Product quality alignment and business unit performance

Over the past decade, new strategic approaches to the management of product quality have become prime drivers of product and process innovation and change in many firms. However, many firm's product quality improvement efforts have failed to deliver anticipated business performance benefits. Implementation problems are generally viewed as significant factors in explaining such failures. Further, the literature suggests that firms' views of product quality are often very different from those of their customers. However, to date this issue has received little empirical attention. The objective of this research was to examine the causes and performance outcomes of product quality alignment ‐ differences between firms' views of the product quality they deliver and customer views of the product quality delivered to them. We conducted exploratory interviews with quality and marketing managers aimed at developing a grounded understanding of the nature, antecedents and consequences of product quality alignment. These fieldwork insights were combined with the existing literature to delineate the central product quality alignment construct and develop specific hypotheses concerning the antecedents and performance consequences of product quality alignment at the SBU‐level. Using data from a mail survey of multiple key informants (general managers, quality managers and marketing managers), we tested hypothesized relationships using a structural equation model methodology. Our quantitative findings provide empirical evidence that product quality alignment positively affects business unit performance. Our data also suggest that the degree to which quality goals spanning customer‐focused and internally‐oriented criteria influence decision‐making and actions taken is positively associated with product quality alignment. Further, our data indicate that while the use of marketing tools in developing and executing product quality improvement efforts is positively associated with product quality alignment, no such association is observed with more commonly recommended TQM tools. Our results also suggest that effective interfunctlonal interactions between quality and marketing functions (higher levels of interfunctional connectedness and lower levels of interfunctional conflict) are positively associated with product quality alignment. Overall, our results suggest that product quality alignment is an important concept in understanding product quality improvement‐performance linkages at the SBU level and that minimizing mis‐alignment may be an appropriate focus for management attention.     

Multi-channel strategy in business-to-business markets: Prospects and problems

Multi-channel marketing strategy has become a major force in business-to-business distribution channels, especially since the option of Internet-based online channels emerged less than a decade ago. Making products and services available to business markets via a wide array of different channels can provide increased levels of customer choice and service. But the task of coordinating and integrating multiple channels that operate at high levels of efficiency has forced managers responsible for channel management to deal with a variety of challenging issues. These include the role of e-commerce in the multi-channel structure, finding an optimal channel mix, creating synergies across channels, building strategic alliances, creating sustainable competitive advantages, managing more complex supply chains, dealing with conflict, and providing the leadership necessary to attain well integrated multiple channels.     

Marketing channel management and the sales manager

For years, the channel manager remained an organizational position found mainly in textbooks and the literature and seldom on company organization charts. Recently, however, persuasive evidence has revealed that marketing channel management comes chiefly under the purview of the sales manager. Accepting this new reality, sales management training will need to be dramatically expanded to include these new channel management responsibilities. But, are all levels of sales managers involved or equally involved in channel management? If not, channel manager training must be tailored for specific levels of sales management in order to achieve desired channel effectiveness and efficiency. To date, no published research has explored whether channel management involvement varies at different levels in the sales manager hierarchy. In this age of channel dynamism, successful companies must determine the specific involvement of each sales management level in channel management so that appropriate training and support can be provided to optimize performance in this critical area of market competition. To address the foregoing issues, data were drawn from a random national sample of sales managers. Results indicate that sales managers at all hierarchical levels participate in administering various aspects of marketing channel management. The degree of involvement, however, varies significantly by sales manager level. Sales management implications are discussed, and areas for future research are suggested.     

Sales channel integration after mergers and acquisitions: A methodological approach for avoiding common pitfalls

This article addresses the integration of sales channels after mergers and acquisitions (M&A) by appraising the strengths, weaknesses, and biases associated with the four most common frameworks for evaluating sales channels (sales management, historical performance, strategic fit, and customer choice) for their appropriateness in a post-M&A context. The authors develop a methodological approach that uses a balanced-scorecard framework to guide managers through the sales channel integration process, and then apply this approach to the merger of two industrial firms' sales organizations across 21 territories. In so doing, they reveal various pitfalls and propose and test some analytical corrections. Longitudinal performance data support comparisons across the different evaluative frameworks; in particular, the sales management and customer choice frameworks provide the most insight into channel partners' post-integration performance. The results support the premise that channel integration can be improved by accounting for factors unique to the M&A context and using an approach that triangulates multiple perspectives.     

The multi-channel challenge: A dynamic capability approach

The maturing of e-commerce, the diffusion of call centres into the B2B space and purchaser demands on price and service are leading to rapid change in the route to market in many B2B sectors, with shifting combinations of channels being offered to the customer in the search for advantage. In this situation managers can no longer rely on the channel resources that they have assembled to provide their extant competitive position. Instead they must be able to combine resources in new ways, gain additional resources and dispose of superfluous resources, and to do this repeatedly and rapidly if they are to compete successfully. The term ‘dynamic capabilities’ has emerged in the strategic management literature for these activities. Using four case studies and the analytic induction approach to data analysis, we identify seven dynamic capabilities for channel transformation.     

An analytic decision making framework to evaluate multiple marketing channels

Marketing channel evaluation is a crucial and complex task. Although empirical studies have made efforts to identify key constructs, no models have been developed to comprehensively assess the viability of different marketing channels for business. With this research, we propose an analytic decision-making framework for multi-channel evaluation. We first develop an analytic network, based on the inputs of managers and literature, to depict the interrelationships between decision criteria. Multi-Criteria Decision Making methods are then adapted to determine the weight of each evaluation criterion and to rank the practicality of alternative marketing channels. The model is tested with Cisco China. Sensitivity analysis is conducted in order to understand the impact of criteria uncertainties on channel rankings and the robustness of the proposed model. The management at Cisco found the model to be transparent, logical, practical, and it provided a valid and reliable guide for evaluating channel alternatives.     

Interacting effects of uncertainties and institutional forces on information sharing in marketing channels

Marketing channel members in China face difficulties created by market uncertainty and opportunistic costs resulting from behavioral uncertainty, both of which undermine channel performance. In this article, we argue that channel members can use information sharing to maintain channel performance under uncertain circumstances. With empirical data from China, we develop and test a theoretical framework which explores the effects of market uncertainty and contractual commitment on information sharing and supplier operational performance. Moreover, we also find that regulatory protection moderates the relationship between market uncertainty and information sharing. Normative and cognitive protection moderates the relationship between contractual commitment and information sharing. Indeed, information sharing serves as a mediator between uncertainties and supplier operational performance. Consequently, Chinese channel managers are advised to increase the use of more information sharing to counter market and behavioral uncertainties in marketing channels.     

Institutional common ownership and firm value: Evidence from real estate investment trusts

This paper contributes to the ongoing debate about whether and how institutional common ownership (ICO) affects firm behavior. Using a sample of equity real estate investment trusts (REITs), which provide significant advantages for isolating a monitoring channel, we find a robust and positive relation between ICO and REIT firm value. The positive relation between ICO and firm value is driven mainly by motivated investors and becomes stronger when we construct our ICO measures using blockholdings. Our difference‐in‐differences analysis, using mergers between institutional investors, suggests a causal relation exists between ICO and firm value. After investigating various channels through which ICO could affect firm behavior, we conclude that asset allocation decisions and performance are the most plausible explanations. Our finding that the monitoring associated with ICO aids managers in their portfolio disposition strategies further supports this conclusion. This enhanced monitoring leads to increased property portfolio returns, as well as more geographic diversification.     

The moderating influence of firm market power on the transaction cost economics model: An empirical test in a forward channel integration context

Transaction cost economics (TCE) has guided a variety of research on governance in the strategic management literature. An important question arises, however, as to whether the TCE framework is equally appropriate for all types of firms in all business settings. In this paper, we argue that TCE is not and suggest that firms with high market power may be able to lower transaction costs under high asset specificity and uncertainty in nonintegrated distribution channels, avoiding the need to utilize highly integrated channels as a result. We test our hypotheses with data collected from 40 manufacturers of electronic and telecommunications products in 109 product‐markets in the United States. The results support our hypothesis that transaction cost factors are better at explaining forward channel integration for firms with low market power than for firms with high market power. Our results indicate that the basic TCE framework must be supplemented by the market power construct to adequately explain forward channel integration decisions. Copyright © 2007 John Wiley & Sons, Ltd.     

Export experience counts: exploring its effect on product design change

In this paper, we explore how managers' export experience can affect the change in product design following changes in perceived past performance. Using data from 519 Portuguese exporters, we find that performance improvement will encourage safe decision making in which firms either will not change the product design or will change it in a way that makes it more similar across the product range. However, when managers' export experience is greater, they encourage change in ways that could support product differentiation. The abilities of experienced managers to read the market, i.e. to interpret changes in performance and translate them into product specifications, help explain these findings. We contribute to the literature in two ways. First, we explore the relationship among past export performance change, product design, and managers' export experience. Second, we identify specific kinds of design changes that firms adopt in response to changes in different dimensions of organizational performance. Based on our findings, we would recommend to new product development managers to consider both managers' export experience and the dimension used to measure performance when evaluating calls for standardizing the design by export managers. Our findings suggest that such calls could be driven by short‐term gains in export performance. Furthermore, we would also emphasize the need to routinely capture information from experienced export managers to ensure that it is considered in future decisions about design changes.     

Performance measurement in R&D: exploring the interplay between measurement objectives, dimensions of performance and contextual factors

Measuring research and development (R&D) performance has become a fundamental concern for R&D managers and executives in the last decades. As a result, the issue has been extensively debated in innovation and R&D management literature. The paper contributes to this growing body of knowledge, adopting a systemic and contextual perspective to look into the problem of measuring R&D performance. In particular, it explores the interplay between measurement objectives, performance dimensions and contextual factors in the design of a performance measurement system (PMS) for R&D activities. The paper relies on a multiple case study analysis that involved 15 Italian technology-intensive firms. The results indicate that firms measure R&D performance with different purposes, i.e. motivate researchers and engineers, monitor the progress of activities, evaluate the profitability of R&D projects, favour coordination and communication and stimulate organisational learning. These objectives are pursued in clusters, and the importance firms attach to each cluster is influenced by the context (type of R&D, industry belonging, size) in which measurement takes place. Furthermore, a firm's choice to measure R&D performance along a particular perspective (i.e. financial, customer, business processes or innovation and learning) is influenced by the classes of objectives (diagnostic, motivational or interactive) that are given higher priority. The implications of these results for R&D managers and scholars are discussed in the paper.     

Sense-making and management in business networks — some observations, considerations, and a research agenda

Business networks are complex webs of interdependent exchange relationships within which companies and individual managers operate. They consist of manifold actors, complex interactions, as well as organizational structures and resource transformation processes. Business managers cannot just capitulate vis-à-vis this complexity. Making sense of complex business networks helps managers to understand their own position, as well as their available options for change. Similarly, research in the area of sense-making and management in business networks may help us understand how managers cope with the contextual complexity in business networks, and how managers construct the forms in which this complexity appears. This paper identifies six major research themes that need to be taken up in the future with regard to sense-making and management in business networks, and discusses some methodological issues to advance our knowledge in this area.     

Exploring the differences in performance measurement between research and development: evidence from a multiple case study

Researchers and practitioners have recently paid great attention to research and development (R&D) performance measurement, although it is acknowledged to be a very challenging task because of R&D intrinsic uncertainty and complexity levels. In this paper, the problem of designing a performance measurement system (PMS) for R&D activities is addressed; specifically, we investigate if and how the design of the PMS is influenced by the type of activity it is applied to, namely Basic and Applied Research or new product development (NPD). We first develop a theoretical framework that comprises the main constitutive elements of a PMS for R&D. Then the framework is used for supporting a multiple case study analysis involving eight Italian technology-intensive firms. The research results show that the criteria for designing the constitutive elements of the PMS are radically different in Basic and Applied Research and NPD. The reasons behind the observed dissimilarities in the design criteria are widely discussed in the paper, as well as their implications for R&D managers.     

Subjective Performance Assessment of Innovation Projects*

Performance assessment of innovation projects is a central issue in innovation management research. Using existing literature, a model is developed to assess the performance of new product and new service development projects. In this model, project performance is defined as a combination of a formatively indicated operational performance construct and a reflectively indicated product performance construct. The validity of this model is tested based on a sample of 219 innovation projects assessed by innovation managers. Using only the innovation managers' responses, it is, however, not possible to distinguish between operational and product performance. The impact of common method bias and informant bias is subsequently assessed using a subsample of 128 of these 219 innovation projects that are assessed by the innovation manager and the project leader. These latter results show that operational and product performance are two distinct constructs. In addition, the multitrait–multimethod analyses show that especially the more abstract items of performance, such as the perceptions of quality, captured knowledge, competitive advantage, gained reputation, and customer satisfaction, suffer from random error and informant bias. Project leaders appear to be better informed to assess operational performance, while innovation managers are better in assessing product performance. The paper concludes with a qualitative comparison of several alternative performance models: the project performance model as derived from the literature, a similar (misspecified) reflective performance model, two stand‐alone models in which operational and product performance are assessed separately, and a mixed model that uses a combination of innovation managers' and project managers' data. Based on this comparison, it is advised to use either the stand‐alone models for operational performance and product performance or the mixed model whereby the project leader assesses operational performance and the innovation manager the product performance of an innovation project.     

Exclusive territories and performance dimensions in industrial distribution channels

There are two main approaches to studying vertical restraints in distribution channels: the anti-competitive and the efficiency approach. This article sets out to analyze the effects of exclusive territories agreements on performance levels in the distribution channel by proposing a number of hypotheses based upon these two approaches and by testing them with paired data from a sample of 116 manufacturer-dealer relationships from the Spanish industrial market. Results show that manufacturers and dealers perceive higher role performance levels in their partners in relationships characterized by exclusive territories. In a similar way, both manufacturers and dealers obtain higher levels of business performance in exclusive territories relationships, but we found no support for a direct effect of this vertical restraint on business performance. Instead, this effect is completely mediated by the higher levels of role performance associated with the exclusive territories agreement. Thus, empirical findings suggest that the economic outcomes achieved in ET relationships are due not to the presence of monopoly rents, but rather to the better role performance of the participants.     

Examining the effect of complexity in strategic group knowledge structures on firm performance

A developing stream of research in the strategy field explores the competitive structure of industries from the perspective of industry participants. This work has demonstrated that managers develop strategic group knowledge structures in order to make sense of their competitive environment. This study extends this line of research by examining the complexity evident in the strategic group knowledge structures developed by firms' top management teams and assessing the relationship between complexity in these knowledge structures and subsequent firm performance. Specifically, we examine the complexity of top managers' knowledge structures regarding their competition using a sample of 76 top management teams from banks in three U.S. cities. Using hierarchical regression, we find a significant relationship between the complexity of cognitive strategic groups and subsequent firm performance. These results suggest that the structure of the cognitive templates that top managers use to understand their environment and the actions of their competitor influence the degree of strategic success of their firm. Copyright © 2002 John Wiley & Sons, Ltd.     

Conglomerates revisited

Recent studies of corporate restructuring have arrived at conclusions that are contradictory when applied to conglomerates. Studies, often based only on manufacturing firms, argue for and against the benefits of conglomerate diversification. This paper reviews the more recent developments in this literature. We then construct a comprehensive sample of conglomerates that allows us to examine changes in conglomerate behavior over the period 1975–84 as manifested in acquisition and divestiture decisions. Our results suggest that conglomerate managers are reducing the complexity of the conglomerate enterprise by decreasing the average number of businesses managed, and by increasing the degree of business-relatedness within the conglomerate enterprise.     

Market orientation and organizational performance: A comparison of industrial versus consumer companies in mainland China using market orientation scale (MARKOR)

Although not conclusive, past empirical marketing strategy studies conducted in the United States and western European countries suggested a strong positive relationship between market orientation and a company's performance. The objective of this study is to investigate the reliability and validity of the market orientation construct in a very different socioeconomic, cultural, and business environment of Asia. Specifically, using the Kohli and Jaworski [J. Mark. 54 (1990) 1] MARKOR scale, this study investigates the market orientations of Chinese business managers who operate in a select number of industrial and consumer goods industries in urban China. Previous research has predicted a positive relationship between market orientation and performance, on the assumption that market orientation provides a firm with a better understanding of its environment and customers, which ultimately leads to enhanced customer satisfaction. Study results indicated that there were statistically significant differences between market-oriented and non-market-oriented Chinese managers in terms of their responses to market orientation scale statements. As well, a higher level of market orientation of Chinese companies operating in the Beijing area was discovered. This is rather encouraging because there is a large body of marketing literature that supports the argument that higher levels of market orientation would lead to better organizational performance. The managerial and public policy implications of the study are also discussed.     

The impact of earnings expectations on corporate downsizing

Research Summary: We propose that due to financial market pressures, managers are forward‐looking in their search and decision processes and focus on meeting performance targets set by the financial community. Using panel data on S&P 100 companies, we find that pressure felt by management to meet the analyst consensus earnings estimate influences the extent of corporate downsizing. Moreover, our results show that high levels of institutional investor stock ownership and CEO power attenuate managers’ sensitivity to financial market pressures, while high levels of analyst coverage increase their sensitivity. Managerial Summary: In this study we examine how financial market pressures influence managers’ downsizing decisions. We argue that investment analysts’ earnings estimates represent important performance targets to which managers aspire. If firms fail to meet analysts’ expectations, the stock price will suffer. This study shows that managers utilize corporate downsizing to address the potential shortfall between a firm's future performance and the analyst consensus earnings estimate. In addition, we find that managers’ concerns over meeting analysts’ earnings estimates are influenced by various contextual factors such as institutional investor stock ownership, CEO power, and high levels of analyst coverage.     

Channel relationship and business uncertainty: Evidence from the Hong Kong market

This study examines the dynamics of channel relationships between an end user and multiple suppliers in Hong Kong, a major international logistics hub in Asia. Drawing on the literature on channel relationships, we examine the links between different channel relationship variables and the contingent effect of business uncertainty on the links between these variables and supplier commitment. The results of the study indicate that expected relationship continuity mediates the effects of trust and relationship quality on commitment. Furthermore, the positive effect of trust on commitment is found to be stronger when business uncertainty is high than when business uncertainty is low. As supply chain management is becoming essential for firms to succeed in today's business, industrial marketing managers need to be aware of the dynamics in channel relationships and to better manage their supply chains. The implications of our findings for research and for the practice of channel relationship management are provided.