Abstract

Operations and strategy literatures have consistently promoted the best practice of accredited management standards for process efficiency and effectiveness. Based on the capability theorizing, studies have investigated how a following firm can improve its operational performance by learning from a leading firmʼs best practices. Our study extends this research stream by applying competitive dynamics perspective from strategy literature to the context of process development and management. We develop insights by applying a dynamic, computational model based on an extensive appraisal of the history of process innovation and improvement in the global automobile industry and draws on the underlying theoretical relationships in the empirical literatures on operations and strategy. The core proposition in our study is that a follower firmʼs investment in process innovation capabilities for long-term growth will provoke strong retaliation from leading firms using the current best practice. We demonstrate that the leading firm can publicly signal its best practice to induce the follower firm to invest in process improvement capabilities but only for short-term survival, not for long-term purposes or goals. In this way, the leader firm maintains its leading edge. Our results also underscore the importance of competition in determining the firm-level process development and management practices.  

Keywords

process innovation,process improvementcompetitionoperations strategy