A note on ‘trade-off and compatibility between performance: definitions and empirical evidence’

Abstract

This paper improves on a novel methodology advanced in order to assess deterministically (i.e., precisely) compromises and compatibilities between manufacturing capabilities in individual firms. We extend the original proposal to include more recent theoretical developments arguing that both trade-offs and compatibilities (e.g., cumulative capabilities) can be observed in a relationship between two or more competitive criteria. This means that as opposed to widely-accepted views, trade-offs and compatibilities can be complementary, and not necessarily mutually exclusive, when explaining relationships between various competitive criteria. As such, our improved methodology and rationale can assess the existence of both trade-offs and compatibilities between multiple capabilities utilising a single framework. Opportunities for novel research that uses our methodology are also offered.

Keywords:

• trade-off model
• cumulative capabilities model
• compatibilities
• deterministic analyses
• probabilistic analyses

Notes

Notes

1. The trade-off model is presented in a similar (if not identical) way to that of the natural laws, as it negates the existence of a single firm that is capable of achieving industry-leading performance across all competitive criteria. This means that the trade-off model is a plausibly falsifiable concept. See Sarmiento (2009), and Popper (2002a, p. 48) for more details.

2. A trade-off relationship between two capabilities implies the achievement of a market-leading level of performance in one of them (e.g., quality) at the expense of lower levels in the other one (e.g., cost). Thus, when neither of the analysed capabilities has achieved an excellent type of performance, it is impossible/illogical to assert the presence of a trade-off relationship between the two competitive criteria. Nevertheless, we think that assessments regarding potential compatibilities (i.e., common levels of performance) between the two capabilities could still be made.