Production competence and its impact on business performance

There has been increasing research attention given to production competence as the source of competitive advantage. Viewing production competence as the function of the fit between business strategy and manufacturing structure, the authors examine the impact of production competence on business performance. This study explores how to obtain a fit between business strategy and manufacturing structure and whether the fit will lend a competitive edge to a manufacturing firm. Seven hypotheses concerning the associations among business strategies, manufacturing structural complexity, and business performance are presented. The sample consists of 170 firms operating in U.S. manufacturing industries. Data were obtained via a mail survey and Compustat. The major findings of the research are that (1) there is a significant association between business strategy and manufacturing structural complexity, implying that business strategy has a profound influence on manufacturing structural decisions; and that (2) production competence has a significant association with business performance. A major finding in this research suggests that a manufacturing firm can significantly improve its business performance by attaining a proper alignment of manufacturing structure with business strategy. A paradigm of corporate manufacturing strategy is developed for future research.