On the relationship between business environment and competitive priorities: The role of performance frontiers

The current study aims to explore the connections between business environments and firms׳ competitive priorities, which establish the basis for manufacturing strategy. This study explicitly considers the effects of asset and operating frontiers, as well as trade-offs across competitive priorities, a topic which has not been thoroughly studied by prior research. We collected data from 434 Chinese firms and analyzed the data using regression analysis. It was found that the operating frontier is affected by the asset frontier, as well as by environmental forces, such as business costs, competition intensity, and market and institutional dynamism. The operating frontier affects competitive priorities, such as cost, quality, and delivery. The asset frontier exerts direct effects on delivery and flexibility, but indirect effects on cost and quality, through the operating frontier. Environmental factors also exert various effects on the priorities. This analysis suggests that Chinese managers do not consistently follow a specific sequence for improving competitive priorities.