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JFMPC
26,1 Linking supply chain disruptions
with organisational performance
of construction firms: the
158 moderating role of innovation
Received 2 December 2019 Ernest Kissi and Kofi Agyekum
Revised 15 June 2020
Accepted 27 October 2020
Department of Construction Technology and Management,
Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Labaran Musah
Kwadaso Estate Y2, Kumasi, Ghana, and
De-Graft Owusu-Manu and Caleb Debrah
Department of Construction Technology and Management,
Kwame Nkrumah University of Science and Technology, Kumasi, Ghana
Abstract
Purpose – Supply chain (SC) disruption, whether demand sided or supply sided, is conversely perceived to affect
organisational performance of construction firms. This paper, therefore, aims to examine the linkage of supply
chain disruptions with organisational performance of construction firms through the moderating role of innovation.
Design/methodology/approach – Using a quantitative research, approach the views of 84 construction
professionals were elicited using a structured questionnaire. Ordinary least squares were utilised to validate
the hypotheses set.
Findings – The study proved that there is a negative relationship between demand-related disruption and
business performance as well as project performance. Also, it was clear from the study that supply-related
disruptions had a significant impact on both project performance and business performance. Although SC
innovation was seen to impact business performance, it had no relationship with project performance.
Generally, innovation was seen to have a moderating effect of demand and supply disruption of project
performance, but it played no moderating role in business performance.
Practical implications – The findings suggest that business firms must be innovative with the supply
chain, as it moderated project success. The supply chain of a construction firm plays a very critical role on
projects; hence, this study recommends that a supply chain manager ought to be innovative in their
operations due to the moderating role SC innovation has on project performance and largely business
performance.
Originality/value – Various studies on supply chain has been done on different sectors in the economy;
however, little can be said about the construction industry on how supply chain disruptions affects business
and project performance and how innovation moderates such effects.
Keywords Disruption, Innovation, Organisation, Moderating, Performance, Supply chains
Paper type Research paper
1.2 Innovation
161
Manmade disruptions and natural disasters tend to hinder supply chain operations. Supply
chain innovations are the system by which companies reconfigure and integrate their
internal and external structures or processes and infrastructure or humanware with the aim
of sensing and grabbing new opportunities that smoothen information management,
sourcing, production and delivery of products in a responsive, cost-efficient and timely
manner to the end consumer (Singhry et al., 2014). A firm’s innovativeness is integral to its
competitive advantage and superior business performance (Zhou and Li, 2012). Chandy et al.
(2006) described innovativeness as the degree to which the firm consistently develops new
products and/or incremental value to existing products. Innovation in the construction
supply chain can thus be defined as the introduction of alternatives to key materials, tools,
and equipment and labour as an exigency to supply chain disruption. Innovation should
incorporate incremental value to existent construction practices and processes to reduce
wastage and excessive demand on the supply chain.
1.3 Performance
Performance has been defined traditionally with concepts like effectiveness, efficiency,
growth, improvement and success, as researchers use these terms interchangeably (Hove
and Banjo, 2015). Performance is the accomplishment of a given task measured against
predetermined or known standards of accuracy, completeness, cost and speed (Rathore,
2016). According to Ali et al. (2013), several research works have been undertaken on
performance measurement at the project level. Recent studies now concentrate on
performance evaluation and management at the company level (Tajuddin et al., 2015; Ali
et al., 2015). To achieve organisational goals, most firms have tried to improve their
efficiency to enhance their performance (Rathore, 2016). Tajuddin et al. (2015), posited that
globalisation offers both opportunities and challenges in which organisations are compelled
to make drastic enhancements not just to compete but to survive. Sonson et al. (2017) in their
studies affirmed that the dynamism and competition associated with the business
environment have motivated and forced construction firms to enforce modern performance
measurement and management systems and structures to create more comprehensive
information on their performance.
Numerous researchers claim that the construction industry suffers from poor
performance (Kissi et al., 2020; Owusu-Manu et al., 2019). Highly competitive and reflective
alterations in the construction industry have compelled construction executives to
incessantly augment the performance of their firms. To measure the performance of a
company, there is a need to establish appropriate key performance indicators (KPI). KPIs are
accumulations of data measures used to analyse the performance of a construction operation
(Ali et al., 2013). Hove and Banjo (2015) avowed that although the three traditional measures
in construction being cost, time and quality offer an idea of the performance of a contracting
firm, they do not independently provide a balanced assessment of the performance of the
firm. Tajuddin et al. (2015) postulated that performance should be reflected by both financial
and non-financial performance. For financial performance, they indicated market share, new
JFMPC customers, return on investment, return on capital employed and many new customers as
26,1 the indicators. The non-financial performance indicators were clients’ features, the
performance of products and the process. According to Hove and Banjo (2015), there is a
universal agreement for those involved in the business of construction who see performance
as the accomplishment of some pre-set objectives against the public who perceive
performance on user satisfaction.
162 Clients’ interpretation of performance is based on the level of satisfaction from the project in
respect to cost, time and quality. Employees perceive performance from the point of job
descriptions, wages and salaries, working hours, investment in training, career plans and good
bonus policies. Employment creation, income generation, contribution towards the national
gross domestic product, compliance with health and safety regulations, adherence to
environmental policies and a positive contribution to the quality of local life are the indicators
governments and societies use to assess the performance of construction organisations.
Tajuddin et al. (2015) grouped the various indicators of organisational performance into two
categories, being project performance and business performance. Also, Rathore (2016)
categorised performance indicators into seven frameworks being cost (estimated, actual and
predicted), time (estimated, actual and predicted), quality (levels of client satisfaction), safety
(incidents and loss of time), innovation (procurement, management, technology) and
sustainability (design and construction).
Based on an exhaustive review of extant literature and assuming a quantitative research
approach, the identified variables from the literature review were purposefully compounded
into close-ended questionnaires. The population comprised top management and senior staff
in construction, architectural, supplying and consultancy firms in Ghana were used for the
study.
2. Development of hypotheses
Several studies have established an adverse relationship between supply chain disruption
and performance (Schmidt and Raman, 2012; Vikulov and Butrin, 2014; Lu et al., 2017).
Disruptions in the supply chain, whether demand or supply related, are reported to have
several negative consequences on firm performance such as short- and long-term
profitability, market share, lower sales price, poor customer service, bad firm reputation and
credibility. Theoretically, managers of firms are required to ensure innovative mechanisms
to improve supply chain performance. Innovation in the supply chain process has been
empirically reported to stimulate a higher level of supply chain performance (Singhry, 2015).
Supply chain innovation aids in cost reduction improves market performance (Stank et al.,
2015), improves customer responsiveness (Butner, 2010), enhances competitive advantage
and supply chain performance (Tan et al., 2015). The dimensions of supply chain innovation
which are perceived as having the tendency to reduce the negative consequences of
disruptions on supply chain performance include technology, collaboration, innovation
capability and managerial role (Figure 1).
H3
H5
Project
H4
Performance
H2
Supply Chain Disruption H6 Figure 1.
• Demand- related Business Conceptual
Disruptiona
Performance moderating role of
• Supply- related Disruptionb
H1
innovation in supply
chain disruptions
Source: Adapted from Ali et al. (2013)
JFMPC et al. (2015) in their study asserted that supply-side disruptions adversely affect the
26,1 production process. Based on this reviewed literature on supply-related disruption and
performance, the study hypothesizes that:
2.4 Moderating role of innovation in the relationship between supply disruptions and
performance
Previous literature provides evidence of the negative consequences of supply-related
disruptions on supply chain performance in varying industries (Hendricks and Singhal,
2005; Schmidt and Raman, 2012). Thus, the firm could reduce the level of consequences of
supply-related disruptions in the supply chain process by being innovative in procurement,
production and delivery to consumers. Suppliers could employ more efficient technologies,
be more collaborative efficiently and effectively, ensure effective innovation capability and
improve managerial role in the innovative process. Segerstedt et al. (2010) stressed that
improving construction supply chain collaboration and performance is critical to achieving
short-term business objectives as well as a long-term competitive advantage. Managers Linking
generally are required to use all resources at their disposal throughout the supply chain to supply chain
reduce the consequences of disruptions. The common approaches towards disruptions
perceived as potential innovative ideas include sourcing and pricing strategies, providing
disruptions in
financial subsidies, encouraging information sharing and incentive alignment between construction
supply chain partners – to tackle supply disruptions (Marley et al., 2014). The discussed
analogy provides evidence of the possibility of innovation as a moderator in the relationship
between supply-related disruptions and supply chain performance. Based on this assertion, 165
the current study hypothesizes that:
2.5 Moderating role of innovation in the relationship between demand disruptions and
performance
Previous literature provide evidence of negative consequences of demand-related
disruptions on supply chain performance in varying industries (Wagner and Neshat, 2012;
Vikulov and Butrin, 2014; Lu et al., 2017). Therefore, for construction firms to be competitive
in the industry, there is the need to be more innovative in the phase of disruptions in the
supply chain process. This is because the construction supply chain is typified by
instability, fragmentation and especially by the separation between the design and the
construction of the built object (Vrijhoef and Koskela, 2000). Thus, a firm could reduce the
level of consequences of demand-related disruptions in the supply chain process by being
innovative. Thus, in the phase of adequate information, consumers can adjust their
purchasing plan to reduce the impact of demand-related disruptions on supply chain
performance. Based on this analogy, the study hypothesizes that:
3. Research methodology
There are three common approaches to research or research strategies, namely: qualitative,
quantitative and mixed methods (Williams, 2007). This research is extensively regarded as
quantitative, as it principally relies on the positivist paradigm, deductive reasoning and
structured questionnaires in the collection of data and analysis (Debrah et al., 2020). Thus, in
this study two approaches were followed leading to the research outcomes.
The first approach was the review of comprehensive literature on the phenomena and
testing the same through the development of a pilot survey with professionals in the field.
This piloted survey was conducted to elicit views of some selected professionals (a selected
professional must have more than ten years of experiences in the field of construction and
working knowledge on the supply chain and innovation of the construction industry) on the
identified variables from literature. In all, ten professionals were considered; they were to
delete, add up and check the soundness of all the identified variables and its relation to the
construction industry. The second approach was the modification of the results of the first
approach to develop a survey (questionnaire). The survey was developed based on the
JFMPC Likert scale of 1 to 5 for both the supply and demand disruptions using the level of
26,1 agreement (where 1: strongly disagree to 5: strongly agree) whereas the performance of the
business and project was ranked based on the level of performance also using the Likert
Scale of 1 to 5 (where 1 = worse to 5 = better). A survey is a systematic method for gathering
information from a sample (entities) to construct quantitative descriptors of the attributes of
the larger population of which the sample belongs (Avedian, 2014).
166 According to Khalid et al. (2012), population refers to the total collection of elements that
one would like to study or make inferences to. The population of the study was the top
management and staff in construction, architectural, supplying and consultancy firms
operating in the Ghanaian construction industry. A convenience sampling approach was
used in the selection of the respondents. Due to the challenges encountered in evaluating the
population size, the study adopted this non-probability sampling technique as adopted in
Owusu-Manu et al. (2019) in the determination of their sample size. It is described in Fugar
and Agyakwah-Baah (2010) that convenient and available sampling is used when the
researcher uses cases that are most convenient and available. According to Etikan et al.
(2016), convenient sampling is made up of whoever is willing to participate. A sample size of
120 top management and senior staff in construction, architectural, supplying and
consultancy firms in Ghana were used for the study. A total of 84 valid surveys were
obtained from the study. The primary source of data was obtained from the questionnaires
answered by the target population. Lau (2017) stressed that a questionnaire survey is most
broadly adopted approach in a quantitative research. Descriptive statistics were employed
to analyse the demographic distribution and the level of disruption and performance. The
relationship between the main constructs was evaluated using correlation and ordinary least
square regression analysis.
The demographic background of the responds revealed that 57.1% of the respondents
were top executives of construction firms, 28.6% were from consulting firms, 10.7% were
from architectural firms and 3.6% belonged to the supplying firms. To be able to help
predict the effects of supply disruptions on organisational performance, the respondent
needed to have some sort of experience in the industry. Results showed that 32.1% of the
respondents had been in operation for 11–15; 25% had operated for 6–10 years, 17.9% had
been in existence for over 20 years, 14.3% had operated for, 1–5 and 10.7% had existed for
16–20 years, making them potent to predict the effects of supply disruptions on
organisational performance.
Description of statistics
Constructs Minimum Maximum Mean SD
Constructs 1 2 3 4 5
result
170
Table 4.
JFMPC
OLS regression
Business performance Project performance
Constructs Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 VIF
*** *** *** *** *** ***
(Constant) 3.157(10.564) 2.266(6.387) 2.337(6.255) 2.500(6.457) 2.870(5.512) 2.910(5.512)
Demand disruption 0.019(0.179) 0.057(0.592) 0.048(0.465) 0.051(0.529) 0.040(0.409) 0.060(0.572) 1.158
Supply disruption 0.353(3.365) *** 0.370(3.835) *** 0.352(3.209) *** 0.505(5.220) *** 0.500(5.173) *** 0.530(4.792) *** 1.302
Innovation capability 0.382(3.969) *** 0.362(3.274) *** 0.113(1.175) 0.134(1.203) 1.322
DMIN 0.099(0.796) 0.070(0.561) 1.658
SDIN 0.021(0.150) 0.066(0.465) 2.115
R 0.351 0.517 0.528 0.502 0.514 0.517
R2 0.123 0.267 0.279 0.252 0.264 0.268
Adj. R2 0.101 0.240 0.233 0.233 0.237 0.221
DR2 0.144 0.011 0.013 0.003
F-Statistics (df) 5.688(2) *** 9.733(3) *** 6.030(5) *** 13.628(2) *** 9.588(3) *** 5.702(5) ***
DF-Statistics 15.752*** 0.616 1.381 0.171
Durbin-Watson 2.089 2.047 1.948 2.028 2.049 2.073
Notes: DM = demand disruption; SD = supply disruption; IN = innovation capability. Coefficients are standardized, t-values are in the parenthesis; *p < 0.1, **p < 0.05; ***p
<
3.2.2 Disruption, innovation capability and business performance. The model 1 of the Table Linking
4 shows that supply related disruptions in the supply chain of the construction industry supply chain
negatively and significantly influenced the business performance of the construction firms
( b = 0.353, P < 0.01). This result indicates that a statistically significant unit increase in
disruptions in
the supply-related disruptions in the supply chain of the construction industry is associated construction
with a 0.353 unit decrease in the business performance of the construction firms. The Model
2 result also shows that supply related disruptions in the supply chain of the construction
industry negatively and significantly influenced the business performance of the
171
construction firms ( b = 0.370, P < 0.01). This result indicates that a statistically
significant unit increase in the supply-related disruptions in the supply chain of the
construction industry is associated with a 0.370 unit decrease in the business performance of
the construction firms. The Model 3 result also shows that supply-related disruptions in the
supply chain of the construction industry negatively and significantly influenced the
business performance of the construction firms ( b = 0.352, P < 0.01). This result indicates
that a statistically significant unit increase in the supply-related disruptions in the supply
chain of the construction industry is associated with a 0.352-unit decrease in the business
performance of the construction firms.
Model 2 of Table 4 shows that the innovation capability of the firms in the construction
industry positively and significantly influenced the business performances of the
construction firms ( b = 0.382, P < 0.01). Thus, a statistically significant unit increase in
the innovation capability of the construction firms is associated with a 0.382-unit
increase in the business performance of the firms. Model 3 also shows that the
innovation capability of the firms in the construction industry positively and
significantly influenced the business performances of the construction firms ( b = 0.362,
P < 0.01). Thus, a statistically significant unit increase in the innovation capability of
the construction firms is associated with a 0.362-unit increase in the business
performance of the firms.
Model 3 of Table 4 shows that innovation capability failed to interact with demand
disruption; the predicting variable but is related to business performance, the criterion or the
outcome variable of the specified Model 3 ( b = 0.362, P < 0.01). This result implies that
innovation capability plays the role of an antecedent or intervening variable in the nexus
between demand disruption and business performance of the construction firms. Model 3
also shows that innovation capability failed to interact with supply disruption; the
predicting variable but is related to business performance, the criterion or the outcome
variable of the specified Model 3 ( b = 0.362, P < 0.01). This result implies that innovation
173
Figure 2.
Innovation as a
moderator in the DD–
project performance
nexus
Figure 3.
Innovation as a
moderator in the SD–
project performance
nexus
higher level of innovation capability reduces the impact of supply disruption on project
performance relative to the low level of innovation capability of construction firms.
4. Discussion
The results from the regression analysis depict that demand-related disruption has no
impact on the project performance and business performance of construction firms. This
clearly shows that when the demand for construction material on site is disrupted, it has no
negative impact on the performance of a project. The overall impact of demand
inconsistencies on business performance indicators in the construction industry is negative.
JFMPC This study eventually rejected the hypothesis that demand-related disruption negatively
26,1 affects project performance and demand-related disruption negatively affects business
performance. This agrees with Wagner and Bode (2008) who indicated in their study that
the demand-side disruptions adversely affect performance in the form of quality problems,
customers’ complaints, delays and mismatch of supply and demand. Wagner and Neshat
(2012) further asserted the negative relationship between the demand-related disruptions
174 and the performance of organizations.
The results of the study further depict that supply-related disruptions negatively
impacts project performance and business performance. When the supply of material or
other inputs does not flow as demanded, the performance of projects or the success of
projects can be affected. This is clear in the study of Altay and Ramirez (2010) who were of
the view that failure to manage supply chain risks effectively may lead to a significant
negative impact on organisations. Such impacts, according to Khan and Burnes (2007),
include not only financial losses but also other aspects of a project like quality, loss of
reputation and damage to assets. Deloitte (2020) reports that supply chain disruptions as a result
of natural disasters like the Coronavirus has impacts on contracts and leads to project delays.
Disruptions lead to issues like poor project delivery, late delivery, cost overruns, non-conformance
to work specifications, low quality and wastage (Riazi et al., 2011; Abidin and Ingirige, 2018).
Supply chain innovation was seen from the study results to positively affect business
performance; however, its impact on project performance was negative. The hypothesis, SC
innovation positively affects project performance, was rejected. However, SC innovation
positively affects business performance was accepted as a hypothesis when the study
results were presented. In a study by Sandanayake et al. (2018), it was revealed that in the
wake of catastrophic happenings, construction supply chain (CSC) vulnerability has become
a primary issue in the industry. Construction organisations today focus on measures to
minimize the effects of catastrophic events and manage risk by creating more resilient
supply chains. It is in this vein that Marley (2006) positioned that there is a need to develop
strategies to mitigate supply chain disruptions due to the complexity and vulnerability of
the supply chain in the construction industry. Mentzer et al. (2001) averred that managing
supply chain aims at enhancing the performance of individual companies in the long term as
well as improving the overall supply chain performance.
With regard to a supply disruption, the study showed that innovation moderated supply
disruption on project performance. However, innovation did not affect demand disruption
moderating business performance. For supply disruption on business performance,
innovation had no moderating effect. As a hypothesis, innovation moderates the effect of
supply disruption on business performance was rejected. Also, innovation moderates the
effect of demand disruption on business performance was rejected as a hypothesis.
Innovation moderates the effect of supply disruption on project performance and innovation
moderates the effect of supply disruption on the project performance were accepted as
hypotheses for the study. Innovation or supply chain management according to Al-Werikat
(2017) helps improve competitiveness, increase profits and have more control over the
different factors and variables within the project. Vrijhoef and Koskela (2000) contributed
that SC innovation and roles are vital and important to the construction industry. Other
authors agreed that supply chain innovation reduces operational cost, lead time, create
superior operational strategies, enhance quality and provide visibility and flexibility for
dealing with rapid changes in customer demand and improves organisational performance
(Chong et al., 2011; Lee et al., 2011; Oke et al., 2013). Therefore, for construction firms to be
competitive in the industry there is the need to be more innovative in the phase of
disruptions in the supply chain process. This is because the construction supply chain is
typified by instability, fragmentation, and especially by the separation between the design Linking
and the construction of the built object (Vrijhoef and Koskela, 2000). supply chain
disruptions in
5. Conclusions and implications
Construction is not only concerned with undertaking and completing a project but operates
construction
as a business. The owners of construction firms want to succeed in the performance of their
project and want to see such performance translated in their businesses as well. Supply 175
chain disruption throughout literature has contributed to the poor performance of both
business operations as well as project performance in the construction industry. Supply
chain innovation must always be explored by construction firms to enhance their project
and business performance. Demand and supply in the construction industry were seen as
critical to the success of the industry hence the call for innovation in the construction supply
chain. This paper critiques the effects of demand-side or supply sided disruptions on the
organisational performance of construction firms and the moderation role supply chain
innovation plays on the effects. The study revealed that demand-related disruption has no
significant impact on both project and business performance. However, it was clear from the
analysis that supply-side disruption affected the operation of a business and led to poor
project performance. Significantly made clear by the study was that SC innovation
positively affected business performance although it had no impact on project performance.
To a larger extent, SC innovation was seen to have an overall impact on business operations.
Innovation was seen throughout the study to have a moderating effect of demand and
supply sided disruptions on project performance but had a negative relationship with
business performance. These findings suggest that business firms must be innovative with
the supply chain, as it moderated project performance. This will largely translate into
business performance. The supply chain of a construction firm plays a very critical role in
projects; hence, this study recommends that the supply chain ought to be innovative in
operation due to the moderating role SC innovation has on project performance and largely
business performance (Figure 4).
This study made significant contributions to the supply chain sector of the Architecture,
Engineering and Construction (AEC) industry through the improvements in the supply chain
through innovation to avert the precarious impact of supply chain disruptions on construction
project performance. Knowledge of supply chain disruptions will help stakeholders in the
construction supply chain (clients, suppliers, contractors and sub-contractors) to monitor the
Supply Chain
Innovation
• Innovation Capacity
Project Performance
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Carvalho, V.M., Nirei, M., Saito, Y. and Tahbaz-Salehi, A. (2016), “Supply chain disruptions: evidence
from the great east Japan earthquake”, Columbia Business School Research Paper, pp. 17-15.
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Management: An International Journal, Vol. 15 No. 5, pp. 347-353.
Corresponding author
Ernest Kissi can be contacted at: kisernest@gmail.com
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