Virtual Manufacturing: Critical Capabilities and Their Organizational Performance Implications

Abstract

Virtual manufacturing (VM) is an emerging manufacturing practice that is increasingly popular among manufacturers. The success of VM requires an in-depth understanding and innovative applications of operations strategies, supply chain management techniques, and business dynamics. In this article, we identify the critical capabilities of VM firms and their organizational performance implications. We first compiled two lists of potential critical capabilities from the academic and practical perspectives. From the lists, we identified nine and six initial constructs of capabilities and organizational performance measures, respectively. Based on the identified constructs, we designed a structured survey questionnaire and conducted an organizational-level field study. Obtaining 150 valid responses, we analyzed the data by exploratory factor analysis to ascertain the critical capabilities and organizational performance measures and by multiple regression analysis to examine their relationships. The data analysis yielded four critical capabilities, namely <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">technological capability</i> , <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">marketing capability</i> , <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">dynamic capability</i> , and <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">relationship capability</i> , and four organizational performance measures, namely <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">personnel performance</i> , <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">corporate social responsibility performance</i> , <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">relationship performance</i> , and <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">marketing performance</i> . We found that relationship capability was the most prominent among the four critical capabilities. Finally, we conducted a case study of a pioneering VM firm to validate the empirical findings from the practical perspective.