Gaining Strategic Advantage: Managing Social Capital in the Supply Chain Robert R. Wharton and Linda E. Parry Western Kentucky University Department of Management 1 Big Red Way Bowling Green, KY 42101 Track: Strategic Management/International Management, Original Paper
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Gaining Strategic Advantage: Managing Social Capital in the Supply Chain
Robert R. Wharton and Linda E. Parry
Western Kentucky UniversityDepartment of Management
1 Big Red WayBowling Green, KY 42101
Track: Strategic Management/International Management, Original Paper
Contact Person: Linda E. Parry, Western Kentucky University, Department of Management, Grise 211, 270-745-5810, [email protected], 270-745-6376 (fax)
Benefits (1 = Not True; 5 = Extremely True)I take more pride in my work. 3.92 119 1.00My work seems for satisfying. 3.57 119 .89I am more likely to stay with this company.
3.73 120 .97
My company is more effective 3.43 120 .91I have helped improve Honda vehicles. 3.69 117 1.16
Motivation for joining a quality team(1 = Not Important; 5 = Extremely Important)
to be part of the Honda team. 3.72 116 1.21to be with my friends 2.54 118 1.32to gain recognition 3.08 118 1.25to solve problems 4.47 120 .70to help the company 4.22 118 .93for job advancement 3.28 117 1.34
Discussion
In competitive, technology-intensive global markets, competitive advantage can only be
achieved through resources that are valuable, rare, and difficult to imitate. One method to
acquire these resources is to go into the marketplace and acquire tangible innovations. However,
these innovations often provide just temporary advantages because other companies are quick to
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copy. Another way to achieve competitive advantage is to adopt processes that are unique and
bundled together so it is difficult for competitors to duplicate.
Managing people throughout the supply chain is one way to achieve sustained
competitive advantage. There are many reasons why building up organizational social capital
provides benefits for the firm. Companies that place workers at the core of their strategies
produce higher long-term returns to shareholders than their peers (Blimes, Wetzker & Xhonneux,
1997). Other studies have shown that there is a significant relationship between placing value on
human resources and firm survival and performance (Pfeffer & Veiga, 1999).
So why don’t more firms try to manage their social capital? One reason is that it is a
long-term process. Many managers are pushed into solving problems with short-term answers.
Another reason is that many organizations still do not see the connection between how they
manage their people and the profits they earn. Of those that do understand the connection, only
one half persist with their practices long enough to see the results. As a result, it is estimated that
only 12% of organizations that actually put into place human resource activities within their own
firms will build profits (Pfeffer & Veiga, 1999).
Managing people throughout the supply chain is even more difficult. Demanding that
suppliers cut costs, be more efficient, and provide better quality is the traditional method that
organizations have used. In response, suppliers have automated, instituted just-in-time practices,
used electronic data instruments, and installed lean manufacturing processes. Nevertheless, these
tools have all been copied by competitors and no longer provide a competitive advantage.
The next opportunity appears to be handling people throughout the chain. Honda has
tried to incorporate practices that encourage teambuilding, training and increased employee
involvement. They are being rewarded. People involved in the Circle Assistance Network are
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more committed to their work, more satisfied as employees, and more apt to take pride in their
work as a result of their team activities. Supplier companies benefit because teams find and
solve problems within the company and report to be more likely to stay with the company.
Nevertheless, managing social capital still poses difficulties for Honda. First,
participating in a quality team is voluntary and not everyone participates. Currently people who
join teams appear to be predisposed to want to be part of the Honda effort. Managers need to
find the reasons why some people do not participate so that they can provide incentives to join.
In addition, some suppliers are not as helpful in assisting their employees to work in
quality teams. A common complaint that we heard at the competition was that companies did
not give employees any time during their shift to work on solving problems. As a result, some
workers had to come to work an hour early or stay an hour later to work in their teams. This
shows the dedication of the team members. At the same time, it also shows that some suppliers
do not value the efforts that workers are making. This is surprising given that most of the
solutions saved the companies thousands of dollars by correcting inefficiencies throughout the
plant. Honda needs to continue educating their suppliers and providing incentives to encourage
more active participation. This is especially true during downturns in the economy when
organizations are prone to “cut” any program that does not give immediate financial payback.
Most advantages do come easily or cheaply. Sustained competitive advantage is about
organization learning. It is based on an understanding of organization processes, structure, and
outcomes. It is learning how to fit the tools to the company’s mission, vision, and strategy.
Managing social capital shows promise for giving managers a method of achieving advantage
but it will not come quickly or without cost.
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As with most studies, this research had limitations and offers suggestions for future
study. First, the participants in this study were members of the quality teams. To get a more
complete picture of the process, one needs to study the host organization (in this case Honda),
top management of the supplier companies, and employees of the suppliers who chose not to
participate in a quality team. Second, this study needs to be replicated over time to observe if
advantages are retained over a period of years (Barney et al., 2001). Finally, many of these
suppliers supply parts for more than just Honda. They supply parts for companies such as
Toyota and General Motors. This suggests a comparison of the supply chain management
practices between and among firms would further research in the field. Finally, Rouse and
Daellenbach (1999) recommend that intangible resources, such as managing social capital,
should be diagnosed via qualitative methods. They suggest that because culture involves tacit
knowledge, organizational members cannot easily communicate culture’s role in developing a
sustainable competitive advantage. Hoskisson, Hit, Wan and Yiu (1999) expand on this view by
recommending that future studies should include multiple approaches.
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