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The Performance Effects of Process Management Techniques

Author

Listed:
  • 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)

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.

Suggested Citation

  • Christopher D. Ittner & David F. Larcker, 1997. "The Performance Effects of Process Management Techniques," Management Science, INFORMS, vol. 43(4), pages 522-534, April.
  • Handle: RePEc:inm:ormnsc:v:43:y:1997:i:4:p:522-534
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    File URL: http://dx.doi.org/10.1287/mnsc.43.4.522
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    Cited by:

    1. 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.
    2. 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.
    3. repec:kap:jtecht:v:42:y:2017:i:3:d:10.1007_s10961-015-9435-6 is not listed on IDEAS
    4. 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.
    5. Aris Tri Haryanto & Tulus Horyono, 2015. "The Influence Of Market Orientation On Innovation Type And Enterprise Performance," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 11(1), pages 68-78, June.
    6. 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. 15(2), pages 3-23, May.
    7. 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.
    8. 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.
    9. Macinati, Manuela S. & Bozzi, Stefano & Rizzo, Marco Giovanni, 2016. "Budgetary participation and performance: The mediating effects of medical managers’ job engagement and self-efficacy," Health Policy, Elsevier, vol. 120(9), pages 1017-1028.
    10. Ogrezeanu Andrei & Scarlat Cezar & Ogrezeanu Andreea, 2015. "Talking the Talk and Walking the Walk: Designing an Online Admissions Process in an Elearning Training Project," Balkan Region Conference on Engineering and Business Education, De Gruyter Open, vol. 1(1), pages 1-9, November.
    11. 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.
    12. Ng, Stephen C.H. & Rungtusanatham, Johnny M. & Zhao, Xiande & Lee, T.S., 2015. "Examining process management via the lens of exploitation and exploration: Reconceptualization and scale development," International Journal of Production Economics, Elsevier, vol. 163(C), pages 1-15.
    13. 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.
    14. Carine Peeters & Bruno Van Pottelsberghe, 2004. "Innovation capabilities and firm labor productivity," Working Papers CEB 04-030.RS, ULB -- Universite Libre de Bruxelles.
    15. Prajogo, Daniel I., 2016. "The strategic fit between innovation strategies and business environment in delivering business performance," International Journal of Production Economics, Elsevier, vol. 171(P2), pages 241-249.
    16. 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.
    17. 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.
    18. Tang, Xinlin & Rai, Arun, 2014. "How should process capabilities be combined to leverage supplier relationships competitively?," European Journal of Operational Research, Elsevier, vol. 239(1), pages 119-129.
    19. Christopher D. Ittner & Venky Nagar & Madhav V. Rajan, 2001. "An Empirical Examination of Dynamic Quality-Based Learning Models," Management Science, INFORMS, vol. 47(4), pages 563-578, April.
    20. 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.
    21. 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.
    22. Adrian S. Choo & Kevin W. Linderman & Roger G. Schroeder, 2007. "Method and Psychological Effects on Learning Behaviors and Knowledge Creation in Quality Improvement Projects," Management Science, INFORMS, vol. 53(3), pages 437-450, March.

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