The Performance Effects of Process Management Techniques

This paper provides exploratory evidence on the cross-sectional association between process management techniques and two profit measures: return on assets and return on sales. Using a sample of firms in two industries (automotive and computer) and four countries (Canada, Germany, Japan, and the United States), we find that certain process management techniques improve profitability while others have little effect on financial performance. In particular, long-term partnerships with suppliers and customers are associated with higher performance in both industries. The value of other techniques such as statistical process control, process capability studies, and cycle time analysis, on the other hand, appears to vary by industry, reflecting differences in the stages of the two industries' process management practices. Finally, computer organizations following an innovation-oriented strategy earned significantly higher accounting returns regardless of the process management techniques employed, suggesting that these techniques have only a second-order effect on performance in this industry.