The link between inventory leanness and firm performance in multinational corporations: The moderating role of firm-specific advantages

Abstract

Since its inception in the 1980s, lean thinking has spread the globe. Many of the lean initia-tives were targeted at achieving lean inventories. Lean inventories bear cost savings on the one hand but may complicate operations management on the other. Consequently, research-ers have tried to investigate the benefits arising from lean inventories. Even though the ma-jority of investigations has acknowledged the performance benefits from lean inventories, challenging voices remain. Moreover, most recent research has shown that the relationship between lean inventories and firm performance is context-dependent. Therefore, this thesis reinvestigates the lean inventories - firm performance relationship in a particular context. The multinational corporation (MNC) with its unique resources and capabilities provides this con-text. This thesis defends the view that the relationship between lean inventories and firm per-formance is contingent upon the MNC's unique resources and capabilities also termed firm-specific advantages (FSAs).

In line with previous research, the relationship between lean inventories and firm perfor-mance is assessed with a quantitative methods approach. Specifically, hierarchical multiple regression analysis is used to test four major hypotheses against their statistical validation in a sample of 123 US manufacturing MNCs. This sample is derived based on sampling procedures established in previous research. In assuring that the sample captures the multinationality dimension, priority is ascribed to the threshold definition of the MNC. Consequently, firm-specific FDI data is collected. This data is collected through secondary as well as primary sources. Financial data for the final sample of 123 US manufacturing MNCs is retrieved from WRDS' COMPUSTAT database for the fiscal year 2013.

The findings of this thesis partially support the idea that inventory leanness is related to firm performance in MNCs. However, contrary to expectations, MNCs will not yield further performance gains from increased inventory leanness. This observation is eventually interpreted as an expression of how MNCs have crossed the optimal point of inventory leanness. Further, the findings of this thesis suggest that the relationship between lean inventories and firm performance is contingent upon the MNC's resources and capabilities. Specifically, it can be shown that innovative capability as well as marketing capability play an important role in translating lean inventories into firm performance. However, capital intensity is not found to influence the relationship between inventory leanness and firm performance in MNCs.