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Production Planning & Control: The Management of


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Sustainable supply chain practices: an empirical


investigation on Indian automobile industry
a b
P.R.C. Gopal & Jitesh Thakkar
a
Thiagarajar School of Management, Madurai, India
b
Department of Industrial and Systems Engineering (ISE), IIT Kharagpur, Khargapur, India
Published online: 08 Jul 2015.

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10.1080/09537287.2015.1060368

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Production Planning & Control, 2015
http://dx.doi.org/10.1080/09537287.2015.1060368

Sustainable supply chain practices: an empirical investigation on Indian automobile industry


P.R.C. Gopala* and Jitesh Thakkarb
a
Thiagarajar School of Management, Madurai, India; bDepartment of Industrial and Systems Engineering (ISE), IIT Kharagpur,
Khargapur, India
(Received 9 November 2014; accepted 1 June 2015)

The purpose of this research study is to analyze sustainable supply chain (SSC) management practices for Indian
automobile industry and to identify the critical factors for its successful implementation. Despite the fact that SSC has
been frequently promoted as a means of improving business competitiveness, little empirical evidence exists in the litera-
ture validating its positive link with organizational performance. Sustainable supply chain practices (SSCP) not only help
in reducing environmental degradation but it also has social and economic implications (as per tipple bottom line
approach). For this purpose, empirical data is collected to measure the SSCP prevailing in Indian automobile industry. A
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structural equation modeling technique is used to build the measurement and structural models. Later, statistical estimates
are used to validate the model that has been built. The data analysis helps to determine whether to accept or reject the
hypothesis that has been stated based on the structural model. The result shows how SSCP are correlated and help in
improving the supply chain performance among the industries being surveyed. It is also observed that environmental and
social performance have a positive relationship with economic performance.
Keywords: supply chain sustainability; structural equation modeling; performance measurement; supply chain
management; sustainability

1. Introduction Diabat 2013). Moreover, gaining competitive edge


Intensified competition at the supply chain level, rapid through effective implementation of sustainable practices
changes in customer demand patterns and pressures from in a highly competitive environment becomes increas-
governments and other stakeholder groups has encour- ingly difficult. Such increased competition has even
aged most companies to increase its attention on adop- greater effect on industry such as the automobile un
tion of sustainability practices. Sustainability has become undoubtedly which is large, diverse and influential of
a competitive advantage of the individual firm’s supply many other business sectors. Without an adequate under-
chain (Zhu and Sarkis 2006). However, researchers have standing of the sustainability related enablers and inhibi-
differing views on adoption of sustainable practices in tors, it is unlikely to accurately evaluate the effect of the
supply chain. (Zhu and Sarkis 2007) study in China on sustainability practices on supply chain.
implementation of green supply chain management The benefits of implementing sustainability practices
(GSCM) practices found that environmental and opera- is to avoid risk related to all three dimensions (eco-
tional performance slightly improved and has not nomic, environmental, and social) of sustainability and
resulted in significant improvement of economic perfor- improve the overall supply chain performance (SCP)
mance. In similar lines (Zaabi, Dhaheri, and Diabat (Seuring and Müller 2008a). Despite widely accepted
2013) also mentioned that adopting these practices incur benefits of sustainability, there is a dearth of literature
additional cost and unprofitable. However, (Craig and regarding the implementation of sustainability practices
Rogers 2008) argued that sustainability is a concept to and their impacts on the SCP particularly in developing
achieve long term economic benefits rather than short countries like India (Xu et al. 2013). It is reported that,
term. For this, organizations needed supporting factors automobile industry is seen as a flagship bearer and is
for successful implementation of sustainable practices in frequently regarded as a barometer measuring the current
supply chain (Seuring and Müller 2008a). Implementa- wealth of a nation’s economy (Childerhouse et al. 2003).
tion of sustainable practices in supply chains is fraught It is also highlighted that, automobile supply chain
with several challenges. These challenges lead to nega- processes such as designing, sourcing, producing and
tive impacts particularly during initiation stage of sus- distributing products in global markets play a central
tainability practices (Faisal 2010; Zaabi, Dhaheri, and role, and these activities account for a bulk of the

*Corresponding author. Email: prcgopal@tsm.ac.in

© 2015 Taylor & Francis


2 P.R.C. Gopal and J. Thakkar

resources consumed and the environmental impact is clear that there is not much work on the investigation
(Halldórsson, Kotzab, and Larsen 2009; Handfield and of sustainability issues from the Indian scenario and there
Nichols 1998). Kagawa et al. (2013) reported that automo- is a large research gap in this field (Xu et al. 2013).
bile industry uses more energy indirectly through its sup- In view of the above, this study is divided into two
ply chain than directly at facility. Hence, automobile phases. First phase analyze the relationship between sus-
supply chain has a significant role in sustainable develop- tainable supply chain inhibitors (SSCI), sustainable sup-
ment. Recent changes in global economy resulted; India is ply chain practices (SSCP), sustainable supply chain
becoming one of the cheapest sourcing destinations in the enablers (SSCE) and SCP. In this stage we also investi-
automotive map edging out arch rivals like China, Mexico gate the moderating effect of SSCE, practices and perfor-
and Eastern Europe. In line with this, many multi-national mance. In the second phase we analyze relationship
industries (BMW, FORD, NISSAN) have identified India among the economic (ECO), environmental (ENV) and
as a potential market for strong product growth and have social (SO) indicators. For this, a sample of automobile
started investing heavily by setting up manufacturing supply chain players to achieve sustainability, which
facilities and distribution centers (Mathiyazhagan and includes suppliers, original equipment manufacturers
Noorul Haq 2013; Xu et al. 2013). It depicts one side (OEMs) in India is considered for the investigation.
huge demand for Indian automobile industry, and other Since, in literature researchers highlighted that suppliers
hand challenges such as climate change, energy provision and OEMs play a key role in achieving sustainability in
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and shortage of natural resources need to handle. automobile supply chain. For example, Mayyas et al.
The products of the automobile industry touch our (2012) and Dincer (2007); reported that OEMs play
daily lives on one hand by providing personal mobility major role in incorporating sustainability principles in
for millions, and on the other, by bringing a wide range designing and manufacturing new vehicles. In addition,
of challenges such as, deterioration air quality, global Hassini, Surti, and Searcy (2012) reported that OEMs in
warming, and the treatment of end of life (ELVs) vehi- the supply chain force their upstream suppliers to
cles. The automotive industry has a critical role to play become more green and sustainable. In similar lines
in ensuring more responsible product creation and sus- Carter and Dresner (2001) and Ageron, Gunasekaran,
tainable facilities, and for more efficient, eco-friendly and Spalanzani (2012) reported that suppliers can act as
and innovatively imagined personal transport options for a direct acting force to achieve sustainability and sup-
a burgeoning global population (Senxian, Jenkins, and plier support is one of the critical success factors in
Rowell 2009). Though many researchers have addressed achieving sustainability in supply chain.
economic and environment issues of automobile industry The remainder of this study is organized as follows.
in literature (e.g. Azevedo, Carvalho, and Cruz-Machado The next section presents the literature review that supports
2011; Luthra, Garg, and Haleem 2014; Mitra and Datta the research framework and hypotheses. The research
2014; Smith 2012). However, there is a gap exists methodology is presented in the third section. Results and
between the desirability of supply chain sustainability in discussion are in Section 4 followed by conclusion, implica-
theory and its implementation in practice (Bowen et al. tions, limitations and future scope of research.
2006; Despeisse et al. 2012). This depicts the importance
of automobile industry contribution in development of
sustainable communities through products particularly 2. Literature review and hypotheses
developing countries like India.
2.1. Model 1
Indian auto component industry is quite comprehen-
sive with near around 500 firms in the organized sector The research framework adopted in this study is pre-
producing practically all parts and more than 10,000 sented in Figure 1 (model 1) and Figure 2 (model 2).
firms in small unorganized sector, in tierized format Model 1 proposes that sustainability practices and inhibi-
(Automotive Component Manufacturers Association tors have influence on their SCP. Sustainability enablers
(ACMA), Ministry of Heavy Industries and Public Enter- have moderating effect on SCP. The explanation of
prises 2006). Assemblers are still considered as the major respective constructs is provided in the following subsec-
competitive units, rather than the complete supply chain tions. Based on the existent literature, four hypotheses
including the first tier component suppliers (Saad and are developed with respect to the proposed relationships
Patel 2006). It is also observed that, the collection of among the SSCI, SSCP, SSCE and SCP.
ELVs are not much emphasized in India. So, promotion
of sustainability practices in supply chain vital and chal-
lenge. Though assemblers (e.g. Hyundai, Tata, Maruthi, 2.1.1. SSC practices
Manhidra&Mahindra) have the recognized importance of Sustainable supply chain management (SSCM) is now
sustainability practices; these are at nascent stage and identified as a primary factor in promoting industrial sus-
have been gaining attention recently (Xu et al. 2013). It tainability (Tonelli, Evans, and Taticchi 2013). The term
Production Planning & Control 3

Sustainable supply SSC enablers


Sustainability is a remarkable concept to increase
chain practices
(SSCP) (SSCE) environmental performance and reduce environmental
impacts (Kannan, Pokharel, and Kumar 2009; Srivastava
H4
2007). Significant environmental impacts are associated
H1+ in three phases of life cycle of a car. These are pre-
-
H2 SC Performance assembly, assembly and use phases. The sustainable
(SCP) objective of preassembly and assembly phases is to make
clean and highly efficient production process to minimize
H3-
the waste, adverse environmental and human health haz-
SSC inhibitors ard emissions. This can be attained by the adoption of
(SSCI)
lean practices in the preassembly and assembly phases.
Implementation of lean practices results significant gain
Figure 1. Research framework (model 1). in environmental efficiency and reduce environmental
impact through more efficient use of materials and natu-
‘sustainability’ has been interpreted in a variety of ways, ral resources (Ageron, Gunasekaran, and Spalanzani
ranging from an inter-generational philosophical position 2012; Lee and Cheong 2011). Further, the design of a
to a multi-dimensional term for business management car is the important activity when aiming for decreasing
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(Ahi and Searcy 2013). For instance, researchers used an adverse affect on the natural environment. Zhu,
environmental, green, carbon account, reverse logistics, Sarkis, and Lai (2007) reported in his study eco design
closed loop supply chain and social sustainability. practices helps automobile organizations to enhance their
However, most of the researchers are inclined to environ- contribution towards sustainability. This can be attained
mental issues, as time goes on, they are increasingly through the effective supply policy of a company, it sets
adopting a triple bottom line (TBL) (i.e. environment, the overall frame and conditions for sustainable supply
economic, and social) approach. Since, TBL signifies the issues. Marinuzzi et al. (2011) found that Toyota was the
resiliency of organizations over time so that organiza- most innovative organizations who designed cars for less
tions better positioned to respond internal and external energy demand and were also more successful in dis-
shocks (Ahi and Searcy 2013). From the review of litera- covering new technology to gether with its more open
ture authors concluded that objectives of all the themes minded approach to environmental issues. Hence,
(environmental, economical, social) individually dis- technological innovation seen as a one of the important
cussed in literature are closed to the macro level defini- approach to achieve sustainability in automobile industry.
tion of sustainable development that is, development that For this organizations should incorporate sustainability
meets the needs of the present generation without com- into their corporate strategy (Koplin, Seuring, and
promising the ability of future generations to meet their Mesterharm 2007). An efficient information technology
own needs (WCED 1987). Hence, SSCM is an extension (IT) system is essential for supporting the GSCM during
of traditional concept of supply chain management by various stages of automobile supply chain. Since,
adding various perspectives from organizational theory, information’s flows associated with both forward and
operations management, business ethics, corporate social backward flow of materials and other resources to man-
responsibility, technology, engineering, economics, pol- age green supply chain efficiently (AlKhidir and Zailani
icy, political science, law and environmental science are 2009).
combined to evaluate in multi-dimensional and multi- Zhu, Sarkis, and Lai (2007) in their study, attempted
scale approaches (Preuss 2009; Seuring and Müller to develop and validate a measurement instrument for
2008b; Wittstruck and Teuteberg 2012). green automobile supply chain management practices
and they identified additional three empirically validated
and reliable dimensions which include internal environ-
Environmental mental management, investment recovery, and customer
(ENV) H5+ cooperation. Investment recovery covers the practices on
sale of excess inventory and scrap and used material.
Economic
(ECO)
Customer cooperation means cooperation with customer
for eco design, green packaging using less energy during
product transportation.
H6+ In addition to the environmental practices this study
Social
(SO)
identifies from the literature and company published
reports, a set of sustainability practices relevant to the
social concerns and sustainability leadership practices in
Figure 2. Research framework (model 2). automobile industry. Rao and Holt (2005) highlighted
4 P.R.C. Gopal and J. Thakkar

that positive and encouraging results are realized for and training of employees will require high initial invest-
those who get involved in SSCM. Ageron, Gunasekaran, ment and these are associated with the increase of direct
and Spalanzani (2012) supported these views with and transaction costs and finally turn up to the increased
empirical study and reported that customer satisfaction, overall product cost (AlKhidir and Zailani 2009; Hsu and
suppliers’ innovation capacity, quality, trust, supply risk Hu 2008; Seuring and Müller 2008a). Even though
management, and fill rate are major benefits of SSCM. implementing these practices organizations can engage in
Continuous improvement is a key performance sustainable contribution, benefits of economic and com-
indicator of sustainability in automobile industry in the petitive advantage will be realized in only in the long
areas such as energy consumption, materials and produc- term. Another important barrier is unawareness of cus-
tion, air emissions, treating of end of life vehicles which tomers; it means that customers do not know about green
are associated with preassembly, assembly and usage products and their benefits so that there is no significant
stages of life cycle of car. Because, these can be reaffirm demand of green products (Luthra et al. 2011). Seuring
over a period of time so that continuous improvement and Müller (2008a) mentioned in their study that insuffi-
leads to improved SCP. cient or missing communication in the supply chain is
The previous research as noted above clearly demon- one of the barriers for SSCM. It indicates lack of trust in
strates that these (lean practices, eco design practices, con- the relationship and fear that data confidentiality may be
tinuous improvement, risk management practices, compromised (Hassini, Surti, and Searcy 2012). Hence,
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customer cooperation ethical behaviour, investment recov- transparency of information among the supply chain is
ery, technological innovation) sustainability practices, lead one of the challenges for SSCM. These challenges (resis-
to higher levels of sustainable SCP, There is, however, tance to technology advancement adoption, supplier
many other specific sustainability practices leads to reluctance, cost implications, lack of government support,
enhance SCP. Based on this discussion, we expect that: missing communication, poor quality of human resources,
lack of top management commitment, market uncertainty)
H1: Adoption of sustainability practices has positive will negatively impact the SSC performance.
influence on SCP for Indian automobile Industry. This discussion suggests that the SSC challenges
affect negatively sustainable SCP. Although this relation-
Adoption of sustainability practices in automobile
ship has not been empirically examined in previous
industry and understanding its impact on the SCP in
research, it is axiomatic that these challenges are likely
Indian automobile industry is quite in a nascent stage
to constitute the core reasons preventing automobile
and hence the above hypothesis can help us to under-
organizations to improve their sustainability performance.
stand that can automobile industry be positively con-
This leads to the following hypotheses.
vinced for SSCP or not.
H2: There is a negative and strong direct relationship
between SSC inhibitors and the implementation
2.1.2. Sustainable supply chain inhibitors level of sustainability practices for Indian
Understanding the effect of sustainable inhibitors on automobile industry.
automobile SC performance will not be complete unless H3: There is a negative and strong direct relationship
due consideration is given to s the sustainability related between SSC inhibitors and the SC performance
inhibitors. Sustainability challenges consist of factors that for Indian automobile industry.
prevent the achievement of the sustainability SCP
through sustainability practices. In this study, a set of sus-
tainability inhibitors are identified in the Indian context. 2.1.3. Moderating impact of SSC enablers
These include cost implications, lack of long term per- Understanding the effect of sustainability sustainable SCP
spective, lack of IT implementation, resistance to technol- will not be complete unless due consideration is placed
ogy advancement adoption, poor quality of human on exploring the sustainability related enablers (Sarkis
resources, market competition and uncertainty, lack of 2001; Zhu and Sarkis 2006). These enablers facilitate the
government support systems, lack of top management achievement of the SCP through sustainability practices.
commitment, supplier reluctance and unawareness of cus- In this study, the following four major enablers are identi-
tomers (Luthra et al. 2011). In the adaptation and imple- fied. These are, measurement or monitoring and manage-
mentation of sustainability practices, cost implications are ment system (Seuring and Müller 2008), awareness about
seen as one of the fundamental reason which prevent sustainability (Brown, de Jong, and Levy 2009;
organizations from fully realizing the benefits of sustain- Geldermann, Treitz, and Rentz 2007; Luthra, Garg, and
ability in supply chains. For example, implementing Haleem 2014; Seuring and Müller 2008b), collaborative
green practices IT enablement, technology advancement relationships (Cox, Chicksand, and Palmer 2007; Geffen
adoption, hiring good quality of employees, motivating and Rothenberg 2000; Lee 2008). Carter and Dresner
Production Planning & Control 5

(2001) suggest that suppliers can act as a direct acting indicators. Since many organizations have put significant
force to achieve sustainability. Ageron, Gunasekaran, and investment to gain benefits from these practices. The
Spalanzani (2012) also reported in his empirical study debate on relationship among the TBL has been an area
supplier support is critical success factor for a sustainable of study for the past two decades. However, the signifi-
supply chain (SSC). Management systems play an impor- cance of this area in supply chain is evolving in recent
tant role to promote sustainability practices in supply years. Because of external pressures such as regulatory
chains (Marshall et al. 2014). They mainly centre on requirements and stake holders are imposed on industries
environmental management systems, namely ISO 14001 to adopt these practices (Berrone et al. 2013; Dey and
and socially related approaches, such as social account- Cheffi 2013; Hofer, Cantor, and Dai 2012; Zhu and
ability SA-8000. Arimura, Darnall, and Katayama (2011) Sarkis 2007). The fundamental question is whether
examined the multifaceted relationship between Japanese implementation of SSC practices leads to improve eco-
firms’ ISO 14001 certification and GSCM practices and it nomic performance. Much of the literature has focused
was found that ISO 14001 promotes the sustainability on relationship between environmental and economic
activities. Organizations have to also create awareness performance than social and economic performance.
(Luthra, Garg, and Haleem 2015) of the sustainability However, recently Wang and Sarkis (2013) discussed
practices that makes the product more eco friendly. It is association of environmental and social to economic per-
similar that, focal companies in the supply chain force formance. Distant views have been reported in literature
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their upstream suppliers to become more green and sus- on association of these dimensions. For example
tainable, they also trying to educate and convince its cus- Reinhardt (1999) reported that environmentally oriented
tomers to buy its green products (Hassini, Surti, and practices can aid in cost reductions and then improve
Searcy 2012). According to Luthra et al. (2011) this is economic performance. Rao and Holt (2005) and Zhu
one of the important supporting factor for automobile and Sarkis (2004) supported this view. Recent studies
customers in India. Many organizations realized the (Chan et al. 2012; Green et al. 2012; Lai and Wong
importance of working collaboratively with their supply 2012; Liu, Tang, and Xue 2012) have also confirmed
chain partners to enhance their sustainability performance there is a direct and positive relationship between envi-
(Faisal 2010). It is also increases the organizational capa- ronmental and economic performance. Rao and Holt
bilities which are expected to generate competitive advan- (2005) mentioned that the economic performance of
tage and improve sustainable SCP (Ageron, Gunasekaran, firms is improved by environmental performance through
and Spalanzani 2012; Faisal 2010; Luthra, Garg, and waste minimization; it results in better utilization of
Haleem 2014). This sustainability related enablers are natural resources, improved efficiency and higher pro-
undoubtedly affirm the level of implementation practices ductivity and reduces operating costs. However, some
in supply chain and hence improve SC performance. researchers (Cordeiro and Sarkis 1997; Sarkis and
So, it leads to the following hypothesis Cordeiro 2001) have reported that there is a negative
relationship between economic and environmental perfor-
H4: The positive relationship between SSC practices mance. Zhu and Sarkis (2007) conducted an empirical
and SC performance is greater when the level of study in Chinese automobile industry and reported that
sustainability enablers is high than when the green supply chain practices have not resulted in signifi-
level of sustainability enablers is low for Indian cant improvement in economic performance.
automobile industry. Over all, the results in the literature have often
shown that there is a positive relationship between eco-
nomic and environmental performance. From the back-
2.1.4. Supply chain performance drop of this we framed following hypothesis
To measure SCP the following performance measure are
considered on-time delivery, market share, return on H5: Environmental sustainability positively influence
investment, the growth of market share. These measures the economic sustainability
are adopted from Gunasekaran, Patel, and McGaughey
(2004) and Fawcett, Magnan, and McCarter (2008). To test the above hypothesis authors considered key
measures from literature (Chaabane, Ramudhin, and
Paquet 2011; Dey and Cheffi 2013; Koplin, Seuring, and
2.2. Causal analysis of sustainable SCP indicators Mesterharm 2007; Mohanty and Prakash 2014; Olugu,
(model 2) Wong, and Shaharoun 2011) such as reduction in energy
In the previous section, we discussed about the causality consumption, reduction in resource consumption, reduc-
among the sustainability adoption factors such as chal- tion in green house gas emissions, and reduction of solid
lenges, enablers, practices and SCP. In this section, we waste, operating cost, total sales, employee wages and
will discuss the relationship among the sustainable SCP benefits, economic value retained.
6 P.R.C. Gopal and J. Thakkar

As we discussed in previous section the number of 3. Research methodology


articles focused on assessing the relationship between Items for survey measurement have been adopted from
social and economic sustainability is very limited the literature discussed in Section 2.
(Seuring and Gold 2013). Seuring and Müller (2008a) Two questionnaires are developed in order to allow
concluded that there is a gap in understanding the rela- testing of the hypotheses of model 1 and model 2. To
tionship between social and economical sustainability in develop the questionnaire all items used 5 point Likert
supply chain. Researchers (Ageron, Gunasekaran, and scale (Appendix). Since, the concept of sustainability is
Spalanzani 2012; Ashby, Leat, and Smith 2012; Gold, more close to cognitive understanding (Byrch et al.
Seuring, and Beske 2010; Hassini, Surti, and Searcy 2007) and Likert scale is more consistent with definitions
2012; Halldórsson, Kotzab, and Larsen 2009; Seuring of beliefs or cognitions (Fishbein and Ajzen 1974). To
and Müller 2008a, 2008b) have discussed the social and support this further, Geller, Roberts, and Gilmore (1996),
economical dimensions of sustainability in supply chain and Vinodkumar and Bhasi (2010) reported that Likert
along with environmental dimensions (TBL) in different scale is most widely used scale in questionnaire survey
contexts. However, understanding the relationship based research. For example, researchers (Ageron,
between social and economical dimensions in automobile Gunasekaran, and Spalanzani 2012; Paulraj 2011; Zhu,
industry is at a nascent stage. Unlike in economic and Sarkis, and Lai 2007) used Likert scale to assess sustain-
environmental association there is a debate in association ability in supply chain.
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of social and economical performance. According to


Friedman (1970) the relationship ought to be negative.
Hoejmose, Brammer, and Millington (2013) argue that 3.1. Sampling and data collection
many firms refrain from investing in social responsibility We obtained a list of potential contacts for this research
because it is costly, and it hampers the economic perfor- through a ACMA of India and Confederation of Indian
mance. Freeman’s (1984) discussed in stakeholder point Industry. A survey instrument was developed to investi-
of view and augmented that the relationship is positive. gate the hypotheses. The questionnaire was pretested
Recent empirical studies (Margolis and Walsh 2003; through discussions with the academicians and supply
Orlitzky, Schmidt, and Rynes 2003) provide some sup- chain managers of automobile industry to ensure its con-
port for the existence of a U-shaped or inverse U shaped tent validity. During this process few items were deleted.
relationship between corporate social performance and The final items on the questionnaire were edited by two
corporate financial performance. Researchers such as supply chain managers those who have a twenty years of
Orlitzky, Schmidt, and Rynes (2003); Barnett and experience in automobile industry to ensure content
Salomon (2012); Allouche and Laroche (2005); Wu validity.
(2006); Margolis, Elfenbein, and Walsh (2007); Wang The finalized questionnaire (Appendix 1) was mailed
and Sarkis (2013); Falck and Heblich (2007) and to 636 supply chain managers. After a period of one
Kossmeier, Ariely, and Bracha (2009) argued that there month the survey questionnaire mailed again to 533 of
is a positive relation between social performance and non respondents. Totally 103 responses were obtained
economic performance. In addition to this, Loureiro, with a response rate of 16.2%. Which was found to be
Sardinha, and Reijnders et al. (2012) conducted empiri- good response rate when compared to previous studies
cal study among the three car manufacturers and reported of similar lines (Chow et al. 2008; Power, Sohal, and
that there is positive relationship was found between the Rahman 2001; Sahay, Cavale, and Mohan 2003) which
social and economic performance indicators. With this are 9–18%. A total of 103 respondents five of them were
backdrop we posit the following hypothesis not useable because of significant data missing and
incompleteness. The percentage of rest 98 usable
H6: Social sustainability positively influence the eco- responses. This data represents 72% of suppliers and
nomic sustainability 28% of original manufacturing equipment. To assess
non-respondent bias, we compared the responses of early
To test the above hypothesis authors considered and late respondents to test for their significant differ-
key measures from literature (Koplin, Seuring, and ences (Armstrong and Overton 1977). We divided the 98
Mesterharm 2007; Olugu, Wong, and Shaharoun 2011) survey respondents into two groups based on their
such as child labour, disclosure of environmental initia- responses received (first and second) and performed t-test
tives to the public, employee wellbeing, training and (Armstrong and Overton 1977) on the responses of the
education operating cost, total sales, employee wages two groups. It is observed at the 5% level, there are no
and benefits, economic value retained. significant differences between the two groups in the
To test these hypotheses, measurement instruments measurement items. Hence, there was no non-response
have been taken from Global Reporting Initiative website. bias. We also tested common method bias first, using the
Production Planning & Control 7

Harman’s single factor test (Harman 1967) (Appendix 2). 1994) authors analysed factor loadings and t-statistics for
In our study, the largest variance explained by any single the path coefficients to the corresponding items for the
factor was 27.43% (model 1) and 30.90% (model 2). To both the models. In the AMOS text output file, the t-value
further support the absence of common method bias, we is the critical ratio which represents the estimate of regres-
conducted the latent factor test (Podsakoff et al. 2003). sion weight divided by its standard error of regression
In this test, a latent factor is introduced to the original weight. In general, value greater than 1.96 or smaller than
measurement model. We found no loss in significance of −1.96 implies statistical significance at the 95% level (Ory
the factor loadings, further indicating that common and Mokhtarian 2009). From Tables 1 and 2 it evidenced
method bias is minimized in our study. that each of the standardized factor loadings indicates that
each item reaches critical values at the 95% significance
level and factor loadings exceed 0.5.The construct validity
3.2. Validity and reliability of our models is explained through the AVE (Fornell and
To test the assumptions of factor analysis Kaiser–Meyer– Larcher 1981; Koufteros 1999) and it is recommended at
Olkin (KMO) was employed in this research. The results least 0.5. The AVE results ranged for model 1 from 0.64
(KMO = 0.73) indicated that factor analysis loadings and 0.84 for model 2 in between 0.53 and 0.62.
may be considered for analyzing discriminate and con- Discriminant validity was established by comparing
vergent validity for all constructs. Tables 1 and 2 provide the squared correlation between two latent constructs to
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details of the measurement model parameters and relia- their respective AVE estimates (Fornell and Larcher,
bility. Individual construct reliability, composite reliabil- 1981). According to this test, discriminant validity exists
ity, and the average variance extracted (AVE) were also if the squared correlation between each pair of constructs
calculated in the research. The Cronbach’s α value is less than the AVE for each individual construct. Com-
ranges between 0.72 and 0.83. All values are well within paring the correlation coefficients given in Tables 3 and
the recommended range (Nunnally 1978). Composite 4 with the AVE values given in Tables 1 and 2, none of
reliabilities (CR) was found to be at least 0.6, (Fornell the squared correlations was found to be higher than the
and Larcher 1981; Lin, Wang, and Yu 2010). These val- AVE for each individual construct.
ues are computed according to the formulae discussed by
Hair et al. (1998) and results are shown in Tables 1 and
2. CR ranged from between 0.87 and 0.9 for the model 4. Results
1, 0.81 to 0.85 for model 2. The values were found to We have used structural equation models (SEM) to test
be well within the recommended range and they provide the causal relationships between four different constructs
further evidence that the measures used are internally of models 1 and 2. The structural model exhibits a rea-
consistent and have sufficient reliability. sonable fit with the data collected. Based on the analysis,
To assesses convergent validity for each construct in the AMOS provides details of the significant relation-
confirmative factor analysis (Dunn, Seaker, and Waller ships found and shown in Figure 3 (model 1), and subse-

Table 1. Measurement model parameters and reliability (model 1).

Items Factor loading t-value SMC Crobach’s α


Sustainability inhibitors (SI) (CR = 0.879; AVE = 0.841) 0.819
1. Resistence to technology advancement adoption (C1) 0.78 6.32 0.60
2. Supplier reluctance (C2) 0.93 6.89 0.86
3. Cost implications (C3) 0.63 a 0.40
4. Lack of government support (C4) 0.55 4.78 0.60
5. Missing communication(C5) 0.61 5.20 0.37
Sustainability practices (SP) (CR = 0.904; AVE = 0.657) 0.727
1. Lean practices (SP1) 0.60 4.86 0.36
2. Eco design practices (SP2) 0.63 5.08 0.40
3. Continous improvement (SP3) 0.78 5.86 0.60
4. Risk management practices (SP4) 0.66 a 0.43
5. Customer cooperation(SP5) 0.59 4.84 0.35
Supply chain performance (SCP) (CR = 0.877; AVE = 0.644) 0.789
1. Return on investment (SC1) 0.70 a 0.50
2. Total inventory cost (SC2) 0.53 4.31 0.28
3. On-time delivery(SC3) 0.69 5.22 0.48
4. Market share (SC4) 0.59 4.72 0.35
8 P.R.C. Gopal and J. Thakkar

Table 2. Measurement model parameters and reliability (model 2).

Items Factor loading t-value SMC Crobach’s α


Economic indicator (ECO) (CR = 0.819; AVE = 0.534) 0.828
1. Operating cost (EC1) 0.83 5.89 0.69
2. Total sales (EC2) 0.60 a 0.36
3. Employee wages and benefits (EC3) 0.66 5.15 0.44
4. Economic value retained (EC4) 0.82 5.86 0.68
Environmental indicator (ENV) (CR = 0.856;AVE = 0.602) 0.824
1. Reduction in energy consumption (EN1) 0.94 8.64 0.89
2. Reduction in resources consumption (EN2) 0.78 a 0.62
3. Reduction in green house gas emissions (EN3) 0.61 6.10 0.37
4. Reduction of solid waste (EN4) 0.59 5.91 0.35
Social indicator (SO) (CR = 0.822; AVE = 0.538) 0.822
1. Child labour (SO1) 0.69 6.50 0.48
2. Disclosure of environmental initiative to the Public (SO2) 0.81 7.45 0.66
3. Employee wellbeing (SO3) 0.79 a 0.62
4. Training and education (SO4) 0.67 6.27 0.44
P 2
ð kÞ
Notes: CR ¼ P 2 P .
P ð 2 kÞ þ ej
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ðk Þ
AVE ¼ P ðk2 ÞþP e (Hair et al. 1998).
j

quent hypotheses are shown in Table 5. Model fit indices Table 5 shows that there is support for H2 that the
values shows good fit (1.30 in the chi-square to degree sustainable inhibitors have strong negative relationship
of freedom ratio, GFI = 0.88, IFI = 0.95, and with implementation level of SSCP (c ¼ 0:30,
RMSEA = 0.06. All these values are satisfactory with t = −2.08). Similarly (H3), a negative relationship was
respect to the recommended range values found between sustainable inhibitors and SCP
(v2 =df ¼ 0:02  0:80; GFI = 0.75–0.99; IFI = 0.88–0.98, (c ¼ 0:53, t = −3.74). This indicates the sustainable
RMSEA = 0.00–0.13, Ory and Mokhtarian, 2009). As inhibitors hamper the SCP and it also advocate the views
hypothesized, significant relationship between SSCP and of Zaabi, Dhaheri, and Diabat (2013) that during initia-
SCP has been established (c ¼ 0:41, t = 2.59). So, H1 is tion stage of sustainability in supply chain these inhibi-
supported. This finding is not particularly surprising and tors have a negative impact.
it tends to confirm the views of Craig and Rogers To verify H4 in model 1 regarding the moderating
(2008); Green et al. (2012), and also it depicts benefits effect of SSCE, a two group analysis relying the base
of sustainability practices from our sample firms, which model represented in Figure 3 was conducted. Based on
is also widely recognized literature. enablers the sample was split into two groups according
to the mean score of the SSCE. The data above the mean
were defined as high moderating group of enablers and
Table 3. Correlation matrix and descriptive statistics of con-
structs (model 1). below the mean was considered as low moderating group

Constructs SI SP SCP
SSCI 1 SSC practices
SSCP −0.53 1 (SSCP)
SCP −0.52 0.57 1
Mean 2.23 3.15 3.27
SD 1.05 1.50 1.41 0.41
-0.53
SC
performance
(SCP)
Table 4. Correlation matrix and descriptive statistics of con-
structs (model 2).

Constructs ECO ENV SO -0.30


Sustainability
ECO 1 inhibitors
(SSCI)
ENV 0.36 1
SO 0.30 0.17 1
Mean 3.18 3.35 3.14
SD 1.10 1.21 1.15 Figure 3. Results of base path model without moderating
effect of SSC enablers (model 1).
Production Planning & Control 9

Table 5. Standardized path estimates of the model without


moderating effect (model 1). Sustainable SC
practices (SSCP)
0.39
Hypothesis Path coefficient t-value Result
H1 SSCP → SCP 0.41* 2.59 Supported SC
Performance
H2 SSCI → SSCP −0.53** −3.74 Supported (SCP)
-0.15
H3 SSCI → SCP −0.30* −2.08 Supported
*p < 0.05; **p < 0.001. -0.47
Sustainability
Inhibitors
(SSCI)
of enablers. Figures 4 and 5 shows the results of the path
model with high and low moderating effect. These
results indicate that there is a good deal of support for Figure 5. Results of base path model with low moderating
H4, that is the positive relationship between SSCP and effect of SSC enablers (model 2).
SCP much stronger (c ¼ 0:66, t = 2.94) in the high
moderating group SSCE than in the low moderating
Table 6. Standardized path estimates of the (model 2).
group of SSCE (c ¼ 0:39, t = 1.64). The explanatory
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power of the path model with high moderating effect of Hypothesis Path coefficient t-value Result
SSCE is also more significant (R2 = 0.86) than that of
H5 ENV → ECO 0.32* 2.67 Supported
the path model with low moderating group of SSCE H6 SO → ECO 0.24* 2.02 Supported
(R2 = 0.23). These findings indicate that SSCE have a
moderating effect on the relationship between SSCP and *p < 0.05.
SCP. There is no effect when enablers are low, but when
they are high the effect is significant and positive.
The hypotheses (H5 and H6) framed from the
research framework (Figure 2) were tested. Model fit Environme
ntal (ENV)
indices vales shows a value of 2.01 in the chi-square to 0.32
degree of freedom ratio, GFI = 0.85, IFI = 0.90,
Economic
RMSEA = 0.10. All these values are satisfactory with (ECO)
respect to the recommended range values 0.17
(v2=df ¼ 0:02  4:80; GFI = 0.75–0.99; IFI = 0.88–0.98,
RMSEA = 0.00–0.13, Ory and Mokhtarian, 2009). 0.24
The results of the path estimates and corresponding Social (SO)
t values are shown in Table 6. From Figure 6, indicate
that the relationship between environmental and eco-
nomic performance of automobile supply chain found to
Figure 6. Results of path model of sustainable SCP indicators
be positive and significant (c ¼ 0:32, t = 2.67). Similarly, (model 2).
we found that there is a significant positive relationship
between social and economic performance (c ¼ 0:24,
t = 2.02) that support hypothesis H6. It is observed that even though significant cost incurred to gain social sus-
tainability, but cost reduction benefits though tax exemp-
tions and incentives from the government. There is a
correlation existed in between environmental and social
Sustainable SC performance indicators.
practices
(SSCP)
SC 5. Conclusion and discussion
Performance
(SCP) This paper has empirically tested a framework identifying
the relationships among the SSCP, inhibitors, enablers
Sustainability
and SCP. This study was conducted drawing on a sample
Inhibitors (SSCI) of 98 automobile companies within India. SEM approach
was used to test the developed hypotheses. The result of
this research investigation focuses on to enhance the SSC
Figure 4. Results of base path model with high moderating literature. Hypothesis H1 revealed that SSCP have
effect of SSC enablers. positive impact on SCP. Contrary to expectations, some
10 P.R.C. Gopal and J. Thakkar

of the literature revealed that sustainable practices were tainable practices in supply chain. Understanding the
not significantly and positively related to SCP. One possi- relationship among the TBL is vital, since the intensity
ble explanation comes from Craig and Rogers (2008) of relationship differ from industry to industry. Once
studied in the view of resource dependence theory, practitioners know the relationship among the three
transaction cost economics, population ecology, and men- indicators they can trade-off between the SC measures.
tioned that sustainability is a concept to achieve long
term economic benefits rather than short term. Therefore,
automobile OEMs in India can encourage their supply 6. Managerial implications
chain partners to adopt sustainability practices, and The Indian auto industry has been growing exponentially
OEMs have to share cost at initial stage of adoption of since in the last one decade, several global auto assem-
sustainability practices to motivate them. blers have started their operations in India and it has
Similarly, results indicated that there are negative and become the outsourcing hub for global auto manufac-
strong direct relationships among SSCI with SSCP and tures. Indian automobile industry is anticipated to have
SCP. These findings in general indicate a need for seri- fourfold increments in investments and 30 new automo-
ously considering effects of certain (cost implications, bile factories through mergers and acquisitions in next
market uncertainty, and missing communication) poten- 8 years (ASAA, May 2014). The phenomenal growth in
tial barriers to effective implementation of sustainability this sector is evidential of the higher production and
practices. This finding is consistent with past research
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higher use of resources. While there is a huge increase


including Zaabi, Dhaheri, and Diabat (2013) which in the production and servicing aspects, Indian automo-
argued that there are many barriers to the successful bile sector today is facing several challenges on sustain-
implementation of SSCM, and it should be noted that ability front. The Indian auto industry is fragmented into
not all the barriers carry an equal impact. Hence, large (OEMs) and small players (SMEs & MSMEs), but
automobile supply chain managers should identify and sustainability focus is mostly limited to only large and
take remedial actions prior to the introduction of the tier 1 suppliers. There are other players such as MSMEs
SSCE. Hence, the effect of inhibitors is minimised or and unorganized sector organizations who need to shift
eradicated. From H4, it is concluded that SSC enablers to sustainability aspects. Though various views have
improve the SCP. In automobile industry SC managers been addressed on impact of sustainability on SC perfor-
should implement high level of enabling factors to gain mance, this study sets the motivation for Indian auto
significant improvement in SCP. In contrast, SC man- industry to implement sustainability practices such as
agers will not experience significant improvement in lean, eco design, risk management, continuous improve-
their SCP, even when sustainability practices are in ment and ethical behavior. This demands a proactive
place, because of the missing enablers to improve the support from Indian government in terms of specific
SC performance. Over all, based on the organization size subsidies to automobile organizations for implementing
SC managers can introduce various enablers’ levels to sustainable practices. OEMs may not realize the full
achieve continuous improvement. This study is also in scope of sustainability benefits unless bring awareness in
line with the finding of Seuring and Müller (2008) who customers for eco design vehicles and end of life vehi-
emphasized the importance of enablers from literature. cles returns in India. OEMs and suppliers need to focus
From model 2, environmental and economic perfor- on supply chain integration and should constantly moni-
mance of automobile supply chain was found to be posi- tor the key performance indicators. Today most of the
tive and significant. As we mentioned in Section 2.2, Indian auto assemblers are following reuse, recycle and
researchers have conflicting views on this relationship. reduction methods through recent technological adop-
From this study, it is concluded that, in automobile tions. However, OEMs have to extend an adequate sup-
industry, improvement of environmental performance port and motivate their suppliers continually. For
leads to cost reductions. It supports the views of example in India, about 4.4 million tonnes/annum of
Azevedo et al. (2011) who analyzed the impact of green hazardous waste ends up in waste moulds or a landfill
practices on SCP in Portuguese automobile supply chain, (Kulkarni, Rao, and Patil 2014).
found that there is a significant positive relationships Management system that is certifications (ISO&GRI)
exist between social and economic performance in help organizations to align their practices with sustain-
automobile industry. This result is in line with the ability objectives. During the interaction with SC man-
Loureiro, Sardinha, and Reijnders (2012)’s study in the agers, the authors ascertained that OEMs need to
automobile industry where they found, social perfor- improve their frequency of training programs on sustain-
mance can lead to lowering costs and risks. ability with employees and suppliers. This study has
As, implementation of sustainable practices are in a revealed that adoption of environmental practices in
nascent stage in India, this study helps the automobile Indian automobile organizations such as reduction of
practitioners to reinforce their views on adoption of sus- energy consumption, resource consumption, emissions
Production Planning & Control 11

and solid waste can see significant improvements in their Notes on contributors
economic performance. Luthra, Garg, and Haleem (2014)
also reported that these measures are critical success fac- P.R.C. Gopal is an assistant professor in
Thiagarajar School of Management, Madurai,
tors for achieving sustainability in Indian automobile Tamilnadu. He is a part time research scholar
industry. Hence, SC managers can consider these mea- in the Department of Industrial and Systems
sures as continuous improvement areas. Social practices Engineering at IIT Kharagpur. He did his
such as disclosure of environmental initiatives, employee MBA from National Institute of Technology
wellbeing can improve Indian automobile organizations’ (NIT) Warangal in 2008 and Bachelors
in Mechanical Engineering in 2005 from
brand in globally and further it improves the economic Bapatla Engineering College, Acharya Nagar-
performance. The Indian automobile industry’s great con- juna University, Andhra Pradesh. He has two research publications
cerns is about identifying and defining appropriate sup- in peer reviewed international journals like International Journal of
ply chain sustainability measures and hence keep on Sustainable Engineering, International Journal of Productivity
monitoring the portfolio of their sustainability measures and Performance Management.
and their relative importance. This study advocates the
development of an index for evaluating sustainability for Jitesh Thakkar is an associate professor in
an individual organization and seeking the opportunities the Department of Industrial and Systems
for future improvements based on a holistic (TBL Engineering at IIT Kharagpur. He obtained
his Doctoral Degree in the area of Supply
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approach) assessment of present practices.


Chain Management from Indian Institute of
Technology (IIT) Delhi in 2009. He did his
M.Tech. in Industrial Engineering with 9.157
CGPA from Indian Institute of Technology
7. Limitations and future research directions (IIT) Delhi and Bachelors in Mechanical
It should be noted that although this study contributes Engineering with Gold Medal from B.V.M Engineering College,
S.P. University, Gujarat. He is a recipient of award “Excellence
new insights to both automobile supply chain practition- in teaching and research (for Year 2007)” given by Charutar
ers and researchers. It has limitations and viable pro- Vidya Mandal – a leading educational trust in Gujarat. He has 15
spects for further research. The sample size is small. research publications in peer reviewed international journals like
Further research is required to make confident general- International Journal of Productivity and Performance Manage-
izations. In future longitudinal studies can be conducted ment, International Journal of Six Sigma and Competitive
Advantage, Journal of Manufacturing Technology Management,
to understand whether the relationship among the TBL Journal of Small Business and Enterprise Development, Interna-
indicators remains positive or not (e.g. curvilinear or U tional Journal of Innovation and Learning etc.
shape). Future research should explore cross-industry
studies to understand the relationship among the sustain-
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Production Planning & Control 15

Appendix 1. (Questionnaire) (Model 1) A.4 SC performance


A.1 SSC practices How did your supply chain perform over the last 3 years rela-
tive to their major competitors on each of the following perfor-
Please indicate the extent to which the following sustainability
mance criteria? (Five-point scales ranging from ‘definitely
practices were implemented in your organization supply chain
better’ to ‘definitely worse’).
(1-not at all implemented 5-fully implemented).
Question Variables Measurement
Question Variables Measurement
1. Return on investment (SC1) 1-5
1. Lean practices (SP1) 1-5
2. Total inventory cost (SC2) 1-5
2. Eco design practices (SP2) 1-5
3. On-time delivery(SC3) 1-5
3. Continuous improvement (SP3) 1-5
4. Market share (SC4) 1-5
4. Risk management practices (SP4) 1-5
5. Ethical behaviour (SP5) 1-5
6. Investment recovery* 1-5
7. Technological innovation* 1-5 Model 2 Questionnaire
8. Customer cooperation* 1-5 How did your supply chain perform over the last 3 years rela-
*Items are deleted during EFA. tive to their major competitors on each of the following perfor-
mance criteria? (Five-point scales ranging from ‘definitely
better’ to ‘definitely worse’).
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A.2 SSC inhibitors Economic Perspective


Please indicate to what extent you perceive that the following Question Variables Measurement
items are BARRIERS/CHALLENGES to successful IMPLE-
MENTATION of sustainability practices in your organization 1. Operating cost (EC1) 1-5
supply chain (Five-point scales ranging from 1-‘not at all’ to 5- 2. Total sales (EC2) 1-5
‘very frequently’). 3. Employee wages and benefits (EC3) 1-5
4. Economic value retained (EC4) 1-5
Question Variables Measurement
1. Cost implications (SI1) 1-5
2. Resistance to technology 1-5 Environmental Perspective
advancement adoption (SI2)
How did your supply chain perform over the last 3 years rela-
3. Lack of government support(SI3) 1-5
tive to their major competitors on each of the following perfor-
4. Unawareness of customers(SI4) 1-5
mance criteria? (Five-point scales ranging from ‘definitely
5. Missing communication(SI5) 1-5
better’ to ‘definitely worse’).
6. Poor quality of human resources* 1-5
7. Lack of top management 1-5 Question Variables Measurement
commitment*
8. Market uncertainty* 1-5 1. Reduction in energy consumption 1-5
(EN1)
*Items are deleted during EFA. 2. Reduction in resources consumption 1-5
(EN2)
3. Reduction in green house gas 1-5
emissions (EN3)
4. Reduction of solid waste (EN4) 1-5
A.3 SSC enablers
Please indicate to what extent to which you perceive that the
following items are important to successful IMPLEMENTA-
TION of sustainability practices in your organization supply Social Perspective
chain (Five-point scales ranging from 1-of no importance’ to 5- How did your supply chain perform over the last 3 years rela-
‘of major importance’). tive to their major competitors on each of the following perfor-
mance criteria? (Five-point scales ranging from ‘definitely
Question Variables Measurement better’ to ‘definitely worse’).
1. Reduction in energy consumption 1-5 Question Variables Measurement
(EN1)
2. Reduction in resources consumption 1-5 1. Child labour (SO1) 1-5
(EN2) 2. Disclosure of environmental 1-5
3. Reduction in green house gas 1-5 initiative to the Public (SO2)
emissions (EN3) 3. Employee wellbeing (SO3) 1-5
4. Reduction of solid waste (EN4) 1-5 4. Training and Education (SO4) 1-5
16 P.R.C. Gopal and J. Thakkar

Appendix 2
Model 1.
Total Variance Explained - Model 1
Initial Eigenvalues Extraction Sums of Squared Loadings
Component Total % of Variance Cumulative % Total % of Variance Cumulative %
1 5.487 27.433 27.433 5.487 27.433 27.433
2 2.061 10.307 37.740 2.061 10.307 37.740
3 1.679 8.394 46.134 1.679 8.394 46.134
4 1.311 6.555 52.689 1.311 6.555 52.689
5 1.225 6.125 58.814 1.225 6.125 58.814
6 1.152 5.762 64.576 1.152 5.762 64.576
7 1.026 5.129 69.705 1.026 5.129 69.705
8 .822 4.111 73.816
9 .797 3.985 77.801
10 .679 3.393 81.194
11 .649 3.243 84.437
12 .568 2.842 87.278
13 .494 2.470 89.748
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14 .396 1.981 91.729


15 .385 1.923 93.652
16 .355 1.773 95.425
17 .286 1.428 96.853
18 .262 1.310 98.162
19 .202 1.010 99.173
20 .165 .827 100.000

Model 2.
Total Variance Explained-Model 2
Initial Eigenvalues Extraction Sums of Squared Loadings
Component Total % of Variance Cumulative % Total % of Variance Cumulative %
1 3.709 30.906 30.906 3.709 30.906 30.906
2 2.492 20.768 51.674 2.492 20.768 51.674
3 1.938 16.147 67.821 1.938 16.147 67.821
4 .818 6.818 74.639
5 .643 5.362 80.001
6 .563 4.690 84.691
7 .434 3.616 88.307
8 .393 3.279 91.586
9 .309 2.574 94.160
10 .302 2.514 96.674
11 .210 1.751 98.425
12 .189 1.575 100.000

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