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Essays on operations strategies
Abstract
Operations strategies, whether prompted by competitive or regulatory forces, can greatly impact firm performance. While operations strategies cover a wide spectrum of issues - supply chain management, technology choice, capacity allocation, etc. - this dissertation focuses on two such issues, namely, sustainability and product development. The thesis comprises three essays. The first essay (Chapter 2) examines a regulatory aspect of sustainability strategy, product take-back, a form of Extended Producer Responsibility (EPR). With a stylized model, we analyze the trade-offs between assigning full responsibility for product recovery to a single echelon in a multi-echelon supply chain versus sharing responsibility between echelons. We demonstrate how the sharing of EPR program costs between the echelons can move the supply chain closer to the coordinated profit benchmark. The second essay (Chapter 3) examines a voluntary aspect of sustainability from an empirical perspective. We investigate the impact from various types of corporate environmental initiatives and environmental awards and certifications on the market value of the firm. We find that the market is selective in reacting to environmental performance, with certain types of initiatives and awards even valued negatively. The third essay (Chapter 4) is an empirical examination of the shareholder value effects that result from the restructuring of firms' product development activities. We find that, on average, the stock market reacts positively to product development restructuring, and that the reaction is dependent on the firm's prior financial performance, restructuring objective, R&D expenditures, and size.
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We examine the relationship between lean manufacturing practices and environmental performance as measured in terms of air emissions and resource use. We draw on two unique surveys of 31 automobile assembly plants in North America and Japan, which contain information on manufacturing practice and environmental performance, as well as in-depth interviews with 156 plant level employees at 17 assembly plants. Our survey results and interviews suggest that lean management and reduction of air emissions of volatile organic compounds (vocs) are associated negatively. Lean manufacturing practices contribute to more efficient use of paints and cleaning solvents, but these in-process changes are not sufficient to meet the most stringent air regulations. We found some evidence to support the link between lean practices and resource efficiency. While our survey results were in hypothesized direction, they were not statistically significant. In-depth semi-structured interviews, however, suggest a more robust relationship, and we use them to describe some mechanisms by which all three aspects of lean management (buffer minimization, work systems, and human resource management) may be related to environmental management practices and performance.
Drawing on the resource-based view of the firm, we posited that environmental performance and economic performance are positively linked and that industry growth moderates the relationship, with the returns to environmental performance higher in high-growth industries. We tested these hypotheses with an analysis of 243 firms over two years, using independently developed environmental ratings. Results indicate that "it pays to be green" and that this relationship strengthens with industry growth. We conclude by highlighting the study's academic and managerial implications, making special reference to the social issues in management literature. We wish to express our appreciation to the Franklin Research and Development Corporation for allowing us to use their proprietary database and to Roger Chope and Steven Matsunaga for assistance with methodological issues. We also thank Thomas Dean, Neil Fargher, David Levy, John Mahon, Alan Meyer, Peter Mills, Richard Mowday, and the anonymous reviewers for helpful comments.
An increasing number of firms in Asia, Europe, and North America engage in voluntary or mandatory end-of-life product management. Since developments in product takeback are driven by a mixture of environmental concerns and economic opportunities, the most promising corporate end-of-life strategies create both economic and environmental value. This article introduces a framework that can help managers identify and assess such supply loop strategies. The usefulness of the framework is demonstrated by applying it to two specific supply loops, recycling and reuse of structural steel sections in the UK construction sector. The case study highlights the importance of supply chain constraints and also shows how lack of data can be a major obstacle to the evaluation of potential win-win supply loops.
Automobile assembly plants worldwide face increasing pressures in the environmental arena. How a plant responds to these issues has significant implications for the cost and quality of plant operations. This paper uses three case studies of US assembly plants to examine the role of partnerships between original equipment manufacturers (OEMs) and their suppliers in improving the environmental performance of manufacturing operations. We find that strong partnerships with suppliers, supported by appropriate incentive systems, were a significant element of the successful application of innovative environmental technologies. Supplier staff members were an important part of achieving environmental performance improvements while maintaining production quality and cost goals. The management factors influencing the extent and nature of supplier involvement are identified. The results of this work point to the importance of suppliers in addressing the manufacturing challenges of the future.
Evidence can be marshalled to support either the view that pollution abatement is a cost burden on firms and is detrimental to competitiveness, or that reducing emissions increases efficiency and saves money, giving firms a cost advantage. In an effort to resolve this seeming paradox, the relationship between emissions reduction and firm performance is examined empirically for a sample of S&P 500 firms using data drawn from the Investor Responsibility Research Center's Corporate Environmental Profile and Compustat. The results indicate that efforts to prevent pollution and reduce emissions drop to the ‘bottom line’ within one to two years of initiation and that those firms with the highest emission levels stand the most to gain.
A central and contentious debate in many literatures concerns the relationship between financial and social performance. We advance this debate by measuring the financial–social performance link mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this heterogeneity within SRI funds. Combining modern portfolio and stakeholder theories, we hypothesize that the financial loss borne by an SRI fund due to poor diversification is offset as social screening intensifies because better-managed and more stable firms are selected into its portfolio. We find support for this hypothesis through an empirical test on a panel of 61 SRI funds from 1972 to 2000. The results show that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that two long-competing viewpoints may be complementary. Furthermore, we find that financial performance varies with the types of social screens used. Community relations screening increased financial performance, but environmental and labor relations screening decreased financial performance. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in-depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not. Copyright © 2006 John Wiley & Sons, Ltd.
Previous empirical work suggests that firms with high environmental performance tend to be profitable, but questions persist about the nature of the relationship. Does stronger environmental performance really lead to better financial performance, or is the observed relationship the outcome of some other underlying firm attribute? Does it pay to have cleanrunning facilities or to have facilities in relatively clean industries? To explore these questions, we analyze 652 U.S. manufacturing firms over the time period 1987–1996. Although we find evidence of an association between lower pollution and higher financial valuation, we find that a firm's fixed characteristics and strategic position might cause this association. Our findings suggest that “When does it pay to be green?” may be a more important question than “Does it pay to be green?”
To date, it is unclear as to how Environmental Management Systems (EMS) are implemented and what effects these systems have on other environmental and operational practices. This study reports empirical insights to EMS practices based on the largest EMS survey of manufacturing firms in the United States. The objective of the study is to test for a relationship between environmental management systems and perceived operations performance while considering direct and indirect effects of various environmental practices. The results of this study are supported by several field studies and provide a new source of information regarding EMS theory development. The results also indicate a positive relationship between an EMS, the environmental practices a firm engages, and operations performance measures.
The ISO 9000 series of quality management systems standards, introduced in 1986, has been adopted at over 560,000 locations worldwide. Anecdotal evidence suggests that firms can achieve internal benefits such as quality or productivity improvements or that certification can help firms maintain or increase their market share, or both. Others argue that the standard is too generic to cause performance improvement but can be seen as a signal of good management. In this paper, we track financial performance from 1987 to 1997 of all publicly traded ISO 9000 certified manufacturing firms in the United States with SIC codes 2000--3999, and test whether ISO 9000 certification leads to productivity improvements, market benefits, and improved financial performance. We employ event-study methods, matching each certified firm to a control group of one or more noncertified firms in the same industry with similar precertification size and/or return on assets. We find that firms' decision to seek their first ISO 9000 certification was indeed followed by significant abnormal improvements in financial performance, though the exact timing and magnitude of this effect depend on the specification of the control group. Three years after certification, the certified firms do display strongly significant abnormal performance under all control-group specifications. The degree to which the precise results vary across control-group specifications indicates that event studies should always include extensive sensitivity analysis, for instance matching by size and performance separately and jointly, using both single firms and portfolios as controls.
Product variety in many industries has increased steadily throughout this century. Component sharing---using the same version of a component across multiple products---is increasingly viewed by companies as a way to offer high variety in the marketplace while retaining low variety in their operations. Yet, despite the popularity of component sharing in industry, little is known about how to design an effective component-sharing strategy or about the factors that influence the success of such a strategy. In this paper we critically examine component sharing using automotive front brakes as an example. We consider three basic questions: (1) What are the key drivers and trade-offs of component-sharing decisions? (2) How much variation exists in actual component-sharing practice? and (3) How can this variation be explained? To answer these questions, we develop an analytic model of component sharing and show through empirical testing that this model explains much of the variation in sharing practice for automotive braking systems. We find that the optimal number of brake rotors is a function of the range of vehicle weights, sales volume, fixed component design and tooling costs, variable costs, and the variation in production volume across the models of the product line. We conclude with a discussion of the general managerial implications of our findings.
Environmental management has the potential to play a pivotal role in the financial performance of the firm. Many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives, while others cite anecdotal evidence of increased profitability. A theoretical model is proposed that links strong environmental management to improved perceived future financial performance, as measured by stock market performance. The linkage to firm performance is tested empirically using financial event methodology and archival data of firm-level environmental and financial performance. Significant positive returns were measured for strong environmental management as indicated by environmental performance awards, and significant negative returns were measured for weak environmental management as indicated by environmental crises. The implicit financial market valuation of these events also was estimated. Cross-sectional analysis of the environmental award events revealed differences for first-time awards and between industries. First-time award announcements were associated with greater increases in market valuation, although smaller increases were observed for firms in environmentally dirty industries, possibly indicative of market skepticism. This linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders, and as one criterion against which to measure investment alternatives.
Cross-functional teams can greatly facilitate the successful implementation of projects. This study examined the influence of a set four antecedent constructs (superordinate goals, accessibility, physical proximity and formalized rules and procedures) on the attainment of both cross-functional cooperation and perceived project outcomes. Through the use of path analysis, the results indicated that superordinate goals, physical proximity and project team rules and procedures have significant direct and/or indirect effects on project outcomes through influencing cross-functional cooperation. Further, cross-functional cooperation was a significant predictor of both perceived task and psychosocial project outcomes. Directions for management practice and future research are discussed.
Closed-loop supply chains (CLSC) have product returns at the center of attention. Our view is that CLSC are best managed from a business perspective where organizations seek to maximize value recovery. The research in the feature issue, and our experiences, shows that there are still numerous, unresolved, managerially relevant issues that deserve further investigation. We also observe that there is a pressing need to validate the assumptions in our models using interdisciplinary, industry-driven research. The time is right for production and operations management to play a central role in the sustainability movement slowly taking hold in practice.
Electronic waste in Europe is growing so fast that it will double between 1998 and 2010, according to European Union documents. And in 1998 it already measured in the region of six million metric tons. The pace of its accumulation worries public officials because e-waste contains lead and other chemicals that can leak into water supplies. As consumers and businesses dump their old computers, regulators are scrambling to steer machines and their parts out of landfills. While this spreading scrap threatens towns around the world, the European Union is preparing a broad response. It will soon issue a Waste from Electrical and Electronic Equipment (WEEE) directive, requiring manufacturers to take machines back for free and to recycle 65 percent of their average weight. The European Parliament passed the directive on 10 April, 2002, one step in the process. Member states of the union will soon consider it; they could ratify the directive, which is akin to law, as early as fall 2002. WEEE is set to take full effect by 2008.
Event studies focus on the impact of particular types of firm-specific events on the prices of the affected firms' securities. In this paper, observed stock return data are employed to examine various methodologies which are used 111 event studies to measure security price performance. Abnormal performance is Introduced into this data. We find that a simple methodology based on the market model performs well under a wide variety of conditions. In some situations, even simpler methods which do not explicitly adjust for marketwide factors or for risk perform no worse than the market model. We also show how misuse of any of the methodologies can result in false inferences about the presence of abnormal performance.
A growing concern for durable product manufacturers is how to manage the products they manufacture when they reach their end of life (EOL). In part, this attention is motivated by a growing number of countries across Europe and East Asia that are enacting legislation that imposes greater responsibilities on manufacturers for managing their EOL products. Even in non-regulated markets, however, some manufacturers are engaging in product recovery to reduce production costs, enhance brand image, meet changing customer expectations, protect aftermarkets, and preempt pending legislation or regulations. This article explains when manufacturers should engage in product recovery efforts through partnerships, alliances, or vertical integration and when they should leave this task to independent firms. Technologies that enhance the productivity of product recovery, the level of uncertainty associated with reverse logistics, diverse manufacturing-related capabilities, the uniqueness of recovered assets, and the desire to avoid dependence on other organizations are key determinants that shape the industrial organization of EOL product recovery.
Greater corporate focus is consistent with shareholder wealth maximization. Diseconomies of scope in the 1980s are confirmed by a trend towards focus or specialization, a positive relation between stock returns and focus increases, and the failure of diversified firms to exploit financial economies of scope (coinsurance of debt or reliance on internal capital markets). Large focused firms were less likely to be subject to hostile takeover attempts than were other firms, but diversified firms were distinguished in the 1980s mostly by being relatively active participants, as both buyers and sellers, in the market for corporate control.
We investigate the influence of environmental initiatives on firms’ anticipated economic performance using an event study methodology. Framing our arguments within an organizational reputation framework, we propose that, due to potential positive effects of these initiatives on firm performance (through increases in reputation), shareholders will react positively to announced environmental initiatives. Contrary to our hypothesis, we found no overall effect of announced environmental initiatives on stock returns. However, our findings indicate that reactions to product-driven initiatives are significantly different than reactions to process-driven ones.
Businesses hoping to survive over the long term will have to remake themselves into better competitors at least once along the way. These efforts have gone under many banners: total quality management, reengineering, rightsizing, restructuring, cultural change, and turnarounds, to name a few. In almost every case, the goal has been to cope with a new, more challenging market by changing the way business is conducted. A few of these endeavors have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. John P. Kotter is renowned for his work on leading organizational change. In 1995, when this article was first published, he had just completed a ten-year study of more than 100 companies that attempted such a transformation. Here he shares the results of his observations, outlining the eight largest errors that can doom these efforts and explaining the general lessons that encourage success. Unsuccessful transitions almost always founder during at least one of the following phases: generating a sense of urgency, establishing a powerful guiding coalition, developing a vision, communicating the vision clearly and often, removing obstacles, planning for and creating short-term wins, avoiding premature declarations of victory, and embedding changes in the corporate culture Realizing that change usually takes a long time, says Kotter, can improve the chances of success.
Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.
Companies are increasingly asked to provide innovative solutions to deep-seated problems of human misery, even as economic theory instructs managers to focus on maximizing their shareholders' wealth. In this paper, we assess how organization theory and empirical research have thus far responded to this tension over corporate involvement in wider social life. Organizational scholarship has typically sought to reconcile corporate social initiatives with seemingly inhospitable economic logic. Depicting the hold that economics has had on how the relationship between the firm and society is conceived, we examine the consequences for organizational research and theory by appraising both the 30-year quest for an empirical relationship between a corporation's social initiatives and its financial performance, as well as the development of stakeholder theory. We propose an alternative approach, embracing the tension between economic and broader social objectives as a starting point for systematic organizational inquiry. Adopting a pragmatic stance, we introduce a series of research questions whose answers will reveal the descriptive and normative dimensions of organizational responses to misery.
Since scientists are becoming increasingly concerned about the declining state of earth's environment and the dubious long-term sustainability of today's high-tech economy, government policymakers are starting to focus on pollution prevention--reducing or eliminating the creation of pollution through smart planning and design--as the most effective way to protect the environment. To product designers and engineers, this emerging ecological emphasis is embodied in the concept of design for the environment (DFE) or green design, a still-developing systems method that promises to bring significant changes to future design practice. As described in this article, DFE is a design process in which a product's environmentally preferable attributes--recyclability, disassembly, maintainability, refurbishability, and reusability--are treated as design objectives rather than as constraints. As these environmental objectives are sought, it is important that the product's performance, useful life, and functionality are maintained. DFE makes a good business sense because it lowers the costs of hazardous-waste disposal while reducing the expenses associated with regulation compliance. At the heart of DFE, Richards noted, is the prompt establishment of a recycling infrastructure and the development of timely and accurate environmental data on the comparative risks of alternative materials, processes, and technologies that designers could use to measure the environmental impacts of a product.
Management of the natural environment is becoming an increasingly important issue to manufacturing firms, yet their manufacturers are also challenged to implement changes that improve competitiveness. To meet this challenge, a new construct grounded in the resource-based view of the firm and manufacturing strategy has been developed: the environmental technology portfolio. The composition of a plant's portfolio - the pattern of its investment in environmental technologies in manufacturing over time - was found to significantly affect both manufacturing and environmental performance for a sample of manufacturing plants.
Purpose
Green supply chain management is a concept that is gaining popularity in the South East Asian region. For many organizations in this region it is a way to demonstrate their sincere commitment to sustainability. However, if green supply chain management practices are to be fully adopted by all organizations in South East Asia, a demonstrable link between such measures and improving economic performance and competitiveness is necessary. This paper endeavors to identify potential linkages between green supply chain management, as an initiative for environmental enhancement, economic performance and competitiveness amongst a sample of companies in South East Asia.
Design/methodology/approach
For this purpose a conceptual model was developed from literature sources and data collected using a structured questionnaire mailed to a sample of leading edge ISO14001 certified companies in South East Asia followed by structural equation modelling.
Findings
The analysis identified that greening the different phases of the supply chain leads to an integrated green supply chain, which ultimately leads to competitiveness and economic performance. Future research should empirically test the relationships suggested in this paper in different countries, to enable comparative studies. A larger sample would also allow detailed cross‐sectoral comparisons which are not possible in the context of this study.
Originality/value
This paper presents the first empirical evaluation of the link between green supply chain management practices and increased competitiveness and improved economic performance amongst a sample of organizations in South East Asia.
Corporate restructuring is an area of great interest to researchers in corporate strategy, finance and organizational studies. In this chapter, we briefly review prior research on corporate restructuring, and then introduce the articles in the special issue. In the papers in the issue there are indications that restructuring can be performance-enhancing for the firm, but it can also have significant unintended consequences. The papers in this issue apply a broad range of research methods and theoretical perspectives to corporate restructuring, its initiating forces, and its consequences.
Product and waste take-back is becoming more regulated by countries to protect the environment. Such regulation puts an economic burden on firms, while creating fairness concerns and potentially even missing its primary target: environmental benefits. This research discusses the economic and environmental impacts of extended producer responsibility type of legislation and identifies efficiency conditions. It is shown that the right policy would (i) make producers responsible for their own waste to avoid fairness concerns and (ii) favor eco-design producers to create stronger environmental benefits. Furthermore, the efficiency of take-back systems is also driven by environmental classification of products, industry structure, and end-user willingness to participate in take-back programs.
This study adds new insights to the long‐running corporate environmental‐financial performance debate by focusing on the concept of eco‐efficiency. Using a new database of eco‐efficiency scores, we analyse the relation between eco‐efficiency and financial performance from 1997 to 2004. We report that eco‐efficiency relates positively to operating performance and market value. Moreover, our results suggest that the market's valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco‐efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.
This paper examines recent developments in the UK packaging regulations, legislation transposing the European Union Packaging Waste Directive (94|62|EC). It explores the way in which the UK regulations have adopted market-based environmental policies, including the use of economic instruments. The environmental benefits gained from the market-based approach are assessed against the policy principles adopted within the EU environmental programme. The study finds evidence that UK policy is moving towards greater adherence to these principles engineered by a combination of market factors and government intervention. Nonetheless, certain elements of the market show fewer signs of developing environmentally sustainable structures, with little evidence of sustained demand for recycled packaging and considerable uncertainty over levels of public awareness. The government must therefore play a leading role in honing policies if the regulations are to fulfil the EU's policy principles more fully in the future. Copyright © 2000 John Wiley & Sons, Ltd. and ERP Environment
The economics literature in municipal solid waste (MSW)markets is concerned primarily with demand-side issues and the associated policy implications. Few have studied the cost structure of this market, and none model the multiple product nature of MSWservices. We argue that the production of MSWservices has two major components Ð disposal and recycling, and that cost complementarities between the two activities may exist. Hence, we specify a multipleoutput cost structure, which models the relationship between recycling and disposal activity and investigates the extent of product-speci® c scale economies and overall scope economies in this market.
Throughout the pages of JPIM and other publications, researchers and practitioners devote considerable effort to identifying the dimensions of new‐product development (NPD) performance that relate most closely to business success. Although we may hope to unveil a set of universal truths about the relationship between NPD performance and business success, the relevant NPD performance measures appear to depend on the industry in which a firm competes.
In fact, Christian Terwiesch, Christoph Loch, and Martin Niederkofler suggest that the overall relevance of NPD performance to business success depends on the firm's competitive market environment. In a study of 86 business units operating in 12 different electronics industries worldwide, they develop a market contingency framework for understanding the impact of NPD performance on a firm's profitability. Their study uses data from the “Excellence in Electronics” project, a joint research effort by Stanford University, the University of Augsburg, and McKinsey & Co.
They describe market context in terms of three dimensions: market share, market growth, and external stability—that is, the average product life cycle duration in the market. Looking at all 86 business units in the study, they find that industry membership accounts for 23% of the variance in profits, with 18 percent of the variance determined by industry profitability and 5% by the three dimensions of market context. For the firms in the study, development performance has the most significant effect in slow‐growth markets and in markets with long product life cycles. In these stable industries, low development intensity, product line freshness, and technical product performance increase profitability.
The results indicate that NPD performance plays a much more important role for explaining the profitability of dominant firms than that of the low‐market‐share firms in the study. NPD performance explains 30% of the profitability variance among the high‐market‐share business units in the study, but none of the variance for the low‐market‐share business units. Although the profitability of the smaller firms in the study is driven primarily by the industry environment, these firms can compete on the basis of superior technical performance.
Extended Producer Responsibility (EPR) legislation focuses on the life-cycle environmental performance of products and has significant implications for management theory and practice. In this paper, we examine the influence of EPR policy parameters on product design and coordination incentives in a durable product supply chain. We model a manufacturer supplying a remanufacturable product to a customer over multiple periods. The manufacturer invests in two design attributes of the product that impact costs incurred by the supply chain—performance, which affects the environmental impact of the product during use, and remanufacturability, which affects the environmental impact post-use. Consistent with the goals of EPR policies, the manufacturer and the customer are required to share the environmental costs incurred over the product's life cycle. The customer has a continuing need for the services of the product and optimizes between the costs of product replacement and the costs incurred during use. We demonstrate how charges during use and post-use can be used as levers to encourage environmentally favorable product design. We analyze the impact of supply chain coordination on design choices and profit and discuss contracts that can be used to achieve coordination, both under symmetric and asymmetric information about customer attributes.
The view that adopting an environmental perspective on operations can lead to improved operations is in itself not novel; phrases such as "lean is green" are increasingly commonplace. The implication is that any operational system that has minimized inefficiencies is also more environmentally sustainable. However, in this paper we argue that the underlying mechanism is one of extending the horizons of analysis and that this applies to both theory and practice of operations management. We illustrate this through two principal areas of lean operations, where we identify how successive extensions of the prevailing research horizon in each area have led to major advances in theory and practice. First, in quality management, the initial emphasis on statistical quality control of individual operations was extended through total quality management to include a broader process encompassing customer requirements and suppliers' operations. More recently, the environmental perspective extended the definition of customers to stakeholders and defects to any form of waste. Second, in supply chain management, the horizon first expanded from the initial focus on optimizing inventory control with a single planner to including multiple organizations with conflicting objectives and private information. The environmental perspective draws attention to aspects such as reverse flows and end-of-life product disposal, again potentially improving the performance of the overall supply chain. In both cases, these developments were initially driven by practice, where many of the benefits of adopting an environmental perspective were unexpected. Given that these unexpected side benefits seem to recur so frequently, we refer to this phenomenon as the "law of the expected unexpected side benefits." We conclude by extrapolating from the developmental paths of total quality management and supply chain management to speculate about the future of environmental research in operations management.
This article is a review of work published in Management Science on the topics of technological innovation, product development, and entrepreneurship since the inception of the journal in 1954. We intend the article to serve two goals. First, we hope that it will be useful to doctoral students and researchers interested in understanding what questions have been addressed in Management Science in the area of innovation. Second, we hope that the article will be useful to sociologists of science who are interested in understanding how knowledge develops in a field. We organize the literature into 12 themes. We then describe some aggregate properties of the articles. In an online supplement, we present brief summaries of the 250 articles we have identified as falling in the domain of our department.
In their quest to manage the complexity of offering greater product variety, firms in many industries are considering platform-based product development. Product platforms, which are component and subsystem assets shared across a product-family, enable a firm to better leverage investments in product design and development. While the platform approach offers a number of benefits, it also imposes certain additional costs that have not received adequate research attention. In this paper, we use an industrial example both to illustrate some of the costs and benefits of platform-based product development and to motivate the development of a mathematical model. The model is formulated to better understand the appropriateness of product platforms and their impact on product-planning decisions. Our results indicate that platforms are not appropriate for extreme levels of market diversity or high levels of nonplatform scale economies. Also, a firm's product positioning and introduction sequence decisions made during the product-planning phase are significantly impacted by the presence of platforms. Specifically, a platform increases the separation among products and offers a multitude of product introduction strategies. We translate our model findings into a managerial framework.
This paper empirically estimates the impact of not meeting promised new product introduction dates on the market value of the firm. We estimate the average “abnormal” change in the market value for a sample of 101 firms around the date when information about delaying the introduction of new products is publicly announced. On average, delay announcements decrease the market value of the firm by 5.25%. The average dollar change in the market value in 1991 dollars is $−119.3 million. The evidence suggests that there are significant penalties for not introducing new products on time.
To provide further insight, regression analyses are used to identify factors that influence the direction and magnitude of the change in market value. We find that the competitiveness of the industry in which the firm operates, the size of the firm, and the firm's degree of diversification are statistically significant predictors for the change in the market value of firms that announce delays in the introduction of new products.
This paper empirically investigates the impact of winning a quality award on the market value of firms by estimating the mean "abnormal" change in the stock prices of a sample of firms on the date when information about winning a quality award was publicly announced. We note that the abnormal returns generated by the quality award winning announcements provide a lower bound for the impact of implementing an effective quality award improvement program. Our results show that the stock market reacts positively to quality award announcements. Statistically significant mean abnormal returns on the day of the announcements ranged from a low of 0.59% to a high of 0.67% depending on the model used to generate the abnormal returns. The reaction was particularly strong for smaller firms (mean abnormal returns ranged from low of 1.16% to a high of 1.26%), and for firms that won awards from independent organizations such as Malcolm Baldrige, Philip Crosby, etc. (mean abnormal returns ranged from a low of 1.31% to a high of 1.65%). Winning a quality award also conveys information about the systematic risk of the firm. We find a statistically significant decrease in the equity and the asset betas after the quality award announcement. There is also evidence to suggest that large firms experience negative stock price performance in the second year before winning quality awards, which is followed by a year of positive performance. Small firms experience a positive stock price performance in the second year before winning quality awards but no negative performance before winning quality awards.
Organizations have increasingly turned to alternative organizational forms such as joint ventures and internal corporate ventures to enhance innovation. The present study examines the use of a similar, newly-developing organizational form for purposes of innovation; namely, the internal corporate joint venture (ICJV), which has characteristics of both traditional joint ventures and internal corporate venturing. This study presents an industry-specific analysis of innovation across 53 ICJV's (hospital/physician group combinations), using qualitative and quantitative analyses to identify those factors most strongly associated with the degree of innovativeness in these new organizations. The empirical findings suggest three factors most significantly associated with innovation in the ICJV's in our sample: (1) age similarity among organizational members, (2) the sponsoring organization's orientation towards innovation, and (3) ICJV participation in integrative activities with the sponsoring organization. The study concludes by suggesting that greater attention be devoted to studying "nested innovation," i.e., innovation within a new organizational form that is itself an administrative innovation.
This paper reports on the culmination of a four year study of high technology product innovation. During the course of this research, we examined over 330 new products in the electronics industry in order to better understand the factors that differentiated successful from unsuccessful product development efforts.
This paper presents the conclusions from the final phase of the research. In this study we empirically test a model of product development that incorporates our findings from the earlier exploratory survey and case study phases of our research. The model identifies the critical organizational subunits, development activities and communication channels that influence product outcome, as well as, external factors such as characteristics of the product and the competitive environment.
Our findings suggest the following key factors affect product outcome: (1) the quality of the R&D organization, (2) the technical performance of the product, (3) the product's value to the customer, (4) the synergy of the new product with the firm's existing competences, and (5) management support during the product development and introduction processes. Also important but less significant were the (6) competence of the marketing and manufacturing organizations and market factors, such as the (7) competitiveness and the (8) size and rate of growth of the target market.
This paper examines the effect on product development of project scope: the extent to which a new product is based on unique parts developed in-house. Using data from a larger study of product development in the world auto industry, the paper presents evidence on the impact of scope on lead time and engineering productivity. Studies of the automotive supplier industry suggest that very different structures and relationships exist in Japan, the U.S., and Europe. Yet there has been little study of the impact of these differences on development performance. Further, little is known about the effects of different parts strategies (i.e. unique versus common or carryover parts) on development. The evidence presented here suggests that project scope differs significantly in the industry, even for comparable products. These differences in strategy, in turn, explain an important part of differences in performance. In particular, it appears that a distinctive approach to scope among Japanese firms---high levels of unique parts, intensive supplier involvement in engineering---accounts for a significant fraction of their advantage in lead time and cost.
In this paper, we investigate project selection choices of duopolists facing two alternatives: undertaking a "pioneering" type project (Type A) aimed to develop a highly innovative product, or an "incremental innovation" type project (Type B) aimed to develop a less innovative product such as the modification of an existing product. A key objective of our research is to examine how firm characteristics such as their differential efficiencies in completing projects, differences in the degree of substitutability between Type A and B products, and first mover advantages affect product development strategies. We develop a game-theoretic model to obtain insights into the project selection problem taking into account competitive reactions to a firm's choice of project development strategies and technical uncertainties associated with project completion times. We report model findings on recommended project selection strategies for efficient and disadvantaged firms. Further, we examine how a firm's choice of a Type A project is affected by an increase in the variance of the project completion time of a Type A project relative to that of a Type B project, while the ratio of their mean completion times is held constant.
When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system”, I am
reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his
life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely”
with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its
responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords
of the contemporary crop of reformers. In fact they are — or would be if they or anyone else took them seriously -preaching
pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have
been undermining the basis of a free society these past decades.
In a departure from the traditional studies of corporate philanthropy that focus on board composition, advertising, and social networks, the authors investigate the financial correlates of corporate philanthropy. The research design controls for firm size and industry while observing firms from a variety of industries. The sample contains matched pairs of generous and less generous corporate givers. The authors find, as hypothesized, a positive relationship between a firm''s cash resources available and cash donations, but no significant relationship between corporate philanthropy and firm financial performance, regardless of whether corporate philanthropy is measured as cash payouts or the aggregate contributions that charities actually receive, and regardless of whether financial performance is gauged using accounting measures or market measures. Whereas the link between available resources and corporate philanthropy is well accepted in the literature on corporate social responsibility, it has been rarely tested and never so definitively found as in this research.