Operational Flexibility Responses to Environmental Uncertainties

Abstract

This study develops and tests a behavioral model of organizational changes in operational flexibility. Regression results using an international data set provide strong support for the general proposition that uncertainties associated with different environmental components--political, government policy, macroeconomic, competitive, input, and product demand uncertainties--have different ~mplications for firm internal, locational, and supplier flexibility. Slack acts as a buffer attenuating, and often offsetting, the direct effects of uncertainties on changes in operational flexibility. The::lUthor wishes to thank Joyce Osland and INCAE for facilitating data collection. Philip Bromiley, Bala Chakravarthy, Geoffrey Maruyama. ElaineMosakowski, and Vernon Ruttan proVided helpful input into the development of this research and. along with Michael Leiblein and D:lVid Shaw, offered valuable comments on earlier drafts. Flinding from the Midwest Universities Consortium for International Activities, Inc. (MUCIA), the University of Minnesota Graduate School, and Krannert's Center for Intern:llional Business Education and Research is gratefully acknowledged. 2 Since March and Simon's (1958) groundbreaking study highlighting the role of uncertainty in organizational decisions. numerous scholars have discussed the managerial implications of uncertainty. In