Applying path analysis method in defining effective factors in organisation agility

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Applying path analysis methodin defining effective factors inorganisation agilityAbbas Toloie Eshlaghy a , Ali N. Mashayekhi b , Ali Rajabzadeh c &Mir Majid Razavian aa Industrial Management, I.A.U. Science and Research Branch ,Tehran, Iranb Graduate School of Management & Econom, Sharif University ofTechnology , Tehran, Iranc Managementt, Tarbiat Modares University , Tehran, IranPublished online: 06 Feb 2009.

To cite this article: Abbas Toloie Eshlaghy , Ali N. Mashayekhi , Ali Rajabzadeh & Mir MajidRazavian (2010) Applying path analysis method in defining effective factors in organisation agility,International Journal of Production Research, 48:6, 1765-1786, DOI: 10.1080/00207540802566410

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International Journal of Production ResearchVol. 48, No. 6, 15 March 2010, 1765–1786

Applying path analysis method in defining effective factors in

organisation agility

Abbas Toloie Eshlaghya*, Ali N. Mashayekhib, Ali Rajabzadehc

and Mir Majid Razaviana

aIndustrial Management, I.A.U. Science and Research Branch, Tehran, Iran; bGraduate Schoolof Management & Econom, Sharif University of Technology, Tehran, Iran; cManagementt,

Tarbiat Modares University, Tehran, Iran

(Received 22 May 2008; final version received 18 October 2008)

Changes in business environment are leading firms to adopt a new productionmodel called agile manufacturing. This term moves away from the traditionalmass production paradigm and focuses on manufacturing highly customisedproducts when customers require them. In this paper, we present an initialapproach to agile organisation based on case studies in an Iranian industrialorganisation. An agile organisation conceptual model has been drawn up, basedon the conclusions of the case study. The study presented here is of an exploratoryfactor analysis and the conclusions are drawn through path analysis, proposepossible routes for future research in the field of agile organisation. By thedefinition of effective factor on organisation agility, as independent variablesrequired information were compiled through questionnaires which are about anIranian industrial organisation, and then direct and in-direct effects of thevariables on organisation agility were surveyed as a depended variable by the pathanalysis method. Interior variables which directly affect on organisation agilityare distinguished from exterior variables which indirectly affect on it due tot-value indicator and final model of path analysis which were defined forresearched organisation. By this method, with partial standardised regressioncoefficient, the priority and grade of every independent variable could be definedbased on effecting depended variable.

Keywords: agile organisation; agile drivers; agile enablers; agile capabilities; pathanalysis method

1. Introduction

The concept of agile manufacturing was first introduced in the report entitled 21st CenturyManufacturing Enterprise Strategy and published by Iacocca Institute of LehighUniversity (Goldman and Nagel 1991) as an option for managing firms in a dynamicworld. Henceforth, it has been adopted by researchers, managers and consultants as thelast stage in the evolution of organisational models or systems.

By reviewing the literature of agile organisation, effective factors on organisation agilitywere clarified in a conceptual model. This article clarifies instruction of factors together andtheir effect on organisation agility. Firstly, the structural validity of questionnairesand effective factors on agility will be classified for factor analysis in this survey.

*Corresponding author. Email: [email protected]; [email protected]

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

� 2010 Taylor & Francis

DOI: 10.1080/00207540802566410

http://www.informaworld.com

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Afterwards, in order to achieve more perfect results, researched achievement could be

analysed based on the interaction of factors together and the proportion of relative effects

on organisation agility through path analysis and structural equation model.Consequently, this paper attempts to analyse the drivers, enablers and capabilities of

organisational agility in order to propose an initial approach to agile organisation.

We carried out exploratory research work based on case study methodology, analysing

the context and degree of practical application of agile organisation in an industrial

organisation in Iran. In particular, the main requirements for organisational agility in

industrial organisation were analysed, as well as the enablers being used by them in order

to increase their responsibility as well as their competency, flexibility and speed. The rest of

the paper is structured as follows.Section 2 focuses on the theoretical background of agile organisation (paper review);

Section 3 represents the conceptual model and the methodology; Section 4 explains factor

analysis variables; Section 5 discusses the path analysis of organisation agility model

variables; Section 6 contains the structural equation model of organisation agility. Finally,

in Section 7, the main conclusions of the paper are presented.A research process diagram, which includes an introductory survey, a resource search

and an interview with experts for discussion, conclusions, and representing suggestions is

shown in Figure 1.

2. Paper review

In the last decade, the industrial environment has undergone substantial changes

characterised not only by their breadth and depth but also by their speed. In this context,

firms in general, and those dedicated to manufacturing in particular, are finding it difficult

to attain a sustainable competitive advantage or even to ensure their survival due to the

high levels of complexity, dynamism and uncertainty they encounter (Vazquez-Bustelo and

Avella 2004). This critical situation has forced firms to review their competitive priorities,

triggering a transition process in which they are abounding traditional manufacturing

models in favour of new organisational forms, new management practices and new

strategies at all levels (Bartezzaghi 1999). A transformation has been observed

in ‘traditional’ production models which are leading to a new production paradigm

linked to agility.The movement towards a new agility-based paradigm, the term ‘agile organisation’

has arisen and is increasingly utilised in literature on operations management and

business administration to mean a model of flexible organisation, capability of rapidly

adapting to changes in the environment and setting a variety of products on the market

to satisfy the requirements of increasing demand and well-informed customers (Kidd

1994, Goldman et al. 1995, Gunasekaran 1999, Sharifi and Zhang 1999, Gunasekaran

et al. 2002). This emerging paradigm, the philosophy that considers a new strategic

positioning in organisation and requires a global view of the firm (Roth 1996), breaks

with the guidelines of the traditional mass production model and setting special

emphasis on the proactive adaptation in order to change (Yusuf et al. 1999).

It highlights the development of dynamic capabilities, the strategic utilisation of

modern technologies, the integration of strategies and operations, customer satisfaction,

through new forms of inter-firm cooperation and knowledge management (Gunasekaran

and Yusuf 2002).

1766 A.T. Eshlaghy et al.

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This pioneering work, which was carried out by the Iacocca Institute, describes agilemanufacturing as a new manufacturing infrastructure, establishing a list of systems andsubsystems of enabling agility, all of which are related to continuous change,responsiveness, quality improvement and social liability in environmental and workingcondition terms.

According to Kidd (1994), agile manufacturing is based on three basic resources: (a) aninnovative management organisation and structure, (b) a worker’s base consistingof highly trained, motivated and empowered people and (c) advanced, flexible and

Introductory survey, resource search and interviewwith experts

Choosing research subject

Survey effective factors on agility represented inliterature

Survey demography specifications of researchsociety

Reliability and validity of measurement tools

Determination of data analysis method

Designing research tools for measuring variables

Collection and study research background

Representing final research model

Determination of methodology and manners ofinformation collection

Data analysis by statistical methods

Variables classification and determination

Path analysis

Reprehensive suggestion

Determination of variables priorities

Compilation of initial research model

Research essentials

Representing initial model andtheoretical basis

Conclusion and suggestions

Research methodology

Discussion and conclusion

Structural equations determination of final model

Research results analysis

Figure 1. Research process diagram.

International Journal of Production Research 1767

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intelligent technologies. Agility is obtained by integrating these three resources in an

interdependent and co-ordinated system. For Goldman et al. (1995), agility is a global

response to changes imposed by a new business environment dominated by a set of forces

that attempt to break with mass production systems and are characterised by change and

uncertainty. These authors have identified four dimensions or foundational elements of

agile manufacturing: (a) enriching the customer, (b) co-operation in order to enhance

competitiveness, (c) mastering change and uncertainty and (d) leveraging the impact of

people and information. For each of these dimensions, they set a list of characteristics of

the agile firm that have been considered by many authors as the starting point in their

business on agility.Despite the fact that agility has been defined in different ways and from different

perspectives and fields of knowledge, a common element to all the definitions is removing

from mass production. Sheridan (1993) argues that agility implies breaking with the

moulds of mass production in order to manufacture more customised products at the time

and location which are required by consumer’s demand. Thus, agile manufacturers

represent a new form of industrial competition on a global scale for the twenty-first

century that generates new operative and management forms designed to encounter the

challenges of the new competitive environment. Agility as a concept, in manufacturing

identifies a production model that is influenced by changes in the environment and links

innovation in manufacturing, information and communication technologies with a radical

organisational redesign, new human resources practices and the application of new

marketing strategies (Esmail and Saggu 1996). Implementation of this management

system, considered the latest stage of evolution of production systems, has been considered

a solution for the problems arising from turbulent business environments (Sharifi and

Zhang 1999).Therefore, a positive relation is expected between more turbulent environments, the

application of agile organisation, the factory results and the degree of competency.

Following the review of several works (Goldman and Nagel 1993, Burgess 1994, Goldman

et al. 1995, Montgomery and Levine 1996, Fliedner and Vokurka 1997, Gunasekaran

1998, 1999, Goranson 1999, Meade and Sarkis 1999, Sharifi and Zhang 1999, 2001, Sharp

et al. 1999, Yusuf et al. 1999, Dove 2001, Coronado et al. 2002, Gunasekaran et al. 2001,

2002, Gunasekaran and Yusuf 2002), three key elements in implementation and

development of agile organisation have been identified: drivers (or motivators), enablers

(facilitators, providers or pillars) and capabilities.The business environment, as a source of change and generator of uncertainty, are

considered the main drivers. In fact, agile organisation describes ‘a comprehensive

response to a new competitive environment shaped by forces that have undermined the

dominance of the mass-production system’ (Gunasekaran et al. 2001). So, agility is

reflected in ‘capability to survive and prosper by reacting quickly and effectively to a

continuously and unpredictably changing, customer-driven and competitive environ-

ment’ (Jain and Jain 2001). Agile organisations can be considered as a model that

integrates technology, human resources through information and communication

infrastructure. It provides flexibility, speed, quality, service and efficiency and enables

firms to react deliberately, effectively and change the environment in a co-ordinated

manner.In spite of theoretical study and interest in agile organisation amongst research and

business circles, there has been little empirical study on its causes, forms and results. So, we


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still do not know how to apply it and what results could be expected. Research shouldtherefore go towards answering the following questions.

. Are companies really changing their behaviour and systems in order to be agilemanufacturers?

. What contextual factors or environmental changes are making it necessary toimplement agile organisation?

. What practices and strategies allow companies to enhance their agility?

. What results could be expected from implementing agile organisation?

3. The conceptual model

The theoretical framework is a substantial and conceptual model on which whole researchis structured; the researcher explores the relationship among factors which are importantin making research subject and making experimental hypothesis. An analytical model is akind of model making for exploited variables from a theoretical framework.

According to the literature survey 26 agile enabler factors (Table 1) and eight agiledriver factors (Table 2) and nine agile capability factors (Table 3) were compiled andrecognised.

A conceptual model which was derived from literature is shown in Figure 2. It consistsof four main parts.

First are the agility drivers which change the business environment, driving the companyto a new position in running their business and searching for a competitive advantage.

Second are the agility enablers that propose the essential headlines of abilities whichprovide the required strength for responding to changes. Third are the abilities of an agileorganisation which provides the means by which the so-called capabilities could be achievedand are supposed to be sought from four major areas (competency, responsibility, flexibilityand speed). Finally, the agile organisations are the fourth part concerned with enrichingcustomer interaction by providing ‘added value’ which requires the organisation to adopt asolution-based approach to satisfy individual customers’ requirements.

Based on this model and the empirical task performed in the programmed research,a methodology has been developed to provide the industrial organisation with arealistic tool for better understanding the total concept of agility, determining theiragility requirements, assessing their current position, and determining the capabilitiesof agility.

The business environment as the source of turbulence and change imposes pressureson the business activities of the company. These uncertainties, unpredicted changes, andpressures urge manufacturing organisations to approach appropriate ways that could leadthem to a stable position and protect them from losing their competitive advantage. Theseare called, as mentioned earlier, agility drivers. These drivers could vary from onecompany to another and from one situation to another, and therefore the way they affecta company could vary as well.

The main objective of this paper is to explore the application, causes and consequencesof agile organisation factors in Iranian industries. Library research revealed effectivefactors on organisation agility; 12 factors including 25 indicators were clarified as enablersof organisation agility (independent variables). Meanwhile, capabilities of organisationagility (depended variables) were considered as a factor which includes four indicators indesigning questionnaire.


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Table

1.Agileenablers

are

derived

from

literature.

Reference

list

Row

Factors

Agilemanufacture

Agileorganisation

1Virtualenterprise

Sharp

etal.(1999),Kidd(1999),

Yusufet

al.(1999)

–

2Electronic

commerce

Sharp

etal.(1999),Kidd(1999),

Yusufet

al.(1999)

–

3Rapid

prototyping

Sharp

etal.(1999),Kidd(1999),

Yusufet

al.(1999)

–

4Im

provem

ent

Sharp

etal.(1999),Kidd(1999),

Yusufet

al.(1999)

–

5Multi-skillandflexible

people

Sharp

etal.(1999),Busteloet

al.

(2006),Kidd(1999),

Gunasekaran(1999)

Kidd(1994),SharifiandZhang

(1999),Bessantet

al.(2001),

CrocittoandYoussef

(2003)

6Team

working

Sharp

etal.(1999),Kidd(1999)

–7

Concurrentengineering

Sharp

etal.(1999),Kidd(1999),

BusteloandVazquez

(2006)

–

8Changeandrisk

managem

ent

Sharp

etal.(1999),Kidd(1999),

BusteloandVazquez

(2006)

–

9Integratedinform

ationsystem

Sharp

etal.(1999),Kidd(1999),

BusteloandVazquez

(2006)

Bessantet

al.(2001),Crocittoand

Youssef

(2003)


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10

Continues

improvem

ent

Sharp

etal.(1999),Kidd(1999),

BusteloandVazquez

(2006)

–

11

Flexible

infrastructure

Gunasekaran(1999)

Hoyat(1996)

12

Supply

chain

BusteloandVazquez

(2006)

Hoyat(1996),Crocittoand

Youssef

(2003)

13

Improved

manufacturingtechnology

Busteloet

al.(2006),Gunasekaran

(1999)

Kidd(1999),SharifiandZhang

(1999)

14

Core

competency

Sharp

etal.(1999),Yusufet

al.

(1999)

–

15

Capabilityforreconfiguration

Yusufet

al.(1999)

–16

Knowledgemanagem

ent

Yusufet

al.(1999),Busteloand

Vazquez

(2006)

–

17

Innovation

Gunasekaran(1999)

Bessantet

al.(2001)

18

Agilestrategy

–Bessantet

al.(2001)

19

Agileprocess

–Bessantet

al.(2001)

20

Rew

ard

system

–CrocittoandYoussef

(2003)

21

Culture


(2003)

22

Re-engineering


(2003)

23

Leadership


(2003)

24

Collaborativerelationships

–Lin

etal.(2006)

25

Uncertainty

andessentialchanges

–Lin

etal.(2006)

26

People

leverageandinform

ationtechnology

–Lin

etal.(2006)


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According to the literature the 12 enabler factors of organisation agility are:

(1) Organisational structure (formality, complexity, centrality).(2) Virtual organisation (process, co-operation).(3) Information technology (employment, integration).(4) Organisational culture (participation, risk acceptance).(5) Leadership (transactional/transformational, future/goal centred).(6) Supply chain (co-operation with supplier/customer).(7) Progressive design technology (simulation, engineering analysis).(8) Progressive manufacturing technology (flexible facility, rapid prototyping).(9) Team working (efficiency, trust being group).

(10) Empowerment and improvement (enrichment, accept job change).(11) Motivation system (job satisfaction, organisational commitment).(12) Planning and evaluation performance (efficiency, integration).

Finally organisation agility as a mere depended variable factor of the research includes:

. Competency.

. Responsibility.

. Flexibility.

. Speed.

Table 3. Agile capabilities are derived from literature.

Row Factors Reference

1 Responsiveness Sharifi and Zhang (1999), Christian et al. (2005)2 Competency Sharifi and Zhang (1999), Lin et al. (2006)3 Flexibility Sharifi and Zhang (1999), Christian et al. (2001b),

Lin et al. (2006)4 Quickness (speed) Sharifi and Zhang (1999), Bessant et al. (2001),

Crocitto et al. (2005)5 Variety of products Bessant et al. (2001)6 Time to market Bessant et al. (2001)7 Variety of product innovations Bessant et al. (2001)8 Quality Crocitto and Youssef (2003)9 Cost Crocitto and Youssef (2003)

Table 2. Agile drivers are derived from literature.

Row Factors Reference

1 Change in competition Christian et al. (2001a), Lin et al. (2006)2 Change in environment Christian et al. (2001a)3 Change in social factor Christian et al. (2001a), Lin et al. (2006)4 Change in technology Christian et al. (2001a), Lin et al. (2006)5 Change in market Christian et al. (2001a)6 Change in politics Christian et al. (2001a)7 Change in customer desire Christian et al. (2001a), Lin et al. (2006)8 Change in supply chain Christian et al. (2001a)


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3.1 Research methodology

The present work is applied research where the aim is towards improvement of a product

or a trend of activity and testing theoretical and subjective concepts in real and alive

situations. Since it attempts to help the attention survey and develop applied knowledge at

a specific point, the present work is applied research.Another criterion in research method division is the manner of data compiling. Thus,

research is divided into two groups: descriptive and experimental. Descriptive research

needs to compile data in order to survey or answer questions about the situation of the

surveyed subject. Descriptive researches are usually related to surveying attitudes, opinions,

demographic information, conditions and processes. The available situation has been

surveyed and reported in the descriptive study. Interrelationship research is a kind of

descriptive research method. The relations of variables are analysed based on research

target. Interrelationship research can be divided into three groups based on the target:

(a) Bi-variable interrelationship study: The aim of this study is to survey two by two

relationships of available variables.(b) Regression analysis: The aim of regression analysis is to predict the changes of uni

or multi depended variables due to changes of independent (predicted) variables.

Pro

gres

sive

des

ign

tech

nolo

gy

Org

anis

atio

nal s

truc

ture

Tea

m w

orki

ng

Org

anis

atio

nal c

ultu

re

Sup

ply

chai

n

Mot

ivat

ion

syst

emCapabilities of agile organisation

• Flexibility• Responsibility• Competency• Speed

Agile drivers• Change in market • Change in

technology• Change in intensity

of competition • Change in customer

requirements

• Change in socialfactors

Virt

ual o

rgan

isat

ion

Em

pow

erm

ent a

ndim

prov

emen

t

Pro

gres

sive

man

ufac

turin

g te

chno

logy

Agile organisation

• Co-operating to enhance competitiveness• Leveraging skills, impact of people and

information• Mastering change and uncertainty• Enriching customers

Info

rmat

ion

Lead

ersh

ip

Enablers of agile organisation

Figure 2. The conceptual model.


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(c) Covariance or interrelationship matrix analysis: A covariance orinterrelationship table is utilised to survey the considered variables in analysis ofbi-variance interrelationship sets. (Sarmady et al. 1983)

The present research is a kind of covariance or interrelationship analysis. Internet andlibrary study methods are utilised for compiling information about theoretical basis andsubject literature. New knowledge is obtained through study articles and books in whichare included more than 300 agility articles. An initial conceptual method with a collectionagile model in the literature determines all effective and represented factors of the articles.Agile models were collected after studying articles in the organisation. An initialconceptual model was represented with a collection of all represented effective factors inthe literature of organisational agility. Standard questions from reliable resources wereexploited about each factor.

Due to expert poll-taking, like rear supervisors and advisors, questions were revisedand designed according to attachment of this section. The questionnaires were designed insuch a way that respondents could understand and answered all questions. Obviouslythe main emphasis of the questionnaire is evaluation of the current condition of theorganisation and the favourite condition of variable is questioned at the end of eachsection according to the professors’ opinion. Question codes of questionnaires and avariable indicator are shown in Table 4.

3.2 Survey demographic specification

Society is a set of elements which have one or several common specifications in research. Thesociety concept is attributed to people who have generalisation. In the present researchsociety includes managers and experts of 28 Iranian industrial organisations and companieswho work in different parts of organisation, such as manufacturing planning, research andcommercial units. Table 5 indicates the distribution of research society people.

Two justification sessions were held as a seminar before the questionnaires weredistributed to get the respondent acquainted with the research literature and basis, and allthe questions were answered in that session. Twenty-eight higher managers participatedin the first session and questionnaires were collected by them under supervision.

The second session, with 42 research and development managers and some experts, washeld later. Finally, they were asked to distribute the questionnaires and then return themfor the rest of the research. Finally 141 questionnaires were collected.

4. Factor analysis of organisation agility variables

In parametric analysis, including path analysis which is used in this research, there arepre-assumptions about measurable variables distribution in the surveyed industrialorganisation. One of the pre-assumptions is normalised variables distribution and theother one is linear assumption among surveyed variables and homogeneity of variance inpath model analysis (Nourusis 2005).

All research variables were controlled by linear and normal assumptions, and requiredchanges were done in this research. Afterwards, a large number of literature variables weresummarised in a small number of factors by exploratory factor analysis. Homogenousmatrix is one of the methods for choosing suitable variables for factor analysis. Since thebasis of the factor analysis method is related to homogeny of inter variables but uncaused,


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Table

4.Questioncodes

ofquestionnaires

andvariable

ofindicator.

Factor

Indicator

Questioncodes

(variables)

Quantity

of

question

Reference

Organisationalstructure

Form

ality

stora,storb,storc

3Stephen

P.Robbins

Complexity

stord,store,storf,storg,storh

5Centrality

stori,storj,stork,storl,storm

,storn

6

Virtualorganisation

Process

vea,veb

2H.T.Goranson

Co-operation

vec,ved

2Inform

ationtechnology

Application

ita,itb,itc,

itd

4Alvin

O.Gunnson

Integration

ite,

itf,itg

3Organisationalcultural

Partnership

cuora,cuorb,cuorc

3JohnR.Schermerborn

Risktaking

cuord,cuore

2Leadership

Evolutionary/socialisation

lsa,lsb,lsc,

lsd,lse,

lsf,lsg

7JohnR.Schermerborn

Future/goalcentred

lsh,lsi,lsj,lsk,lsl,lsm,lsn

7Supply

chain

Co-operationwithcustomers

sca,scc

2RickDove

Co-operationwithsupplier

scb,scd

2Im

proved

designtechnology

Sim

ulationtechnology

tda

1PaulT.Kidd

Engineering

analysis

technology

tdb

1

Improved

manufacturing

technology

Flexible

facility

tmc

1PaulT.Kidd

Rapid

prototyping

tmd,tm

e2

Team

workingtrust

being

group

Efficiency

twa,tw

b,tw

c,tw

d,tw

e,tw

f,tw

g7

PaulG.Friedman

and

Elaine

A.Yarbrough

Trust

beinggroup

twh,tw

i,tw

j,tw

k,tw

l,tw

m,

twn,tw

o,tw

p9

Empowermentand

improvem

ent

Jobenrichment

eia,eib,eic

3Judith

R.Gordon,John

M.

Ivancevich

and

Michael

T.

Matteson

Acceptofjobchange

eid,eie,

eif,eig,eih,eii

6

Motivationsystem

Jobsatisfaction

msa,msb,msc,msd

4Martin

J.Gannon

and

Fred

Luthans

Organisationalcommitment

mse,msf,msg,msh,msi,msj,

msk

7

Planningandevaluation

perform

ance

Efficiency

pepa,pepb

2JohnR.Schermerborn

Integration

pepc,

pepd,pepe

3

(continued

)


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Table

4.Continued.

Factor

Indicator

Questioncodes

(variables)

Quantity

of

question

Reference

Organisationagility

Competency

orag1–11,orag14–15,

orag19–27

22

SharifiandZhang

Responsibility

orag12–13,orag28–42

17

Flexibility

orag16–17,orag43–52

12

Speed

orag18,orag53–56

5

Total:13

29

155

155

–


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inter homogenous matrix could be calculated. Usually these homogenous matrices show

the relationship among some variables and lack of relation with others (Kline 2001).As shown in Table 1, the exploratory factor analysis method has integrated and unified

literature independent factors like information technology with virtual organisation, and

progressive design technology with progressive manufacturing technology. Meanwhile,

some literature factors like organisational structure, divided central factors on the one

hand, and formality and complexity on the other. Motivation system to job satisfaction

factors and organisational commitment analysis results are shown in Table 6.Exploratory factor analysis on depended variables (agile capability) was done.

According to this method depended variables of competency and responsibility were

confirmed by factor analysis. However, flexibility and speed indicators were integrated in

one indicator (Table 6). The reason could be found in fewer numbers of speed indicator

questions and contiguity proximity of flexibility and speed; and exploratory factor analysis

was considered as the calculation basis at this division.

5. Path analysis of organisation agility variables

Path analysis is a method for evaluating equality rate, and the conformity of a set of data

with modal, which is required to adjust theoretical modal as a causal diagram (Dutuit 2001).

By using factor analysis results in this section, we try to define directly and indirectly the

relations of modals indicators with ‘organisation agility’ variable, and evaluate the relative

importance of direct and indirect variables relations by LISREL software.In order to survey the introduction of organisation agility modal factors including:

leadership, team working, empowerment and improvement, motivation system-job

Table 5. Demography information.

Title Frequency PercentageCumulativepercentage

Education degree BSc 97 68.8 68.8MSc 37 26.2 95.0PhD 7 5.0 100.0Total 141 100.0 –

Education course Technical 110 78.0 78.0Management 18 12.8 90.8Science 7 5.0 95.7Other 6 4.3 100.0Total 141 100.0 –

Organisational position Management 33 23.4 23.4Expertise 108 76.6 100.0Total 141 100.0 –

Job background (year) 55 45 31.9 31.955–10 42 29.8 61.7510–15 14 9.9 71.6515–20 23 16.3 87.9520–25 13 9.2 97.2425 4 2.8 100.0Total 141 100.0 –


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satisfaction, motivation system-organisational commitment, planning and evaluationperformance, organisational structures-complexity and formality, organisational struc-tures-centrality, information technology and virtual organisation, organisational culture,progressive design and manufacturing technology, supply chain. With depended variable,‘organisation agility’, the relation of all independent variables was surveyed to clarify thevariables which directly relate to organisation agility.

In Figure 3, the relations of independent variable to depended variable could besurveyed according to t-value coefficients; t42 indicates the lack of meaningful relationsbetween independent variables and dependent variables.

As shown in Figure 3, t42 is red (in black and white sheets, light grey). It shows thatthere are no meaningful relations between mentioned paths or variables. Only directrelation factors of leadership, progressive design and manufacturing technology, teamwork, empowerment and improvement, job satisfaction, organisational commitment,planning and evaluation performance with depended variable is 99% meaningful (t42).While it is obvious that the above-mentioned factors have direct relations with variables, itcould be shown whether other variables could indirectly relate to dependent variablesthrough these variables.

LISREL proposed paths for mutual relations by improving model indicator variablesand a meaningful model is achieved by adding some of them. These relations are:

. leadership interrelation,

. with complexity and formality,

Table 6. The results of depend and independent variables analysis.

Obtained factors of independent variablesof factor analysis Independent variables of literature factors

Leadership (ls) Leadership (ls)Team working (tw) Team working (tw)Empowerment and improvement (ei) Empowerment and improvement (ei)Motivation system-job satisfaction (ms-js) Motivation system (ms)Motivation system-organisational commit-

ment (ms-oc)Planning and evaluating performance (pep)

Planning and evaluating performance (pep) Organisational structure (orst)Organisational structure-formality and

complexity (orst-fc)Information technology (it)

Organisational structure-centrality (orst-ce) Virtual organisation (ve)Information technology-virtual organisa-

tion (it-ve)Organisational culture (orcu)

Organisational culture (orcu) Progressive design technology (tda)Progressive design and manufacturing

technology (tdm)Progressive manufacturing technology(tma)

Supply chain (sc) Supply chain (sc)

Obtained factors of dependent variables offactor analysis Dependent variables of literature factors

Competency CompetencyResponsibility ResponsibilityFlexibility FlexibilitySpeed Speed


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. centrality,

. organisation culture,

. job satisfaction,

. interrelation team working with supply chain and job satisfaction,

. interrelation empowerment and improvement with information technology,

. virtual organisation and job satisfaction,

. interrelation planning and evaluation of performance with supply chain, and

. finally between organisation agility with progressive design and manufacturingtechnology.

LISREL in model improvement indicators did not propose other paths for drawingavailable models in this phase.

As shown in Figure 4, leadership variable (ls), team working (tw) empowermentand improvement (ei), organisational commitment (ms-oc), planning and evaluatingperformance (pep), progressive design and manufacturing technology have a directrelation with dependent variables, and other variables do not have a meaningful directrelation with organisation agility. However, these variables sometimes have meaningful

Figure 3. Initial modal of path analysis with t-value.


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relations with exterior variables. Therefore, it could be concluded that these variables can

indirectly affect organisation agility.For drawing and analysing a final path model, all paths were omitted with t42. Thus,

final values of model parameters will be clarified. Standardised coefficient values can be

observed in Figure 4. All possible relations are drawn between independent and depended

variables in the final pass analysis model. As we see in the path model, all independent

variable factors which are represented as a component of the agility model, are related

either directly with an organisation agility dependent variable or through one of the

mediator factors: consequently, none of the variables are omitted.As shown in Figure 4, the value of the error variance of organisation agility equal to

0.28 and only 28% of organisation agility variance are not defined through available

variables, and about 72% of organisation agility variance is affected by available variables

which include most parts for describing the variable through available variables, which

shows the precision of selected model.Table 7 represents indicators related to final path model fitness which indicates the

suitable fitness of model.All used fitness indicators show that this model has an excellent fitness, while LISREL

model improvement indicators did not propose other paths for drawing the available

model.

6. Structural equation organisation agility model

Structural equation modelling (SEM) as a method for measuring relationships among

latent variables has been around since the early twentieth century, originating in Sewall

Wright’s 1916 work (Hooman 2005).

Figure 4. Final path analysis model with standardised value.


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Structural equations of final path analytic model by LISREL software are as follows:

Orag ¼ 0:25�lsð0:076Þ

3:23

þ 0:20�twð0:056Þ

3:59

þ 0:19�eið0:066Þ

2:91

þ 0:45�ms ocð0:058Þ

7:65

þ 0:18�pepð0:069Þ

2:59

þ 0:13�tdmð0:047Þ

2:82

Errorvar:¼ 0:27ð0:033Þ

8:15

, R2 ¼ 0:72

As shown in Figure 3, variables such as: leadership (ls) variable, team working (tw),

empowerment and improvement (ei), organisational commitment, planning and evaluating

performance, progressive design and manufacturing technology has a direct relation with

the dependent variable. Furthermore other variables, which were mentioned earlier,

indirectly affect organisation agility. Consequently, equations of themediator variables are

followed to survey the indirect effect of variables on dependent variables of organisation

agility.

ls ¼ 0:25�orst fcð0:079Þ

3:13

þ 0:31�orst comð0:077Þ

4:07

þ 0:27�orcuð0:063Þ

4:30

þ 0:17�ms jsð0:060Þ

2:80

Errorvar: ¼ 0:35ð0:043Þ

8:15

, R2 ¼ 0:65

tw ¼ 0:23�lsð0:077Þ

3:03

þ 0:4�scð0:071Þ

5:56

þ 0:21�ms jsð0:078Þ

2:69


8:15

, R2 ¼ 0:65

ei ¼ 0:42�lsð0:070Þ

5:94

þ 0:26�twð0:066Þ

3:92

þ 0:27�itveð0:065Þ

4:14


8:15

, R2 ¼ 0:57

ms oc ¼ 0:27�lsð0:077Þ

3:5

þ 0:24�ms ocð0:071Þ

2:27

þ 0:18�scð0:073Þ

5:82


8:15

, R2 ¼ 0:49

pep ¼ 0:51�lsð0:069Þ

7:38

þ 0:24�ms ocð0:068Þ

3:5

þ 0:18�scð0:06Þ

3:05

, Errorvar: ¼ 0:41ð0:05Þ

8:15

, R2 ¼ 0:59

Table 7. Fitness indicators of final path analytic model.

Indicators ValueAcceptabledomain Results

Model fitnessindicator

X2=df 1.84700 ðX2=dfÞ�2 Model confirmation Chi square divided todegree of freedom

P-value 0.20678 P�0.05 Model confirmation Significance levelRMSEA 0.03700 RMSEA�0:09 Model confirmation Root mean square error

of approximationRMR 0.04000 RMR � 0 Model confirmation Root mean square residualGFI 0.96000 GFI� 0:09 Model confirmation Goodness of fit indexAGFI 0.89000 AGFI� 0:85 Model confirmation Adjusted goodness

of fit indexNFI 0.96000 NFI� 0:90 Model confirmation Normed fit indexCFI 0.99000 CFI� 0:90 Model confirmation Comparative fit indexIFI 0.99000 IFI� 0:90 Model confirmation Incremental fit index


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Table 8 indicates the direct relation among variables. Therefore, in path diagramand mentioned structural equations, the variables such as: leadership (ls), team working(tw), empowerment and improvement (ei), organisation commitment (ms-oc), planningand evaluating performance (pep), and progressive design and manufacturingtechnology are related positively and directly with organisation agility. Thus, it couldbe cited that whatever the leadership, team working, empowerment and improvement,and organisation commitment, planning and evaluating performance, and progressivedesign and manufacturing technology be enhanced, agility in organisation will beenhanced too.

At the end, in Table 9 the values of indirect relations of exterior variables withorganisation agility variable could be surveyed. As observed, complexity and formalityvariables, centrality, information technology virtual organisation, organisational culture,supply chain, and job satisfaction are related indirectly through other variables withorganisation agility variable.

Table 10 indicates the total values of direct and in-direct relations on organisationagility variable. Table 11 indicates relation of variables in final path model withorganisation agility variable.

7. Conclusions

If variable effect could be defined with other variables by path analysis, and comparedwith other variable effects, the effective factor will be found. The effect of each variableis composed of direct and indirect effect. The definition rate of direct and indirecteffect and the defining of indirect path importance is called decomposition.Standardised value is used for calculating various effects and their comparison inpath analysis. Since the values of direct and indirect effects are standardised, they canbe compared directly together.

To define the importance of direct impact between two variables, paying attentionto the standardised path coefficient is sufficient.

To define direct and indirect effect, coefficients should multiply during the path.To define the total effect of one variable to another, it is required to add direct andindirect effect together. Therefore, the importance of components could be achievedaccording to stratification of the total effect of standardised values. In Table 7 theimportance and priority of achieved model factors in organisation agility are asfollows:

. leadership,

. organisation commitment system,

. job satisfaction,

. empowerment and improvement,

. planning and evaluating performance,

. organisational structure-certainty,

. team working,

. organisational culture,

. progressive design and manufacturing technology,

. information technology,

. virtual organisation and

. organisational structure-formality and complexity.


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Table 8. Direct value in final path model.

Direct relations between variablesin model

Estimatedvalue

Standarderror t-value Significant

Leadership (ls) relation with organisa-tion agility (orag)

0.025 0.076 3.23 P50/01

Team working (tw) relation with orga-nisation agility (orag)

0.200 0.056 3.59 P50/01

Empowerment and improvement (ei)relation with organisation agility(orag)

0.190 0.066 2.91 P50/01

Organisational commitment (ms_oc)relation with organisationagility(orag)

0.450 0.058 7.65 P50/01

Progressive design and manufacturingrelation (tdm) with organisationagility(orag)

0.130 0.047 2.82 P50/01

Planning and evaluating performance(pep) relation with organisationagility(orag)

0.180 0.069 2.59 P50/01

Complexity and formality (orst_fc)relation with leadership (ls)

0.250 0.079 3.13 P50/01

Centrality (orst_com) relation with lea-dership (ls)

0.310 0.077 4.07 P50/01

Organisational culture (orcu) relationwith leadership (ls)

0.270 0.063 4.30 P50/01

Job satisfaction (ms_js) relation withleadership (ls)

0.170 0.060 2.80 P50/01

Information technology/virtual organi-sation (itve) relation with empower-ment and improvement (ei)

0.270 0.065 4.14 P50/01

Information technology/virtual organi-sation (itve) relation with organisa-tional commitment (ms_oc)

0.160 0.071 2.27 P50/01

Relation supply chain (sc) with team-working (tw)

0.400 0.071 5.56 P50/01

Supply chain (sc) relation with planningand evaluating performance(pep)

0.018 0.060 3.05 P50/01

Job satisfaction(ms_js) relation withteamworking (tw)

0.210 0.078 2.69 P50/01

Job satisfaction (ms_js) relation withorganisational commitment (ms_oc)

0.430 0.073 5.82 P50/01

Leadership (ls) relation with teamwork-ing (tw)

0.230 0.077 3.03 P50/01

Leadership (ls) relation with empower-ment and improvement (ei)

0.420 0.070 5.94 P50/01

Leadership (ls) relation with organisa-tional commitment (ms_oc)

0.2700 0.077 3.50 P50/01

Leadership (ls) relation with planningand evaluating performance (pep)

0.510 0.069 7.38 P50/01

Team working (tw) relation withempowerment and improvement(ei)

0.260 0.066 3.92 P50/01

Organisational commitment (ms_oc)relation with with planning and eval-uating performance (pep)

0.240 0.068 3.50 P50/01


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Table 11. relation of variables in final path model with organisation agility variable.

Effective factors onagile organisation Direct effect In-direct effect Total effect Priority

Leadership (ls) 0.25 0.27 0.52 1Organisational commitment (ms_oc) 0.45 0.05 0.50 2Job satisfaction (ms_js) – 0.27 0.27 3Empowerment and improvement (ei) 0.19 – 0.19 4Planning and evaluatingperformance (pep)

0.18 – 0.18 5

Organisation structure-centrality(orst_com)

– 0.16 0.16 6

Team working (tw) 0.15 0.05 0.20 7Organisational culture (orcu) – 0.14 0.14 8Progressive design andmanufacturing (tdm)

0.13 0.01 0.14 9

Information technology/virtualorganisation (itve)

– 0.13 0.13 10

Organisation structure-complexityand formality (orst_fc)

– 0.13 0.13 11

Table 10. The total values of direct and in-direct relations.

Direct and indirect relations of variableswith organisation agility variable (orag) Significant t-value

Standarderror

Estimatedvalue

Leadership (ls) 0.51 0.07 7.71 P50/01Organisational commitment (ms_oc) 0.49 0.06 8.57 P50/01Job satisfaction (ms_js) 0.27 0.05 4.98 P50/01Empowerment and improvement (ei) 0.19 0.07 2.91 P50/01Planning and evaluating performance (pep) 0.18 0.07 2.59 P50/01Centrality (orst_com) 0.16 0.04 3.60 P50/01Team working (tw) 0.15 0.05 2.80 P50/01Organisational culture (orcu) 0.14 0.04 3.76 P50/01Progressive design and manufacturing (tdm) 0.13 0.05 2.82 P50/01Information technology/virtual organisation (itve) 0.13 0.04 3.13 P50/01Complexity and formality (orst_fc) 0.13 0.04 2.90 P50/01

Table 9. Values of indirect relation of outer variables on organisation agility variable.

Indirect relation of outer variableswith organisation agility(orag)

Estimatedvalue

Standarderror t-value Significant

Complexity and formality (orst_fc) 0.130 0.04 2.90 P50/01Centrality (orst_com) 0.160 0.04 3.60 P50/01Information technology/virtualorganisation (itve)

0.130 0.04 3.13 P50/01

Organisational culture (orcu) 0.140 0.04 3.76 P50/01Supply chain (sc) 0.030 0.03 0.99 P50/01Job satisfaction (ms_js) 0.026 0.05 4.98 P50/01


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The important point is that, despite the existence of supply chain variables in research

models of target organisations, it could be omitted because of the downsizing coefficient of

importance. It should be stated that the supply chain does not have an effective impact onorganisation agility in recent research.

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Documents

Applying path analysis method in defining effective factors in organisation agility