Factors affecting the organizational performance of manufacturing firms

Abstract

Numerous studies have been conducted to explore the individual effects of organizational culture (OC) and supply chain management (SCM) practices on organizational performance (OP) in different settings. The aim of this study is to investigate the impact of OC and SCM on OP. The sample of the study consisted of 93 manufacturing firms in Jordan. Data were collected from employees and managers from different divisions using a reliable and valid measurement instrument. The findings confirm that both OC and SCM practices significantly predict OP. The current study is significant in reliably testing the relationship between SCM practices and OP; however, it is necessary to consider cultural assumptions, values and beliefs as the impact of OC on OP is greater than the impact of SCM practices. Based on the results, future studies should consider the moderating and mediating role of OC on the relationship between SCM practices and OP.

Introduction

Research on organizational performance (OP), either with regard to its financial or its operational aspects, has revealed different factors that have significant effects on

OP. Examples of these factors include enterprise risk man- agement,1 multidivisional structures of organizations,2 CEO charisma,3 stakeholders involvement and support,4 intellectual capital,5 human capital,6 CEOs social net- works,7 organizational learning,8 the strategic integration of human resource management,9 managerial practices related to strategies, performance measurement, corporate governance, innovation and development, along with thexternal environment,10 adoption of green supply chain management (SCM) practices11 human resource prac- tices,12 knowledge management capacity,13 supportive organizational climate,14 supply chain quality manage- ment15 supply chain innovation,16 human capital disclo- sure17 and knowledge creation.18 Concerning the relationship between organizational cul- ture (OC) and OP, Yesil and Kaya19 carried out a study to explore the impact of OC (clan, adhocratic, market and hierarchical cultures) on financial OP using a sample con- sisting of managers of Turkish companies. Their results indicated that none of these dimensions were related to the financial dimensions of OP. On the other hand, Prajogo and McDermott 20 found a positive relationship between OC and OP. In a study on the impact of human resources on SCM and OP, Gomez-Ceden oetal.21 found a direct influence of an SCM implementation on SCM outcomes and an indirect influence on OP of firms from different industries in Spain. Using a sample of manufacturing and service firms from Malaysia, Chong et al.22 asserted the positive impact of SCM practices on OP.

Evidence from China has confirmed the positive impact of supply chain integration (internal, customer and supplier integration) on OP. Li et al.23 investigated the impact of four practices of SCM (supplier and customer partnership, the level and quality of information sharing and postpone- ment) on OP, measured by market and financial perfor- mance. Their results pointed to a significant influence of these practices on OP dimensions. Miguel and Brito 24 ana-lysed data collected from companies in different industries in Brazil to explore the relationship between SCM and OP. They concluded that SCM practices exert positive influ-ences on OP. Okongwu et al.25investigated the impacts of quality of information sharing and suppliercustomer partnerships on the OP of industrial firms in France. Their results supported the hypothesis that SCM practices positively predict OP. In light of the aforementioned findings, the aim of this study is to explore factors affecting financial and non-financial per- formance via investigating the impact of OC dimensions and SCM practices on OP. The remainder of the article is organized as follows: Literature review and hypothesis development section provides a literature review and hypothesis development; this is followed by the presentation of the conceptual model for the study in section Conceptual model. The Research methodology section addresses the research methodology, and results are presented in section Data analysis and results. A discussion of the findings and conclusion are provided in the sixth section. The final section highlights the research implications and provides future research directions. Literature review and hypothesisn development Organizational culture Scholars have defined OC as shared values and beliefs held by individuals that form the basis for patterns of behaviour in solving problems.26 Denison 27 argued that the core content of OC covers beliefs, values and assump- tions held by individuals within organizations. In contrast, Schein 28 described OC as a behaviour that determines how an organization grasps and reacts to the external and internal environments, thus embedding the reaction to the organizational environment in the definition of OC. Many attributes concerning OC emerge in the literature. It has been considered to guide individual communications within an organization29 and to be a critical antecedent factor for the success of knowledge management initia-

Summaries the following articles ?

tives

30

and a predictor of OP.

31

In terms of the dimensions of OC, studies such as that of

Balthazard et al.

32

have used the Organizational Culture

Inventory

(OCI), (#2012 Human Synergistics International)

developed by Robert Cooke and J. Clayton Lafferty, which

covers three types of OC: aggressive/defensive, passive/

defensive and constructive cultures. The OCI measures 12

behavioural norms called 112 oclock positions. Chang

and Lin

33

plotted OC on four axes (flexibility, internal,

external and effectiveness), which cover four types of

OC: cooperative, innovative, consistent and effective.

According to these authors, cooperation, information

sharing, empowerment and teamwork distinguish a coop-

erative culture. Adaptability and creativity are the major

features of innovative cultures. Rules and regulations, as

well as efficiency, are the dimensions included in a con-

sistency culture.

Finally, the main focus of the effectiveness, culture is on

competitiveness, goal achievement and effectiveness. In

their study of the relationship between OC, total quality

management and operational performance, Baird et al.

34

used the organizational culture profile to measure OC. The

profile consists of six dimensions: teamwork/people

respect, outcome orientation, innovation, stability, atten-

tion to detail and aggressiveness. For this study, two OC

dimensions were adopted: adaptability

26

and performance

orientation.

35

According to Ahmad,

26

customers, risks and

mistakes drive an adaptable organization. Performance

orientation refers to the accountability of members towards

results and high levels of performance.

35

Table 1 shows

examples of the OC dimensions used in the literature.