The influence of cultural compatibility and product complexity on manufacturing flexibility and financial performance

The literature has highlighted manufacturing flexibility as an important requirement for an effective response to market uncertainty; however, the impact on financial performance often showed mixed results. Through the lens of congruence and uncertainty reduction theories, this study argues that cultural compatibility can enhance the efficacy of this relationship. In addition, as product complexity increases, these relationships can be influenced differently. A survey was conducted on 150 Vietnamese manufacturers and found that cultural compatibility acted as a mediator to enhance the effects of manufacturing flexibility on financial performance. The results revealed that manufacturers initially experienced unfavorable financial measures from the implementation of manufacturing flexibility, however, with the cumulative efforts of cultural compatibility resulting in competitive advantage for the firm. That is, when achieving cultural alignment with their supply chain partners, firms can leverage manufacturing flexibility to capture higher market share and profits. On one hand, product complexity dampens the impact of manufacturing flexibility on cultural compatibility, however, its joint effects with cultural compatibility can positively influence financial performance, in terms of market share and revenues. This represents a unique opportunity for firms, as cultural compatibility can be an alternative to offset or to accommodate higher levels of complexity when competing in a global economy.