Key manufacturing capability elements and business performance

Abstract

The purpose of this research was to extend the recent stream of work in operations strategy on the trade-off and cumulative models of manufacturing capability development. Using results from the 1996 Manufacturing Futures Survey, the paper attempts to test whether pursuing more capabilities (the cumulative model) is reflected in improved return on assets. We consider both industry and country effects. Firms with performance in the upper quartile on a capability are described as 'high' performers and the number of times a firm achieves this level represents the number of capability elements that they have. The results show no evidence of the cumulative model. Quality and delivery capabilities are nevertheless strongly evident. Simply adding more capabilities generally produced no improvement in return on assets. Stepwise regression of ROA on the capabilities produced models with good explanatory power in some countries and industries though not all capabilities loaded. When interactions between capability elements were added to the regression models, results were mixed. In some cases, no interactions loaded, while in others, large increases in adjusted R 2 occurred, particularly in industry models.

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