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Achieving
Achieving manufacturing manufacturing
flexibility through flexibility
entrepreneurial orientation
997
Shih-Chia Chang
Department of Business Administration,
National Taipei College of Business, Taipei, Taiwan
Ru-Jen Lin
Institute of Business and Management,
Lunghwa University of Science and Technology,
Taoyuan, Taiwan
Fu-Jen Chang
Department of Business Administration,
National Taipei College of Business, Taipei, Taiwan, and
Rong-Huei Chen
Department of Business Administration,
Lunghwa University of Science and Technology, Taoyuan, Taiwan

Abstract
Purpose – Entrepreneurial orientation (EO) purportedly enhances a firm’s competitive edge, but its
alignment with specific dimensions of manufacturing flexibility has not been convincingly
documented. The purpose of this study is to investigate the effects of several identifiable aspects of EO
on particular types of manufacturing flexibility.
Design/methodology/approach – Using the data collected from 115 motherboard manufacturers,
the study employs multiple regression analysis to examine the effects of entrepreneurial practices on
manufacturing flexibility.
Findings – The statistical results lead to the following conclusions: autonomy, innovativeness,
risk-taking and proactiveness have significant positive effects on new product flexibility; autonomy,
innovativeness, and competitive aggressiveness improve product mix flexibility; innovativeness,
proactiveness, and competitive aggressiveness determine volume flexibility.
Research limitations/implications – The research focuses exclusively on external manufacturing
flexibility, ignoring, for the time being, internal manufacturing flexibility factors.
Practical implications – The outcomes of the present study reveal that manufacturing flexibility
cannot be achieved by simply installing a computer-aided system; rather, it needs to be planned,
managed, and integrated with a firm’s entrepreneurial endeavors.
Originality/value – This is the first empirical study to investigate the effects of EO on
manufacturing flexibility rather than on business performance, which most of the previous research on
this topic has emphasized. In terms of practical applicability, the findings provide plant managers with
valuable guidelines for improving manufacturing flexibility by undertaking appropriate
entrepreneurial action. Industrial Management & Data
Systems
Keywords Manufacturing industries, Flexibility, Entrepreneurialism, Innovation, Risk assessment, Vol. 107 No. 7, 2007
Competitive strategy pp. 997-1017
q Emerald Group Publishing Limited
Paper type Research paper 0263-5577
DOI 10.1108/02635570710816711
IMDS Introduction
107,7 In today’s dynamic environment of global competition, rapid technological
innovations, short product life cycles, and demanding product customization,
manufacturing firms face a high level of uncertainty caused by ongoing change.
Previous research has suggested development of manufacturing flexibility as a
strategy to deal with the more dynamic and competitive market (Anand and Ward,
998 2004; De Toni and Tonchia, 1998; Verdu-Jover et al., 2006). Many believe that
high-manufacturing flexibility could enable a faster and more cost-efficient response to
rapid market changes. Flexibility has become an effective weapon for gaining
competitive advantage in an uncertain manufacturing environment (Gerwin, 1993;
Narasimhan et al., 2004; Scala et al., 2006). Meanwhile, entrepreneurial orientation (EO)
has been promoted as necessary to improve a firm’s competitiveness and performance.
In practice, EO includes a wide range of processes or activities characterized by a
tendency to act autonomously, a propensity to innovate and take risks, and a
predisposition to be aggressive toward competitors, as well as proactive with regard to
marketplace opportunities, to aim at new venture creation (Lumpkin and Dess, 2001).
Schumpeter (1970) was the first to indicate that the characteristics of entrepreneurship
can be an important source of developing manufacturing flexibility, and other scholars
have subsequently confirmed his claim (Hussey, 1997; Burgelman, 1991; Miller, 1983;
Covin and Slevin, 1989; Zahra, 1993). In general, it is believed that an entrepreneurial firm’s
strategic posture to be first-mover and capitalize on emerging opportunities ahead of their
competitors facilitates its development of manufacturing flexibility (Barringer and
Bluedorn, 1999). In order to take advantage of emerging opportunities, these firms monitor
market changes and develop more flexible manufacturing systems that allow a faster
response (Li et al., 2005). In other words, when faced with a fiercely dynamic and changing
environment, such EO practices help to develop manufacturing flexibility necessary to
respond promptly. Specifically, it has been argued by several scholars that a more
innovative, risk-taking posture, which is also proactive in regard to marketplace
opportunities and aggressive towards competitors, is more likely to promote
manufacturing flexibility (Covin, 1991; Covin and Slevin, 1991).
Although many previous studies addressed the importance of EO practices in
manufacturing flexibility improvement, the supposed link between the types of EO
activities and manufacturing flexibility has never been empirically demonstrated in
the field of strategic management. The purpose of this study is to investigate how
different EO practices (autonomy, innovativeness, proactiveness, competitive
aggressiveness, and risk taking) link with specific types of flexibility (new product,
volume, and product mix).
The contents of this paper comprise a brief overview of the literature concerned
with defining manufacturing flexibility and EO, ways of measuring them, and the
theoretical relationship between them; a description of research design including the
basic model, hypothesis, and statistical methods; and finally, statistical results and
their implications for management.

Literature review
Manufacturing flexibility
Since, the characteristics of manufacturing flexibility are vague and ambiguous, the
definitions of flexibility are often colored by a particular managerial situation
(Upton, 1994; Sethi and Sethi, 1990; Abad-Grau and Arias-Aranda, 2006). In the field of Achieving
operations, manufacturing flexibility was originally defined as the ability of manufacturing
manufacturing to respond to environmental changes (Mandelbaum, 1978). Research
conducted by Upton (1994) defines manufacturing flexibility as a capability to react to flexibility
market variation with little penalty in time, effort, cost, or performance. Some
researchers have treated manufacturing flexibility as a multi-dimensional construct
that could be classified in many different ways (Gerwin, 1993; Suarez et al., 1996). De 999
Toni and Tonchia (1998) provide a comprehensive review of various classification
schemes. For example, one could divide manufacturing flexibility into process,
product, or production volume, in relation to the objects of variation.
For the purpose of this study, we choose to review manufacturing flexibility by
relating it to EO. Several studies have distinguished between internal and external
flexibility (Lynch and Cross, 1991; Upton, 1994; Chang et al., 2003; Chang et al., 2005).
External flexibility is directly related to customer requirements and thus to a firm’s
competitive advantage. It is also referred to as “first order” flexibility (Suarez et al.,
1996), or market-based flexibility (Chen et al., 1992). External flexibility is easier to
recognize by customers, since it directly affects a firm’s competitiveness. Examples of
external flexibility are new product, product mix, and volume flexibility. Based on
Sethi and Sethi (1990) and Suarez et al. (1996), new product flexibility is the ability to
introduce new product quickly; product mix flexibility signifies the ability to
manufacture a variety of products within a short period of time; and volume flexibility
is the ability to operate profitably at varying overall output levels. These definitions
have been adopted by many other studies (Boyer and Leong, 1996; Schmenner and
Tatikonda, 2005). By contrast, internal flexibility is related to the need for operations
efficiency, and it is not directly related to market demand and environmental
uncertainties. Examples of internal flexibility are machine, material handling, and
routing flexibility. Its impact on a firm’s market competitiveness is largely indirect and
it is not easily recognized by customers. This study focuses on the analysis of the
relationship between external flexibility and EO.

Entrepreneurial orientation
Many studies in strategy literature have defined EO in terms of processes, practices,
and decision-making activities that lead to the development and delivery of new and
innovative products or services that can differentiate a firm from others in the market
(Lumpkin and Dess, 1996; Jambulingam et al., 2005; Chen et al., 2006; Garcia-Morales
et al., 2006; Naldi et al., 2007). In other words, EO involves the intentions and actions of
key players functioning in a dynamic generative process aimed at pre-empting
emerging opportunities. Other empirical studies suggest that EO is a
multi-dimensional construct and can be evaluated from different perspectives (Covin
and Slevin, 1989). For example, Miller (1983) offers specific dimensions for
characterizing EO; he describes an entrepreneurial firm as one that “engages in
product marketing innovation, undertakes somewhat risky ventures, and is first to
come up with proactive innovations, beating competitors to the punch” (1993, p. 771).
Accordingly, he uses the dimensions of innovativeness, risk-taking, and proactiveness
to conceptualize entrepreneurship. Innovativeness reflects the propensity of a firm to
engage in new ideas and creative processes that may result in new products, services
or technological processes; proactiveness refers to the firm’s tendency to lead rather
IMDS than follow in the exploration of new opportunities; and risk-taking reflects the firm’s
107,7 propensity to devote substantial resources to projects that entail a high probability of
failure along with chances for high returns.
Lumpkin and Dess (1996) add two other factors which can be considered important
in measuring EO: competitive aggressiveness and autonomy. Competitive
aggressiveness refers to a firm’s propensity to directly and intensely challenge its
1000 competitors to improve its own marketplace position. In some studies, competitive
aggressiveness and proactiveness have been treated as one and the same (Covin and
Covin, 1990; Antoncic, 2007). Lumpkin and Dess (1996), by contrast, suggest that the
two are distinct factors. Proactiveness is a response to opportunities, whereas
competitive aggressiveness is a response to threats. According to this distinction, a
firm intends to seek out an attractive niche (i.e. proactiveness), and once it has
established the niche, it seeks to protect its position (i.e. competitive aggressiveness).
With regard to autonomy, it refers to independent action of an individual or a team in
generating an idea and carrying it through to completion. In other words, an
organizational player pursues opportunities self-directedly, acts independently, makes
key decisions, and implements new ideas.
Referring to various theoretical perspectives outlined above, we recognize five
dimensions of EO: autonomy, innovativeness, risk-taking, proactiveness, and
competitive aggressiveness.

Manufacturing flexibility and entrepreneurial orientation

Prior empirical works that examined the outcomes of EO have focused on business
performance, but have ignored manufacturing flexibility. For example, through
conceptual considerations, Schumpeter (1970) proposes that an increase in product
innovation, product variety, and market competitiveness lies at the core of
entrepreneurial activity. Anecdotal evidence from numerous case studies suggests
that a high propensity towards entrepreneurial posture in decision-making processes
enhances a manufacturing firm’s responsiveness to downstream market changes
(Covin, 1991; Doh, 2000; Frese et al., 2002; Mondal and Espana, 2006).
Even though recent empirical studies by Becherer and Maurer (1997), Dess et al.
(1997), Bhuian et al. (2005), Wiklund and Shepherd (2005) and Li et al. (2005) have found
that entrepreneurial activities are positively related to business performance, they still
provide no insights into their impact on manufacturing flexibility. EO reflects a firm’s
propensity to engage in the “pursuit of new market opportunities and the renewal of
existing areas of operations” (Hult and Ketchen, 2001, p. 901). It enables manufacturing
firms to develop manufacturing flexibility for the sake of pre-empting the market
(Zahra and Covin, 1995; Zhou et al., 2005). As Slater and Narver (1995) and Miller (1983,
p. 771) note, an entrepreneurial firm is willing to devote the necessary resources to
cultivate capacities that enable it to create new products, innovate existing products, or
adjust the level of production ahead of competitors to seize emerging opportunities.
Barringer and Bluedorn (1999) support the notion of a causative link between EO and
manufacturing flexibility. These authors believe that manufacturing firms should
develop specific types of manufacturing flexibility corresponding to the unique
character of their EO. In other words, a fit between the type of manufacturing
flexibility and factors contributing to EO activities is necessary. Managers should
examine their entrepreneurial activities when making decisions as to which type of Achieving
manufacturing flexibility to develop. manufacturing
Despite the appeal of this idea, some researchers have questioned the effects of EO
on manufacturing flexibility. For example, Covin and Slevin (1990) do not find a flexibility
significant positive relationship between EO and competitive performance of small
firms. Further, they claim that in regard to new ventures, the effects of EO on
manufacturing flexibility are more beneficial in emerging industries than in more 1001
advanced industries. Moreover, some studies have even presented a contrary view
regarding the relationship between EO and manufacturing flexibility. For instance, a
longitudinal study by Zahra (1993) finds that the introduction of new products is
negatively associated with price-based rivalry, a key characteristic of competitive
aggressiveness which contributes to EO (Lumpkin and Dess, 1996). It implies that EO
has a negative effect on new product flexibility. Covin (1991) also indicates that
high-performing entrepreneurial firms may offer a narrow range of products compared
to their lower performing counterparts; in other words, EO is not associated with
product mix flexibility.
In summary, the literature holds inconsistent views on the alignment between EO
and manufacturing flexibility. There are several reasons for this inconsistency. One is
that the levels of EO and manufacturing flexibility are defined and measured in
different ways. For instance, not every study simultaneously incorporates volume,
product mix and/or new product flexibility even though these are recognized as
important types of flexibility in manufacturing today. Some studies focus on internal
routing and machine flexibility while others look into external manufacturing
flexibility such as product mix and new product. In the case of EO, many studies use
insufficient dimensions or aggregated measures to define it (Lumpkin and Dess, 1996).
For instance, Kreiser et al. (2002), use innovativeness, proactiveness, and risk-taking to
examine the alignment between EO and environmental hostility. In several EO studies,
the notion of competitive aggressiveness has been ignored (Smart and Conant, 1994).
Some authors treat competitive aggressiveness and proactiveness as the same (Covin
and Covin, 1990), while others suggest that the two dimensions are independent
(Lumpkin and Dess, 1996). Further, Knight (2000) and Zhou et al. (2005) use the
aggregated measures of EO to examine the relationship between EO and
manufacturing flexibility. It is therefore no wonder that the link between
manufacturing flexibility and EO is inconclusive.
Also, lacking in the literature is an empirical verification of the one-to-one
relationship between the dimensions of EO and the types of manufacturing flexibility.
Chang et al. (2002) suggested that not all types of manufacturing flexibility are
desirable in all circumstances. Suarez et al. (1996) suggest the need for firms to select a
type of flexibility that suits their particular conditions and circumstances. In other
words, managers must encourage those entrepreneurial activities which benefit
specific types of flexibility (Slater and Narver, 1995; Lumpkin and Dess, 1996). Given
the multi-dimensional nature of both manufacturing flexibility and EO, the exact
relationship between these two concepts needs to be recognized and defined more
precisely. For example, with its risk-taking nature, an entrepreneurial firm is willing to
devote the necessary resources to opportunities that may result in expediting an
introduction of new products into the market. This EO posture drives a firm to develop
new product flexibility, but not volume flexibility. The alignment between
IMDS manufacturing flexibility and EO must be assessed based on the one-to-one
107,7 relationship rather than on the aggregate level (e.g. a high level of manufacturing
flexibility versus a high level of EO). It is important that management recognize such
an alignment so that firms can implement entrepreneurial activities to develop specific
types of manufacturing flexibility to offset the potential negative effect of
environmental uncertainty.
1002
Basic research model and hypotheses
We selected the Taiwan motherboard industry to study the relationship between
manufacturing flexibility and EO for two reasons: the significance of manufacturing
flexibility and historically intense level of EO. First and foremost, Taiwan is the largest
motherboard producer in the world, accounting for approximately 80 percent of the global
market. The majority of motherboard manufacturers in Taiwan are original equipment
manufacturers (OEMs), and their clients are mostly large multinational PC firms such as
HP, IBM, NEC, Sony, Gateway, and Dell. Similar to OEMs in other high-tech industries,
motherboard manufacturers are known for being flexible in adjusting their strategies and
operations to meet constantly changing customer demands. Next, many motherboard
manufacturers have traditionally assumed a strong EO posture to facilitate product
design and production planning activities. That means that a firm takes risks through
capital investment in plant and equipment, acts proactively by entering markets early in
the product life cycle, and displays intense competitive aggressiveness through strategies
intended to secure a strong global market position.
Three types of external manufacturing flexibility are considered most critical to a
motherboard firm’s competitive advantage: new product flexibility, product mix
flexibility and volume flexibility. In the motherboard industry, new product flexibility
refers to the ability to develop new motherboards based on various newly introduced
CPUs. For instance, when Intel introduced six new CPUs, including Intel 875P, 856E,
865G, 856P, 865PE, and 875PE, motherboard manufacturers with high levels of new
product flexibility were able to design and manufacture new motherboards based on
all six CPUs, whereas those with lower new product flexibility were capable of
developing and producing only half that number. The life cycle of a new motherboard
product is typically very short, ranging from three to six months. As soon as the new
products become outdated, companies must actively renovate the original design to
meet the needs of low-end PC users (e.g. students, small businesses, and video games).
The capability of producing a large number of revised motherboards reflects
product-mix flexibility. Historically, demand in the motherboard industry has been
characterized by a high level of uncertainty. Moreover, due to the short life cycle of the
motherboard products, downstream buyers (e.g. PC and notebook manufacturers) tend
to take a “wait-and-see” attitude and place orders in large quantities at the last minute,
requesting fast delivery. The demand level differentiation between peak and low
seasons can be as much as 60 percent of the average production level. Consequently,
volume flexibility is necessary to adjust production levels to satisfy customer need in
the motherboard industry.
Figure 1 shows the research hypotheses relating to the relationship between EO and
manufacturing flexibility. In the rest of this section, we summarize the theoretical
relationship for each specific linkage, based on the observation data from motherboard
industry as well as the relevant literature.
 Dimensions of Entrepreneurial Orientation Types of Manufacturing Flexibility Achieving
manufacturing
Autonomy
HAN flexibility
HAP
HIN New product flexibility
Innovativeness HIP 1003
HIV

HRN
Product mix flexibility
Risk-taking HRV

HPN

Proactiveness
HPV
Volume flexibility
HCP
Figure 1.
Competitive aggressiveness HCV Research framework

Autonomy and manufacturing flexibility

Like most high-technology industries, the motherboard industry is known for its
highly uncertain customer demand in terms of product options. For OEMs in Taiwan,
autonomous orientation helps to handle frequent changes of product design requested
by overseas PC clients. Theoretically, the literature has supported the relationship
between autonomous activities and manufacturing flexibility. Lumpkin and Dess
(1996, p. 140) describe autonomy as “the ability and will to be self-directed in the
pursuit of opportunities.” Self-directed teams are considered conducive to
organizational learning and knowledge sharing; both shorten the cycle time of new
product development (NPD) (Senge, 1990). Muthusamy et al. (2005) also demonstrate
that greater autonomy encourages a freethinking exchange of information and enhance
the latitude to explore and examine new ways of handling problems during the new
product or modified product development, thus resulting in an increased rate of new
products and product variety introduction into the market (Kanter, 1989). Moreover,
Clark and Fujimoto (1991) maintain that team autonomy provides the means for
extending the frontiers and diversity of R&D capabilities that enable a firm to shorten
the time cycle for modifying existing products as well as developing new products.
Based on the above, the following research hypotheses are proposed.
HAN. Autonomy leads to higher new product flexibility.
HAP. Autonomy leads to higher product mix flexibility.

Innovativeness and manufacturing flexibility

Almost all customer orders for motherboard products in Taiwan are from large
overseas PC companies such as IBM, Apple, and Hewlett Packard. Subject to the
overall economy trends, those large clients frequently change the pattern of their
IMDS contract manufacturing orders, mostly in regard to specification and reconfiguration,
107,7 in response to demand fluctuations from end-users. Such changes have forced their
contract manufacturers to be innovative.
Many studies suggest that innovativeness contributes to new product, product mix,
and volume flexibility. Lumpkin and Dess (1996) and Frese et al. (2002) postulate that
innovativeness taps a firm’s potential for engaging in novelty, experimentation, and
1004 R&D activities that may result in new products, production processes, and
technological advancements. Gerwin (1993) find that product and process
technology innovation accelerate the development of new products (Chang et al.,
2002; Lee and Tsai, 2005). An entrepreneurial firm may be more inclined to pre-empt a
new market (Miller and Camp, 1985). Often, new market opportunities arise with
technological innovation. It is important that entrepreneurial firms apply advanced
manufacturing technology (AMT) to offer various product options so as to take
advantage of new opportunities (Kekre and Srinivasan, 1990; Chen et al., 1992). In
addition, advancements of manufacturing technologies (for example, programmable
part-loading and tool-changing devices, or the integration of computer-aid
manufacturing, computer-aid design, and programmable automated systems) enable
a firm to significantly shorten the cycle time of NPD as well as changeover times for
the manufacturing of different products (Petroni and Bevilacqua, 2002; Small, 2006).
Suarez et al. (1996) investigate the impact of AMT in the form of programmable
automated production on flexibility based on the data collected from the printed circuit
board (PCB) industry. They find that an increase in the innovation of manufacturing
technology and production process may reduce the lead time necessary to modify the
existing products, develop new products, and change production levels, and
consequently enhance product mix, new product, and volume flexibility (Sethi and
Sethi, 1990). Accordingly, the following research hypotheses are formulated.
HIN. Innovativeness leads to higher new product flexibility.
HIP. Innovativeness leads to higher product mix flexibility.
HIV. Innovativeness leads to higher volume flexibility.

Risk-taking and manufacturing flexibility

Our observations have confirmed that the motherboard manufacturers in Taiwan face
hostile competition from countries such as Japan, Korea, China, Singapore, and
Malaysia. Goll and Rasheed (1997) and Zahra and Garvis (2000) point out that
munificent environments may not provide firms with an impetus to take risks;
however, excessively hostile environments will discourage risk-taking. The literature
suggests that a high level of risk-taking practices could enable firms to enhance new
product and volume flexibility. Nohria and Gulati (1997) assert that entrepreneurs with
a strong risk-taking tendency are more likely to invest in, and employ, untested
product and process technology, thus enabling the firm to introduce new products
quickly as well as to develop a capability for adjusting the levels of production.
Lumpkin and Dess (1996) point out that an entrepreneurial firm with a risk-taking
nature is willing to invest in new manufacturing equipment or untested technological
processes ahead of competitors, thereby ensuring a rapid introduction of new products
to satisfy their clients’ fast-changing demands for product features. Overall,
risk-taking stimulates manufacturing firms to achieve higher levels of new product
flexibility and volume flexibility. Accordingly, we propose the following research Achieving
hypotheses. manufacturing
HRN. Risk-taking leads to new product flexibility. flexibility
HRV. Risk-taking leads to volume flexibility.

Proactiveness and manufacturing flexibility 1005

The fourth characteristic of entrepreneurship is proactiveness. A proactive firm
assumes an opportunity-seeking, forward-looking perspective through introducing
new products ahead of competition as well as practices that help anticipate future
demand to create change and shape the environment (Venkatraman, 1989; Lumpkin
and Dess, 1996). Many studies have suggested that new product and volume flexibility
will be enhanced when firms behave proactively. For example, Covin and Slevin (1989)
and Miller (1983) postulate that a proactive firm is one that leads rather than follows in
the development of new technologies, the introduction of new products, and investment
into manufacturing capacity. Specifically, Tannous (1996) claims that capacity
planning and investment ahead of market demand facilitates a firm’s capability to
effectively increase or decrease aggregate output levels in response to market
fluctuations. In such a situation, both new product and volume flexibility enhancement
are likely to occur. Evidence from empirical studies suggests that proactiveness may
help a firm to become pre-emptive, or first mover, which typically requires aggressive
development of new products, and adjustment of production volume in response to
fluctuations in customer demand (Chang et al., 2003). Accordingly, we propose the
following research hypotheses.
HPN. Proactivness leads to higher new product flexibility.
HPV. Poactiveness leads to higher volume flexibility.

Competitive aggressiveness and manufacturing flexibility

The motherboard firms in Taiwan display a willingness to directly and intensely
challenge their competitors from other Asian countries such as Japan, Korea, China,
Singapore, and Malaysia, as well as local competitors in the same industry, to advance
their own market position. These firms are characterized by competitive
aggressiveness. Numerous studies in the field of strategic management confirm that
a competitively aggressive stance facilitates product mix and volume flexibility. For
example, Woo (1981) demonstrate that a high capability to modify the existing
products quickly allows new entrants to seize a market niche by focusing on high
value-added products. Miller and Camp (1985) find that the most successfully
aggressive firms are those that do not shy away from market expansion in terms of
customer base as well as the breadth of product line. Similarly, Porter (1985)
recommends two strategies for the existing firms to aggressively pursue alternative
ways: redefining their products or services, and expanding their market scope. These
strategic initiatives can be accomplished by accelerating the cycle of product
modification as well as offering various product options in the market. Venkatraman
(1989) find that a firm characterized by entrepreneurship is inclined to spend
aggressively, compared to competitors, on product development and manufacturing
processes, thus increasing their product flexibility and volume flexibility.
IMDS Overall, competitive aggressiveness induces a firm to effectively enhance its product
107,7 mix flexibility and volume flexibility. Accordingly, we propose the following
hypotheses.
HCP. Competitive aggressiveness leads to higher product mix flexibility.
HCV. Competitive aggressiveness leads to higher volume flexibility.
1006
Research design methodology
Survey
A survey methodology was used to collect data pertaining to the proposed research
hypotheses. The sample was randomly selected from the motherboard industry in
Taiwan. A total of 328 questionnaires were mailed to top executives, including
vice-presidents, general managers, and plant managers, in selected strategic business
units (SBUs) within the motherboard industry. In order to raise the response rate, the
top executives of the targeted plants were additionally contacted by telephone, which
stimulated professional interest and improved survey participation. Following Swink’s
(1999) suggestion, follow-up telephone calls were made to those who did not return a
survey within one month. A total of 119 questionnaires were returned, with a response
rate of 36.28 percent. Out of these, 115 surveys were found to be valid for statistical
analysis. Based on their annual revenues, the 115 respondents represented gross sales
of less than $20 million (600 million Taiwanese dollars). Table I provides a summary of
the descriptive statistics of these 115 respondents.

Measurement and scale development

A pre-test of the survey instrument was conducted through interviews with
manufacturing executives, vice-presidents or presidents from five companies.
Operational measures of manufacturing flexibility and EO constitute the two main
sections of the questionnaire. These were reviewed and pre-tested by a group of
researchers and plant managers in the motherboard industry. Plant managers agreed
that new product, product mix, and volume were the three types of manufacturing
flexibility most critical to a firm’s competitive edge. In addition, various objective
measurements for these three types of flexibility were evaluated. New product
flexibility was measured by the total number of new motherboard models produced,
number of new components made, number of new models processed simultaneously by
a plant, and time required to introduce new models in the last two years (Gerwin, 1993;
Sethi and Sethi, 1990). Product mix flexibility was measured by the total number of

Sales No. employees

Range Frequency Percent Range Frequency Percent

% $20 million 27 23.4 % 100 13 11.3

$20 , 100 million 30 26.1 101 , 300 33 28.7
$101 , 200 million 19 16.5 301 , 500 28 24.3
$201 , 300 million 21 18.3 501 , 600 16 13.9
$304 , 400 million 12 10.4 601 , 800 18 15.7
Table I. $$401 million 6 5.3 $ 801 7 6.1
Sample profiles (n ¼ 115) Total 115 100.0 Total 115 100.0
revised motherboard products made, number of revised products manufactured Achieving
simultaneously by a plant, and the ratio of the total output to the changeover time/cost manufacturing
between different products processed in those two years (Browne et al., 1984). Volume
flexibility was measured as the ratio of the smallest volume to the largest volume for flexibility
profitable operation as well as the ratio of production volume fluctuation to the unit
cost, and to the quality defect rate in which production volume fluctuation was
computed as the variance of monthly production (Suarez et al., 1996). 1007
We had previously identified five dimensions of EO: autonomy, innovativeness,
proactiveness, competitive aggressiveness, and risk-taking. The instrument used to
measure EO was a modified version of the one used by Dess and Lumpkin (2005), and
was based on a seven-point Likert scale. Respondents were asked to rate, on a 28-item
instrument, the degree of implementation of entrepreneurial activities at their firms.

Statistical methods
Two stages of statistical analysis were performed. First, we performed factor analysis
on EO and manufacturing flexibility items to investigate the dimensions of EO and
manufacturing flexibility. Next, three regression models were used to examine the
effects of the EO practices on new product, product mix, and volume flexibility,
respectively. The basic assumptions with respect to the constant variance, influential
outliers, and normality were thoroughly verified and did not affect the results (Chang
et al., 2003).

Reliability and validity

The internal consistency method was used to assess the reliability of empirical
measurements. The internal consistency of a set of measured items refers to the degree
to which the items in the set are homogeneous (Ward et al., 1994; Flynn et al., 1995).
Internal consistency was estimated using Cronbach’s a value. Based on the results of
the factor analysis shown in Tables II and III, all five constructs show Cronbach’s a
above the recommended value of 0.70 (Nunnally, 1969; Yang et al., 2005), which
indicates a relatively high degree of internal consistency. Finally, convergent validity
for manufacturing flexibility and EO measures was assessed by the corrected-item
total correlations (CITC) (Kerlinger, 1979). The results in Tables II and III show that all
the items have correlation values larger than 0.5, and therefore demonstrate
high-convergent validity for manufacturing flexibility and EO measures.

Statistical results
Results of factor analysis
Table II presents the results of the varimax factor analysis for EO. The factor rotation
yielded five dimensions from a total of 28 variables of EO. Three items were removed
due to the volume of factor loadings below 0.5 (Bollen and Lennox, 1991). The
remaining 25 items were organized into five common factors. All eigenvalues from the
five factors were greater than 1.0. The cumulative variance explained by all the factors
is 55.02 percent. A total of five common factors are identified as follows: proactiviness
(E1), innovativeness (E2), competitive aggressiveness (E3), risk taking (E4), and
autonomy (E5). For the factor analysis of manufacturing flexibility, three dimensions
were derived from a total of 14 variables, as Table III shows. Four items were deleted.
IMDS
Cumulative
107,7 variance
Factor explained Cronbach’s
Factors/items loading CITC Eigenvalue (percent) a

El proactiveness 5.2284 14.94 0.8179

1008 P1 adopting creative methods of running
business ahead of competitors 0.6971 0.602
P2 introducing new products or
technological capabilities ahead of the
competition 0.7352 0.576
P3 expanding capacity ahead of the
competitors 0.6909 0.565
P4 continuously seeking opportunities
(such as new market, new customer)
related to the present operations 0.6558 0.579
P5 striving to be a “first mover” to capture
the benefits of industrial pioneering 0.6739 0.591
P6 close monitoring of technological
trends and identifying future needs of
customers 0.7091 0.576
E2 innovativeness 4.2779 27.16 0.8241
I1 a strong intention to encourage and
stimulate technological, product-market,
or administrative innovation 0.7583 0.627
I2 a strong intention to stimulate
creativity and experimentation 0.6882 0.587
I3 a long-term commitment to invest in
new technology, R&D, and continuous
improvement 0.6833 0.585
I4 innovative initiatives hard for
competitors to imitate successfully 0.6863 0.581
I5 routinely making dramatic innovation
in products, services, or process
technologies 0.6993 0.564
I6 introduction of untested technology 0.7413 0.601
E3 competitive aggressiveness 3.6719 37.65 0.8063
C1 adopting a price-cutting strategy to
enhance a competitive position 0.6916 0.551
C2 assuming an aggressive position to
combat market challenge 0.7175 0.616
C3 copying the business practices or
techniques of successful competitors to
enhance a competitive position 0.7274 0.583
C4 adopting routinely, a highly
competitive, “undo-the-competitive”
posture against threatening competition 0.7322 0.587
C5 use of unconventional strategies to
Table II. challenge competitors 0.7381 0.619
Results of factor analysis E4 risk-taking 3.2796 47.02 0.7839
of five entrepreneurial R1 committing a large portion of its
orientation dimensions resources in order to grow 0.6755 0.562
(n ¼ 115) (continued)
 Cumulative
Achieving
variance manufacturing
Factor explained Cronbach’s flexibility
Factors/items loading CITC Eigenvalue (percent) a

R2 investing in high-risk projects which

promise high returns 0.6952 0.56 1009
R3 investing in major projects through
heavy borrowing 0.712 0.571
R4 using tried-and-true practices and
techniques to explore new opportunities 0.805 0.668
E5 autonomy 2.7977 55.02 0.7838
A1 developing independent work units
such as “skunkworks” to enhance
creative thinking 0.6589 0.561
A2 developing effective ways to allow
employees and project teams access to the
needed resources to try their new ideas 0.765 0.574
A3 efforts to create autonomy via actions
such as bending rules and bypassing
procedures and budgets 0.7382 0.637
A4 implementing necessary structural
changes such as forming small
autonomous groups to stimulate new
ideas 0.7355 0.587 Table II.

These three dimensions of manufacturing flexibility were identified as new product

flexibility (M1), volume flexibility (M2), and product mix flexibility (M3).

Results of regression analysis

The five dimensions of EO are treated as independent variables, while the three types
of manufacturing flexibility are treated as dependent variables. Prior to performing
regression analysis, the correlation matrix of the independent variables was verified as
Table IV. The results show that the correlation between the pairs of variables was
insignificant. Thus, multicollinearity does not appear to be a problem in the regression
analysis (Chang et al., 2002; Neter et al., 1996).
Table V summarizes the results of the regression analysis. The values given in the
table are p-value and coefficients, which are standardized regression coefficients. The
ANOVA results show p-values for the three models as 0.0001, 0.0001, and 0.0002.
Model 1 in Table V shows that employee or team autonomy has a significantly
positive effect on new product flexibility (b ¼ 0.2018, p , 0.05). This result supports
HAN. It appears that the motherboard manufacturers can achieve a high rate of new
product introduction through allowing individuals and teams to exercise their
creativity and to act independently. Next, the culture of innovation drives the
development of new product flexibility (b ¼ 0.2170, p , 0.05), which supports HIN.
Finally, risk-taking (b ¼ 0.2880, p , 0.01) and proactiveness orientation (b ¼ 0.3213,
p , 0.01), as reflected in the organizational processes and decision-making style of a
firm, can be a source of new product flexibility. This finding supports HRN and HPN.
IMDS
Cumulative
107,7 variance
Factor explained Cronbach’s
Factors/items loading CITC Eigenvalue (percent) a

M1 new product flexibility 2.6375 42.34 0.7751

1010
Table III.
Results of factor analysis
of three manufacturing
flexibility types (n ¼ 115)
NP1 number of new motherboard models
introduced 0.7093 0.5727
NP2 number of new motherboard models
produced simultaneously by a plant 0.8465 0.6551
NP3 time required to introduced new
motherboard models 0.7510 0.6049
M2 volume flexibility 1.8092 55.26 0.7443
V1 ration of the smallest volume to the
largest volume for profitable operation 0.7594 0.5672
V2 ratio of average production volume
fluctuation to unit cost 0.7240 0.5857
V3 ratio of average production volume
fluctuation to quality defect rate 0.7656 0.5576
M3 product mix flexibility 3.2897 23.50 0.7760
PM1 number of revised motherboard
products made 0.8058 0.5513
PM2 number of revised motherboard
products produced simultaneously by a
plant 0.7738 0.6079
PM3 ratio of the total output and the
waiting time of product processed 0.7065 0.5815
PM4 ratio of the total output and the
changeover time between different
products processed 0.7207 0.5756

Competitive
Autonomy Innovativeness Risk-taking Proactiveness aggressiveness

Autonomy 1.0000 (0.0000)

Table IV.
Pair-wise correlations of
independent variables
(n ¼ 115)
Innovativeness 0.07891 (0.4019) 1.0000 (0.0000)
Risk-taking 20.11449 (0.2231) 20.13270 (0.1574) 1.0000 (0.0000)
Proactiveness 0.13345 (0.1551) 20.04492 (0.6336) 0.01320 (0.8886) 1.0000 (0.0000)
Competitive
aggressiveness 0.14941 (0.1110) 0.06217 (0.5092) 0.07921 (0.4001) 0.03505 (0.7100) 1.0000 (0.0000)

Based on the results of Model 2, employee autonomy has a significant positive impact
on product mix flexibility (b ¼ 0.2997, p , 0.001). The results confirm HAP. As
predicted, innovativeness significantly increases product mix flexibility (b ¼ 0.2434,
p , 0.05), which supports HIP. Additionally, the empirical results confirm HCP
(b ¼ 0.3312, p , 0.01), namely, that firms with strong competitive aggressiveness are
more likely to improve their capability to expand product range.
Based on the value shown in Model 3, the motherboard manufacturers in Taiwan
implement a large number of innovative activities leading to greater capability to
 Achieving
Manufacturing flexibility
Entrepreneurial Model 1 new product Model 2 product mix Model 3 volume manufacturing
orientation flexibility flexibility flexibility flexibility
Autonomy þ * 0.2018 (0.036 2) þ * * * 0.2997 (0.0008) £ 0.0887 (0.3515)
Innovativeness þ * 0.2170 (0.0468) þ * 0.2434 (0.0417) þ* 0.2388 (0.0283)
Risk-taking þ * * 0.2880 (0.0030) £ 0.0214 (0.8046) £ 0.0498 (0.5993) 1011
Proactiveness þ * * 0.3213 (0.0015) £ 0.1412 (0.1171) þ* 0.2574 (0.0268)
Competitive
aggressiveness £ 0.0414 (0.7195) þ * * 0.3312 (0.0020) þ * * * 0.3345 (0.0009)
Adjusted R 2 0.2057 0.2437 0.1762
F-value 6.49 7.83 5.54
ANOVA p-value 0.0001 * * * 0.0001 * * * 0.0002 * * * Table V.
Results of regression
Notes: “ þ ”: positive effect; “ 2 ”: negative effect; “ £ ”: no effect 2; the first number is the analysis: entrepreneurial
standardized coefficient of the regression and the second number inside the parenthesis is the p-value; orientation and flexibility
*p , 0.05; * *p , 0.01; * * *p , 0.001
(n ¼ 115)

adjust aggregate production levels effectively (b ¼ 0.2388, p , 0.05). This finding

supports HIV. Finally, strategic initiatives of both proactiveness (b ¼ 0.2574, p , 0.05)
and competitive aggressiveness (b ¼ 0.3345, p , 0.001) are the drivers of volume
flexibility in the motherboard firms. The statistical results support HPV and HCV.
The only insignificant relationship found was the effect of risk-taking on volume
flexibility (HRV). The original rationale for examining this relationship was to find out
whether an entrepreneurial firm with a risk-taking propensity to acquire untested
process technology could develop a capability for changing volume levels (Nohria and
Gulati, 1997). We made a few field trips to interview plant managers to elucidate this
finding. For motherboard manufacturers, the real considerations for employing
untested process and product technologies ahead of competitors are typically faster
NPD, lower manufacturing cost, or better product quality rather than reducing the
set-up time for adjusting the levels of production. This finding reveals the fact that the
capability of effectively increasing or decreasing aggregate output levels could not be
improved through highly risky decisions to invest in new manufacturing technology.

Limitations and future research directions

The present study necessarily contains some limitations, which, however, open
interesting avenues for future research. In this study, we examined how
entrepreneurial activities could improve external flexibility (i.e. new product,
product mix, and volume flexibility), rather than internal flexibility. Future research
can examine the alignment between entrepreneurial activities and internal flexibility
such as machine, material handling, and routing flexibility for a complete
understanding of how plant managers use EO to enhance manufacturing flexibility.
The data used in this study were collected only from one specific type of industry –
the motherboard industry in Taiwan. It is not known how the selection of industries
and geographical areas could affect this study’s findings. Since, the natures of product
life cycle and industry structure are different from industry to industry and from
country to country, future studies should investigate the applicability of our findings to
other industries and other geographic areas.
IMDS Conclusions and practical implications
107,7 This research explores how the five dimensions of entrepreneurial activity are aligned
with three types of manufacturing flexibility: product mix, new product, and volume
flexibility. We have provided evidence that entrepreneurial activities can enhance
manufacturing flexibility as a strategy for coping with environmental uncertainty.
More specifically, innovativeness, proactiveness, autonomy, competitive
1012 aggressiveness, and risk-taking can stimulate a firm’s capability to develop new
products, offer different product options, and adjust production levels as needed.
This is the first empirical study to investigate the effects of EO on manufacturing
flexibility rather than on business performance, which most of the previous research on
EO has emphasized. Our results complement Zahra (1993), as well as Wiklund and
Shepherd (2005), and confirm that EO can help explain the managerial processes that
provide some firms with an ability to utilize their manufacturing flexibility to cope
with environmental turbulence. In the field of strategic management, Upton (1994)
estimates that 40 percent of flexibility improvement efforts are unsuccessful, and
concludes that one of the major causes of poor performance is inability to identify
“which factors most affected it (flexibility)” (p. 77). An important finding of our study is
that manufacturing flexibility development should be integrated with an
entrepreneurial posture. In other words, manufacturing flexibility cannot be
achieved by simply installing a computer-aided system. Instead, manufacturing
flexibility needs to be planned, managed, and integrated with a firm’s entrepreneurial
activities.
The findings of this study provide several practical implications for plant
managers. First, it is clear from the results that an autonomous posture is a significant
driver of new product and product mix flexibility. These results are consistent with
similar findings reported by Muthusamy et al. (2005) and Clark and Fujimoto (1991).
One important point that transpired from our research is that to introduce a new
product faster and to offer a greater variety of products, firms must increase the
autonomy of their cross-functional teams to encourage generating new ideas and
solutions.
Our field observations confirm the above theoretically drawn conclusion. There is
already a tradition of cross-functional team cooperation within the motherboard
industry in Taiwan. Historically, motherboard manufacturers have been using various
R&D project committees to integrate design, manufacturing, and other functions such
as design for manufacturability (DFM), design for assembly (DFA), and design for
testability (DFT). Through such autonomous committees, these firms efficiently reduce
the number of parts, and simplify the assembly and testing process, thus effectively
accelerating the development process of new products and product modification. Two
of the motherboard factories we visited estimate that they even benefit from the
implementation of autonomous teams (etc. DFA and DFM) to reduce the number of
parts by 1.8 percent, leading to a shorter cycle time for new motherboard design. We
suggest that firms implement various R&D project committees and delegate to them a
high degree of autonomy, which is advantageous to leveraging new product and
product mix flexibility.
Our study reveals that motherboard firms with a strong tendency to innovate may
facilitate their capability to accelerate the development of new products, increase
product variety, and adjust production volume fast, which is consistent with
Lumpkin and Dess (1996). This finding suggests that an innovative posture can stimulate Achieving
the development of new and modified products, as well as dramatically increase the speed manufacturing
of delivery, thus differentiating an organization from others on the market. The
implication of this finding is that entrepreneurially-minded firms should establish an flexibility
innovative atmosphere within the whole organization to encourage employees to
experiment with novel ideas in order to develop new products, modify current products, as
well as improve technological processes. In addition, our analysis reveals that a strong 1013
propensity for risk-taking in technology adoption is a significant driver of new product
flexibility. This finding strongly suggests that managers can deploy untested technology
ahead of competitors to accelerate introduction of a new product.
The results of the study also prove that both new product and volume flexibility are
significantly enhanced by the degree of proactiveness. Recall that proactiveness refers
to a firm’s propensity of anticipating and acting on future need by seeking new
opportunities (Lumpkin and Dess, 1996). Proactiveness is crucial to successful
management because it entails a forward-looking perspective which can create a first
mover advantage vis-à-vis competitors (Zahra and Covin, 1995). According to
Katayama (1989), the first mover usually faces more demand uncertainties and must
therefore be able to introduce the new product into the market and adjust production
volume as needed. Another implication of our study for managers is the need to
develop a system of close monitoring and scanning of the environment for identifying
customer needs, industry trends, and emerging opportunities. Such a system would
stimulate a firm to enhance its new product and volume flexibility in order to seize new
opportunities and gain first mover advantages.
Furthermore, the results of this study confirm that competitive aggressiveness is an
effective strategy for firms to enhance product mix and volume flexibility. Firms with
an aggressive orientation are better able to provide various options for different
markets and adjust the level of production according to client requirements, which
allows them to maintain a highly competitive position.
Based on the above results, it appears that proactiveness and competitive
aggressiveness are differently related to new product and product mix flexibility. For
example, a firm that practices proactivness could enhance new product flexibility, but
not product mix flexibility. By contrast, a firm with a competitively aggressive attitude
could significantly increase product mix flexibility rather than new product flexibility.
This corroborates Venkatraman’s (1989) view that a strong proactive tendency
increases a firm’s ability to introduce new products and thus pre-empt the new market.
It also substantiates Chang’s et al. (2003) claim that a strongly competitive-aggressive
stance gives a firm an ability to vary the mix of products, allowing it to secure and
sustain its market position. In summary, managers seeking attractive market
opportunities are advised to use proactiveness as a strategy to develop new product
flexibility. Once a new market niche has been established, competitive aggressiveness
strategy should be used to enhance product mix flexibility; so that the market is
protected.

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Corresponding author
Shih-Chia Chang can be contacted at: chang@mail.ntcb.edu.tw

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