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Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
The Asian Journal of Shipping and Logistics 33(4) (2017) 263-272
Contents lists available at ScienceDirect
The Asian Journal of Shipping and Logistics Journal homepage: w w w .elsevier.com/locate/ajsl
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects*
Hee Sung BAEa a
Assisant Professor, Tongmyong University, Korea, E-mail:[email protected] (First Author)
ARTICLE INFO
ABSTRACT
Article history:
There are two aims of this study: one is to analyze the relationship among perceived environmental uncertainty, supply chain integration and operational performance and the other is to test direct, indirect and total effects among the variables. To achieve the aims of this study, various research methods were used. The population is Korean firms in China. Questionnaires were sent to the sample firms, and 208 data were used in the analysis. Validity and reliability of measuring items were verified by a confirmatory factor analysis, and the causal links among the variables were verified by a structural equation modeling analysis. The results are as follows. First, the relationship between perceived environmental uncertainty and supply chain integration is the causal link. Environmental uncertainty is an antecedent of supply chain integration and this is explained by information processing theory. Second, supply chain integration has a positive effect on operational performance. To improve performance, managers have need of interaction with suppliers and customers as well as inter-departments. Third, there is no direct effect between environment and performance but there are direct, indirect and total effects among the variables. The negative effect of perceived environmental uncertainty on performance (direct effect) is changed with positive effect (indirect and total effects). This is explained by fit as mediation by Venkatraman (1989).
Received 7 September 2017 Received in revised form 30 November 2017 Accepted 1 December 2017 Keywords: Perceived environmental uncertainty Supply Chain Integration Operational Performance Korean Firms
Copyright © 2017 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. T h i s i s a n o p e n a c c e s s a r t i c l e u n d e r t h e C C B Y - N C - N D l i c e n s e (http://creativecommons.org/licenses/by-nc-nd/4.0/).
1. Introduction Many firms have performed direct investment to China because the
country is the world’s factory. In addition, many Korean firms have also
* This research was supported by the Tongmyong University Research Grants (2016A003).
http://dx.doi.org/10.1016/j.ajsl.2017.12.010 2092-5212/© 2017 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. Peer review under responsibility of the Korean Association of Shipping and Logistics, Inc.
264
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
invested in China. The cause of foreign direct investment (FDI) to China is keen competition in the market and the competition is followed by firms’ needs which would achieve cost advantage. This is the cause of investment to China which has cheap and quality labor. An increase of the firms which invest in China is caused by variance of the Chinese market and this is the background to the growth of the Chinese market. However, research which analyzes environment on the Chinese market is not active. From the viewpoint, research concerned with perceived environmental uncertainty of the Chinese market is required. Firms which have performed FDI in China grasp customer needs, share the needs with other departments, and achieve the needs through sharing the information with suppliers to minimize the negative effect of perceived environmental uncertainty on performance. From this viewpoint, supply chain integration is an important strategy of firms which perform FDI in China and this is explained by information processing theory. Firms acquire information from external environment because of perceived environmental uncertainty. The external information is learnt by managers and applied to internal processes. Superior internal processes structured through absorption of the information are also the basis of integration with suppliers and customers and this is connected with high performance (Bae and Lee, 2015). Research concerned with the relationship between environment, integration and performance has been performed by many researchers. For example, the moderating effect of environment on the relationship between integration and performance is verified by many researchers (Fynes et al., 2004; Kim and Chai, 2016; O’Leary-Kelly and Flores, 2002; Richey et al., 2009; Sundram et al., 2016; Wong et al., 2011). In addition, previous studies have investigated that perceived environmental uncertainty has a direct effect on supply chain integration (Paulraj and Chen, 2007; Ragatz et al., 2002). The relationship between the variables can be explained by information processing theory. Environment exists in exterior of firms and has an effect on firms. To overcome the negative effect of perceived environmental uncertainty on performance, managers acquire information from external environment, and the information is the basis of improving internal processes of firms. In addition, firms which structure the efficient internal processes make better integration possible with suppliers and customers. From this viewpoint, managers mediate the relationship between environment and firms. In this regard, managers’ recognition of environment is the basis of firms’ strategic behavior. Their recognition on supply chain integration is the basis of performance improvement. In addition, the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and performance can be explained by fit as mediation by Venkatraman (1989). However, there are the research papers which have not verified the relationship. For instance, environmental uncertainty has no moderating effect on the relationship between customer integration and service performance (Wong et al., 2011). Technological uncertainty has no effect on the relationship between supply chain relationship quality and supply chain performance (Fynes et al., 2004). Pagell and Krause (2004) did not prove the relationship between perceived environmental uncertainty, manufacturing flexibility and performance. Liao and Tu (2008) have verified that manufacturing system integration has no effect on manufacturing performance in high environmental uncertainty. TarifaFernandez and De Burgos-Jimenez (2017) did not find the moderating effect of uncertainty between supply chain integration and performance. On the other hand, prior research has analyzed that environmental uncertainty has negative effect on a manufacturer’s satisfaction with the perceived supplier performance (Ryu et al., 2008) and service
performance (Wood, 2008). This is connected with the limitations of the research as follows. First, research concerned with the direct effect of perceived environmental uncertainty on supply chain integration is not active. In addition, prior research has verified the negative relationship between environment and performance (Ryu et al., 2008; Wood, 2008) but research to consider perceived environmental uncertainty as an antecedent of supply chain integration is insufficient. This means that research concerned with precedent variables to affect supply chain integration is needed. Second, prior research has not verified a causal link between perceived environmental uncertainty and supply chain integration (Pagell and Krause, 2004). According to strategic choice theory, environment is existed in exterior of firms and it is an important factor to influence on firms. In this regard, firms choose proper strategy to fit the variance of environment, followed by high performance. Supply chain integration as a strategy of firms is affected by perceived environmental uncertainty and this is the basis of gaps in performance among firms. Therefore, this study needs to investigate the effect of perceived environmental uncertainty as an antecedent of supply chain integration. Third, research which has analyzed the moderating effect of environmental uncertainty on the relationship between supply chain integration and performance is active (Fynes et al., 2004; O’Leary-Kelly and Flores, 2002; Richey et al., 2009; Wong et al., 2011) but research concerned with the mediating effect of supply chain integration on the relationship is not active. Sundram et al. (2016) found that supply chain integration mediates the relationship between supply chain management practices and supply chain performance. According to information processing theory, if managers recognize environmental uncertainty, they acquire information in the market to minimize the negative effect of environmental uncertainty on performance, and the information is the basis of improving internal processes. In addition, they achieve supply chain integration through sharing the information with suppliers and this is connected with high performance. Hence, the negative effect of environmental uncertainty on performance (Ryu et al., 2008; Wood, 2008) is changed as the positive effect by way of supply chain integration. Moreover, this study needs to verify the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and performance. The confirmation of the direct, indirect and total effects among perceived environmental uncertainty, supply chain integration and operational performance can make it possible better understanding to the relationship between the variables. Therefore, there are two objectives of this study. One is to prove the mediation effect of integration on the relationship between environment and performance and the other is to verify direct, indirect and total effects among the variables.
2. Literature Review 2.1. Perceived environmental uncertainty and supply chain integration Environment is investigated as a moderator between integration and performance by prior research (Richey et al., 2009; Wong et al., 2011). However, the direct effect of environment on integration is not investigated in the research. From the viewpoint of contingency theory, environment is the factor which has a direct influence on strategy and performance (Lawence and Lorsch, 1967; Thompson, 1967). Moreover, supply chain integration is one of strategies which firms can choose.
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
Environment is existed in exterior of firms and it has an effect on firms. This means that it does not affected by firms. Perceived environmental uncertainty has a negative effect on performance and as a result, firms need to decide strategy to minimize the negative effect of the uncertainty on performance. The strategy mediates the relationship between environment and performance and it has a role to change a negative effect (a direct effect) with a positive effect (indirect and total effects) on the effect of perceived environmental uncertainty on performance. Therefore, this study verifies a direct effect of perceived environmental uncertainty on supply chain integration not tested by the research. In addition, this study identifies the direct, indirect and total effects among perceived environmental uncertainty, supply chain integration and operation performance. This is the basis of the hypothesis as follows. H. 1 Perceived environmental uncertainty has a positive influence on supply chain integration.
2.2. Supply chain integration and operational performance The relationship between integration and performance is proved by a majority of previous studies. Supply chain integration is started from inter-functional integration and developed to inter-corporate integration (Stevens, 1989). Inter-functional integration is the inception of supply chain integration (Bae, 2014) and as a result, firms can remove overlaps and inefficiencies in inter-functional activities. Firms can also achieve standardized communication through inter-departmental integration and consequently, they can attain high performance (Matapoulos et al., 2007). In addition, efficient internal processes of each firm are the basis of making inter-corporate integration possible. The high level of communication capability which firms have is the cause of creating customer needs in the market and applying to internal processes in firms. In addition, the needs are shared with suppliers and as a result, it is achieved (Bagchi et al., 2005; Bae and Lee, 2015). The relationship between supply chain integration and performance is explained by information processing theory. Firms create information in the market on the basis of environmental uncertainty, the information is disseminated to internal processes of firms and as a result, the internal processes is re-structured to fit customer needs through responding to the information. This is similar with processing information shown from market orientation (Bae, 2014). Form the viewpoint, prior research has ascertained the positive relationship between supply chain integration and performance (Bagchi et al., 2005; Boon-itt and Wong, 2011; Ghobakhloo et al., 2011; Rajaguru and Matanda, 2009; Schoenherr and Swink, 2012; Wong et al., 2011). This is the basis of a hypothesis as follows. H. 2 Supply chain integration has a positive influence on operational performance.
2.3. Perceived environmental uncertainty and operational performance Environment can be classified into various dimensions and it cannot be controlled by firms. It is the root of uncertainty, and firms respond to the uncertainty through collecting information in the market when there is high environmental uncertainty. In this regard, environmental uncertainty is the cause of lack of information when managers make a decision, and the relationship between environmental uncertainty and performance is
265
negative. Previous studies have verified that environmental uncertainty has a negative effect on performance (Fink et al., 2008; Ryu et al., 2008; Wood et al., 2008). The relationship between the variables is explained by information processing theory and contingency theory. According to the former, managers face uncertainty because of lack of information when they make a decision. To minimize the uncertainty, managers acquire information through interacting with environment such as other departments, suppliers and customers (Flynn et al., 2010). According to the latter, the recognition of managers on environment is the cause of gaps in performance among firms. If managers recognize high environmental uncertainty, they make an effort to minimize the negative effect of environmental uncertainty on performance. In addition, environmental uncertainty is the cause of a lack of information when managers perform strategy, and the lack of information is the cause of the negative effect of environmental uncertainty on performance. The viewpoint is in accord with fit as mediation by Venkatraman (1989). This explains the direct relationship between environment and performance and the intervening effect of strategy (supply chain integration) on the relationship. From the viewpoint, environmental uncertainty has a negative effect on performance, and strategy (supply chain integration) positively mediates the relationship. This is the basis of the hypothesis as follows. H. 3 Perceived environmental uncertainty has a negative effect on performance.
3. The Research Model and Methodology 3.1. The Research Model The relationship between the variables represents as follows.
Supply Chain Integration
H.1
Environmental Uncertainty
H.3
H.2
Operational Performance
Fig. 1 The Research Model
Contents lists available at ScienceDirect
The Asian Journal of Shipping and Logistics Journal homepage: w w w .elsevier.com/locate/ajsl
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects*
Hee Sung BAEa a
Assisant Professor, Tongmyong University, Korea, E-mail:[email protected] (First Author)
ARTICLE INFO
ABSTRACT
Article history:
There are two aims of this study: one is to analyze the relationship among perceived environmental uncertainty, supply chain integration and operational performance and the other is to test direct, indirect and total effects among the variables. To achieve the aims of this study, various research methods were used. The population is Korean firms in China. Questionnaires were sent to the sample firms, and 208 data were used in the analysis. Validity and reliability of measuring items were verified by a confirmatory factor analysis, and the causal links among the variables were verified by a structural equation modeling analysis. The results are as follows. First, the relationship between perceived environmental uncertainty and supply chain integration is the causal link. Environmental uncertainty is an antecedent of supply chain integration and this is explained by information processing theory. Second, supply chain integration has a positive effect on operational performance. To improve performance, managers have need of interaction with suppliers and customers as well as inter-departments. Third, there is no direct effect between environment and performance but there are direct, indirect and total effects among the variables. The negative effect of perceived environmental uncertainty on performance (direct effect) is changed with positive effect (indirect and total effects). This is explained by fit as mediation by Venkatraman (1989).
Received 7 September 2017 Received in revised form 30 November 2017 Accepted 1 December 2017 Keywords: Perceived environmental uncertainty Supply Chain Integration Operational Performance Korean Firms
Copyright © 2017 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. T h i s i s a n o p e n a c c e s s a r t i c l e u n d e r t h e C C B Y - N C - N D l i c e n s e (http://creativecommons.org/licenses/by-nc-nd/4.0/).
1. Introduction Many firms have performed direct investment to China because the
country is the world’s factory. In addition, many Korean firms have also
* This research was supported by the Tongmyong University Research Grants (2016A003).
http://dx.doi.org/10.1016/j.ajsl.2017.12.010 2092-5212/© 2017 The Korean Association of Shipping and Logistics, Inc. Production and hosting by Elsevier B.V. Peer review under responsibility of the Korean Association of Shipping and Logistics, Inc.
264
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
invested in China. The cause of foreign direct investment (FDI) to China is keen competition in the market and the competition is followed by firms’ needs which would achieve cost advantage. This is the cause of investment to China which has cheap and quality labor. An increase of the firms which invest in China is caused by variance of the Chinese market and this is the background to the growth of the Chinese market. However, research which analyzes environment on the Chinese market is not active. From the viewpoint, research concerned with perceived environmental uncertainty of the Chinese market is required. Firms which have performed FDI in China grasp customer needs, share the needs with other departments, and achieve the needs through sharing the information with suppliers to minimize the negative effect of perceived environmental uncertainty on performance. From this viewpoint, supply chain integration is an important strategy of firms which perform FDI in China and this is explained by information processing theory. Firms acquire information from external environment because of perceived environmental uncertainty. The external information is learnt by managers and applied to internal processes. Superior internal processes structured through absorption of the information are also the basis of integration with suppliers and customers and this is connected with high performance (Bae and Lee, 2015). Research concerned with the relationship between environment, integration and performance has been performed by many researchers. For example, the moderating effect of environment on the relationship between integration and performance is verified by many researchers (Fynes et al., 2004; Kim and Chai, 2016; O’Leary-Kelly and Flores, 2002; Richey et al., 2009; Sundram et al., 2016; Wong et al., 2011). In addition, previous studies have investigated that perceived environmental uncertainty has a direct effect on supply chain integration (Paulraj and Chen, 2007; Ragatz et al., 2002). The relationship between the variables can be explained by information processing theory. Environment exists in exterior of firms and has an effect on firms. To overcome the negative effect of perceived environmental uncertainty on performance, managers acquire information from external environment, and the information is the basis of improving internal processes of firms. In addition, firms which structure the efficient internal processes make better integration possible with suppliers and customers. From this viewpoint, managers mediate the relationship between environment and firms. In this regard, managers’ recognition of environment is the basis of firms’ strategic behavior. Their recognition on supply chain integration is the basis of performance improvement. In addition, the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and performance can be explained by fit as mediation by Venkatraman (1989). However, there are the research papers which have not verified the relationship. For instance, environmental uncertainty has no moderating effect on the relationship between customer integration and service performance (Wong et al., 2011). Technological uncertainty has no effect on the relationship between supply chain relationship quality and supply chain performance (Fynes et al., 2004). Pagell and Krause (2004) did not prove the relationship between perceived environmental uncertainty, manufacturing flexibility and performance. Liao and Tu (2008) have verified that manufacturing system integration has no effect on manufacturing performance in high environmental uncertainty. TarifaFernandez and De Burgos-Jimenez (2017) did not find the moderating effect of uncertainty between supply chain integration and performance. On the other hand, prior research has analyzed that environmental uncertainty has negative effect on a manufacturer’s satisfaction with the perceived supplier performance (Ryu et al., 2008) and service
performance (Wood, 2008). This is connected with the limitations of the research as follows. First, research concerned with the direct effect of perceived environmental uncertainty on supply chain integration is not active. In addition, prior research has verified the negative relationship between environment and performance (Ryu et al., 2008; Wood, 2008) but research to consider perceived environmental uncertainty as an antecedent of supply chain integration is insufficient. This means that research concerned with precedent variables to affect supply chain integration is needed. Second, prior research has not verified a causal link between perceived environmental uncertainty and supply chain integration (Pagell and Krause, 2004). According to strategic choice theory, environment is existed in exterior of firms and it is an important factor to influence on firms. In this regard, firms choose proper strategy to fit the variance of environment, followed by high performance. Supply chain integration as a strategy of firms is affected by perceived environmental uncertainty and this is the basis of gaps in performance among firms. Therefore, this study needs to investigate the effect of perceived environmental uncertainty as an antecedent of supply chain integration. Third, research which has analyzed the moderating effect of environmental uncertainty on the relationship between supply chain integration and performance is active (Fynes et al., 2004; O’Leary-Kelly and Flores, 2002; Richey et al., 2009; Wong et al., 2011) but research concerned with the mediating effect of supply chain integration on the relationship is not active. Sundram et al. (2016) found that supply chain integration mediates the relationship between supply chain management practices and supply chain performance. According to information processing theory, if managers recognize environmental uncertainty, they acquire information in the market to minimize the negative effect of environmental uncertainty on performance, and the information is the basis of improving internal processes. In addition, they achieve supply chain integration through sharing the information with suppliers and this is connected with high performance. Hence, the negative effect of environmental uncertainty on performance (Ryu et al., 2008; Wood, 2008) is changed as the positive effect by way of supply chain integration. Moreover, this study needs to verify the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and performance. The confirmation of the direct, indirect and total effects among perceived environmental uncertainty, supply chain integration and operational performance can make it possible better understanding to the relationship between the variables. Therefore, there are two objectives of this study. One is to prove the mediation effect of integration on the relationship between environment and performance and the other is to verify direct, indirect and total effects among the variables.
2. Literature Review 2.1. Perceived environmental uncertainty and supply chain integration Environment is investigated as a moderator between integration and performance by prior research (Richey et al., 2009; Wong et al., 2011). However, the direct effect of environment on integration is not investigated in the research. From the viewpoint of contingency theory, environment is the factor which has a direct influence on strategy and performance (Lawence and Lorsch, 1967; Thompson, 1967). Moreover, supply chain integration is one of strategies which firms can choose.
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
Environment is existed in exterior of firms and it has an effect on firms. This means that it does not affected by firms. Perceived environmental uncertainty has a negative effect on performance and as a result, firms need to decide strategy to minimize the negative effect of the uncertainty on performance. The strategy mediates the relationship between environment and performance and it has a role to change a negative effect (a direct effect) with a positive effect (indirect and total effects) on the effect of perceived environmental uncertainty on performance. Therefore, this study verifies a direct effect of perceived environmental uncertainty on supply chain integration not tested by the research. In addition, this study identifies the direct, indirect and total effects among perceived environmental uncertainty, supply chain integration and operation performance. This is the basis of the hypothesis as follows. H. 1 Perceived environmental uncertainty has a positive influence on supply chain integration.
2.2. Supply chain integration and operational performance The relationship between integration and performance is proved by a majority of previous studies. Supply chain integration is started from inter-functional integration and developed to inter-corporate integration (Stevens, 1989). Inter-functional integration is the inception of supply chain integration (Bae, 2014) and as a result, firms can remove overlaps and inefficiencies in inter-functional activities. Firms can also achieve standardized communication through inter-departmental integration and consequently, they can attain high performance (Matapoulos et al., 2007). In addition, efficient internal processes of each firm are the basis of making inter-corporate integration possible. The high level of communication capability which firms have is the cause of creating customer needs in the market and applying to internal processes in firms. In addition, the needs are shared with suppliers and as a result, it is achieved (Bagchi et al., 2005; Bae and Lee, 2015). The relationship between supply chain integration and performance is explained by information processing theory. Firms create information in the market on the basis of environmental uncertainty, the information is disseminated to internal processes of firms and as a result, the internal processes is re-structured to fit customer needs through responding to the information. This is similar with processing information shown from market orientation (Bae, 2014). Form the viewpoint, prior research has ascertained the positive relationship between supply chain integration and performance (Bagchi et al., 2005; Boon-itt and Wong, 2011; Ghobakhloo et al., 2011; Rajaguru and Matanda, 2009; Schoenherr and Swink, 2012; Wong et al., 2011). This is the basis of a hypothesis as follows. H. 2 Supply chain integration has a positive influence on operational performance.
2.3. Perceived environmental uncertainty and operational performance Environment can be classified into various dimensions and it cannot be controlled by firms. It is the root of uncertainty, and firms respond to the uncertainty through collecting information in the market when there is high environmental uncertainty. In this regard, environmental uncertainty is the cause of lack of information when managers make a decision, and the relationship between environmental uncertainty and performance is
265
negative. Previous studies have verified that environmental uncertainty has a negative effect on performance (Fink et al., 2008; Ryu et al., 2008; Wood et al., 2008). The relationship between the variables is explained by information processing theory and contingency theory. According to the former, managers face uncertainty because of lack of information when they make a decision. To minimize the uncertainty, managers acquire information through interacting with environment such as other departments, suppliers and customers (Flynn et al., 2010). According to the latter, the recognition of managers on environment is the cause of gaps in performance among firms. If managers recognize high environmental uncertainty, they make an effort to minimize the negative effect of environmental uncertainty on performance. In addition, environmental uncertainty is the cause of a lack of information when managers perform strategy, and the lack of information is the cause of the negative effect of environmental uncertainty on performance. The viewpoint is in accord with fit as mediation by Venkatraman (1989). This explains the direct relationship between environment and performance and the intervening effect of strategy (supply chain integration) on the relationship. From the viewpoint, environmental uncertainty has a negative effect on performance, and strategy (supply chain integration) positively mediates the relationship. This is the basis of the hypothesis as follows. H. 3 Perceived environmental uncertainty has a negative effect on performance.
3. The Research Model and Methodology 3.1. The Research Model The relationship between the variables represents as follows.
Supply Chain Integration
H.1
Environmental Uncertainty
H.3
H.2
Operational Performance
Fig. 1 The Research Model
shows the relationship between perceived environmental uncertainty, supply chain integration and operational performance. It explains that perceived environmental uncertainty has a positive effect on supply chain integration and has a negative effect on operational performance. In addition, the research model explains that supply chain integration has a positive effect on operational performance. The role of supply chain integration on the relationship between perceived environmental uncertainty and operational performance can be explained by fit as mediation by Venkatraman (1989). In addition, the role of perceived environmental uncertainty to integration and performance can be proved by direct, indirect and total effects. The relationship between the variables can be explained by research hypotheses. 3.2. Research Methodology To achieve the research objectives, conceptual and operational definitions of the measuring items used in this study are extracted by prior
266
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
research (verified internal validity). The definitions are properly amended to fit the research objectives through interview with scholars and workers in the industry (verified external validity). The conceptual definitions of the measuring items are as follows. Perceived environmental uncertainty means the degree of impossibility of prediction to outcomes in the future (Chow et al., 1995; McGinnis and Kohn, 1993). It is divided into munificence, dynamism, heterogeneity and hostility. Munificence means a degree of continuous growth of a market caused by environmental variance. Dynamism means the difficulty of predicting change in the market. Heterogeneity means the change of competitive methods of competitors and customers’ preferences and expectations. Hostility means the degree of competition and regulations of the government in the market. Supply chain integration can be defined as working together among departments within a firm, understanding mutual different viewpoints, sharing resources and information and achieving common goals in supply chains (Ellinger et al., 2000; Stank et al., 2001/2002; Stock et al., 2000). It is divided into customer integration, supplier integration and internal integration. Customer integration means understanding for needs of core customers and responding to the needs. Supplier integration means structuring collaborative relationships with core suppliers for stock management and stable supply of raw materials and parts. Internal integration means processes of cooperation and interaction for maintenance of the close relationship between departments. Operational performance can be measured in terms of efficiency and effectiveness and this is connected with cost performance and service performance. Cost performance is an internal perspective of firms. Service performance is an external perspective of firms. All items are measured for perception on a seven Likert scale.
smooth communication with customers concerned with goods and services (sci 4) supplying goods and services to respond to customer needs (sci 5) Supplier integration: an exchange of harmonized information with suppliers (sci 6) participation of suppliers in inventory control (sci 7) use of quick response (sci 8) a degree of network integration with suppliers for stable purchase (sci 9) a degree of receiving stable goods and services from suppliers (sci 10) Internal integration: the possibility of real time checking of data concerned with goods and services (sci 11) sharing information between departments (sci 12) a degree of integrated inventory control (sci 13) the possibility of real time checking on total stock (sci 14) a high level of information integration in production processes (sci 15) Cost performance: a degree of saving of labor costs following reduction and redisposition of works (per 1) a degree of cost saving concerned with decreasing stock (per 2) a degree of cost saving concerned with stock management (per 3) a degree of cost saving in conformity with order management (per 4) Operational performance
Table 1 The definitions of variables Variables
a degree of cost saving concerned with contract with partners (per 5) Service performance: a degree of increased flexibility of operations through
Definitions
cooperation with partners (per 6)
Munificence:
an ability to fulfill special requirements of customers (per 7)
potentiality in the market (env 1)
an ability to supply estimated quality on time (per 8)
possibility of success when the firm entries into the new market
an ability to provide customers with value added service (per 9)
(env 2)
an ability to cooperatively overcome any problems with partners
a growing opportunity of the market (env 3)
if they are occurred (per 10)
Dynamism: the impossibility of forecasting the behavior of competitors in the market (env 4) impossibility of forecast on demand of the market (env 5) Environmental uncertainty
impossibility of confirmation of customer needs (env 6) Heterogeneity: a change of competitors’ competitive methods (env 7) a change of customers’ preference for goods/services (env 8) a change of customers’ level of expectation (env 9) application of various competitive strategies (env 10) Hostility: the strength of competition in the market (env 11) considering the response of competitors in decision-making (env 12) difficulty in analyzing the strategies of competitors (env 13) the degree of regulations of the government (env 14) Customer integration:
Supply chain integration
close contact with customers concerned with goods and services (sci 1) rapidness of order processes (sci 2) a high level of information sharing with customers (sci 3)
To achieve the research objectives, this study performed a survey to Korean manufacturing firms in China. The sample frame is verified by a Chinese membership list of the Korea International Trade Association. The sample is extracted 1,000 firms in the sample frame through random sampling, and a questionnaire was sent to them. Before the survey, the researcher contacted with the sample firms by telephone and confirmed whether they want to participate in the survey. The survey was performed to the firms which want to participate in the survey, and the method was personal visits. The respondent was a clerk of logistics or marketing department in the sample firms. They were the most proper in the objectives of this study because they have performed collaborative works with other departments and stakeholders such as supplier and customers. As a result of a survey, 213 questionnaires were collected. Five questionnaires were not used in the analysis because of improper response, and 208 questionnaires were used in the analysis. Concerned with nonresponse bias, this study used the method recommended by Armstrong and Overton (1977). The method is that questionnaires are divided into four groups on the basis of an arrived order. The first group and the last group are compared on the basis of gaps in responses. As a result of the analysis, there is no gap in the response and this means that there is no
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
non-response bias. This study used various analytical methods to test the hypotheses. First, estimate and purification of data are proved through the following processes. It is to identify error and missing data emerged in the process of response and coding as data investigating processes. This is performed by data coding and confirmation of missing data in SPSS. The missing data in items are substituted by a row average method of SPSS. Second, construct validity is verified by convergent validity and discriminant validity and tested by a confirmatory factor analysis (CFA). To verify the goodness of fit of the research model, this study used various indices as follows: p value on chi-square (criterion: ≥ 0.05), Q (chi-square/ degree of freedom, criterion: < 2.0), GFI (criterion: ≥ 0.9), AGFI (criterion: ≥ 0.8), CFI (criterion: ≥ 0.9), NFI (criterion: ≥ 0.9), IFI (criterion: ≥ 0.9), TLI (criterion: ≥ 0.9), and RMSEA (criterion: < 0.08) (Baumgater and Homburg, 1996; Segars and Grover, 1993). P value on chi-square is the index to estimate a model but it is sensitively changed by the number of data. For this reason, if the number of a sample is over 200 (n ≥ 200), it may be just treated as a reference index rather than estimating goodness of fit of a model (Baumgater and Homburg, 1996). In addition, this study tested Cronbach’s alpha and average variance extracted (AVE) for confirming reliability of the data. AVE means the sum of squared factor loading coefficients. If it is over 0.5, there is no problem. If there are no problems in the reliability and validity of the collected data, the researcher needs to analyze the structural equation modeling (SEM) to test the hypotheses. The contents are as follows. First, the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and operational performance is analyzed by SEM (Venkatraman, 1989). This is verified by confirmation of three hypotheses: a causal link between perceived environmental uncertainty and supply chain integration (H.1), a causal link between supply chain integration and operational performance (H.2), and a causal link between perceived environmental uncertainty and operational performance (H.3). The results of SEM are more informative than the results of a multiple regression analysis because verification of a causal link through SEM can suggest goodness of fit of a model as well as a path analysis among variables. Second, the direct, indirect and total effects of perceived environmental uncertainty on supply chain integration and operational performance are verified by SEM. The direct effect is analyzed by test of the hypotheses. This is verified by the above hypotheses (H.1, H.2 and H.3). Moreover, the indirect effect of perceived environmental uncertainty is verified by the coefficient which multiplies the estimate on the result of H.1 by the estimate on the result of H.2. There is the direct effect of perceived environmental uncertainty on operational performance (H.3), and the direct effect added to the indirect effect consists of the total effect. The total effect means whether perceived environmental uncertainty has a positive effect on operational performance by way of supply chain integration. The analysis is performed by SPSS 23.0 and AMOS 23.0. The results are as follows.
4. The Results of an Empirical Test 4.1. General Characteristics of responding firms This study analyzes the collected data to achieve the research objectives. Before testing the hypotheses, this study verifies the general characteristics of the responding firms.
267
Table 2 The general characteristics of responding firms The type of business
n (%)
Annual turnover (U$ a million)
n (%)
Chemistry/Rubber
12 (5.8)
Below 3
98 (47.1)
Electronics/1electricity
48 (23.1)
3 - 10
36 (18.7)
Metal/Nonmetal
51 (24.5)
10 - 100
6 (2.9)
Machine/Transport/Equipment
14 (6.7)
No answer
44 (21.2)
Fiber/Clothing/Leather
50 (24.0)
Employees
n (%)
Food/Paper/Furniture
8 (3.8)
Below 100
85 (40.9)
Food/Beverage
12 (5.8)
100 - 500
68 (32.7)
Others
8 (3.8)
500 - 1000
18 (8.7)
No answer
5 (2.4)
Over 1000
19 (9.1)
Total
208 (100)
No answer
18 (8.6)
As shown in, there are 51 firms in the metal and nonmetal industries which is the highest percentage (24.5%) and 8 firms in the food, paper and furniture which is the lowest percentage (3.8%). Annual turnover of the responding firms is to grasp the volume of firms. The highest percentage of annual turnover is below U$ 3 million which has 98 firms (47.1%). This means that they are small and medium sized firms. Similarly, the highest percentage of employees is below 100 workers which have 85 firms (40.9%). This result also explains that they are small and medium sized firms. 4.2. The Results of Reliability and Validity To verify reliability and validity, this study analyzes a confirmative factor analysis. The criteria are over 0.4 in factor loading coefficients, over 0.6 in Cronbach’s alpha, over 0.5 in AVE, and 2.0 in critical ratio. The results are as follows. Table 3 The results of CFA on perceived environmental uncertainty Factor, perceived environmental uncertainty has four dimensions such munificence, dynamism, hostility and heterogeneity. However, 14th item is deleted because the factor loading coefficient is below 0.4. The other items have no problems in the criteria., the test of chi-square is supported and this means that the characteristics of sample firms are not the same as the characteristics of the population. The other results of goodness of fit have no problems in the criteria. As a result of the analysis, the perceived environmental uncertainty has a positive effect on supply chain integration (H.1 is supported). Supply chain integration has a positive effect on operational performance (H.2 is supported). However, perceived environmental uncertainty has no effect on operational performance (H.3 is not supported). This is the cause of analyzing direct, indirect and total effects among perceived environmental uncertainty, supply chain integration and operational performance. The result is as follows. Table 7 The results of analyzing the direct, indirect and total effects of perceived environmental uncertainty OP Variables, there are no problems in the result. However, the fitness indices are no good because p value is supported. However, the sample firms are over 200 and that is why it can be treated as a reference. but the fitness index is no good because p value is supported. The others are no problems in the criteria. That is why this study tests the hypotheses. 4.3. The Results of empirical tests, the direct effect of perceived environmental uncertainty on operational performance is 0.033 in estimate and 0.734 in critical ratio. This means that there is no effect of perceived environmental uncertainty on operational performance. The indirect effect of perceived environmental uncertainty on operational performance is multiplies the estimate of the direct effect of perceived environmental uncertainty on supply chain integration by the estimate of the direct effect of supply chain integration on operational performance. The former is 0.338 in estimate and 3.765 in critical ratio, and the latter is 0.519 in estimate and 6.228 in critical ratio. As a result, the indirect effect of perceived environmental uncertainty on operational performance is 0.175. Finally, the total effect of perceived environmental uncertainty on operational performance is 0.208. This means that operational performance is improved in 0.208 when perceived environmental uncertainty is increased in 1.0. 4.4. Discussion
266
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
research (verified internal validity). The definitions are properly amended to fit the research objectives through interview with scholars and workers in the industry (verified external validity). The conceptual definitions of the measuring items are as follows. Perceived environmental uncertainty means the degree of impossibility of prediction to outcomes in the future (Chow et al., 1995; McGinnis and Kohn, 1993). It is divided into munificence, dynamism, heterogeneity and hostility. Munificence means a degree of continuous growth of a market caused by environmental variance. Dynamism means the difficulty of predicting change in the market. Heterogeneity means the change of competitive methods of competitors and customers’ preferences and expectations. Hostility means the degree of competition and regulations of the government in the market. Supply chain integration can be defined as working together among departments within a firm, understanding mutual different viewpoints, sharing resources and information and achieving common goals in supply chains (Ellinger et al., 2000; Stank et al., 2001/2002; Stock et al., 2000). It is divided into customer integration, supplier integration and internal integration. Customer integration means understanding for needs of core customers and responding to the needs. Supplier integration means structuring collaborative relationships with core suppliers for stock management and stable supply of raw materials and parts. Internal integration means processes of cooperation and interaction for maintenance of the close relationship between departments. Operational performance can be measured in terms of efficiency and effectiveness and this is connected with cost performance and service performance. Cost performance is an internal perspective of firms. Service performance is an external perspective of firms. All items are measured for perception on a seven Likert scale.
smooth communication with customers concerned with goods and services (sci 4) supplying goods and services to respond to customer needs (sci 5) Supplier integration: an exchange of harmonized information with suppliers (sci 6) participation of suppliers in inventory control (sci 7) use of quick response (sci 8) a degree of network integration with suppliers for stable purchase (sci 9) a degree of receiving stable goods and services from suppliers (sci 10) Internal integration: the possibility of real time checking of data concerned with goods and services (sci 11) sharing information between departments (sci 12) a degree of integrated inventory control (sci 13) the possibility of real time checking on total stock (sci 14) a high level of information integration in production processes (sci 15) Cost performance: a degree of saving of labor costs following reduction and redisposition of works (per 1) a degree of cost saving concerned with decreasing stock (per 2) a degree of cost saving concerned with stock management (per 3) a degree of cost saving in conformity with order management (per 4) Operational performance
Table 1 The definitions of variables Variables
a degree of cost saving concerned with contract with partners (per 5) Service performance: a degree of increased flexibility of operations through
Definitions
cooperation with partners (per 6)
Munificence:
an ability to fulfill special requirements of customers (per 7)
potentiality in the market (env 1)
an ability to supply estimated quality on time (per 8)
possibility of success when the firm entries into the new market
an ability to provide customers with value added service (per 9)
(env 2)
an ability to cooperatively overcome any problems with partners
a growing opportunity of the market (env 3)
if they are occurred (per 10)
Dynamism: the impossibility of forecasting the behavior of competitors in the market (env 4) impossibility of forecast on demand of the market (env 5) Environmental uncertainty
impossibility of confirmation of customer needs (env 6) Heterogeneity: a change of competitors’ competitive methods (env 7) a change of customers’ preference for goods/services (env 8) a change of customers’ level of expectation (env 9) application of various competitive strategies (env 10) Hostility: the strength of competition in the market (env 11) considering the response of competitors in decision-making (env 12) difficulty in analyzing the strategies of competitors (env 13) the degree of regulations of the government (env 14) Customer integration:
Supply chain integration
close contact with customers concerned with goods and services (sci 1) rapidness of order processes (sci 2) a high level of information sharing with customers (sci 3)
To achieve the research objectives, this study performed a survey to Korean manufacturing firms in China. The sample frame is verified by a Chinese membership list of the Korea International Trade Association. The sample is extracted 1,000 firms in the sample frame through random sampling, and a questionnaire was sent to them. Before the survey, the researcher contacted with the sample firms by telephone and confirmed whether they want to participate in the survey. The survey was performed to the firms which want to participate in the survey, and the method was personal visits. The respondent was a clerk of logistics or marketing department in the sample firms. They were the most proper in the objectives of this study because they have performed collaborative works with other departments and stakeholders such as supplier and customers. As a result of a survey, 213 questionnaires were collected. Five questionnaires were not used in the analysis because of improper response, and 208 questionnaires were used in the analysis. Concerned with nonresponse bias, this study used the method recommended by Armstrong and Overton (1977). The method is that questionnaires are divided into four groups on the basis of an arrived order. The first group and the last group are compared on the basis of gaps in responses. As a result of the analysis, there is no gap in the response and this means that there is no
Empirical Relationships of Perceived Environmental Uncertainty, Supply Chain Collaboration and Operational Performance: Analyses of Direct, Indirect and Total Effects
non-response bias. This study used various analytical methods to test the hypotheses. First, estimate and purification of data are proved through the following processes. It is to identify error and missing data emerged in the process of response and coding as data investigating processes. This is performed by data coding and confirmation of missing data in SPSS. The missing data in items are substituted by a row average method of SPSS. Second, construct validity is verified by convergent validity and discriminant validity and tested by a confirmatory factor analysis (CFA). To verify the goodness of fit of the research model, this study used various indices as follows: p value on chi-square (criterion: ≥ 0.05), Q (chi-square/ degree of freedom, criterion: < 2.0), GFI (criterion: ≥ 0.9), AGFI (criterion: ≥ 0.8), CFI (criterion: ≥ 0.9), NFI (criterion: ≥ 0.9), IFI (criterion: ≥ 0.9), TLI (criterion: ≥ 0.9), and RMSEA (criterion: < 0.08) (Baumgater and Homburg, 1996; Segars and Grover, 1993). P value on chi-square is the index to estimate a model but it is sensitively changed by the number of data. For this reason, if the number of a sample is over 200 (n ≥ 200), it may be just treated as a reference index rather than estimating goodness of fit of a model (Baumgater and Homburg, 1996). In addition, this study tested Cronbach’s alpha and average variance extracted (AVE) for confirming reliability of the data. AVE means the sum of squared factor loading coefficients. If it is over 0.5, there is no problem. If there are no problems in the reliability and validity of the collected data, the researcher needs to analyze the structural equation modeling (SEM) to test the hypotheses. The contents are as follows. First, the mediating effect of supply chain integration on the relationship between perceived environmental uncertainty and operational performance is analyzed by SEM (Venkatraman, 1989). This is verified by confirmation of three hypotheses: a causal link between perceived environmental uncertainty and supply chain integration (H.1), a causal link between supply chain integration and operational performance (H.2), and a causal link between perceived environmental uncertainty and operational performance (H.3). The results of SEM are more informative than the results of a multiple regression analysis because verification of a causal link through SEM can suggest goodness of fit of a model as well as a path analysis among variables. Second, the direct, indirect and total effects of perceived environmental uncertainty on supply chain integration and operational performance are verified by SEM. The direct effect is analyzed by test of the hypotheses. This is verified by the above hypotheses (H.1, H.2 and H.3). Moreover, the indirect effect of perceived environmental uncertainty is verified by the coefficient which multiplies the estimate on the result of H.1 by the estimate on the result of H.2. There is the direct effect of perceived environmental uncertainty on operational performance (H.3), and the direct effect added to the indirect effect consists of the total effect. The total effect means whether perceived environmental uncertainty has a positive effect on operational performance by way of supply chain integration. The analysis is performed by SPSS 23.0 and AMOS 23.0. The results are as follows.
4. The Results of an Empirical Test 4.1. General Characteristics of responding firms This study analyzes the collected data to achieve the research objectives. Before testing the hypotheses, this study verifies the general characteristics of the responding firms.
267
Table 2 The general characteristics of responding firms The type of business
n (%)
Annual turnover (U$ a million)
n (%)
Chemistry/Rubber
12 (5.8)
Below 3
98 (47.1)
Electronics/1electricity
48 (23.1)
3 - 10
36 (18.7)
Metal/Nonmetal
51 (24.5)
10 - 100
6 (2.9)
Machine/Transport/Equipment
14 (6.7)
No answer
44 (21.2)
Fiber/Clothing/Leather
50 (24.0)
Employees
n (%)
Food/Paper/Furniture
8 (3.8)
Below 100
85 (40.9)
Food/Beverage
12 (5.8)
100 - 500
68 (32.7)
Others
8 (3.8)
500 - 1000
18 (8.7)
No answer
5 (2.4)
Over 1000
19 (9.1)
Total
208 (100)
No answer
18 (8.6)
As shown in