organizational structure, integration, and manufacturing performance

13 Pages·2012·0.49 MB·English

Volume 5• Number 1 • January - June 2012
ORGANIZATIONAL STRUCTURE, INTEGRATION,
AND MANUFACTURING PERFORMANCE: A
CONCEPTUAL MODEL AND PROPOSITIONS
Rafael Teixeira
Universidade do Vale do Rio dos Sinos
[email protected]
Xenophon Koufteros
Texas A&M University
[email protected]
Xiaosong David Peng
Texas A&M University
[email protected]
ABSTRACT: One major characteristic of studies in operations and supply chain management literature
is a focus on how integration can lead to superior operations and manufacturing outcomes. Most of these
studies, however, focus only on internal or external integration and few have been dedicated to under-
stand how both internal and external integration influence performance outcomes. In addition, few stud-
ies, if any, have looked to the antecedents of organizational structure as a driver for such forms of integra-
tion. To help filling this gap, we draw on organizational structure and resource-based view theoretical
perspectives to present a conceptual model that proposes a relationship between organizational structure
and integration. The model also considers major antecedents of organizational structure and the manu-
facturing performance consequences of integration. As a result, we introduce a series of propositions to
be subject to empirical scrutiny as well as serve as a reference for future conceptual and empirical models.

Keywords: Organization structure, integration, manufacturing performance

1. INTRODUCTION Whang, 1997; Morris & Calantone, 1991; Stevens, 1989)
and recent studies have empirically demonstrated how
Because of the competitive challenges imposed by
integration positively impacts organizational perfor-
globalization, which has made firms adopt practices
mance (Frohlich & Westbrook, 2001; Koufteros, Cheng,
such as outsourcing and cooperation between compa-
& Lai, 2007; Koufteros, Vonderembse, & Jayaram,
nies (Harland, Lamming, & Cousins, 1999), literature
2005; Rosenzweig, Roth, & Dean, 2003; Morgan Swink,
in operations management has placed considerable
Narasimhan, & Wang, 2007; Vickery, Jayaram, Droge,
attention in the supply chain phenomenon (Chen &
& Calantone, 2003).
Paulraj, 2004; Ireland & Webb, 2007; Ketchen & Hult,
2007; Krause, Handfeld, & Tyler, 2007; Li, Rao, Ragu- One characteristic of studies about supply chain in-
Nathan, & Ragu-Nathan, 2005; Storey, Emberson, tegration is the investigation of its potential effects
Godsell, & Harrison, 2006). Organizations that want to on organizational performance outcomes. Frohlich
succeed have to enhance their connections with other and Westbrook (2001) are among the first authors
organizations in order to acquire and mobilize com- to empirically demonstrate that organizations with
plementary resources for their core activities. In fact, high levels of integration with their customers and
there has been a growing consensus among research- suppliers achieve superior firm performance when
ers regarding the importance of integration between compared to organizations with low levels of inte-
a given organization and its customers and suppliers gration. Stank et al. (2001 ) tested a model includ-
(Bowersox, Daugherty, Droge, Rogers, & Wardlow, ing not only external integration with customers
1989; Eloranta & Hameri, 1991; Lee, Padmanabhan, & and suppliers, but also internal integration. Their
69
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
70 ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81
results showed that internal and external integra- we conceptualized supply chain integration as three
tion have effects on different firm performance vari- distinct constructs: internal integration, supplier in-
ables. Subsequent empirical studies on internal and tegration, and customer integration. Understanding
external integration have demonstrated their effects the relationships between organizational structure
on financial performance and competitive capabili- constructs and integration can be essential for aca-
ties (Rosenzweig et al., 2003), customer service per- demicians and practitioners interested in develop-
formance (Vickery et al., 2003), product innovation ing theories and strategies to achieve outstanding
(Koufteros et al., 2007; Koufteros et al., 2005), and manufacturing performance.
customer satisfaction (Swink et al., 2007), and op-
The paper is organized as follow. The next section
erational performance (Flynn, Huo, & Zhao, 2010;
presents a theoretical background on organizational
Wong, Boon-itt, & Wong, 2010).
structure and resource-based view. These two theo-
However, few studies have explored the anteced- retical lenses set the basis for our understanding and
ents of supply chain integration. Examining some explanation of how constructs in our model relate to
potential antecedents of supply chain integration, one another. Then, we present our model, define its
Vickery et al. (2003, p. 535) concluded, “supply chain constructs, and present formal propositions relating
integration is facilitated by integrated information them. Finally, we conclude our paper discussing the
technologies”. Based on a multiple case studies model and summarizing its contributions as well as
of small and medium enterprise firms of UK, Har- limitations and opportunity for future research.
land, Caldwell, Powell, and Zheng (2007) explored
the potential barriers for adoption of supply chain 2. LITERATURE REVIEW
information integration technologies. Zhao, Huo,
2.1. Organizational structure
Flynn, and Yeung (2008) analyzed the impact of
power on customer integration in the supply chain
Organizational structure can be viewed as the way
context. These authors contribute to supply chain
responsibility and power are allocated inside the or-
management literature, but more comprehensive
ganization and work procedures are carried out by
models that explore the potential antecedents and
organizational members (Blau, 1970; Dewar & Wer-
consequences of supply chain management are still
bel, 1979; Germain, 1996; Gerwin & Kolodny, 1992;
needed. In this context, we attempt to answer the
Ruekert, Walker, & Roering, 1985; Walton, 1985). For
following conceptual research questions: how organi-
Thompson (1965), organizational structure is the
zational structure is conceptually related to internal and
organization’s internal pattern of relationships, au-
external integration? How such relationship might influ-
thority, and communication. Similarly, Goldhaber
ence manufacturing performance?
et al. (1984, p. 44) define organizational structure
as “the network of relationships and roles existing
We attempt to fill this gap in literature by concep-
throughout the organization”.
tually exploring how organizational structure may
enhance supply chain integration, since organiza- The primary relationships that have been studied
tional structure is recognized for influencing organi- by organizational theory scholars are those relating
zational behavior, and how supply chain integration strategy and structure, structure and performance,
is related to manufacturing performance. Saying it and the congruence of strategy and structure with
differently, the objective of this paper is to intro- performance (Jeminson, 1981). The general conclu-
duce a theoretical model that relates organizational sions are that organizations must fit structure and
structure constructs and supply chain integration processes if the strategy wants produce positive re-
and explore its influence on manufacturing perfor- sults (Chandler, 1962; Channon, 1971). The relation-
mance. More specifically, we theoretically explore ship between structure and performance, however,
how the level of centralization, flatness, and hori- is more tenuous and is mediated by many other or-
zontal integration influences the supply chain in- ganizational constructs. For this reason, we believe
tegration. Then, we theoretically conceptualize the that a linkage between organizational structure and
effects of supply chain integration on manufactur- communication may improve communication capa-
ing performance outcomes, since improvements in bilities, resulting in different levels of integration.
supply chain integration tends to be related with Many authors argue the existence of this relation-
manufacturing competitive capabilities (Rosenz- ship. Porter and Roberts (1976) and Frederickson
weig et al., 2003). For the purpose of this research, (1986) theorizes that organizational structure strong-
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81 71
ly influences communication and facilitates the flow resources are those that enable an organization to
and processing of information, while Koufteros create a differentiated strategy, that is, that help the
et al. (2007) and Kim (2005) provide empirical evi- organization to create value for its stakeholders. Sec-
dence about the relationship between organizational ond, resources must be rare, assuring that a specific
structure and internal communication. However, as resource is difficult to be developed by other com-
organizational structure has many dimensions (Da- petitors. Third, resources must be imperfectly imi-
manpour, 1991), and some of them affect communi- table. In other words, resources must be difficult to
cation, we drawn on a limited number of variables imitate, enabling firms to create strategies based on
to study their relationships. resources that are difficult to imitate. Perhaps com-
petitors can try to replicate firm’s strategy based on
imperfectly imitable resources, but it is not possible
2.2. Resource-based view
to fully imitate and acquire the same advantage. Fi-
The resource-based view (RBV) has its roots back to nally, resources must not be substitutable. Saying
Penrose (1959) who views organizations as bundles it differently, organization’s resource cannot have
of resources that are managed, deployed, and reor- similar or equivalent resources in the market.
ganized in ways to provide unique form and value.
During the 1980’s, Wernerfelt (1984) defined re-
3. THEORETICAL DEVELOPMENT
sources as tangible and intangible assets that an or-
ganization possesses, while other authors also made The theoretical model of the relationship between
significant contributions to this theoretical perspec- organizational structure, internal communication,
tive (Dierickx & Cool, 1989; Rumelt, 1984). In 1991, integration, and performance is presented in Figure
Barney (1991) provided a more concise framework 1. This model is based on the resource-based view
to understand how resources can provide sustain- assumption that integration allows organizations to
able competitive advantage. His rationale is based mobilize and acquire complementary resources from
on two major assumptions. First, resources are het- their partners, improving their activities and achiev-
erogeneous, which means that organizations have ing a better manufacturing performance (Teece, Pi-
different resources, routines, capabilities and other sano, & Shuen, 1997). Previous studies have shown
assets that differentiate one organization from an- that integration its related to product development
other. This differentiation among organizations’ re- performance (Hoopes & Postrel, 1999; Koufteros et
sources helps to create different strategies and sus- al., 2007; Koufteros et al., 2005), manufacturing per-
tained competitive advantage. By pursuing different formance (Frohlich & Westbrook, 2001; M. Swink &
resources and creating different strategies, organi- Song, 2007), competitive capabilities (Rosenzweig et
zations may achieve different levels of performance. al., 2003), distribution performance (Mohr & Nev-
The second assumption is that resources have some in, 1990), customer service performance (Vickery,
degree of immobility. This means that some resourc- Droge, Stank, Goldsby, & Markland, 2004; Vickery
es have high degree of mobility and can be “pur- et al., 2003), partnership performance (Mohr & Spe-
chased” in the market, while other resources have kman, 1994), enterprise resource planning adoption
low degree of mobility and are more difficult to be (Masini & Van Wassenhove, 2009), and innovation
“purchased”. Based on these different degrees of (Ettlie & Reza, 1992). In our theoretical model, in-
resource mobility, organizations can develop their tegration is a broader construct composed of three
unique resources and create strategies difficult to be parts: supplier integration, customer integration,
imitated by competitors. and functional integration. Each one of these con-
structs is hypothesized to have effects on different
In order to create a sustainable competitive advan-
manufacturing performance measures.
tage, resources must have four attributes (Barney,
1991). First, resources must be valuable. Valuable Figure 1 - The proposed theoretical framework
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
72 ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81
Manufacturing
Organizational Performance
Organizational
Structure
Integration
Quality
Centralization
Internal
Integration Flexibility
Flatness
Internal Supplier Cost
Communication Integration
Managerial
specialization Delivery
Customer
Employee Integration
specialization
Innovation
Furthermore, we attempt to explore and understand how organizations use their organizational structure as-
sets to improve their ability to integrate and acquire which the right to make decisions and evaluate ac-
complementary resources from their partners. Or- tivities is concentrated on the top hierarchy levels of
ganizational structure can be a source for competi- organizations (Fry & Slocum, 1984; Hall, 1977). Cen-
tive advantage as well as a determinant position for tralization can be seen as an increase of decisions
acquisitions of other resources. Then, the configura- make at higher hierarchical levels within organiza-
tion and relationship among organizational resourc- tions and a decrease of participation of employees
es allow the development of new resources that may in the decision making process (Daft, 1995; Doll &
lead to competitive advantage (Black & Boal, 1994). Vonderembse, 1991; Germain, 1996; Walton, 1985;
We believe that a organization’s ability to internally Zaltman & Duncan, 1977). It can also be conceptual-
and externally integrate, acquiring and mobilizing ized as a locus of authority and decision-making in
resources from its partners, is partially influenced the organization. Environment plays an important
by its organizational structure. Some organizational role for locus of authority since organizations in un-
structure configurations might permit a better inte- certainty environments should delegate decisions to
gration between organizations while others might lower hierarchy levels in order to quickly adjust to
not. In our model, the relationship between orga- changing situations (Doll & Vonderembse, 1991).
nizational structure and integration is mediated by
Second, flatness of organization hierarchy is concep-
organizational communication because organiza-
tualized as the degree to which an organization has
tional structure influences communication between
many or few levels of management hierarchy (Burns
departments (Porter & Roberts, 1976) which, in turn,
& Stalker, 1961). Walton (1985) argues that a tradi-
affects the degree to which a organization can de-
tional command and control model is characterized
velop socials relations with other organizations, like
by an expanded hierarchy that may be a by-product
customers and suppliers.
of the systems and is justified by the need to control
employee behavior. On the other hand, a commit-
3.1. Organizational structure
ment model is characterized by a management sys-
tem that tends to be flat, relies upon shared goals
Our theoretical model has three organizational
for control and lateral coordination, bases influence
structure constructs. First, centralization of deci-
on expertise and information rather than position,
sion making process can be defined as the degree to
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81 73
and minimizes status differences. Organic organi- thors (Putnam, Philips, & Chapman, 1996; Walton,
zations tend to have few levels of hierarchy and be 1985), the level of communication can be conceptu-
characterized by more efficient and effective flows alized as the degree to which vertical and horizontal
of information and decision-making. A flat organi- communication is slow, difficult, and limited versus
zation can reduce problems of information delays, fast, easy, and abundant.
distortion and corruption as information flows from
one level to another.
3.3. Organizational integration
Third, specialization of departments and employ-
The value chain framework developed by Porter
ees refer to the level of horizontal integration exis-
(1985) is one of the first theoretical foundations in
tent within an organization. In other words, it is the
the context of strategy to advocate in favor of linkag-
degree to which departments and employees are
es among and across supply chain activities connect-
functionally specialized or integrated. Low levels
ing buyers and suppliers as well as linkages among
of horizontal integration reflects an organization in
organization’s activities, integrating supporting and
which the departments and employees are function-
core organizational functions. For Lawrence and
ally specialized, whereas high levels of horizontal
Lorch (1968, p. 1), integration is “the quality or state
integration reflects an organization in which depart-
of collaborations that exists among departments
ments and employees are integrated in their work,
that are required to achieve unity of effort by the de-
skills, and training (Davenport & Nohria, 1994; Doll
mands of the environment”. This definition is nar-
& Vonderembse, 1991; Gerwin & Kolodny, 1992;
row and exclusively related to internal integration.
Vonderembse, Ragunathan, & Rai, 1997). Given that
However, integration can also happen outside the
cross-trained employees tend to be responsive to
boundaries of organizations, as proposed by Por-
changes in customers’ needs (MacDuffie, 1995; Von-
ter. Recent studies in the context of the supply chain
derembse et al., 1997), managers can used horizontal
management, on the other hand, have proposed a
integration to address fast changing environments.
broader concept of integration that includes not only
At the same time, a great variety of specialists in a
integration of buyers, but also integration of suppli-
horizontally integrated organization may provide
ers in the chain (Frohlich & Westbrook, 2001; Swink
a broader knowledge base (Kimberly & Evanisko,
et al., 2007; Vickery et al., 2004; Vickery et al., 2003).
1981), increasing cross-fertilization of ideas (Aiken
As a consensus among many scholars (Bowersox et
& Hage, 1971). For example, Wiersema and Bantel
al., 1989; Koufteros et al., 2005; Morris & Calantone,
(1992) found that educational specialization hetero-
1991), such definition reflects the external orienta-
geneity of top management team was a significant
tion of organizational integration and, together with
predictor of organizational change.
the concepts proposed by Porter (1985) and Law-
rence and Lorch (1968), it enriches the concept and
3.2. Internal communication the strategic importance of integration. Thus, for the
purpose of this research, we define integration as the
According to communication theory, communica-
collaboration and linkages between and across orga-
tion can be viewed as a transmission process trough
nizational functions as well as organizational part-
a channel (mode) that includes messages (content),
ners, including customers and suppliers.
the channel (mode), feedback (bidirectional com-
munication), and communication effects (Krone, Internal integration refers to the cross-functional
Jablin, & Putnam, 1987). Conceptualizing commu- team orientation reflecting the linkages within or-
nication inside organizations, Grunig, Grunig, and ganizational functions and teams, also known as
Dozier (2002, p. 486) define internal communication horizontal linkages (Bishop, 1999; Guzzo & Dickson,
as a “specialized sub-discipline of communication 1996; Henke, Krachenberg, & Lyons, 1993). High de-
that examines how people communicate in organi- gree of cross-functional integration implies a rich-
zations and the nature of effective communication ness collaboration and communication environment
systems in organizations”. In a comprehensive liter- among people and departments, increasing mutual
ature review, Goldhaber (1999) found that, although feedback and the probability to solve problems. In-
there are quite few differences, there are a number ternal integration through the use of cross-function-
of common elements that led to definition of inter- al teams is commonly used by organizations inter-
nal communication as the flow of messages within a esting in achieving a better performance in terms of
network of independent relationships. For other au- quality, innovation, and new product development
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
74 ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81
(Clark & Wheelright, 1992; Olson, Ruekert, & Bon- metrical systems of internal communication while
ner, 2001; Song & Benedetto, 2008). mechanical structures have asymmetrical systems of
internal communication. Similar results were found
Supplier integration refers to the collaborative in-
in the study conducted by Kim (2005), in which or-
volvement of suppliers with the buyer organiza-
ganic structure is positively correlated with sym-
tion, providing operational (Sahin & Robinson,
metrical communication and negatively correlated
2002) as well as strategic information (Shah, Gold-
with asymmetrical communication.
stein, & Ward, 2002) and supporting activities, such
as new product development processes (Koufte- The flow of information and intensity of communi-
ros, Nahm, Cheng, & Lai, 2007). In comparison to cation as well as horizontal and vertical integration
cross-functional integration, supplier integration depends on the level of centralization, flatness, and
refers to external linkages, also known as verti- horizontal integration, among other organizational
cal linkages (Porter, 1985) between organizations structure variables. An organization structure can
and their suppliers (Frohlich & Westbrook, 2001). stimulate or inhibit the flow of communication by
Because of its strategic nature, supplier integra- developing mechanisms to encourage participation
tion can be characterized by the collaborative and and information sharing. Aiken, and Hage (1971)
long-term relationship between buyer and supplier found that, in less complex, less formal, and decen-
(Narasimhan & Kim, 2002; M. Swink, Narasimhan, tralized organizations, communication is greater
& Kim, 2005), involving high levels of trust, com- than in complex, formal, and centralized ones. Lo-
mitment and information sharing (Heide & John, cus of decision-making tends to increase commu-
1990; Heide & Stump, 1995). nication because a participatory work environment
facilitates the involvement and communication
Customer integration is defined as the collaborative among employees, whereas centralization reduces
involvement of customers with the buyer organiza- participation of employees, decreasing communi-
tion, strategically sharing information and knowl- cation. Participative decision making stimulates
edge about their needs and buyer organization’s communication and information flow in the entire
product performance, such as quality, delivery time, organization (Kanter, 1983). Few hierarchy levels
and cost. Similarly conceptualized by other authors reduces the number of people involved in the com-
(Frohlich & Westbrook, 2001; Swink & Song, 2007; munication process, increasing its speed and accu-
Vickery et al., 2003), customer integration is also part racy (Damanpour, 1991; Hull & Hage, 1982). Thus,
of external and vertical linkages of buyer organiza- vertical communication tends to be more developed
tions, in this case, linkages between a given organi- in flatness organizations when compared to orga-
zation and its customers. Close and collaborative nizations with numerous hierarchy levels. Because
relationships with customers may be an important of increase in the knowledge sharing and training
factor influencing supply chain performance (Stank of employees, high levels of horizontal integration
et al., 2001 ), market performance (Swink & Song, tends to increase the level of internal communica-
2007), and innovation (Koufteros et al., 2005; Urban tion (Damanpour, 1991; Vonderembse et al., 1997).
& von Hippel, 1988). Specialized employees are more likely to share their
ideas in a high horizontally integrated organization.
Therefore, we conceptualize that:
3.4. The relationship between organizational struc-
ture and internal communication
Proposition 1a: Centralization is negatively related
to internal communication.
Organizational structure is recognized by many
authors to have effects on the level of internal com-
Proposition 1b: Flatness is positively related to inter-
munication (Grunig, 2002; Hall, 1977; Klauss & Bass,
nal communication.
1982). According to Robbins (1990), organizational
structure determines the pattern of communication Proposition 1c: Horizontal integration is positively
as well as the formal lines of interaction between related to internal communication.
individuals within organizations. In a research
conducted by Holtzhausen (2002), organizational
3.5. The relationship between internal communica-
structural changes results in information flow and
tion and integration
face-to-face communication improvements. Grunig
et al. (2002) show that organic structures have sym- Internal communication is assumed to enhance inter-
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81 75
nal and external organizational integration because to feedback. In addition, integration with suppliers
it increases the interaction and flow of information helps improvement of innovation, cooperation, and
between employees, allowing them to improve co- problem solving (Frohlich & Westbrook, 2001), al-
ordination of activities. Because of the richness com- lowing organizations to acquire and mobilize com-
munication between cross-functional teams, depart- plementary knowledge resources (Koufteros et al.,
ments and functions, employees can develop closely 2007). In fact, the lack of internal and external sup-
relationships and collaborative behaviors to one an- ply chain integration has been recognized by many
other. At the same time, these internal linkages al- authors as sources of potential problems such as
low employees in the entire organization to have a cost increase as well as quality and delivery prob-
better and fast understanding about suppliers’ and lems (Clark 1996; Flynn, Schroeder, & Flynn, 1999;
customers’ needs. Wheelwright & Bowen, 1996).
Empirical studies have found positive effects of inter- Internal integration reduces uncertainty by improv-
nal communication on a variety of organization out- ing communication between departments. Cross-
comes, including inter-functional integration (Gupta, functional teams composed of specialized employ-
Raj, & Wilemon, 1985), harmony between functions ees with different background and knowledge can
(Souder, 1988), coordination (Gupta & Wilemon, share information and improve the decision mak-
1990), and market orientation (Kohli & Jaworski, ing process. Because of the early involvement of
1990). Much research in supplier integration is also participants, this enriched decision making process
based on the assumption of internal communication helps to clarify product requirements before money
as a way to properly make use of suppliers’ knowl- has been invested on a new product (Gupta & Wi-
edge and achieve superior performance (Koufteros lemon, 1990). Information sharing and technology
et al., 2007; Swink & Song, 2007; Vickery et al., 2003). help teams to develop better product and new fea-
Conceptualizing about customer integration compe- tures, enhancing product performance (Rosenthal &
tence, Jacob (2006) demonstrates that communication Tatikonda, 1992). For example, interactions between
is an important competence that organizations must marketing and manufacturing tend to have strongly
possess in order to successfully integrate with their effects on product design quality (Swink & Song,
customers. We, then, conceptualize: 2007). Other studies have demonstrated the positive
impact of internal integration on delivery time per-
Proposition 2a: Internal communication is positively
formance (Brown & Eisenhardt, 1995; Clark & Fuji-
related to internal integration.
moto, 1991; Swink et al., 2007; Tesarolo, 2007).
Proposition 2b: Internal communication is positively
Proposition 3a: Internal integration is positively re-
related to supplier integration.
lated to product innovation performance.
Proposition 2c: Internal communication is positively
Proposition 3b: Internal integration is positively re-
related to customer integration.
lated to quality performance.
Proposition 3c: Internal integration is positively re-
3.6. The relationship between integration and manu-
lated to delivery time performance.
facturing performance
Proposition 3d: Internal integration is positively re-
Literature has strongly suggested the relationship
lated to flexibility performance.
between organizational integration and organiza-
tions’ performance outcomes (Ettlie & Reza, 1992;
Proposition 3e: Internal integration is positively re-
Frohlich & Westbrook, 2001; Koufteros et al., 2007;
lated to cost performance.
Koufteros et al., 2005; Paulraj & Chen, 2007; Sarah
& Stock, 2003; Tesarolo, 2007). Organizations with Because suppliers can be viewed as strategic col-
high levels of internal and external integration are laborators, supplier integration can stimulate the
more likely to regularly examine their performance long-term commitment and collaboration and en-
compared to other competitors that are not integrate hance information sharing and trust with the buyer
because they are constantly interacting and receiv- organization. Under these circumstances, suppliers
ing information from their external partners. Also, can provide information feedback about materials,
these organizations can identify customers’ needs pricing, and process capabilities for improvement
more quickly because they are more likely exposed of quality, as recently demonstrated by empirical
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
76 ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81
studies (Koufteros et al., 2007; Koufteros et al., 2005; on organization performance outcomes (Frohlich &
Swink & Song, 2007; Swink et al., 2007). Such infor- Westbrook, 2001; Swink et al., 2007). However, there
mation feedback can also help organizations to early is little evidence on customer integration effects on
detect product quality problems and design better quality. For instance, Koufteros et al. (2005) and
product and production processes. Suppliers’ in- Swink et al. (2007) did not find a statistically signifi-
volvement in early stages of new product develop- cant relationship between customer integration and
ment can also shorten and speed it up (Clark 1989; quality. We, therefore, conceptualize:
Tesarolo, 2007). Moreover, the benefits of external
Proposition 5a: Customer integration is positively
integration can be exemplified through the work of
related to product innovation performance.
Rosenzweig et al. (2003). These authors demonstrate
the positive effects of supplier and customer integra-
Proposition 5b: Customer integration is positively
tion on product quality, delivery reliability, process
related to delivery time performance.
flexibility, and cost. Other example is the work of
Vickery et al. (2003) that show how external integra- Proposition 5c: Customer integration is positively
tion leads to a better customer service performance, related to flexibility performance.
measured in terms of pre-sale customer service,
product support, responsiveness, delivery speed,
4. DISCUSSION
and delivery dependability. Therefore, we concep-
tualize: Our theoretical model attempts to integrate ante-
cedents and consequences of supply chain integra-
Proposition 4a: Supplier integration is positively re-
tion. In doing so, the model gives a step further in
lated to product innovation performance.
terms of looking the supply chain concept in a more
Proposition 4b: Supplier integration is positively re- integrative, comprehensive, and realistic manner.
lated to quality performance. Firms are constrained by their organizational struc-
tures and may have limited options for integration
Proposition 4c: Supplier integration is positively re- with their customers and suppliers. For example, a
lated to delivery time performance. large firm that centralize its decision making pro-
cess tends to lower the speed to which information
Proposition 4d: Supplier integration is positively re-
flows inside the organization because it has to fol-
lated to flexibility performance.
low all hierarchical levels from bottom to up and
Proposition 4e: Supplier integration is positively re- vice-versa. In this case, we can argue that the larger
lated to cost performance. the firm, the lower tends to be the speed to which the
information flows. Another example is the case of
By providing valuable information, customers can multi-functional employees who perform multiple
also be perceived as strategic collaborators and be tasks simultaneously. In this case, the organization
integrated in the organization. Customer integra- may increase integration because employees have a
tion, in this case, can yield many benefits to orga- much broader view about organizational processes
nizations because customers can provide informa-
and may be aware that the result of their tasks has
tion such as their needs as well as organizations’
impact for other parts of organization. Thus, from
product performance. The evaluation of products
this perspective, our theoretical model tries to in-
and the feedback provided by customers can reduce
clude these nuances by viewing some aspects of
uncertainty and help organizations to develop bet-
organization as antecedents for integration through
ter quality products (Stump, Athaide, & Joshi, 2002).
the lens of communication.
Such information is fundamental for new product
development that meets customer expectation. In Also, the model proposes a more holistic view of
their study, Stank et al. (2001 ) found positive rela- supply chain management because it provides a
tionship between customer integration and multiple perspective that begins and finishes inside the or-
organization performance variables, including de- ganization but encompasses other organizations. In
livery speed, responsiveness, and flexibility. These other words, the perspective provided here starts
authors conclude that “customer integration is the with the organizational structure, passes through
most critical competency associated with improved customers and suppliers, and goes back to organi-
performance” (Stank et al., 2001 p. 39). Other authors zation performance. In doing so, the model calls at-
also found positive impact of customer integration tention constructs not usually discussed in supply
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81 77
chain management literature, like internal commu- and new firms, on the other hand, may not have an
nication. Internal communication is a construct that organizational structure that is stable and complete
serves as a bridge to the theoretical gap existent be- because they may still be in a growing process and
tween organization structure variables and integra- many changes are yet to come. Thus, stability of or-
tion. It is through the internal communication pro- ganizational structure may be an assumption per-
cess that employees talk to each other and commu- taining our proposed model because it allows for
nicate managers about information captured from organizational structure variables have an effect on
customers and suppliers. It is the internal commu- internal communication and, subsequently, on inte-
nication the managers can design procedures and gration and performance.
policies to take advantage of closeness to customer
and suppliers. Such closeness and information are,
5. CONCLUSION
then, worked by managers, which create and modi-
fy tasks to allow for reconfiguration of resources and This paper proposed a comprehensive conceptual
improvement of performance. model to understand how organizational struc-
ture may be related to organization integration. We
However, our model becomes complex to empiri-
viewed organizational structure resulting from three
cally work with since many constructs and variables
major constructs: centralization of decision making
come into play to portray this more realistic and
process, flatness of organization, and specialization.
detailed perspective of supply chain integration.
We conceptualized organization integration as a
Perhaps this is the reason why such models are not
multi-dimensional construct encompassing internal
commonly presented in the literature. That is, the
as well as customer and supplier integration. In addi-
fact that our theoretical model attempts to provide
tion, by using internal communication as an interme-
a more comprehensive nature of supply chain inte-
diate construct, we explored how such internal and
gration becomes also its potential weakness since it
external integration may affect manufacturing per-
is not so parsimonious to be easily operationalized.
formance. To help us understand and explain how
For instance, there are multiple propositions to be
all these variables are related, we follow the organi-
tested, which in turn may affect the degrees of free-
zational structure literature and resource-based view
dom necessary to empirically test all these proposi-
perspective. We presented a series of propositions
tions. A general model, like the one proposed in this
that summarize the conceptualized relationships.
study, needs some contextual variables that help to
delimit the findings according to other variables like One contribution of our paper is to come up with
the industry or type of product, like in the study de- a model that conciliate organizational and supply
veloped by Flynn et al. (2010) and Wong et al. (2010). chain integration and theorize about their impact
In other words, this model needs some moderator on manufacturing performance. Most studies litera-
variables that help us distinguish results in firms ture in operations and supply chain management
with distinct characteristics not included here, like investigate only part of these two forms of integra-
size and technology, for example. However, inclu- tion, but not both. We attempted to organize previ-
sion of additional moderator variables may result in ous studies into a coherent framework that include
a large number of additional propositions that may both forms of integration. Other contribution is to
impede the model to be empirically tested. For this propose a model that takes into account the major
reason, the model can be viewed a starting point for antecedents of organizational integration and how
other models attempting to encompass a more real- they impact on internal integration. By doing this,
istic perspective of supply chain phenomenon. we bring some of the already established variables
existent in the organization theory to operations and
Finally, it is important to mention that the model
supply chain literature. Finally, our paper discusses
and propositions are more appropriate for analysis
and theorizes about factors influencing manufactur-
of large and older firms than for analysis of small
ing performance, a critical issue for studies in op-
and new ones. Large and older firms already passed
erations and supply chain management, since they
through the process of structuring themselves and
need more theory building approach.
are more likely to be mature in terms of organiz-
ing their processes internally. That is, organization This paper presents some limitations and opportuni-
structure of large and older firms tends to be stable ties for future research. First, as a conceptual work,
and has only minor changes along the years. Small this paper has to be subject to empirical scrutiny in
Teixeira, R., Koufteros, X. A., Peng, X. D.: Organizational Structure, Integration, and Manufacturing Performance: a Conceptual Model and Propositions
78 ISSN: 1984-3046 • Journal of Operations and Supply Chain Management 5 (1), pp 69 - 81
order to verify whether the propositions presented Chen, Injazz J., & Paulraj, Antony. (2004). Towards a theory of
here hold in practice. In this sense, future research supply chain management: The constructs and measure-
ments. Journal of Operations Management, 22, 119-150.
could collect empirical data from different manu-
facturing sectors to test the validity of this model. Clark , K. B. (1989). Project scope and project performance: The
Second, because our model is a first step to under- effect of parts strategy and supplier involvement on product
development. Management of Science, 33(10), 1247-1263.
stand the effects of organizational and supply chain
integration on performance, it is not exhaustive and Clark , K. B. (1996). Competing through manufacturing and new
some variables and relationships is not included in manufacturing paradigm: Is manufacturing strategy passe?
it. For this reason, future studies could contribute to Production and Operations Management, 5(1), 42-58.
the literature by proposing new variables as well as
Clark, K. B., & Fujimoto, T. (1991). Product development perfor-
new relationships not previously discussed. Finally, mance. Boston: Harvard Business School Press.
our model is limited to manufacturing firms and
Clark , K. B., & Wheelright, S.C. (1992). Organizing and leading
our propositions may not hold in the case of service
heavyweight development teams. California Management Re-
firms. We suggest other scholars to use our model as view, 34(3), 9-28.
a first step toward the construction of a theoretical
Daft, R. L. (1995). Organizing theory and design (5th ed.). St. Paul:
model to better understand how organizational and
West Publishing Company.
supply chain integration can also have an impact on
performance of service firms. That is, our model can Damanpour, F. (1991). Organizational innovation: A meta-anal-
be used as a basis for development of other models ysis of effects of determinants and moderators. Academy of
Management Journal, 34(3), 555-590.
that employ some of our insights and ideas to evalu-
ate performance of service firms. Davenport, T., & Nohria, N. (1994). Case management and the
integration of labor. Sloan Management Review, 35(2), 11-23.
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