The purpose of this paper is to provide guidance in setting the level of autonomy (i.e. parental control) of plants in a network to enhance operational performance. In particular, the effect of autonomy on performance is analysed directly and indirectly through internal manufacturing network integration (MNI) and external supply chain integration (SCI) as two dimensions of manufacturing network embeddedness.
The analysis is based on data from 441 manufacturing plants in 17 countries. Data were gathered during the Sixth International Manufacturing Strategy Survey. Five main constructs were obtained after carrying out a confirmatory factor analysis: plant autonomy, internal MNI, external SCI, efficiency and effectiveness. Direct and indirect relationships among the constructs are tested through a structural equation model.
Higher levels of autonomy correlate with higher effectiveness and similar efficiency. However, lower autonomy leads to higher levels of manufacturing network and SCI, which enhance performance. Although not statistically significant, the analysis of the total effects reveals a mildly positive effect of autonomy on effectiveness and negative effect on efficiency, which requires further investigation.
Further research could include headquarters’ perspectives or additional determinants (e.g. business strategy objectives).
Managers should set autonomy levels strategically: higher for effectiveness and lower for efficiency. However, lower autonomy can also strengthen internal MNI and external SCI, thus improving operational performance.
The concept of manufacturing network embeddedness highlights the importance of considering external supply chain and internal MNI in the same framework, as both dimensions can affect operational performance.
