Introduction
Supply chain integration (SCI) has received increasing attention among academicians and practitioners alike in recent years (Frohlich and Westbrook, 2001, Narasimhan and Kim, 2002, Vickery et al., 2003, Droge et al., 2004, Swink et al., 2005, Das et al., 2006, Swink et al., 2007, Zhao et al., 2008, Braunscheidel and Suresh, 2009, Flynn et al., 2010). SCI consists of the integration of internal functions, as well as the integration with customers and suppliers (Stank et al., 2001b). Despite the increasing research interests in SCI, our understanding of what influences SCI, and the relationships between internal and external integration, is still very limited. While some studies (e.g. Stevens, 1989, Stevens, 1990) conceptually described the relationship between internal and external integration, there is limited empirical evidence on this relationship (Hillebrand and Biemans, 2003). Furthermore, findings about this relationship from previous studies were inconsistent. While some studies provided empirical evidence for the impact of internal integration on external integration in areas such as information sharing (Carr and Kaynak, 2007) and new product development (Koufteros et al., 2005), others postulated and tested a reverse relationship from external integration to internal integration from the perspective of external and internal collaboration (Salvador et al., 2001, Sanders and Premus, 2005, Sanders, 2007). In a recent study, Braunscheidel and Suresh (2009) found that internal integration has a positive influence on external integration which includes supplier and customer integration as two sub-dimensions. Therefore, there is a need for empirically testing the relationship between internal integration and external supplier and customer integration to improve our understanding of the mechanism of SCI. This will help practitioners focus their limited resources to either invest first in internal integration or external integration.
In order to achieve a high level of integration with suppliers and customers in the supply chain, the company should have the capability and willingness to integrate with external partners (Fawcett et al., 2007). While the capability of the company to integrate with its partners is reflected by the company's level of internal integration (break down functional silos, share information, and deploy cross-functional teams), the willingness to integrate relates to the company's relationship commitment to its partners. The literature has confirmed that trust and relationship commitment engender cooperation between trading partners (Morgan and Hunt, 1994, Lai et al., 2008). With relationship commitment, companies within a supply chain can establish long-term relationships with their partners and enhance the level of external integration. In a recent study, Zhao et al. (2008) found that relationship commitment to the customer significantly influenced the degree of customer integration. Although both internal integration (Stevens, 1989, Stevens, 1990) and relationship commitment (Zhao et al., 2008) have been suggested to significantly influence external integration, this study will be one of the first to simultaneously examine the impacts of internal integration and relationship commitment on external integration in a supply chain. Furthermore, the willingness to integrate may enhance the effectiveness of internal integration on external integration. Similarly, internal integrative capability may also enlarge the role of relationship commitment in improving external integration. Therefore, we will also test the interactive effect of internal integration and relationship commitment on external integration.
We conduct this study using data collected from Chinese manufacturers. While China has become a global manufacturing center and plays a very important role in many global supply chains, very few studies on supply chain management have been conducted in China (Zhao et al., 2006, Zhao et al., 2007). Furthermore, most studies on SCI and relationship management have been performed in the context of Western cultures (e.g. Droge et al., 2004, Germain and Iyer, 2006, Gimenez and Ventura, 2005, Koufteros et al., 2005, Morgan and Hunt, 1994) . There is a need for testing and validating theories of SCI and relationship management in different cultural settings (Huff and Kelley, 2003). The collectivism culture and emphasis on “Guanxi” (relationship) in China provide a fertile ground for testing and validating these theories developed in Western cultures. Furthermore, enterprises in China have different histories and varying cultures and management philosophies, depending on their ownerships (Delios et al., 2006). Ownership, as a form of control and governance, has significant implications for organizational control, risk sharing, resource allocation, bargaining power, and managerial decision making (Zhao and Luo, 2002). Different ownerships represent different cultures which may influence SCI and relationship commitment. For example, while Chinese state-owned, collectively owned, or privately owned companies are characterized by a high collective culture, joint ventures (JVs) and foreign-owned companies exhibit a more individualistic culture. In the collective culture, relationship commitment is deemed more important in maintaining relationships, as compared to that in an individualistic culture. As such, relationship commitment may play a more important role in achieving external integration in Chinese controlled companies in which the Chinese collectivism culture and “Guanxi” (relationship) dominate. In contrast, in foreign controlled companies, which have a more individualistic culture, relationship commitment may play a lesser role in improving external integration. While relationship commitment might have a greater effect on external integration in Chinese controlled companies, internal integration may play a more important role in pursuing external integration in foreign controlled companies, which may exhibit relatively more advanced information and manufacturing technologies. Besides ownership, we also examine the relationships between internal integration, relationship commitment, and external integration in different contexts of industries and regions.
This study addresses two major research questions: (1) How do internal integration and relationship commitment to customers and suppliers influence external integration with customers and suppliers? (2) What are the differences in the relationships between internal integration, relationship commitment and external integration for companies with different ownerships, in different industries and regions? This study will contribute to the SCI literature and practices in several ways. First, this study will provide empirical evidence of the effects of both internal integration and relationship commitment to customers and suppliers, on external integration with customers and suppliers. The empirical evidence will also demonstrate the relative importance of internal integration and relationship commitment in improving external integration. Second, this study will reveal the difference of the effects of internal integration and relationship commitment to customers and suppliers on external integration with customers and suppliers for companies with different ownerships, which is a proxy for culture. It will also indicate the differences between different regions and industries. Third, this study will provide managerial guidelines for practicing managers to decide how to devote their efforts and resources in different areas of SCI, and how to manage companies with different ownerships, in different industries and regions to achieve a higher level of external integration.
The remainder of the paper is organized as follows: First, the theoretical background and research hypotheses are described. Next, the research methodology is presented, followed by the presentation of the analyses and results. Subsequently, managerial implications are discussed. Finally, main conclusions are drawn, together with limitations of this study and suggestions for future research.
Section snippets
Theoretical background and research hypotheses
SCI refers to “the degree to which an organization strategically collaborates with its supply chain (SC) partners and manages intra- and inter-organization processes to achieve effective and efficient flows of products, services, information, money and decisions, with the objective of providing maximum value to its customers” (Zhao et al., 2008, p. 7). There are mainly two types of SCI: external integration and internal integration.
Questionnaire design
Based on the relevant supply chain management literature and theoretical framework described earlier, a survey instrument was designed to measure relationship commitment and varying types of SCI. In addition, the questionnaire also included the demographic profile of the company such as industry, ownership, size and location. In this study, we conceptualized SCI as having three dimensions: internal integration, external integration with customers, and external integration with suppliers. We
Analyses and results
SEM is used to estimate the relationships among different constructs and to test the four research hypotheses. SEM estimates were generated using LISREL 8.54 with the maximum likelihood estimation method. The goodness of fit indices for our model are χ2=3345.78 with degrees of freedom=880, RMSEA=0.073, 90% confidence interval for RMSEA=(0.070; 0.075), NNFI=0.96, IFI=0.96, CFI=0.96, Standardized RMR=0.095, NFI=0.95, RFI=0.96, PNFI=0.88, GFI=0.78, AGFI=0.76, PGFI=0.70. These indices are better
Improving external integration through internal integration or relationship commitment
Our study clearly shows, from both conceptual arguments and empirical evidence, that internal integration is an enabler for external customer and supplier integration, suggesting that an effective approach to enhance external integration is to pursue internal integration. This finding is partially supported by Braunscheidel and Suresh (2009), Carr and Kaynak (2007) and Koufteros et al. (2005).
In today's competitive environment, companies are forced to cooperate closely with their suppliers and
Conclusions and future research
With the growing importance of relationship commitment and recognition of different types of SCI over the past decade, it is essential to improve our understanding of these constructs and their associated interrelationships. This research contributes to the literature by developing and empirically testing a relationship commitment—SCI model based on a sample of manufacturing firms in China. The model includes relationship commitment to both the customer and the supplier, and three types of SCI.
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