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A Framework to Evaluate the Relationship between Product Complexity and Organizational System Outcomes: The Effect of Coordination Mechanisms on Firm Performance

Skiver, Ryan L

Abstract Details

2014, Doctor of Philosophy, University of Toledo, Business Administration.
Product complexity has been increasing over the past couple decades due to customer demand for new technologies and customized products. Firms must adopt these differentiated products to continue thriving in today’s customer-driven market. Literature suggests that added product complexity has the potential to lead to greater profits if the complexity is managed effectively (Kekre & Srinivasan, 1990; Meeker, Parikh, & Jhaveri, 2009; Meyer & Mugge, 2001). Yet firms with higher levels of product complexity experience profit margins that are on average three percent lower than firms that do not have high product complexity (Bozarth, Warsing, Flynn, & Flynn, 2009; Hoole, 2006). Firms with greater product complexity typically do have higher revenue growth, but have lower margins (profits). A key imperative is to find ways of more efficiently managing complexity. Literature has shown that managing product complexity effectively poses great difficulty in coordinating complex systems and aligning product complexity with strategic goals (Jacobs & Swink, 2011). To more effectively manage complexity, firms must understand what is product complexity, and therefore, the drivers and outcomes of product complexity. This dissertation was structured to find management techniques in product complex environments that would render gains in profits instead of profit losses. This dissertation first proposes that product complexity must be understood clearly to identify product complexity drivers. Second, the link between product complexity and innovation must be explored to understand product complexity outcomes. Third, based on a clear understanding of product complexity, coordinating mechanisms that alleviate the strain from product complexity can be generated. This dissertation explores these relationships using three theories: contingency theory, complexity theory, and the resource-based view. The development of a research model is discussed, variables and constructs are defined, and the relationships among variables are explained by the hypotheses based on an extensive literature review. Using this literature review and interviews with practitioners, a survey was created to study United States firms facing high product complex environments. The respondents were CEOs and VPs of R&D or Product Development. Structural equation modeling using analysis of moment structures (AMOS) and Smart PLS (partial least squares) were used to test the measurement and structural models before interpreting the results. The results showed that external environment factors are leading to product complexity. This product complexity was created in two dimensions multiplicity and relatedness. Innovation both Red Ocean and Blue Ocean are outcomes of the two dimensions of product complexity. Also, and most importantly, the results uncovered coordination mechanisms that can be used to effectively manage product complexity and to provide successful innovative outcomes (i.e., Blue Ocean and Red Ocean). Prior literature has pointed to a three percent decrease in profits in high complexity environments; however, this dissertation shows that firms employing these coordination mechanisms had better results in spite of the high product complexity. The results also show the need for successful innovations, as they impact overall firm performance. In concluding theoretical and managerial implications are discussed from these results and future research is explored.
Paul Hong (Committee Chair)
Callaway Stephen (Committee Member)
Modi Sachin (Committee Member)
Haase Dwight (Committee Member)
251 p.

Recommended Citations

Citations

  • Skiver, R. L. (2014). A Framework to Evaluate the Relationship between Product Complexity and Organizational System Outcomes: The Effect of Coordination Mechanisms on Firm Performance [Doctoral dissertation, University of Toledo]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=toledo1407322112

    APA Style (7th edition)

  • Skiver, Ryan. A Framework to Evaluate the Relationship between Product Complexity and Organizational System Outcomes: The Effect of Coordination Mechanisms on Firm Performance. 2014. University of Toledo, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=toledo1407322112.

    MLA Style (8th edition)

  • Skiver, Ryan. "A Framework to Evaluate the Relationship between Product Complexity and Organizational System Outcomes: The Effect of Coordination Mechanisms on Firm Performance." Doctoral dissertation, University of Toledo, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=toledo1407322112

    Chicago Manual of Style (17th edition)