Enhancing effects of manufacturing flexibility through operational absorptive capacity and operational ambidexterity

Abstract

a b s t r a c tA large body of research investigates how manufacturing flexibility in uncertain environments leads to firm performance, with mixed results. The mixed findings could be due to differences across firms in terms of the capabilities to acquire, assimilate, and transform knowledge and to simultaneously pursue both the exploitation of existing operational capabilities and the exploration for new operational capabilities. Building on the literature that suggests that manufacturing flexibility mediates the relationship between environmental uncertainty and firm performance, we explore the applicability of two organizational learning contingencies to the operations environment: operational absorptive capability and operational ambidexterity. Absorptive capacity enables the recognition and assimilation of new knowledge. Ambidexterity determines whether this knowledge will be applied for both exploration and exploitation. Using a sample of 852 manufacturing firms, we find that environmental uncertainty affects firm performance directly and indirectly through manufacturing flexibility. Furthermore, both operational absorptive capacity and operational ambidexterity moderate the relationship between environmental uncertainty and manufacturing flexibility and the relationship between manufacturing flexibility and firm performance. Theoretical and practical implications are discussed.

The relationship between exploration and exploitation strategies, manufacturing flexibility and organizational learning: An empirical comparison between Non-ISO and ISO certified firms

“…Machine flexibility seeks ways of reducing the utilization time of machines in the organization and their cost (Wahab et al, 2008). These activities improve over time, first through the experience accumulated among the workers and standardization of processes (Patel et al, 2012), which corresponds to exploitation, and second through study of competitors' production practices (Petroni & Bevilacqua, 2002), which corresponds to exploration. The ISO standard pursues both management and standardization of processes and continuous improvement (ISO, 2012), indicating a direct correspondence between these two concepts.…”

“…All variables have been considered as reflective variables as related literature has treated them (see Karuppan andGanster, 2004 andChang et al, 2006 for manufacturing flexibility, Yalcinkaya et al, 2007 andPatel et al, 2012 for exploration and exploitation strategies, or Ruiz, Molina, and Lloréns (2009) for organizational learning).…”

“…Environments characterized by demand, competition, and technological uncertainty require firms to pursue exploration and exploitation activities (Patel, Terjesen, & Li, 2012). In twenty-first century competition, firms with a high degree of ambidexterity can develop both, perfecting existing resources and developing new competencies through high manufacturing flexibility.…”

“…Following the trend of the most recent studies, which use few dimensions to measure manufacturing flexibility (Patel et al, 2012), we chose three dimensions to measure this variable: machine flexibility, material handling flexibility, and routing flexibility. All three dimensions were measured through the scales proposed in the study by Larso (2004).…”

“…For that purpose. organizational learning capabilities (Patel et al, 2012), ambidexterity (ÓReilly & Tushman, 2008) and manufacturing flexibility (Beach et al, 2000) could be good examples of capabilities that according to RBV (Amit and Schoemaker, 1993, Barney, 2001and Peteraf, 1993 and dynamic capabilities view (Eisenhardt and Martin, 2000, Helfat et al, 2007, Teece et al, 1997 could lead to the competitive advantage obtaining. In this section, we attempt to summarize the aspects that managers should develop to enable the achievement of competitive advantage.…”