Accepted Manuscript

Supply Chain Integration, Advanced Manufacturing Technology, and Strategic

Leadership: An Empirical Study

M. Birasnav, Joshua Bienstock

PII: S0360-8352(19)30025-7
DOI: https://doi.org/10.1016/j.cie.2019.01.021
Reference: CAIE 5647

To appear in: Computers & Industrial Engineering

Received Date: 23 June 2018

Revised Date: 3 January 2019
Accepted Date: 9 January 2019

Please cite this article as: Birasnav, M., Bienstock, J., Supply Chain Integration, Advanced Manufacturing
Technology, and Strategic Leadership: An Empirical Study, Computers & Industrial Engineering (2019), doi:
https://doi.org/10.1016/j.cie.2019.01.021

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 Supply Chain Integration, Advanced Manufacturing Technology, and Strategic

Leadership: An Empirical Study

M. Birasnav*

School of Management, New York Institute of Technology, Old Westbury, NY 11568

birasnav@gmail.com

Joshua Bienstock

School of Management, New York Institute of Technology, Old Westbury, NY 11568

jbiensto@nyit.edu

1
*
Corresponding Author

2
 Supply Chain Integration, Advanced Manufacturing Technology, and Strategic

Leadership: An Empirical Study

Abstract

Top management support is a crucial investment at any manufacturing firm

striving to integrate supply chain partners with the manufacturing processes so as to

achieve competitive advantage. Though the effectiveness of different leadership

behaviors exhibited in top-level management has been documented in the leadership

literature, the influence of such behaviors on developing linkages with supply chain

partners has not been extensively examined. In order to bridge this research gap, this

study examines the interlinkages between strategic leadership theory and supply chain

integration theory. In addition, it also investigates the interrelationship between these

two theories in the context of implementation of advanced manufacturing technology.

Data has been collected from 107 small manufacturing companies and was analyzed

3
using structural equation modelling. Results show that transactional leadership

exhibited in top-level management is positively related to internal integration within the

manufacturing companies. Transformational leadership behavior exhibited in top-level

management and advanced manufacturing technologies implemented in the shop floor of

these companies are positively related to the integration of external supply chain

partners. In addition, we also found that in those instances where small manufacturing

companies place a high emphasis on the implementation of advanced manufacturing

technology, they are guided by transformational leaders who strongly integrate their

companies with their customers.

Keywords: Internal integration; Supplier integration; Customer integration; Advanced

manufacturing technology; Strategic leadership; Small manufacturing

industries.

1. Introduction

Intense global competition pressures manufacturing companies to improve their

internal processes and develop collaborative networks with their suppliers and customers

4
to generate mutual benefits. They have recognized that merely optimizing existing

manufacturing infrastructure would fail to maintain and preserve a competitive

advantage. Therefore, they develop human capital to transform the shop floor into a

flexible system capable of quickly responding to customers’ demands. Successful

manufacturing companies have succeeded by implementing versatile platforms to

integrate supply chain partners with their manufacturing strategies (Frohlich &

Westbrook, 2001). For these reasons, companies place a high priority on the

development of long-term relationships with internal and external supply chain partners

(Flynn, Huo, & Zhao, 2010).

It is unimaginable that long-term relationship development would be initiated

without the support of top-level managers who are engaged in the formulation and

prioritization of corporate strategies. These managers are solely responsible for deciding

the upper limit of resources to invest in developing relationships with suppliers and

customers. Thus, in the absence of these attributes, they will lose their competitive

edge. Specifically, leadership behaviors encapsulate the right quantity of demand

information from the customers through establishing relational trust and positive

5
perceptions of long-term support (De Treville, Shapiro, & Hameri, 2004). Further, it is

top-level manager’s charismatic behaviors which differentiate their firms from their

competitors and increase the overall visibility of their organizations. Consequently,

external partners, for example suppliers, increase their identification with the

organizations and decide to participate with these organizations (Fanelli & Misangyi,

2006). Due to these reasons, researchers strongly believe that formulation and

implementation of supply chain strategies require influential leadership behaviors and

top management support (Chen & Paulraj, 2004; Krause, 1999; Mentzer et al., 2001;

Dubey, Gunasekaran & Ali, 2015). Nonetheless, we have carried out a preliminary

literature review in the database of ABI/INFORM Collection. Managers in the

successful entrepreneurial-oriented companies, who have ambidextrous leadership

behaviors and placed great emphasis on maximizing integration with suppliers and

customers, succeeded in improving market responsiveness (Luu, 2017a, 2017b). Likewise,

a study found that both strategic leadership and supply chain integration are the crucial

elements for companies to improve agility in the humanitarian operations (L’Hermitte et

al., 2016). It is evident from this review that there have been no empirical studies

6
addressing the importance of strategic leadership behaviors on strengthening the

relationship with the internal and external supply chain partners. Thus, we have

concluded that there is a need to investigate the impacts of strategic leadership

behaviors on internal and external integration.

In addition, constraints related to utilizing resources to meet the requirements of

customers commonly prevail in the manufacturing companies. In particular, these

companies have natural pressures from the dominating customer organizations to build

up technological capabilities to deliver quality and customized products. As a result,

companies having strong technological capabilities have well-established platforms to

integrate with supply chain partners (Vickery et al., 2003). At the same time, it is also

found in the western economies that implementation of advanced manufacturing

technologies and managers who participate in the process of formulating manufacturing

strategy achieve improved capabilities of competitiveness (Tracey, Vonderembse, &

Lim, 1999). These studies show the importance of implementing advanced technologies

in the manufacturing environment to develop capabilities supporting achieving

competitive advantage. However, operations management literature lacks strong

7
empirical research demonstrating the contributions of top-level leaders to integrate

supply chain partners with the manufacturing system in the context where high

emphasis is given for the implementation of advanced manufacturing technology.

Waldman, Ramirez, and House (2001) proved that charismatic leaders are very effective

in the environment possessing high uncertainties. Since implementation of advanced

manufacturing technologies helps firms to absorb uncertainties in the environment, we

believe that the interlink between strategic leadership theory and supply chain

integration theory would be very strong in the context of implementing advanced

manufacturing technology.

In order to bridge the above research gaps in the literature, this study has the

following research questions: 1) do strategic leadership behaviors exhibited by top-level

managers influence the level of supply chain integration?, 2) does the implementation of

advanced manufacturing technology contribute to integrate supply chain partners with

the manufacturing plants?, and 3) can the emphases given for the implementation of

advanced manufacturing technology alter the strength of impact of strategic leadership

behaviors on the level of supply chain integration?. These questions were answered with

8
the help of responses we collected from Indian manufacturing companies and structural

equation modelling (SEM) technique used to test the proposed hypotheses. SEM showed

that strategic leadership behaviors (transactional and transformational leadership) have

varying impacts on supply chain integration, and it also showed that advanced

manufacturing technology has potential to alter the impact of transformational

leadership and customer integration.

The arguments and hypotheses are mentioned in section 2. Section 3 explains the

characteristics of sample of companies taken from Indian manufacturing industries and

measures used to collect responses from these companies. Section 4 describes analyses we

used to process the data, and section 5 explains the results obtained from SEM

technique. Finally, section 6 discusses implications this study carries for both research

and practice, lists out various limitations constraining the interpretation of the results,

and explains the possibilities of extending this study further.

2. Theoretical Background and Hypotheses

9
 Firms develop valuable resources that are rarely available in the market and

make it inimitable by their competitors. Since these resources are unique, they become a

competitive advantage for the firms (Barney, 1991). Though studies focused on the

resource based view of firm concentrated mainly on internal resources, relational view of

firm suggests that firms also generate resources through interorganizational

collaboration and strategic partnerships having a main reason that these resources are

not available with them (Dyer & Singh, 1998). Thus, organizations formulate supply

chain integration strategy through which they develop and sustain competitive

advantage and achieve performance improvement (Leuschner, Rogers, & Charvet, 2013;

Droge, Jayaram, & Vickery, 2004; Narasimhan & Kim, 2002).

Upper echelon theory suggests that top-level managers interpret the

organizational situations in which a strategy is formulated and act according to their

interpretations. Such interpretations are the functions of top-level managers’

personalities, norms and values, and accrued experiences in the organizational

environment (Hambrick, 2007). Simply, this theory posits that characteristics of top-

level managers and their leadership behaviors decide the way of formulation of strategy

10
and level of achievement of performance. In this direction, we believe that leadership

behaviors will have potential to decide the way of formulating supply chain integration

strategy. Further, the way top-level managers exhibit leadership behaviors to produce

organizational results depends on the given conditions, and thus, leadership behaviors

become a source of competitive advantage to the firms. Certain behaviors (for example

charismatic leadership) are very effective in achieving performance improvement in an

uncertain environment (Waldman et al., 2001). When the situation is unpredictable,

ambiguity appears in the environment and managers will have different ways to

interpret the uncertain environment. Therefore, in a situation of high degree of

discretion, characteristics of the top-level managers will provide final shape to the

strategy and decide the performance improvement (Hambrick, 2007).

Information processing perspective defines uncertainty as the simple difference

between the amount of information an organization possesses and the amount of

information that organization requires to solve a problem (Galbraith, 1973).

Organizations use advanced manufacturing technologies to increase information

processing capabilities to absorb uncertainty in the manufacturing environment (Kotha

11
& Swamidass, 2000). In this direction, we expect that certain leadership behaviors

would be very effective to formulate supply chain integration strategy in the

environment of implementation of advanced manufacturing technologies.

The integration of transformational and transactional leadership and supply

chain integration theories dominates other leadership theories in the organizational

environment. For example, charismatic leadership theory postulates that charismatic

leaders increase external stakeholders’ identification with firms through exhibiting

symbolic behavior, and they convey firm’s vision to external stakeholders and encourage

them to share their vision. As a result, these leaders support creating shared vision and

norms to endure relationship for long term. Further, charismatic leaders are widely

known for supporting risk-taking activities among employees. However, Bass, (1985)

highlighted that this charismatic theory itself is not sufficient to explain the whole

transformational process taking place inside the firm. Leaders are required to improve

the knowledge and skill level of employees and to identify and satisfy the needs of

employees. Without increasing the capability of employees or developing human capital,

firms cannot wipe out the fear of outcomes of risk-taking activities. In addition,

12
suppliers and customers’ identification with the firm itself are insufficient for firms to

achieve competitive advantage. Motivating these stakeholders to involve in the

manufacturing process is vital for organizations to survive in this competitive

environment. Therefore, the combined transformational-transactional leadership theory,

rather than charismatic leadership theory alone, is needed to integrate suppliers,

customers, and employees with the manufacturing processes. According to Bass (1985),

charismatic leadership is a part of transformational leadership.

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INSERT FIGURE 1 HERE

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2.1 Supply chain integration

Porter’s (1980) value chain model is the root of the concepts of supply chain

integration. The value chain model emphasizes the horizontal linkages of value chain

activities (for example, logistics, operations, and marketing) within a plant. The value

system requires an alignment between value chain activities of plant and their external

13
partners (vertical linkages) to produce better outcomes. The aim of horizontal and

vertical linkages is to create value for customers. In the organizational environment,

these activities are the value added processes performed independently by different

entities inside and outside the boundaries of firms, and integration of such independent

processes brings a unified control over these processes (Flynn et al., 2010). Thus,

integration is measured based on the intensity of various independent parties working

collaboratively to produce mutually acceptable results (O’Leary-Kelly & Flores, 2002).

In the supply chain context, Flynn et al. (2010) add strategic collaboration component

together with the value chain model. Strategic collaboration highlights the relationship

between supply chain partners working together to achieve mutual strategic goals. It

triggers creation of various social mechanisms to impart commitment and trust to

increase the endurance of the relationship with supply chain partners. In specific, Flynn

et al. (2010) define supply chain integration as “the degree to which a manufacturer

strategically collaborates with its supply chain partners and collaboratively manages

intra- and inter-organization processes” (p. 59).

14
 There is no widely accepted dimensions of supply chain integration in the field of

operations management. Researchers have focused on supply chain integration as a

single dimensional construct (Tsanos & Zografos, 2016; Rosenzweig, Roth, & Dean,

2003; Vickery et al., 2003; Mostaghel et al., 2015), two-dimensional constructs (Droge,

Jayaram, & Vickery, 2004; Narasimhan & Kim, 2002; Cagliano, Caniato, & Spina,

2006), and three-dimensional constructs (Flynn et al., 2010; Yunus & Tadisina, 2016;

Leuschner et al., 2013; Wong & Boon-itt, 2008). Following the previous researchers, we

classify supply chain integration as internal integration, supplier integration, and

customer integration.

The knowledge-based view of a firm posits that firms are social entities or

systems in which competencies of individual employees and groups of employees are

leveraged with the help of a cluster of principles to deliver useful products and services

(Kogut & Zander, 1992). These principles guide manufacturing companies to structure

the relationships among employees who are engaged in individual work or group tasks

inside or outside the companies, and thus, they form a united system containing internal

functions and processes of a whole firm to achieve mutual benefits (Germain & Iyer,

15
2006). This system generates feelings of joint ownership for the master production

schedule and encourages employees to adhere to the production schedules. In addition,

creation of information systems strengthens the integration of production systems with

other systems through fast dissemination of information (Armistead & Mapes, 1993). As

a result, these principles ensure coordination and collaboration between internal entities

(Rosenzweig et al., 2003).

Calls for integrating with external partners are growing in the manufacturing

industries as the synergetic competencies between manufacturers and external partners

make both parties competitive in the supply chain network. Researchers have constantly

emphasized that manufacturing organizations should engage in managing the activities

of other firms involved in their supply chain networks, in addition to managing their

own businesses, and they should also structure their businesses to carry out operations

on a shared basis with their external partners (Frohlich & Westbrook, 2001; Hale,

1999). Supplier integration is a social process through which manufacturing companies

leverage suppliers’ design and technical competencies through developing strong long-

term relationships. Due to this process, manufacturing companies introduce more new

16
products, and they become competitive in the market (Koufteros, Vonderembse, &

Jayaram, 2005; Ragatz, Handfield, & Petersen, 2002).

Customer integration allows manufacturers to understand the demand

requirements of the customers and to leverage the capabilities of customers for

strengthening the manufacturers’ capabilities. Stank, Keller, & Closs (2001) describe

customer integration as competencies possessed by organizations to create unique

products or services that customers want. It also provides opportunities for

manufacturers to develop long-term relationships with customers and make the

manufacturing system capable of producing innovative products (Koufteros et al., 2005).

In this direction, external integration supports joint problem solving and reducing

complexity in the supplier and customer sides. Overall, since suppliers and customers

are also given opportunities to leverage the capabilities of manufacturers, external

integration reduces lead-time in the supply chain and improves the supplier’s

manufacturing process (Petersen, Handfield, & Ragatz, 2005).

We also conducted a systematic literature search using keywords such as supply

chain integration, antecedent, and factor in the abstracts of articles available in

17
ABI/INFORM Collection database. The summary of the relevant literature has been

mentioned in Table 1.

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INSERT TABLE 1 HERE

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2.2 Strategic leadership

Strategic management theory assigns higher importance to the influence of the

behaviors of top-level managers over their subordinates’ behavioral change and to these

managers’ actions to affect the outcomes of their organizations. Strategic leadership is a

study of leadership behaviors executed by the top-level managers who involve in

strategy formulation and vision development processes. Upper echelon theory reiterates

that top-level managers are very important to change the intensity of firm outcomes in

certain situation, and their demographic characteristics and their behaviors make

changes in the level of organizational outcomes (Hambrick & Mason, 1984). The level of

discretion managers have in the organizational environment encompassing constraints

18
with which top-level managers operate will be reflected in the strategies they formulate.

Therefore, based on their discretion, top-level managers can freely select the appropriate

behaviors in the organizational environment. In this direction, strategic leaders can

involve in the identification of relevant behaviors and execute those behaviors when

situation demands. Researchers have considered two leadership behaviors to describe

strategic leadership namely transformational or charismatic leadership and transactional

leadership (Waldman et al., 2001; Jansen, Vera, & Crossan, 2009; Vera & Crossan,

2004), Since charismatic leadership is a part of transformational leadership behaviors,

we consider both transformational and transactional leadership as the characteristics of

strategic leadership.

Transformational leaders are the leaders who promote trustable climate, treat

employees individually, affect employees’ self-interests, set vision for the organizations,

and motivate employees intrinsically. The definition and structure of the behaviors of

transformational leadership are not finite, and researchers have defined and described

these in their own ways. According to Bass (1985), four behaviors - idealized influence

or charisma, inspirational motivation, intellectual stimulation, and individualized

19
consideration - describe transformational leaders in the organizational environment.

Podsakoff et al. (1990) describe this behavior through vision articulation, being an

appropriate model, motivation through creation of group goals, expectations for high

performance, individualized support, and intellectual stimulation. The description of

transformational leadership, according to Carless, Wearing, and Mann (2000), is as

follows: communication of vision, staff development, supportive leadership, empowering

employees, innovative thinking, lead by example, and charismatic behavior. Through

communicating vision of the organization, transformational leaders convey an image of

the organization and the personal and organizational values to the stakeholders. They

develop employees through instilling confidence and assigning more responsibilities to

encourage skill development (Carless et al., 2000). These leaders support their

employees through communicating their expectations to the organizational members and

motivate employees by providing challenging tasks. They also empower employees to

make decisions and act as role models for their employees. Further, charismatic behavior

attracts respect from employees and establishes trust among the employees (Bass, 1990).

20
 On the other hand, transactional leaders are traditional leaders operating in the

current organizational structure and given strategies. Predominantly, these leaders are

the promotors of exchanges that motivate employees to achieve goal. Thus,

transactional leadership closely follows path goal theory (House, 1971). In specific, Bass

(1990) describes transactional leaders with the following three behaviors:

Contingent reward - Through this behavior, leaders confirm monetary or non-monetary

rewards for the employees’ good work and acknowledge the good work of employees;

Active management by exception - This behavior encourages leaders to constantly search

for deviations in the employees’ work from the standard procedure and allows them to

make corrective actions before letting the problems appear; and

Passive management by exception - This behavior allows leaders to engage with

employees only when the assigned task does not meet the standard set by the leaders.

Since researchers have widely found that passive form of transactional leadership

does not support leaders to achieve organizational goals, they have used the first two

behaviors to demonstrate transactional leadership behaviors. Transformational and

transactional behaviors are not mutually exclusive as transformational leaders are seen

21
often using contingent reward behaviors. Thus, studies have found that these behaviors

are highly correlated with each other, and the same managers exhibit both

transformational and transactional behaviors in different situations and varying

amounts (Avolio, Bass, & Jung, 1999; Bass, 1998).

2.3 Advanced manufacturing technology

In order to confront with competitive pressure, manufacturing strategy should

have a component of advanced technology enabling manufacturers to develop

competitive capabilities. Such manufacturing technologies are state-of-the-art

manufacturing techniques and equipment used on the shop floor that are integrated

with the information technology and other practices implemented in relation to the

production process (DeRuntz & Turner, 2001). Manufacturing companies use these

technologies for their design and engineering purposes, production planning and control,

managing information, and actual manufacturing and assembly process (Bessant &

Haywood, 1988). Advanced manufacturing technologies are the strategic weapon for any

manufacturing companies striving to absorb uncertainties arising from the supply chain

22
partners. To do this, they create flexible manufacturing concepts using these state-of-the

art technologies to ensure production flexibility. Consequently, manufacturers

implement such technologies for making operational decisions. In this direction,

advanced technologies support manufacturing companies to build up competitive

capabilities and make such capabilities unique and competitors would not have

opportunities to leverage such capabilities. Organizations can enjoy this advantage as

long as they ensure the fit between manufacturing processes and marketing decisions

(Kotha & Swamidass, 2000).

These technologies transform an organization into a computer-integrated system

aiming to reduce lead-time and improve consistency in the products. Thus, these

technologies are also the sources of competitive advantage. However, implementation of

these technologies varies among manufacturing organizations. Large companies enjoy

the benefits of robots, whereas small companies implement computer numerical control

machines and many times, these machines require high operator involvement. Therefore,

implementation of these technologies attracts huge investments to develop competent

workforce to involve in with these technologies.

23
2.4. Strategic leadership and internal integration

Wheelwright and Clark (1992) and Pagell (2004) described that achieving

integration fit (for example, between design and manufacturing departments) depends

on the level of support received from the top level management. According to Pagell

(2004), top management support is required even for increasing the level of

communication in the organizational environment and implementing human resource

management activities through which top level leaders achieve internal integration

among various internal departments. Top-level leaders are those who could develop

strategic goals for eliminating barriers for intra-organizational communication.

Removing these barriers requires strategic vision and significant financial resources to be

invested on communicational technologies across various departments. As per upper

echelon theory, top level managers’ characteristics, in specific, leadership behaviors,

24
have potential to play important roles in achieving improved coordination between

internal departments.

This belief is supported by the fact that transformational leadership theory

supports establishing trust among employees, promoting innovative culture in the

organization, providing autonomy to employees, and increasing group cohesion (Howell,

Avolio, & Schmitt, 1993; Nemanich & Keller, 2007; Podsakoff et al., 1990; Schaubroeck,

Lam, & Cha, 2007). Transformational leaders support implementing communicational

technologies to integrate various internal functions and engage employees to participate

in these technologies (Birasnav, Rangnekar, & Dalpati, 2011).

Researchers have also found that transformational and transactional leadership

behaviors support organizations to implement human capital development practices

such as recruitment, reward management, training and development (Zhu, Chew, &

Spangler, 2005). Such practices also support developing employees of different

departments to engage in cross-functional teams created to achieve internal integration.

In specific, Pagell (2004) also clearly mentioned that functional-centric incentives, rather

than individual-centric incentives to achieve the goal, support organization to get

25
consensus for high internal integration. It should be remembered that both

transformational and transactional leadership theories are supportive of using reward

systems to motivate individual employees or group of employees.

Further getting support for these theories, Sobek et al. (1998) described that

Toyota achieves high internal integration through two important customer focus

approaches such as level of social processes and standardization. Leadership literature

shows that transformational leadership behaviors are most frequently used to influence

the group level works carried out in the organizational environment (Jung & Sosik,

2002). In the same vein, transactional leadership behaviors create a favorable

environment for standardization of the process, set objectives for task accomplishment,

and ensure high stability in the processes (Vera & Crossan, 2009). In India,

organizations adopting defender strategies emphasizing standardization and routines

have shown high stability in their processes (Gupta, 2011).

Furthermore, research studies also provide support for our belief that these two

kinds of leadership styles are frequently exhibited in the small business environment. In

the small companies, simple and centralized organizational structure help employees to

26
make frequent communication with their managers and founders, and this structure

paves a way for the emergence of close leaders in the small business environment. Close

leaders can easily get consensus to form cross-functional teams and ensure frequent

communication between different departments. For these reasons, Avolio et al. (2004)

hypothesized that transformational leaders will build strong relationship with their

employees who are structurally close to them. Further, studies also support that small

companies have witnessed their top-level managers exhibiting transformational

leadership behaviors intrinsically motivating their employees and improving

organizational innovation, in other words increasing new product flexibility

(Gumusluoglu & Ilsev, 2009). Therefore, we strongly believe that transformational and

transactional leadership behaviors are necessary for achieving improved fit between

various internal departments of Indian small manufacturing companies.

Hypothesis 1a: Transformational leadership behaviors would be positively related to

internal integration in the Indian small manufacturing companies.

Hypothesis 1b: Transactional leadership behaviors would be positively related to internal

integration in the Indian small manufacturing companies.

27
2.5. Transformational leadership and external integration

Decisions related to making investments at supplier organizations are long-term

decisions requiring the involvement of top-level managers. Supplier development process

requires manufacturers to move their employees to the location of suppliers for a certain

period of time, and at the same time, communication should be regularly held between

two parties to share the production and logistics schedule. In some circumstances,

proprietary information might be required to share with each other. Therefore, trust

should be established in the buyer-supplier relationship. Decisions related to deploying

financial resources and activities related to establishment of relational trust fall under

the purview of the responsibilities of top-level managers. In this direction, we have

preliminary evidence showcasing that leadership behaviors are prerequisites in the

Indian manufacturing companies to collaborate and integrate with suppliers (Dubey et

al., 2015).

In general, external partners evaluate organizations based on the leadership

quality of the top-level manager. Symbolism of a charismatic leader promotes the

28
visibility of the organization and creates his/her organization as a unique organization.

Therefore, identification developed by this leader inside the organization is most likely

to increase external partners’ identification with his/her organization whenever they

interact with the organizational members (Fanelli & Misangyi, 2006). Nevertheless,

small organizations are not dominant in their industries and have tangible and

intangible resources comparably less than other firms (Street & Cameron, 2007). In

order to utilize the resources available at suppliers, top level managers in the small

companies must exhibit transformational behaviors to convey the need for creating

shared vision and norms and attract suppliers to participate with achieving this shared

vision.

In parallel, transformational behaviors have had huge impact on the downstream

supply chain in the service industries particularly. It was found that these industries

have had more number of long-term customers, and customers have had strong

intensions to maintain long-term relationship with these industries (Liao & Chuang,

2007). Further, leaders supporting empowerment have been seen changing the

employees’ adaptability skills while interacting with customers, and as a results,

29
employees change their tactics to attract customers during selling process and improve

customers’ service related satisfaction (Ahearne, Mathieu, & Rapp, 2005). At this

juncture, it should be noted that empowerment is more frequently exercised by

transformational leaders. In addition, it was also found in the eastern economics that

transformational behaviors are associated with high employees’ customer-oriented

behaviors (Liaw, Chi, & Chuang, 2010). Furthermore, researchers have highlighted that

inspiring and ideal leadership styles that are conducive for implementing quality

management (customer focus aspect) are more prevalent in Indian culture (Lenka, Suar,

& Mohapatra, 2010). Thus, we hypothesize the following:

Hypothesis 2a: Transformational leadership behaviors would be positively related to a)

supplier integration and b) customer integration in the Indian small

manufacturing companies.

2.6 Advanced manufacturing technology and supply chain integration

Implementing advanced manufacturing technologies requires manufacturers and

suppliers to undergo system change to strengthen the relationships between

manufacturers and upstream supply chain partners (Esposito & Passaro, 1997; Vickery

30
et al., 2003). Computer aided production management software provides opportunities

for making adjustments in the production process and controlling production at all the

stages of manufacturing, and as a result, manufacturing companies achieve high internal

integration. In addition, some technologies, Computer Aided Design (CAD) and

Computer Numerical Control (CNC) machines are used in the shop floor to control the

movement of the tools and functions of the machines, store all the data in the decoded

format, and thus, they provide control over the production process (Boyer et al., 1997).

Since design related drawing should be exchanged between design and manufacturing

functions and the output of CNC machines does matter for the marketing functions, use

of such technologies promotes high internal integration.

Further, Davenport (1998) highlights the use of enterprise resource planning

systems to increase the flow of information across various functions within the

companies. In addition, technological systems used for total quality management (TQM)

and total productive maintenance require participation of suppliers to improve quality

and reduce defective rates, and thus, these systems demand supplier integration with

the manufacturers. Further, since customer focus is one of the dimensions of the TQM

31
system, it requires customers’ early participation in the product design with the

manufacturers. These technologies develop a unified system within a manufacturing

company and integrate all the internal functions through transmitting information, and

thus, they remove the barriers of integrating various functions (Snell & Dean, 1992). In

this direction, it is understood that manufacturing companies providing greater

emphasis for implementing advanced manufacturing technologies could realize high

integration of their supply chain partners with their manufacturing processes. Though

the investments would be lesser in small manufacturing companies, they cannot improve

their competitive capabilities without upgrading their manufacturing systems. Thus,

small companies are expected to operate advanced technology driven manufacturing

process to integrate their supply chain partners with their production systems.

Hypothesis 3: Advanced manufacturing technology would be positively related to a)

internal integration, b) supplier integration, and c) customer integration in

the Indian small manufacturing companies.

2.7 Interactive effects of advanced manufacturing technology

32
 Advanced manufacturing technologies provide support to the manufacturing

companies to become capable to absorb customer choices in terms of creating new

design and transform these choices into tangible products. Therefore, capabilities of

achieving product and process flexibility highly contribute to sustain competitive

advantage among companies implementing such technologies (Mcdermott, Greis, &

Fischer, 1997). Leaders do the same tasks of improving process and product flexibilities

through encouraging employees to acquire knowledge from both internal and external

systems and employees to share the acquired knowledge with other employees

(Birasnav, 2014). These findings provide preliminary evidence that both leadership

behaviors and advanced technologies complement each other to satisfy customer choices.

Primarily, lead-time reduction is the obvious benefit observed by manufacturers who

promote using new manufacturing technologies. They also witnessed improved

competitive capabilities along with managers’ participation in the strategy development

process (Tracey et al., 1999). In addition, it is also found among manufacturing

companies that when high emphasis was given manufacturing flexibility, leaders who are

33
participating and delegating have shown high managerial performance in their

companies (Kathuria & Partovi, 1999).

Since supply chain partners are expected to be prepared to manage uncertainties,

manufacturers are in need of developing appropriate leadership behaviors to confront

complex situations and articulate such situations to the partners, Importantly, such

behaviors should help the companies to train supply chain partners to develop skills and

competencies to resolve issues emerging in these situations. Contributions of charismatic

leadership behaviors were very strong in the uncertain environment in the western

economics (Waldman et al., 2001). Manufacturers also use advanced technologies to

absorb uncertainties arising from the environment. Therefore, the synergy between

idealized influence behaviors and implementation of advanced technologies are expected

to be significant to integrate internal systems.

Further, inspirational communication behaviors of transformational leaders of

manufacturing companies support developing strong relationships across the internal

systems and external systems. In parallel, literature shows that advanced manufacturing

technologies are implemented to improve communication across the manufacturing

34
subsystems and align the manufacturing processed between manufacturers and external

supply chain partners (Vickery et al., 2003; Zairi, 1992). In addition, studies have

showcased that transformational leaders use empowerment as a tool among groups of

employees to make independent decisions (Avolio et al., 2004; Jung & Sosik, 2002).

Similarly, studies show that implementation of advanced technologies demands workers

to be involved in decision making on the shop floor (Jaikumar, 1986). Therefore, it is

strongly expected that the synergy between transformational leadership and advanced

technologies strengthens the integration of all the internal systems together. Further,

researchers also found that the interaction between advanced manufacturing technology

and top management support for quality predicted the improved financial performance

and increased manufacturing flexibility in the manufacturing companies (Boyer et al.,

1997). Following Boyer et al., we believe that the interaction between advanced

manufacturing technology and transformational leadership could predict high internal

integration.

The emergence of a particular leadership style is a function of the characteristics

of the environment. For example, when environment becomes stable or less vulnerable,

35
predictive capability of organization increases. As a result, transactional leadership style

emerges to enforce standardization and routineness in the work flow (Waldman et al.,

2001). However, when environment becomes volatile, it is organizational leaders’

responsibility to increase the predictive capability of an organization during this

environment. Therefore, transformational leaders emerge in the organizational system to

increase the capability of the manufacturing system to integrate with suppliers and

customers. Since advanced manufacturing technologies are used to absorb uncertainties

in the environment, implementation of these technologies has the potential to alter the

emergence of leadership style in the manufacturing system. In this regard, we

hypothesize that implementation of advanced manufacturing technologies moderate the

relationship between leadership behaviors and supply chain integration.

Hypothesis 4: The higher the emphasis for the implementation of advanced

manufacturing technologies, the stronger the relationship a) between

transformational leadership behaviors and internal integration, b) between

transformational leadership behaviors and supplier integration, and c)

36
 between transformational leadership behaviors and customer integration in

the Indian small manufacturing companies.

Hypothesis 4d: The lower the emphasis for the implementation of advanced

manufacturing technologies, the stronger the relationship between

transactional leadership behaviors and internal integration in the Indian

small manufacturing companies.

3. Research Methodology

3.1 Sample characteristics

Data for the main study were collected from the manufacturing companies

located in the Indian State of Tamilnadu. The sampling frame included manufacturing

companies who are the members of the Coimbatore District Small Industries

Association. These companies are located in 65 different regions classified based on

postal index numbers. Random sampling procedure was used to identify the

participating firms for this study. A random sample of 33 regions consisting of 817

manufacturing companies were selected, and owner or general manager and operations

manager working in a manufacturing plant were targeted for this study. Prior to

37
collecting responses for the main study, the survey questionnaire, adapted based on

previous measures, was reviewed by academicians who have knowledge about Indian

manufacturing industries. This questionnaire was modified based on a pilot study

conducted among 12 manufacturing companies who were the members of Bharat Heavy

Electrical Limited Small and Medium Association. Further, we have also collected data

from 16 manufacturing companies of Coimbatore District Small Industries Association

before we started data collection for our main study to understand the difficulties that

could arise while collecting data.

We collected responses from two persons (owner/general manager and operations

manager) in each manufacturing plant for this study in order to minimize common

method bias. Researchers have pointed out that common method bias would be

minimum and at the same time, validity of responses would be higher, if multiple

persons were involved in data collection rather than if a single person responds to the

entire survey (Linderman, Schroeder, & Choo, 2006). Since data for this study were

collected from two different persons, common method bias is expected to be minimal.

38
 We used a delivery and pickup survey questionnaire methodology and email

survey methodology to collect responses from manufacturing companies. Out of 817

manufacturing companies, emails sent to 56 companies were undeliverable and 40

companies could not be reached due to missing email addresses. Thus, in total 721

companies were invited to participate in this study. We have received 107 useable

responses from the manufacturing companies for this study. We faced certain difficulties

such as entry restrictions, companies not located in the addresses mentioned in the

database, nonparticipation of the managers due to their busy schedules, mismatch of the

responsibilities of the participated persons, incomplete responses, and certain companies

fell outside of the sampling areas, which reduced the response rate. Final data were

collected from 107 pairs of owner/general manager and operations manager that

represented 107 manufacturing companies.

The top three manufacturing sectors of companies participating in this study

were fabricated metal products, industrial and commercial machinery and computer

equipment, and primary metal industries. The sales volume of approximately 56 per

cent of the participated companies were below ≈ US 154, 000. Fewer than 100

39
employees worked in the participating manufacturing plants. Approximately 75 per cent

of the participating plants were functioning in this manufacturing industry for between

6 and 15 years. All of the operations managers participating in this study were male.

However, 103 owners/general managers were male and 4 were female. All the

owners/general managers and operations managers were less than 50 years of age. Five

owners/general managers and fifteen operations managers had less than five years of

experience in their plants. 89 owners/general managers and 89 operations managers had

less than fifteen years of experience in their plants.

In order to assess the nonresponse bias, we compared the investment made in

plant and machinery of both responded and nonresponded manufacturing companies

using t test. Results of this test showed that these two groups of companies have no

significant differences in terms of their investment in plants and machineries (p < 0.1).

Thus, we conclude that the companies that participated in this study represents the

population of companies from which random sample has been taken.

3.2 Measures

40
 Following Vera and Crossan (2009), strategic leadership behaviors were measured

using two leadership styles namely transformational leadership and transactional

leadership. To measure transactional leadership, we slightly adapted the measure

developed by Waldman et al. (2001). To measure transformational leadership behaviors,

we slightly adapted the measures developed by Carless et al. (2000). 5 point Likert scale

(1 = Not at all; 5 = Always) was used to collect responses for all the leadership related

items. Operations managers were asked to rate these leadership behaviors exhibited by

the owners or general managers in their manufacturing plants. Four items representing

supportive leadership, empowerment, lead by example, and charisma related items were

used to represent transformational leadership in the data analysis, and three items are

not used for the data analysis due to low factor loading values. Two items representing

management by exception and contingent reward was used to represent transactional

leadership in the data analysis, three items are not used for the data analysis due to low

factor loading values. The internal consistency of the items of transformational

leadership (Cronbach alpha, ⍺ = 0.64) and transactional leadership (⍺ = 0.65) was

good.

41
 The same operations managers were requested to provide responses for the

implementation of advanced manufacturing technologies in their plants. To measure the

extent of implementation of advanced manufacturing technologies, we used a measure

developed by Tracey et al. (1999). These items did not ask operations managers specific

technologies used in the shop floor as did other researchers (for example, Boyer et al.,

1997). Since surveyed industries are small in size, generic questions, rather than very

specific technologies, would help managers to provide level of emphasis for implementing

advanced manufacturing technologies. Responses were collected using 5-point Likert

scale (1 = Strongly disagree; 5 = Strongly agree). Three items of this measure were used

for the data analysis, and since deletion of one item improved the alpha value of this

construct, it was not considered for the data analysis. The internal consistency value of

these items was good (⍺ = 0.81).

The extent at which manufacturers integrating with internal partners and

external partners was measured using items developed by Narasimhan and Kim (2002).

These items are adapted to represent only one major supplier and only one major

customer of the manufacturers. We used 7-point Likert scale (1 = Extremely low; 7 =

42
Extremely high) to collect responses for these items. We used three items to represent

internal integration, three items to represent supplier integration, and two items to

represent customer integration for the data analysis. Owners or general managers were

requested to rate at what extent they were integrated within their plants, between their

plants and suppliers, and between their plants and customers. The internal consistencies

between the items of internal integration (⍺ = 0.80), supplier integration (⍺ = 0.87),

and customer integration (⍺ = 0.60) were good.

4. Data analysis

Following the previous research studies, we have followed the sequence of testing

measurement model and structural model using LISREL 8.7. Confirmatory factor

analysis was performed by relating all the items to its relevant constructs to test the

measurement model. Structural model was tested by establishing path relationships

between constructs in the measurement model.

Convergent validity describes at what extent the items converge altogether on its

relevant latent construct in the measurement model (Garver & Mentzer, 1999). In

43
general, convergent validity is assessed by observing the significant t value of the factor

loadings of each item on its construct, and specifically, research studies have not

specified a definite cutoff point for factor loadings (Koufteros, 1999). Discriminant

validity describes the degree at which a latent construct and its indicators differ from

another latent construct and its indicators. Following Koufteros (1999), we developed a

confidence interval (ϕ ± 2 σe) for correlation (ϕ) of each pair of the latent constructs to

assess the discriminant validity, and we look out whether one is included in this

confidence interval. Evidence of discriminant validity would be achieved if one is not

included in this confidence interval.

The overall fit of the measurement model will be assessed with the help of the

following indices: the ratio of χ2/df, Bentler Bonnet non-normed fit index (NNFI),

comparative fit index (CFI), and root mean square error of approximation (RMSEA).

The value of χ2/df less than 2.0 indicates that measurement model carries good fit;

measurement model carrying NNFI and CFI values of more than 0.90 shows that it

carries good fit with the data (Koufteros, 1999). Further, the RMSEA value of less than

44
0.50 shows good fit of the model, and the RMSEA value of less than 0.10 shows

reasonable fit of the model (Meyer & Collier, 2001).

Evaluating the structural model is necessary to test all the proposed hypotheses.

Structural path coefficients (γ) would be examined at the significant level (p < 0.05) to

find support for the hypotheses, only if the structural model fits with data. Following

Germain and Iyer (2006), two interaction terms are calculated by multiplying the

variables of transformational leadership and advanced manufacturing technology and by

multiplying the variables of transactional leadership and advanced manufacturing

technology. Before calculating the product terms, all of these three variables were mean

centered to reduce multi-collinearity.

5. Results

5.1 Measurement model

The results of the developed measurement model have been shown in Table 2

that lists out the values of all the factor loading of items on their constructs. T value of

each factor loading is significant at p < 0.01 and all the t values are more than |2|.

45
Thus, we ensure that all the items used in the measurement model converges into its

latent constructs. The fit indices of this measure model are as follows: χ2 = 174.52

(degrees of freedom = 104); normed chi square value (χ2/df) is 1.68 (<2); NNFI = 0.92;

CFI = 0.94; RMSEA = 0.08. These fit indices satisfactorily meet the cut off values

suggested by the researchers. Table 2 shows the descriptive statistics of the studying

variables and correlation between these values. The correlation coefficients show that all

the studying variables are positively associated with each other. In addition to these

values, confidence interval of ϕ between all the latent constructs are also mentioned in

Table 3 for the purpose of assessing discriminant validity. Since no confidence intervals

of any pair of latent constructs do not include the value one, we ensure that all the

latent constructs are distinct and thus, we have received support for discriminant

validity.

----------------------------------------------------------------------------------------------

INSERT TABLES 2 AND 3 HERE

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46
5.2 Structural model

The fit indices of the structural model are as follows: χ2 = 219.54 (degrees of

freedom = 128); normed chi square value (χ2/df) is 1.72 (<2); NNFI = 0.90; CFI =

0.92; RMSEA = 0.08. These fit indices shows a good fit between variance-covariance

matrix of the actual data and variance-covariance matrix of the hypothesized model.

Figure 2 shows the results of the structural equation modelling. The results of the

structural equation modelling provide strong support for integrating the theories of

strategic leadership and supply chain integration. The structural path coefficient

between transformational leadership and internal integration is not significant, and thus,

we have not received any support for hypothesis 1a. However, the structural path

coefficient between transactional leadership and internal integration is positive and

significant (γ = 0.38, p < 0.05). This significant path coefficient indicates the

importance of exhibiting transactional behaviors to integrate internal systems, and thus,

hypothesis 1b is supported. Further, the structural path coefficient between

transformational leadership and supplier integration (γ = 0.42, p < 0.05) is positive and

47
significant, and coefficient between transformational leadership and customer integration

is also positive and significant (γ = 0.71, p < 0.01). These results highlight that

manufacturers exhibit transformational leadership behaviors to integrate their

manufacturing systems with external supply chain partners, and consequently,

hypothesis 2a and 2b have received complete support. These results show enough

evidences that the greater the strategic leadership behaviors shown in the top-level

management, the greater the integration among the supply chain partners.

----------------------------------------------------------------------------------------------

INSERT FIGURE 2 HERE

----------------------------------------------------------------------------------------------

Furthermore, the structural path coefficient between advanced manufacturing

technology and internal integration is not significant. Thus, hypothesis 3a is not

supported. However, structural path coefficient between advanced manufacturing

technology and internal integration (γ = 0.28, p < 0.05) is significant and positive.

Structural path coefficient between advanced manufacturing technology and internal

integration (γ = 0.26, p < 0.05) is also significant and positive. Consequently,

48
hypotheses 3b and 3c are supported. These results provide support for the additive

effects of strategic leadership behaviors and advancement manufacturing technology on

supply chain integration.

Further, the structural path coefficients of interaction terms between

transformational leadership and advanced manufacturing technology and between

transactional leadership and advanced manufacturing technology on internal integration

are not significant. Thus, hypotheses 4a and 4d are not supported. These findings

indicate that transactional leadership style works well directly to integrate the internal

systems, and level of emphasis given for implementing manufacturing technologies does

not affect transactional leaders to build integrated internal systems in the

manufacturing environment. Similarly, we did not find the significant structural path

coefficient between the interaction term (transformational leadership and advanced

manufacturing technology) and supplier integration. Therefore, hypothesis 4b is not

supported. Interestingly, we found that the interaction term between transformational

leadership and advanced manufacturing technology carries significantly positive

structural path coefficient over customer integration (γ = 0.40, p < 0.01). This

49
coefficient shows that when greater emphasis given for advanced manufacturing

technology, transformational leaders are effective to integrate customers with the

manufacturing system. This finding provides strong support for hypothesis 4c.

To illustrate the interaction effects, we have plotted the transformational

leadership on customer integration on one standard deviation above and below the

advanced manufacturing technology. Figure 3 illustrates this interaction effect, and it

shows that when manufacturing companies provide high emphasis for implementing

advanced manufacturing technologies, the effect of transformational leadership on

customer integration is stronger than the effect of transformational leadership on

customer integration when low emphasis is given for implementation of advanced

technologies. Following Hayes (2013) and Johnson and Neyman (1936), we applied the

Johnson-Neyman technique to find the boundary line of the region of the values of the

advanced manufacturing technology in which the impacts of transformational leadership

on customer integration would be significant and positive. This technique provides

additional support for this interaction effect of transformational leadership and

advanced manufacturing technology on customer integration. Johnson-Neyman point

50
has occurred at -.63 (t = 1.983, p < 0.05). The effect of transformational leadership on

customer integration is strong and positive above this Johnson-Neyman point, and this

effect is not significant below this point. This finding provides additional evidence that

when small manufacturing companies provide high emphasis for implementing advanced

manufacturing technology, manufacturers will highly exhibit transformational behaviors

to integrate the manufacturing system with their customers.

----------------------------------------------------------------------------------------------

INSERT FIGURE 3 HERE

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6. Discussions and conclusions

The findings of this study carry implications for interpreting the previous

research studies in the literature of both operations management and leadership,

51
building up competitive capabilities for manufacturers, and revealing opportunities for

future research endeavors.

The first implication for the findings of this study is that strategic leadership

behaviors are required for integrating supply chain partners with the manufacturing

processes. Transactional leaders take care of integrating internal systems whilst

transformational leaders take care of integrating manufacturing systems with external

supply chain partners. Many researchers have suggested that top management support

is required for integrating supply chain partners with manufacturing system. However,

the requirement of the style of leadership needed has been explored here to understand

the importance of top managers’ behaviors in the manufacturing environment. This

study finds that in the small manufacturing industries studied, transactional leaders are

doing a great job of integrating employees with manufacturing system and ensure

coordination among the internal systems. In fact, in small companies, rather than

creating chaos, leaders should work within the existing infrastructure to please

customers’ requirements. Since internal systems work together to meet customer

demands, leaders are required to set goals and the ways to achieve such goals. Cultural

52
form of leadership involves in making the existing manufacturing infrastructure strong,

implementing strategies and maintaining culture prevalent in the organization

(Waldman et al., 2001). Therefore, monitoring the effectiveness of the functions of

internal systems and employees in the manufacturing companies is highly essential to

sustain customer base. In this direction, transactional leaders function to strengthen the

internal integration in the manufacturing environment. Pagell (2004) proposed that top

management support and reward systems are two of the main factors required in the

organizational environment to strengthen the internal integration. This study provides

empirical support for the proposition of Pagell (2004) that top management support in

the transactional form is required to monitor the functions of the internal systems and

reward employees to collaborate together with the internal systems.

On the other hand, transformational leadership works very well to integrate

external supply chain partners with the manufacturing organizations. Setting vision and

strategy formulation are important to identify new external partners to expand the

current operations. It is very important to demonstrate to customer organizations that

their plants are capable of producing and satisfying the demands of the customers, and

53
they will be ready to take risks to change manufacturing system to meet the

requirements of customers. In the small industries, it is proven that the greater the

exhibition of transformational leadership behaviors, the higher the external integration.

Maak and Pless (2006) posited that to have collaboration with suppliers and customers,

leaders should have a vision for the future and create moral infrastructure, and

importantly, leaders should have relational intelligence to connect and collaborate with

inside and outside partners. Relational intelligence is a combination of emotional

intelligence and ethical intelligence. Studies in the leadership literature point out that

leaders having relational intelligence are transformational leaders (Hur, van den Berg, &

Wilderom, 2011; Zhu et al., 2011). The findings of this study advances their proposition

through this empirical study that transformational leaders’ charismatic behavior binds

both suppliers and customers well with the small manufacturing systems. In this

direction, this study advances two theories namely strategic leadership theory and

supply chain integration theory. To date, studies have explored the outcomes of

strategic leadership behaviors (Jansen et al., 2009; Waldman et al., 2001) and

antecedents and outcomes of supply chain integration (Vickery et al., 2003; Droge et al.,

54
2004). Our study found for the first time that both strategic leadership and supply chain

integration theories are empirically proved correlating with each other. This is a starting

point for the need of showing strategic leadership behaviors in the supply chain

environment, and how leaders influence to improve supply chain performance should be

answered hereafter. Therefore, we invite researchers to empirically examine the

mediating variables in the relationship between strategic leadership behaviors and

supply chain performance.

The second implication of the findings of this study is the impact of

implementation of advanced manufacturing technologies on integrating with external

supply chain partners. Previous studies show that implementing technologies is a vital

activity necessary to strengthen the integration of supply chain partners (Vickery et al.,

2003). However, they have not investigated the importance of implementing such

technologies in the small manufacturing industries. The implemented technologies

require customers to interlink with manufacturing systems as these technologies enable

systems to produce faster and greater varieties of products. Therefore, customer

participation is warranted to engage with the manufacturers for the new product

55
development. In this direction, these technologies require suppliers to be available with

the manufacturers on just-in-time basis (DeRuntz & Turner, 2001). Thus, when

manufacturers provide high emphasis for implementing these technologies, integration

with external supply chain partners becomes strong and unavoidable. The findings of

this study are consistent with the findings of previous studies. For example, Vickery et

al. (2003) found that implementation of information technologies (advanced

manufacturing technology is a component) leads to high supply chain integration.

Devaraj, Krajewski, and Wei (2007) found that eBusiness capabilities implemented in

the manufacturing industries for purchasing purposes with suppliers and collaboration

purposes with suppliers and customers lead to high external integration. This study

advances their findings by focusing on only one sector of manufacturing industries based

on small size. In the small industries, advanced manufacturing technologies are

implemented aiming to integrate suppliers and customers with the internal systems. The

measure we used for assessing advanced manufacturing technology did not specify any

particular technologies. Therefore, we invite researchers to assess the implementation of

56
advanced technologies with the help of a list of specific technologies implemented inside

the plant.

The third implication of the findings of this study is the greater emphasis given

for the implementation of advanced manufacturing technologies, the stronger the

relationship between transformational leadership behaviors and customer integration.

Customer organizations require manufacturers to respond quickly in terms of sharing

information and meeting the customer requirements. Sustaining the base of the

customers is only viable when customers are integrated with the manufacturers and

exhibiting high trust with the customers. When greater emphasis is given for

technologies to generate manufacturing flexibilities (in terms of volume and new

product), transformational leaders emerge in the manufacturing system to strengthen

the relationship with their customers. Studies have shown that when transformational

leaders emerge in the organizational environment, customers are more likely to develop

long-term relationship with the service providing organizations (Liaw et al., 2010). This

study mainly advances the findings of Vickery et al. (2003) who described formulation

of integrative supply chain strategy that carried two components namely information

57
technologies and supply chain integration, and found that implementation of

information technologies leads to high supply chain integration. This study advances

their findings that transformational leadership behaviors must be considered to

formulate this integrative supply chain strategy. These behaviors complement advanced

manufacturing technologies to integrate customers with the manufacturing systems. In

the cases of small manufacturing companies, who predominantly supply larger

companies, the synergy between leadership behaviors and manufacturing technologies

did impact on customer integration and not on internal integration and supplier

integration. The reason for this phenomenon is that large company customers are

invested in maximizing integration with small manufacturing companies. The strength

of the large company customers bond with small manufacturers is reflected by the fact

that the representatives of large manufacturing customers often utilize site visits.

Consequently, transformational leaders of small manufacturing companies maximize

their relationship with large customers when technological innovations are introduced.

We found the reason that the synergy between transformational behaviors and

manufacturing technologies did not impact on internal integration is that smaller

58
manufacturing companies lack sufficient scale and resources to make use of technology

to improve internal integration. Thus, implementing technological changes for the

purpose of internal integration would be impracticable.

Therefore, we invite researchers to investigate empirically other significant factors

(for example, uncertain environment and organizational structure) that may play a

significant role to predict supply chain integration along with leadership behaviors. In

addition, this finding also advances the findings of Boyer et al. (1997) who found that

the interaction between quality leadership and advanced technologies predicts sales

growth and profitability of manufacturing companies and the findings of Kathuria and

Partovi (1999) who found that participating and delegating leadership behaviors

improve managers’ performance when high emphasis given for manufacturing flexibility.

This study shows that interaction effects of transformational leadership and advanced

manufacturing technologies predict high customer integration. Extending this study

further might help these interaction effects to predict both financial performance and

managerial performance. In this direction, we invite researchers to extend our model

further to predict both financial and managerial performance.

59
 Since transactional leadership is related to internal integration and

transformational leadership is related to external integration, the findings of this study

suggest manufacturing organizations to develop strategic leadership behaviors in the

top-level management. Supply chain integration is necessary for any organizations

striving to strengthen their competitive capabilities and achieve superior performance

(Flynn et al., 2010; Wong & Boon-itt, 2008). Strategic leadership behaviors support

manufacturers to develop competitive advantage. Therefore, it is necessary for the

organizations to offer training programs for their managers to exhibit strategic

leadership behaviors. In addition to this, they should train managers on when these

behaviors to be shown. Since transactional behaviors are related only to internal

integration, standardization and routineness should be highly emphasized inside the

plants to integrate various functions. However, when relationships are to be developed

with the external stakeholders, managers should be requested to exhibit

transformational behaviors to achieve the desired outcomes. Further, small

manufacturing organizations should consider investing in advanced technologies as these

60
technologies are related to high external integration. Top-level managers may decide on

the limit of their investment in such technologies.

Though this study submits interesting findings to the literature, the results are

bounded by the limiting factors that should be considered before interpreting and

generalizing the findings. We did not focus on internal integration between the

departments within the manufacturing plants; instead we focused on the entire

manufacturing plant. Second, the unit of analysis is the plant level and not the

organization level. Therefore, cautions are required before comparing the results of this

study over other studies. However, it is not uncommon that two different manufacturing

plants operated by a single company could maintain different supplier and customer

bases. Supporting this notion, Youndt et al. (1996) underlined that corporations adopt

different possible ways to manage different manufacturing facilities, and therefore,

variations naturally exist between manufacturing plants in terms of their operational

activities.

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Strategic leadership Supply chain integration theory

theory

Internal
Transactional integration
leadership

Supplier
integration

Transformationa
l leadership Customer
integration

Advanced
manufacturing
technology

Figure 1. The conceptual model of this study

83
84
L1

L2
Transformation
L3 I1
al leadership
NS
L4 Internal
γ = 0.42** I2
γ = 0.71* integration
T1
Transactional I3
γ=
leadership 0.38**
T2 S1
NS
A1 Supplier
γ= S2
Advanced integration
A2 0.28**
manufacturing S3
NS
A3 technology
NS γ= C1
FA 0.26** Customer
TL * AMT γ = 0.40*
NS integration
C2
RA
TR * AMT

85
Note: TL – Transformational leadership; TR – Transactional leadership; AMT – Advanced manufacturing technology; p < 0.01; p < 0.05; All the endogenous
* **

variables are allowed to covary. Errors of some indicators are allowed to correlate.

Figure 2. Results of structural equation modelling

86
 7

6
Customer integration

5 Low Advanced
manufacturing
technology
4
High Advanced
manufacturing
3 technology

1
Low Transformational High Transformational
leadership leadership

Figure 3. Illustration of moderation effect

87
88
 Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration

Authors Sample Antecedents Supply chain Findings

integration
dimensions
Tsanos & 162 logistics Mutuality/Reciprocity; Supply chain In the supply chain environment,
Zografos (2016) managers of Trust; Commitment integration mutuality/reciprocity improves trust
manufacturing (information among the supply chain partners,
firms located in integration) which in turn improves commitment
Europe, USA, among partners. Further, improved
and Asia commitment encourages strong
informational integration with
supply chain partners.
Woo, Pettit, & 127 Korean Port supply chain Port supply chain It was found that supply chain
Beresford (2013) seaport orientation (relationship integration orientation is positively associated
terminal orientation; human with supply chain integration of the
operators resources; financial seaports.
resources; top
management support)

89
Li, Tarafdar, & 411 American Collaborative knowledge Internal integration; It was found that collaborative
Rao (2012) firms management practices supplier integration; knowledge management practices
(knowledge generation; customer implemented in the firms support
knowledge storage; integration strengthening the integration of the
knowledge access; internal functions of the firms and
knowledge dissemination; the integration with the functions of
knowledge application) both suppliers and customers.
Shou et al. 843 Product characteristics Internal integration; It was found that complexity of the
(2017) manufacturing (product variety; and supplier integration; products mainly requires
firms located product complexity) customer manufacturing companies to
across the integration integrate with the internal functions
globe and suppliers. However, variety of
products requires companies to
integrate with internal and external
functions.
Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions

90
Cao et al. 317 Organizational culture Internal integration; This study revealed that group- and
(2015) manufacturing (development culture; supplier integration; development-oriented organizational
companies rational culture; group customer culture are significantly related to
located in ten culture; and hierarchical integration integration with supply chain
countries culture) partners. However, rational-oriented
culture is positively related only to
integration with internal functions.
Further, hierarchy-supported
organizational culture was
negatively related to both internal
and customer integration.
Vickery et al. 57 independent Integrative information Supply chain This study found that information
(2003) first tier technologies (Electronic integration technologies implemented in the
automotive data interchanges; supply chain network have predicted
suppliers of information systems; and strong integration with supply chain
General technology-driven partners.
Motors, Ford, manufacturing systems)
and Daimler-
Chrysler
Chiang, Chen, 809 Information sharing Customer This study found that the extent at
& Wu (2015) manufacturing integration which manufacturers and partners
companies having willingness to share
located in operational, technical, and strategic

91
 Greater China information is positively associated
Region with the strength of customer
integration.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions
Patnayakuni, 110 logistics Relational asset Information flow This study found that long-term
Rai, & Seth and supply specificity; long-term integration orientation exhibited toward supply
(2006) chain managers orientation; relational chain partners by the companies and
working in interaction routines the extent at which suppliers make
manufacturing their investments very specific to
and retail companies support to establish
organizations formal or informal mechanism for
information exchange among supply
chain partners. As a result, such

92
 information exchange strengthens
the integration of information flow
among supply chain partners.

Huo et al. 317 Human capital Internal integration; This study investigated the
(2016) manufacturing (Organizational supplier integration; relationship between human capital
companies commitment; managers’ customer and supply chain integration. It
located in 10 multi-skilling; employees’ integration found that employees who are
countries multi-skilling) committed to organizations involve
in the efforts of organizations to
integrate with supply chain partners.
Multiple skills of both employees
and managers are found to be
correlated positively with integrating
the internal functions of the
organizations. Further, interaction
effect of employees’ multi-skilling
and organizational commitment has
been found improving both internal

93
 integration and customer
integration.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions
Droge, 57 independent Product modularity; Supplier This study found that developing
Vickery, & first tier process modularity integration; interchangeable parts to add variety
Jacobs, automotive customer into the products, standardization
(2012) suppliers integration procedures, implementing technologies
supporting product varieties, and
establishing computerized
manufacturing system comprising of
general-purpose machines and NC/CNC
machines in the shop floor have
positively associated with supplier and
customer integration.

94
Mostaghel et 233 Swedish retail Access to new markets; Supply chain This study found that opportunities for
al. (2015) and wholesale anticipated performance; integration accessing new markets and anticipated
service companies external performance; performance trigger companies to adopt
enterprise systems enterprise systems. Adopting these
adoption enterprise systems strengthened the
integration of companies with their
supply chain partners.
Alfalla-Luque, 266 Employee commitment Internal integration; This study found that organizations in
Marin-Garcia, manufacturing supplier integration; which highly committed employees are
& Medina- plants located in 9 customer working, have had strong integration
Lopez (2015) countries integration with their supply chain partners.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions

95
Wong & 5 companies in Environmental Internal integration; This study found that environmental
Boon-itt, Thai automobile uncertainty (supply supplier integration; uncertainty is positively associated with
(2008) industry uncertainty; customer customer integration of supply chain partners. It
uncertainty; technology integration also found that when there are high
uncertainty) norms are in place in the industries,
strong association between
environmental uncertainty and supply
chain integration is predicted.
Tseng & Liao 124 Taiwanese Information technology Supply chain This study found that companies that
(2015) container shipping application; integration implement information technologies and
companies Market orientation are highly responsive to the market
needs are found to be highly integrated
with supply chain partners.
Qrunfleh, 205 American Supplier lean practices; Supply chain This study found that suppliers who are
Tarafdar, & manufacturing information systems integration highly focused on implementing lean
Ragu-Nathan firms strategy efficiency practices have supported organizations
(2012) to integrate with supply chain partners.
This support was very strong when
these organizations formulate
information system strategy directed to
improve efficiencies of internal and
inter-organizational operations.

96
 Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions
Fu, Zhan, & 463 Chinese Farmers’ trust; Farmers’ This study found that farmers who have
Tan (2017) farmers farmers’ normative integration with the shown commitment to the normative
relationship company relationship with companies have highly
commitment; farmers’ integrated with the company. Further, it
instrumental is also found that farmers who placed high
relationship trust at their companies have shown high
commitment normative relationship commitment with
their companies.

97
Villena, 133 Spanish Compensation risk; Supply chain This study found that supply chain
Gomez‐Mejia, manufacturing employment risk integration executives discouraged integration with
& Revilla companies supply chain partners when they faced
(2009) high risks with compensation and
employment systems executed in their
organizations. Further, when they worked
under high environmental volatility, the
discouragement level was also very high.
Lin (2014) 179 Taiwanese Knowledge sharing; Supply chain It was found that knowledge sharing,
manufacturing communication integration communication quality, and exhibition of
companies quality; technological mutual trust and commitment with supply
innovation chain partners and innovation behaviors of
capabilities; the organizations predict strong
partnership quality integration with supply chain partners.
(mutual trust and Further, it was also found that knowledge
commitment) sharing, communication quality, and
technological innovation strengthened
supply chain integration through
improving mutual trust and commitment
with partners.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

98
Authors Sample Antecedents
Vermeulen, 10 plastic Organization and integration
Niemann, & manufacturing (top management support;
Kotzé (2016) companies located supply chain integration
in South Africa strategy); supply chain
partnership (collaboration;
trust; commitment; shared
resources; competitive
pricing); supply chain
information management
(information sharing; system
integration; technologies
requirements)
Briscoe et al. 3 client Procurement decisions of
(2004) organizations of clients; business environment
construction of construction industries
industries and (personal; departmental;
each client’s 9 organizational; external)
supply chains
Supply chain Findings
integration
dimensions
Supplier integration This qualitative study revealed
that trust and commitment in the
relationship are to be strong
factors to promote supply chain
integration. Competitive pricing
and availability of limited
resources also strengthen the
efforts of supply chain integration.
Supply chain This qualitative study found that
integration procurement-related decisions
(information flow made by client organizations have
and system; positively impacted the
collaboration with informational flow with the
clients) construction companies and
improved collaboration with these
companies. Further, it was also
99
 found that the environment of
construction industries have
altered the procurement decisions
made by client organizations.

Hong, Tran, & 711 Supplier- oriented electronic Supplier This study found that
Park (2010) manufacturing communication technologies integration; manufacturing companies that are
companies located (ECTs); customer-oriented customer adopted ECTs have shown strong
in 23 countries ECTs integration integration with their suppliers
and customers.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions

100
Lau et al. 5 manufacturing Product modularity Supply chain This study found that companies
(2010) companies located integration carrying out projects on modular design
in Hong Kong and on integrative design were loosely
coordinating with their partners and
were in tight control over the
coordination with supply chain partners
respectively. Further, it also identified
that factors such as new module
development, knowledge creation,
project size, and supply chain efficiency
alter the strength of the relationship
between product modularity and supply
chain integration.
Cagliano, 297 European Manufacturing Supply chain This study found that manufacturing
Caniato, & manufacturing improvement integration companies adopted lean production
Spina (2006) companies programs (lean (integration of practices have witnessed high
production; information flow; integration with their supply chain
enterprise resource integration of partners in terms of information and
planning) physical flow) material flow.
Cagliano, 276 European Use of internet (E- Supply chain This study showed that manufacturing
Caniato, & manufacturing Commerce; E- integration companies are clustered into four
Spina (2003) companies Procurement; E- mechanisms categories in terms of use of internet.
Operations) (coordination with These categories of companies are

101
 suppliers and clearly differed from each other on
customers) sharing information with suppliers and
customers and establishing system
coupling with these external partners.

Table 1. Summary of empirical studies examining the factors that strengthen supply chain integration (continued)

Authors Sample Antecedents Supply chain Findings

integration
dimensions
Golini, 441 Plant autonomy External supply This study hypothesized that higher
Deflorin, & manufacturing chain integration autonomy given to manufacturing
Scherrer companies located plants would be highly associated with
(2016) in 17 countries integration of external supply chain
partners. However, this hypothesis was
not supported.
Li et al. (2009) 182 Chinese Information Supply chain This study found that implementation
companies technology integration of information technology in the
companies is positively associated with
integration with supply chain partners.

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Turkulainen, 261 Economic Supplier integration This study found that location and size
Kauppi, & manufacturing institutional factors (information of the plants and benchmarking efforts
Nermes (2017) plants located in 9 (country; industry; sharing; supplier taken are related to supplier integration
countries size of the plant; development; long- mechanisms at various levels.
benchmarking term commitment;
efforts) conflict resolution;
integrated
information
technology)
Yunus & 223 Uncertain Internal integration; This study found that companies that
Tadisina Indonesian environment (supply supplier integration; are customer-oriented have strongly
(2016) manufacturing uncertainty; demand customer integration integrated with supply chain partners.
firms uncertainty; Further, it is also found that
technology organizational culture moderated the
uncertainty); internal relationship between customer-
drivers (anticipation orientation and supply chain
of benefits; customer integration.
orientation)

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 Table 2. Measurement model

Completely standardized
Latent construct Item t value
factor loading

L1 0.40* 1.00

L2 0.73* 3.47
Transformational leadership
L3 0.41* 2.75

L4 0.74* 3.47

T1 0.58* 1.00
Transactional leadership
T2 0.83* 4.16

A1 0.79* 1.00
Advanced manufacturing
A2 0.79* 7.33
technology
A3 0.73* 6.94

I1 0.70* 1.00

Internal integration I2 0.62* 6.01

I3 0.90* 8.38

S1 0.84* 1.00

Supplier integration S2 0.85* 10.37

S3 0.80* 9.56

Customer integration C1 0.71* 1.00

C2 0.62* 6.02

Note: * p < 0.01;

Fit indices: χ2 (df = 104) = 174.52, χ2 /df = 1.68, NNFI = 0.92, CFI = 0.94, RMSEA =

0.08.

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 Table 3. Descriptive statistics and Pearson correlation coefficients

Variables 1 2 3 4 5 6

Mean 4.27 4.22 3.93 4.83 4.63 5.09

Standard deviation 0.53 0.65 0.76 1.00 1.01 0.92

1. Transformational leadership 0.00

0.27*
2. Transactional leadership 0.00
(0.01, 0.13)

0.32* 0.35*
3. Advanced manufacturing technology 0.00
(0.01, 0.15) (0.06, 0.28)

0.43* 0.40* 0.32*

4. Internal integration 0.00
(0.06, 0.33) (0.04, 0.33) (0.09, 0.40)

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 0.34* 0.22*
0.39* 0.71*
5. Supplier integration (0.03, 0.25) (-0.04, 0.00
(0.12, 0.42) (0.42, 0.96)
0.24)

0.41* 0.34* 0.44* 0.63* 0.61*

6. Customer integration 0.00
(0.09, 0.40) (0.02, 0.33) (0.16, 0.54) (0.39, 0.97) (0.33, 0.87)

Note: * p < 0.01; Confidence interval for correlation (ϕ) are mentioned in the parentheses.

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 Highlights

 Transactional leaders concentrate on internal integration

 Transformational leaders concentrate on external integration

 Advanced manufacturing technology is focused on external integration

 Manufacturing technology moderates leadership and customer integration linkage

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