Impact of Entrepreneurial Supply Chain Management Competence on Performance of manufacturing Small Medium Enterprises in twin cities of Pakistan

Presented By;

Ejaz Ahmed

1900062

Muhammad Waqas Asif

1900095

Muhammad Hasan Manzoor

1900077

Supervised By; Yalman Ansari

CHAPTER 1

INTRODUCTION

Background of the Study

Importance of SME Sector in Economic development SME Sector according to SMEDA Competitive advantage SME’s can achieve through SCM Research regarding SCM significance in SME’s Research Methodology applied

Gap Analysis

Lack of Entrepreneurial endeavors

Patents infringements and registration problems

Cheap competition from neighbors and under developed local SME industry

Industry Ignorance towards Competitive SCM advantages in SME’s

Problem Statement/Research Questions

The influences of research variables as mentioned above calculate the positive upward trends in performance in comparison to competition while using entrepreneurial SCM in SME’s.

The Impact of entrepreneurial SCM Competence i.e Innovative Orientation, Risk taking characteristics, Proactiveness, Relational Capital and Coordination Capabilities.

The most important Variable that reflects most positive in quantitative analysis

Innovative Orientation

Scope of the Study To bring the SMEs in best competitive position. To support our study we have selected the SMEs of Pakistan in which supply

chain activities are extensively performed. Our study are restricted to only five variables of SCM entrepreneurial

Competence i.e. Innovativeness Orientation, Risk-taking characteristics, pro-activeness, and relational capital, coordination capability, which are important for our study and will enhance supply chain performance respectively.

This study will allow the managers to understand the relation of entrepreneurial supply chain management Competence and Performance, to work and act more efficiently that will ultimately improve their supply chain performance.

Study Objectives This study attempts to contribute to the SCM and entrepreneurship literature

by exploring this gap.

First, we examine the role of a specific entrepreneurial SCM competence, which we define as the inimitable SCM capability for recognizing and pursuing business opportunities that engender success and growth.

Second, to extend the knowledge in this area, we first seek to establish whether a parallel exists between literature in entrepreneurship and SCM.

Rationale / Significance of Study Manufacturing SMEs lack behind in term of financial and tangible

resources that are much crucial to competencies in the global market, successes in the competitive global environment appear to large fundamental and intangible resource constitute their entrepreneurial SCM competence. Their key tangible resources include innovation orientation, risk-taking characteristics, proactive orientation, relational capital and coordination capability.

In this immensely competitive global environment, the practical contribution of this study to the corporate and business environment is; to help SMEs in Pakistan to make supply chain management (SCM) as a core strategic competence to gain competitive edge, to compete in highly competitive or challenging environments in which there are a large number of SMEs, SMEs are more prone about profit hence to help to maximize their profit.

CHAPTER 2

REVIEW OF THE LITERATURE

General In this immensely competitive global environment, many firms

resort to supply chain management (SCM) as a core strategic competence to gain

competitive edge. Pakistan's industrial performance has been on a reliable decrease

throughout the previous three decades. SME (Small and Medium Enterprises) structure more than 99

percent of the aggregate organizations in Pakistan. There is an immediate relationship between the soundness of SME

area in an economy and the general quality and development of that economy.

Previous research shows that there is less research work in entrepreneurial SCM in SMEs of Pakistan

Performance (Dependent Variable) In terms of methods to review and classify company’s performance, several

critiques show the significance of comprising a structured process to get better performance eventually.

We have worked upon key areas and have identified five main inclinations causing drastic influence and modifications to supply chain plan and performance i.e. Innovativeness Orientation, Risk-taking characteristics, pro-activeness, and relational capital and coordination capability.

Manufacturing SMEs normally depend on various stakeholders for the overall performance and profitability of the organization such as suppliers, engineers, assemblers, retailers and even the end users. Until the processes pass on successfully through each of its stakeholder, the desired profitability cannot be achieved. All these stakeholders are part of supply chain hence making it even more important (La Londe and Masters, 1994).

Entrepreneurial SCM Competence (Independent Variable) We characterize Entrepreneurial SCM Competence as the matchless SCM

ability for perceiving and seeking after business open doors that induce achievement and development.

Entrepreneurial SCM capabilities give significant preferences that encourage SCM exercises.

Past literature shows that the most vital organizational traits can be assembled into five classifications: advancement introduction, risk taking attributes, proactiveness introduction, relational capital ability, and coordination capacity.

Thus, we characterize entrepreneurial SCM ability as the incomparable SCM capacity for perceiving and seeking after business opportunities that incite achievement.

Innovation orientation In the survey, most of the SME managers mentioned the importance of an

aggressive innovative approach. Firms with a strong innovative orientation tend to possess distinctive

competences and outlooks (Quintana-Garcia and Benavides-Velasco 2005), and are characterized by a managerial vision and innovative organizational culture that aims at achieving the firm’s goals through a supply chain (Gonzalez-Padron et al. 2008).

Firms with limited tangible resources that want to pursue SCM strategies may need a strong innovative posture to take the initiative to pursue new opportunities in complex and risky markets.

An innovation orientation also should give rise to processes, practices, and decision-making activities associated with supply chain activities and thus may contribute to firm performance (Shin et al. 2000).

Entrepreneurial SCM Competence (Independent Variable)

Risk-taking Characteristics The critical role of risk-taking characteristics appears in virtually all SME

literature. Risk-taking activities engender superior organizational performance for entrepreneurial firms.

Firms in complex supply chains require seamless coordinated flows of goods, services, information, and cash; or else, they face significant supply risk (Harland et al. 2004).

Manuj and Mentzer (2008) identify eight types of SCM risk: supply, operational, demand, security, macro, policy, competitive, and resource.

Risk-taking or venturing behavior also may result when firms engage in new supply chains or provide new products and services to supply chain members.

Entrepreneurial SCM Competence (Independent Variable)

Pro activeness Orientation Most SMEs in our survey are highly proactive with respect to their industry,

product category, and how they compete in the supply chain.

We define a proactiveness orientation as the firms’ tendency to originate proactive innovations that beat competitors to the punch (Miller 1983).

Proactiveness entails a firm’s ability to integrate supply chain information and shape its environment by introducing new products, technologies, and administrative techniques (Miller and Friesen 1978).

Thus, a proactiveness orientation drives entrepreneurial SCM competence.

Entrepreneurial SCM Competence (Independent Variable)

Relational Capital Skill In our survey, SME executives frequently highlighted the importance of being

socially connected to customers and suppliers, which the literature refers to as relational capital skill (Dwyer et al. 1987).

In this context, social networking activity is a strategy for augmenting their self-interests through mutual relationships (Galaskiewicz 1979).

In SCM terms, a relational capital skill symbolises an ability to connect with supply chain members who control necessary inputs, especially those whom the entrepreneurs know well enough to predict their behaviour (Sarkar et al. 2001).

To accomplish this provision, manufacturing SMEs could engage in relationships with supply chain partners that leverage the core competencies of the individual partners and thereby better manage uncertainty in exchange processes.

Entrepreneurial SCM Competence (Independent Variable)

Coordination Capability Prior literature examined information sharing as an enabler of coordination

capability within the supply chain (Carr and Smeltzer 2002). This competence refers to the capability to integrate key business processes

among supply chain members to provide the correct products, services, and information (Kim et al. 2006). A relationship also may arise between the use of coordination capability and the richness of shared information.

Coordination capability among supply chain members has a positive and direct effect on both internal and external collaboration, and information sharing is a key dimension of collaboration.

Coordination capability simplifies manufacturing processes to increase cost efficiency, increases employees’ productivity, reduces variation, and eliminates waste.

The possession of coordination capability signals to partner firms that information sharing can drive relationship development; hence, coordination capability is a factor that supports entrepreneurial SCM competence.

Entrepreneurial SCM Competence (Independent Variable)

Theoretical FrameworkEntrepreneurial SCM Competence

Dependent Variable Independent Variable

Innovation Orientation

Relational Capital Skill

Coordination Capability

Proactiveness Orientation

Risk-taking Characteristics Performance

Hypotheses H1: There is a positive relationship between Innovativeness Orientation and

Performance.

H1o: There is no relationship between Innovativeness Orientation and Performance.

H2: There is a positive relationship between Risk-taking Characteristics and Performance.

H2o: There is no relationship between Risk-taking Characteristics and Performance.

H3: There is a positive relationship between Pro-activeness and performance.

H3o: There is a no relationship between Pro-activeness and performance.

H4: There is a positive relationship between Relational Capital and performance.

H4o: There is a no relationship between Relational Capital and performance.

H5: There is a positive relationship between Coordination Capability and performance.

H5o: There is a no relationship between Coordination Capability and performance.

CHAPTER 3

RESEARCH METHODOLOGY

Sampling Method Population There are approx. 2 million Micro Small and Medium Enterprises in

Pakistan. These include 400,000 Manufacturing units, 600,000 Service sector units and 1 million Trade sector units (retailers).

Population for this study is the SMEs of Pakistan in general and the workforce of the SMEs of twin cities of Pakistan specifically.

For the sake of the study it has been assumed beforehand that enterprises is well known of the supply chain activates in Pakistan.

Sample Size

We selected different type of manufacturing and service based small and medium enterprise in Rawalpindi and Islamabad.

The sample size for this research study is 100 which include senior & first line manager and supervisor from different SMEs of twin cities of Pakistan.

Sampling Method

Sampling Technique A sample is basically a subset of the population, selected by either probability or non-

probability methods. Randomly selected sample of 100 respondents was selected for this study from 20 SMEs of

twin cities of Pakistan which include: Paint Removers manufacturers, Drain Pipe manufacturers, Soap & Chemical manufacturers, Furniture manufacturers, Polythene Bag manufacturers, Jewelry manufacturers, and mobile banking services.

This sample size includes employees of the organizations working directly or indirectly with their respective supply chains.

Sampling Method

Data Collection Techniques Research Instruments This study is meant to discover the prevailing relationship between the

independent variables and depending variable. Correlation and regression study has been conducted for the purpose. Data has been gathered through questionnaires designed for quantitative

research. In this questionnaire, likert scale has been used to measure the

responses on a 5 point scale regarding the dependent and independent variables.

Pilot Reliability Test A pilot test comprising a sample of 30 responses was conducted to test the internal validity of

the items; Cornbach’s coefficient alphas were calculated using the data of each independent variable and the dependent variable.

Data Collection Techniques

Variables

Chronbach’s

Alpha

Chronbach’s Alpha based

on Standardized Items

Performance .751 .713

Innovation orientation .838 .837

Risk-taking .817 .801

Proactiveness .782 .767

Relational Capital .719 .713

Coordination Capabilities .759 .753

Sample CharacteristicsS. No Demographics Frequency Percentage

1 Age Interval

25-30 yrs. 20 20

31-35 yrs. 16 16

36-40 yrs. 16 16

41-45 yrs. 11 11

46-50 yrs. 25 25

Above 50 yrs. 12 12

2 Gender

Male 89 89

Female 11 11

3 Sector Type

Manufacturing 88 88

Service 12 12

4 Work Experience

5-10 yrs. 25 25

11-15 yrs. 24 24

16-20 yrs. 13 13

21-25 yrs. 21 21

26-30 yrs. 17 17

5 Type of Organisation

Private 90 90

Public 10 10

6 Job Status

Managerial 91 91

Non- managerial 9 9

Data Analysis Techniques

Both primary data and secondary data have been used for this research study. The primary data has been collected through already available articles on the topic while the secondary data has been gathered from questionnaires. The data has been analyzed on the basis of quantitative research.

CHAPTER 4

RESULTS

Descriptive Statistics

Variables Mean SD

Innovation

Orientation

3.350 1.067

Risk-taking 4.080 .939

Proactiveness 3.400 1.015

Relational

Capital

4.250 .821

Coordination

Capabilities

3.260 1.078

Performance 4.540 .5009

Inferential Statistics Correlation Analysis

Sr.

no

Variables Innovation

Orientation

Risk-taking Proactiveness Relational

Capital

Coordination

Capabilities

Performance

1 Innovation

Orientation

1

2 Risk-taking .042 1

3 Proactiveness .737** -.087 1

4 Relational

Capital

.291** -.144 .145 1

5 Coordination

Capabilities

.657** -.120 .651** .097 1

6 Performance .701** .251* .604** .258** .531** 1

Regression Analysis

Inferential Statistics

Predictors Outcomes

Beta T p

Innovation Orientation .354 3.159 .002

Risk-taking .304 4.403 .000

Proactiveness .233 2.294 .024

Relational Capital .146 2.077 .040

Coordination Capabilities .185 2.013 .047

CHAPTER 5

DISCUSSION

Hypothesis 1 There is a positive relationship between Innovation Orientation and

Performance. The statistics show that this hypothesis is supported. Innovation Orientation has a significant impact on the Performance.

Firms with a strong innovative orientation tend to possess distinctive competences and outlooks, and are characterized by a managerial vision and innovative organizational culture that aims at achieving the firm’s goals through a supply chain (Gonzalez-Padron et al. 2008).

Relationship between innovation orientation and performance is significant at 0.01 level of confidence, as t-value is 3.159 which is greater than 2 and p-value is 0.002 which is less than 0.05, showing that H1 is accepted and null hypotheses regarding innovation orientation is rejected.

Hypothesis 2 Hypothesis 2 is supported, i.e. there is positive and significant

relationship between Risk-taking and Performance. Manufacturing SMEs with risk-taking entrepreneurial

characteristics are likely to seek profit-maximizing strategies in which they leverage SCM. Risk-taking or venturing behavior also may result when firms engage in new supply chains or provide new products and services to supply chain members.

According to the results there is a significant relationship between Risk-taking and Performance at 0.05 significant level of SMEs of Pakistan, as p-value of Risk-taking is 0.000 which is less than .05 and t-value is 4.403 which is more than 2, which shows that H2 is accepted and null hypotheses regarding Risk-taking is rejected.

Hypothesis 3 The success of an organization depends heavily upon the success of

the proactiveness of the supply chain in which it participates as a partner Cai et al., (2008) also stated that one of the issues that have become critical for gaining competitive advantages for companies is improving supply chain performance and its orientation.

The Pro-activeness has a positive relationship with performance. According to the results there is a significant relationship between Pro-activeness and Performance at 0.05 significant level of SMEs of Pakistan, as p-value of Pro-activeness is 0.024 which is less than 0.05 and t-value is 2.294 which is more than 2, which shows that H3 is accepted and null hypotheses regarding Pro-activeness and Performance is rejected.

Hypothesis 4 There is a positive relationship between Relational Capital and

Performance. The statistics show that this hypothesis is supported. Relational Capital has a significant impact on the Performance.

To accomplish relational capital, manufacturing SMEs could participate in relationships with supply chain partners that leverage the core competencies of the individual partners and thereby better manage uncertainty in exchange processes.

Relationship between relational capital and performance is significant at 0.01 level of confidence, as t-value is 2.077 which is more than 2 and p-value is .040 which is also less than .05 which shows that, H4 is accepted and null hypotheses regarding relational capital is rejected.

Hypothesis 5 There is a positive relationship between coordination capability and

Performance. The statistics show that this hypothesis is supported. The possession of coordination capability signals to partner firms that

information sharing can drive relationship development; hence, coordination capability is a factor that supports entrepreneurial SCM competence.

The results show that the coordination capability and performance have significant relationship. Relationship between coordination capability and performance is significant at 0.05 level of confidence, and t value is 2.013 which is greater than 2 and p value is .047 which is less than 0.05, so H5 is rejected and null hypotheses regarding coordination capability is accepted.

Summary of Discussion This study has been conducted in a very rigorous manner in order to bring up the best

possible knowledge body in the field of supply chain management.

As hypothesized through the literature review, the impact of five identified variables, innovation orientation, risk-taking, Proactiveness, relational capital and coordination were studied, and the results came out highly correlated. Previous researches also supported the notion and identified a high correlation between the dependent and independent variables.

The results showed that SMEs in Pakistan will get benefit for this study. As SMEs have less resource of finance so they will get competency by these variable.

As evident, all independent variable are positively strongly correlated with the supply chain performance. It shows that SMEs performance area is whole operational area in the supply chain that impacts the whole process very complexly.

Conclusions Based on the findings of our research, organizational capabilities of manufacturing Small

and Medium Enterprises support superior performance. We conclude that SCM entrepreneurial competence i.e. innovativeness, risk taking, proactiveness, relational capital and coordination capacity effect Performance.

The results provide empirical evidence manufacturing SMEs that possess a high level of entrepreneurial Supply Chain Management competence perform better in their supply chain. The SMEs performance is led by entrepreneurial SCM competence further proceed by SCM strategies and Performance of manufacturing SMEs is affected by SCM competence.

Result shows significant relationship between entrepreneurial SCM competence and performance. There is direct and indirect effect of entrepreneurial SCM competence on performance. Missing links can provide significant relationship between SMEs capabilities and performance.

SMEs must implement SCM strategies to get full benefit entrepreneurial SCM strategies. SMEs can enhance their performance by linking up and skillfully managing their entrepreneurial SCM competence.

Recommendations Our findings suggest that to flourish in this competitive global market, manufacturing

SMEs should develop unique competence that are inimitable to maximize their utility in the supply chain. The possession of entrepreneurial SCM competence leads to the development of crucial organizational capability.

Managers of manufacturing SMEs should devise an appropriate collection of capabilities to support their entrepreneurial SCM competence.

Organization should also investigate remaining potential dimensions, such as the organizational learning or knowledge management in which SMEs engage after participating in supply chain activities.

Organization should consider performance from multiple perspectives, such as market structure, from industrial organization literature; ownership structure, from finance literature; or corporate governance, from organizational behavior literature.

The antecedents of entrepreneurial SCM competence have not been be explored. So further research should investigate both internal and external factors of SMEs that influence entrepreneurial SCM competence.