Exploring the relationship between manufacturing practices, agile capabilities and organisational performance: a case of the Thai automotive parts industry

Contemporary manufacturers have to endure the challenges of a constantly changing economic environment that is increasingly competitive. Today’s business world has witnessed increasingly intense foreign competition, rapid technological change, shorter product life-cycles and customers frequently demanding new products. To deal with this dynamic and uncertain marketplace, firms are required to become more nimble, flexible and quickly responsive to competitive and pressure situations. Recognising this trend, the manufacturing sector has focused on becoming more agile. In business situations characterised by high uncertainty, agility is not just desirable but is quickly becoming a requirement for organisations’ success. Despite number of theories being developed on agility by many academics and practitioners, few businesses have implemented agility to its full potential. Most studies on the experiences in the manufacturing sector have documented events and processes in developed economies. To respond to these issues, this study explores the development of agility in the context of a developing economy, Thailand, and specifically, its automotive parts industry. This study develops and empirically tests a research model to capture the key enablers of agility and the impact of agile capabilities on organisational performance. The conceptual foundation of the research is grounded in the Resource-based View (RBV) and the Dynamic Capability View (DCV), and in a review of the operations strategy literature. The framework establishes the cause-and-effect relationships between manufacturing practices and agile capability and organisational performance outcomes. To do this, seven hypotheses are developed and tested. The research pursues a positivist paradigm by using Structural Equation Modelling (SEM) analysis. The psychometric properties of the research instrument are generated through a rigorous procedure of content validity. This is followed by a large-scale questionnaire survey involving the Industrial Estates Authority of Thailand, focusing on tier-1 automotive parts producers. The response rate in this study is 43% (n=297). The findings confirm that the manufacturing practices in which organisational resources are integrated and reintegrated to generate new capability positively influence the development of agility. The results confirm the positive impact of agile capabilities on a business organisation’s success, particularly with reference to operational performance.The research makes an original contribution to the operations strategy and agility literature by developing and validating the research model and the accompanying measurement instrument. In particular, the conception, measurement, hypotheses and empirical findings of the manufacturing practices and the agility construct represent a significant contribution in advancing the theoretical foundation and the empirical basis of agility in the context of developing economies. Finally, the research makes a practical contribution by offering a tool for a business organisation to assess and measure its agility initiative and progress, and to identify those areas where improvement is needed