The purpose of this paper is to examine the effect of inventory leanness on productivity. In particular, the authors explore the moderating role of environmental complexity and the mediating role of risk taking.
In the mediated moderation analysis of the relationship among inventory leanness, risk taking, environmental complexity and productivity, the authors adopt the instrumental variable method to test the hypotheses based on data collected from 1,709 Chinese listed manufacturing firms.
The results show that there is an inverted U-shaped relationship between inventory leanness and productivity. The authors then demonstrate the role of risk taking in mediating this relationship. Furthermore, the authors find that environmental complexity not only negatively moderates the relationship between inventory leanness and productivity, but also negatively moderates the relationship between risk taking and productivity.
Managers should not be excessively pursuing inventory leanness improvements, so as not to damage the ability to increase productivity.
This paper may be the first study to empirically demonstrate the moderating effect of environmental complexity and the mediating effect of risk taking on the inverted U-shaped relationship between inventory leanness and productivity.
