literature review - E-commerce industry - efficient supply chain management

Research Article

Factors affecting the organizational performance of manufacturing firms

Ahmad Adnan Al-Tit

Abstract Numerous studies have been conducted to explore the individual effects of organizational culture (OC) and supply chain management (SCM) practices on organizational performance (OP) in different settings. The aim of this study is to investigate the impact of OC and SCM on OP. The sample of the study consisted of 93 manufacturing firms in Jordan. Data were collected from employees and managers from different divisions using a reliable and valid measurement instrument. The findings confirm that both OC and SCM practices significantly predict OP. The current study is significant in reliably testing the relationship between SCM practices and OP; however, it is necessary to consider cultural assumptions, values and beliefs as the impact of OC on OP is greater than the impact of SCM practices. Based on the results, future studies should consider the moderating and mediating role of OC on the relationship between SCM practices and OP.

Keywords Organizational culture, supply chain management practices, organizational performance, manufacturing firms

Date received: 9 November 2016; accepted: 4 May 2017

Introduction

Research on organizational performance (OP), either with

regard to its financial or its operational aspects, has

revealed different factors that have significant effects on

OP. Examples of these factors include enterprise risk man-

agement, 1

multidivisional structures of organizations, 2

CEO charisma, 3

stakeholders’ involvement and support, 4

intellectual capital, 5

human capital, 6

CEOs’ social net-

works, 7

organizational learning, 8

the strategic integration

of human resource management, 9

managerial practices

related to strategies, performance measurement, corporate

governance, innovation and development, along with the

external environment, 10

adoption of green supply chain

management (SCM) practices, 11

human resource prac-

tices, 12

knowledge management capacity, 13

supportive

organizational climate, 14

supply chain quality manage-

ment, 15

supply chain innovation, 16

human capital disclo-

sure 17

and knowledge creation. 18

Concerning the relationship between organizational cul-

ture (OC) and OP, Yesil and Kaya 19

carried out a study to

explore the impact of OC (clan, adhocratic, market and

hierarchical cultures) on financial OP using a sample con-

sisting of managers of Turkish companies. Their results

indicated that none of these dimensions were related to the

financial dimensions of OP. On the other hand, Prajogo and

McDermott 20

found a positive relationship between OC

and OP.

In a study on the impact of human resources on SCM

and OP, Gómez-Cedeño et al. 21

found a direct influence of

an SCM implementation on SCM outcomes and an indirect

influence on OP of firms from different industries in Spain.

Using a sample of manufacturing and service firms from

Malaysia, Chong et al. 22

asserted the positive impact of

SCM practices on OP.

Business Administration Department, College of Business and Economics

(CBE), Qassim University, Al Malida, Kingdom of Saudi Arabia

Corresponding Author:

Ahmad Adnan Al-Tit, Business Administration Department, College of

Business and Economics (CBE), Qassim University, Al Malida, Buraidah

15452, Qassim, Kingdom of Saudi Arabia.

Emails: [email protected]; [email protected]

International Journal of Engineering Business Management

Volume 9: 1–9 ª The Author(s) 2017

DOI: 10.1177/1847979017712628 journals.sagepub.com/home/enb

Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License

(http://www.creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without

further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/

open-access-at-sage).

Evidence from China has confirmed the positive impact

of supply chain integration (internal, customer and supplier

integration) on OP. Li et al. 23

investigated the impact of

four practices of SCM (supplier and customer partnership,

the level and quality of information sharing and postpone-

ment) on OP, measured by market and financial perfor-

mance. Their results pointed to a significant influence of

these practices on OP dimensions. Miguel and Brito 24

ana-

lysed data collected from companies in different industries

in Brazil to explore the relationship between SCM and OP.

They concluded that SCM practices exert positive influ-

ences on OP.

Okongwu et al. 25

investigated the impacts of quality of

information sharing and supplier–customer partnerships on

the OP of industrial firms in France. Their results supported

the hypothesis that SCM practices positively predict OP. In

light of the aforementioned findings, the aim of this study is

to explore factors affecting financial and non-financial per-

formance via investigating the impact of OC dimensions

and SCM practices on OP.

The remainder of the article is organized as follows:

‘Literature review and hypothesis development’ section

provides a literature review and hypothesis development;

this is followed by the presentation of the conceptual

model for the study in section ‘Conceptual model’. The

‘Research methodology’ section addresses the research

methodology, and results are presented in section ‘Data

analysis and results’. A discussion of the findings and

conclusion are provided in the sixth section. The final

section highlights the research implications and provides

future research directions.

Literature review and hypothesis development

Organizational culture

Scholars have defined OC as shared values and beliefs

held by individuals that form the basis for patterns of

behaviour in solving problems. 26

Denison 27

argued that

the core content of OC covers beliefs, values and assump-

tions held by individuals within organizations. In contrast,

Schein 28

described OC as a behaviour that determines

how an organization grasps and reacts to the external and

internal environments, thus embedding the reaction to the

organizational environment in the definition of OC. Many

attributes concerning OC emerge in the literature. It has

been considered to guide individual communications

within an organization 29

and to be a critical antecedent

factor for the success of knowledge management initia-

tives 30

and a predictor of OP. 31

In terms of the dimensions of OC, studies such as that of

Balthazard et al. 32

have used the Organizational Culture

Inventory ®

(OCI), (# 2012 Human Synergistics International)

developed by Robert Cooke and J. Clayton Lafferty, which

covers three types of OC: aggressive/defensive, passive/

defensive and constructive cultures. The OCI measures 12

behavioural norms called 1–12 o’clock positions. Chang

and Lin 33

plotted OC on four axes (flexibility, internal,

external and effectiveness), which cover four types of

OC: cooperative, innovative, consistent and effective.

According to these authors, cooperation, information

sharing, empowerment and teamwork distinguish a coop-

erative culture. Adaptability and creativity are the major

features of innovative cultures. Rules and regulations, as

well as efficiency, are the dimensions included in a con-

sistency culture.

Finally, the main focus of the effectiveness, culture is on

competitiveness, goal achievement and effectiveness. In

their study of the relationship between OC, total quality

management and operational performance, Baird et al. 34

used the organizational culture profile to measure OC. The

profile consists of six dimensions: teamwork/people

respect, outcome orientation, innovation, stability, atten-

tion to detail and aggressiveness. For this study, two OC

dimensions were adopted: adaptability 26

and performance

orientation. 35

According to Ahmad, 26

customers, risks and

mistakes drive an adaptable organization. Performance

orientation refers to the accountability of members towards

results and high levels of performance. 35

Table 1 shows

examples of the OC dimensions used in the literature.

Supply chain management

Chong et al. 22

defined supply chain management (SCM)

based on two approaches: supply management and logistics

management. The focus of the supply management is inte-

gration, while the focus of logistics management is inven-

tory reduction. According to Park and Krishnan, 38

cited in

Chong et al., 22

SCM can be defined as activities aimed at

integrating partners in the supply chain to produce the right

quantity of a product to be distributed in the right place at

the right time.

Huang et al. 39

classified SCM research into three cate-

gories: (i) an operational approach that relates to produc-

tion, inventory and operational tools; (ii) a design approach

that deals with operational systems and information and

(iii) a strategic approach that refers to relationships and

competitive advantage. Huang et al. 40

used information

sharing and technological interdependence to measure the

level of integration in the supply chain. Okongwu et al.’s 25

study explored the relationship between SCM practices and

OP. They measured SCM practices in terms of information

sharing, supplier partnerships, customer relationships and

information quality. Two of these dimensions (supplier

partnerships and customer relationships) were adopted to

meet the purposes of this study (Table 2).

Organizational performance

Performance indicates to the achievement level of the mis-

sion at the work place that develops an employee job. 44

2 International Journal of Engineering Business Management

Treacy and Wiersema, 45

cited in Zack et al., 46

suggested

three OP-related capabilities that provide a baseline for

competitive advantage: customer intimacy, product leader-

ship and operational excellence. Product leadership refers

to competition based on product and service innovation.

Customer intimacy relates to the competition in terms of

the strength of customer satisfaction and retention. On the

other hand, operational excellence relates to competition by

virtue of the efficiency of internal processes. 44

In the SCM domain, Arif-Khan et al. 41

identified three

categories of OP related to SCM: flexibility, output and

resource performance. According to these authors, flexi-

bility in performance relates to an organization’s respon-

siveness, output performance pertains to an organization’s

ability to deliver a superior level of customer service and

resource performance concerns an organization’s ability

to achieve efficiency. Using a sample consisting of 652

firms in Singapore, Chia et al. 47

examined performance

measurements used by SC managers. They found that the

most usable indicators were cost reduction, gross revenue,

pre-tax profit and customer satisfaction. Table 3 shows

examples of the OP dimensions used in the existing

literature.

Relationship between OC and OP

On the association between OC and OP, Yesil and Kaya 19

provided evidence from Turkey using a sample consisting

of 300 companies operating in the textile, food and service

industries. Measuring OC in terms of adhocratic, clan, hier-

archical and market cultures and OP by sales growth and

return on assets, they found no significant relationship

between their OC dimensions and OP indicators. Prajogo

and McDermott 20

examined the relationship between OC

and OP using four cultural dimensions adopted from Quinn

and Spreitzer 50

– group culture, developmental culture,

hierarchal culture and relational culture – and four dimen-

sions of performance, namely, product and process quality,

product and process innovation. Their findings indicated a

Table 1. Organizational culture dimensions used in the literature.

Dimensions of organizational culture Researcher (s)

Clan culture Adhocracy culture Market culture Hierarchy culture

Yesil and Kaya 19

Cooperativeness Innovativeness Consistency Effectiveness

Chang and Lin 33

and Akhavan et al.30

Aggressive/defensive cultures Passive/defensive culture Constructive cultures

Balthazard et al. 32

Adaptability culture Consistency culture Involvement culture Mission culture

Ahmad26

Culture management Conflict resolution Change disposition Employee participation Goal clarity Identification with the organization Organization focus and integration Authority locus Management style Customer orientation Human resource orientation Task orientation Performance orientation

Erwee et al.35

Information flow Involvement Meetings Staff perceptions of teamwork Staff perceptions of teamwork

supervision

Sikorska-Simmons36

Results-oriented vs. process-oriented cultures

Tightly controlled vs. loosely controlled cultures

Job-oriented vs. employee-oriented cultures

Closed system vs. open system cultures Professional vs. parochial cultures

Chang and Lin37

Teamwork/people respect Outcome orientation Innovation, stability Attention to details Aggressiveness

Baird et al.34

Table 2. Supply chain management dimensions used in the literature.

Dimensions of supply chain management Researcher (s)

Customer relationship Information sharing Information technology Internal operation Strategic supplier partnership Training

Chong et al.22

Collaborative distribution Distribution flexibility IT-enabled distribution Inventory management Order commitment Transparency in the distribution process

Arif-Khan et al.41

Supply chain integration Information sharing Strategic relationships with suppliers and

customers Support customer order

Jabbour et al.42

Information sharing, information quality Supplier partnership Customer relationship

Okongwu et al.25, Al-Tit43

Technological interdependence Information sharing

Huang et al.40

Al-Tit 3

positive relationship between developmental culture and

three of the OP dimensions (product quality, product inno-

vation and process innovation).

Al-Tit 51

conducted a study to investigate the mediating

role of OC between Human Resource Management (HRM)

practices and OP. It was found that OC moderated the rela-

tionship between HRM practices and OP. Lee and Yu 31

investigated the relationship between OC and OP using a

sample of companies from three sectors: high-tech firms,

hospitals and insurance companies. Their results confirmed

the positive impact of OC on OP.

In Jordan, Bashayreh 52

investigated the relationship

between OC and OP. It was found that there is a relationship

between OC (policies and procedures) and OP. Based on 240

valid questionnaires collected from insurance companies,

Al-Nsour 53

investigated the role of OC in improving employ-

ees’ performance in the Jordanian banking sector. The results

identified there is a relationship between OC components

(expected Organization) and Employees’ Performance. Con-

sequently, the following hypothesis is proposed:

H1: OC (cultural adaptability and performance orienta-

tion) predicts OP.

Relationship between SCM and OP

Chong et al. 22

collected data from a sample consisting of

163 manufacturing and service companies in Malaysia to

test the relationship between SCM practices and OP (opera-

tional and innovative performance). They found a direct

influence of SCM practices, on both the operational and

the innovative performance of Malaysian companies.

Based on 128 valid questionnaires collected from different

manufacturing companies in India, Arif-Khan et al. 41

investigated the relationship between agile SCM practices

and OP. The results identified four SCM practices related

to the agile supply chain: collaborative distribution, distri-

bution flexibility, inventory management and order com-

mitment. In addition, they confirmed the association

between these practices and OP. Using the four dimensions

of SCM (information sharing, cooperation, long-term rela-

tionships and process integration) and four dimensions for

OP (cost, delivery, flexibility and quality), Miguel and

Brito’s 24

results supported the positive relationship

between SCM and OP. In addition, in a study of the rela-

tionship between SCM and OP with a sample of 450 man-

ufacturing companies in France, Okongwu et al. 25

found

direct and indirect impacts of SCM practices on OP. There-

fore, the following hypothesis is proposed:

H2: SCM (supplier partnership and customer relation-

ship) predicts OP.

Conceptual model

Figure 1 shows the study variables and the relationships

postulated between them. The conceptual model consists

of three variables: OC, SCM and OP. Two potential relation-

ships between the variables are assumed: OC is significantly

related to the OP, and SCM is significantly related to the OP.

Research methodology

Research sample and data collection

The study population comprises manufacturing firms oper-

ating in Amman, the capital city of Jordan. Of these firms, a

Table 3. Organizational performance dimensions used in prior literature.

Dimensions of organizational performance Researcher (s)

� Sales-based performance Ismail et al.48, Al-Tit43, Chong et al.22 and Lee and Yu31 – Sales revenue, profitability, return on investment – Return on assets, manufacturing productivity – Product added-value, employee added-value – Sales growth and market share

� Organizational-based performance – Product leadership (product and service innovation) – Product and service quality – Customer intimacy (customer satisfaction and retention) – Operational excellence (internal processes efficiency) – Employee development, and job satisfaction

� Supply chain-based performance Arif-Khan et al.41 – Flexibility performance – Output performance – Resource performance – Cost reduction – Gross revenue – Profit before tax – Customer satisfaction

Treacy and Wiersema45

– Profitability, revenue, sales volume and growth – New customers, customer satisfaction, company reputation

Tan and Sousa49

4 International Journal of Engineering Business Management

sample of 300 firms was randomly selected. The study

sample intentionally involved employees from different

departments because OC might differ among organiza-

tional units. A questionnaire-based survey was carried out

to collect data from the participants. The response rate was

34% (102) due to the low percentage of firms that agreed to participate in the study. Of the questionnaires returned,

nine were incomplete. This left 93 questionnaires usable

for data analysis.

Measures

The OC measure comprises two dimensions: adaptability 26

and performance orientation. 35

Four items were developed

to measure this variable. SCM practices were measured

using two dimensions adapted from Okongwu et al. 25

and

Flynn et al. 54

: supplier partnerships (information networks,

market information sharing, inventory level sharing,

demand forecast sharing) and customer relationships

(information networks, market information sharing,

computer-based orders, customer feedback and com-

plaints). Also based on these authors, mutual collaboration

and inventory management were used to evaluate supplier

partnerships, while practices directed towards the manage-

ment of customer complaints and building long-term rela-

tionships with customers were used to evaluate customer

relationships. Eight items were developed to measure this

variable. In addition, following Okongwu et al. 25

and

Quinn and Spreitzer, 50

employee satisfaction, customer

satisfaction and the introduction of new products were used

to measure non-financial performance, based on Hallavo 55

and Quinn and Spreitzer. 50

Five items were developed to

measure this variable. Therefore, the total number of items

in the questionnaire was 17 items. The questionnaire was

anchored based on a 5-point Likert-type scale that con-

sisted of from 1 point (strongly disagree) to 5 point

(strongly agree). Table 4 summarizes the measurements

used to evaluate the study variables.

Validity and reliability

Construct validity was assured as a measure previously

developed and validated. Reliability testing is defined as

a measure that ensures the stability and consistency of

results over time. 56

The findings of validity and reliability assessments, as

displayed in Table 5, confirm the acceptability of the mea-

surements used in the current study as recommended 55,57,58

(Cronbach’s a values above 0.7, w2/df < 2.0, RMSEA < 0.080, and CFI > 0.9).

Data analysis and results

Intercorrelation matrix

The Pearson’s correlation coefficients in Table 6 indicate

that all the study variables are associated with each other.

There are significant relationships between OC, SCM prac-

tices and OP indicators.

Hypothesis testing

The results of the paths postulated for this study, as summar-

ized in Table 7 and portrayed in Figure 2, provide support for

H1 and H2. The OC dimensions explain 45% of the variance in OP and have a significant positive impact on OP (Cultural

adaptability, b ¼ 0.367, t ¼ 4.897, p value � 0.05; Perfor- mance orientation, b ¼ 0.321, t ¼ 4.132, p value � 0.05). The SCM dimensions explain 40% of the variance in OP and have a significant positive impact on OP (Supplier partner-

ship, b ¼ 0.281, t ¼ 3.897, p value � 0.05; Customer rela- tionship, b ¼ 0.275, t ¼ 3.712, p value � 0.05).

Discussion and conclusion

This study aimed to investigate factors affecting OP by

exploring the effect of OC and SCM practices on the OP

Figure 1. Research model.

Table 4. Measurements used in the study.

Variables Dimensions Researcher (s)

OC Cultural adaptability

Performance orientation

Ahmad 26

and Erwee et al. 35

SCM Supplier partnership

Customer relationship

Okongwu et al. 25

and Quinn and Spreitzer50

OP Operational performance

Okongwu et al. 25

and Al-Tit 51

and Quinn RE and Spreitzer50

OC: organizational culture; SCM: supply chain management; OP: organi- zational performance.

Al-Tit 5

of manufacturing firms from Jordan. The findings of the

study indicate that both OC and SCM practices signifi-

cantly predict OP. Concerning the relationship between

OC and OP, the results in the literature are mixed. In a

study of the relationship between the same constructs, Yesil

and Kaya 19

revealed a non-significant relationship between

OC and OP. On the other hand, Lee and Yu 31

confirmed

that OC positively predicts OP. The findings of this study

are consistent with Abu-Jarad et al., 59

suggesting that OC is

a key dimension in studies intending to investigate OP,

particularly in non-Western settings.

On the relationship between SCM practices and OP,

Chong et al., 22

Arif-Khan et al., 41

Miguel and Brito 24

and

Okongwu et al. 25

found a positive effect of SCM practices

and OP. Consistent with Quinn and Spreitzer, 50

this study

found a significant relationship between customer partner-

ship and operational performance. The results of Quinn

and Spreitzer 50

rejected the hypothesis that supplier

partnerships are related to operational performance. How-

ever, they explained that this was due to the introduction of

internal integration in the model. In this study, the ultimate

aim of which was to investigate factors affecting OP, the

results show that both OC and SCM practices are examples

of such factors. Overall, the study concludes that organiza-

tions driven by customers, partners, risk and mistakes and

oriented towards high levels of employee performance will

experience more enhanced levels of OP.

Implications and future research directions

Despite the significant contribution of SCM practices to

OP, 41,22,24,25

the findings of this study indicate that the

impact of OC on OP is greater than the impact of SCM

practices on the same construct. Therefore, both research-

ers and managers should give importance to organizational

beliefs, values and assumptions along with other variables.

Hence, future research should examine the moderating and

mediating role of OC on the relationship between supply

chain practices and OP. The aim of this study is to explain

the direct relationship between SCM, OC and OP in the

absence of previous studies conducted in Jordanian

settings. However, the intended direct relationship is

Table 5. Reliability and validity of measurements.

Construct Items Mean SD a w2/df RMSEA CFI p Value

OC Cultural adaptability 2 3.74 0.90 0.83 1.22 0.061 0.94 0.00 Performance orientation 2 3.80 0.89 0.81

SCM Supplier partnership 4 3.86 0.88 0.78 1.63 0.074 0.91 0.00 Customer relationship 4 3.98 0.91 0.78

OP Operational performance 5 3.81 0.81 0.80 1.47 0.067 0.96 0.00

OC: organizational culture; SCM: supply chain management; OP: organizational performance. p � 0.05.

Table 6. Intercorrelation of variables.

1 2 3 4 5

1 1.00 2 0.42 1.00 3 0.52 0.40 1.00 4 0.61 0.39 0.46 1.00 5 0.66 0.71 0.63 0.69 1.00

1: Cultural adaptability; 2: performance orientation; 3: supplier partner- ship; 4: customer partnership; 5: operational performance. p � 0.05.

Table 7. Hypothesis testing.

Hypotheses Dimensions r2 b T Result

H1: OC predicts OP

Cultural adaptability

0.446 0.367 4.897* Accepted

Performance orientation

0.321 4.132*

H2: SCM predicts OP

Supplier partnership

0.397 0.281 3.897* Accepted

Customer relationship

0.275 3.712*

OC: organizational culture; OP: organizational performance; SCM: supply chain management. *p Value � 0.05.

Figure 2. Final model.

6 International Journal of Engineering Business Management

considered an initial point to develop new models on

direct–indirect relationship between these variables in the

same context. Hence, neither mediating nor moderating

effects were studied in the current study. As recommended,

future research is required to examine such casual effects of

mediating and moderating variables.

The sample used in this study is limited to manufac-

turing firms in Amman, the capital city of Jordan. This

study is limited by its low response rate due to firms’

refusal to participate in the study, since they regarded the

required data, as secrets should be preserved from com-

petitors. Consequently, the findings should be considered

with caution based on the declined response rate. Accord-

ing to Holbrook et al., 60

a lower response rate will only

affect the survey estimates.

Future studies should assess the impact of OC and sup-

ply chain practices on the OP of other manufacturing

firms in other countries. Finally, the research model

should include additional variables that contribute to OP

level to explore more factors that may affect OP in

Jordanian settings.

Acknowledgement

The author would like to thank the Jordanian firms who partici-

pated in this research. He would also like to thank the Deanship of

Scientific Research in Qassim University, Saudi Arabia.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with

respect to the research, authorship, and/or publication of this

article.

Funding

The author(s) received no financial support for the research,

authorship, and/or publication of this article.

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