How Do Supply Chain Integration and Product Innovation Capability Drive Sustainable Operational Performance?

Abstract

This study analyzes the influence of supply chain integration dimensions (internal integration and external integration) on the product innovation capability (market knowledge and product development) and operational performance of manufacturing firms, considering product innovation capability as a mediator. A purposive sampling method was used, and data were collected through a survey completed by 129 medium and large manufacturers in Pakistan and analyzed using the structural equation modeling technique. The results show internal and customer integrations are not directly related to operational performance. Furthermore, supplier integration was positively related to both product innovation capability and operational performance. Likewise, the link between product innovation capability and operational performance is positive. The study uniquely evaluates that product innovation capability positively mediates the impacts of internal and external integration on operational performance. The outcomes of this study will help managers of manufacturing firms boost their firms’ product innovation capability and operational performance by focusing on supply chain integration. Moreover, to achieve sustainability in the supply chain, practitioners are provided with directions on operationalizing supply chain integration. The study uniquely identifies the mediation effects of product innovation capability (market knowledge and product development) between internal and external integration and operational performance.