The role of culture in supply chain integration

Article based on research by Frank Wiengarten

It's broadly accepted that supply chain integration practices are based on a manager's economic assessment of return on investment.

But Esade's Frank Wiengarten and Christian F. Durach, chair of supply chain and operations management at ESCP Europe Business School, suggest that national culture plays a pivotal role in decision-making, with a strong relationship between national cultural values and plant-level supply chain integration practices and outcomes.

Their research, featured in the International Journal of Production Economics, examines the relationship between national collectivism values – the level to which groups and organisations are prioritised over individuals – and internal and external supply chain integration of companies.

National collectivism values, they say, generate an aspirational need that influences the focus of decision makers when considering the levels of integration.

Culture plays an integral part in the decision-making process of operations and supply chain managers

According to the Behavioural Theory of the Firm approach – an economics-based concept to examining the motives of a business – strategic decisions are not always based on economic considerations, but are subject to levels of aspiration of managers and decision makers. Wiengarten and Durach's research supports and extends this behavioural theory, and adds national culture as an external force to the theory.

Perspectives on supply chain integration

Supply chain integration has been defined from different perspectives in terms of the direction of integration – external integration with customers and suppliers or internal integration between departments – and the depth of the relationship, be it at the operational information exchange level or at the strategic level.

Managers and researchers have viewed supply chain integration as a remedy for multiple performance considerations and as a source of competitive advantage. It has been assumed that managers can freely choose the specific level of integration that suits their supply chain configuration and strategy in terms of expected operational and financial gains.

National culture plays an integral part in firms' decision-making processes

However, recent behavioural theory literature has shown that decisions are not always made independently and to maximise firm profits. Various studies have suggested that culture plays an integral part in the decision-making process of operations and supply chain managers.

In light of these findings, Wiengarten and Durach assert that the current application of theory may not exhaustively explain the managerial behaviour observed with respect to supply chain integration.

Further studies reveal the various aspects of culture and their impact on the efficacy and level of integration of practices, mainly those relating to fields such as quality management or lean manufacturing. But the impact of culture on supply chain management, and particularly supply chain integration, has been under-researched.

Culture factory
Managers and researchers have viewed supply chain integration as a remedy for multiple performance considerations (Photo: Industry View/Getty)

There are behavioural implications of a culture of collectivism on supply chain integration decisions: they may drive location and partnering decisions and managerial actions. Understanding these implications can help managers and researchers identify how efficacy is related to national culture.

Collectivism culture in supply chain integration

Organisational decision makers pursue goals that are influenced by both internal and external goal-setting forces. Decision makers evaluate the need to adjust existing practices by comparing organisational performance with internal and external targets, which leads to a fixation on aspiration levels.

External aspirational factors are broadly attributed to the comparison of firms to similar organisations. However, it has become more apparent that they are also influenced by societal pressures to conform with country level values. 

National culture plays an integral part in firms' decision-making processes, and the values and practices of managers at a national cultural and societal level influence their actions.

The key objective of Wiengarten and Durach's research was to explore the influence of a national culture of collectivism values (in-group and institutional) on managers' choice of higher or lower degrees of plant-level integration practices. Specifically, they asked whether collectivism values at the national level influence managers' choices toward internal and external supply chain integration.

The assumption that supply chain integration practices are based on a manager's economic assessment ignores the multifaceted nature of managerial decision-making

The cultural influences at play are important for managers to understand their motives for integration; aspirations driven by national culture may blur their view of whether it is economically warranted.

Internal versus external factors

The assumption that supply chain integration practices are based on a manager's economic assessment of return on investment ignores the multifaceted nature of managerial decision-making and the role played by external, cultural factors.

The actions of managers cannot always be attributed to accounting or capital market performance measures; behavioural and at times irrational external forces often guide their decisions. The aspirational values on a country level trickle down into manufacturing plants in those countries, affecting the organisational decision makers' choice of practices.

Internal supply chain integration has to be understood as a more immediate and simple solution than external integration with supply chain partners

Generally, decision makers will search for a solution that meets their organisational goals and select the first solution they see that meets those goals. From their perspective, internal supply chain integration has to be understood as a more immediate and simple solution to the problem than external integration with supply chain partners.

This supports the general assumption that managers will search for simple rather than complex solutions to problems: in the case of high national institutional collectivism values, organisational decision makers will resort to internal integration as the first alternative they see to meet their aspirational objectives. It also supports the assumption of the Behavioural Theory of the Firm that if internal supply chain integration satisfies the goal, there is little effort made to establish external supply chain integration.

The role of culture in organisational research is complex, and theoretical studies are not without limitations. However, they do establish an important basis for further research and the results provide important insight for researchers and decision makers in manufacturing plants. 

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