Firm risk and self-reference on past performance as main drivers of lean production implementation

Abstract

Purpose The purpose of this paper is to investigate the role of external and internal sources of variability on the degree of lean production implementation. For this, this paper analyzes the effects of environmental risk and the company’s past operational performance on the level of lean production implementation. Design/methodology/approach Utilizing the reasoning of prospect theory and the threat-rigidity hypothesis, three hypotheses have been developed as to the impact of internal and external sources of variability on the degree of lean production implementation. A questionnaire has been developed to test the hypotheses of the paper on a sample of first-tier suppliers in the Spanish automotive industry. The methodology comprises a combination of hierarchical regression analysis and mediation analysis. Findings In line with the propositions of prospect theory, the results obtained show support for the influence of firm risk and past operational performance variability in terms of undertaking decisions that favor further progress in lean production implementation. Originality/value This paper contributes to the explanation of the circumstances that ultimately lead to the implementation of lean production. Consequently, the impact of the external and internal environment influences a company’s commitment to increasing its level of lean production implementation and fosters managers’ strategic decision making. Furthermore, its implementation could help guarantee firm survival.