The role of operations management decisions between environmental dynamism and firm performance : evidence from U.S. manufacturing sector

Our research is oriented in analyzing the moderating role of firm’s strategic decisions (payables outstanding towards upstream supply chain, degree of capital tied up in fixed assets), and firm’s tactical decisions (efficiency in managing inventory and flexibility in production) in dynamic environments. Current literature demonstrates how changes in external market conditions, such as demand uncertainty, lead to variation in firm’s performance. Still, the yearly rate of performance fluctuations is affected by the decisions of the firm itself, classified as “tactical” and “strategic” according to their nature. We collected yearly data on 1769 publicly traded U.S. firms in manufacturing sector, particularly we considered the part production manufacturing industries, selecting five SIC codes. Our panel data analysis goes from 1999 to 2013, allowing us to retrieve 13,791 observations. With mixed model regression, we demonstrate that strategic decisions, negatively affect the yearly ROA performance, through a first linear analysis. On the contrary, tactical decisions, positively affect yearly ROA performance with a linear trend. Moreover, we found evidence that strategic decisions: “Payables Outstanding” and “Capital Intensity” show a non-linear U shape, thus with increasing returns; whereas tactical decisions: “Volume Flexibility” and “Inventory Efficiency”, reveal an Inverted U shape, thus with decreasing returns. Hence, we gain a consistent effect both in linear and non-linear terms within the grouping “Tactical decisions” and within the grouping “Strategic decisions”, as further support of the theoretical and logical classification methodologies. More importantly, we investigate the interaction terms in order to capture the moderating role of our variables; we demonstrated that a higher level of volume flexibility and a lower level of capital intensity, positively moderate firm’s profitability in uncertain environments. Finally, we ran “post-hoc” analyses, such as non-linear term analysis, subgroup models, MANOVA tests, in order to hone our findings and provide managers with keen results, applicable to specific scenarios and industries.