The moderation effect of strategic alignment on the relationship between plant investment decisions and operational performance

Abstract

Purpose

Given the sudden increase in plant investments across the manufacturing sector due to recent disruptions in the global supply chain caused by the COVID pandemic, the Ukraine/Russian war, ocean piracy incidents, and others, there is a need to strategically align the investments decisions with the overall business strategy. This study aims to establish whether strategic alignment enhances the effect of plant investments on operational performance.

Design/methodology/approach

Using the fifth version of the Global Manufacturing Research Group (GMRG V) dataset, we employ a structural equation model (SEM) to establish the moderating role of strategic alignment in plant investments-operational performance relationships.

Findings

The results suggest that strategic alignment enhances the positive effect of plant investments on operational performance, especially in cost, delivery, flexibility, and innovation. However, we found partial support for the moderating role of strategic alignment on quality performance.

Research limitations/implications

Although the study was based on the GMRG global dataset and numerous papers have been published using the same dataset, the use of a convenience sample on a select group of companies may limit the generalizability of the results. With the increase in new plant investments in computer chip manufacturing, electronics, and electrical in recent years, the findings could help corporate executives maximize the benefits of their investment decisions. Companies should ensure that their plant investment decisions are strategically aligned with their overall business strategy to achieve optimal outcomes.

Practical implications

With the increase in new plant investments in computer chip manufacturing, electronics, and electrical in recent years, the findings could help corporate executives maximize the benefits of their investment decisions. Companies should ensure that their plant investment decisions are strategically aligned with their overall business strategy to achieve optimal outcomes.

Originality/value

The study comprehensively demonstrates that the extent of improvement in operational performance depends on how closely plant investment decisions align with the overall company strategy. Manufacturers should align major investment decisions with competitive priorities driven by market requirements to enhance operational performance.