This paper aims to explore the extent to which four elements of the value chain – marketing, research and development, procurement, and operations – are associated with product quality and product innovation.
A survey of 194 managers of Australian firms, and multivariate analysis using structural equation modeling was used to test the hypotheses.
The elements of the value chain differ in their association with product outcomes. Marketing and production are related to product quality, but surprisingly while research and development is related to product innovation, marketing is not. Procurement is related to both product quality and product innovation.
The paper shows that individual elements of the value chain are related to specific competitive strategies and how these elements are related to each other, suggesting the need to direct effort within the firm for better, targeted performance. The results are limited by the sample size and geography of the survey.
Specific value chain functions tend to be associated with specific performance outcomes. This suggests that managers might gain by targeting specific elements of the value chain as their organizations strive for specific competitive goals.
This paper seeks to help managers and decision makers to assess the relationship between the different attributes of the value chain and product quality and innovation. It is often not feasible for managers to emphasize all the elements of the value chain simultaneously, and this paper provides an important step in looking at these individual linkages.
