Firms undertake efforts to compete along multiple fronts. First, they integrate internally in order to prepare a cohesive organizational response and to ready the ground for external integration. They then seek to integrate with both customers and suppliers which can increase the breadth and depth of resource endowments. Internal and external integration are posited to improve manufacturing related competitive capability. This study examines whether internal integration and external integration impact manufacturing related competitive capability. The findings indicate significant positive effects of internal integration on both supplier and customer integration. Each supply chain integration dimension has a significant direct effect on competitive capability. Testing for mediation effects indicates that customer integration and supplier integration partially mediate the effects of internal integration on competitive capability.
TopIntroduction
With rapid changes in technology and globalization of markets, it is not enough simply to optimize internal structures and infrastructures based upon business strategy. Today, most manufacturers have linked their internal processes to external suppliers and customers. The three forms of integration, i.e., internal, supplier, and customer integration have emerged as important elements of the supply chain. Internal integration is defined as a process of inter-functional interaction, collaboration, coordination, communication and cooperation that bring functional areas together into a cohesive organization (Flynn et al., 2010; Zhao et al., 2011; Narasimhan & Kim, 2002). Supplier integration refers to the process of interaction and collaboration between an organization and its suppliers to ensure an effective flow of supplies (Flynn, et al., 2010; Zhao et al., 2011; Narasimhan & Kim, 2002; Frolich & Westbrook, 2001; Vickery et al., 2003). Customer integration is to the process of interaction and collaboration between an organization and its customers to ensure an effective flow of products and/or services to customers (Flynn et al., 2010; Zhao et al., 2011; Zhao et al., 2008; Narasimhan & Kim, 2002; Frolick & Westbrook, 2001).
In addition to internal integration a recent stream of academic work attests to the importance of customer and supplier integration. For example, Rosenzweig et al. (2003) report on the positive effects of external integration on operational performance and manufacturing competitive capability. Similarly, Swink et al. (2007) and Vickery et al. (2003) find that external integration has a positive effect on customer service and customer satisfaction. In the domain of product development, Petersen et al. (2003), Petersen et al. (2005), Koufteros et al. (2005), and Koufteros, et al. (2007) find that external and internal integration affect product innovation and other related capability.