Supply Chain Orientation and Balanced Scorecard Performance

A recent Journal of Managerial Issues article noted that "the purpose of strategic management research is to learn why some organizations outperform others and then convey this knowledge to managers" (Crook et al., 2006: 409). In an effort to serve this purpose, the focus of our study is on how firms' approaches to supply chain management can shape performance. Supply chains are linkages of actors that collectively convert raw inputs into completed products (Mabert and Venkataraman, 1998). Some of these links cross firm boundaries, while others remain inside a single firm. Firms such as Dell, Toyota, and TaylorMade have created significant advantages over their rivals, in part, based on developing superior supply chains (Boyer et al., 2004). On the other hand, poor supply chain management often has serious negative consequences. For example, a recent study revealed that the emergence of major supply chain problems typically reduces a firm's shareholder value by over ten percent (Hendricks and Singhal, 2003). Although supply chains have long been viewed as a means to enhance performance in neighboring fields such as marketing, logistics, and operations management, it has attracted little attention from strategic management scholars. In an effort to shed new light on why some firms outperform others, we build on strategy theory and research to examine the concept of supply chain orientation (e.g., Hult, 2004). A supply chain orientation is defined as the extent to which there is a predisposition among chain members toward viewing the supply chain as an integrated entity and on satisfying chain needs in an integrated way. This predisposition can arise when chain members develop shared values and beliefs centered on the importance of the overall supply chain, not just on their specific functional area. Drawing on the resource-based view (RBV) of the firm, we posit that supply chain orientation is a strategic capability (Black and Boal, 1994; Godfrey and Hill, 1995) that contributes to competitive advantage and positively influences organizational performance. In assessing performance, we respond to calls to consider broader sets of outcome performance criteria than has been customary (e.g., Kaplan and Norton, 1996). In particular, we examine whether or not a supply chain orientation is related to the four dimensions of the Balanced Scorecard: customer performance, financial performance, internal process performance, and innovation and learning performance (Kaplan and Norton, 1996; Maiga and Jacobs, 2003). Whereas internal process performance (i.e., speed, quality, cost, and flexibility of a particular supply chain process (Hult et al., 2004)) is directly tied to supply chains, the other three dimensions reflect broader issues that may or may not be closely tied to supply chain practices (cf. Mabert and Venkataraman, 1998). Thus, there is value in uncovering the extent to which supply chains shape these important metrics. We examine the links between supply chain orientation and performance using data from 129 firms. Our article is intended to offer two main contributions to the literature. The first is introducing and developing the concept of supply chain orientation. The second contribution is offering initial empirical insight into how supply chains can enhance firm performance outcomes. THEORY AND HYPOTHESES Resource-based View of the Firm We rely on the resource-based view (RBV) of the firm as our study's theoretical foundation. A basic tenet of the RBV is that top-performing firms are those that are able to develop, obtain, and/or exploit strategic resources--firm assets that are rare, valuable, difficult to imitate or substitute and organizationally activatable (Barney, 1991; Wernerfelt, 1984). Resource-based view precepts note that resources that possess the aforementioned characteristics are those that can be utilized to build competitive advantages for firms. …