As supply chains mature, their complexity increases. Managers are asked to improve productivity while increasing customer service. Shareholders expect profitability to grow quarter over quarter. These internal and external forces have the effect that often tasks that previously were performed internally become outsourced (Williamson, 2008). This results in increased interaction among firms in a supply chain and requires closer relationships to ensure that the flows of product, information and payments operate efficiently (Flynn, Huo, & Zhao, 2010; Frohlich & Westbrook, 2001; Thun, 2010; Wagner, 2003). Managing these relationships requires cross-functional and cross-firm business processes with appropriate levels of information sharing, operational coordination and select close partnerships (Charvet, 2008; Lambert & Cooper, 2000; Rai, Patnayakuni, & Seth, 2006; Sanders, 2007).
The term “supply chain integration” (SCI) has been defined as the extent of engagement with suppliers and customers (Frohlich & Westbrook, 2001). The terms “supply chain collaboration” (Stank, Keller, & Daugherty, 2001) and “supply chain coordination” (Carr, Kaynak, & Muthusamy, 2008) are used to describe elements of SCI. As “collaboration begins with customers and extends back through the firm (…), integration is needed both internally and externally (Stank et al., 2001, p. 29).” In addition, “integration involves coordinating (…) the forward physical flow of deliveries” and “the backward coordination of information technology” (Frohlich & Westbrook, 2001). Therefore, it is believed that collaboration and coordination are elements of SCI (Mackelprang, Robinson, & Webb, 2012).
The focus of this research is on SCI. To integrate all of the studies we collected into one framework, we provide the following definition of SCI for this research. SCI is the scope and strength of linkages in supply chain processes across firms. Information, operational and relational integration facilitate the linkages in supply chain processes between firms. The scope of SCI can be integration with customers, suppliers, internal or external. The overall premise of our research is to test whether tighter integration leads to better firm performance.
A large increase in research investigating SCI has been observed in the SCM discipline, as shown in Figure 1. Until now, only a few qualitative reviews of the SCI literature can be found (Chen, Daugherty, & Landry, 2009b; Fabbe-Costes & Jahre, 2008; Simatupang & Sridharan, 2005; Van der Vaart & van Donk, 2008). While such studies have a substantial contribution to the field, they do have inherent drawbacks because it is challenging to objectively tie together primary research. As the debate between Hanushek (1989, 1994) and Hedges, Laine, and Greenwald (1994a,1994b) has shown, a subjective review of existing literature may be just that. In addition, the results of a meta-analysis can be used subsequently to suggest areas in need of further investigation. SCI has often been operationalized and measured differently, and this adds to the challenge of integrating the findings. Overall, empirical evidence seems to support the positive impact of SCI on firm performance, however mixed findings are not uncommon (Flynn et al., 2010). In addition, the selection of firm performance as the dependent variable is a natural link and has been critical in the literature (Fabbe-Costes & Jahre, 2008; Van der Vaart & van Donk, 2008). The more important decision is how to measure and evaluate firm performance, which is multi-dimensional. It has been show that a single study does not have enough power, due to the relatively small sample size, to explain the magnitude of a statistical relationship (Hunter, 2001; Lipsey & Wilson, 2001). Therefore, aggregating several studies into a meta-analysis is of critical importance in order to draw conclusions that are valid beyond the limited situations in which they were obtained and make empirical generalizations (Leone & Schulz, 1980).
The primary purpose for this study is thus to provide the first comprehensive, quantitative and integrative review of empirical research linking SCI to overall firm performance. The methodological advantage of a meta-analytic study is that statistical artifacts such as sampling or measurement error can be accounted for (Hunter & Schmidt, 1990). Another advantage is the ability to examine how various study design factors may affect the relationship between SCI and firm performance: (1) Is there evidence of a positive correlation between SCI and firm performance? (2) Does the correlation between SCI and firm performance vary across different dimensions and operationalizations of SCI? and (3) Does the correlation between SCI and firm performance vary across different performance dimensions?
The remainder of the study is organized as follows. The theoretical background and research hypotheses are developed in the following section. Following that section, the research methodology is described and results of the meta-analysis are reported. Last, conclusions are presented, including theoretical implications, managerial implications, limitations and recommendations for future research.