Do horizontal relationships matter to production and operations managers?

Abstract

This paper shifts the focus of production, operations and supply chain management business relationships from the vertical to the horizontal side and calls for more research on this issue. The main intent is to provide managerially oriented arguments regarding the linkages between the achievement of operations-related goals and decisions related to horizontal business relationships. Specifically, we address the following research question: Does a linkage exist between production and operations objectives and the decisions a company makes about horizontal agreements, particularly horizontal governance mode choice? To answer this research question, we develop literature-based hypotheses and collect data from 4316 agreements of mergers and acquisitions and alliances and joint venture announced and completed between 2000 and 2010 by 88 of the first 100-ranked members of the Fortune 500 in the year 2000. We then test the hypotheses through a binary logistic regression model. This study brings interesting results and findings in terms of how and why production management considerations should play a crucial role in the type of strategic decisions that are usually reserved for finance and strategy managers. Operations managers should be fully involved in such decisions if they are to be well acquainted about how their choices impact on operational objectives.

Keywords:

• horizontal relationships
• operations performance
• governance choice
• mergers and acquisitions
• alliances and joint ventures