The interplay of integration, flexibility and coordination: a dynamic capability view to responding environmental uncertainty

Abstract

PurposeSupply chain literature highlights that environmental uncertainty (EU) encourages firms to integrate their business strategies and develop strategic flexibility (SF). The authors’ use the dynamic capability view (DCV) to explain why the EU motivates firms to develop SF and integrate business strategies for better supply chain coordination (SCC) and enhanced performance. This study tests the role of SCC as a mediator between (1) business strategy integration (BSI) and operational performance, and (2) SF and operational performance. The study also measures the contingent effect of structural constructs on the relationship between EU, BSI and SF.Design/methodology/approachData of 356 firms drawn from the continuous innovation network (CINet) are used in this paper. Structural equation modeling (SEM) is used to test the direct, indirect and moderation hypotheses.FindingsThe paper finds that EU enhances SF and BSI. Further, BSI has a significant positive impact on SCC that drives operational performance. The paper also finds that SF has no direct impact on SCC rather it affects SCC through BSI. SCC mediates the relationship between (1) SF and operational performance, and (2) BSI and operational performance. The organization's structural factors including connectedness and formalization moderate the effect of EU on BSI and SF.Originality/valueThe paper extends debate at the interface of supply chain risk and strategy literature and provides a specific understanding of the “external-internal-external” mechanism in the context of the turbulent business environment. This mechanism helps to understand why and under what structural conditions EU (external) leads to BSI and SF (internal). Further, BSI and SF (internal) help firms to manage SCC (external) effectively that in turn improve operational performance.