Bagus Developing A Model For Supply Chain Agility and Innovativeness To Enhance Firms'

Management Decision
Developing a model for supply chain agility and innovativeness to enhance firms’
competitive advantage
Chih-Jou Chen,
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Supply chain
Developing a model for agility and
supply chain agility and innovativeness
innovativeness to enhance firms’

competitive advantage
Chih-Jou Chen Received 14 January 2018
Revised 10 September 2018
Department of Marketing and Logistics Management, Accepted 21 September 2018
National Penghu University of Science and Technology, Magong, Taiwan
Abstract
Purpose – Developing agility and innovativeness as dynamic capabilities are important for firms to sustain
their competitive advantage in today’s global economy. The purpose of this paper is to develop and
empirically test a framework to investigate how the supply chain agility and innovativeness are achieved
through IT integration and trust in members of supply chain and how these, in turn, can enhance firms’
competitive advantage.
Design/methodology/approach – This research employs a survey method and data are collected from
senior managers working in the supply chain or IT area. The model and hypotheses are tested utilizing data
from 204 usable Taiwan manufacturing firms via structural equations modeling methodology.
Findings – The study demonstrates that both IT integration and trust in supply chain members significantly
enhance supply chain agility and innovativeness, which in turn positively affect firm’s competitive
advantage. The results indicate that IT integration and trust are antecedents and major joint partnership
resources for improving supply chain agility and innovativeness.
Research limitations/implications – Data are collected from manufacturing industry in Taiwan and
single respondent from each firm, the generalizability of current findings to other industries or countries
should require additional investigation.
Practical implications – The study suggests that a firm should focus on IT integration and trust in supply
chain members to achieve supply chain agility and innovativeness. To take advantage of supply chain agility
and innovativeness, through maximizing firm’s competitive advantage, firms should continually adapt to the
fast changing business environment and search for creative ways to satisfy new market needs.
Originality/value – Given the attention paid to supply chain agility and innovativeness in terms of
importance to responding to business uncertainty and competitiveness, and more recently, as important
capabilities in managing supply chain management, this paper investigates how IT integration and trust can
contribute to supply chain agility and innovativeness. Provide evidence regarding the impact of IT
integration and trust on agility of supply chains, innovativeness and competitive advantage.
Keywords Innovativeness, Trust, Competitive advantage, IT integration, Supply chain agility
Paper type Research paper
1. Introduction
In today’s global marketplace – exemplified by fast changing consumer preferences, raising
competitive challenges, short product life cycles, and temporary advantage – the ability to
respond and innovate has become an indispensable organizational capability (Lee, 2002).
Indeed, quick response and constant innovation are primary sources of sustainable
advantage (Distanont and Khongmalai, 2018; DeGroote and Marx, 2013). As dynamic
capabilities, agility and innovativeness enable companies to respond to unforeseen events,
cope with unexpected challenges, and raise the competitive edge (Slater et al., 2010). Agility
is an ability which enables firms to operate effectively in an ever-changing environment full
of uncertainty and instability (Sahin, 2000). Agility is also a business-wide capability that
embraces organizational structures, information systems, logistics processes, and, in Management Decision
particular, mindsets (Hartványi and Nagy, 2008). Specifically, organizations with agility © Emerald Publishing Limited
0025-1747
can better take advantage of changes as opportunities and synchronize supply with DOI 10.1108/MD-12-2017-1236
MD demand (Swafford et al., 2008). Braunscheidel and Suresh (2009) noted that with intense
competitive pressures as well as high levels of turbulence and uncertainty, organizations
require agility in their supply chains. Moreover, agility can improve financial and
operational performance: sales, profitability, speed to market, market share and customer
satisfaction (DeGroote and Marx, 2013).
Innovativeness is important for organizational sustainability, as firms need to be
innovative in order to survive in highly competitive environments (Calantone et al., 2002).
Besides, innovativeness enables companies to sense competitive opportunities and threats,
make promptly and customer-oriented decisions, develop new product to meet the market
needs and evolving customer expectations better than the competition (Barreto, 2010). If these
activities result successfully they will impact and enhance performance (Su et al., 2015).
The ability to innovate is recognized as one of the determinant factors for organizations to
survive and succeed (Maury, 2018; Wang and Ahmed, 2004). Innovativeness is an important
organizational capability, because the success of new products is the engine of growth which
has a strong effect on increasing sales, profits and power of competition for many
organizations (Kuncoro and Suriani, 2018; Battor and Battor, 2010). However, a firm’s
competitive advantage depends largely on the links it forges with external organizations
rather than its internal capabilities (Ramdas and Spekman, 2000). The world is in the era of
supply chain competition, where organization no longer acts in isolation as an independent
entity, but as a supply chain to create value delivery systems that are more responsive
and agile to fast-changing markets, more consistent and reliable (Pandey and Garg, 2009).
Both of agility and innovativeness at the organizational level are broad concepts; thus, we
focus only on agility and innovativeness in firm’s internal supply chains.
The core capabilities of a company lie in its ability to design and manage its supply chain
in order to gain maximum advantage in the market where competitive forces are changing.
To be reliable in highly uncertain environments, supply chains need to be able to respond
quickly to external changes (Lee, 2002). To deal with such a high level of turbulence and
uncertainty, organizations require agility in their supply chains to provide superior value
and new product as well as to manage business disruption risks and ensure uninterrupted
service to customers. Naturally this is also true for organizations that are highly
interdependent in a supply chain, and indeed the ability to generate innovativeness is
essential for supply chain members seeking to adapt and modify themselves to achieve a
parity between their organizations’ responsiveness and marketplace’ changes by improving
their flexibility in all operational activities (Moon et al., 2012). Hence, in order to cope with
rapidly changing and competition, organizations have gradually realized that they should
cooperate more closely and efficiently with their partners. The interactions and
relationships among members in supply chains are beneficial for organizations to
collaborate and innovate (Panayides and Lun, 2009). Building relationships of trust seems
to be a continuously attractive feature for business partners in contemporary society.
Through effective and quick interaction, corporation and integration among the members in
supply chains, firms can further create competitive and innovative solutions to satisfy the
diversified needs from customers.
The two joint partnership resources: Information Technology (IT) and trust, may be
viewed as two potentially key drivers of enhancing to promote interacting, sharing and
collaborative decision making among partners (Singh and Teng, 2016). Indeed, efficient IT
integration and partnership among partners in supply chains can be considered as a crucial
and strategical issue of sustaining competitive advantage for firms and supply chains
(Byrd and Davidson, 2003). A number of research studies have focused on these two
important factors of success in supply chains (Rai et al., 2006). However, achieving the close
level of trust in relationships which business partners hope for is not easy during the
business cooperation period.
The role of IT integration and inter-organizational trust ensure firm to gain competitive Supply chain
advantage (Singh and Teng, 2016). Besides, researchers have shown that supply chain agility agility and
and innovativeness may work in conjunction with IT or trust and contribute to the overall innovativeness
success of the chain through outcome measures (Panayides and Lun, 2009; Yang, 2014).
Previous studies, explore only fragmented parts of the whole phenomenon thereby missing
crucial links in the presence of other influential factors. Despite some theoretical and
conceptual works suggesting that these two constructs may relate to supply chain agility
and innovativeness; this has not yet been assessed together empirically. This study aims to
address this gap in the literature. The purpose of this paper is to investigate how the supply
chain agility and innovativeness are achieved through IT integration and trust in supply
chain members and how these, in turn, can enhance firm’s competitive advantage.
This paper consists of six sections including this introduction section. Section 2 provides
theoretical background and builds hypotheses. Section 3 describes the research

methodology whereas Section 4 provides analysis and results. Section 5 concludes the
study and discusses practical contributions. The last section consists of limitations and
possible directions for future research.
2. Theoretical background and hypotheses development

With increasing global competition, manufacturers seek ways to build sustainable
competitive advantage in order to enhance their competitive position. Competitive
advantage can come from a variety of sources, such as superior quality, advanced
technology, quick response to market changes and needs, product and service
differentiation, but the advantage is most sustainable when it is difficult to imitate.
The dynamic capabilities perspective (DCP) is a widely applied paradigm to explain
variance in performance across competing firms. The DCP refers to the ability of a firm to
integrate, build, renew, adapt and reconfigure its resource base in response to dynamism in
the external changing environment (Vahlne and Johanson, 2013). The DCP is a framework
which extends and applies both the resource-based view (RBV ) and the competence-
capabilities perspective to explain the sources of firm-level competitive advantage over time
(Teece, 2007). Dynamic capability is regarded as a higher-level routine that is used to adapt
operational routines and capabilities to develop new value-creating strategies (Salvato and
Rerup, 2011). Scholars suggest that organizational capabilities can be conceptualized as a
hierarchy, with a higher-order capability being developed through a series of lower-order
capabilities (Kraaijenbrink et al., 2010). Supply chain agility, as a type of operational
capability, refers to a firm’s ability to perform operational activities together with
channel partners in order to adapt or respond to marketplace changes in a rapid manner
(Swafford et al., 2008). Innovativeness is firms’ capacity to bring in new products and
processes (Azadegan and Dooley, 2010), generate new ideas (Hult et al., 2004), respond quickly
to customer requirement changes (Tavani et al., 2013), improve their ability to escape
competition (Porter, 2011) and enhance customer satisfaction (Simon and Yaya, 2012). In this
view, both supply chain agility and innovativeness are widely defined as higher-order
capabilities that enable firms to exploit existing lower-order capability.
Accordingly, in current IT business value research, scholars increasingly regard IT
capabilities as lower-order capabilities that enabling the development of higher-order
capabilities, such as agility, knowledge management as well as new product development
dynamic and operational capabilities, rather than higher-order capabilities in themselves
(Baier et al., 2008). Research suggests that trust may serve as the “relational lubricant”
(Ireland and Webb, 2007) that allows knowledge transfer, joint learning, collaboration and
revenue-sharing to occur in supply chain organizations (Inkpen, 2001). Trust and IT may be
viewed as two joint partnership resources/principle levers helping to promote sharing and
collaborative decision making among partners (Singh and Teng, 2016).
MD Following this logic and according to the DCP, the current study proposes that both IT
integration and trust in supply chain members are lower-order capabilities that can be
leveraged to develop higher-order capabilities (i.e. supply chain agility and innovativeness)
that, in turn, directly affect firms’ competitive advantage. Figure 1 shows the research model.
2.1 IT integration
IT has long been theorized to reduce imperfect information and uncertainty, enhance firms’
information processing capability (Daft and Lengel, 1986), and act as a safekeeping by
decreasing information asymmetries and improving group norms among the partners
(Singh and Teng, 2016). IT supports the firms’ operations, unifies distant links of the supply
chain and growing interlinks firms with its customers (Barros et al., 2015). IT integration not
only enables process automation, but also can provide the ability to disseminate timely and
accurate information, resulting in improved managerial and employee decision-making
(Hitt et al., 2002). Many firms have increasingly employed intra and inter-organizational
information systems to coordinate their internal functions and also coordinate with their
customers, suppliers and business partners (Devaraj et al., 2007; Sun and Teng, 2012).
IT integration includes three elements: physical flow integration, information flow
integration and financial flow integration (Rai et al., 2006). Hence, IT integration plays
remarkable role in supply chain management by integrating firm networks
and synchronizing material, information and financial flow (Acar and Uzunlar, 2014).
In a supply chain environment, the depth and breadth of IT integration between partners,
covers computer mediated communications, processes, sharing, monitoring, coordination
and joint decision making (Singh and Teng, 2016). In this way, the managers and decision
makers can make sound judgments based on valid information, and thus IT integration is
one of the critical issues of supply chain management.
IT systems, techniques and practices are used to enable information sharing all over
supply chain partners, by incorporate both internal and external business functions. IT
integration can be defined as the degree of communication, coordination and relevant
information integration among various internal functional departments and external supply
chain partners (Swafford et al., 2008).
2.2 Trust
Trust is widely researched in the social exchange literature (Zaheer et al., 1998). While the
social exchange theory suggests organizational reactions are contingent on the rewarding
actions from the exchange relationship (Blau, 1964), when firms experience trust they tend
to reciprocate and consider the needs of the trusting partners. Trust will help sustain the
intention of both parties to continue cooperation (Doney and Cannon, 1997). Dodgson (1993)
argues that a high level of trust is an important ingredient necessary for facilitating
communication needed for generation of learning and innovation. Moreover, trust is an
important foundation by which to improve the interactive performance among
IT H2(+) Supply Chain

Integration Agility H6(+)
H4(+) Competitive
H1(+)
H3(+) Advantage
Figure 1. H7(+)
Research framework Trust Innovativeness
H5(+)
organizations (Smith and Barclay, 1997), as well as a critical part of the process of achieving Supply chain
the goals of both parties (Kasper-Fuehrera and Ashkanasy, 2001). agility and
Trust refers to the extent to which partners in a relationship perceive each other as innovativeness
credible and benevolent. The trust construct is used to reflect the level of the cooperation
and competition relationships between supply chain members. In this context, trust is
regarded as a firm’s belief that its supply chain partners will perform actions that will result
in positive outcomes and will not take unexpected actions that result in negative outcomes
for the firm (Anderson and Narus, 1990). The strength of this belief thus may lead the
firm to have confidence in its partner’s reliability and integrity (Morgan and Hunt, 1994).
Anderson et al. (1987) also defined trust as an overall evaluation of the honesty and trust
that one party feels with regard to another, and the trust among organizations is regarded
as an important mechanism of coordination and integration among them.
Organizational trust can be divided into intra- and inter-organizational trust. Trust is a
key construct in inter-organizational relationships (Talay and Akdeniz, 2014).
Inter-organizational trust refers to the extent to which organizational members have a
collectively held trust orientation toward the partner firm ( Jeffries and Reed, 2000). Inter-
organizational trust is widely acknowledged as a key relational mechanism in governing
and coordinating logistics activities between partner firms (Lai et al., 2008). Trust is
important for the information sharing and collaboration between supply chain partners and
development of long-term collaborative strategy (Stonkutė and Vveinhardt, 2016).
Therefore, inter-organizational trust in a supply chain relationship will bring the high
levels of cooperation, and further improve the satisfaction of both parties.
By eliminating the restrictions of place and time, IT integration encourages mutual
cooperation among different partners, which can increase both learning and interaction
efficiency among organizations. Organizations use IT to make connections among internal
functional departments and external supply chain partners in order to transform important
data into useful knowledge. If connectivity is enhanced through IT integration, firm
partners can more easily share individual interpretations of the information, thereby
making consensus development more efficient. Due to the smooth communication flows
achieved by IT integration, partners can become more familiar with each other and with the
operations of their businesses, thus aiding the development (Chiou et al., 2004). The level of
integration in such computer mediated systems is capable of facilitating value added
partnerships, reducing costs and influencing partner relationships (Grover et al., 2002).
Information technologies assist partners in information exchange which has been linked in
the previous research to increases in trust levels (Dyer and Chu, 2003). IT integration can
separate an investment’s beneficial impact on coordination costs from the damaging impact
on its transaction costs, thus allowing firms to move toward the establishment of long-term,
stable partnerships and increase resource utilization through greater coordination.
Sheu et al. (2006) found that better IT integration as well as better communication
contributes to a better platform for both parties to engage in coordination, participation and
problem-solving activities. The resulting information transparency through the integration
is beneficial for establishing forbearance and developing inter-organizational trust due to
the reduced need for monitoring and evaluating the partner firm’s behavior (Wei et al., 2012).
Thus, it is proposed that:
H1. IT integration of firms is positively related to trust in supply chain members.
2.3 Supply chain agility

Supply chain agility refers to the degree of swiftness with which supply chains respond to
customer’s needs (Christopher, 2012). Supply chain agility represents the ability of an
organization’s internal supply chain functions to provide a strategic advantage by
MD responding to marketplace uncertainty. The key feature of an agile organization is
flexibility, and organizations with supply chain agility can better respond to unforeseen
cases or accidents (Swafford et al., 2008). Supply chain agility comprises of customer
satisfaction, quality improvement, cost minimization, delivery speed, new product
introduction, service level improvement, lead time reduction (Agarwal et al., 2007).
Supply chain agility enables the firm to make timely decisions to deal with SC problems
such as delivery delays, unsatisfied customers and lead time issues because agility allows to
quickly deal with conflicts in the strategic decision-making process and improves
responsiveness to environmental changes (Swafford et al., 2008).
Achieving supply chain agility allows firms to reduce inventory, counteract market
variations efficiently, respond to consumer demand quickly, and integrate with suppliers and
partners effectively. Gligor et al. (2013) have defined supply chain agility as the ability of the
firm to quickly adjust tactics and operations within its supply chain to respond to
environmental changes, opportunities and threats. It enables firms to provide customer-oriented
products and services through reallocation of resources and best practice integration in a
rapidly changing environment. Supply chain agility enhances the ability of the entire supply
chain to create value, because the key to this is satisfying customer demand in a prompt manner
(Meredith and Francis, 2000). Supply chain agility is considered as a key element of an
organization’s competitive strategy.
IT provides the mechanism for firms to effectively collect, store, reach, share, and
analyze data (Swafford et al., 2008). IT would deliver electronic information to partners in
real time, which greatly improves speed, flexibility and responsiveness. A firm with a high
level of IT integration across different channels of operation may be able to transmit,
combine and process external data from customers and suppliers/vendors. Li et al. (2009)
stated that IT integration can facilitate information sharing, communication and
coordination in the areas of demand estimation, production scheduling, and inventory
and production quality. The effective integration and application of IT can improve the
timeliness, correctness of information flows, and promote the sharing of knowledge
(Handfield and Nichols, 2002). IT integration may be effortless in such a firm to share data
among various internal systems (e.g. forecasting, production, shipment and accounting) and
to retrieve information from various databases for decision support. Further, external and
internal systems can automatically reflect order changes in downstream processes or
systems (Barua et al., 2004) and help monitor order status at various stages in the process of
a manufacturing plant. IT is regarded as a major enabler and facilitator of agility.
Information and knowledge sharing can create opportunities to increase supply chain
agility (Mondragon et al., 2004). DeGroote and Marx (2013) conduct empiric survey that
investigates the impact of IT on supply chain agility measured by the ability to sense and
respond to market changes. Therefore, the following hypothesis is considered:
H2. IT integration of firms is positively related to supply chain agility.
Trust among partners in inter-organizational relationships improves communication and
dialogue and can create common strategic visions. Trust among partners has a positive
influence on supply chain responsiveness (Handfield and Nichols, 2002).
The implementation of a lean, responsive and agile supply chain relies on a higher
degree of trust (Svensson, 2001). In supply chain context trust sets an arrangement in which
firms contribute the minimum amount of resources and time to an inter-organizational
relationship to achieve efficiency and the expected benefits of trust based transaction exceed
the expected costs (McCarter and Northcraft, 2007). In fact, all of the good corporations for
better performance of supply chains are based on the trust and good relationships among
partners, and therefore to enhance supply chain systems can be operated and implemented
efficiently (Panayides and Lun, 2009). Trust has been proven to have a close relationship
with speeding up the product development cycle in supply chains. The greater agility in a Supply chain
supply chain can only be achieved effectively through close communication and agility and
consultations among suppliers, manufacturers and distributors (Lin et al., 2006). Trust is the innovativeness
basis of agility and flexibility (Kirby, 2003). Mutual trust can have a positive impact on
desire and ability of the partners to adjust to changing environmental demands
through modification or termination of the agreement (Young-Ybarra and Wiersema, 1999).
Minnaar et al. (2017) find that trust is interactively related to control in complex and often
unpredictable ways rather than in linear ways that result from managerial decision-making.
Accordingly, we hypothesize that:
H3. Trust in supply chain members is positively related to supply chain agility.
2.4 Innovativeness
Innovativeness is firms’ capacity to bring in new products and processes (Azadegan and
Dooley, 2010), generate new ideas (Hult et al., 2004), respond quickly to customer
requirement changes (Tavani et al., 2013) and enhance customer satisfaction (Simon and
Yaya, 2012). Many empirical studies have found that firms’ innovativeness yields higher
financial performance (Yu et al., 2013). The definitions of innovation and innovativeness are
not consistent in the literature (Damanpour, 1987), and the two terms are often used
interchangeably (Garcia and Calantone, 2002). Innovation is a revolution or a new idea that
can improve a product, procedure and/or service (Robbins and Judge, 2012), it can gradually
improve a product, procedure, organizational system or marketing system to create value
for customers. Innovativeness is generally characterized as a function of adoption of a new
idea or action. Hult et al. (2004) state that innovativeness relates to a firm’s capacity to
engage in innovation. According to the previous mentioned, here innovativeness is defined
as the degree of a manufacturer’s openness to using a new idea or action in relation to its
logistics, facilities, systems, procedures, policies, plans, products or services.
Information sharing is one of the benefits of IT integration which facilitates firms to
integrate information in different practices such as logistics and distribution, procurement
and manufacturing (Swafford et al., 2008). IT integration enables the firm to continually
analyze changes in customer needs, competitive action and product-market options, seek
customer feedback and input, and monitor customers’ satisfaction and expectations.
Interaction through IT integration will strengthen openness and commitment, and
discourage malfeasance and opportunism between partners, which in turn may promote
partner cooperation. Close discussions can help inspire creativity from the product
development team, and the formation of new knowledge (Ford and Randolph, 1992). As
such, IT integration reinforces a cooperative exchange relationship, where the buyers and
suppliers have common goal, share information and resources in operations, and realize
mutually beneficial solutions. The communication and coordination with external partners
through IT is helpful to integrate customers and suppliers into the supply chain
management process for better product design, customer service and total performance
(Bajaj et al., 2004). It is also helpful to create innovations, as well as overcoming and
correcting problems prior to their occurrence (Dröge et al., 2000). Thus, it is proposed that:
H4. IT integration of firms is positively related to innovativeness in the supply chain.
From a social capital theory perspective, trust is a relational lubricant, allowing greater benefits
of knowledge transfer, joint learning, and the sharing of risks and costs associated with
exploring and exploiting opportunities (Inkpen, 2001). With higher levels of trust in a supply
chain, partners are more prone to invest assets specific to the relationship such as personnel
training, co-located facilities, manufacturing or marketing processes, research and development
of new and existing products and actual production equipment (Willette et al., 2016).
MD Trust may generate positive atmosphere among key players involve in innovation capability
building process. The higher degree of trust among supply chain partners can likely inspire
innovation, while a lower degree of trust has been shown to stifle it (Landry et al., 2002).
Because trust is a group-held mindset, it promotes and strengthens the cooperation and
coordination among supply chain partners (Ojha et al., 2016). When partners come together and
establish trusting relationships, knowledge, information and other key strategic resources are
more likely to be shared effectively and collaboratively (Barnes and Liao, 2012). In addition,
Armbrecht et al. (2001) indicated that new perspectives and information can result from
knowledge sharing, thus leading to the creation of new products or services. Trust is
essential to enhance business innovation (Panayides and Lun, 2009), the good relationships
among partners within supply chain would promote innovation since the members are
influenced by each other, which further also affects their innovativeness and decision-making.
Fawcett et al. (2012) also found that trust enabled collaborative innovation, generate superior
business performance among supply chain network. The interdependence and long-term
relationships among members within supply chain are important facilitators of innovativeness
( Jean et al., 2010). Thus, it is proposed that:
H5. Trust in supply chain members is positively related to innovativeness in the
supply chain.
2.5 Competitive advantage

Competitive advantage exists when a firm has a product or service that is perceived by its
target market customers as better than that of its competitors. Competitive advantage is
composed of the action results and managerial decisions which result in the organization’s
superior performance when compared to those of their competitors (Barney, 1991;
De Guimaraes et al., 2016). Competitive advantages pertain to a firm’s ability to show a
higher degree of competitiveness as compared to its rivals within a given industry, such as
being able to reduce cost, creating distinct products or services, or better satisfy customers
(Porter, 2011). A firm is said to have competitive advantage when the existed or potential
competitors can not duplicate or it will cost much to imitate.
Besides being significantly different from competitors, firms have to consider other key
success factors, such as being able to cope with environmental changes and resist the
actions of competitors (Aaker, 2008). The competitive advantage of a firm is not only seen
with regard to tangible products, but also in relation to intangible abilities, efficiency and
customer responses. Reed and DeFillippi (1990) argue that competitive advantage can be
derived from numerous sources. For instance, competencies are within the organization’s
control and can be exploited to generate competitive advantage for superior performance
(Hinterhuber, 2013).
In long term competitive advantage, companies acquire sustainable competitive
advantage through their ability in developing a set of main competence so that they can
service their targeted customers better than their competitors. The main competence refers
to a set of unique competence which is developed in a company in its main fields, such as
quality, customer service, innovation, flexibility, responsiveness so that it can surpass its
competitors (Srivastava et al., 2013). Therefore, competitive advantage can be defined as the
state in which an organization has better resources and implementation abilities so as to
reduce costs, create more value for customers, and gain better business performance in
long-term competition with rival firms.
Supply chain agility focuses on improving adaptability and flexibility for responding
effectively to the changing market environment (Lee et al., 2013). Supply chain agility has
the ability to rapidly respond to changes in market and customer demands as the bearer of
competitive advantage. Lin et al. (2006) have stated that in order to achieve an edge over
competitors in the rapidly changing business environment, organizations must align with Supply chain
suppliers and customers to streamline operations and work together to achieve a level of agility and
agility beyond individual organizations. Supply chain agility enables an organization to cut innovativeness
down on production costs, improve customer satisfaction and remove non-value adding
activities, so as to maintain an advantageous position in a competitive environment
(Braunscheidel and Suresh, 2009). Lee (2004) argues that organizations like H&M, Mano and
Zara use supply chain agility to differentiate themselves from their competitors. Previous
researches have explored supply chain agility’s significant impact on firm to gain higher
business performance and competitive advantage (Yang, 2014; Dubey et al., 2018).
Supply chain agility is important for firms to gain competitive advantage (Wu et al., 2017).
Therefore, the following hypothesis is put forth:
H6. Supply chain agility is positively related to firm’s competitive advantage.
Innovativeness refers to a firm’s tendency to engage in and support new ideas,

experimentation and creative processes that may result in new products, services or
technological processes (DeTienne et al., 2015; Shan et al., 2016). Innovativeness is an
indispensable ability that can help a firm to surpass the expectations of customers.
Deshpandé and Farley (2004) pointed out that innovativeness can bring enterprises better
performance, and help them to develop products, procedures and management
mechanisms that are diversified, valuable, rare, differentiated and difficult to imitate.
Innovativeness is a kind of crucial resource or ability for firms to gain competitive
advantages over competing firms. Innovativeness has previously been recognized as a
knowledge-based (intangible) resource that provides competitive advantage (Cassia and
Minola, 2012; Rasmussen, 2014). This resource enables the organization to create
long-term competition by gathering knowledge, skills in technology, and experience in
creativity and development and introducing new ideas in the form of product innovation,
process innovation, or business model innovation. Without innovativeness, firms may be
unable to transform resources into outputs (Hult et al., 2004). Hult et al. (2004) stated that
managers can find feasible solutions to problems and challenges through innovativeness,
which helps enterprises to maintain a competitive advantage and also helps avoid
declines. More innovativeness can be a significant enabler to create value and will help to
respond to customers’ needs, in developing new capabilities that allow to achieve and
sustain better performance or superior profitability in the increasingly complex,
competitive and rapidly changing environment (Calantone et al., 2002; Wang and Wang,
2012). Hence, the following hypothesis is considered:
H7. Innovativeness in the supply chain is positively related to firm’s competitive advantage.
3. Research methodology
3.1 Sample and data collection
This study adopted a quantitative methodology using a questionnaire as a tool in data
collection. Taiwan has emerged as a major manufacturing power to the global economy.
For this reason, data were collected in Taiwan. This research is based on a survey because
there is no archival database which provides detailed information on SCM practices.
The design process for the survey questionnaire consisted of two stages. In the first stage,
an extensive literature review on SCM practices was conducted to ensure the content
validity of the questionnaire. Then, a pilot study was conducted with four scholars and
12 senior managers (including logistics and supply chain, purchasing and operations,
manufacturing, marketing and sales, information system managers and chief
executive officers) to review the preliminary questionnaire, checking for items
wording, ease of understanding and validity, its logical consistencies, sequence of
MD items, potentially confusing items and contextual relevance. Based on suggestions made,
the questionnaire was refined for clarity. A double translation protocol was used for
questionnaire development. No significant difference was found.
The sample was selected via purposive sampling from the list of “The 2000 Largest
Manufacturing Corporations in Taiwan (2015),” published by the CommonWealth Magazine.
Most of these manufacturing companies were the representatives of supply chain
practitioners in their respective industry. The key informants were the senior managers
or project managers who had experiences in IT or SCM practices, interacting with
SC members, and having a good understanding of boundary spanning activities. The key
informant approach has been widely used in empirical researches (Stump and Heide, 1996)
because of the key informant’s knowledge of the organization, access to strategic information,
and familiarity with the contextual of the firms (Aguilar, 1967).
A total of 885 questionnaires were mailed out to the addresses of the respondents.
After two follow-up letters and innumerable personal contacts via telephone and e-mail,
235 companies completed and returned the survey questionnaire. The response rate is
26.6 percent. After eliminating surveys with excessive missing data and lower levels of
confidence, we obtained 204 completed responses, representing an effective response rate
of 23.1 percent (204 of 885 firms). Table I presents information about the characteristics of
the respondents in the study.
To determine whether the sample size was adequate for the data analysis, a power analysis
using G*Power 3.1 software was conducted (Faul et al., 2007). With type-1 error probabilities
set to 0.05, a sample size of 166 was required to reach abundant statistical power of 80 percent
for a moderate effect size of 0.309. Therefore, the sample size of this study is sufficient to
ensure that the results of the statistical method are robust (Hair et al., 2017).
Potential non-response bias was examined by comparing early and late responses for all
items using t-test. The results suggested no significant difference between the early
respondents and the late respondents (p o0.05). A non-response bias is not problematic.
To reduce the effect of anxiety, social desirability and acquiescence, some questions were
reverse scored, and item complexity and ambiguity were also reduced (Podsakoff et al.,
2003). When data for the exogenous and endogenous variables are collected from
single informants, common method variance (CMV ) may lead to inflated estimates of
the relationships between the variables (Podsakoff and Organ, 1986). Therefore, the
respondents were carefully selected to reduce the possible effect of common method bias
(Harrison et al., 1996). Based on sample characteristics, the respondents were 70 from supply
chain departments (purchasing, logistics managers) and 118 higher level managers who
were directly involved in supply chain activities. More than 80 percent of the respondents
held important positions in their companies. Their average work experience was 4.6 years in
their current positions, indicating adequate informant knowledge. Mitchell (1994) indicates
that these respondent attributes are apt to diminish single source biases. Furthermore, we
conducted Harman’s one-factor test (Podsakoff and Organ, 1986), one of the most widely
used methods to evaluate the possibility of CMV (Podsakoff et al., 2003). The results of a
factor analysis revealed five factors, which combined to account for 69.36 percent of the total
variance. The first factor accounted for 31.15 percent of the total variance; however, it did
not account for a majority of the variance. On the basis of these results, CMV did not appear
to be a problem in our study.
3.2 Measures
All the measurement items in the study were adapted from the relevant literature, with
minor modifications and rewording to ensure contextual consistency. All constructs were
measured using multiple Items. For each measure, respondents assessed their agreement
with statements on a seven-point Likert scale was adopted with anchors ranging from
Number of responses Percentage of responses
Supply chain
agility and
Industry type of companies innovativeness
Electronic/electrical equipment 55 26.96
Industrial/commercial machinery 29 14.22
Instruments and related products 25 12.25
Pharmaceuticals 19 9.31
Chemicals 18 8.82
Transportation equipment 15 7.35
Rubber and plastic products 11 5.39
Food and dairy products 9 4.42
Furniture and fixtures 7 3.43
Fabricated metal products 6 2.94
Others 10 4.91
Number of employees
Less than 199 43 21.08
200 ~ 499 35 17.16
500 ~ 999 59 28.92
1,000 ~ 4,999 47 23.04
Over 5,000 20 9.80
Job title type of respondents
Supply chain manager 45 22.06
Logistics manager 25 12.25
Product manager 31 15.20
Manufacture manager 36 17.65
Sales manager 10 4.90
IT manager 27 13.24
Project manager 14 6.86
Others 16 7.84
Working years in current position
Less than 2 39 19.12
2–3.9 52 25.49
4–5.9 55 26.96
6–9.9 25 12.25
Over 9.9 21 10.29 Table I.
Non response 12 5.89 Profile of respondents’
Total respondents ¼ 204 characteristics
strongly disagree (1), neither agree nor disagree (4), to strongly agree (7), unless otherwise
specified. Table AI contains a list of the measures used in this study.
IT integration is defined as the degree of communication, coordination and relevant
integration of information among various internal functional departments and external
supply chain partners. IT integration is measured from Swafford et al. (2008) with five items.
Trust refers to the honesty and promises of partners by obeying transaction rules and
keeping good attitudes and behaviors (Anderson and Narus, 1990; Hibbard et al., 2001).
A six-item scale is used from Doney and Cannon (1997) to measure Trust. Supply chain
agility is defined as a manufacturer’s rapid response and adjustment to the supply chain to
cope with dramatic changes in the market environment. Thus, supply chain agility is
measured with eight items by Zhang et al. (2002) and Swafford et al. (2008). Innovativeness
is defined as a manufacturer’s ability to create a new idea or action using logistics, facilities,
systems, procedures, policies, plans, products or services. Innovativeness is measured by
Hurt et al. (1977) and Calantone et al. (2002) with five items. Competitive advantage is
defined as the process by which an organization has better resources and implementation
MD ability so as to cut cost, create more value for customers and gain higher business
performance over a long time amid growing competitors. Competitive advantage is
measured with seven items adapted from Hunt and Morgan (1995).
The presented variables were tested for normality. Literature presents different reference
values that skewness and kurtosis measures must respect to assess for normality. Values of
skewness and kurtosis for all of the variables analyzed were well below prescribed levels
(skewness o2.0 and kurtosis o7.0), indicating no significant departures from normality in
the data (Yuan et al., 2005). Also, the tests for variance inflation factor (VIF) were calculated.
The results showed that no VIF values were greater than 5. (The highest value was 2.194).
Thus, we can conclude that there are no multicollinearity problems.
4. Data analysis and results

Statistical techniques were used to analyze the survey data to test the hypotheses. These
techniques included confirmatory factor analysis (CFA), and structural equation modeling
(SEM). The research model shown in Figure 1 was analyzed primarily using SEM,
supported by LISREL 9.2 software. Numerous researchers have proposed a two-stage
model-building process (Hair et al., 2010; Jöreskog and Sörbom, 2001). The first step involves
the analysis of the measurement model, while the second step tests the structural
relationships among latent constructs. The aim of the two-step approach is to assess the
reliability and validity of the measures before their use in the full model.
4.1 Measurement model validation

Before testing the hypotheses, we used CFA to simultaneously validate the reliability,
convergent and discriminant validity of the measures of all constructs used in this study.
Composite reliability (CR) was used to assess the internal consistency of the measures.
Therefore, this study assessed the reliabilities of the constructs using CFA. As shown
in Table II, the study found overall acceptable values of the composite reliabilities, which
range between 0.852 and 0.932. All constructs meet the general minimum value of 0.7, which
indicates adequate reliability of our constructs (Hair et al., 2010).
The convergent validity of the constructs was verified by using the three criteria
suggested by Fornell and Larcker (1981): all indicator loadings should be significant and
exceed 0.7; construct reliability and Cronbach’s α should exceed 0.7 (Hair et al., 2010); and
average variance extracted (AVE) by each construct should exceed the variance due to
measurement error for that construct (i.e. AVE should exceed 0.50). In Table II, it can be seen
that the CFA results were highly consistent with the relationships expected between the
measured items and their respective constructs. All the factor loadings for all items exceed
the recommended level of 0.7, and all factor loadings are significantly related, via t-tests at
p o0.001, to their respective constructs. The CFA and Cronbach’s α of the constructs
ranged from 0.847 to 0.932, and thus all exceeded the generally accepted value of 0.70. In
addition, the AVE ranged from 0.649 to 0.714. Hence, all three conditions for convergent
validity were met.
Furthermore, the discriminant validity of the constructs was assessed using the
benchmark suggested by Fornell and Larcker (1981). For discriminant validities, the
construct’s AVE should not be below 0.50 or the square root of the AVE should not be less
than the correlation of the construct with other constructs. Table III lists the correlations
among the constructs, with the square root of the AVE on the diagonal. Discriminant
validity is established since AVE for each construct is more than 0.50 and also the square
root of the AVE is significantly larger than any correlations involving the construct,
indicating that all constructs share greater variance with their own measures than with
other constructs. Besides, we examine the item to construct loadings and cross loadings.
Construct Item Factor loading t-value CR Cronbach’s α AVE
Supply chain
agility and
IT integration (ITI) TTI1 0.816 17.842 0.852 0.847 0.676 innovativeness
TTI2 0.825 18.284
TTI3 0.793 17.623
TTI4 0.783 17.413
TTI5 0.832 19.686
Trust (Tr) Tr1 0.781 16.364 0.906 0.905 0.692
Tr2 0.818 17.952
Tr3 0.826 18.181
Tr4 0.783 17.638
Tr5 0.854 21.823
Tr6 0.835 19.292
Supply chain agility (SCA) SCA1 0.893 26.572 0.932 0.925 0.714
SCA2 0.778 14.636
SCA3 0.812 18.693
SCA4 0.828 20.154
SCA5 0.792 15.442
SCA6 0.815 17.946
SCA7 0.875 25.384
SCA8 0.784 15.075
Innovativeness (In) In1 0.878 25.871 0.918 0.912 0.688
In2 0.837 23.792
In3 0.891 28.514
In4 0.804 21.726
In5 0.799 17.186
Competitive advantage (CA) CA1 0.806 16.737 0.886 0.874 0.649
CA2 0.795 14.812
CA3 0.832 18.541
CA4 0.826 17.885
CA5 0.774 13.793
CA6 0.858 22.918 Table II.
CA7 0.781 14.557 Confirmatory factor
Notes: CR, Composite reliability; AVE, average variance extracted. See Table AI for the description of each analysis results of the
construct and item measurement model
Construct Mean SD AVE 1 2 3 4 5
IT integration (1) 5.014 0.985 0.676 0.822

Trust (2) 4.883 0.837 0.692 0.569** 0.832
Supply chain agility (3) 4.695 1.068 0.714 0.427** 0.438** 0.845 Table III.
Innovativeness (4) 4.746 1.059 0.688 0.259** 0.446** 0.283** 0.829 Discriminant validity:
Competitive advantage (5) 4.932 0.925 0.649 0.238** 0.342** 0.507** 0.521** 0.806 inter-correlation
Notes: Italic values: The square root of the average variance extracted (AVE) for each construct. **po 0.01 and AVE
The results indicate that all the measurement items load highly on their own latent construct
than on other constructs.
Additionally, the results of the CFA indicated that the final measurement model
exhibited strong levels of fit: χ2/df ¼ 1.895 ( χ2 ¼ 807.28; df ¼ 426), GFI ¼ 0.92, AGFI ¼ 0.88,
NFI ¼ 0.95, NNFI ¼ 0.97, CFI ¼ 0.98 and RMSEA ¼ 0.05, as shown in Table IV. All the
model-fit indices exceed the respective common acceptance levels indicated by previous
research (Hair et al., 2010), demonstrating that the measurement model exhibited a fairly
MD good fit with the data collected. Given this collection of supporting indices, the measures
demonstrated adequate and sufficient reliability, convergent validity and discriminant
validity. In summary, it can be concluded that the measurement model is acceptable.
4.2 Test of the structural model

Once the measurement model was confirmed to be reliable and valid, the next step was to
assess the structural model results. As shown in Table IV, all of the model-fit indices of the
structural model exceeded their respective common acceptance levels: χ2 to a degrees of
freedom ratio of 2.487 ( χ2 ¼ 1,066.88; df ¼ 429), GFI ¼ 0.9, AGFI ¼ 0.84, NFI ¼ 0.94,
NNFI ¼ 0.95, CFI ¼ 0.96, and RMSEA ¼ 0.060, suggesting that the model fit the data well.
The structural path coefficients were used to confirm the proposed hypotheses. All of the
seven paths exhibited at least a p-value less than 0.05. The results demonstrate that all of the
hypotheses are supported. More specifically, IT integration has a strong positive effect on
trust in supply chain members (β ¼ 0.547, t ¼ 8.921, p o0.001). Therefore, H1 is supported.
Moreover, IT integration positively influences supply chain agility (β ¼ 0.315, t ¼ 3.025,
p o0.01) and innovativeness (β ¼ 0.188, t ¼ 2.237, p o0.05), lending support to H2 and H4.
H3 and H5, which proposes that trust directly affects supply chain agility (β ¼ 0.358,
t ¼ 3.257, p o0.01) and innovativeness (β ¼ 0.376, t ¼ 4.473, p o0.001), are also supported.
As expected, supply chain agility has a positive impact on competitive advantage
(β ¼ 0.419, t ¼ 6.536, p o0.001). Our findings also support prior research with regards to
innovativeness has a positive effect on competitive advantage (β ¼ 0.432, t ¼ 7.248,
p o0.001), thereby supporting H6 and H7. These findings indicate that competitive
advantage can be obtained from supply chain agility and from having positive innovative
outcomes. The results of hypotheses tests along with the path coefficients and their
significance values are shown in Figure 2.
Measurement Recommended
Model fit indices model Structural model value
Chi-square/degree of freedom ( χ2/df ) 807.28/426 ¼ 1.895 1,066.88/429 ¼ 2.487 ⩽3.00

Goodness-of-fit index (GFI) 0.92 0.90 ⩾0.90
Adjusted goodness-of-fit index (AGFI) 0.88 0.84 ⩾0.80
Normed fit index (NFI) 0.95 0.94 ⩾0.90
Table IV. Non-normed fit index (NNFI) 0.97 0.95 ⩾0.90
Model fit indices for Comparative fit index (CFI) 0.98 0.96 ⩾0.90
measurement and Root mean square error of 0.05 0.06 ⩽0.08
structural models approximation (RMSEA)
IT 0.315** Supply Chain

Integration Agility (R2 = 0.41) 0.419***
0.188* Competitive
0.547*** Advantage (R2 = 0.48)
0.358**
Trust Innovativeness 0.432***
Figure 2. (R2 = 0.30) 0.376*** (R2 = 0.32)
Results of the
SEM analysis
Notes: *p < 0.05; **p < 0.01; ***p < 0.001
Our study provided an integrated model examining the influence of it integration and trust Supply chain
on competitive advantage through supply chain agility and innovativeness. The R2 values agility and
show that it integration and trust account for 41 percent of the variance in supply chain innovativeness
agility and 32 percent of variance in innovativeness. Additionally, supply chain agility and
innovativeness account for 48 percent of the variance in competitive advantage.
5. Discussion and implications

5.1 Discussion
Globalization in the business environments, increase in product ranges, and decrease in the
product life cycles compel firms to improve strong coordination and collaboration with their
supply chain partners, and to develop and maintain their own resources and capabilities in
order to survive and sustain their operations. A firm’s unique resources and capabilities are
the key sources of a sustainable competitive advantage. The purpose of this study is to
extend and apply both the RBV and the competence-capabilities perspective to
manufacturing firms in Taiwan by identifying the joint relationship resources that
facilitate and complement the organizational dynamic capabilities which, in turn, lead to a
In this study, we explore how the IT integration and inter-organizational trust can
facilitate supply chain agility and innovativeness, and thus have a substantially positive
effect on a manufacturer’s competitive advantages. The study demonstrates that both IT
integration and trust in supply chain members significantly enhance supply chain agility
and innovativeness, which in turn positively affect firm’s competitive advantage.
The results indicate that IT integration and trust are antecedents and major joint
partnership resources for improving supply chain agility and innovativeness.
The result indicates that IT integration significantly influences the trust in members of
supply chain. The better the IT integration of the organization in terms of using IT to
coordinate/integrate activities in design, development, procurement, manufacturing,
logistics and distribution will further enhance trust in supply chain members. This result
is based on the fact that organizations widely use IT systems and applications to process
both internal and external data, and deliver and exchange information among partners
rapidly and smoothly, which can promote the firms to establish close relationships with
suppliers and customers. The findings of the study support the study conducted by Grover
et al. (2002) which states that IT integration significantly influences trust in members of
supply chain.
The results of data analysis show that IT integration significantly influences the supply
chain agility and innovativeness. The better the IT integration of the organization in terms
of using IT to facilitate collaborative decision making, automation of exchange procedures
and documents, and the sharing of applications and databases, etc., between the partners
will further improve supply chain agility and innovativeness. Meanwhile, trust in supply
chain members significantly influences the supply chain agility and innovativeness.
The better trust in supply chain members in terms of close relationships, keeping promises
and interests, being honest and trustworthy, etc., between the partners will enhance supply
chain agility and innovativeness improvement. The findings of the study support the
findings of Panayides and Lun (2009) who states that the firms manage to succeed because
establishing trust in supply chain members can improve their capabilities for
innovativeness. It shows the role of IT integration and trust as unique joint partnership
resources capable of supply chain agility and innovativeness and also finds evidence that
organizations form partnerships to strengthen dynamic capabilities in supply chains.
The study finds that trust is the pivot of the factor influencing supply chain agility and
innovativeness. The more IT integration contributes to trust positively, the more the factor
contributes to supply chain agility and innovativeness correspondingly. This suggests that
MD trust plays a significant role in agile activities and innovative behaviors of supply chains
where their members are in a co-opetition relationship. Trust is an important coordinating
mechanism in interfirm relations, reducing transaction costs and fostering successful
collaborations among organizations. However, achieving the close level of trust in
relationships which business partners hope for is not easy during the business cooperation
period. To achieve effective supply chain agility and innovativeness, the relevant parties
should reinforce their collaborative behaviors and activities in relation to the IT integration
that would enhance the trust-based relationships.
Furthermore, the results show that supply chain agility significantly influences the
firm’s competitive advantage. The higher supply chain agility built by each member of
the supply chain in terms of the ability to have visibility of demand, flexible and quick
response and synchronized operations, the ability to effectively integrate supply chain and
forge close and long-term relationships with customers and suppliers will tend to encourage
the growth of the firm’s competitive advantage. Moreover, innovativeness significantly
influences the firm’s competitive advantage. The higher the innovativeness in the form of
trying new ideas and new ways, seeking creative methods, introducing new process
in the supply chain context will improve firm’s competitive advantage. In a rapidly
changing environment, companies should foster supply chain agility, detect changes in
market demands, strengthen market response ability, acquire the required resources and
skills, lower production costs, strive to achieve customer satisfaction and remove non-value
adding activities to maintain a competitive position. Moreover, Martin (2002) emphasized
that manufacturers should create diversity by making use of technology and innovation to
obtain competitive advantage, which can develop the market, diversify risk and improve
companies to operate sustainably. The findings of the study support the findings by
Arif Khan and Pillania (2008), Panayides and Lun (2009) and Swafford et al. (2008) which
state that supply chain agility and innovativeness will enhance the company’s
competitive advantage, in terms of products and services that are difficult to imitate by
competitors, better quality and quicker response than competitors, a cheaper cost and
higher profits than competitors.
This study examines the relationships among the lower-order capabilities/joint
relationship resources (IT integration and inter-organizational trust in supply chains),
higher-order capabilities (supply chain agility and innovativeness), and competitive
advantage. While several studies on supply chain agility and innovativeness have been
conducted in developed countries, the present study is the novel to shed light on the effect of
such dynamic capabilities in a developing county, Taiwan, where the manufacturing
industry plays a key role in the national and global economy. As this applies to many
developing countries, it is assumed that Taiwan is a suitable representative for these
countries. Several implications can be drawn from the findings for both practitioners and
scholars who are involved in the development of supply chain management in the
manufacturing industry.
5.2 Implications
This study contributes to an exploration of the subject of IT integration, trust, supply
chain agility and innovativeness, as well as addressing gaps in the literature on this topic.
According RBV and the competence-capabilities perspective, resources include tangible
and intangible assets that are tied semi-permanently to the firm, such as in-house
technological expertise, trademarks, brand names, trade contacts and highly skilled
employees. Capabilities, in contrast, refer to the capacity to accomplish specific value-
added tasks using supporting resources. In a very competitive global market, these
resources and capabilities are important to enable businesses to obtain or sustain their
From the DCP, IT integration and trust are unique joint relationship resources that, Supply chain
through dynamic capabilities (supply chain agility and innovativeness), can be developed agility and
and integrated to strengthen or maintain the manufacturer’s competitiveness across innovativeness
markets. Thus, a DCP might be useful when investigating supply chain agility and
innovativeness because it provides insight into the manufacturer’s ability to be prescient
and sense opportunities and threats, master change and uncertainty, enrich the customer,
leverage the impact of people and information, and cooperate to compete.
Findings from this paper reveal that IT systems and applications in the form of
electronic connections linking supply chain partners are capable of positively influencing
relationship establishment, agility and innovativeness. IT brings supply chain partners
closer despite physical distance from each other. Practitioners should view IT not only as an
instrument to improve performance but also as an enabler of relationships, supply chain
agility and innovativeness. Therefore, a firm should increase the rate it builds trust, supply
chain agility and innovativeness by investing in IT integration, which enables it to
capitalize on inter-organizational synergies. The firm also should invest in practices that
enhance the IT integration, such as employee training to improve the effectiveness of using
IT applications or more communication approaches with suppliers to foster an information
sharing culture. These practices will improve the information flow and advance the
integration across different departments within the manufacturing firm and among supply
chain members. Improving in IT integration enables information of market changes,
customer needs and new product concept and design to be shared among product
development, procurement, and manufacturing functions. In turn, this improves
communication, leading to reductions in cycle time for new product development,
ramp-up time, manufacturing time, innovation and quality improvement, increased
customer satisfaction and reduced resource inputs. Effective operational collaboration,
proactive response to changes, shorter lead-time and faster delivery enable a firm to be
ultimately more agile and innovative.
Besides, the study has found that trust will positively influence supply chain
performance by influencing agility and innovativeness in the supply chain. Competitive
advantage depends more on the strength of the supply chain team than on the capabilities of
any single company. In such an environment, relationship quality and trust matter.
It is therefore important for managers to understand the key parameters that give rise to
trust with suppliers and monitor their improvement. Manufacturers may invest resources in
the enhancement of relational exchanges with suppliers to promote the development of
trust. Importantly, as trust becomes part of the culture across the supply chain team, a
network of agility and innovation is inculcated.
5.3 Contributions to theory

This study provides the following two theoretical contributions. First, the study proposes
a framework to explore the DCP of the firm in relation to organizational resources,
capabilities and their effects on the competitive advantage. A number of research studies
in the supply chain context have been conducted in developed countries. However, this
study is the novel that focuses on developing countries, especially in Taiwan.
This extends previous studies by adding to the literature that supply chain agility and
innovativeness are rather crucial and highly relevant for the manufacturing industry in
developing countries. Second, the findings of this study reveal how firms in supply
chains can obtain a competitive advantage from the capabilities of supply chain agility
and innovativeness in manufacturing industry. In order to achieve this, firms can utilize
two joint relationship resources (IT integration, and inter-organizational trust in supply
chains). The study supports DCP. Therefore, the study is the first that confirms the
relevance of these resources and capabilities in a holistic model.
MD 6. Limitations and future research
The interpretation of the results should be handled with due care. The data are collected
from manufacturing industry in Taiwan and single respondent from each firm.
The responses are perceptual in nature. This may lead to two possible biases. First,
respondents may be unwilling or unable to recognize poor abilities in their supply chains,
leading to exaggerated evaluations. Second, respondents may have a limited or localized
vision of the lower order capabilities deployed through their supply chain. Therefore, the
generalizability of current findings to other industries or countries should require additional
investigation. Further research can be carried out by using multiple countries and
respondents of each supply chain to make the research more meaningful and generalizable.
Supply chains are actually involved in various parties and activities, and complex
relationships among them as well as the suppliers, customers and their individual needs.
The multiple parties with complex relationships and therefore to be extended and also
generated various problems of how to measure the relationships among partners in a supply
chain. Thus, the measurement related issues are worth to further study.
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Appendix
Construct Items
IT integration (ITI) ITI1 Use of IT to coordinate/integrate activities in design and development

ITI2 Use of IT to coordinate/integrate activities in procurement

ITI3 Use of IT to coordinate/integrate activities in manufacturing
ITI4 Use of IT to coordinate/integrate activities in logistics and distribution
ITI5 Use of enterprise resource planning or supply chain planning software for
managing/coordinating global supply chain
Trust (Tr) Tr1 We can count on our partners to be concerned about our welfare
Tr2 We believe the information that our partners provide us
Tr3 Our partners are trustworthy
Tr4 When making important decisions, our partners consider our welfare as well as
their own
Tr5 Our partners keep promises they make to our firm
Tr6 We find it necessary to be cautious with our partnersR
Supply chain SCA1 Speed in reducing manufacturing lead time
agility (SCA) SCA2 Speed in reducing product development cycle time
SCA3 Speed in increasing frequency of new product introductions
SCA4 Speed in increasing levels of product customization
SCA5 Speed in adjusting delivery capability
SCA6 Speed in improving customer service
SCA7 Speed in improving delivery reliability
SCA8 Speed in improving responsiveness to changing market needs
Innovativeness (In) In1 We frequently tries out new ideas in the supply chain context
In2 We seek out new ways to do things in our supply chain
In3 We are creative in the methods of operation in the supply chain
In4 We often introduce new ways of servicing the supply chain
In5 Our new process introduction in the supply chain has increased over the last 5 years
Competitive CA1 Compared with our competitors, we offer unique benefits and novel features to
advantage (CA) our customers
CA2 Compared with our competitors, we offer high quality products to our customers
CA3 Compared with our competitors, we provide dependable delivery
CA4 Compared with our competitors, we provide customized products
CA5 Compared with our competitors, we deliver products to the market quickly
Table AI. CA6 Compared with our competitors, we offer competitive prices
List of items in survey CA7 Compared with our competitors, we are able to compete based on quality
questionnaire Note: RReverse-scored items
Corresponding author
Chih-Jou Chen can be contacted at: benson@npu.edu.tw
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innovativeness to enhance firms’

theoretical background and builds hypotheses. Section 3 describes the research

2. Theoretical background and hypotheses development

IT H2(+) Supply Chain

2.3 Supply chain agility

2.5 Competitive advantage

Innovativeness refers to a firm’s tendency to engage in and support new ideas,

4. Data analysis and results

4.1 Measurement model validation

Construct Mean SD AVE 1 2 3 4 5

IT integration (1) 5.014 0.985 0.676 0.822

4.2 Test of the structural model

Chi-square/degree of freedom ( χ2/df ) 807.28/426 ¼ 1.895 1,066.88/429 ¼ 2.487 ⩽3.00

IT 0.315** Supply Chain

5. Discussion and implications

5.3 Contributions to theory

automotive industry”, International Journal of Physical Distribution & Logistics Management,

IT integration (ITI) ITI1 Use of IT to coordinate/integrate activities in design and development

ITI2 Use of IT to coordinate/integrate activities in procurement

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