An investigation of the impact of flexibility on global reach and firm performance

Fawcett, Stanley E

Within today's fiercely competitive global economy, the concept of "competing on capabilities" has become fundamental to many firms' competitive strategies.1 The idea of capabilities-based competition was first widely publicized-in a simple and relatively undeveloped form-by Porter2 in his discussion of competitive advantage. Porter argued that some form of cost leadership or differentiation was vital to competitive success. Hayes, Wheelwright, and Clark3 later moved the discussion to the manufacturing arena, emphasizing the need to focus on a limited set of competitive dimensions or priorities in order to use manufacturing to build a sustainable advantage. The capabilities concept further emerged as Cleveland et al.4 attempted to measure "production competence" by defining competence as a variable rather than a fixed attribute. These authors defined production competence as manufacturing performance (strengths and weaknesses) along certain strategic priorities, and suggested that a definite link should exist between competence and firm performance.

Prahalad and Hamel5 next visited the concept via their discussion of "core competencies," which are defined as "the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies." Again, these authors emphasize that a core competence should focus on providing a differential advantage. Core competencies should thus (1) provide potential access to a wide variety of markets, (2) make a significant contribution to customer satisfaction, and (3) be difficult for competitors to replicate. The final major step in the development of the capabilities concept occurred as Stalk et al.6 highlighted the importance of organizational practices and business processes in the development and strategic use of capabilities. Today, after 15 years of evolution, the objective of critical capabilities can be stated as follows: to use business practices and processes to develop and focus the firm's human, technological, and financial resources (infrastructure) to meet the real needs of customers.

In the quest to achieve a capabilities-based competitive advantage, the firm must identify one or more dimensions along which it will endeavor to differentiate itself. Hayes et al.7 identified five competitive dimensions-cost, quality, flexibility, delivery, and innovation-that drive strategy to deliver superior value to customers. In recent years, firms have emphasized product cost and quality to the point that competitive parity has resulted and these two dimensions have come to be viewed as the price of admission to today's global marketplace. Even as cost and quality have become minimum standards by which competitiveness is measured, flexibility has received increasing attention as a viable differentiator. In fact, flexibility has taken center stage as the notion of time-based competition has been widely adopted.8,9,10 Moreover, by the early 1990s, flexibility had been identified as the next major competitive battlefield."

The emergence of flexibility as an important strategic capability has created a need to gain a better understanding of both the issues that lead to the development of a capability to be flexible and the impact of flexibility on firm performance. This need is even more pressing given flexibility's pivotal role in helping firms meet the dynamic challenges of today's global operating environment. The research reported in this paper seeks to provide relevant insight regarding both the creation and the competitive impact of a flexibility-based strategy within an international operating environment. Specifically, a measure of value-added flexibility was developed, the importance of information availability and planning procedures to the creation of a flexibility-based strategy was evaluated, and the impact of flexibility on global reach and firm performance was determined. The next section develops the conceptual model and presents the research hypotheses. Within this section, the relevant literature is discussed as background for the model development. The methodology is then presented and is followed by a discussion of the analysis and findings. The paper concludes by highlighting theoretical and managerial implications as well as directions for future research.

CONCEPTUAL FRAMEWORK

Contingency theory implies that firms adapt to changes in their competitive environment by modifying their approach to competition in order to maintain or enhance performance.12 This contingency relationship has long been discussed as essential to understanding the strategy and performance of a firm.13,14 Contingency theory thus provides a basic rationale for the recent emphasis on flexibility-based strategies since they represent a strategic response to emerging competitive threats.15 Further, the strategic management concept as summarized by Bracker16 suggests that a firm utilizes its resources to achieve specified objectives within a given competitive environment. In essence, strategy focuses the firm's resources via a competitive driver such as flexibility to enhance firm performance. This notion that internal resources can and should be developed and focused to provide a hard-to-replicate differential advantage has gained much credibility in recent years.l7,18 A key to resource-based strategic management is the establishment of organizational skills and processes that enable a firm to build and deliver distinctive, cost-competitive products. The firm's value-added activities of logistics and manufacturing represent areas where unique organizational skills and processes can be developed and are a likely source of differential advantage. Thus, a cross-functional approach that integrates critical skills and processes enables logistics and manufacturing to achieve a flexibility competence that can lead to a sustainable competitive advantage. Combining and operationalizing these concepts yields the sequential relationship shown in Figure 1.

This sequential relationship provides the basis for the present study (see Figure 2). That is, recognizing that dramatic changes have occurred in the global competitive environment over the past twenty years, the emphasis is on the role of flexibility-based strategic responses and their impact on firm performance. Specifically, flexibility represents the competitive driver, or focusing mechanism, through which competitive advantage is sought. Two principal resources, or antecedents of a flexibility competence, are considered in the proposed model. They are (1) information availability for decision making and (2) planning sophistication and planning procedures. Information and planning were the focus of the study because of the literature's emphasis on business practices, procedures, and policies on the designation and development of appropriate competitive capabilities.l9 That is, information and planning greatly influence the establishment of the practices, procedures, and policies that determine the extent to which flexibility is developed as a competitive weapon. Finally, two outcomes that are likely to be influenced by a flexibility-based capability are considered. First, comparative performance vis-A-vis leading competitors is evaluated. Second, long-term global competitive potential is considered by looking at the firm's presence in worldwide factor-input and consumer markets. Each of these constructs is discussed in the following paragraphs and the related hypotheses are listed in Table 1.

A Cross-Functional Perspective of Flexibility Competence

Flexibility is often defined as the "ready capability to adapt to new, different, or changing requirements." In today's competitive arena, flexibility is often characterized as "doing things fast" and "being responsive to the market."20,21 Sun Tzu recognized the importance of flexibility when he noted that, "every minute ahead of the enemy is an advantage."22 In essence, the ability to respond more rapidly than the competition-an ability enhanced by a flexibility competenceplaces the firm in a position to better meet the needs of consumers and thus provides the firm with a tangible competitive advantage.

Unfortunately, despite the perceived importance of flexibility as a competitive weapon, U.S. manufacturers have not emphasized flexibility to the same extent as their Japanese rivals.23 Two explanations are often given for this lack of flexibility emphasis. First, firms develop competitive priorities sequentially, and with U.S. firms engaged in closing the quality gap, flexibility has yet to receive the highest level of management attention.24 Second, Cox25 noted that while most firms view flexibility as important, few firms have adequate measures to monitor and encourage flexibility performance. Thus, the importance of flexibility as a strategy driver depends on the strategic orientation of the firm, which is influenced by the firm's measurement of flexibility performance.

Hayes and Wheelwright26 were among the first to stress the role of manufacturing flexibility as a vital element of firm strategic content. They claimed that flexibility could be effectively used to help U.S. firms restore their competitiveness in the face of global competition. At about the same time, enhanced flexibility was touted as one of the principal benefits of just-in-time manufacturing. Schonberger 27 noted that Japanese manufacturers were on the leading edge of exploiting flexibility to achieve competitive advantage. He stated that "Japanese strategies require flexibility, and get it, by means of procedures and policies" that permeate the firm and often run counter to U.S. practice. Schonberger thus implied that flexibility is not only an essential strategic element but that it must be planned for. Swamidass and Newell28 empirically validated the importance of flexibility as an important variable in manufacturing strategy content. They considered the role of manufacturing flexibility in helping firms cope with environmental uncertainty and found that flexible firms outperform their less flexible counterparts.

While manufacturing researchers were focusing on flexibility as part of manufacturing strategy content, Shapiro and Heskett29 were emphasizing the importance of flexibility to logistics strategy. Flexibility was considered to be critical to their notion of customer service and a logistics-based strategic advantage. In a later study of leading-edge logistics practices, Bowersox et al.30 found that firms that use logistics as a competitive weapon to establish and maintain customer loyalty relied heavily on achieving high levels of flexibility to both respond to customer needs and overcome unforeseen contingencies. They identified information availability and technology as key resources in the development of flexibility competence. Stalk et al.31 highlight logistics flexibility as fundamental to capabilitiesbased competition in their Wal-Mart example, which shows how the use of cross-docking, a satellite communications system, and a private trucking fleet yield superior operational flexibility.

Stalk et al.'s discussion is particularly noteworthy since it points out the need to cross traditional functional domains to achieve long-term strategic advantage. They state that, "another attribute of capabilities is that they are collective and cross-functional-a small part of many people's jobs, not a large part of a few." This position is consistent with Churchman's systems view,32 which suggests that strategic content should be viewed from a systems rather than a functional orientation. Therefore, the measure of flexibility used in this research consists of both manufacturing and logistics components (see Table 2).

Antecedents of a Flexibility Competence

Two primary antecedents of a flexibility competence are the availability of useful information and the level of comprehensive strategic planning in the design of the international network. Each is discussed in the following paragraphs.

Information. Managers need information to determine organizational objectives and to work toward achieving them.33,34,35,36 That is, information is used extensively in strategy formulation (planning) and strategy implementation as well as in the day-to-day control of operations. Information about activities or linkages in the value chain is particularly relevant for efforts using flexibility as a competitive driver.37,38 Bartlett and Ghoshal39 further note that information is needed for strategic control in an international setting. Without adequate information, coordinating and controlling worldwide operations for competitive advantage is impossible.

Within the model, two types of information are of particular importance. First, strategic information used in the configuration and design of the facility network is vital because it impacts the deployment and productivity of a firm's value-added resources.40 Specific information in this area includes comparative resource costs and availability, governmental influences and regulations, and geographic/ demographic factors that affect both market demand and the operating environment.41 While configuration decisions are always difficult, the complexities of location decisions are greatly magnified when global decisions are made. The diverse legal, political, cultural, and economic climates of different countries increase the risks and uncertainties in global operations.42 43 Therefore, decisions made by managers in a global environment require the collection and communication of substantially larger amounts and more diverse types of information to facilitate the effective configuration and coordination of manufacturing networks. The survey items used in this research to measure strategic location sophistication were drawn from existing research (see Table 2).44,45,46,47,48

Second, relevant information that focuses on managing continual operations is essential to value addition. Peters49 noted this when he aptly stated that "what gets measured, gets done." This statement ties a firm's information and control system directly to efforts to manage operations to establish a competitive advantage. From a measurement perspective, two distinct operational areas were examinedmanufacturing and logistics. Researchers in both manufacturing and logistics have long recognized the importance of information to making effective operating decisions.50,51,52 Similarly, over the past decade, researchers in both areas have become aware that the truly relevant and timely information needed to make the decisions that lead to enhanced manufacturing and logistics competence was often unavailable.53'54 Much of the problem rests in the fact that the information used in daily decision making is generated and/or filtered by the firm's accounting and control systems. Kaplan55 noted that traditional control systems emphasize external reporting needs, provide distorted cost information, and fail to provide insight about essential non-financial issues such as quality, delivery, and flexibility. Despite Kaplan's call for new information systems, little change occurred until recently; however, it appears that top managers have now recognized "that new strategies and competitive realities demand new measurement systems."56 The survey instrument sought to identify how well the firms' information systems provide useful manufacturing- and logistics-related information (see Table 2). Useful information was defined as information that "enables managers to make operating decisions that will lead to long-term competitive success."

Strategic Planning. The very essence of contingency theory is that managers use information about environmental changes to help them make decisions that will ensure continued success. Bracker57emphasizes that this process involves strategic planning. Further, it has been suggested that this process or planning dimension plays as significant a role in securing high levels of firm performance as does the development of a critical capability.58 In fact, Stalk et al. state that the essence of strategy is selecting the correct capability. Focusing specifically on the manufacturing function, Hayes et al.59 note that the strategic planning process should help the manufacturing function "organize itself in such a way as to reinforce the priorities that the company has placed on certain competitive dimensions." Likewise, Bowersox et al.6 place substantive importance on the linkage between the strategic planning process and the development of logistics capabilities. In short, strategic planning impacts the development of a flexibility capability by processing information to (1) select flexibility as a competitive dimension to be developed and (2) organize resources to develop and implement a flexibility strategy.

Strategic planning was decomposed into two dimensions for measurement purposes. The first dimension evaluated the extent to which planning is used in efforts to build a competitive advantage. This dimension also described the planning process by measuring the utilization levels of basic planning tools. The second dimension emphasized the formality of the planning process with respect to the design of the firm's value-added operations. The formalization of the planning process has been identified as important to competitive success.61,62 Specifically, planning formality was measured for seven different activities considered to be important to long-term competitive success. Formality was defined as incorporating "extensive analysis of risks and benefits, documentation of alternatives, and communication of the firm's objectives and strategy implementation process to all relevant management levels." The individual items used to capture both strategic planning dimensions are listed in Table 2.

Outcomes of a Flexibility Competence

A principal rationale for seeking to enhance the firm's flexibility competence is to improve the firm's competitive position. Better firm performance is thus an expected outcome of a flexibility competence. A second outcome that can be reasonably expected from greater flexibility is the ability to better manage geographically dispersed operations. Each of these two proposed outcomes are discussed below.

Global Reach. Economic globalization has created a competitive environment where formidable world competitors identify and penetrate profitable markets worldwide. Firms that traditionally emphasized domestic markets now find they must understand the intentions of tough foreign rivals simply to defend their home market. This situation creates a serious dilemma firms must develop a global perspective or risk competitive extinction.63 In essence, globalization has altered the dynamics of competitive strategy. Ohmae64 has suggested that competitive success can best be achieved by establishing a global presence. Global presence or reach helps a firm compete as it (1 ) increases global market share, (2) prevents competitors from cross-subsidizing their global operations by establishing a presence in their home markets, (3) monitors worldwide technology developments, (4) accesses suppliers and supplier innovations, and (5) creates scale, experience, and scope economies.

Successful implementation of a global strategy requires that the firm increase its performance to "world-class" levels while providing seamless standards of performance across borders.65 Coordinated global manufacturing strategies have emerged to meet these two criteria.66 These global strategies emphasize the management of worldwide resources and markets. The success of these strategies depends on the rationalization and subsequent coordination of productive activities. Coordination is achieved through the proactive use of information and logistics systems.67 Kogut68 argued that flexibility plays a central role in the coordination and success of global strategies, suggesting that firms that possess greater logistics and manufacturing flexibility are better positioned to extend their global reach. To better understand the global reach of respondent firms, the survey instrument collected information concerning the extent of global operations, especially as they relate to decoupling comparative advantage and accessing worldwide markets (see Table 2).

Firm Performance. Measuring firm performance is often a challenge since actual performance data related to an individual business unit's competitive position is not generally published in annual reports and is usually closely held and therefore very difficult to obtain. While objective performance measures are preferable, perceptual measures have been found to correlate closely with objective measures and are therefore acceptable and useful substitutes when objective data are unavailable69,70

Perceptual measures of performance are typically oriented toward financial and marketing issues and include return on assets, growth in sales, after tax return on investment, and market share. Other, less traditional, measures such as comparative cost reduction, customer service, product quality, and overall competitive position have also been used successfully.71 Because firms were generally not willing to share actual performance data, a perceptual measure using a combination of financial, marketing, and less traditional measures was employed in this research.

METHODOLOGY

An understanding of complex competitive issues such as those of interest here can best be gained by gathering data from actual organizational settings.72 Therefore, an empirical study utilizing a survey methodology was undertaken to examine the proposed model and associated hypotheses. The methodology was performed in a manner consistent with the guidelines suggested by Flynn et al.73

The sample population consisted of senior level managers directly responsible for their strategic business unit's international operations involving Mexican production sharing. The sample population was compiled from three directories: America's Corporate Families and International Affiliates,74 Directory of American Firms Operating in Foreign Countries,75 and International Directory of Corporate Affiliations.76 After eliminating duplicate listings and clearly incomplete addresses, 633 managers were included in sample population. However, during the course of the survey administration, 109 surveys were returned as undeliverable because of incorrect address information. Thus, the adjusted sample size consisted of 524 managers.

The survey was developed after an extensive review of the literature and several interviews with managers involved in their firm's international value-added operations. This approach helped assure content validity. Existing constructstypically consisting of seven-point, interval scales-were used where possible to increase construct reliability. After initial survey development, several phases of pre-testing were performed to modify question content and survey structure. The objective was to increase both the survey response rate by making the survey as user-friendly as possible and the meaningfulness of the collected data. A modification of Dillman's Total Design Method77 was then employed to assure the best possible response rate. Overall, 131 usable surveys were returned, providing a response rate of just over 25 percent.

Analysis of the responses across the different mailings showed that no significant differences in the responses existed. Also, the demographic stratifying variables were compared to previously published data concerning Mexican production sharing operations. This comparison revealed that the respondent group was representative of the overall production sharing population. Thus, the analysis of responses indicated that no response bias was present.

Finally, respondent managers were largely division and corporate managers from a variety of functional areas, with manufacturing and materials managers most frequently represented. The relatively senior position of the managers placed them in a position to be knowledgeable about the constructs of interest. As noted above, the items in the constructs were developed based on a careful review of the literature. Churchill's78 approach of dropping items with low inter-item correlations from the constructs was used to purify the measurement scales. Cronbach's coefficient alpha, a commonly used measure of internal consistency, was then used to assess each construct's reliability. The alpha scores are shown in Table 2. All of the alpha scores approximate .8 or larger, indicating that the constructs are reliable.79

ANALYSIS

Testing of the hypotheses is based on the coefficients estimated from the structural equations implied in Figure 2,80,81 First, the manifest reflective scales associated with the latent constructs of Information Capability (Fl), Strategic Planning (F2), and Flexibility (F3) are represented in the measurement portion of the model: proposed nomologically and examined for reliability using coefficient alpha (see Table 2) is further validated by the holistic test of fit within the overall set of equations. Thus, the latent constructs are well represented by their associated manifest variables. The second step was to examine the overall fit of the model. The x^sup 2^ value is sufficiently small that the hypothesis that the covariance matrix implied by the equations does not fit the covariance matrix of the data was rejected. Further, the additional goodness of fit statistics are very close to their upper limit of 1.00, indicating that the overall structural equation model fits very well. Next, the structural coefficients were examined. Each of the coefficients was statistically different from zero, although two were only significant at the p

DISCUSSION

Antecedents of Flexibility, namely Information Capability and Strategic Planning, were related as hypothesized in HI. That is, Strategic Planning was strongly and significantly influenced by Information Capability (gamma^sub 1^ = .771, p

Four hypotheses (i.e., H4-H7) were proposed to link the antecedent constructs to the two measures of overall strategic outcomes-Global Reach and Firm Performance. Specifically, Information Capability and Strategic Planning were hypothesized to directly influence Global Reach and Firm Performance, H4 and H5 respectively. They also each influenced both Global Reach and Firm Performance through Flexibility, H6 and H7 respectively. Thus, Flexibility both moderates and mediates the effects of Information Capability and Strategic Planning on the ultimate outcome measures. For example, Flexibility mediates the relationship between Information Capability and Global Reach (gamma^sub 3^, H4) by it own effects on Global Reach (Beta^sub 2^) (Parameter bias in these estimated simultaneous equations was avoided by GLS.) This explains the fact that both H4, the effects of Information Capability on Global Reach (gamma^sub 3^), and H5, the effects of Strategic Planning on Firm Performance (Beta^sub 3^), are only significant at the p

Finally, strong support of H6 and H7 is indicated by Beta^sub 2^ and Beta^sub 4^ respectively, demonstrating that the direct effects of Flexibility on the ultimate outcome measures are strongly significant. This finding validates much of the anecdotal and conceptual literature regarding the importance of flexibility-based strategies. Overall, within the holistic modeling framework, the use of multiple measures and highly reliable scales increases the confidence in the tests of the proposed model and associated set of hypotheses.

CONCLUSIONS AND IMPLICATIONS

The central focus of this research was to gain a better understanding of the impact of flexibility on a firm's competitive position. Even so, to be managerially and theoretically relevant, an examination of flexibility as a value-added capability must consider three issues: (1) the measurement of value-added flexibility, (2) resource utilization-in this case, information availability and planning proceduresrequired to enhance flexibility, and (3) the value or impact of a flexibility strategy on firm performance. First, flexibility was defined in terms of the firm's ability to respond to competitive requirements (shorter lead times, special requests, unexpected events). The ability to effectively and rapidly meet these demands depends on activities that are performed in more than one functional area. Thus, this definition forced the researchers to view and therefore operationalize flexibility as a cross-functional or team-oriented strategy involving both manufacturing and logistics capabilities. The use of multiple measures that incorporate two different functional areas is a unique and important attribute of this study, and provides greater insight into the development and implementation of an effective flexibility strategy.

Second, the findings of this research indicate that the two resources examined-information and planning-are both important to the effective implementation of a flexibility strategy. Information Capability influences Flexibility in two ways, directly and through Strategic Planning. The direct effect links information to a manager's ability to make "good" decisions that ultimately lead to an enhanced capability. Without useful information, the manager's ability to facilitate the creation of a flexibility competency is severely limited. This follows Lord Kelvin's statement, "When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it . . . your knowledge is of a meager and unsatisfactory kind."83 Likewise, the direct effect supports the linkage between measurement and behavior because people typically do what is inspected rather than what is expected. The indirect effect through the firm's planning procedures is reported in Table 4 and suggests that information is vital to the firm's efforts to organize resources to develop a flexibility strategy. This standardized indirect effect represents almost 33 percent of the total effect of information on flexibility. Combining the direct and indirect effects demonstrates that a firm must collect and disseminate useful information regarding the firm's value-added abilities if it hopes to develop a flexibility competence.

Strategic planning impacts Flexibility primarily through the selection of a firm's competitive focus. That is, as the firm evaluates the competitive environmentcompetitors' strategies and customer requirements-it selects an approach or focus that it hopes will provide some form of desirable differentiation and thus a sustainable competitive advantage. Flexibility is viewed as a potential option for enhancing competitiveness. This aspect of strategic planning was measured via the manifest scale for planning process. Once a competitive focus on flexibility is determined to be important, the strategic planning process defines how the firm will develop the desired flexibility competence-in this case, the manufacturing and logistics attributes of flexibility are considered. As suggested above, strategic planning plays an important role in bringing the firm's resources to bear in order to achieve a flexible strategy. The manifest scale for planning formality measured this aspect of strategic planning. Overall, the firm's planning efforts provide the interface between the firm and its competitive environment and direct resource utilization to develop competitive competencies. In the case of a flexibility strategy, the impact of the firm's planning efforts was found to be positive and statistically significant.

Third, the recent emphasis on flexibility-based strategies appears to be justified by the results of the empirical analysis performed in this research. Indeed, firms that achieved higher levels of flexibility significantly outperformed their less flexible counterparts. Flexibility was found to impact positively not only the firm's ability to extend its global reach but also its ability to enhance comparative performance relative to leading industry competitors. The relationship between Flexibility and Global Reach is highly significant, suggesting that flexibility is very important to the success of global manufacturing strategies. This importance arises largely from flexibility's facilitating role in the coordination process and flexibility's unique ability to help firms manage the high levels of environmental and operating uncertainty inherent in international operations. Similarly, the relationship between Flexibility and Firm Performance is highly significant, emphasizing the fact that firms that reduce cycle times and respond to customer needs tend to be successful.

An interesting implication, worthy of follow-up investigation, arises from the relationship between Information Capability and Global Reach. The direct linkage between these two constructs was found to be somewhat significant but negative. Given the anecdotal emphasis on information and global operations, this finding is surprising. One possible explanation that was suggested in follow-up interviews is that much of the information capability of firms is directed inward to help firms manage day-to-day operations. Thus, while this information is important to the design and implementation of a flexibility strategy, relevant and timely information to be used in coordinating global operations is often unavailable. This point is consistent with many of Kaplan's critical comments regarding modern measurement systems. To better understand this direct linkage, future research might investigate the role and use of information technology as a facilitator of global reach. It should be pointed out, however, that the total effect of Information Capability on Global Reach was positive. The indirect effect reported in Table 4 was 1.946, considerably larger than the direct effect and obviously positive. This finding suggests that information's greatest influence emerges as it is used to build skills and capabilities. This finding also supports the centrality of Flexibility as a moderating and mediating variable.

NOTES

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6Same reference as Note 1.

7Same reference as Note 3.

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19Same reference as Note 1.

20Same reference as Note 8.

21Same reference as Note 10.

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23Same reference as Note 15.

24Same reference as Note 11.

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37Same reference as Note 3.

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50Same reference as Note 3.

51Same reference as Note 30.

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57Same reference as Note 16.

58Same reference as Note 28.

59Same reference as Note 3.

60Same reference as Note 30.

61Same reference as Note 30.

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67Same reference as Note 62.

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71V Govindarajan, and J. Fisher, "Strategy, Control Systems, and Resource Sharing: Effects of Business-Unit Performance," Academy of Management Journal 33, no. 2 (1990): 259-285.

72Same reference as Note 33.

73B. B. Flynn, S. Sakakaibara, R. G. Schroeder, K. A. Bates, and E. J. Flynn, "Empirical Research Methods in Operations Management," Journal of Operations Management 9, no. 2 (1990): 250-284.

74Duns Marketing Service, America's Corporate Families and International Affiliates (Parsippany, N.J.: Dun's Marketing Service, 1991).

75Uniworld Business Publications, Directory of American Firms Operating in Foreign Countries, I (New York: World Trade Academy Press, 1991).

76National Register Publications, International Directory of Corporate Affiliations (Skokie, Ill.: National Register Publishing Co., 1991).

77A. Dillman, Mail and Telephone Surveys: The Total Design Method (New York: John Wiley & Sons, 1978).

78G. A. J. Churchill, "A Paradigm for Developing Better Measures of Marketing Constructs," Journal of Marketing Research 16 (Feb. 1979): 64-73.

79J. C. Nunnally, Psychometric Theory (New York: McGraw-Hill, 1978). 80K. A. Bollen, Structural Equations with Latent Variables (New York: John Wiley & Sons, 1989).

81L. A. Hayduk, Structural Equation Modeling with Lisrel (Baltimore: John Hopkins Press, 1987).

82C. Bentler, EQS: Structural Equations Program (Los Angeles: BMDP Inc, 1989).

83Same reference as Note 3.

Authors' Note: The authors would like to express appreciation to the study participants for their time and thoughtful responses. We also express appreciation to the MSU-CIBER for its support of this research. ABOUT THE AUTHORS

Stanley E. Fawcett is associate professor of international business and logistics management in the Marriott School of Business at Brigham Young University. He received his Ph.D. from Arizona State University in operations and logistics management, and has published extensively on integrated logistics and operations management, especially as they relate to international operations.

Roger J. Calantone is professor of innovation and marketing in the Eli Broad School of Business at Michigan State University. He received his Ph.D. from the University of Massachusetts and has published widely in the area of new product development.

Sheldon R. Smith is assistant professor of accounting at Brigham Young University-Hawaii Campus. He received his Ph.D. at Michigan State University and published primarily in the area of accounting information's impact on international network design and management.

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