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The Performance Effects of Process Management Techniques

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Author Info

  • Christopher D. Ittner

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6365)

  • David F. Larcker

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6365)

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    Abstract

    This paper provides exploratory evidence on the cross-sectional association between process management techniques and two profit measures: return on assets and return on sales. Using a sample of firms in two industries (automotive and computer) and four countries (Canada, Germany, Japan, and the United States), we find that certain process management techniques improve profitability while others have little effect on financial performance. In particular, long-term partnerships with suppliers and customers are associated with higher performance in both industries. The value of other techniques such as statistical process control, process capability studies, and cycle time analysis, on the other hand, appears to vary by industry, reflecting differences in the stages of the two industries' process management practices. Finally, computer organizations following an innovation-oriented strategy earned significantly higher accounting returns regardless of the process management techniques employed, suggesting that these techniques have only a second-order effect on performance in this industry.

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    File URL: http://dx.doi.org/10.1287/mnsc.43.4.522
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 43 (1997)
    Issue (Month): 4 (April)
    Pages: 522-534

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    Handle: RePEc:inm:ormnsc:v:43:y:1997:i:4:p:522-534

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    Related research

    Keywords: process improvement; quality management; value chain; competitive advantage; organizational design;

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    Cited by:
    1. George Joseph & Asha George, 2007. "A framework to integrate the enterprise domain ontology and organizational change application domain," International Journal of Accounting and Information Management, Emerald Group Publishing, vol. 12(2), pages 3 - 23, June.
    2. Cao, Mei & Zhang, Qingyu, 2010. "Supply chain collaborative advantage: A firm's perspective," International Journal of Production Economics, Elsevier, vol. 128(1), pages 358-367, November.
    3. Wang, Weijia & Plante, Robert D. & Tang, Jen, 2013. "Minimum cost allocation of quality improvement targets under supplier process disruption," European Journal of Operational Research, Elsevier, vol. 228(2), pages 388-396.
    4. Feten Hamama, 2012. "Systemes De Controle Et Processus De Gestion Des Connaissances, Une Illustration Dans Le Secteur De L'Equipement Automobile," Post-Print hal-00691176, HAL.
    5. Leenders, M.A.A.M. & Wierenga, B., 2001. "The Effectiveness of Different Mechanisms for Integrating Marketing and R&D," ERIM Report Series Research in Management ERS-2001-20-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Carine Peeters & Bruno Van Pottelsberghe, 2004. "Innovation capabilities and firm labor productivity," Working Papers CEB 04-030.RS, ULB -- Universite Libre de Bruxelles.
    7. Fullerton, Rosemary R. & McWatters, Cheryl S., 2002. "The role of performance measures and incentive systems in relation to the degree of JIT implementation," Accounting, Organizations and Society, Elsevier, vol. 27(8), pages 711-735, November.
    8. Banker, Rajiv D. & Bardhan, Indranil R. & Chen, Tai-Yuan, 2008. "The role of manufacturing practices in mediating the impact of activity-based costing on plant performance," Accounting, Organizations and Society, Elsevier, vol. 33(1), pages 1-19, January.
    9. Kim, Bowon, 2003. "Dynamic outsourcing to contract manufacturers with different capabilities of reducing the supply cost," International Journal of Production Economics, Elsevier, vol. 86(1), pages 63-80, October.
    10. George Joseph & Asha George, 2007. "A framework to integrate the enterprise domain ontology and organizational change application domain," Accounting Research Journal, Emerald Group Publishing, vol. 15(2), pages 3-23, June.
    11. Kao, Chiang & Hung, Hsi-Tai, 2007. "Management performance: An empirical study of the manufacturing companies in Taiwan," Omega, Elsevier, vol. 35(2), pages 152-160, April.
    12. Gunday, Gurhan & Ulusoy, Gunduz & Kilic, Kemal & Alpkan, Lutfihak, 2011. "Effects of innovation types on firm performance," International Journal of Production Economics, Elsevier, vol. 133(2), pages 662-676, October.
    13. Zeynep Ton, 2008. "The Effect of Labor on Profitability: The Role of Quality," Harvard Business School Working Papers 09-040, Harvard Business School, revised Jul 2009.

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