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International Journal of Production Research

ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20

The match between efficiency/flexibility strategy


and organisational culture

Zhongfeng Su , Dongtao Yang & Jianjun Yang

To cite this article: Zhongfeng Su , Dongtao Yang & Jianjun Yang (2012) The match between
efficiency/flexibility strategy and organisational culture, International Journal of Production
Research, 50:19, 5317-5329, DOI: 10.1080/00207543.2011.618149

To link to this article: http://dx.doi.org/10.1080/00207543.2011.618149

Published online: 05 Oct 2011.

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International Journal of Production Research
Vol. 50, No. 19, 1 October 2012, 53175329

The match between efficiency/flexibility strategy and organisational culture


Zhongfeng Sua*, Dongtao Yanga and Jianjun Yangb
a
School of Business, Nanjing University, Nanjing, Jiangsu, PR China; bSchool of Management, Xian Jiaotong University,
Xian, Shaanxi, PR China
(Received 14 December 2010; final version received 24 August 2011)

A mismatch between efficiency/flexibility strategy and organisational culture results in production inefficiency
within the firm, whereas a proper match leads to superior performance. This study tries to find out the proper
match between them by investigating their joint effect on firm performance. Based on the data of 212 Chinese
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firms, this research finds that the proper organisational culture for efficiency strategy is characterised by
individualism, high power distance, and low uncertainty avoidance, whereas the proper culture for flexibility
strategy has the characteristics of collectivism, low power distance, and high uncertainty avoidance.
Keywords: efficiency/flexibility strategy; organisational culture; firm performance

1. Introduction
The internal consistency issue in the manufacturing strategy research indicates that a mismatch between
manufacturing strategy and organisational culture results in production inefficiency and competition within the
firm, whereas a proper match leads to a competitive advantage and superior performance (e.g. White 1986, Bates
et al. 1995, Prajogo and McDermott 2005). Thus, the strategic fit between manufacturing strategy and
organisational culture is an important research issue (Dangayach and Deshmukh 2001). But, what is the proper
match between them? Although previous research found that manufacturing strategy and organisational culture are
highly related, surprisingly few studies have investigated the proper match between them, which is a serious research
gap (Maull et al. 2001, Metters et al. 2010).
The purpose of this study is, therefore, to provide some insights into the strategic fit between manufacturing
strategy and organisational culture. We achieve our objective in several steps. First, because manufacturing strategy
can be classified by the type of product to be produced (Voss 1995, Morita and Flynn 1997), and firms can compete
in the market by offering either standard products or made-to-order products (e.g. Filley and Aldag 1980, Lowson
2001), we highlight efficiency/flexibility strategy (standard products/made-to-order products) as a key manufactur-
ing strategy. Second, we hypothesise how efficiency/flexibility strategy and three dimensions of organisational
culture (specifically, individualism/collectivism, power distance, and uncertainty avoidance) interactively affect firm
performance. Third, we empirically test our hypotheses using the data of Chinese firms. Finally, we discuss our
contributions, limitations, and future directions.
China is taken as the research setting of this study for three compelling reasons. First, although China is deemed
as the worlds factory, only a few studies on manufacturing strategy have been conducted in China (Zhao et al.
2006, Li et al. 2010). The importance of Made in China makes it critical to know more about what is going on there
(Li et al. 2011). Second, more and more multinational corporations have transferred, are transferring, or are going
to transfer their manufacturing departments to emerging economies such as China (Hahn and Bunyaratavej 2010).
Improved knowledge about China has enormous practical implications for them to operate in China (Child and Tse
2001). Finally, the Chinese experience can shed light on other emerging economies (Su et al. 2009).
Several theoretical values fuel this study. First, this study provides some insights into the critical research
question: what is the proper match between manufacturing strategy and organisational culture? Second, by
investigating the match between efficiency/flexibility strategy and organisational culture, this study joins a series of
recent work on the internal consistency issue in the manufacturing strategy research (Voss 1995). Finally, this study
responds to a critical call in the organisational culture literature that asks for identifying the associations between

*Corresponding author. Email: zhongfengsu@163.com

ISSN 00207543 print/ISSN 1366588X online


2012 Taylor & Francis
http://dx.doi.org/10.1080/00207543.2011.618149
http://www.tandfonline.com
5318 Z. Su et al.

organisational culture and manufacturing strategy (Metters et al. 2010). In addition, insights in this study also have
important practical applications because they help managers accomplish the match between manufacturing strategy
and organisational culture and further enhance firm performance. Overall, the importance of the research topic and
context suggests that this study is in a position to extend our theoretical understanding and to guide managerial
implications.

2. Conceptual model and hypotheses development


2.1 Conceptual model
Since the publication of Skinners (1969) seminal article, manufacturing strategy has received a great deal of
attention.1 One of the most important research topics in manufacturing strategy research is the internal consistency
(Voss 1995). The strategic fit perspective argues that the fit between strategy and infrastructure is critical to
achieving strategic goals (Miller 1992). Manufacturing strategies are useful only to the extent that they. . .lead to
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greater consistency among the elements which define operations (Bozarth and McDermott 1998, p. 428).
Conversely, a failure to achieve internal consistency can result in a mismatch between the various choices in
manufacturing which will severely impair a companys ability to be competitive (Voss 1995, p. 9). Herein, there is
general agreement in the manufacturing strategy literature that the decisions regarding the structure and
infrastructure of an organisation should be in line with its manufacturing objective/competitive priorities
(Dangayach and Deshmukh 2001, p. 910).
Because of the importance of the internal consistency, scholars have highlighted several organisational elements,
such as controls, procedures, communications, attitudes, experience and skills, and human resource policies
(e.g. Skinner 1974, Hill 1989, Vokurka and Leary-Kelly 2000).2 In addition to these elements, it is also crucial to
realise the internal consistency between manufacturing strategy and organisational culture in that organisational
culture defines the way in which a firm conducts its business (Barney 1986, p. 657).
Extant research indicates that a proper match between manufacturing strategy and organisational culture leads
to competitive advantage and superior performance, whereas a mismatch results in production inefficiency and
competition within the firm (e.g. White 1986, Bates et al. 1995, Prajogo and McDermott 2005). Thus, the strategic
fit between manufacturing strategy, organisational culture, and business performance represents an important
research issue (Dangayach and Deshmukh 2001, p. 911). But, what is the proper match between manufacturing
strategy and organisational culture?
The proposition that manufacturing strategy and organisational culture are highly related has been well
acknowledged in prior research, and several scholars have investigated the impact of organisational culture on
manufacturing strategy. For example, McDermott and Stock (1999) find that organisational culture affects
advanced manufacturing technologies implementation outcomes; Nahm et al. (2004) highlight the impact of
organisational culture on time-based manufacturing practices; Prajogo and McDermott (2005) find that different
subsets of total quality-management practices are determined by different types of culture; Prajogo and McDermott
(2011) examine the relationships between the cultural dimensions of the competing values framework with product
quality, process quality, product innovation, and process innovation; and Baird et al. (2011) conduct an analysis of
the association between organisational culture with the use of total quality management.
Although extant studies have enriched our knowledge of the association between manufacturing strat-
egy and organisational culture, few studies have investigated what would be the proper match between them (Maull
et al. 2001, Metters et al. 2010). The only study we are aware of that touches upon this issue is Bates et al. (1995),
which finds that a manufacturer with a well-aligned and implemented manufacturing strategy exhibits a
group-oriented organisational culture with coordinated decision-making, decentralised authority and a loyal
work force.
It is noteworthy that the research on manufacturing strategy can be divided into the process approach and the
content approach (e.g. Leong et al. 1990). The process approach refers to the process of formulating and
implementing manufacturing strategy, while the content approach concerns the content of manufacturing strategy
(e.g. Adam and Swamidass 1989, Leong et al. 1990). Bates et al. (1995) focused on the manufacturing strategy
process and left the content approach as a topic for future research (Bates et al. 1995, p. 1568). Thus, to provide a
more fine-grained picture on the internal consistency between manufacturing strategy and organisational culture,
this study will highlight the content approach.
International Journal of Production Research 5319

2.2 Efficiency/flexibility strategy


The content approach identifies four manufacturing objectives: cost, quality, dependability, and flexibility (e.g. Buffa
1984, Wheelwright 1984).3 Concerning the relations among these objectives, there are competing perspectives on
whether or not there is an incompatibility among them.4 The trade-off perspective argues that important trade-offs
must be made among these objectives because it is impossible to excel in all of them simultaneously (Fine and
Hax 1985, p. 29). In contrast, the cumulative model suggests that as the requirements for a basic level of quality
are satisfied, firms will tend to use that base as a jumping-off point to improve other dimensions (Ferdows and
DeMeyer 1990). The competing perspectives lead to it being difficult to clarify manufacturing strategy by
manufacturing objectives (Swink and Way 1995). As a result, scholars suggest that it is a better choice to identify
manufacturing strategy by the type of product to be produced (Voss 1995, Morita and Flynn 1997).
Woodwards (1965) study is the seminal research that classifies manufacturing strategy using the products as the
criterion. Woodward (1965) classifies manufacturing production technologies as large batch/mass production and
unit/small batch, and further indicates that large batch/mass production firms focused on efficiencies, while
unit/small batch firms were flexible in meeting customer needs (Ebben and Johnson 2005, p. 1250). Subsequently,
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the manufacturing literature suggests that a firm can compete in the market by offering either standard products or
made-to-order products (e.g. Lowson 2001). Firms offering standard products compete on their organisational
efficiencies, whereas firms offering made-to-order products compete on their flexibilities to meet individual customer
needs (Filley and Aldag 1980, Ebben and Johnson 2005). Thus, manufacturing strategy can be classified as efficiency
strategy or flexibility strategy, depending on the products the firm offers (e.g. Ebben and Johnson 2005, Tan and
Wang 2010).
Firms taking efficiency strategies generally provide only a few products that are the core offerings of the firm,
which combined with predictable demand allows for simpler production scheduling, inventory levels, and delivery
(Ebben and Johnson 2005, p. 1252). In contrast, firms operating flexibility strategies are more responsive to
individual customer needs by providing made-to-order products (Tan and Wang 2010). The key to efficiency and
flexibility strategies does not only come from the ability to meet variation in quantity of product provided, but also
from the variation in types of products that are offered (Ebben and Johnson 2005, p. 1250).
Extant research indicates that the organisational and operational requirements to achieve efficiency conflict with
those to achieve flexibility (e.g. Filley and Aldag 1980, Fiegenbaum and Karnani 1991). For example, Stigler (1939)
suggests that the technology needed for efficiency is entirely different from that required for flexibility. Thompson
and Bates (1957) indicate that firms with flexible goals prefer skilled labour to specialised equipment; conversely,
firms emphasising efficiency often invest in specialised equipment. A detailed presentation of the differences in
organisational and operational requirements between efficiency strategy and flexibility strategy is summarised
in Table 1.
It is noteworthy that some firms try to mix efficiency strategy and flexibility strategy. Yet, the differences in the
organisational and operational requirements lead to firms experiencing difficulties in achieving efficiency and
flexibility synchronously (Doty et al. 1993). Thus, firms that try to mix efficiency strategy and flexibility strategy
often suffer from an inability to provide standard or made-to-order products effectively (Tushman and OReilly
1999), and they are at a significant disadvantage to other firms and underperformed (Ebben and Johnson 2005).
Tushman and OReilly (1999) suggests that a firm can only provide both standard and made-to-order products
effectively if they are pursued in physically separate entities, with different organisation characteristics, such as
structures, systems, and culture. As a result, it is impossible for a firm with only one entity to provide both standard

Table 1. Characteristics of efficiency strategy and flexibility strategy firms.

Manufacturing aspect Efficiency strategy firms Flexibility strategy firms

Equipment Specialised equipment General-purpose equipment


Assets Heavy fixed assets Light or medium fixed assets
Organisation structure Mechanistic Organic
Manufacturing line employees Perform standard tasks Perform unique or alter tasks
Decision-makers Unskilled Skilled
Control systems Feed forward Feed back

Note: Adapted from Ebben and Johnson (2005).


5320 Z. Su et al.

and made-to-order products synchronously. Hence, efficiency strategy and flexibility strategy are two ends of a
continuum (Ebben and Johnson 2005), and they are taken together as efficiency/flexibility strategy to describe
manufacturing strategy in this study.
Regarding the impact of efficiency/flexibility strategy on firm performance, Filley and Aldag (1980, p. 305)
indicate that the survival of organisations seems to depend, on the one hand, upon creating efficiency of operations,
or on the other hand, producing an outcome which is relatively made-to-order. Thus, either efficiency strategy or
flexibility strategy can lead to superior performance. For example, Ebben and Johnson (2005) find that both
efficiency strategy and flexibility strategy contribute to firm performance, and there is no difference in their
performance effects.
Although extant research has improved our understanding of the performance implication of efficiency/
flexibility strategy, understanding its internal consistency with organisational culture can further enrich our
knowledge on its performance implications (Dangayach and Deshmukh 2001). However, few studies have probed
such an issue, which is a serious research gap (Maull et al. 2001, Metters et al. 2010). To address such a gap, we will
investigate how efficiency/flexibility strategy and organisational culture interactively impact firm performance to
find out the proper match between them. In the next section, we will briefly introduce organisational culture and
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then develop our hypotheses.

2.3 Organisational culture


Organisational culture typically is defined as a complex set of values, beliefs, assumptions, and symbols that define
the way in which a firm conducts its business (Barney 1986, p. 657), and it is a holistic construct that describes the
complex set of knowledge structures which organisation members use to performance tasks and generate social
behavior (Bates et al. 1995, p. 1568). As a driving force behind all the actions in the organisation, organisational
culture has significant impacts on many aspects of the organisation (Barney 1986), including manufacturing strategy
(Maull et al. 2001). But, what are the associations between organisational culture and manufacturing strategy?
The organisational culture literature suggests that organisational culture not only directly impacts manufactur-
ing strategy, but also affects its performance implication (Dangayach and Deshmukh 2001). As we have mentioned
above, extant research has investigated the direct impact of organisational culture on manufacturing strategy
(e.g. McDermott and Stock 1999, Nahm et al. 2004, Prajogo and McDermott 2005). Yet, little attention has been
paid to the effect of organisational culture on the performance implication of manufacturing strategy, which leads to
the critical research question: what is the proper match between manufacturing strategy and organisational
culture? (e.g. Maull et al. 2001, Metters et al. 2010).
To better understand the proper match between manufacturing strategy and organisational culture, we will
investigate the performance effects of the interactions of efficiency/flexibility strategy with individualism/
collectivism, power distance, and uncertainty avoidance. We highlight individualism/collectivism, power distance,
and uncertainty avoidance for two reasons. First, they have been widely taken as key dimensions of organisational
culture in extant research (e.g. Sitkin and Pablo 1992, Bochner and Hesketh 1994, Shane 1995, Wuyts and Geyskens
2005, Wang et al. 2011). Second, they have been used in previous research on the relationship between
manufacturing strategy and organisational culture. For example, Bates et al. (1995) take individualism/collectivism
and power distance to distinguish different types of organisational culture. Thus, to keep in accord with previous
research, they are adopted in this study.

2.4 Hypothesis development


Individualism/collectivism refers to the extent to which the demand and interests of groups are taken over the desires
and needs of individuals (Hofstede 2001). In an individualist culture, people are viewed as independent (Power et al.
2010). They believe in formal systems that explicitly define, control, and evaluate individual contributions
(Bates et al. 1995). In contrast, people in a collectivist culture view themselves as inherently interdependent with the
group to which they belong (Wuyts and Geyskens 2005). They are cooperative, enjoy working together, care about
their partners, and perform better in close cooperation with others (Wagner 1995).
Manufacturing line employees in firms operating flexibility strategies perform altering tasks (Filley and Aldag
1980). They need to cooperate and share knowledge with others because they lack all the knowledge and capabilities
required to accomplish their tasks (Chen et al. 1998). Collectivism encourages close cooperation and knowledge
International Journal of Production Research 5321

sharing (Wagner 1995, Michailova and Hutchings 2006). Thus, it assists manufacturing line employees to perform
their tasks and further enhance the performance implication of flexibility strategy. In addition, to facilitate
cooperation and knowledge sharing, firms operating flexibility strategies would emphasise group or collective,
rather than individual, contributions (Filley and Aldag 1980). Collectivism creates a socialisation mechanism that
encourages organisational members to commit to group goals (Jaworski 1988, Li et al. 2010). Thus, flexibility
strategy and collectivism are a proper combination and have synergistic effects on firm performance.
In contrast, individualism emphasises independence (Power et al. 2010), which impedes cooperation and
knowledge sharing (Michailova and Hutchings 2006). Moreover, people in an individualist culture believe in formal
systems that explicitly define, control, and evaluate individual contributions (Bates et al. 1995), which are in
opposition to the need of flexibility strategy. Thus, individualism does not fit with flexibility strategy.
Regarding efficiency strategy, manufacturing line employees perform standard tasks (Filley and Aldag 1980).
There is less need for cooperation and knowledge sharing among employees. In addition, efficiency strategy
competes on organisational efficiencies (Filley and Aldag 1980, Ebben and Johnson 2005). The detailed formal
systems that explicitly define, control, and evaluate individual contributions can significantly enhance
organisational efficiencies (Ouchi 1979). Thus, efficiency strategy prefers individualism to collectivism. Therefore:
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Hypothesis 1: The interaction between efficiency/flexibility strategy and individualism/collectivism has a positive
impact on firm performance.
Power distance refers to the distribution of authority within a firm (Bates et al. 1995). It reflects the practice of
inequalities in the distribution of. . . power and authority (Hofstede 1980, p. 72). High power distance focuses on the
limits of authority and explicit definition of tasks, whereas low power distance emphasises equality and consultative
decision-making (Hofstede 1980, Bates et al. 1995).
In this study, we suggest that the interaction between efficiency/flexibility strategy and power distance has a
negative impact on firm performance for three reasons. First, efficiency strategy involves simple and straightforward
decision-making (Lee et al. 2002, Ebben and Johnson 2005). Superiors in the firm are able to make these decisions
themselves. Thus, autocratic decision-making is suitable for efficiency strategy. In contrast, flexibility strategy often
requires more complicated decisions (Lee et al. 2002, Dreyer and Gronhaug 2004). Superiors can hardly do it by
themselves. Thus, consultative decision-making is a better choice. High power distance leads to an autocratic
decision-making, whereas low power distance results in a consultative one (Hofstede 1980; Bates et al. 1995). Thus,
high power distance and efficiency strategy is an appropriate combination, while low power distance and flexibility
strategy is the other one.
Second, the tasks and contributions of manufacturing line employees in firms taking efficiency strategies can be
explicitly defined, controlled, and evaluated, whereas those of manufacturing-line employees in firms operating
flexibility strategies are not able to be easily defined, controlled, or evaluated (Filley and Aldag 1980, Persentili and
Alptekin 2000). High power distance leads to firms with explicit definition of tasks and tight control (Shane 1995);
thus, it fits with efficiency strategy rather than flexibility strategy.
Finally, as shown in Table 1, efficiency strategy works prefers a mechanistic organisation structure, whereas
flexibility strategy prefers an organic one (Thompson and Bates 1957, Filley and Aldag 1980). Because the power
distance of a mechanistic organisation is high, whereas that of an organic organisation is at a low level (Jennings and
Seaman 1994, Sine et al. 2006), it is reasonable to conclude that low power distance is appropriate for flexibility
strategy.
In summary, we argue that flexibility strategy and low power distance are an appropriate combination. In other
words, the interaction of efficiency/flexibility strategy and power distance has a negative impact on firm
performance. Therefore,
Hypothesis 2: The interaction between efficiency/flexibility strategy and power distance has a negative impact on
firm performance.
A firms uncertainty avoidance reflects the extent to which the firm feels threatened by and tries to avoid
uncertain, ambiguous, or undefined situations (Hofstede 2001). Firms high in uncertainty avoidance believe that
risks are dangerous and ambiguity is threatening (Sitkin and Pablo 1992). They value adaptability because
adaptability aids in coping with the uncertainties and reduces the risks and ambiguity (e.g. Bright and Cooper 1993,
Erramilli 1996).
Because efficiency strategy and flexibility strategy are affiliated with different levels of uncertainty, uncertainty
avoidance plays a critical role in the performance implication of efficiency/flexibility strategy. As shown in Table 1,
5322 Z. Su et al.

a firm taking flexibility strategies holds general purpose equipments and light or medium fixed assets, which can
easily be used for different purposes (Lowson 2001). In addition, its manufacturing line employees are able to
perform altering tasks that further enhance its adaptability (Ebben and Johnson 2005). Thus, the firm operating
flexibility strategy has a high level of adaptability. Uncertainty avoidance values adaptability (e.g. Bright and
Cooper 1993, Erramilli 1996), and so there is a match between uncertainty avoidance and flexibility strategy.
In contrast, in a firm operating efficiency strategy, the equipments are specialised and the assets are heavy fixed
(Lowson 2001). They can hardly switch uses, which depress the adaptability of the firm. In addition, the
manufacturing line employees also counteract the adaptability, in that they are only able to perform standard tasks
(Filley and Aldag 1980). As a result, the firm operating efficiency strategy often faces high uncertainties. For this
firm, it must be able to tolerate such high uncertainties. Otherwise, it would suffer a significant conflict between high
uncertainties caused by efficiency strategy and the organisational culture with low uncertainty tolerance. Therefore,
Hypothesis 3: The interaction between efficiency/flexibility strategy and uncertainty avoidance has a positive impact
on firm performance.
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3. Methods
Different units of analysis have been used in various empirical studies on manufacturing strategy, such as
manufacturing business unit, plant, and firm (Swink and Way 1995). Yet, the appropriate unit of analysis depends
upon the particular research questions to be addressed (Leong et al. 1990, p. 119). This study takes the firm level for
two reasons. First, efficiency/flexibility strategy is a firm-level manufacturing strategy, and previous research on it is
adopted at the firm-level (e.g. Ebben and Johnson 2005, Tan and Wang 2010). Second, organisational culture is a
firm-level phenomenon (e.g. Bates et al. 1995, Wuyts and Geyskens 2005, Wang et al. 2011). To keep in accord with
organisational culture, the manufacturing strategy should be measured at the firm level as well. Overall, the research
question of this study suggests that the appropriate unit of analysis is the firm.

3.1 Sample and data collection


Data for this study were obtained through an interview survey instrument. Firms in the manufacturing industry
were chosen to investigate manufacturing strategy. These firms were from several provinces of China, such as
Beijing, Hebei, Jiangsu, Guangdong, Henan, and Shaanxi, so as to avoid any bias in certain regions.
The data were gathered in three phases. First, we developed a questionnaire based on previous studies, and
modified it according to the conditions that firms faced in China. A pilot test was conducted with 15 firms, whose
responses were excluded from the final study. The questionnaire was revised using the feedback from the pilot study.
The questionnaire was prepared in English and then translated into Chinese. The Chinese version was subsequently
back-translated by a third party to ensure accuracy. The two translations indicated no substantial differences in the
meanings of the scales.
Second, we randomly selected 1000 firms from a list of firms provided by the local government and business
research firms. The pre-commitment technique was used to increase the response rate. A telephone enquiry was
performed before the formal survey, and 263 firms agreed to participate in the survey.
Finally, we adopted the direct interview method to obtain the responses to our survey instrument. Because this
method allowed us to clarify respondents queries on the spot, avoid the situation whereby a busy executive or senior
manager delegated the task of filling out the survey to their secretary, and ensure the responses were complete and
usable for data analysis, we chose it over a mail survey or online survey. All the interviewers were PhD students and
teachers in Chinese universities, and most had taken part in an interview survey before. They received training
covering background information, interview skills, and the exact meaning of every question in the questionnaire
before embarking on the interview process.
To reduce common method bias, the questionnaires on each firm were completed by two top managers
(Zhou and Wu 2010). At the beginning, the interviewer showed the interviewee a letter that explained the intent of
the survey and promised to keep all responses confidential. Then, two interviewers interviewed two executives
separately. The final score of each item was the average of the responses from two top managers.
We started the survey in October 2009 and had obtained 241 firms by March 2010. After deleting responses with
missing data, firms that provided only responses from one top manager, and firms whose answers from two
executives had distinct differences, we finally had 212 usable firms with an effective response rate of 21.2%.
International Journal of Production Research 5323

In addition, to avoid the possibility that a firm have several separate entities to pursue both standard and
made-to-order products, we have checked all the usable firms. None of them met this criterion. Thus, the final
sample included 212 firms.
One issue commonly concerning survey methodology is non-response bias. To check it, we compared the
responding and non-responding firms along major attributes such as firm age and ownership status using the t-test.
All t-statistics were insignificant. Moreover, there were no significant differences between the 212 usable firms and
the 29 deleted firms. In addition, the likelihood of non-response bias was further tested by splitting the total sample
into two groups based on the time they agreed to be interviewed (Armstrong and Overton 1977). A comparison of
the two groups revealed no significant differences, supporting the assumption that respondents were not different
from non-respondents.

3.2 Variables and measures


Questionnaire items, unless stated otherwise, are measured using a five-point scale in which 1 represented strongly
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disagree and 5 represented strongly agree.


Firm performance was measured by eight items which were consistent with those of Li and Zhang (2007)
( 0.944). The respondent was asked to rate their firms performance relative to its principal competitors over the
last three years on: (1) sales growth, (2) profit growth, (3) return on assets, (4) return on investment, (5) market share
growth, (6) overall efficiency of operations, (7) return on sales, and (8) cash flow from operations.
Following Ebben and Johnson (2005), efficiency/flexibility strategy was measured by seven items, which were
shown in Table 2 ( 0.843).
Having consulted Bates et al. (1995), Hofstede (2001), Wuyts and Geyskens (2005), and Wang et al. (2011),
individualism/collectivism ( 0.805) was measured by: (1) our firm emphasises cooperation and collectivism;
(2) our firm encourages jointly responsible for the successes and failures; and (3) close cooperation is preferred over
working independently. Power distance ( 0.769) was measured by the following: (1) the hierarchical line is very
distinct in our firm and it is not allowed to be bypassed; (2) the juniors are not allowed to against the superior, and
they must follow the will of the superior; and (3) the superior has the last word, and the juniors can not discuss with
them freely. Uncertainty avoidance ( 0.761) was measured by the following: (1) top managers encourage the
development of innovative strategies, knowing well that some will fail (inversed); (2) we believe that a change in

Table 2. Measures of efficiency/flexibility strategy.

Items Scores Items

1. Our company provided standard products to all of 12345 Our company provided only made-to-order
our customers products and services to customer groups or
individual customers
2. We invoiced our customers using a set price list 12345 Our products were priced based on the mod-
ifications that were required by customers
3. We utilised long product runs in manufacturing 12345 We utilised short products runs in
manufacturing or produced in single unit
batches
4. Our manufacturing line employees performed 12345 Our manufacturing-line employees were fre-
standard tasks in completing the production/ quently required to perform unique tasks or
assembly of products alter products
5. Our manufacturing materials inputs did not vary 12345 Our manufacturing-materials inputs varied
greatly with production runs greatly with production runs or were spe-
cially ordered for particular production runs
6. Customers ordered our products from established 12345 Customers often asked for modification in
descriptions or catalogues without product products when ordering or they ordered
modification products specifically modified for their
market segment
7. We manufactured products and placed them in 12345 We manufactured products after they were
inventory for later sale ordered

Note: From Ebben and Johnson (2005).


5324 Z. Su et al.

market creates a positive opportunity for us (inversed); and (3) we have a strong preference for high-risk projects
with chances of high return (inversed).
Firm size was adopted as the first control variable, which referred to the number of full-time employees. It was
measured by a five-point scale (from 1 less than 50 to 5 more than 1000). Firm age was the second control
variable. Because technological turbulence, market turbulence, and competitive intensity all affect firm performance
(e.g. Jaworski and Kohli 1993), they were controlled as well. Their measures were adopted from Jaworski and Kohli
(1993) and Zhou (2006). Technological turbulence ( 0.762) was measured by the following: (1) our industry is
characterised by rapidly changing technology; (2) the rate of technology obsolescence is high in our industry; (3) it is
difficult to forecast the technological changes in the next three years; and (4) technological changes provide big
opportunities in our industry. Market turbulence ( 0.825) was measured by the following: (1) the volume and/or
composition of demand are difficult to predict; (2) the evolution of customer preference is difficult to predict; (3) our
demand fluctuates drastically from week to week; and (4) new demands in the market are significant difference from
existing one. Competitive intensity ( 0.833) was measured by the following: (1) price competition is a hallmark of
our industry; (2) any action that a company takes, others can make a response swiftly; (3) one hears of a new
competitive move almost every day; and (4) competition in our industry is cut-throat.
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3.3 Reliability and validity


Composite reliability was estimated by Cronbachs alpha. All Cronbachs alpha values were above the cutoff point
0.70 (Cronbach 1971). Thus, the theoretical constructs exhibited good psychometric properties. We conducted
chi-square difference tests for all of the multi-item constructs in pairs to test discriminant validity (Fornell and
Larcker 1981). The process involved collapsing each pair of constructs into a single model and comparing its Et with
that of a two- construct model (Anderson and Gerbing 1988). The results indicated that in each case the difference in
chi-square value was significant, providing evidence to discriminant validity.
Because the dependent variable and independent variables were measured by the responses from two top
managers, the potential dangers of common method bias should not be present in this study (Zhou and Wu 2010).
In addition, we further examined it via Harmans one-factor test (Podsakoff and Organ 1986). The test on all the
items of independent and dependent variables extracted five distinct factors that accounted for 67.68% of the total
variance, with the first one explaining 24.66%. Thus, no general factor was apparent, and a common method bias
was not a serious issue in this study (Podsakoff and Organ 1986).
As noted above, the score for each item was the average of those from two interviewers, thus the inter-rater
reliability was tested as well. Inter-rater reliability can be tested by correlation coefficients (Shrout and Fleiss 1979).
All the variables showed high correlation coefficients. Thus, our data had good inter-rater reliability.

4. Analysis and results


Table 2 lists basic information on each factor and correlations among them.
The ordinary least-squares regression was used to test our hypotheses in four steps. First, we added control
variables into the model; second, efficiency/flexibility strategy; third, the interactions of efficiency/flexibility strategy
with three dimensions of organisational culture separately; and finally, the full model. Because the variables were
entered in steps, we tested the incremental R-squares (Finkle 1998). The results are shown in Table 3. As can be seen,
all incremental R2 values are significant. Furthermore, we calculated variance inflation factors (VIF) statistic to
check multicolinearity. All VIFs are below the cutoff point 10, which shows that there is no major threat of
multicolinearity in this study (Neter et al. 1985).
Regression results are reported in Table 4. Model 3a indicates that the interaction of efficiency/flexibility
strategy and individualism/collectivism has a positive impact on firm performance is positive ( 0.222, p < 0.001).
Thus, Hypothesis 1 is supported. Hypothesis 2 argues that the interaction of efficiency/flexibility strategy and power
distance negatively affect firm performance, which is supported by the results of Model 3b ( 0.105, p < 0.10).
Model 3c indicates that the interaction of efficiency/flexibility strategy and uncertainty avoidance has a positive
impact on firm performance ( 0.205, p < 0.05). Thus, Hypothesis 3 is supported as well. In addition, our full
model (Model 4) provides the same results as those of Models 3a, 3b, and 3c, which further supports our hypotheses.
International Journal of Production Research 5325
Table 3. Descriptive statistics and correlation matrix.

1 2 3 4 5 6 7 8 9 10

1. Firm age 1
2. Firm size 0.360** 1
3. Technological turbulence 0.037 0.018 1
4. Market turbulence 0.044 0.112 0.428** 1
5. Competitive intensity 0.057 0.008 0.509** 0.340** 1
6. Efficiency/flexibility strategy 0.017 0.071 0.352** 0.284** 0.341** 1
7. Individualism/collectivism 0.055 0.018 0.398** 0.190** 0.298** 0.267** 1
8. Power distance 0.039 0.064 0.286** 0.194** 0.339** 0.475** 0.223** 1
9. Uncertainty avoidance 0.047 0.049 0.462** 0.244** 0.382** 0.507** 0.400** 0.273** 1
10. Firm performance 0.135* 0.196** 0.098 0.094 0.078 0.044 0.016 0.075 0.051 1
Means 10.15 1.49 3.30 3.02 3.70 2.79 3.86 3.17 2.62 2.33
SD 12.04 0.91 0.74 0.85 0.71 0.71 0.53 0.80 0.77 0.73

Note: *p < 0.05, **p < 0.01.


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Table 4. Results of regression analysis.

Model 1 Model 2 Model 3a Model 3b Model 3c Model 4

Firm age 0.190** 0.182** 0.187*** 0.199*** 0.192** 0.194***


Firm size 0.263*** 0.269*** 0.220*** 0.260*** 0.296*** 0.234***
Technological turbulence 0.126* 0.179** 0.134* 0.198*** 0.158** 0.210***
Market turbulence 0.117* 0.125* 0.193*** 0.164** 0.164*** 0.216***
Competitive intensity 0.122* 0.069 0.131* 0.139* 0.150** 0.154**
Efficiency/flexibility strategy (EFS) 0.145* 0.077 0.158** 0.168* 0.180*
Individualism/collectivism (IC) 0.032 0.060
EFS  IC 0.222*** 0.294***
Power distance (PD) 0.218*** 0.236***
EFS  PD 0.105 0.140*
Uncertainty avoidance (UA) 0.150** 0.136*
EFS  UA 0.205* 0.228***
R2 0.178 0.195 0.220 0.224 0.214 0.248
F-value 2.834*** 2.954*** 2.693*** 1.966** 1.935** 1.990**
R2 change 0.017 0.025 0.029 0.019 0.053
F test for R2 change 4.329* 3.253* 3.793* 2.454 2.337*

Note: p < 0.10; *p < 0.05; **p < 0.01; ***p < 0.001.
Model 2 compares the R2 change with Model 1, Models 3a, 3b, 3c, and 4 with Model 2.

5. Discussion and conclusion


5.1 Contributions
Several theoretical contributions distinguish this study. First, this study provides some insights into the critical
research question: what is the proper match between manufacturing strategy and organisational culture? The fit
between manufacturing strategy and organisational culture is crucial to the overall effectiveness of a firm, and it is
an important predictor of firm performance (White 1986, Bates et al. 1995, Prajogo and McDermott 2005). Yet, few
studies have taken them together to analyse the proper match between them (Bates et al. 1995, Metters et al. 2010).
The only study we are aware of that touches upon this issue focuses on the manufacturing strategy process and
leaves the content issue as a topic for future research (Bates et al. 1995, p. 1568). Following the context approach of
manufacturing strategy, this study highlights efficiency/flexibility strategy as a key manufacturing strategy and
explores how its interactions with organisational culture affect firm performance. The research finds that the proper
organisational culture for efficiency strategy is characterised by individualism, high power distance, and low
uncertainty avoidance, whereas the proper culture for flexibility strategy has the characteristics of collectivism,
5326 Z. Su et al.

low power distance, and high uncertainty avoidance. The findings enrich our knowledge of the proper match
between manufacturing strategy content and organisational culture.
Second, this study contributes to the manufacturing strategy research. Extant research indicates that firms
taking efficiency strategies have different organisational and operational requirements from firms operating
flexibility strategies, and there is a significant diversity in organisational culture as well (Filley and Aldag 1980,
Lowson 2001). Because the internal consistency between manufacturing strategy and organisational characteristics
is one of the most important research topics in the manufacturing strategy research (Voss 1995), the strategic fit
between manufacturing strategy, and organisation culture, and business performance is an important research issue
(Dangayach and Deshmukh 2001, p. 911). This study joins in a part of a series of recent work on such an issue.
Thus, it has substantial contributions to the manufacturing strategy research.
Third, this study is of importance to the organisational culture literature. The organisational culture literature
indicates that it is critical for a firm to match its organisational culture with manufacturing strategy, because an
ill-suited organisational culture can reduce the firms effectiveness and disable the firm from perceiving all its
operational options, which, in turn, can prevent it from choosing options consistent with operational necessities
(McLaughlin and Fitzsimmons 1996, Pun 2001). However, the precise nature of cultures significance is ambiguous
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and a question unanswered is: what are the associations between organisational culture and manufacturing strategy
(Metters et al. 2010)? By investigating how efficiency/flexibility strategy and organisational culture interactively
affect firm performance, this study enriches our knowledge of the influence of organisational culture on the
performance implication of manufacturing strategy, which contributes to the organisational culture literature.
Finally, this study improves our understanding of the values of manufacturing strategy and organisational
culture. Although the performance implications of both manufacturing strategy and organisational culture have
been empirically tested, there are also significant performance differences among firms taking the same
manufacturing strategy or have similar organisational cultures (e.g. Newman and Nollen 1996, Corbett 2008).
Because manufacturing strategy and organisational culture are highly related, studies that examine either
manufacturing strategy or organisational culture alone can hardly explain such phenomena in that they suffer the
omitted variable biases (Bates et al. 1995, Metters et al. 2010). This study finds that the proper combination of
manufacturing strategy and organisational culture has synergistic effects on firm performance, whereas the
improper combination impedes firm performance. Thus, a possible explanation for the phenomena is that the joint
effect of manufacturing strategy and organisational culture on firm performance leads to the diversity in
performance. Overall, the findings not only provide a possible explanation as to why there are significant
performance differences among firms taking the same manufacturing strategy or have similar organisational
cultures, but also enrich our knowledge of the values of manufacturing strategy and organisational culture.

5.2 Managerial implications


The findings of this study have important applications for managers. Our findings suggest that firms taking
efficiency strategies should build the organisational culture characterised by individualism, high power distance, and
low uncertainty avoidance; whereas firms operating flexibility strategies should build the organisational culture
characterised by collectivism, low power distance, and high uncertainty avoidance. In addition, a firm that is
suffering from the mismatch between manufacturing strategy and organisational culture should pay attention to
both manufacturing strategy and organisational culture to eliminate the conflicts between them. And, if possible,
it should adjust its manufacturing strategy and organisational cultures to improve the fit between them.

5.3 Limitations and future direction


Despite the contributions, this study has some limitations. First, the results of our study are limited to China and
should be viewed cautiously when generalised to other contexts. Second, the cross-sectional data used in the study
may cast doubt on causal statements derived from empirical findings. Finally, although we found little trace of
common method bias, we cannot completely rule out its potential influence. Future research should use secondary
data or combine survey data with secondary data to avoid this problem.
We suggest three directions for future research. First, this study focuses on the proper match between efficiency/
flexibility strategy and organisational culture, but it is unable to illuminate how firms can accomplish the match and
what firms suffering the mismatch should do. These questions call for further studies. Second, in addition to
International Journal of Production Research 5327

efficiency/flexibility strategy, other kinds of manufacturing strategy have been identified. Future studies should pay
attention to them to paint a more comprehensive picture of the match between manufacturing strategy and
organisational culture. Finally, there are several other taxonomies of organisational culture, such as clan, efficiency,
hierarchy, and innovative cultures. Future studies need to investigate the match between them and a manufacturing
strategy to further improve our understanding of such an issue.

Acknowledgements
We gratefully acknowledge the suggestions and comments received from the reviewers and the editor. We thank the Humanities
and Social Sciences Research Foundation from the Ministry of Education of China (11YJC630184) and the Philosophic and
Social Science Foundation from the Education Department of Jiangsu Province, China (2011SJD630012) for the generous
financial support. All views expressed are those of the authors and not those of the sponsoring organisations.

Notes
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1. Because there are several literature reviews on manufacturing strategy, we review relevant research in this study only briefly.
For a more comprehensive literature review, see Leong et al. (1990), Swink and Way (1995), Voss (1995), and Dangayach
and Deshmukh (2001).
2. Bozarth and McDermott (1998) provide an excellent literature review on this issue, and Leong et al. (1990), Swink and Way
(1995), Voss (1995), and Dangayach and Deshmukh (2001) all pay attention to it. Thus, we have not reviewed the literature
on such an issue in this article.
3. For a more comprehensive literature review on manufacturing objectives, see Leong et al. (1990) and Dangayach and
Deshmukh (2001).
4. Rosenzweig and Easton (2010) have provided a much more comprehensive literature review on the relations among
manufacturing objectives. Thus, we have not focused much attention to this issue in this study.

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