The moderating role of organizational environments on the relationship between inventory leanness and venture survival in Chinese manufacturing

Abstract

Purpose The purpose of this paper is to investigate the relationship between inventory leanness and venture survival, and demonstrate the role of organizational environments in moderating this relationship from three dimensions: environmental complexity, dynamism and munificence. Design/methodology/approach Using a large panel data of more than 150,000 new Chinese small- and medium-sized enterprises between 2000 and 2007 in the manufacturing sector, the authors employ the method of survival analysis via an accelerated failure time model to explore the non-linear relationship between inventory leanness and the likelihood of survival. Moreover, the moderation model is applied to examine the moderating role of organizational environments. Findings At its core, this paper demonstrates the inverted U-shaped relationship between inventory leanness and the likelihood of survival. Furthermore, the authors find that environmental complexity and dynamism can negatively moderate this relationship, whereas environmental munificence acts the exact opposite. Practical implications Managers need to realize the trade-off between inventory leanness and venture survival. Collectively, more than 90 percent of new Chinese ventures have great potential to improve the likelihood of survival by implementing inventory leanness management. In addition, firms ought to be fully aware of the internal management and the external environments. Originality/value This is the first study to confirm the inverted U-shaped relationship between inventory leanness and the likelihood of survival, and empirically verify the moderating role of environmental complexity, dynamism and munificence on this relationship.

Moderation Effects of Organisational Environment on the Relationship between Capital Structure and Financial Performance of Central Java Rural Banks, Indonesia

“…These results are consistent with the results of previous studies that show that the environmental dynamism can affect the relationship between capital structure and company performance (Priem et al, 1995;Gilley et al, 2004). This result is not related to the research of Wang et al (2019) that finds that environmental dynamics can negatively moderate this relationship. In contrast, both environmental dynamism and complexity are insignificant.…”

“…These results support previous findings that environmental munificence can support the relationship between organizational strategy and the performance of company (Aldrich, 1979;McArthur and Nystrom, 1991). This result is not related to the study of Wang et al (2019), which reveals that environmental munificence can negatively moderate the relationship between inventory survival and venture survival. Therefore, if the environmental conditions are stable, an increase in savings and loans increases ROE more than in non-established conditions.…”

“…This finding supports the results of previous studies that environmental dynamism moderates the relationship between strategy and company performance (Priem et al, 1995;Gilley et al, 2004). These results are not in accordance with the research of Wang et al (2019), which finds that environmental dynamism can be negatively moderate this relationship. Thus, environmental dynamism can affect the performance of rural bank directly and can also moderate the relationship between capital structure and the performance of rural bank.…”

“…Companies that are old and have assets and a high level of liquidity operating in high environmental munificence then follow the pecking order theory (Haron, 2018). Likewise, the results of Wang et al (2019) show that environmental munificence can negatively moderate the relationship between inventory leanness and venture survival. Therefore, in this study, it is expected that environmental munificence has a positive moderation effect on the relationship between capital structure and rural bank performance.…”

“…Wang and Li (2008), who examined large companies in the US, showed that the negative effect of search deviation on organizational performance varies to environmental dynamism. Likewise, the study of Wang et al (2019) finds that environmental dynamism can be negatively moderate this relationship. Therefore in this study, it is expected that the moderating effect of the environmental dynamism on the relationship between capital structures is negative.…”