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The effects of integrated supply management practice

and environmental management practices on relative

competitive quality advantageRam Narasimhan

a & Tobias Schoenherr

a

a Department of Supply Chain Management, Michigan State University, East Lansing, USA

Published online: 29 Jun 2011.

To cite this article: Ram Narasimhan & Tobias Schoenherr (2012): The effects of integrated supply management practices

and environmental management practices on relative competitive quality advantage, International Journal of ProductionResearch, 50:4, 1185-1201

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International Journal of Production Research

Vol. 50, No. 4, 15 February 2012, 1185–1201

The effects of integrated supply management practices and environmental

management practices on relative competitive quality advantageRam Narasimhan and Tobias Schoenherr*

Department of Supply Chain Management, Michigan State University, East Lansing, USA

(Received 22 July 2010; final version received 2 December 2010)

Superior quality continues to be central to a manufacturing company’s success, and firms are constantlystriving for quality advantage over their competition. It is therefore crucial for companies to ensure the soundpractice of quality management principles. However, companies must also seek additional avenues to enhancethe relative competitive quality advantage of their product offerings. In this context, we examine the role of integrated supply management practices (SMP) and environmental management practices (EMP) as driversof actual and perceived quality. We suggest that these groups of practices, in addition to quality managementpractices, are crucial in an increasingly transparent, competitive and global business environment. As such,SMP can be leveraged with suppliers providing expertise, capabilities and high quality inputs for the finalproduct, resulting in higher actual quality, but also via the suppliers’ more intangible reputation, generatinghigher perceived quality. Similarly, EMP can result in process improvements impacting actual quality, but canalso create a favourable image of the company among customers, enhancing the perceived quality of the firm’sproducts. Overall, we suggest SMP and EMP as key strategic drivers aiding in the further differentiationof firms. Our hypotheses are grounded in the resource-based view of the firm, and are tested with survey datacollected from 434 manufacturing plants.

Keywords: integrated supply management; environmental management; relative competitive quality advan-tage; resource-based view of the firm

1. Introduction

Quality management remains a key ingredient for competitive success (Flynn et al . 1995, Soteriou and Chase 2000,

Hendricks and Singhal 2001), and has developed into a major research stream in production research (Nair 2006).

Firms strive for sustainable relative quality advantage to differentiate themselves from their competition (Choo et al .2006), and for many leading manufacturers quality is the cornerstone of competitive advantage (e.g. Honda 2008).

Relative competitive quality advantage, i.e. the delivery of quality that is superior to one’s competitors, is therefore

a key for competitive success.

It is undisputed that quality management practices (QMP) can lead to superior quality outcomes (Dow et al .

1999) and increased quality performance (e.g. Choi and Eboch 1998, Samson and Terziovski 1999, Linderman et al .

2003, Nair 2006). However, past studies have suggested that not all quality management practices lead to a better

quality performance (Dow et al . 1999), and that there may also be other factors contributing to quality (Flynn et al .

1995). Furthermore, in addition to practices that contribute to improving the actual quality of a product, it may also

be important for firms to consider the impact on perceived quality that certain actions may have, a domain relegated

primarily to marketing. Within this context it is the objective of the present paper to explicate additional drivers

(i.e. initiatives in addition to traditional quality management practices) of both actual and perceived quality that

can lead to a relative competitive quality advantage (the terms ‘quality’, ‘relative competitive quality’ and ‘relative

competitive quality advantage’ will be used interchangeably) in today’s global environment. We define relativecompetitive quality advantage as a firm’s quality performance relative to its competitors, i.e. our performance

measure is not an absolute quality measure of a firm’s products.

The two practices we focus on as having a notable impact on relative competitive quality advantage are

integrated supply management practices (SMP) and environmental management practices (EMP). Firstly,

integrated SMP refer to the effective utilisation of the suppliers’ expertise, capabilities and high-quality inputs to

produce the final product (which has an effect on actual quality), as well as the appropriate exploitation of the

*Corresponding author. Email: [email protected]

ISSN 0020–7543 print/ISSN 1366–588X online

2012 Taylor & Francis

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suppliers’ reputation for the reliability and durability of its products (which has an effect on perceived quality). We

chose integrated SMP as a potential determinant since a supplier’s components oftentimes become a central part of

a firm’s final product, and can thus contribute significantly to its ultimate quality (Narasimhan and Das 1999, Chen

et al . 2004). Manifestations for heightened SMP at the manufacturing plant level can for example be the presence

of strategic alliances/partnerships or formal supplier development programs. A distinguishing characteristic of SMP

as opposed to most traditional quality management practices, such as total quality management, is its external

orientation, i.e. the leverage of outside supply-chain partners for relative competitive quality advantage. Secondly,

EMP may be able to impact actual quality through process improvements, new materials, different material

specifications and sourcing decisions; environmental management excellence has therefore been called the key to

improving operations (Corbett and Klassen 2006). EMP can further increase perceived quality by creating

a favourable perception and image of the firm, and its products, among customers. We chose to include EMP

in our model since prior research has suggested a relationship between environmental management excellence

and improved operations (Corbett and Klassen 2006), and since a firm’s engagement on the environmental front

may generate a better image for it among increasingly environmentally conscious customers. With this investigation

we are therefore also contributing to the literature on environmental management in the supply chain, which has

been characterised as sparse (Vachon and Klassen 2007). Manifestations of heightened EMP at the manufacturing

plant level can be visible in the extent of use of EMP, such as pollution prevention initiatives, recycling and waste

reduction efforts. Overall, we suggest that while traditional quality management practices, such as statistical process

control or Six Sigma, are still important, integrated SMP and EMP may supplement the QMP efforts of firms to

achieve relative competitive quality advantage.Both SMP and EMP are of great interest to academics and practitioners due to the trend toward outsourcing

and the increased environmental awareness of consumers. Our research is therefore grounded in both theoretical

and practical motivations. From a theoretical perspective, our research is motivated by the resource-based view

(RBV) of the firm. The basic premise of RBV is that valuable, rare, inimitable and non-substitutable capabilities

represent resources that can lead to sustainable competitive advantage (Barney 1991). These characteristics, it can be

argued, are also a function of the resource’s ‘embeddedness’ and its ability to adapt to changes in the competitive

environment. We explicate SMP and EMP in terms of the resource-based view and provide theoretical arguments

for their potential to contribute to both actual and perceived quality.

From a practical perspective, firms are constantly striving to increase their relative quality advantage over their

competition, while maintaining cost at or below the same level. This objective must be pursued against the pressure

to raise asset productivity and the need to contribute to the top line performance of firms. Against this background,

the principal question that needs to be answered is: what investments should be made to achieve relative quality

advantage over competition? An examination of overall quality ratings of automobiles by J.D. Power andAssociates (www.jdpower.com) and Consumer Reports (www.consumerreports.org) suggests that American

automotive manufacturers have achieved near parity in quality with Japanese automakers, especially in measurable

quality attributes, compared with 30 years ago. American car manufacturers lag, however, in customer perception of

product quality (ALG 2009). While the Japanese continue to enjoy superior perceived quality, the challenge faced

by the American automotive industry lies in how to erase this ‘perception deficit’. Recent advertising campaigns by

American carmakers’ attempt to overcome this perceived shortfall by positioning themselves as being ‘as good as’

Japanese car brands; for example Buick, calls itself ‘the new class of world class’ and presents itself as a comparable

alternative to Lexus (Buick 2010). In view of this perception deficit, it can be argued that while actual comparative

product quality as a result of traditional quality management practices may be quite similar, comparative quality as

perceived by the consumer can be a crucial differentiator. In addition to QMP, firms should thus strive for

additional relative competitive quality advantage by means of non-QMP initiatives like integrated SMP and EMP.

Specifically, since most firms are not completely vertically integrated, suppliers may have a significant influence on

the relative competitive actual and perceived quality of the product. Similarly, efforts in the environmental area may

pay off in process improvements resulting in better actual quality, as well as a better public image of the firm,

generating a greater perceived quality.

2. Hypothesis development

2.1 The impact of integrated supply management practices

Prior research has suggested that there are factors other than quality improvement efforts that may lead to a relative

competitive quality advantage (Flynn et al . 1995). With greater customer value and competitive advantage being

1186 R. Narasimhan and T. Schoenherr

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the overriding objectives of supply management (Wisner 2003), we contend that integrated SMP of the firm, such as

strategic alliances or formal supplier development strategies, can impact relative competitive quality. Integrated

supply management, which can be defined as practices dealing with the effective and efficient management of the

supply base (Talluri and Narasimhan 2004), has been shown to impact overall firm performance (Narasimhan and

Das 1999, Scannell et al . 2000, Chen and Paulraj 2004, Chen et al . 2004), elevating the importance of appropriate

sourcing strategies (Elmaghraby 2000). We thus expect a similar relationship between these practices and relative

competitive quality advantage.Integrated supply management has become increasingly important for firms due to the focus on core

competencies, outsourcing, globalisation, increasing customer demands and competitive pressures (Lawson et al .

2009, Melnyk et al . 2009). Outsourcing is associated with a decreased direct control over product and process

quality and increased dependency on suppliers for product quality. The relationship with suppliers therefore needs

to be managed and monitored carefully, especially in terms of product and process quality. From a practical

perspective, this was demonstrated by the recent recalls of consumer products due to poor supplier quality

(Story 2007, FDA 2008), which illustrated the vital role of SMP in ensuring quality, as well as its effect on customer

perceptions of the firm and its products. SMP, however, cannot only assure acceptable quality levels, but also

provide additional value by increasing relative competitive quality advantage, i.e. a level of product performance

that exceeds the product performance of the competition, which is a necessary ingredient for differentiation.

For example, the exclusive use of the security, communications and diagnostics system OnStar in General Motors

vehicles provides the car manufacturer with a competitive advantage also in terms of quality – the presence of

OnStar can be a key feature requested by consumers, adding to the perceived quality of the automobile. Furthersupport is provided by arguments in Holweg and Pil (2008) and Barrat and Oke (2007).

From a theoretical perspective we suggest that integrated SMP are crucial resources under the RBV that can lead

to a relative quality advantage (Wernerfelt 1984, Barney 1991). The unique knowledge that can be created in the

buyer–supplier relationship, may represent such a distinctive pairing of individual capabilities and intangibles, and

can create such valuable, rare, inimitable and non-substitutable resources (Rungtusanatham et al . 2003). We label

SMP as valuable since they can help improve a firm’s effectiveness and efficiency by ensuring closer interaction with

supply-chain partners. Such collaboration and information sharing can, for example, lead to quality-improvement

suggestions hitherto not considered by the manufacturing firm. SMP can also be rare, in that, they cannot be

acquired easily or automatically: time, effort, trust and conviction are needed to successfully implement and use

these practices (Krause 1999). SMP as a resource can further be inimitable in that it needs to be developed and

refined over time to achieve its greatest potential; knowledge and experience play key roles in this regard. SMP can

also be non-substitutable since other resources or practices are not able to deliver the same benefits. This relates

especially to the often dynamic and unique one-to-one relationship created between a buyer and a supplier. Forexample, such interaction and the potential combination of unique skills, capabilities, viewpoints and backgrounds

can enable the improvement or development of new, innovative and high-quality products (e.g. Koufteros et al .

2005, Jayaram 2008). SMP thus have the potential to provide a competitive disparity that is beneficial to the firm.

Additionally, the interaction with suppliers in this strategic fashion can significantly increase the tacit knowledge

inherent in the relationship, and thus lead to a competitive advantage for both the buyer and the supplier (Polanyi

1983, Linderman et al . 2004). Tacit knowledge, which can itself be a resource, consists of skills, know-how and

contextual knowledge, suggesting the notion of embeddedness (Li et al . 2008). It is often subconscious, and is

therefore difficult to formalise and communicate (Nonaka 1994). Further theoretical support is provided by the

knowledge-based view of the firm (Grant 1996). Since the creation of knowledge can be a socially complex process

requiring significant organisational learning, the knowledge-base and capabilities developed can be a source of

sustainable competitive advantage (Huang et al . 2008). In these instances knowledge constitutes a resource

(Hult et al . 2006, Paiva et al . 2008). Overall, based on these arguments we formulate our first hypothesis as follows:

Hypothesis 1a: Integrated supply management practices have a positive effect on actual relative competitive quality advantage.

In our next hypothesis we concentrate on the perception of higher relative competitive quality that may be

created by supply-chain strategies. While customers may not be intimately familiar with a firm’s supply-chain

strategy and what it involves (e.g. whether formal supplier development programs are in place, or whether Six Sigma

is practiced within the company), they are influenced by cues received from marketing campaigns and publicity

generated by the firm, which may be easier for the customers to discern. Therefore we suggest that supply-chain

strategy can influence consumer perception and complement marketing efforts to achieve a superior perceived

quality. As such, strategically selecting suppliers based not only on their capabilities, but also on their market

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perception and reputation among consumers, may add to the relative quality advantage of a firm (Babakus et al .

2004). These unique and intangible supplier attributes can be leveraged for an increased perceived quality and

overall greater competitive quality advantage. Considering the near parity of product quality among manufacturers,

the perceptual aspects associated with a product are increasingly becoming important in today’s dynamic fast-paced

and intensely competitive environment. Furthermore, the strategic alliances that are often developed between brand-

name suppliers and buyers can serve as a resource, enabling a more competitive market position, especially when the

sourcing engagements are exclusive. As such, the association with a reputable supplier (part of a strategy based onSMP) can create a positive perception of the product. Consider for example the ‘Intel Inside’ logo, prominently

displayed on personal computers, which is meant to raise the perceived quality of the product by leveraging the

technology reputation of Intel. Since its inception in the early 1990s, this trademark, representing safety, leading

technology and reliability, has been creating a ‘pull’ for Intel-based PCs, and has been providing an assurance

for consumers that the systems are powered by the latest technology (Intel 2010). Similarly, in advertising luxury

automobiles, sales promotions tout ‘Bose stereo system’ or ‘Microsoft Sync Technology’, with the intention

of capitalising on the market reputation of a component supplier. The appeal of such brand names may also apply

for upstream, second-tier suppliers; tier one suppliers themselves may be perceived more favourably (and

thus receive more favourable treatment, for example better delivery terms) by second-tier suppliers when the

ultimate customer is a prominent firm such as IBM. Overall, perceived higher quality derived from SMP may

set products apart that are not necessarily different in actual quality (Stuart 2000). We therefore suggest:

Hypothesis 1b: Integrated supply management practices have a positive effect on perceived relative competitive quality

advantage.

2.2 The impact of environmental management practices

Besides integrated supply management, environmental management practices may be a key contributor to relative

competitive quality advantage. These can be defined as ‘techniques, policies and procedures a firm uses that are

specifically aimed at monitoring and controlling the impact of its operations on the natural environment’

(Montabon et al . 2007, p. 998), and can manifest themselves in activities related to pollution prevention, recycling

and waste reduction. The link between environmental management and firm performance has been established

in past studies. For example, Russo and Fouts (1997) found that corporate environmental performance and

profitability are positively linked, and Klassen and Whybark (1999) confirmed the impact of environmental

technologies on manufacturing performance. Furthermore, environmentally conscious manufacturing is becomingincreasingly important to the end customer, and therefore is an imperative for firms striving for superior customer

satisfaction (e.g. Deutsch 2005, Blumenstyk 2006). The practice of environmental management principles could thus

have a considerable impact on both the actual and perceived relative competitive quality advantage.

Let us first focus on the impact of EMP on actual relative competitive quality advantage. A related link was

asserted by Pil and Rothenberg (2003) who found a significant synergetic relationship between environmental

performance and superior quality. The authors attributed this link to environmental management practices, since

they often utilise approaches and techniques that are similar to those employed in quality improvement efforts such

as root-cause analysis and data tracking. A spillover effect due to learning and experience in the use of these

methods can then occur, contributing to superior quality and superior environmental performance. Similarly,

environmental management practices can lead to a more effective management of internal capabilities and

innovation, as has been illustrated by past studies. For example, a firm engaging in recycling may re-evaluate the

materials it uses in its products, leading to the discovery of innovative uses of current materials (Montabon et al .

2007). Such re-evaluation can also lead to the inclusion of a new or innovative material with subsequent effectson product quality. Parallels can further be seen in Klassen and McLaughlin (1996) who suggested that both

environmental management and quality management practices aim at achieving similar types of objectives.

Further, environmental management may be a manifestation of underlying management processes, including

those for quality, thus enabling greater relative quality advantage (Alexander and Buchholz 1978). Synergies

between environmental management and quality were also noted by Karapetrovic and Willborn (1998).

In addition, Greening and Turban (2000), who suggested a link between a firm’s environmental performance

and the attraction of a high-quality workforce, provide additional support for the link between EMP and product

quality.


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We differentiate our work from other studies in that we focus on the link between environmental management

practices and enhanced quality relative to a firm’s competitors (i.e. relative competitive quality advantage).

Specifically, we consider the practices of pollution prevention (Coggburn and Rahm 2005), recycling of materials

(Park and Stoel 2005) and waste reduction (Sharma et al . 2007). All three can serve as competitive resources

enabling better company performance (Sroufe 2003). In terms of our specific outcome of relative competitive quality

performance, these practices may lead to the identification of better processes and product alternatives, ultimately

leading to a better relative competitive quality.Based on these studies and utilising a similar rationale as in our development of Hypothesis 1a, we suggest

that EMP can represent valuable resources that may lead to an advantage in terms of relative competitive

quality. This is in line with research assessing core resources in environmental management (Arago ´ n-Correa and

Sharma 2003, Sroufe 2003, Wu et al . 2008). Additional support is provided by the natural resource-based view of the

firm, which considers a firm’s relationship to its natural environment as a source of competitive advantage

(Hart 1995). More specifically, Hart (1995, p. 991) noted that ‘it is likely that strategy and competitive advantage

in the coming years will be rooted in capabilities that facilitate environmentally sustainable economic activity’.

Furthermore, EMP are often context dependent and embedded in the manufacturing practices and systems

of an organisation. For example, pollution prevention is influenced by manufacturing and procurement practices.

The recycling of materials is influenced by product design, material specifications and use, and remanufacturing

practices. For instance, when aiming at greater recyclability and better pollution prevention, innovative processes

and product alternatives can be discovered that have a synergetic and simultaneous effect on product quality. The

intensity and the effective use of EMP are thus unique to firms, and can represent a valuable resource. We thereforeargue that EMP can lead to a greater actual relative competitive quality advantage:

Hypothesis 2a: Environmental management practices have a positive effect on actual relative competitive quality advantage.

Similar to the rationale for Hypothesis 1b, we focus in Hypothesis 2b on the effect of EMP on perceived relative

competitive quality advantage, i.e. the potential of a firm’s environmental stance to influence the perception created

in the marketplace concerning its relative quality. While customers may not necessarily be familiar with a firm’s

internal environmental strategy (e.g. how a plant disposes of its hazardous waste, and what initiatives are in place to

reduce this waste), they are susceptible to cues received from public relations initiatives emphasising the firm’s

environmental efforts. The practice of environmental management may thus represent a radical shift of the firm’s

public perception and reputation. The significance of this effect is especially heighted in the current environment

where environmentally conscious behaviour is becoming increasingly important to consumers (Klassen and

McLaughlin 1996). Such positive perceptions of the firm on the environmental front may translate into better

perceived quality of the firm’s products (Lindgreen et al . 2009) and lead to the consumer’s ultimate purchase

of the product (D’Souza et al . 2006). Several companies, such IKEA (IKEA 2009) and others listed in the

‘eco friendly companies’ directory’ (www.ecofirms.org), provide illustrative examples. Esty and Winston (2006),

in their book Green to Gold , further chronicle how companies are utilising their green strategies for competitive

advantage.

Additional support for this premise is provided by Russo and Fouts (1997) who showed that the environmental

reputation possessed by a firm can lead to additional sales. This is due to the increasing importance placed on these

issues by concerned customers, which can, for example, manifest itself in the demand for green product certifications

(Pagell et al . 2007, Vachon 2007). Pagell et al . (2007) concluded that competitive advantage can be achieved by

a reputation for ‘being green’, which they labelled as a valuable resource. Consumers may also associate a higher

relative quality with a product from a firm that utilises EMP, making the association that a firm, which is

responsible in its environmental management, must also be thorough in its quality management. This was illustrated

by Pil and Rothenberg (2003, p. 413), who noted that ‘firms that have attained superior performance on theenvironmental front are able to leverage those efforts to enhance their quality profile’ (emphasis added), and by

Shrivastava (1995, p. 198), who concluded that firms can achieve a competitive advantage by catering to the

‘ecological concerns of ‘‘green’’ customers’. Similarly, Miles and Covin (2000) suggested that environmental

performance is a fundamental aspect of a firm’s reputation. Thus positive perception of a firm’s image and

reputation, and its spill-over effects to relative perceived quality, as well as the perception of higher levels of

innovativeness (an aspect of quality) by firms pursuing ‘green practices’, lead us to put forward our last hypothesis:

Hypothesis 2b: Environmental management practices have a positive effect on perceived relative competitive qualityadvantage.


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Maloni and Benton 1997), supply base rationalisation (e.g. Cousins 1999, Das and Narasimhan 2000, Ogden and

Carter 2008) and formal supplier development (e.g. Hartley and Choi 1996, Krause and Scannell 2002, Yeung 2008).

Common to all these practices is their focus on quality and other capabilities from external entities in order to gain acompetitive advantage. The construct environmental management practices includes the three dimensions of

pollution prevention (e.g. Klassen and Whybark 1999, King and Lenox 2002), recycling of materials (e.g. Montabon

et al . 2007, Sirsly and Sur 2008, Lexus 2009) and waste reduction (e.g. Shah and Ward 2007, Sharma et al . 2007).

Respondents were asked to what extent the plant had invested resources in these programs in the last two years,

assessed on a scale from ‘not at all’ (value¼1) to ‘to a great extent’ (value ¼7).

The construct quality management practices, which will serve as a control variable, includes five approaches

commonly associated with quality management: total quality management (e.g. Flynn et al . 1995, Kaynak and

Hartley 2008), ISO 9000 certification (e.g. Singh 2008, Martı ńez-Costa et al . 2009), supplier certification (e.g.

Juran 1979, Flynn et al . 1994, 1995, Terziovski et al . 1997, Simpson et al . 2002), statistical process control

(e.g. Flynn et al . 1995, Rungtusanatham 2001) and Six Sigma (e.g. Schroeder et al . 2008, Zu et al . 2008). These

practices relate not only to initiatives aimed at manufacturing process or technology improvements, but cover

a broad set of quality management approaches. Common to all these practices is their mostly internal orientation

and the focus on shop-floor processes. Similar to above, respondents were asked to what extent the plant had

invested resources in these programs in the last two years.

Three additional variables were included to control for exogenous effects. First, since our study relied on data

from eight different countries, we controlled for country-specific effects (Harzing and Sorge 2003). While country-

specific differences can be of interest, this was not the goal of our present research. Second, as a proxy for resource

endowments and the ability of a firm to pursue quality-related practices, we included the size of the company as

a further control. And third, similar as in Ketokivi and Schroder (2004), we controlled for process choice of whether

the manufacturing environment of a firm was primarily characterised by an engineer-to-order, a make-to-order,

an assemble-to-order or a make-to-stock setting.

Table 1. Sample characteristics.

Calibration sample Holdout sample

N Percentage N Percentage

CountryAustralia 31 11.49% 19 11.56%

Austria 11 5.11% 6 10.05%China 32 25.11% 25 28.14%Germany 33 12.77% 26 12.06%Italy 30 14.04% 24 13.07%South Korea 59 13.62% 56 12.56%Sweden 12 13.19% 20 9.55%Taiwan 27 4.68% 23 3.02%

Total 235 100.00% 199 100.00%

Number of employees1–49 60 25.86% 34 17.17%50–99 44 18.97% 43 21.72%100–499 65 28.02% 61 30.81%500–1999 39 16.81% 39 19.70%42,000 24 10.34% 21 10.61%

Total 232 100.00% 198 100.00%

Manufacturing process choiceEngineer-to-order 24 13.33% 18 11.92%Make-to-order 86 47.78% 73 48.34%Assemble-to-order 21 11.67% 17 11.26%Make-to-stock 49 27.22% 43 28.48%

Total 180 100.00% 151 100.00%


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4. Assessment of psychometric properties: hypothesis tests

4.1 Validity and reliability assessment

Our initial large sample size allowed us to proceed in a rigorous and structured fashion, employing a split-sample

approach with a calibration and a holdout sample. As such, we utilised the calibration sample to refine the

measurement items and their factor scores. In the first step, exploratory factor analysis was conducted to investigate

the underlying factor structure of our sample (Maximum Likelihood estimation, Varimax Rotation with Kaiser

Normalization). The resulting structure led to three uni-dimensional factors, which were confirmed by an

examination of the scree plot. Overall, the factor result explained 55.77% of the variance. A second step subjected

the derived constructs to a confirmatory factor analysis. The model fit the data well (V 2¼151.797; df ¼51).

No measurement items had to be removed, confirming the soundness of our theoretically-based measure

development discussed above. Values for the comparative fit index (CFI) and the non-normed fit index (NNFI)

(Bentler and Bonnet 1980), the two indices most frequently used to assess fit (e.g. Gowen et al . 2006), were 0.958 and

0.946 respectively, i.e. above the recommended cut-off level of 0.900. Alternate fit indices, such as the incremental

fit index (IFI) and the normed fit index (NFI), further confirmed the soundness of our measurement model (0.958

and 0.939 respectively).

Potential common method bias was assessed via confirmatory factor analysis and the Harman’s single-factortest (Boyer and Hult 2005). In the presence of substantial common method bias a single factor would emerge

that accounts for all or most of the variables (Podsakoff and Organ 1986). The uni-dimensional model resulted

in a 2¼355.218 with df ¼54, indicating that the one-factor model has a considerably poorer fit compared with the

proposed model. Thus common method bias was deemed to be not a serious concern.

The final measurement items for the constructs, including their mean, standard deviation, loading, t-value,

standard error, R2, composite reliability and Cronbach alpha values are provided in Table 2; the corresponding

survey questions are provided in the Appendix. Validity and reliability were assessed based on recommendations by

Anderson and Gerbing (1988). Content validity was assured by the development and design of the survey instrument

by an international group of senior researchers. In addition, each measurement item was grounded in empirical

supply chain literature, as illustrated above.

The convergent validity was assessed by assuring that each indicator’s estimated coefficient loads significantly on

its suggested underlying construct, i.e. that the coefficient is greater than twice its standard error. As can be seen

from Table 2, this requirement is fulfilled in all instances, establishing convergent validity. In addition, no significantcross-loadings were present. To test for discriminant validity we examined whether the confidence interval around

the correlation estimates includes 1.0; this was not the case, assuring discriminant validity. As an additional test to

assess discriminant validity we employed the approach suggested by Bagozzi and Phillips (1991). Similar to Handley

and Benton (2009) and Huang et al . (2008), we compared a series of constrained models, in which the correlation

between two pairs of constructs is set to 1.00, to the unconstrained model. Using Chi-square difference tests

the nested models were compared, with a significant difference being indicative of the two constructs being distinct.

The difference in all three possible comparisons was significant at the 0.001 level, further confirming discriminant

validity.

Table 2. Final construct measurement items.

Construct Variable Mean Standard deviation Loading t-value Standard error R2

Quality managementpractices ¼0.851; CR¼0.865

IP26 4.419 1.712 0.623 10.112 0.104 0.388IP27 4.164 2.057 0.752 12.973 0.117 0.565IP28 3.787 1.865 0.861 15.846 0.099 0.741IP29 3.778 1.784 0.816 14.613 0.098 0.666

IP31 3.314 2.136 0.683 11.389 0.125 0.467Integrated supply management

practices ¼0.726; CR¼0.735PR08.B 3.862 1.893 0.716 11.193 0.118 0.513PR08.E 3.954 1.798 0.620 9.391 0.115 0.385PR08.J 4.073 1.569 0.599 9.005 0.102 0.358PR08.L 3.648 1.801 0.616 9.315 0.115 0.380

Environmental managementpractices ¼0.820; CR¼ .0821

IP33 4.292 1.631 0.822 13.827 0.095 0.675IP34 4.473 1.625 0.765 12.626 0.097 0.585IP35 4.930 1.530 0.744 12.192 0.092 0.553

Note: CR: Composite Reliability (Fornell and Larker 1981).


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The confirmatory factor analysis determined uni-dimensionality. As can be seen from Table 2, the measurement

item loadings are all well above the suggested threshold value of 0.30 (O’Leary-Kelly and Vokurka 1998). Reliability

was confirmed via Cronbach alpha (Hair et al . 1998) and the calculation of composite reliability based on Fornell

and Larker (1981). Finally, the construct validity was assured by assessing content validity, uni-dimensionality,reliability, convergent and discriminant validity (O’Leary-Kelly and Vokurka 1998). The evaluation of all of the

construct validity components showed them as having good psychometric properties, establishing the construct

validity of the measures. Correlations of the individual measurement items are provided in Table 3.

4.2 Hypothesis tests

Having established validity and reliability of our multi-item constructs using the calibration sample, ordinary least

squares (OLS) regression analysis was conducted with the holdout sample to investigate the impact of SMP and

EMP, in the presence of QMP and the other control variables, on both actual and perceived quality. Any missing

values were imputed based on the expectation maximum algorithm for multiple imputation.

The control and the independent variables were entered in two separate blocks. The addition of the main inde-

pendent variables (SMP and EMP) in the second block resulted in a significant change in the F statistic, and explaineda significantly greater proportion of the variance in the dependent variable. This provides support for the addition of

the two main independent variables, after controlling for QMP, firm size, country and manufacturing process choice.

Table 4 presents the results of the regression analysis evaluating the impact on actual quality (Hypotheses 1a and 2a),

and Table 5 summarises the results for the variables regressed on perceived quality (Hypotheses 1b and 2b).

Hypothesis 1a was supported, confirming that, after controlling for the impact of QMP, SMP emerges as one

of the enablers of actual quality (¼0.188, p5 0.05) relative to competition. Similarly, EMP had a statistically

significant and positive relationship with actual quality performance (¼0.210, p5 0.05) relative to competition,

confirming Hypothesis 2a. An interesting finding, which is consistent with our arguments above, is that QMP

significantly influenced the actual quality when looked at in isolation, i.e. before the variables SMP and EMP are

entered into the regression equation. As such, QMP was statistically significant in the results of step 1 (¼0.267,

p5 0.01). However, in the presence of SMP and EMP, QMP becomes non-significant. The only other control variable

that was significant, albeit at the 0.1 level, was the dummy variable for make-to-order (¼0.153, p5 0.1), having

make-to-stock as the reference category. This suggests that actual quality is greater in a make-to-order environment.The results in Table 5 provide marginal support for Hypotheses 1b and 2b. Specifically, while our data confirm

the influence of SMP (¼0.160, p5 0.1) and EMP (¼0.156, p5 0.1) on perceived quality, this is at the 0.1

significance level. However, similar to the arguments above, QMP exhibits a significant and positive relationship

with relative perceived quality in step 1 of the regression when only the control variables are present (¼0.293,

p5 0.001). This influence becomes non-significant though in step 2 as SMP and EMP are added to the model. The

final model also includes two control variables as significantly influencing perceived quality. These are the country

dummy variable for Sweden (¼0.173, p5 0.1), having Australia as the reference category, and the dummy

manufacturing process choice variable for make-to-order (¼0.210, p5 0.01), having make-to-stock as the

Table 3. Correlations.

IP26 IP27 IP28 IP29 IP31 PR08.B PR08.E PR08.J PR08.L IP31 IP32 IP33

IP26 1 0.521** 0.486** 0.517** 0.374** 0.397** 0.308** 0.223** 0.242** 0.296** 0.265** 0.197**IP27 1 0.633** 0.630** 0.468** 0 .401** 0 .275** 0 .220** 0 .275** 0 .286** 0.272** 0.302**IP28 1 0.718** 0.588** 0.394** 0.386** 0.301** 0.469** 0.399** 0.360** 0.382**IP29 1 0.502** 0.415** 0.345** 0.316** 0.311** 0.371** 0.241** 0.253**

IP31 1 0.328** 0.318** 0.434** 0.590** 0.415** 0.381** 0.396**PR08.B 1 0.484** 0.470** 0.378** 0.316** 0.238** 0.179**PR08.E 1 0.341** 0.365** 0.249** 0.196** 0.145*PR08.J 1 0.356** 0.360** 0.247** 0.316**PR08.L 1 0.357** 0.350** 0.282**IP33 1 0.622** 0.604**IP34 1 0.586**IP35 1

Notes: * p5 0.05; ** p5 0.01.


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reference category. This suggests that Swedish respondents had a higher perception of quality than their Australian

counterparts, and that make-to-order products received better evaluations in terms of perceived quality when

compared to make-to-stock products. Overall, our data analysis provides strong support for our conjectures

hypothesising the influence of SMP and EMP on actual quality advantage relative to competition. However, onlymarginal support was provided for the impact of SMP and EMP on perceived quality advantage relative

to competition. Interestingly, the construct QMP became non-significant in step 2 of the regression analysis in both

models, supporting the notion that SMP and EMP exert a significant influence on relative quality advantage.

5. Discussion

Our findings provide intriguing insight into firms’ efforts to increase their relative competitive quality advantage

in today’s competitive and fast-paced market environment. Specifically, the results lend validity to the arguments

Table 4. OLS regression results for Hypotheses 1a and 2a.

VariableStandardised

beta coefficient t-value Significance

Step 1Control variables

Firm size 0.087 1.141 0.256

d1_Taiwan 0.061 0.592 0.554d2_Sweden 0.132 1.423 0.156d3_South Korea 0.011 0.095 0.925d4_Italy 0.020 0.207 0.836d5_Germany 0.003 0.029 0.977d6_China 0.049 0.481 0.631d7_Austria 0.036 0.466 0.642d1_ETO 0.008 0.101 0.920d2_MTO 0.189 2.315 0.022d3_ATO 0.060 0.791 0.430QMP 0.267 3.106 0.002

Constant 14.727 0.000R2 0.140

Adjusted R2 0.085F -value 2.528 ( p50.01)


Firm size 0.034 0.452 0.652d1_Taiwan 0.036 0.347 0.729d2_Sweden 0.122 1.306 0.193d3_South Korea 0.023 0.194 0.847d4_Italy 0.030 0.306 0.760d5_Germany 0.067 0.666 0.506d6_China 0.046 0.444 0.657d7_Austria 0.081 1.035 0.302d1_ETO 0.019 0.251 0.802d2_MTO 0.153 1.906 0.058d3_ATO 0.079 1.065 0.288QMP 0.084 0.814 0.416

Constant 9.539 0.000Independent variables

Integrated supply management (Hypothesis 1a) 0.188 2.198 0.029Environmental management (Hypothesis 2a) 0.210 2.325 0.021R2 0.186Adjusted R2 0.124F -value 3.007 ( p50.001)D R2 (from Step 1 to Step 2) 0.046 ( p50.01)

Note: dependent variable: product performance.


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concerning SMP as resources with which firms can differentiate themselves in terms of relative competitive quality

performance. It is the unique boundary-spanning combination of buyer and supplier characteristics, strengths and

skills, which underpin the relational rent (Dyer and Singh 1998). SMP represent resources due to the embedded

and integrated nature of the relationship between firms, the unique combination of expertise and capabilities, thecreation of implicit knowledge and their dynamic and flexible nature. For example, the supplier’s capabilities and

expertise in a certain product or process technology can enable the development of a new product or enhance

the end customer’s perception of relative quality (Wisner 2003, Paiva et al. 2008, Yeung 2008). For instance, since

quality encompasses product and process innovation, product features, the ability to offer better warranties and the

ability to customise products to different markets and price points, buyers can exploit external supplier resources,

such as their product and innovation capabilities. These improvements in quality might not have been possible for

the buyer by merely relying on its own capabilities or without substantial investments in resources. An additional

important resource that can emerge from these relationships is the tacit knowledge created by the unique

Table 5. OLS regression results for Hypotheses 1b and 2b.

VariableStandardised

beta coefficient t-value Significance


Firm size 0.022 0.283 0.777

d1_Taiwan 0.047 0.456 0.649d2_Sweden 0.185 1.991 0.048d3_South Korea 0.062 0.533 0.595d4_Italy 0.117 1.200 0.232d5_Germany 0.083 0.831 0.407d6_China 0.052 0.513 0.609d7_Austria 0.040 0.514 0.608d1_ETO 0.033 0.423 0.673d2_MTO 0.238 2.927 0.004d3_ATO 0.096 1.282 0.201QMP 0.293 3.404 0.001

Constant 13.929 0.000R2 0.142Adjusted R2 0.087

F -value 2.565 (p5

0.05)Step 2Control variables

Firm size 0.063 0.816 0.416d1_Taiwan 0.022 0.211 0.833d2_Sweden 0.173 1.832 0.069d3_South Korea 0.066 0.561 0.575d4_Italy 0.122 1.246 0.214d5_Germany 0.131 1.290 0.199d6_China 0.055 0.526 0.600d7_Austria 0.073 0.922 0.358d1_ETO 0.041 0.533 0.594d2_MTO 0.210 2.592 0.010d3_ATO 0.111 1.496 0.136QMP 0.149 1.442 0.151

Constant 9.244 0.000Independent variables

Integrated supply management (Hypothesis 1b) 0.160 1.860 0.064Environmental management (Hypothesis 2b) 0.156 1.703 0.090R2 0.171Adjusted R2 0.108F -value 2.713 ( p50.01)DR2 (from Step 1 to Step 2) 0.029 ( p50.05)

Note: dependent variable: perceived overall product quality.


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and socially complex interactions. This knowledge and its associated capabilities, including skills, know-how and

contextual knowledge (Li et al . 2008), can be an important source for the increase of relative competitive quality

advantage (Rungtusanatham et al . 2003, Huang et al . 2008).

We have argued how SMP can influence perceived quality via strategic alliances with reputable suppliers. Our

data analysis provided only marginal support for this contention. An explanation for why our data showed

only marginal support for this relationship may lie in the fact that not many companies have started to truly

leverage their supply management capabilities in their marketing communication efforts. Such promotion of SMPmay be necessary, since they may not always be visible and apparent to a customer. The present study suggests that

greater integration between SMP and advertising and promotion campaigns might lead to higher relative perceived

quality. This represents a worthwhile research to pursue in the future.

Our findings also confirm EMP as initiatives capable of generating higher levels of relative competitive quality

(Montabon et al . 2007). Environmental management practices can serve as a competitive advantage especially if

they are difficult to imitate; this is the case particularly when tacit knowledge is required for their implementation.

The present study utilised measures for environmental management that were readily available in the secondary

dataset. It should be noted that EMP encompasses much more, including a fundamental rethinking within the firm

concerning products, product design, investments in manufacturing assets, processes, materials, environmental

impact, sourcing, life-cycle cost management, total cost of ownership and supplier management. Better measures

for EMP are warranted for a fuller investigation of its influence on relative quality advantage.

The data provided only marginal support for our hypothesis delineating the impact of EMP on perceived

quality. Future research is encouraged to reinvestigate this link with different samples incorporating the presenceor absence of marketing communication intended to inform customers regarding the firm’s EMP.

An intriguing finding common to both regression models was that quality management practices were not

statistically significant in the presence of SMP and EMP. This suggests that the impact of QMP on relative

competitive quality advantage is attenuated in the presence of SMP and EMP. The result highlights the important

role that both integrated supply management and environmental management practices play in achieving relative

competitive quality advantage in today’s environment. We would like to stress that the dependent variable is quality

performance relative to the competition. In other words, our results and interpretations do not imply that QMP do

not influence the quality level of a firm. The results can be interpreted in terms of order qualifiers and order winners.

Our results suggest that while quality management practices are still necessary and instrumental in achieving quality,

they are not sufficient to competitively differentiate a firm from its competition. This finding is interesting and

confirms prior suggestions that factors other than quality improvement efforts can lead to competitive advantage

(Flynn et al . 1994). It is also in line with results in Dow et al . (1999) who found that not all quality managementpractices lead to better quality performance.

Besides these theoretical extensions, our findings also provide important implications for managers. Our results

suggest the strategic importance of integrated supply management and environmental management practices, and

illustrate their potential as valuable resources for achieving both actual and perceived quality. With firm’s focusing

only on their core competencies, outsourcing all other activities and relying more on suppliers, SMP is imperative

for continued success in quality-based competition. The same holds true for EMP. While they are often enforced by

regulations, our results show that the practice of environmental management can lead to an increase in a firm’s

relative competitive quality advantage.

6. Conclusion

This research has shown that both SMP and EMP can be resources enabling relative competitive quality advantage.These resources can provide the foundation for better operations and enable a firm to achieve higher levels of actual

and perceived quality relative to competition. As with any research, the present study has certain limitations. This

study utilised secondary data. As such, the use of secondary data in any study is problematic, especially in terms

of the measures used to assess underlying constructs. However, we believe that the use of a secondary dataset for the

present research does not pose a serious threat to the validity of conclusions reached. We refer to numerous studies

that have used secondary data, and which have made significant contributions to theory development in production

research (e.g. Narasimhan and Jayaram 1998, Flynn and Flynn 2004, Narasimhan et al . 2006, Roth 2007,

Rossetti and Choi 2008).


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A further limitation, as is common in most empirical research, is the use of a single key respondent. While the

data collection effort sought to identify the most knowledgeable key respondent within a firm, we were only able

to collect data from this one individual in most cases. Further, this research focused on SMP and EMP in addition

to QMP as two crucial determinants of relative competitive quality advantage. However, there may be yet other

factors playing a role in impacting relative competitive quality advantage such as marketing communication that

highlights the firm’s efforts in SMP and EMP. Future research is needed to investigate these influences.

Additional research opportunities abound. For example, with a focus on these practices, investigating the fitbetween a firm’s desired positioning in the market and practices employed to achieve this goal would be worthwhile.

Building on and extending Bensaou and Venkatraman (1995), it can be argued that the application of not just any

practice will lead to superior performance; rather, it must be the right practices that exhibit the best overall fit with

the objective. These studies cumulatively can contribute to a better understanding of manufacturing’s contribution

to competitive quality advantage under the current global competitive environment.

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Appendix: questionnaire items

Table 6. Quality management practices.

Not at all To Some Extent To a Great Extent

IP26 Total quality management 1 2 3 4 5 6 7IP27 ISO 9000 certification 1 2 3 4 5 6 7IP28 Supplier certification 1 2 3 4 5 6 7IP29 Statistical process control 1 2 3 4 5 6 7IP31 Six Sigma (Green Belt/Black Belt) 1 2 3 4 5 6 7

Table 7. Integrated supply management practices.


PR08.B Formal strategic sourcing process 1 2 3 4 5 6 7PR08.E Strategic alliances/partnerships 1 2 3 4 5 6 7PR08.J Supply base rationalisation (decrease/increase base) 1 2 3 4 5 6 7PR08.L Formal supplier development program 1 2 3 4 5 6 7

Table 8. Environmental management practices.


IP33 Pollution prevention 1 2 3 4 5 6 7IP34 Recycling of materials 1 2 3 4 5 6 7IP35 Waste reduction 1 2 3 4 5 6 7


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