Inter-firm relationship management strategy and firm performance: evidence from electronic parts and equipment manufacturing businesses in Thailand.

Author:Ngowsiri, Sutee
Position:Report
 
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  1. INTRODUCTION

    Currently, business environment has changed dramatically and the competition has become more intensive (Meira et al., 2010; Samuel et al., 2011, Smirnova et al., 2011). Accordingly, each firm is increasingly aware of inter-firm relationship management (Narasimhan et al., 2009; Toole and Donalson, 2002) in order to create cooperation among firms which leads to goal accomplishment (Samuel et al., 2011). Therefore, inter-firm relationship management is important for firms' sustainable competitive operations which can be in the form of the cooperation of supply chain (Choe, 2008; Kim et al., 2011; Tukamuhabwa et al., 2011), outsourcing (Langfield-Smith and Smith, 2003; Mullin 1996) and joint venture (Dickson and Weaver, 1977; Kamminga and Vander Meer-Kooistra, 2007). Each firm has to pay attention to the strategic management of inter-firm relationship including trust, bonding, communication, shared value and empathy which affect firm performance (Meng, 2012; Panayides, 2007). Moreover, the strategic management of inter-firm relationship reduces risk of operations between firms and partners (Nix et al., 2008; Simirnova et al., 2011).

    This research aims to study the relation between inter-firm relationship management strategy and firm performance through operational flexibility, resource utilization effectiveness and customer fulfillment. It is conducted by studying of electronics parts and equipment manufacturing businesses for radio, television and communication in Thailand. Four theories, namely network theory, organizational learning theory, resource based view and contingency theory, are employed to explain in this study. From reviewing literature, there are several researches studying inter-firm relationship management which affects firm performance (Meira et al., 2010; Meng, 2012; Panayides, 2007). However, it is found that none of the researches have studied through these three mediator variables. There is of any research in this field of industry in Thailand. Consequently, the results of the study will be beneficial to top executives in such industry in inter-firm relationship management strategy in order to improve and develop firm performance.

    The key research question of this research is how each dimension of inter-firm relationship management has an impact on firm performance. Consequently, the specific questions are as follows: (1) how does each dimension of inter-firm relationship management strategy affect operational flexibility?, (2) how does each dimension of inter-firm relationship management strategy influence resource utilization effectiveness?, (3) how does each dimension of inter-firm relationship management strategy affect customer fulfillment?, (4) how does operational flexibility influence firm performance?, (5) how does resource utilization effectiveness influence firm performance?, (6) how does customer fulfillment affect firm performance?, (7) how does inter-coordination experience moderate each dimension of inter-firm relationship management strategy-operational flexibility, effectiveness resource utilization, customer fulfillment relationships?, (8) how does environmental munificence moderate operational flexibility- firm performance relationships?, (9) how does environmental munificence moderate resource utilization effectiveness--firm performance relationships?, and (10) how does environmental munificence moderate customer fulfillment--firm performance relationships?.

    The main objectives of this research are as follows: (1) To investigate the effects of each dimension of inter-firm relationship management strategy on operational flexibility, (2) To investigate the effects of each dimension of inter-firm relationship management strategy on resource utilization effectiveness, (3) To investigate the effects of each dimension of Inter-firm relationship management strategy on customer fulfillment, (4) To investigate the effects of operational flexibility on firm performance, (5) To investigate the effects of resource utilization effectiveness on firm performance, (6) To investigate the effects of customer fulfillment on firm performance, (7) To examine the moderating effects of inter-coordination experience on each dimension of inter-firm relationship management strategy -operational flexibility, effectiveness resource utilization, customer fulfillment relationships, (8) To test the moderating effects of environmental munificence on operational flexibility- firm performance relationships, (9) To test the moderating effects of environmental munificence on effectiveness resource utilization--firm performance relationships, and (10) To test the moderating effects of environmental munificence on customer fulfillment--firm performance relationships.

    The remainder of this paper is organized as follows. The first part provides theoretical foundation. The second provides a literature review and hypothesis development. The third describes the details of research methods, including population and data collection procedure, the variable measurements of each construct, reliability and validity, statistic technique, and equation to test the hypotheses are provided. The fourth provides results and discussion. The final summarizes the finding of both theoretical and managerial contribution. Suggestions for future research are also presented.

  2. THEORETICAL FOUNDATION

    This research is an attempt to study inter-firm relationship management strategy which affects firm performance by using four theories: network theory, organizational learning theory, resource-based view and contingency theory.

    Firstly, net work theory is based on the relation between firms which each firm is likely to rely on one another rather than operating on their own, especially knowledge transfer such as knowledge sharing and exchanging (Cao and Zhang 2011; Simatupang and Sridharan, 2005). Consequently, all firms in the network try to succeed according to the purposes of each firm by using inter-firm relationship management which plays a part of such success (Vaccaro et al., 2010; Wilkinson and Young, 2002). In this research, network theory is developed to explain the relationships among organizational factors, inter-firm relationship management strategy, and firm performance. When each firm builds connection with other firms via collaboration of operation (Smirnova et al., 2011) which are provided by other important factors towards the relation in the network, firm will obtain various resources and capabilities with other partners by mutually sharing main activities (Tanpinyoputtikhun and Ussahawanitchakit, 2009). Moreover, it helps save time and cost of transferring and gathering of marketing activities, research and development, and productions (Cooper and Slagmulder, 2004; Cao and Zhang, 2011; Kim et al., 2010). Hence, it can be explained that inter-firm relationship management strategy relates to operational flexibility, resource utilization effectiveness, and customer fulfillment.

    Secondly, organizational learning theory concerning organizational learning is able to influence behavior and increases understanding capacity in the coordination among firms (Damanpour, 1991; Panayides, 2007) which each firm increases learning and experience from cooperating with one another (Liu, 2011). Therefore, this research implies organizational learning to explain the phenomenon of inter-coordination experience as a moderating variable interacted with inter-firm relationship management strategy which affects three variables: operational flexibility, resource utilization effectiveness and customer fulfillment.

    Thirdly, resource-based view is widely used as theoretical foundation to describe firms when learning and experience are obtained from the cooperation among firms (Baraldi, Gressetvold and Harrison, 2012). It is likely to become the competency of firms which is a valuable resource and a competitive advantage (Barney, 1991). Thus, this research uses this theory to explain the relationships among three variables; operational flexibility, resource utilization effectiveness and customer fulfillment are related to firm performance.

    Finally contingency theory is to explain the capability of firms to adapt themselves to the changing environment in order to be consistent and balanced (Sauser, Reilly and Shenhar, 2009). Besides, this theory is to predict firm performance which depends on the suitability in each factor of firms such as production factor and the capability of employees which firms are able to control and adapt themselves during short run under the unpredictable environment (Butterman, Germain and Iyer, 2008) in order to operate better and to have better performance under the changing environment (Caglio and Ditillo, 2008). This research uses this theory to explain the phenomena of environmental munificence which interact the operational flexibility, resource utilization effectiveness, and customer fulfillment which affect firm performance.

    This research has developed the conceptual framework as shown in Figure 1 below which builds on network theory, organizational learning theory, resource-based view, contingency theory, and relevant literature. According to the theoretical foundations, inter-firm relationship management strategy is assigned as the independent variables, while firm performance is designated as the dependent variable. Operational flexibility, resource utilization effectiveness, and customer fulfillment are mediating variables of the research. Finally, inter-coordination experience and environmental munificence are the moderating effects of the research. The conceptual model and hypotheses are depicted as below.

  3. LITERATURE REVIEWS AND HYPOTHESIS DEVELOPMENT

    3.1 Inter-firm relationship management strategy

    Inter-firm relationship management strategy is the core construct in this research which this empirical research is mainly proposed to study how inter-firm relationship management...

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