A revisit of lean production on performance based on heterogeneity

Abstract

Purpose The purpose of this paper is to revisit causal effects and investigate hysteresis effects of lean production on performance. With a focus on firm heterogeneity, this paper explores the role of organization ownership structure in shaping the relationship between lean production and performance. Design/methodology/approach The propensity score matching (PSM) model combined with difference-in-difference (DID) estimation is applied to minimize selection bias caused by firm heterogeneity and endogeneity problems derived from unobserved fixed variables that could potentially affect the desired causal relationship. Findings Results show that lean production has no significant effect on business performance; however, the relationship between lean production and operations performance is positive and significant, especially for non-state-owned firms. Furthermore, the non-significant effect of lean production on performance of state-owned firms is largely due to the failure of lean production implementation. Meanwhile, lean production can only improve operations performance of non-state-owned firms in the short term due to their inability to continuously implement lean production. Research limitations/implications This paper only covers manufacturing listed firms in China. Further studies are needed to test the wide implications of this paper in other countries. Practical implications This paper may help managers to identify problems in the implementation of lean production for different organization ownership structure firms, thus providing new insight into the implementation of lean production. Originality/value This paper appears to be the first one to examine causal effects of lean production on performance in China by applying the PSM model combined with DID estimation.