The impact of organizational structure on time‐based manufacturing and plant performance

Abstract

Abstract The innovation and organizational theory literatures argue that implementing radical innovation can be facilitated or hindered by the organization’s structural design. As firms attempt to cope with an external environment that is changing from industrial to post‐industrial, how do they implement change? This study develops a research framework that examines relationships among various structural dimensions (i.e. number of layers in the hierarchy, level of horizontal integration, locus of decision‐making, nature of formalization, and level of communication), time‐based manufacturing practices, and plant performance. Based on 224 responses from manufacturing firms, this study develops instruments to measure these organizational sub‐dimensions using part of this sample (N=104), and it tests the structural relationships with the remaining responses (N=120). Results indicate that the nature of formalization, the number of layers in the hierarchy, and the level of horizontal integration have significant, direct, and positive effects on the locus of decision‐making and level of communication. Locus of decision‐making and the level of communication, in turn, have significant, direct, and positive effects on time‐based manufacturing practices. Finally, time‐based manufacturing practices have a significant, direct, and positive impact on plant performance.

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