Integrating Distinctive Manufacturing Competence Globally: Its Effect on Business Performance (2000)

This paper investigates an important managerial issue of how multinational businesses in global industries integrate distinctive manufacturing competence across borders to improve business performance. In addressing this issue, we take a systems approach. The results show that there exists the most effective usage profile (i.e., the ideal usage profile) of integrating mechanisms for global integration of manufacturing competence. They further reveal that those businesses which utilize integrating mechanisms at the levels closer to the ideal usage profile outperform those which do not. INTRODUCTION The effective management of distinctive manufacturing competence is essential for the success of manufacturing companies since the competence proves to be an important source of creating their sustainable competitive advantage (Cleveland et aL, 1989; Hayes and Wheelwright, 1984; Skinner, 1985). With recent globalization of markets and businesses, however, manufacturing competence has increasingly been dispersed across national boundaries (DuBois et al., 1993; Flaherty, 1986). This in turn has necessitated global integration as a crucial part of global management of the competence. As a consequence, a critical challenge facing many multinational businesses today is how to integrate the geographically dispersed manufacturing competence to improve business performance. This apparently important issue has not been adequately addressed in the literature. The extant research has examined the issue of global integration of the manufacturing competence. However, its contribution to the understanding of the issue appears to be rather limited due to the following reasons. First, most research does not seem to be comprehensive in the sense that it relies on only a few company cases (e.g., Mascarenhas, 1984). Second, most research tends to investigate integrating mechanisms individually rather than in combination (e.g., Shi and Gregory, 1998) despite the fact that all firms use them simultaneously as a profile. Third, all existing studies fail to examine the effect of global integration of the competence on performance. Without examining performance implications, existing studies tend to provide little basis for value enhancing prescription. By addressing the shortcomings of previous research, we intend to offer managers valuable insights on how to integrate manufacturing competence across borders for improved business performance. For this purpose, we aim to achieve the following in this research. First, we will identify the integrating mechanisms used to coordinate the competence across borders. Second, we will come up with the most effective usage profile of integrating mechanisms, along with the less effective profiles. Third, we will compare the most effective profile with other less effective profiles to see how they differ. Finally, we will investigate performance implications of the use of the mechanisms at different levels. BACKGROUND LITERATURE AND RESEARCH QUESTIONS Distinctive Manufacturing Competence in the Global Industry Context According to the strategy literature, distinctive competence refers to a set of activities that an organization does particularly well in relation to its competitors (Hitt and Ireland, 1985). Since the competence is competitively superior, valuable, and difficult to imitate, it becomes a key source of gaining a sustainable competitive advantage and thus a core component of organizational strategy (Andrews, 1971). Further, empirical studies show evidence of a positive effect of the competence on performance (Snow and Hrebiniak, 1980). Similarly, distinctive manufacturing competence can be defined as a set of activities associated with manufacturing that is superior to competition. Manufacturing involves various activities related to converting inputs into the final product form, including inventory control, fabrication, assembly, quality control, machining, and equipment maintenance (Hayes et al. …