Does sticky inventory management improve productivity?

Abstract

Purpose The purpose of this study is to demonstrate the nonlinear relationship between inventory stickiness and productivity, with investment efficiency being a mediator and environmental dynamism being a moderator. Design/methodology/approach Using a large panel data collected from 1,479 Chinese listed manufacturing enterprises over the period from 2010 to 2020, this research employs the instrumental variable method combined with two-stage least squares estimators to explore the inverted-U-shaped relationship between inventory stickiness and productivity. Furthermore, the mediating role of investment efficiency and the moderating role of environmental dynamism are demonstrated via two three-model systems. Findings As its core, productivity initially increases with inventory stickiness until a turning point at the end of the sample, beyond which the incremental effect of inventory stickiness on productivity become negative. That is, an inverted U-shaped relationship between inventory stickiness and productivity is found to exist. Moreover, further mediated moderation analysis highlights that investment efficiency is a key mediator of this relationship, whereas environmental dynamism is a key moderator. Practical implications Managers ought to gauge carefully against the tradeoffs between inventory stickiness and productivity. In general, over 90% of manufacturing enterprises have great potential to increase productivity by implementing sticky inventory management. In addition, managers are suggested to place emphasis on investment management and environmental strategy. Originality/value This paper contributes to the current understanding about productivity by illustrating and verifying the nonlinear effect of sticky inventory management. It may be the first study to empirically demonstrate the mediating effect of investment efficiency and the moderating effect of environmental dynamism on the relationship between inventory stickiness and productivity.

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