When should global manufacturers invest in production network upgrades? An empirical investigation

Abstract

PurposeIn this paper, the authors empirically investigate under which conditions production network management is effective to improve manufacturers' financial performance. For this, the authors explore contingencies between production networks and the three key dimensions of organizational environment.Design/methodology/approachA survey with senior managers was conducted for this research. The authors used a hierarchical regression analysis to test interaction effects and draw on follow-up interviews with chief operating officers (COOs) and senior managers to elaborate and explain the found associations.FindingsResults indicate that manufacturers' financial performance is only associated with their network capability level if they operate in hostile competitive environments. In moderate competitive environments, improvements in the network capability level are not associated with greater financial performance. In particularly munificent environments, such production network upgrades are even associated with the opposite effect.Practical implicationsResults highlight in which organizational contexts upgrading production networks has positive performance implications and under which circumstances it is ineffective or even counterproductive.Originality/valueThe authors draw on unique survey data to add quantitative evidence to the predominantly conceptual and qualitative literature on global production networks. This is also one of the first studies to connect the topics of production networks and organizational environment.