An Investigation of the Antecedents and Impacts of Logistics Management Capabilities and Logistics Outsourcing
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Logistics costs constitute a significant portion of US economy every year. As operations become globalized and dispersed geographically, and channel power concentrated closer to the end-customer, logistics roles within companies have become more strategic. Hence, by cultivating and managing logistics capabilities efficiently and effectively, companies can achieve competitive edge. In this context, logistics outsourcing is becoming an important governance choice for acquiring required logistics capabilities, in more globalized and complex settings, requiring specialized expertise. Consequently, the market for logistics outsourcing has increased during the past few years and the magnitude of outsourced logistics is much higher than in-house logistics. This dissertation explores these issues under three essays described below. The first essay investigates effects of logistics function on firm performance. The potential of logistics as a source of competitive advantage has traditionally not attracted much attention, because top management often has regarded logistics as a function merely to support other operations. Even though few studies identified distinctive capabilities which firms can derive from their logistics function and tested their strategic contributions to firm performance, those capabilities do not fully demonstrate the strategic potential of logistics functions because distinctive capabilities do not necessarily support the firm’s competitive objectives. Therefore, this essay aims to find out the strategic value of logistics function and its effects on business performance drawing on the Theory of Production Competence. The Theory of Production Competence posits that a firm can generate improved performance by developing functional capabilities that need to be aligned with functional strategic objectives as well as the firm’s overall strategic goals. The theory encompasses two different alignments: functional and strategic alignment. Adapting this theory into logistics settings, this essay defines the two alignments as logistics competence and strategic alignment, respectively, and postulates that logistics competence can generate improved performance, conditional on higher strategic alignment. For testing the various hypotheses, primary data was collected from a sample of CEOs, senior managers, and mid- and upper-level supply chain and logistics managers in North American manufacturing firms. A new index to operationalize logistics competence was adopted. The results support most of the hypotheses and show that, developing logistics capabilities aligned with logistics strategic objectives, along with the firm’s overall strategic goals, firms can lead to higher firm performance under many business settings. The second essay investigates the effects of institutional pressures on the extent of logistics outsourcing based on the notions of institutional isomorphism. The essay hypothesizes that, in addition to rational efficiency, institutional pressures could be related to the stage of decisions on the extent of logistics outsourcing. In addition, firms are heterogeneous with respect to the extent of logistics outsourcing under a similar institutional environment in reality. This essay attempts to address the heterogeneity in the perspective of human agency perspective. Accordingly, this essay postulates that top management members’ beliefs and behaviors mediate the impacts of institutional pressures on the extent of logistics outsourcing. The top management constitutes human agency, translating external influences into managerial actions on organizational structures, based on their perceptions and beliefs of institutional practices, providing internal institutional norms and values by which managers should engage in structuring actions related to the use of logistics outsourcing. To test the hypotheses, survey data was collected from manufacturing firms which had already outsourced parts or whole logistics functions and are North American companies. Using partial least squares (PLS) methodology, the effects of institutional pressures, rational efficiency, and top management on the extent of logistics outsourcing were tested. The extent of logistics outsourcing was measured using two different measurement items: costs allocated to outsourced logistics activities over total logistics costs and the number of outsourced logistics activities. The results show that institutional pressures, rational efficiency have different results of their effects on the extent of logistics outsourcing depending on the measurement items. In addition, top management mediated the institutional effects on the extent of logistics outsourcing when the extent of logistics outsourcing is defined as the number of outsourced logistics activities. The third essay presents a state-of-the-art survey of literature on logistics outsourcing and the status of logistics outsourcing in manufacturers. Based on a critical appraisal of past literature, this essay attempts to clarify and identify the major gaps for future research. In addition, this study also investigates the characteristics of logistics and logistics outsourcing by surveying the status of logistics outsourcing to derive a deeper understanding of logistics outsourcing. The survey targeted at a sample of CEO and senior managers and mid- and upper-level supply chain and logistics managers in manufacturing firms. The results are discussed at length in the essay to be topical relevance to both researchers and practitioners.