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J. of the Acad. Mark. Sci. (2007) 35:507522 DOI 10.



A market orientation in supply chain management

Soonhong Min & John T. Mentzer & Robert T. Ladd

Received: 8 January 2007 / Accepted: 9 March 2007 / Published online: 24 March 2007 # Academy of Marketing Science 2007

Abstract Despite the logical association between market orientation (MO) and the supply chain management concepts of supply chain orientation (SCO) and supply chain management (SCM), and the potential mediating role of SCO and SCM in the MO-firm business performance (PERF) relationship, there have been few, if any, attempts to investigate MO in a supply chain context. Thus, this study tests the relationships between MO, SCO, SCM, and PERF. Results indicate MO has a strong, positive impact on SCO and SCM. Interestingly, SCO was found to have the largest direct influence on PERF, followed by MO, followed by SCM. Managers should realize that SCO is critical to fulfilling customer requirements, i.e., a firms efforts to work with supply chain partners will not pay off if the firm is not supply chain-oriented. Although overshadowed by SCO, MO is still a foundation for managing the supply chain and has a positive impact on

PERF. Equally important, the fact that the contribution of SCM to firm performance is overshadowed by MO and SCO does not mean SCM is irrelevant in corporate strategy. Managerial and future research implications of these findings are discussed. Keywords Market orientation . Supply chain orientation . Supply chain management

Introduction Market orientation (MO) plays a central role in marketing management and strategy, with focus on creating superior customer value while pursuing profits (Slater and Narver 1994). Different authors (e.g., Kohli and Jaworski 1990; Slater and Narver 1994) agree that a firms MO focuses on specific behaviors. Kohli and Jaworski (1990) proposed that MO is a set of company-wide implementing activities of the marketing concept (a business philosophy) so that a market-oriented firm practices the three pillars of the marketing concept (customer focus, coordinated marketing, and profit orientation) to satisfy customers. Slater and Narver (1994) argue their definition of MO is commensurable with Kohli and Jaworski (1990) since MO consists of three behavioral components (customer orientation, competitor orientation, and interfunctional coordination) each of which involves intelligence generation, dissemination, and managerial action. Deshpande and Farley (1998) also contend MO is the cross-functional activities that create and satisfy customers through continuous needs assessment. Thus, MO focuses on three company-wide behaviorsgenerating, disseminating, and responding to market informationand operationalizes the marketing concept (cf. Jaworski and Kohli 1993).

S. Min Division of Marketing and Supply Chain Management, Michael F. Price College of Business, The University of Oklahoma, 307 West Brooks Room 1, Norman, OK 73019-4001, USA e-mail: smin@ou.edu J. T. Mentzer (*) Department of Marketing and Logistics, The University of Tennessee, 310 Stokely Management Center, Knoxville, TN 37996-0530, USA e-mail: jmentzer@utk.edu R. T. Ladd Department of Management, The University of Tennessee, 410 Stokely Management Center, Knoxville, TN 37996-0530, USA e-mail: tladd@utk.edu


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There are, however, several gaps in MO literature. First, although a positive relationship between a firms MO and its performance was found in numerous studies, weak or lack of association has also been reported. Facing somewhat disparate findings, authors (e.g., Matsuno et al. 2002) explored moderating variables in the MO-performance path, but research on mediators is less extensive (Han et al. 1998). Second, except for a few studies (e.g., Siguaw et al. 1998), the conceptualization and implications of MO to date have been mainly in the context of individual firms, in spite of the growing importance of supply chain management (SCM). Market oriented-firms aim to better serve customer requirements based on market information obtained and shared inside the firm in a coordinative manner (Kohli and Jaworski 1990). Social network literature (Lee et al. 2004) suggests external networks with suppliers and other partners (a supply chain) provide a firm with information on new technological and market opportunities and collaboration to exploit opportunities. Thus, firms interact with supply chain partners to acquire external resources and the necessary information to offer products that attract and retain customers and, accordingly, obtain performance superior to competition (cf. Lee et al. 2004). However, the value of supply chain social ties is contingent on such firm internal capabilities as market sensing through a market orientation (Day 1994). That is, although SCM concepts as the source of additional resources may mediate the MO-performance relationship, MO as the impetus for SCM concepts may still have direct, positive impact on firm performance. Despite apparent logical association between MO and SCM concepts and the possible mediating role of SCM concepts in the MO-firm performance link, there have been few, if any, attempts to investigate MO in a supply chain context. Thus, this study contributes to the body of knowledge by testing the relationships between MO, SCM concepts, and firm performance to examine (1) contradictory findings on the MO-firm performance link (i.e., does MO directly influence performance or indirectly via a mediating factor like SCM), and (2) the commonly proposed SCM-firm performance link (e.g., Fugate et al. 2006). Investigating the relationship between MO and SCM concepts expands the boundaries of both MO and SCM research, and examines the idea of interfunctional integration both inside and outside the firm to create customer value (Kotler 1997).

Supply chain management concepts Mentzer et al. (2001, p. 4) describe a supply chain as a set of three or more organizations directly linked by one or more of the upstream and downstream flows of products,

services, finances, and information from a source to a customer. Thus, the nature of a supply chain is comprehensive and membership is open to any firm that performs a flow function, including suppliers, manufacturers, third party financial providers, 3PLs, and market research firms. Mentzer et al. (2001) differentiate between supply chains as phenomena that exist, and management of those supply chains. That is, whether a firm likes it or not, it operates in supply chains that consist of suppliers, distributors, and various forms of intermediaries. However, it is not feasible for a firm to closely work with all firms in the supply chain, because not every firm is equally capable of, and/or critical to, customer value creation. Moreover, supply chain relations are costly to maintain (Burt 1992). Thus, each firm must be selective in managing relationships with a limited set of partners. As such, managed supply chains are organized and operated through agreed-upon goals and activities of the partners. Since the focal firm is inseparable from its managed supply chain, but not necessarily from supply chains as natural phenomena, SCM phenomenaovert and collective efforts of supply chain partnersshould be examined in the context of managed supply chains (Mentzer et al. 2001). We propose that the SCM concept consists of different terms to delineate different phenomena: a Supply Chain Orientation (SCO) within a firm and Supply Chain Management (SCM) across firms within a supply chain, both of which are operationalizations of SCM philosophy. SCM philosophy is a shared mental model or schema of joint problem solving both inside and outside the firm within the boundaries of a supply chain (cf. Madhavan and Grover 1998). That is, SCM philosophy is a team mental model, based on shared prior knowledge of how things should be (cf. Day and Nedungadi 1994). Welch and Wilkinson (2002) propose such schemas as essential determinants of supply chain relationships because it is the way managers make sense of interactions taking place with other firms, and represents a different kind of dynamic force shaping relationships and networks. Specifically, SCM philosophy (1) takes a systems approach to view the supply chain as a whole rather than a set of fragmented parts, (2) seeks synchronization of intrafirm and interfirm operational and strategic capabilities into a unified, compelling marketplace force, and (3) focuses supply chain partners on creating customer value (Mentzer et al. 2001). Each supply chain partner should arrange the systemic, strategic implications of the coordinated activities in each supply chain process before the partners perform joint actions to obtain improved, balanced performance of individual firms and the supply chain as a whole (Jennings and Mandani 1992). The implication of SCM philosophy is that the focal firm is not free from its macro environment (the managed supply chain) since SCM philosophy steers and adjusts partners attitudes toward collective actions within the managed supply chain.

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To initiate SCM philosophy, managers need specific behavioral guidelines within the boundaries of the firm. Mentzer et al. (2001) emphasize the importance of embracing SCM philosophy within a firm and called it Supply Chain Orientationimplementation by a firm of the activities involved in systemically and strategically managing various flows in a supply chain. Without SCO inside a firm, it is not possible to implement SCM philosophy within the supply chain. SCM requires each firm in a supply chain to be supply chain oriented, and to perform a specific set of managerial actions within the supply chain in a collective manner. Thus, Mentzer et al. (2001, p. 18) define SCM as, the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. Organizations are multilevel systems in which micro phenomena are embedded in macro contexts and macro phenomena emerge through the interaction and dynamics of lower-level elements (Kozlowski and Klein 2000). A managed supply chain is a multilevel system in which supply chain partners are embedded. Thus, SCM phenomena emerge through overt, collective efforts of supply chain partners. This form of emergence is called composition, which is based on assumptions of isomorphism (coalescence), and illustrates the convergence of similar low level characteristics (supply chain partners actions) to generate a higher level property (actions taken by a managed supply chain as a whole) that is essentially the same as its constituents. Our in-depth interviews revealed this type of emergence: an interviewee stated, Our supply chain partner thinks, breaths, and speaks as if our company. Firm boundaries become blurred as firms become more dependent on supply chain partners (Kotler 1997), and every firm function is included in SCM (Min and Mentzer 2000). The relationship between SCO and SCM is explained by the social network view. Hkansson and Snehota (1995) propose three layers of business relationships and their interplay in a supply chain setting: activity links, resource ties, and actor bonds. Activities links (different firms carrying out different parts of supply chain processes) create unique performance for each firm, as well as other firms involved in the business processes as a whole. Resources uniquely available to each firm are tied together (resources ties) to constitute new sources of capabilities. A firms critical resources may extend beyond firm boundaries, and combine with those of other firms in unique ways to create competitive advantage (Dyer and Singh 1998). Actor bonds are prerequisites for activity links and resource ties (Hkansson and Snehota 1995). Firms in a supply chain require actor bonds or interfirm ties (e.g., trust, commit-

ment, cooperative norms, shared identity), which both constrain and enable behaviors (Tsai and Ghoshal 1998). In the long term, actor bonds evolve, activity links and resources ties change, and the three mutually adjust (Hkansson and Snehota 1995). Eventually, such interfirm cooperation translates into performance benefits for the firms forming a network (Gulati 1998). Days (1994) concepts of channel linking (relationship building) and channel bonding (interfirm cooperation) are equivalent to Hknsson and Snehotas (1995) concepts of actor bonds, and activity links and resource ties, respectively. SCO established inside a firm in the form of actor bonds or channel linking (e.g., trust, commitment, cooperative norms, organizational compatibility, and top management support) is a strong antecedent to SCM activities (activity links and resources ties or channel bonding) across supply chain partners. SCO and SCM are related, but different, concepts in that SCO (actor bonds) is developed and maintained by a firm, whereas SCM (activity links and resource ties) is shared in relationships between supply chain partners. As the previous discussion indicates, SCO and SCM have much in common with MO: (1) creating value to satisfy customers at a profit, (2) implemention through interfunctional coordination, and (3) a strategic context. There are differences, however: (1) MO concerns an individual firm and is implemented within a firm, (2) SCO concerns a supply chain and is implemented within a firm, and (3) SCM concerns a supply chain and is implemented by multiple firms within a supply chain. Based on the similarities and differences between these concepts, we investigate the strategic implications of the MOSCO SCM path on firm performance by (1) examining the role of MO in developing SCO and SCM, (2) confirming the validity of the SCM constructs (SCO and SCM), and (3) testing potential mediating effects of SCO and SCM on the MO-firm performance relationship (Fig. 1).

Theoretical framework The relationship between MO and firm performance has been established in many studies (e.g., Jaworski and Kohli 1993; Matsuno et al. 2000; Slater and Narver 1994). Thus, we posit a direct, positive impact of MO on firm performance (PERF), but we also examine potential mediating factors. MO enhances a firms business performance when it is combined with the firms channel linking (SCO) and channel bonding (SCM) capabilities (Day 1994). Marketoriented firms realize the need for network competence, defined as the degree of network management task execution between firms (SCM) as well as the degree of network management qualification possessed by people handling the firms relationships (SCO) (Ritter et al. 2002).


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Figure 1 The scope of the study and an overview of the structural model.

As such, if firms in a supply chain feel strongly tied (SCO) and valuable information on customer needs is shared between them (SCM), it is possible for the firms to collect rich information about customer preferences and respond to customer requirements. In sum, MO contributes directly to firm performance, and indirectly via the SCOSCM path across the boundaries of the firms in a supply chain. Further, firms perform organizational learning, an inherent, inseparable part of MO, through such external partners as customers, distributors, and suppliers (Slater and Narver 1995). All strategic alliances are firm co-alignments where partners seek to learn and acquire from each other products, skills, technologies, and knowledge not available to competitors (Lei et al. 1997). Strategic alliances are important tactics within and across firms to learn and acquire new capabilities (Mowery et al. 1996). Thus, MO cannot be separated from interfirm relationships with customers, suppliers, and other key constituencies (cf. Webster 1992). Therefore, MO drives a firm toward a systems approach (SCO) and cooperative actions with other firms (SCM) to deal with the complexity of learning and building new sources of competitive advantage beyond the firm. Firm information generation, storage, and utilization are essential to SCM. A market-oriented firm produces and stores market information that is needed to build, maintain, and enhance a systems approach to cooperative relationships with other firms. A key component of SCM is information sharing between supply chain partners (Min et al. 2005). Information gathered via MO by individual firms can serve as the basis for shared information among supply chain partners, and thus, MO indirectly contributes to SCM. A firm with information about customers, suppliers, and sociopolitical and technological trends can answer such

questions as which supply chain best serves its customers, with which firms to manage a supply chain, and what should be accomplished in the supply chain. Finally, many researchers found strong evidence of a positive MOPERF association, whereas several researchers found either a weak or nonexistent association. Although research on moderators of the MOPERF relationship has been substantial (e.g., Deshpande and Farley 1998), less exists on possible mediators (Han et al. 1998). Considering that the MO-firm performance path is well established and that there are potential mediators of the relationship, we propose the following: H1a: H1b: Firm MO directly and positively contributes to firm business performance. Firm MO positively contributes to firm business performance indirectly via the SCOSCM path.

Markets include customers and distributors as well as exogenous forces that affect their needs and preferences (Kohli and Jaworski 1990) and interfirm collaboration allows firms to generate intelligence about creating superior customer value (Slater and Narver 2000). Thus, it is important to understand both consumer behavior and the trade (e.g., Lusch and Brown 1996). While the conceptualization of MO suggests information sharing inside the firm (Jaworski and Kohli 1993), SCM asserts broader information sharing across firms, accessing supply chain partners expertise, databases, and information systems (Mentzer et al. 2001). Therefore, if a learning network is based on openness (SCO) and cooperation (SCM) across firms, the network enables firms to absorb, assimilate, and apply external information to knowledge in each firm (Dickson and Farris 2001). As such, a market-oriented firm should be motivated to be supply chain oriented to obtain

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information from supply chain partners. Siguaw et al. (1998) found firm MO affects the other partners trust, commitment, and cooperative norms, conceptualized in this study as components of SCO. A market oriented firm possesses a knowledge base, and thus, should recognize the systemic, strategic implications of the managerial activities involved in the various flows in a supply chain. H2: Firm MO directly and positively contributes to firm SCO.

Supply chain oriented firms build and maintain internal behavioral elements (trust, commitment, cooperative norms, organizational compatibility, and top management support) to develop relationships with supply chain partners (Mentzer et al. 2001). The dimensions of SCO are evidenced in numerous studies (see Mentzer et al. 2000 for a review). Among these dimensions of SCO, trust and commitment are the most mentioned relational variables, both of which are proposed to promote intra-network collaboration (c.f., Tsai and Ghoshal 1998). Cooperative norms and organizational compatibility (business philosophies, goals, and management style), however, regulate intra-network collaboration, and shared values and norms across firms affect the development and management of supply chain partnerships (Park and Ungson 1997). In addition, top management glues together the sub-dimensions of SCO, because without top management support and recognition, members of the firm are not willing to pursue a SCO that requires time, effort, and resources. The key components of SCM are collective efforts for managing supply chains as a whole (Cooper et al. 1997). There should be agreement on the vision and focus of serving customers (Lambert et al. 1998). Mutually sharing information among supply chain members is required, especially for planning, integrating, and monitoring processes (e.g., Global Logistics Research Team at Michigan State University 1995). Effective SCM requires sharing risks and rewards to generate competitive advantage (Cooper et al. 1997). Cooperationmutual, coordinated activities performed by firms in a business relationship to produce superior outcomes mutually expected over time (Anderson and Narus 1990)among supply chain members is also required. SCM requires partners to build, maintain, and enhance long-term relationships (Mentzer et al. 2001). Unless inter-firm relationships are maintained and further developed while waste is reduced, coordinated actions to dynamically respond to the needs of end customers in a changing market environment may not be possible (Greene 1991). Finally, SCM practices (e.g., Efficient Customer Response, Quick Response, Vendor Managed Inventory, Collaborative Planning, Forecasting, and Replenishment) require supply chain leadership to coordinate activities across supply chain partners.

Although SCO and SCM are conceptualized in the context of supply chain relationships, the locus of each concept is different. SCO is a firms unilateral policy based on past interactions with, and future expectations of, supply chain partners. In contrast, SCM is observable, multilateral efforts to manage supply chain processes in which all supply chain partners participate. Accordingly, the measurement scales used in this study (See Appendix) are worded to reflect the different loci of SCO (our business unit) and SCM (our supply chain members). Social categorization theory suggests fewer and more intense relationships (e.g., managed supply chains) build such relational variables as trust, commitment, cooperative norms, and compatibility (SCO) (cf. Tajfel and Turner 1986), all of which promote supply chain information sharing and collaboration. These relational variables are prerequisites for firms to cooperate to accomplish common goals (SCM). Where parties share goals, values, and affective attachment, they act for the benefit of one another (Gundlach et al. 1995). Furthermore, a firms internal readinessinternal resources for networking, network orientation of personnel, integration of intra-firm communication, and corporate culture open to external networkingis an antecedent to successful execution of networking with supply chain partners (Ritter et al. 2002). A firms internal capabilities to strategically coordinate such activities as alliance planning, negotiation, management, and termination and to manage alliance-related knowledge inside the firm lead to strong, harmonious alliances and alliance-based organizational learning (Kale et al. 2002)all parts of SCM. H3: Firm SCO directly and positively contributes to SCM.

SCO directly influences firm performance. Firm trust and commitment toward channel partners lead to better firm financial performance (Siguaw et al. 1998). Firm cooperative norms positively impact marketing and logistics performance (Cannon et al. 2000). Trust positively affects a firms cost savings and market share growth (Dyer and Chu 2003). On the other hand, interfirm cooperation (SCM) mediates the effect of SCO on firm performance. Trust promotes interfirm coordination that, in turn, produces higher profit (Jap 1999), and there is a positive trust-interfirm collaboration-performance path (Hewett and Bearden 2001). H4a: H4b: Firm SCO directly and positively contributes to firm business performance. Firm SCO positively contributes to firm business performance indirectly through SCM.

Firms pool skills and resources with supply chain partners to achieve higher performance (cf. Lusch and Brown 1996). Heide and John (1992) discussed quasi-


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integration, achieved in interfirm relationships by establishing vertical control for efficiency reasons. We propose that managing a supply chain requires each firm to perform a set of managerial actions in a collective manner under supply chain leadership. Consequently, successful cooperation in any managed supply chain represents a means for each firm to improve its outcomes. SCM pursues lower total required resources to provide the necessary customer service (Cooper and Ellram 1993), and improve customer service through increased product availability and reduced order cycle times (Min and Keebler 2001). As such, SCM is concerned with improving efficiency (cost reduction) and effectiveness (customer service) in a strategic context to obtain competitiveness that improves profitability of individual firms and the supply chain as a whole. For effective survey-based data collection and analysis, the scope of testing the hypotheses in this study was limited to the SCMPERF path for individual firms (Fig. 1). Thus, testing the performance of a supply chain as a whole is left for future research. H5: Firm SCM directly and positively contributes to firm business performance.

Methodology Structural Equation Modeling (SEM), using SPSS-AMOS 5.0, was the main statistical analysis tool to purify measurement items and test hypotheses. Target firms were not limited to one industry, so a random sample was drawn from the Council of Supply Chain Management Professionals. Target respondents were senior executives able to identify at least one supply chain to which their firms belong and responsible for SCM. There was a concern that individuals in different functions (i.e., marketing versus SCM) have unique perspectives on MO. Based upon exploratory in-depth interviews with 28 senior executives at 20 companies, it was concluded that target respondents were qualified to provide valid responses to MO items. During the pretest, t-tests were conducted on 30 pairs of SCM respondents and their internal counterparts in marketing, comparing responses on 22 MO questions. Results support the contention that SCM respondents were qualified to answer MO questions.1 Since managed supply chain relationships develop common knowledge and understanding between partners about each other and the ways they can and should interact
A difference was found for only one item (MODISS #1, a=0.01). Since both groups had similar response patterns (5.83 for marketing and 4.80 for SCM, both above the neutral point on the 1 to 7 scale), we concluded there is no strong evidence the groups are different in responding to MO questions.

(Wilkinson and Young 2002), use of single informant design was justified by multi-level theory (cf. Kozlowski and Klein 2000)a single informant can provide relevant data to measure higher level properties that emerge from low level characteristics if descriptions of the observable, as opposed to emotions, are measured. Thus, the SCM measurement items address what the focal firm does with its supply chain partners in a coalescent manner, using observable behavior-oriented items that help respondents think about SCM activities objectively. Further, a single informant is appropriate when the informant has unique access to relevant information (Kozlowski and Klein 2000). The key in a single informant design is to find the most suitable respondent (John and Reves 1982). In this study, respondents were able to identify at least one supply chain to which their firms belong, and were well exposed to SCM issues (more than 80% of the respondents held high ranking corporate positions such as CEO, COO, CLO, President, Vice President, General Manager, or Director, and the rest held senior SCM positions). Packets (cover letter, questionnaire, and return postage) were distributed in three waves to 2,680 target respondents (1,312 in the pretest and 1,368 in the final test) and 442 usable responses (140 in the pretest and 302 in the final test) were received, for effective response rates of 12.4 and 24.67%, respectively, after undeliverable questionnaires were eliminated. Nonresponse bias in both the pretest and final test was checked by comparing early and late respondents for all constructs through ANOVA, and produced no significant differences (Armstrong and Overton 1977). Nonresponse bias in the final test was also checked by comparing, through ANOVA, all respondents with 30 randomlycontacted non-respondents for five non-demographic items in the questionnaire (Mentzer and Flint 1997). No statistically significant differences were found, and so, nonresponse bias was not considered a problem. Measurement scales MO, SCO, SCM, and PERF were proposed as second-order constructs, and the items used to measure them as indirect reflective measures (Edwards and Bagozzi 2000) of both the second and first order factors associated with them (Gerbing and Anderson 1988). Only in this way can cause and effect relationships among the four general constructs be viewed as important. Previous studies provided items adoptable or adaptable to measure the constructs of MO, SCO, SCM, and PERF. The adopted/adapted items were tested for validity and reliability, along with newly developed items, in the process of academic expert review, industry expert debriefing, pretest, and final test. Some items were newly developed based upon the literature, 28 in-depth interviews and debriefings with executives from

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20 companies, and the pretest. To develop new items, the iterative process recommended by Gerbing and Anderson (1988) and Bienstock et al. (1997) was followed. The Matsuno and Mentzer (2000) MO scaleintelligence generation (MOGEN), intelligence dissemination (MO DISS), and responsiveness (MORESP)was adopted for this study. This MO scale is an enhanced measure of MO that outperforms the Jaworski and Kohli (1993) MARKOR scale in terms of psychometric properties under the same conceptualization of MO (i.e., an implementation of the marketing concept). The items to measure SCO were borrowed from several studies and modified (based upon qualitative interviews) to reflect supply chain relationships rather than the dyadic interfirm relationships that were the focus of the previous studies. The items for credibility (SCOCRED) and commitment (SCOCOMM) were adapted from Siguaw et al. (1998), benevolence (SCOBENE) from Kumar et al. (1995), cooperative norms (SCONORM) from Cannon and Perreault (1999), organizational compatibility (SCOCOMP) from Bucklin and Sengupta (1993), and top management support (SCOTOPM) from Jaworski and Kohli (1993). The items to measure SCM tap such integration factors as agreement on SCM vision and focus (SCMVISN), information sharing (SCMINFO), supply chain cooperation (SCMCOOP), process integration (SCMINTG), and supply chain leadership (SCMLEAD); as well as such relationship factors as risk and reward sharing (SCMRISK) and building, maintaining, and enhancing long-term relationships (SCMREL). All SCM items were newly developed, though informed by the literature (e.g., Bowersox et al. 1999) and the qualitative interviews. Since MO, SCO, and SCM are inter-functional in nature, the performance scale is a combination of financial (ROA, ROI, and ROS), marketing (sales growth and market share growth), and logistics (availability, product and service offerings, and timeliness) measures widely used in the literature to reflect the multidimensional nature of firm performance. Items to measure profitability (PERFPROF) and growth (PERFGROW) were adapted from Matsuno et al. (2000). Items to measure availability of products and services (PERFAVAI), product and service offerings (PERFP&S), and timeliness (PERFTIME) of a firm were adapted and modified from the Global Logistics Research Team at Michigan State University (1995), Bienstock et al. (1997), and Bowersox et al. (1999). The rest were developed based on the literature (e.g., Bienstock et al. 1997; Cooper and Ellram 1993) and the interviews. Due to practical considerations discussed earlier, only the performance of individual firms was measured in this study. Although firm performance has been measured subjectively (e.g., Golden 1992) or objectively (e.g., Cronin and Page 1988), researchers using both subjective and objective

measures found a strong correlation between them (e.g., Robinson and Pearce 1988). Thus, antecedent justification exists for using self-report perceptual performance measures. Following Matsuno and Mentzer (2000), comparison measures (performance relative to major competitors) were adapted to provide respondents with an anchor point to more objectively assess firm performance. Scale purification The primary tools for measurement scale purification and validation included Confirmatory Factor Analysis (CFA) for validity, reliability or correlation analysis for internal reliability, and qualitative analysis in both the pretest and the final test (cf. Bienstock et al. 1997). The maximum likelihood estimation (MLE) method was employed in CFA. Based on the results of CFA and qualitative assessment of the pretest data, a final test survey was prepared with the reduced set of 96 items. After the two stages of the scale refinement process (pretest and final test), 80 items were kept (see Appendix). Cronbachs a values (or bivariate correlation) for the final measurement model are presented in the Appendix. Justification for our use of the four general constructs during hypotheses testing was made using an extension of Widamans (1985) comparison models for convergent and discriminant validity. The three comparison models include Model 0 (individual items as unique factors in a construct), Model 1 (individual items loaded on 1 first order factor), and Model 2 (individual items loaded on any one of the appropriate first order factors that, in turn, are loaded on the second order factor). A significant improvement in fit of Model 1 over Model 0 provides evidence of convergent validity; a similar improvement in fit between Models 2 and 1 provides evidence of discriminant validity (Widaman 1985). To these models, we added Model 3, which allows free association of the first-order constructs of Model 2. Comparison of Models 2 and 3 allows assessment of the measurement efficiency of using 4 second-order constructs as opposed to 21 first-order constructs. Table 1 presents these comparison models for each of the four general constructs addressed in this study, along with similar analysis addressing all four second-order constructs simultaneously. Using the absolute difference (Chi Sq.), root mean square error of approximation (RMSEA), and comparative fit index (CFI) as indicators, Model 1 was consistently superior to Model 0 (convergent validity), and Model 2 was consistently better than Model 1 (discriminant validity). While Model 3 was better than Model 2 in absolute terms (Chi Sq. tests), it shows only minimal improvement in fit (RMSEA and CFI) and is always inferior to Model 2 when the parsimony of the model is considered (CAIC). These results suggest both discriminant

514 Table 1 Model comparisons for convergent and discriminant validity tests Model # and description Order and fit Chi-sq df Difference Chi-sq df-diff p-diff

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Marketing orientation (MO) 0: No factors 3Unacceptable 1: One factor 2Weak 2: One 2nd order, 1Close 3 1st order 3: 3 Correlated 1Close 1st order Supply chain orientation (SCO) 0: No factors 4Unacceptable 1: One factor 3Unacceptable SCOOne 2nd order, 1Moderate 6 1st order SCO6 correlated 2Moderate 1st order Supply chain management (SCM) 0: No Factors 4Unacceptable 1: One Factor 3Unacceptable 2: One 2nd Order, 1Moderate 7 1st Order 3: 7 Correlated 2Moderate 1st Order Business performance (Perf) 0: No factors 4Unacceptable 1: One Factor 3Unacceptable 2: One 2nd order, 1Close 5 1st order 3: 5 Correlated 2Close 1st order All four constructs 0: No factors 5Unacceptable 1a: One Factor 4Weak 1b: Four 1st Order 3Moderate Factors 2: Four 2nd Order, 1Close 21 1st Order 3: 21 1st Order Factors 2Close

1,295.1 421.8 166.9 166.9

136 119 116 116

873.3 254.9 0.0

17 3 0

<0.001 <0.001

0.168 0.092 0.038 0.038

<0.001 <0.001 0.941 0.941

1,409.2 650.0 415.2 415.2

0.000 0.739 0.956 0.956

2,859.5 1,540.4 385.2 334.6

190 170 166 155

1,319.1 1,155.2 50.6

20 4 11

<0.001 <0.001 <0.001

0.216 0.164 0.066 0.062

<0.001 <0.001 0.001 0.016

2,973.7 1,808.8 680.4 703.6

0.000 0.487 0.918 0.933

6,108.8 2,224.2 830.8 784.9

435 405 398 384

3,884.6 1,393.3 45.9

30 7 14

<0.001 <0.001 <0.001

0.208 0.122 0.060 0.059

<0.001 <0.001 0.002 0.007

6,310.1 2,626.8 1,280.4 1,328.5

0.000 0.679 0.924 0.929

2,361.6 1,033.4 126.7 115.0

78 65 61 56

1,328.2 906.7 11.7

13 4 5

<0.001 <0.001 0.039

0.312 0.222 0.061 0.059

<0.001 <0.001 0.130 0.156

2,448.8 1,207.8 328.0 349.9

0.000 0.576 0.971 0.974

16,186.2 3,160 10,892.9 3,081 8,560.7 3,075 4,812.9 3,052 4,331.9 2,871

5,293.3 2,332.2 3,747.7 481.1

79 6 23 181

<0.001 <0.001 <0.001 <0.001

0.117 0.092 0.077 0.044 0.041

<0.001 <0.001 <0.001 1 1

21,741.8 11,959.9 9,667.9 6,061.1 6,808.0

0.000 0.400 0.579 0.865 0.888

Models 1 and 2 have exactly the same fit and degree of freedom for the MO analyses because they are equivalent models when only three firstorder constructs are analyzed. Chi-sq and df are the minimized fit of the specified model and its associated degrees of freedom. The probability associated with all models was less the 0.001, is considered a test of exact fit, and was omitted from the table. Difference Chi-sq., df-Diff, and p-Diff refer to the difference in fit between the specified model and the model immediately above it. This test provides evidence of convergent (Model 0 vs. 1) and discriminant (Model 1 vs. 2) validity. Both convergent and discriminant validity was demonstrated for all constructs. RMSEA, the root mean squared error of approximation (Browne and Cudeck 1993), is a measure of close fit. The p-close statistic tests if RMSEA<=0.05. CAIC is the Consistent Akaike Information Criterion (Bozdogan 1987), and is useful in selecting among multiple competing models addressing the same variables. CFI is the Comparative Fit Index (Bentler 1990), and serves as a noncentral measure of relative fit. Order was determined by the CAIC; fit was classified using the RMSEA using categories: Unacceptable RMSEA>0.10, Weak 0.08<RMSEA<0.1, Moderate RMSEA<0.08 and p-close<0.05, Close p-close>0.05.

and convergent validity for each construct considered in this study, and the relative efficacy of using the secondorder factors in the hypotheses tests. Model 2 for all constructs served as the measurement model on which all subsequent hypotheses tests were conducted.

CFI values above .90 indicate good fit (Bentler 1990). CFI of .865, although acceptable, falls below that level. CFI for the residual model was acceptable when either SCO or SCM was removed. Thus, before nomological validity was assessed with the structural model, a comparison model test

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was performed to assure that SCO and SCM are closely related but different concepts: Model A with SCO and SCM as two correlated but distinctive second order factors, and Model B with one second order factor to which all the first order factors of SCO and SCM converged. The model comparison yielded a Chi sq. difference of 264.5 at 2 df, and represented significantly better fit for Model A (Table 2). Thus, based upon the theory and the empirical test, SCO and SCM are related but different concepts. Finally, since we used single-informants and SCO, SCM, and PERF were believed to be closely related, we tested for common-method bias, in which the extent of the relationships might be inflated (Podsakoff and Organ 1986). Common-method bias was checked with one-factor analysis using Exploratory Factor Analysis (EFA) with varimax rotation to see if only one general factor arises from all the indicator variables or if one dominant factor explains most of the covariance of the variables (MacKenzie et al. 2001). The EFA results indicate that 14 different factors have Eigen values of 1 or higher and the first factor explained only 25 % of the variance. Thus, common-method bias was not considered an issue.

Finally, neither H4b nor H5 was supported because the CR for SCMPERF was 1.50 (a=0.13). In sum, although MO has a strong, positive impact on SCO, which has a strong, positive influence on both SCM and PERF, neither the direct MOPERF nor the indirect MOSCOSCMPERF path was supported. The summary statistics of Hypotheses 15 are presented in Table 4.

Discussion and Post Hoc analysis Contrary to many previous studies, a positive link between MO and firm performance was not confirmed (H1a). Against the theory proposed in this paper, the indirect contribution of MO to firm performance via the SCOSCM path (H1b) was also not supported. As theorized, however, a positive MOSCO path was found (H2), as was a relationship between SCO and SCM (H3). Mentzer et al. (2001) proposed that firms implementing SCM collectively in a supply chain must first have and implement a SCO inside their firms, and thus, SCO is antecedent to SCM. The direct impact of SCO on firm performance was supported (H4a) while the indirect impact via SCM was not (H4b). That is, internal firm readiness for SCM is essential for managing supply chain processes across firms and improving firm performance. Surprisingly, a significant SCMPERF path was not found (H5). To better understand the findings, we tested two post hoc models (Fig. 2). In Post Hoc Model 1 the direct path between SCO and PERF was removed. The rationale was that as both the MOPERF and SCMPERF relationships were well grounded theoretically and empirically, we suspected the stronger influence of SCO on PERF overshadowed the relatively weaker impacts of MO and SCM on PERF. Post Hoc Model 1 demonstrated good fit (CFI=0.92, NNFI=0.91, RMSEA=0.048), and as hypothesized, the MOPERF path became statistically significant (CR=4.30, a=0.01). Apparently, the weaker, positive impact of MO on PERF was overshadowed by the stronger influence of SCO in the Test Model. However, the SCMPERF path remained insignificant (CR=0.60, a=0.55) (Table 5). The insignificant SCMPERF path in Post Hoc Model 1 led us to test Post Hoc Model 2, in which both the MOPERF and SCOPERF paths were removed. Post Hoc Model 2, which also showed

Hypotheses testing The structural model was constructed for hypotheses testing by a partial aggregation approach in which a second-order, higher-order latent variable was represented by multiple first-order variables, each of which is represented by two composites of 24 measurement items (Bagozzi and Heatherton 1994). The proposed Test Model showed good fit (CFI of 0.92 and NNFI of 0.91). RMSEA indicated excellent fit (0.048) (Browne and Cudeck 1993). The standardized coefficient weights and critical ratios (CR) for each causal path are provided in Table 3. Both the direct MOPERF path (H1a) and the indirect MOSCOSCM PERF path (H1b) were rejected (CR for MOPERF of 1.89 (a=0.06) and for SCMPERF of 1.50 (a=0.13)). H2 was supported (CR for MOSCO of 4.88 (a=0.01) and the standardized weight of 0.75). H3 was also supported (CR for SCOSCM of 7.12 and the standardized weight of 0.67 (a=0.01)). H4a was also confirmed (CR=2.15 for SCO PERF and the standardized weight was 0.40 at a=0.05).

Table 2 Distinctiveness between SCO and SCM Model # and description Order and fit Chi-sq df Difference Chi-sq df-diff p-diff RMSEA p-Close CAIC CFI

A: One factor B: Two factor

2Close 1Close

2,450.49 2,186.02

1,163 1,161



0.061 0.054

<0.001 0.026

3,202.1 2,951.0

0.854 0.884

516 Table 3 Final SEM estimates, the partial aggregation structural model Path SCO SCM PERF PERF PERF Intelligence generation Intelligence dissemination Responsiveness Availability Product and services offering Timeliness Profitability Growth Credibility Benevolence Commitment Cooperative norm Compatibility Top management support Supply chain vision Information sharing Risk and reward sharing Cooperation Process integration Long-term relationships Supply chain leadership MO SCO MO SCO SCM MO MO MO PERF PERF PERF PERF PERF SCO SCO SCO SCO SCO SCO SCM SCM SCM SCM SCM SCM SCM Std. weights 0.75 0.68 0.30 0.39 0.15 0.67 0.82 0.67 0.61 0.69 0.60 0.69 0.63 0.61 0.60 0.68 0.79 0.82 0.72 0.77 0.68 0.86 0.95 0.98 0.87 0.62

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Critical ratios 4.88 7.12 1.89 2.15 1.50 4.75 5.46 (Fixed) 6.17 6.52 5.65 (Fixed) 7.54 (Fixed) 6.37 4.18 7.65 8.00 6.90 13.07 11.19 15.94 (Fixed) 15.94 15.18 10.02

P 0.01 0.01 0.06 0.03 0.13 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Only first and second order factors appear in this table.

good model fit (CFI=0.91, NNFI=0.91, RMSEA=0.050), confirmed a positive, significant relationship between SCM and PERF (CR=4.04, a=0.01) (Table 5). Thus, we argue that the positive SCMPERF path is overshadowed by the stronger impacts of MO and SCO on firm performance. There are several possible explanations for the weaker effect of SCM on firm performance. First, performance benefits of a managed supply chain as a whole may improve disproportionately for each supply chain partner. Second, there may be a SCM-supply chain performance-firm performance path, i.e., if a supply chain as a whole achieves higher levels of

efficiency and effectiveness, each partner benefits from the supply chain performance. Thus, to properly capture firm level performance benefits derived from supply chain performance, supply chain-specific performance measures should be developed in future research. Finally, the positive effect of SCM may be realized only in the long run due to the complexity of implementing SCM across firm boundaries and, in many cases, across national borders (cf. Mentzer et al. 2001). On average, U.S. firms have been actively involved in SCM for less than 5 years, which has left individual partners with as yet unrealized benefits from SCM (Min et al. 2005). Since this

Table 4 Summary statistics of hypotheses testing results: H1 through H5 Hypotheses H1a: MO PERF H1b: MO SCO SCM PERF H2: MO SCO H3: SCO SCM H4a: SCO PERF H4b: SCO SCM PERF H5: SCM PERF Path(s) tested MO PERF SCM PERF MO SCO SCO SCM SCO PERF SCM PERF SCM PERF Reg. weight 0.51 0.09 1.02 1.50 0.49 0.09 0.09 Std. error 0.30 0.06 0.21 0.21 0.23 0.06 0.06 Std. weight 0.30 0.15 0.75 0.68 0.39 0.15 0.15 CR 1.90 1.50 4.88 7.12 2.15 1.50 1.50 Accept/ reject Rejected Rejected Accepted Accepted Accepted Rejected Rejected

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study captured only a snapshot of SCM, future longitudinal studies should examine SCM-based performance, and resultant firm performance benefits.

Implications Managers should realize that SCO is critical to fulfilling customer requirements. As the results illustrate, SCO mediates the relationship between MO and business performance. That is, a firms efforts to work with supply chain members will not pay off if the firm is not supply chain-oriented. Although overshadowed by SCO, MO is still a foundation for managing the supply chain. MO has a positive impact on firm performance (when SCO is controlled) and, thus, implementing MO is not the responsibility of marketing alone. Everyone in the firm should promote MO and SCO inside the firm to create effective SCM across the supply chain. Equally importantly, the fact that the contribution of SCM to firm performance was overshadowed by MO and SCO does not mean SCM is irrelevant in corporate strategy. Supply chain partners should devise profit-sharing plans that allow performance gains via collective efforts to be split to every partners satisfaction. Joint performance metrics and profit

sharing plans should be included in long-term contracts, and continuous adjustments made to perfect such complex collaboration as SCM requires. Finally, managers should use the framework of this research (the MOSCOSCM PERF path) to diagnose business performance to find out whether their lack of MO or SCO hinders managing their supply chains and obtaining better performance. This study also offers a conceptualization of SCO as an operationalization of supply chain philosophy that is actuated inside individual firms, and SCM as the sum of all management actions undertaken to realize that philosophy across firms. Further, the specifics of implementing SCO within a firm and SCM across firms were documented. With such guidelines, managers should realize the collective implementation of SCM in the supply chain must first have SCO inside the firm. Managers can also use the SCO and SCM measurement items in the Appendix to evaluate their performance. The theory of MO in SCM means expansion of the domain of marketing by combining an important concept in marketing (MO) with one in business (SCM). Despite the long-standing argument that the marketing concept (the philosophical foundation of MO) is an important business philosophy, the investigation of the role of MO outside the firm has been limited. In this study, however, MO was

Table 5 Changes of statistical significance on proposed causal paths and model comparisons Models Path tested MO PERF MO SCO SCO SCM SCO PERF SCM PERF Model comparison Chi sq. Df Test model Std. weight 0.30 0.75 0.68 0.39 0.15 CR 1.90 4.48 7.12 2.15 1.50 P 0.06 0.01 0.01 0.03 0.13 Post hoc model 1 Std. weight CR 0.61 4.30 0.79 5.00 0.67 7.13 NA NA 0.05 0.59 Post hoc model 1Test model 1343.351338.98=4.37 794793=1 P 0.01 0.01 0.01 NA 0.55 Post hoc model 2 Std. weight CR NA NA 0.74 4.63 0.69 7.10 NA NA 0.30 4.04 Post hoc model 2Test model 1381.511338.98=42.53 795793=2 P NA 0.01 0.01 NA 0.01


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hypothesized to nurture a systems approach to see the supply chain as the source of necessary resources and skills for a firms success, promoting cooperative partner activities, and thus, extends the domain of MO research to other disciplines. The confirmed MOSCOSCM path supports assertions (Day 1994) that MO has positive impacts on functional coordination with suppliers, distributors, and consumers. This study also raises the need for further building and testing of MO in SCM theory. For example, although the finding that MO-firm performance is mediated by SCO supports existing literature that posits MO is not sufficient for a firms market competitiveness (e.g., Han et al. 1998), further research is needed to investigate any firm-specific or market-specific conditions that might trigger the mediating role of SCO on MOPERF path. As such, this study may help researchers further understand potential limitations of the role of MO, as well as its interactions with environmental factors while influencing firm performance. Finally, although the purpose of this study was to explore the causal relationships between the second-order constructs, the causal relationships between the various first-order constructs provide a fertile area for future research. Through the literature review and executive interviews, we adopted and tested a definition of SCO and SCM. However, theory development in SCM research needs further advancement. We do not argue that our conceptualization of SCO is complete, or that it is the only antecedent of SCM. Constructs such as alliance capability (Kale et al. 2002), and network competence (Ritter et al. 2002) are potential dimensions of SCO. What is common across different studies, including ours, is that before a set of activities are implemented across supply chain partners,

each individual partner should be ready to contribute particular parts of the collective effort. Unless the focal firm is ready to actively pursue cooperation with other firms, SCM cannot be successfully accomplished. Contrary to the commonly accepted proposition that SCM has strong positive impact on firm performance (e.g., Fugate et al. 2006), however, the impact of SCM on PERF was weak. As discussed earlier, the weak SCMPERF link may be because supply chain performance mediates the SCM PERF link or because SCM only affects firm long-term performance due to the complexity of operationalizing SCM across firms. Thus, future research is called for to investigate the role of supply chain performance and/or the longitudinal effect of SCM on firm performance. Finally, we believe single informant design in SCM research is, though theoretically and methodologically adequate, not ideal. A multiple informant design with triadic data (supplier firm, focal firm, and customer firm) more fully reflects the supply chain. Although Kozlowski and Klein (2000) propose a single informant design is relevant in multilevel analysis if observable, descriptive data are collected from well-informed respondents to measure composition-type emergence, they recommend both within-group (within managed supply chains) and between-group (between managed supply chains) variance whenever possible. Identifying multiple, well-qualified respondents in triads is problematic, not to mention the difficulty of obtaining a reasonable response rate (SEM requires 80 items5=400 triads, or 1,200 matched respondents). Although potential common method bias was not found in our study, we do hope future research arises in which triadic data are collected to test both within-group and between-group variance to further our understanding of SCM. Appendix Table 6

Table 6 Measurement item descriptions Measurement items

MOGENE (Intelligence generation): Cronbachs a=0.66a We poll end users at least once a year to assess the quality of our products and services. In our business unit, intelligence on our competitors is generated independently by several departments. We periodically review the likely effect of changes in our business environment (e.g., regulation) on customers. In this business unit, we frequently collect and evaluate general macro economic information (e.g., interest rate, exchange rate, GDP, industry growth rate, inflation rate). In this business unit, we collect and evaluate information concerning general social trends (e.g., environmental consciousness, emerging lifestyles) that might affect our business. In this business unit, we spend time with our suppliers to learn more about various aspects of their business (e.g., manufacturing process, industry practices, clientele). MODISS (Intelligence dissemination): Cronbachs !=0.84 Marketing personnel in our business unit spend time discussing customers future needs with other functional departments. Our business unit periodically circulates documents (e.g., reports, newsletters) that provide information on our customers. We have cross-functional meetings very often to discuss market trends and developments (e.g., customers, competition, suppliers).

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Table 6 (continued) Measurement items Technical people in this business unit spend a lot of time-sharing information about technology for new products with other departments. Market information spreads quickly through all levels in this business unit. MORESP (Response to intelligence): Cronbachs !=0.70 For one reason or another, we tend to ignore changes in our customers product or service needs. (R) The product lines we sell depend more on internal politics than real market needs. (R) We are slow to start business with new suppliers even though we think they are better than existing ones. (R) If a major competitor were to launch an intensive campaign targeted at our customers, we would implement a response immediately. Even if we came up with a great marketing plan, we probably would not be able to implement it in a timely fashion. (R) We tend to take longer than our competitors to respond to a change in regulatory policy. (R) SCOCRED (Credibility): Cronbachs !=0.79 Promises made to our supply chain members by our business unit are reliable. Our business unit is knowledgeable regarding our products and/or services when we are doing business with our supply chain members. Our business unit does not make false claims to our supply chain members. Our business unit is not open in dealing with our supply chain members. SCOBENE (Benevolence): Cronbachs !=0.87 When making important decisions, our supply chain members are concerned about our welfare. When we share our problems with our supply chain members, we know they will respond with understanding. In the future we can count on our supply chain members to consider how their decisions and actions will affect us. When it comes to things that are important to us, we can depend on our supply chain members support. SCOCOMM (Commitment): Bivariate correlation=0.34 at .01 level (two-tailed). We defend our supply chain members when outsiders criticize them, if we trust them. We are patient with our supply chain members when they make mistakes that cause us trouble but are not repeated. SCONORM (Cooperative norms): Cronbachs !=0.66b Our business unit is willing to make cooperative changes with our supply chain members. We believe our supply chain members must work together to be successful. We view our supply chain as a value added piece of our business. SCOCOMP (Organizational compatibility): Bivariate correlation=0.47 at 0.01 level (two-tailed). Our business units goals and objectives are consistent with those of our supply chain members. Our CEO and the CEOs of our supply chain members have similar operating philosophies. SCOTOPM (Top management support): Cronbachs !=0.84. Top managers repeatedly tell employees that this business units survival depends on its adapting to supply chain management. Top managers repeatedly tell employees that building, maintaining, and enhancing long-term relationships with our supply chain members are critical to this business units success. Top managers repeatedly tell employees that sharing valuable strategic/tactical information with our supply chain members is critical to this business units success. Top managers repeatedly tell employees that sharing risk and rewards is critical to this business units success. Top management offers various education opportunities about supply chain management. SCMVISN (Agreement on supply chain vision and goals): Cronbachs !=0.86. Our supply chain members have common, agreed to goals for supply chain management. Our supply chain members are actively involved in standardizing supply chain practices and operations. Our supply chain members clearly define roles and responsibilities of each other cooperatively. We all know which supply chain members are responsible for what activity within the supply chain. SCMINFO (Information sharing): Cronbachs !=0.75. Our supply chain members practice Electronic Data Interchange, either via VAN or Internet. Our supply chain members regularly (at least once a quarter) exchange supply and demand forecasts with each other. Our supply chain members frequently (at least once a month) exchange demand change information with each other to facilitate operational plans and reduce reliance on second-guesses. SCMRISK (Risk and reward sharing): Cronbachs !=0.80. Our supply chain members share risks and rewards. Our supply chain members help each other finance capital equipment. Our supply chain members share research and development costs and results with each other. SCMCOOP (Cooperation): Cronbachs !=0.88. Our supply chain members have a record of allowing each other to participate in strategic decisions. Our supply chain members share the results of performance measures with each other to improve the efficiency and effectiveness of the supply chain processes. Our supply chain members improve the quality of products and services to the end users in a collaborative manner.

520 Table 6 (continued) Measurement items

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Our supply chain members actively propose and implement cost reduction ideas. Our supply chain members are actively involved in our business units new product development and commercialization process. Our supply chain members jointly manage logistics and inventory in the supply chain. SCMINTG (Process integration): Cronbachs !=0.80. Our supply chain members reduced formal organizational structures to more fully integrate operations with each other. Our supply chain members place personnel at the business facilities of each other to facilitate cooperation. An interfunctional team from our business unit, together with the teams from our supply chain members, has meetings to figure out how to serve our mutual customers better. One of our supply chain members owns and/or manages one of the supply chain processes (e.g., manufacturing, transportation, warehousing, distribution, marketing, etc.) for the rest of our supply chain members. Our supply chain members successfully integrate operations with each other by developing interlocking programs and activities. SCMREL (Building/maintaining/enhancing relationships): Cronbachs !=0.86. Our supply chain members substantially reduced channel complexity over the past three years to closely work with a selected set of supply chain members. Our supply chain members have guidelines for developing, maintaining, and monitoring long term supply chain relationships with each other. Our supply chain members have facilitated a strong and long-term supply chain relationship fostering cooperation with each other. SCMLEAD (Agreement on supply chain leadership): Cronbachs !=0.90. In our supply chain, there exists a firm that provides supply and/or demand forecasting, which is critical to the other members supply chain planning and activities. In certain situations in our supply chain, one firm sets the standards for all supply chain members to follow. In our supply chain, there exists a firm that acts as a management consultant for other members supply chain practices. In our supply chain, there exists a firm that benchmarks best practices/processes and shares the results. In our supply chain, there exists a firm that imposes rules and standards for sharing information about product orders, shipments, and inventory. In our supply chain, there exists a firm that maintains an integrated database and access method to facilitate information sharing with other supply chain members. PERFAVAI (Inventory availability): Bivariate correlation=0.77 at 0.01 level (two-tailed). Our business units stock availability relative to our competitors. Our business unit does a better job of consistently maintaining available stock than our major competitors. PERFP&S (Product and service offerings): Cronbachs !=0.63c. Our business units product/service offerings in terms of variety of features, options, sizes, and/or colors relative to our competitors. Our business units product/service offerings in terms of quality relative to our competitors. Our business units product /service offerings in terms of handling difficult, nonstandard orders to meet special customer specifications relative to our competitors. PERFTIME (Timeliness): Cronbachs !=0.79. Our business units customer order-to-delivery cycle time specifications relative to our competitors. Our business units customer order-to-delivery cycle time consistency relative to our competitors. Our business unit does a better job providing our customers real time information about their orders than our major competitors. PERFPROF (Profitability): Cronbachs !=0.95. Our business units return on assets (ROA) relative to our competitors. Our business units return on investment (ROI) relative to our competitors. Our business units return on sales (ROS) relative to our competitors. PERFGROW (Growth): Bivariate correlation=0.83 at 0.01 level (two-tailed). Our business units sales growth relative to our competitors. Our business units market share growth relative to our competitors.

We acknowledge that the standardized Cronbachs alpha for Generation was under Nunnallys (1978) threshold value (0.663<0.7). We may attribute the variance to sampling error. Considering that (1) we modeled constructs using SEM rather than using unit weighted subscales (where Cronbachs alpha is the most critical), (2) the items demonstrate good convergence in the CFA model, and (3) the current MO scale was tested and retested in previous studies (Matsuno and Mentzer 2000; Matsuno et al. 2000; Matsuno et al. 2002) as well as this study, and showed its reliability, we concluded Generation consists of all 6 items as theorized. b Acknowledging potential problems with the marginal standardized alpha for Cooperative Norms (i.e., 0.6612), we reemphasize the fact that the items show good convergence in the CFA model, which is used for hypotheses testing. In addition, the lowest corrected item-to-total correlation was 0.39 (O12), which was still higher than 0.30. Accordingly, all three items were kept to measure Cooperative Norms. c The standardized alpha for Product/Service Offerings was below the 0.7 threshold value. In consideration that the lowest value was above 0.3, and the alpha value obtained when the item with the lowest item-to-total correlation was removed (i.e., 0.6063) did not improve from the initial alpha value, we decided to keep all three items for the Product/Service Offerings factor. The remaining items illustrate good convergence in the CFA model.

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