Simultaneous effects of functional involvement and improvement programs on manufacturing and financial performance in Chinese firms

Purpose – The purpose of this paper is to examine the simultaneous effects of two process variables: functional involvement in strategy formulation, and manufacturing improvement programs, on manufacturing performance and financial performance of manufacturing firms in China. Design/methodology/approach – Rigorous empirical research methods are used to ensure proper data collection process, and reliability and validity of constructs. Structural equation modeling is used to examine the relationships between functional involvement, improvement programs, manufacturing performance and financial performance. Findings – It was found that involvement of marketing, finance and operations in strategy formulation have an effect on cost and quality whereas the involvement of emerging functions such as human resources, public relations, research and development and information technology have an effect on all aspects of manufacturing performance. Originality/value – Studies of manufacturing strategy have primarily focused on choices and plans that denote strategic intent, rather than on the process of formulating and realizing strategy. Typical studies have used data from developed countries, such as Europe and North America. Insufficient attention has been paid to the process variables of manufacturing strategy and their effects on manufacturing performance. The study addresses these gaps in the literature using data collected from Chinese firms.