manufacturers
in Korea to consider SCD to adapt effectively to changing customers demand for
innovative products, services and processes to raise their competitiveness.
The external environment in which a firm operates is pivotal in implementing and
adopting SCI (Richey et al., 2009). Increased SCD may increase a firms operational
complexity and expose it to greater risk and vulnerability, resulting in supply chain
disruptions. Disruption at one point may cause a sequence of adjustments elsewhere in
supply chains. SCD may be an inherent condition of interactions between multiple
supply chain partners due to the characteristics of supply chains that involve multiple
layers of information and information flow, transportation and production planning. As
SCD increases, firms need to concentrate more on SCI and information processing
capacity so as to acquire superior performance (Zhou and Benton, 2007). This implies
requirements for increased SCI such as information sharing, product development, joint
planning and forecasting through an integrated system, when SCD is high. Therefore,
this study ascertains that the role of SCI is not to minimize SCD, but to reduce the
negative effects of SCD on logistics performance. Under high SCD, changes in products
and innovation rates will create pressure to alter the level of supply chain integration.
An integrated supply chain with better communication and information sharing will
 6

help to boost logistics performance. In addition, joint innovation-related knowledge

with suppliers and customers may be necessary to create new and novel ideas in the
adaptation of changes in both products and processes through effective SCI practices
(Noordhoff et al., 2011). Internal, supplier and customer integration process is more
likely to occur under a high level of SCD, resulting in considerable improvements in
logistics performance.

H4: The association between internal integration and logistics performance will be
moderated by SCD.

H5: The association between supplier integration and logistics performance will be
moderated by SCD.

H6: The association between customer integration and logistics performance will be
moderated by SCD.
<insert Figure 1 around here>

3. Methodology

3.1 Instrument development

To ensure content validity, all instruments are adapted from prior research in SCM,
deemed to have reliable and valid scales. . A five-point Likert scale anchored by 1
(strongly disagree) and 5 (strongly agree) is deployed to evaluate the degree of SCI and
SCD in the exhortation: please evaluate to what extent you agree or disagree with the
following question. Logistics performance is also measured by a five-point Likert
scale, ranging from 1 (strongly worse) to 5 (much better) in the question: please assess
to what extent your organization achieves the stated logistics performance measures
compared to major competitors in the industry. Previous measurements of SCI, SCD
and logistics performance have used either a five-point or seven-point Likert scale.
Nonetheless, the data gathered from a five-point format can readily be transferred to
seven-point equivalency, meaning that using either of them does not yield significant
differences in mean score, variance, skewness or kurtosis (Dawes, 2008). Accordingly,
adopting a five-point Likert scale in this study is unlikely to be a concern.
All scales deployed to measure SCI, are categorized into three dimensions: internal,
supplier and customer integration, adapted from Wong et al. (2011), and Flynn et al.
(2010). This study measures SCD by employing Zhou and Bentons (2007) instruments.
Finally, logistics performance measures are derived from Green et al. (2008), Stank et
al. (2001), Boon-itt and Wong (2011), and Li et al. (2009). Table 1 provides a detailed
description of the scales employed to measure each variable. The firm size is included
as a control variable that may affect logistics performance owing to extra available
resources or scale effects (Swink et al., 2007). Firm size is measured by the natural
logarithm of the number of full-time employees.
Pre-testing of each item with Korean academics in SCM and logistics or supply
chain managers in the manufacturing industry ensured that each item is understandable
and pertinent to practices in Korea. Subsequently, this study undertakes a pilot test with
sixteen practitioners to ensure content validity by modifying a few wordings.
Confirmatory factor analysis (CFA) is used to purify the measurement model, whilst
hypotheses are tested using hierarchical moderated regression models.
 7

<insert Table 1 around here>

3.2 Data collection

This study focuses on South Korean manufacturers because few SCI studies have
featured this early adopter of state-of-the-art innovation and technology and its dynamic
manufacturing centres (Nelson and Pack, 1999). Many multinational corporations in
Korea have expanded their production, especially in technology-intensive industries,
apposite for investigative supply chain research. To obtain a representative sample, we
cross-checked three official directories: The Korea Chamber of Commerce & Industry,
Korea International Trade Association and Korea Integrated Logistics Association
because no single directory identifies the population of firms. Logistics and supply
chain managers in senior positions are targeted to answer online questionnaires since
they possess sufficient knowledge regarding overall processes of SCI and performance.
After randomly selecting 864 sample firms, online questionnaires were emailed
followed by two reminders, which generated 126 responses (a 14.58 % response rate).
Each response is collected at the firm level with no missing data due to the structural
design of the online questionnaire. The responses represent various manufacturing
sectors, drawn mainly from senior managers.

<insert Table 2 around here>

Tests for non-response bias check for any significant difference between early and
late responses by considering late respondents as non-respondents as suggested by
Armstrong and Overton (1997). Student t-tests show no significant difference at p<0.05,
implying that non-response bias is unlikely. In addition, a Harmans one-factor test is
conducted because the data are collected from a single type of respondent at a single
point in time. If no one general factor accounted for the majority of covariance, there is
no concern due to common method variance. The result shows that the first factor
accounted for 35.57% of total variance, suggesting no concern for common method
variance.

3.3 Measurement reliability and validity

The measurement model aims to ensure unidimensionality, reliability and validity by
using CFA. Table 3 indicates measurements, factor loadings, Cronbachs alpha,
composite reliability (CR) and average variance extracted (AVE). The measurement
model is supported by goodness-of-fit indices (Normed 2=1.47, SRMR=0.06,
GFI=0.83, TLI=0.92, CFI=0.93, RMSEA=0.06), which satisfy the recommended cut-
off values, indicating unidimensionality (Hair et al., 2006). The reliability of constructs
is evaluated by Cronbachs alpha and CR. Values of both over 0.7 indicate adequate
reliability of the measurement scales (Hair et al., 2006). All factor loadings exceed 0.5,
significant at the 0.001 level, indicating convergent validity (Hair et al., 2006). Further
the coefficient of all items exceeds twice their standard error, whilst the AVE of
constructs all exceeds 0.5 (Fornell and Larcker, 1981).

<insert Table 3 around here>

Discriminant validity is also ensured (Table 4). All chi-square differences between
 8

all pairs of constructs of the constrained and unconstrained model are significant at the
0.001 level, indicating strong discriminant validity (Bagozzi et al., 1991). Also, each of
the square roots of the AVEs is greater than each pairwise correlation between
constructs, suggesting an acceptable level for discriminant validity (Fornell and
Larcker, 1981).

<insert Table 4 around here>

4. Results
This study uses a hierarchical moderated regression to test the hypotheses as Aiken
and West (1991) recommended. First, the control variable is entered into the regression.
Then, the independent variables are entered. Next, the moderating variable, SCD is
entered as a block. Finally, the interaction terms of SCD and each dimension of SCI
(internal, supplier and customer integration) is entered as a block. If the inclusion of the
interaction term accounts for a significant amount of incremental variance in the
dependent variable, there is evidence of a moderating effect of SCD on the given
relationships. The following equation indicates the moderated model for this study.

LP = 0 + 1 SCI + 2 SCD + 3 SCI SCD + e (1)

LP indicates logistics performance, and SCI incorporates underlying components

(internal integration, supplier integration and customer integration).
Prior to the analysis, a centering procedure avoids multicollinearity issues (Jaccard
and Turrisi, 2003). Otherwise, inflated standard errors and misinterpretation of the
statistical significance of the regression terms may ensue. Variance inflation factors
(VIFs) are computed to check for multicollinearity. In each step in the hierarchical
regression model, the largest value of VIF is 1.061, far below the critical threshold of 10
making multicollinearity unlikely for this study. The result indicates that H1, H2 and H3
are all supported in step 2 in the multivariate regression analysis in Tables 5 (=0.362,
p<0.001 for internal integration-logistics performance; =0.437, p<0.001 for supplier
integration-logistics performance; =0.291, p<0.001 for customer integration-logistics
performance). However, the control variable, firm size has no significant effects on
logistics performance with insignificant beta, which seems to defy intuition. Table 5
presents results for the effects of the SCD and SCI interaction. It shows that SCD
positively moderates the association (1) between internal integration and logistics
performance (=0.247, p<0.001), (2) between supplier integration and logistics
performance (=0.213, p<0.001), and (3) between customer integration and logistics
performance (=0.232, p<0.001). The exploratory power (R2) increases significantly
compared to the previous step, whilst the direct effect of each component of SCI is
significant. In addition, the incremental F values for the block of the interaction terms
are also highly significant (p<0.01) (Jaccard and Turrisi, 2003). H4, H5 and H6 are all
supported. This study conducts an additional analysis to illustrate the details of the
moderation as shown in Figure 2. In this way, this study evaluates the effects of each
dimension of SCI on logistics performance at low and high values of SCD, defining low
SCD as one standard deviation below the mean and high SCD as one standard deviation
above the mean. It shows the nature of the moderation of SCD on the association
between each dimension of SCI and logistics performance, implying that SCD can
 9

positively moderate the association between each dimension of SCI and logistics
performance.

<insert Table 5 around here>

<insert Figure 2 around here>

5. Discussion

5.1 Theoretical contribution

This work contributes to understanding of the associations between SCI, SCD and
logistics performance. It considers how some firms obtain greater logistics performance
than others which put similar efforts into SCI. Regarding the role of SCD as an
influencing factor for the degree of logistics performance, firm size is not statistically
significant, which is counterintuitive. It appears that the additional resources available
to large firms did not lead to higher logistics performance. Nonetheless, this result
upholds prior findings that firm size does not positively impact performance (Danese
and Romano, 2011). Rozenweig et al. (2003) find that firm size has a positive impact on
product quality, but not on delivery reliability or cost leadership. They argue that where
no systematic information system is present, merely being large offers little
significant advantage for delivery reliability, which constitutes one component of
logistics performance. Our study employs logistics performance as a dependent variable
giving results in line with their finding. The possible explanation might be that the
organizational structure for better logistics performance sometimes does not rely on
firm size but rather on the quality of decisions made by top management in the
organization (Haan et al., 2007). Another explanation might be that the scale of large
firms might impede their ability to develop close collaboration with supply chain
partners (Evans and Wurster, 2000), resulting in no improvement in logistics
performance. Moreover, the finding supports H1, H2 and H3, and provides empirical
corroboration for the predicted curvilinear association between SCI and logistics
performance, implying that internal, supplier and customer integration play a pivotal
role in determining the level of logistics performance. This finding empirically validates
the assertion of Wong et al. (2011), who argue that each dimension of SCI contributes
to the higher level of performance. Additionally, this result partially supports Zhou and
Bentons (2007) proposition that integrating effective supply chain practices and
effective information sharing are now crucial to enhance supply chain practice. This
study notes that the impacts of internal, supplier and customer integration on logistics
performance strengthen when SCD is heightened. Findings that the three components of
SCI have a positive impact on logistics performance contribute to broadening our
knowledge of SCM.
This study contributes to expanding the importance of contextual factors in an SCM
context, as Mouritsen et al. (2003) claim that a similar degree of SCI practices
sometimes do not yield equal performance depending on the context. It becomes
imperative to find the context under which SCI can be more beneficial. Many
academics attempt to reveal the efficacy of SCI on performance by adopting various
contextual variable such as international supplier network (Danese et al., 2013),
technological uncertainty, environmental uncertainty, demand uncertainty, supply
uncertainty (Fynes et al., 2004), fast supply network structure (Danese and Romano,
2013), competitive intensity (Fynes et al., 2005) and market orientation (Liu et al.,
2013). This work expands prior research by examining whether the association between
 10

SCI practices and performance is contingent on SCD. As predicted, there are

moderating effects of SCD on the relationship of SCI-logistics performance. This study
finds that in the presence of a higher level of SCD, the efficacy of integrating upstream
and downstream and internally is amplified as shown in Figure 2. In this respect, this
study contributes towards understanding of the potential consideration of the level of
SCD in the Contingency Theories in SCI contexts.
These findings indicate that Korean manufacturers have a stronger association
between SCI and logistics performance under higher levels of SCD, but that the strength
of that relationship where the SCD of manufacturers is low becomes completely
different. Thus, these findings indicate that manufacturers who encounter higher levels
of SCD are more capable of gaining stronger SCI- logistics performance links, which
has become a vital means of achieving sustainable competitive advantage in todays
volatile environments. One explanation might be that high innovation rates and fast-
changing market demands require firms to integrate their supply chain processes more
to become more responsive, to raise logistics performance. As Richey et al. (2009)
point out, shortening product life cycles compel firms to integrate both internal and
external processes to survive in a fierce market. A higher level of SCD such as (1) a
high innovation rate for operational processes; (2) frequent innovation of products and
service; and (3) a high level of new products accounting for a high fraction of total
revenue, may put more pressure on maintaining a strong link between SCI and logistics
performance from the manufacturers stance. Furthermore, under a high level of SCD,
diffusion and sharing of recent integrated information system and proper knowledge and
information within and between firms should be more rapid. Zhou and Benton (2007)
not only note that SCD can determine the information-processing requirement, but they
also argue that when SCD is high, effective supply chain practices become more
important. Findings here support Miles and Snows (1974) argument that companies
matched with their environmental context are able to augment performance.
Das et al. (2006) note that the ideal level of SCI may vary based on industry,
product life cycle or production strategy. Findings reported here linking the ability to
adapt to changes in both products and processes in terms of innovation may arise
because manufacturers in Korea are early adopters of innovative technology implying
that SCI implementation may not yield universal advantages for manufacturers
elsewhere. Manufacturers that face a high level of SCD should implement more
intensive internal, supplier and customer integration to attain better logistics
performance. Accordingly, managers should take into account the role of SCD as a key
contingency variable when they select an organizational structure for managing SCI
practices and affecting logistics performance, as Contingency Theory contended that
managers should take into consideration the specific current situations which firms face
when they make a crucial decision (Svahn and Westerlund, 2007).

5.2 Managerial contribution

The findings reported provide managers with insights for adopting SCI practices
under different levels of SCD. To enhance logistics performance, executives or senior
managers should be aware of the importance of SCI practices since limited corporate
resources may obstruct effective implementation. They should strive to simultaneously
implement internal, supplier and customer integration, because none is inferior.
Manufacturers should retain an ability to rapidly deal with a high level of SCD when
aspiring to SCI and its outcomes in South Korea. SCD is inherent in products especially
when the firms are keen to innovate. Any modifications or changes in the configuration
 11

and structure of the supply chain inescapably alter its dynamism and so need to raise the
capability to rapidly adjust to changing levels of dynamism by forming superior ways of
innovating supply chain operations. By effectively sharing information, manufacturers
are able to properly cope with SCD and reduce uncertainty. They must evaluate current
levels of SCD before further implementing SCI, because it is not guaranteed to raise
logistics performance. Furthermore, they should simultaneously develop SCI and
measure SCD to facilitate their interaction, rather than trying to implement SCI
practices only. Higher levels of SCD present an opportunity, not a threat. This is
because a high innovation rate in production forces the manufacturers with suppliers
and customers to quickly adapt their manufacturing, production, delivery and
forecasting in order to reflect actual demand and supply from suppliers and customers.
Zailani and Rajagopal (2005) echoed the paramount importance of rapidly recognising
reading market signals and reacting to the environment for innovative products, services
and processes as well as the products short life cycle. Maintaining the high degree of
integration and building the ability to rapidly reflect the high degree of SCD needs
substantial investment in money and time. Senior managers need to view such an
investment as a potential revenue rather than a cost.

5.3 Limitations and future research

Although this work makes several contributions to SCM contexts, it has limitations.
The study includes only Korean samples, so the generalization of findings may be
difficult. It would be worthwhile if future study is undertaken in different or multiple
countries. This study adopts only firm size as a control variable, but other factors such
as manufacturer sector and types of ownership may be important control variables. The
sample of this research is drawn from manufacturers, but further research may adopt a
broader range of industries including service industries, which may present different
patterns. This study collated data at the level of focal operations in supply chain
networks by collecting a single respondent per firm; multiple responses per firm may be
appropriate. Future studies may seek data from respondents in different tiers of supply
chain echelons. Further, this study employed a cross-sectional design but longitudinal
study of process development may become desirable.
 12

References
Aiken, L.S. and West, S.G. (1991), Multiple Regression: Testing and Interpreting
Interactions, Sage, New York, NY.
Alam, A., Bagchi, P.K., Kim, B., Mitra, S. and Seabra, F. (2014), The mediating effect of
logistics integration on supply chain performance: a multi-country study,
International Journal of Logistics Management, Vol. 25 No. 3, pp. 553-580.
Armstrong, J.S. and Overton, T.S. (1997), Estimating non-response bias in mail surveys,
Journal of Marketing Research, Vol. 14 No. 3, pp. 396-402.
Bagchi, P.K., Ha, B.C., Skjoett-Larsen, T. and Soerensen, L.B. (2005), Supply chain
integration: a European survey, International Journal of Logistics Management, Vol.
16 No. 2, pp. 275-294.
Bagozzi, R.P., Yi, Y. and Phillips, L.W. (1991), Assessing construct validity in
organizational research, Administrative Science Quarterly, Vol. 36 No. 3, pp. 421-
458.
Boon-itt, S. and Wong, W.Y. (2011), The moderating effects of technological and
demand uncertainties on the relationship between supply chain integration and
customer delivery performance, International Journal of Physical Distribution &
Logistics Management, Vol. 41 No. 3, pp. 53-276.
Chan, F.T.S. and Qi, H.J. (2003), An innovative performance measurement method for
supply chain management, Supply Chain Management: An International Journal,
Vol. 8 No. 3, pp. 209-223.
Chow, G., Heaver, T.D. and Henriksson, L.E. (1994), Logistics performance: definition
and measurement, International Journal of Physical Distribution & Logistics
Management, Vol. 24 No. 1, pp. 17 - 28
Danese, P., Romano, P. and Formentini, M. (2013), The impact of supply chain
integration on responsiveness: the moderating effect of using an international supplier
network, Transportation Research Part E: Logistics and Transportation Review,
Vol. 49 No. 1, pp. 125-140.
Danese, P. and Romano, P. (2013), The moderating role of supply network structure on
the customer integration-efficiency relationship, International Journal of Operations
& Production Management, Vol. 33 No. 4, pp. 372-393.
Danese, P. and Romano, P. (2011), Supply chain integration and efficiency performance:
a study on the interactions between customer and supplier integration, Supply Chain
Management: An International Journal, Vol. 16 No. 4, pp. 220-230.
Das, A., Narasimhan, R. and Talluri, S. (2006), Supplier integration-finding an optimal
configuration, Journal of Operations Management, Vol. 24 No. 5, pp. 563-582.
Das, A., Handfield, R.B., Calatone, R.J. and Ghosh, S. (2000), A contingent view of
quality management: the impact of international competition on quality, Decision
Sciences, Vol. 31 No. 3, pp. 649-690.
Dawes, J. (2008), Do data characteristics change according to the number of scale points
used? An experiment using 5-point, 7-point and 10-point scales, International
Journal of Marketing Research, Vol. 50 No. 1, pp. 61-77
Dess, G.G. and Beard, D.W. (1984), Dimensions of organizational task environments,
Administrative Science Quarterly, Vol. 29 No. 1, pp. 52-73.
Donaldson, L. (2001). The Contingency Theory of Organization, Sage, Thousand Oaks.
Evans, P. and Wurster, T. (2000), Blown to Bits: How the New Economics of Information
Transforms Strategy, Harvard Business School Press, Boston.
 13

Fabbe-Costes, N. and Jahre, M. (2008), Supply chain integration and performance: a

review of the evidence, International Journal of Logistics Management, Vol. 19 No.
2, pp. 130-154.
Fisher, M. (1997), What is the right supply chain for your product?, Harvard Business
Review, Vol. 75 No. 2, pp. 105-116.
Flynn, B.B., Huo, B. and Zhao, X. (2010), The impact of supply chain integration on
performance: a contingency and configuration approach, Journal of Operations
Management, Vol. 28 No. 1, pp. 58-71.
Fornell, C. and Larcker, D.F. (1981), Structural equation models with unobservable
variables and measurement error: algebra and statistics, Journal of Marketing
Research, Vol. 18 No. 1, pp. 29-50.
Fynes, B., de Burca, S. and Marshall, D. (2004), Environmental uncertainty, supply chain
relationship quality and performance, Journal of Purchasing & Supply Management,
Vol. 10 No. 4-5, pp. 179-190.
Fynes, B., de Burca, S. and Voss, C. (2005), Supply chain relationship quality, the
competitive environment and performance, International Journal of Production
Research, Vol. 43 No. 16, pp. 3303-3320.
Germain, R., Claycomb C. and Droge, C. (2008), Supply chain variability, organizational
structure, and performance: the moderating effect of demand unpredictability,
Journal of Operations Management, Vol. 26 No. 5, pp. 557-570.
Gimenez, C., van der Vaart, T. and van Donk, D.P. (2012), Supply chain integration and
performance: the moderating effect of supply complexity, International Journal of
Operations & Production Management, Vol. 32 No. 5, pp. 583-610.
Gingersberg, A. and Venkatraman, N. (1985), Contingency perspectives of organizational
strategy: a critical review of the empirical research, Academy of Management
Review, Vol. 10 No. 3, pp. 421-434.
Green, K.W., Whitten, D. and Inman, R.A. (2008), The impact of logistics performance
on organizational performance in a supply chain context, Supply Chain Management:
An International Journal, Vol. 13 No. 4, pp. 317-327.
Hair, J.F., Black, W., Babin, B. and Anderson, R.E. (2006), Multivariate Data Analysis,
Pearson, New York, NY.
Haan, J.D., Kisperska-Moron, D. and Placzek, E. (2007), Logistics management and firm
size: a survey among Polish small and medium enterprises, International Journal of
Production Economics, Vol. 108 No. 1-2, pp. 119-126.
Huang, M.-C., Yen, G.-F. and Liu, T.-C. (2014), Reexamining supply chain integration
and the suppliers performance relationships under uncertainty, Supply Chain
Management: An International Journal, Vol. 19 No. 1, pp. 64-78.
Huo, B., Qi, Y., Wang, Z. and Zhao, X. (2014), The impact of supply chain integration on
firm performance: the moderating role of competitive strategy, Supply Chain
Management: An International Journal, Vol. 19 No. 4, pp. 369-384.
Iyer, K.N.S., Germain, R. and Claycomb, C. (2009), B2B E-commerce supply chain
integration and performance: a contingency fit perspective on the role of
environment, Information and Management, Vol. 46 No. 6, pp. 313-322.
Jaccard, J. and Turrisi, R. (2003), Interaction Effect in Multiple Regression, Sage,
Thousand Oaks.
Jayaram, J., Xu, K. and Nicolae, M. (2011), The direct and contingency effects of
supplier coordination and customer coordination on quality and flexibility
performance, International Journal of Production Research, Vol. 49 No. 1, pp. 59-
85.
 14

Lee, H.L. (2002), Aligning supply chain strategies with product uncertainties, California
Management Review, Vol. 44 No. 3, pp. 105-119.
Li, G., Yang, H., Sun, L. and Sohal, A.S. (2009), The impact of IT implementation on
supply chain integration and performance, International Journal of Production
Economics, Vol. 120 No. 1, pp. 125-138.
Liu, H., Ke, W., Wei, K.K. and Hua, Z. (2013), Effects of supply chain integration and
market orientation on firm performance: evidence from China, International Journal
of Operations & Production Management, Vol. 33 No. 3, pp. 322-346.
Mellat-Parast, M. and Spillan, J.E. (2014), Logistics and supply chain process integration
as a source of competitive advantage: an empirical analysis, International Journal of
Logistics Management, Vol. 25 No. 2, pp. 289-314
Miles, R.E. and Snow, C.C. (1974), Fit, Failure, and the Hall of Fame, Free Press, New
York, NY.
Min, S., Roath, A.S., Daugherty, P.J., Genchev, S.E., Chen, H. and Arndt, A.D. (2005),
Supply chain collaboration: whats happening?, International Journal of Logistics
Management, Vol. 16 No. 2, pp. 237-256.
Mostaghel, R., Oghazi, P., Beheshti, H.M. and Hultman, M. (2015), Strategic use of
enterprise systems among service firms: antecedents and consequences, Journal of
Business Research, Vol. 68 No. 7, pp. 1544-1549.
Mouritsen, J., Skjtt-Larsen, T. and Kotzab, H. (2013), Exploring the contours of supply
chain management, Integrated Manufacturing Systems, Vol. 14 No. 8, pp. 686-695.
Nelson, R.R. and Pack, H. (1999), The Asian miracle and modern growth theory, The
Economic Journal Vol. 109 No. 457, pp. 416-436.
Noordhoff, C.S., Kyriakopoulos, K., Mooreman, C., Pauwels, P. and Dellaert, B.G.C.
(2011), The bright side and dark side of embedded ties in business-to-business
innovation, Journal of Marketing, Vol. 75 No. 5, pp. 34-52.
Quesada, G., Rachamadugu, R., Gonzalez, M. and Martinez, J.L. (2008), Linking order
winning and external supply chain integration strategies, Supply Chain Management:
An International Journal, Vol. 13 No. 4, pp. 296-303.
Ragatz, G.L., Handfield, R.B. and Peterson, K.J. (2002), Benefits associated with supplier
integration into new product development under conditions of technology
uncertainty, Journal of Business Research, Vol. 55 No. 5, pp. 389-400.
Richey, R.G., Chen, H., Upreti, R., Fawcett, S.E. and Adams, F.G. (2009), The
moderating role of barriers on the relationship between drivers to supply chain
integration and firm performance, International Journal of Physical Distribution &
Logistics Management, Vol. 39 No. 10, pp. 826-840.
Rosenzweig, E.D., Roth, A.V. and Dean, J.W. (2003), The influence of an integration
strategy on competitive capabilities and business performance: an exploratory study
of consumer products manufacturers, Journal of Operations Management, Vol. 21
No. 4, pp. 437-456.
Seo, Y.-J., Dinwoodie, J. and Kwak, D.-W. (2014), The impact of innovativeness on
supply chain performance: is supply chain integration a missing link?, Supply Chain
Management: An International Journal, Vol. 19 No. 5/6, pp. 733-746.
Stevens, J. (1989), Integrating the supply chain, International Journal of Physical
Distribution & Logistics Management, Vol. 19 No. 8, pp. 3-8.
Svahn, S. and Westerlund, M. (2007), The modes of supply net management: a capability
view, Supply Chain Management: An International Journal, Vol. 12 No. 5, pp. 369-
376.
 15

Swink, M., Narasimhan, R. and Wang, C. (2007), Managing beyond the factory walls:
effects of four types of strategic integration on manufacturing plant performance,
Journal of Operations Management, Vol. 25 No. 1, pp. 148-164.
Tsanos, C., Zografos, K.G. and Harrison, A. (2014), Developing a conceptual model for
examining the supply chain relationships between behavioural antecedents of
collaboration, integration and performance, International Journal of Logistics
Management, Vol. 25 No. 3, pp. 418-462
Wong C.Y., Boon-itt, S. and Wong, C.W.Y. (2011), The contingency effects of
environmental uncertainty on the relationship between supply chain integration and
operational performance, Journal of Operations Management, Vol. 29 No. 6, pp.
604-615.
Zailani, S. and Rajagopal, P. (2005), Supply chain integration and performance: US
versus East Asian companies, Supply Chain Management: An International Journal,
Vol. 10 No. 5, pp. 379-393.
Zhou, H. and Benton, W.C. (2007), Supply chain practice and information sharing,
Journal of Operations Management, Vol. 25 No. 6, pp. 1348-1365.
 1

Figure 1. Theoretical model

 2

Figure 2. The moderating effect of SCD on associations between each dimension of SCI and
logistics performance
 3

Table 1. Instruments of this study.

Construct Measurement Literature
II1 a high level of responsiveness within our plant to meet other Wong et al.,
departments needs 2011 ; Flynn et
II2 an integrated system across functional areas under plant control al., 2010
II3 information flows among purchasing, inventory management, sales,
and distribution departments within our plants
II4 physical flows among production, packing, warehousing, and
transportation departments
SI1 sharing information to our major suppliers through information Wong et al.,
technologies 2011 ; Flynn et
SI2 a high degree of strategic partnership with suppliers al., 2010
SI3 a high degree of joint planning to obtain rapid response ordering
process (inbound) with suppliers
SI4 providing information to us in the production and procurement
process
SI5 supplier involvement in the product development processes
CI1 a high level of information sharing with major customers about Wong et al.,
market information 2011 ; Flynn et
CI2 sharing information to major customers through information al., 2010
technologies
CI3 a high degree of joint planning and forecasting with major customers
to anticipate demand visibility
CI4 providing information to us in the procurement and production
CI5 customer involvement in the product development process
SCD1 new products account for a high fraction of total revenue Zhou and
SCD2 products and services are innovated frequently Benton, 2007
SCD3 the innovation rate of operational processes is high
LP1 Ability to provide desired quantities on a consistent basis Green et al.,
LP2 Flexibility to modify order size, volume or decomposition during 2008
logistics operation Stank et al.,
LP3 customer lead time and load efficiency 2001; Li et al.,
LP4 reliable delivery performance 2009; Boon-itt
LP5 inventory visibility and Wong, 2011
LP6 total logistics cost
Note: II: internal integration; SI: supplier integration; CI: customer integration; SCD: supply
chain dynamism; LP: logistics performance.
 4

Table 2. Demographic characteristics of respondents (N=126).

Demographic characteristics Frequency (%)
Manufacturing sector
Computer/communication equipment 17 (13)
Automotive 18 (14)
Machinery 10 (8)
Apparel/textile/leather 15 (12)
Semiconductor/electronic 11 (9)
Food/Grocery 16 (13)
Chemicals/oil/rubber/plastic 8 (6)
Mineral 9 (7)
Furniture 19 (16)
Others 3 (2)

Position
Staff 7 (6)
Assistant manager 5 (4)
Manager 9 (7)
Deputy general manager 10 (8)
Department manager 39 (31)
Managing director 24 (19)
CEO 32 (25)
 5

Table 3. Construct measurements, reliability and validity.

Standardized factor loadings (t-value)
Items Mean SD II SI CI SCD LP
II1 3.44 0.93 0.83 (9.28)
II2 3.43 0.99 0.68 (7.54)
II3 3.55 0.99 0.80 (8.94)
1
II4 3.66 1.02 0.76
SI1 3.52 1.07 0.78 (9.18)
SI2 3.65 1.00 0.69 (8.01)
SI3 3.40 0.98 0.81 (9.67)
SI4 3.55 0.95 0.72 (8.37)
1
SI5 3.34 0.93 0.79
CI1 3.31 0.94 0.76 (7.61)
CI2 3.42 0.83 0.54 (5.49)
CI3 3.31 0.90 0.77 (7.68)
CI4 3.27 0.84 0.65 (5.49)
1
CI5 3.33 0.91 0.72
SCD1 3.57 0.99 0.82 (0.83)
SCD2 3.57 1.02 0.69 (7.33)
1
SCD3 3.50 0.98 0.79
1
LP1 3.17 1.09 0.80
LP2 3.26 1.03 0.82 (10.13)
LP3 3.38 1.25 0.78 (9.56)
LP4 3.46 1.17 0.75 (9.04)
LP5 3.31 1.10 0.80 (9.87)
LP6 3.30 0.99 0.74 (8.87)
0.85 0.86 0.81 0.80 0.90
CR 0.85 0.87 0.85 0.81 0.88
AVE 0.60 0.58 0.54 0.59 0.56
Note: Normed 2=1.46, SRMR=0.06, GFI=0.83, TLI=0.92, CFI=0.93, RMSEA=0.06;
1
Initially fixed at 1.0; Critical ratios are all significant at a 0.001.
 6

Table 4. Chi-square difference test and square root of AVE versus correlation.
Pair-construct test Square root of AVE versus correlation
Pairs Constrained Unconstrained
2 difference II SI CI SCD LP
2 df 2 df
II-SI 68.94 28 47.44 27 21.50*** II 0.78
II-CI 80.25 27 52.04 26 28.21*** SI 0.71*** 0.76
II-SCD 67.64 14 13.95 13 53.70*** CI 0.66*** 0.65*** 0.74
II-LP 81.96 35 54.81 34 27.15*** SCD 0.10 0.22* 0.20 0.77
SI-CI 81.54 35 49.76 34 31.78*** LP 0.42*** 0.48*** 0.32** 0.63*** 0.75
SI-SCD 70.91 20 22.89 19 48.02***
SI-LP 94.90 44 67.06 43 27.84***
CI-SCD 105.19 20 50.17 19 55.02***
CI-LP 135.76 44 94.53 43 41.22***
SCD-LP 103.56 27 85.01 26 18.56***
Note: ***p<0.001; **p<0.01; *p<0.05; p<0.1; Square root of AVE is on the diagonal; II: internal integration; SI: supplier integration; CI:
customer integration; SCD: supply chain dynamism; LP: logistics performance.
 7

Table 5. Hierarchical moderated regression analysis for each dimension of SCI and LP.
Variable entered Step 1 Step 2 Step 3 Step 4
Firm size -0.055 -0.003 -0.002 0.027
II 0.362*** 0.320*** 0.329***
SCD 0.546*** 0.549***
II x SCD 0.247***
F change 0.371 18.231*** 63.291*** 14.231***
F for the regression 0.371 9.327*** 30.464*** 28.883***
R2 0.003 0.132 0.428 0.488
Adjusted R2 -0.005 0.118 0.414 0.472
Firm size -0.055 -0.039 -0.036 -0.052
SI 0.437*** 0.333*** 0.347***
SCD 0.502*** 0.527***
SI x SCD 0.213**
F change 0.371 29.077*** 51.959*** 10.190**
F for the regression 0.371 14.766*** 31.242*** 27.744***
R2 0.003 0.194 0.434 0.478
Adjusted R2 -0.005 0.181 0.421 0.461
Firm size -0.055 -0.023 -0.027 -0.034
CI 0.291** 0.195** 0.208**
SCD 0.536*** 0.527***
CI x SCD 0.232***
F change 0.371 11.235** 53.532*** 11.124**
F for the regression 0.371 5.819** 23.380*** 21.771***
R2 0.003 0.086 0.365 0.419
2
Adjusted R -0.005 0.072 0.349 0.399
Note: ***p<0.001;**p<0.01; II: internal integration; SI: supplier integration; CI: customer
integration; SCD: supply chain dynamism.