Exploring the Effect of Business Environment on Supply Chain Integration and Financial Performance: An Environment-System-Performance Paradigm

This article develops and tests a primary conceptual model of the direct effects of business environment on supply chain integration (SCI) and an alternative moderation model to better understand the role of the environment in developing integration and financial performance improvement. Structural equation modeling and moderated regression are used to analyze the survey data collected from manufacturing firms in China. The results reveal significant positive relationships between environmental dynamism and all three dimensions of SCI, and between environmental hostility and internal integration. The results also indicate that internal integration fully mediates the relationships between environmental hostility and both customer and supplier integration. Supplier integration is significantly and positively associated with financial performance, whereas internal and customer integration are not significantly associated with performance. Importantly, through the test of an alternative model, environmental hostility and environmental dynamism are shown to affect SCI directly, rather than moderating the SCI-performance relationship. This article provides useful guidelines for managers to develop integrated supply chains to improve the financial performance under dynamic and hostile environments.