Product configuration, ambidexterity and firm performance in the context of industrial equipment manufacturing

Abstract

a b s t r a c tThe practice of configuring products to individual customer orders has found application in a variety of industry contexts, but little is known about the specific capabilities that firms develop to successfully compete when offering configurable products. Our research begins to fill this gap in the context of industrial equipment manufacturing. Drawing from the ambidexterity literature, we argue that firms have to balance dual goals of reducing variation and promoting variation in their product configuration activities by fostering two distinct firm-level capabilities: product configuration effectiveness (PCE) and product configuration intelligence (PCI). Specifically, we hypothesize that the simultaneous presence of PCE and PCI-that is, product configuration ambidexterity (PCA)-drives superior firm responsiveness and, indirectly firm sales and operating margin. However, we also contend that responsiveness gains through PCA can diminish with product complexity and can increase operating cost. We test these hypotheses by collecting both primary and secondary data from a sample of 108 European industrial equipment manufacturing firms. Results from our analyses indicate that PCA has an indirect effect through responsiveness on sales and operating cost but not on operating margin, with this effect diminishing with product complexity. Taken together, our results suggest that investment in developing PCA may represent a conundrum for industrial equipment manufacturing firms, because it translates into market but not financial advantages, and it is intertwined with product design decisions. We conclude this study with a discussion of the findings for theory and practice.

Strategy and organization research in operations management

“…Research in these topics can be conducted at all levels of analysis: 1) individual (Croson et al, 2013;Wu and Katok, 2006); 2) "operating unit," such as team (Edmondson and Nembhard, 2009;Hyer et al, 1999), department (Tucker et al, 2007;Safizadeh et al, 2003), establishment (Sousa and Voss, 2007;Schmenner and Cook, 1985), or firm (Roh et al, 2016;Salvador et al, 2014); 3) "super-unit," such as plant network (Ferdows et al, 2016;Schmenner, 1982) or multi-function network (Gray et al, 2015;Swink and Song, 2007); and 4) "industries and countries" (Spring et al, 2017;Albuquerque et al, 2007).…”

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The Relationship between Human Resource Management Ambidexterity and Talent Management: The Moderating Role of Electronic Human Resource Management

“…Therefore, in their study, Salvador, Chandrasekaran & Sohail (2014) argued that CEOs who are interested in enhancing their firms' ability to compete by offering configurable products will not achieve it without ambidextrous human resource which depends on exploitation of existing skills as well as exploration of new competencies that leads the organization to be ambidextrous. Furthermore, Mi Yang, Cheih Fang, Rong Fang & Hui Chou (2014) argued that ambidexterity used to describe an organization's ability to do two different things -exploitation and exploration-dexterously at the same time.…”

Quality ambidexterity, competitive strategies, and financial performance

“…identifies two kinds of learning activities within an organization: exploration of new possibilities and exploitation of old certainties. Although scarce resources and limitations on managerial scope might suggest that firms develop one activity at the expense of the other, an emerging line of research proposes that viewing exploration and exploitation as complementary leads to better results than implementation of only one (Chandrasekaran et al, 2012;Kristal et al, 2010;Salvador et al, 2014).…”