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BIJ
29,9 Supply chain integration and
economic performance: empirical
evidence from a developing country
2710 Minh Hue Nguyen
University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam and
Received 4 January 2021
Revised 5 September 2021
Yokohama National University, Yokohama, Japan
26 October 2021
Accepted 31 October 2021
Anh Chi Phan
VNU-University of Economics and Business, Hanoi, Vietnam, and
Yoshiki Matsui
Yokohama National University, Yokohama, Japan and
The Open University of Japan, Chiba, Japan

Abstract
Purpose – This study seeks to investigate the impact of supply chain integration (SCI) practices on economic
performance in Vietnamese enterprises.
Design/methodology/approach – Based on data collected from 144 Vietnamese enterprises, this study
employs partial least squares path modeling to analyze the direct and indirect relationships among external
integration, information integration, process integration and economic performance.
Findings – Analytical results indicate that of the three SCI practices, external integration has a significant and
positive impact on economic performance. Process integration and information integration, on the one hand,
reveal insignificant direct impact on economic performance, and on the other, show significant indirect effect on
economic performance through external integration.
Originality/value – This study sheds new light on the contribution of SCI to economic performance in
developing economies and offers suggestions for not only local management but also foreign investors on the
efficient allocation of resources to achieve higher economic performance.
Keywords Supply chain integration, Economic performance, Empirical study, Developing country
Paper type Research paper

1. Introduction
Supply chain management (SCM) has been recognized as one of main factors in creating a
sustainable competitive in many organizations (Li et al., 2005). SCM refers to the systematic
and strategic coordination of business functions inside an organization and with both its
suppliers and its customers to improve the performance of not only the individual
organization but also the whole supply chain (Huo, 2012; Li et al., 2005). As one of the most
important aspects of SCM, supply chain integration (SCI) has attracted increasing attention
from practitioners, consultants and academics. SCI is expected to be a great source of
economic performance since it enables a firm to strategically collaborate “with its supply
chain partners and collaboratively manages intra- and inter-organisation processes” (Flynn
et al., 2010). As such, organizations can optimize the efficiency of all operation flows,
maximize values to customers and improve economic performance.
The understanding and measurement of SCI are inconsistently captured in the literature.
Some studies measured SCI through a single construct of SCI practice (Zhu et al., 2018;
Benchmarking: An International
Journal The authors are grateful to the Editor, Associate Editor, and anonymous reviewers for their valuable
Vol. 29 No. 9, 2022
pp. 2710-2732 comments and helpful suggestions. This research is substantially supported by Grants-in-Aid for
© Emerald Publishing Limited Scientific Research (KAKENHI) under grant Nos. 25245050, 18F18310, and 19H01520. This research is
1463-5771
DOI 10.1108/BIJ-01-2021-0004 partly funded by University of Economics Ho Chi Minh City, Vietnam.
Lu et al., 2018; Huang et al., 2014); some assessed SCI through multiple dimensions such as Economic
internal and external integration practices (Chaudhuri et al., 2018), internal integration, impact of
customer integration and supplier integration (Ayoub et al., 2017; Huo, 2012; Wong et al.,
2011; Flynn et al., 2010); some examined other practices related to information management
supply chain
(Kumar et al., 2020; Jin et al., 2014) or corporate strategy integration (Swink et al., 2007), etc. integration
These studies confined themselves to mainly considering the direct effect of SCI on
performance; few investigated interactions among SCI practices in relation to performance.
To address these research gaps, this study operationalizes SCI from a broader, 2711
multidimensional perspective to better describe SCI and capture possible interactions
among SCI practices in the relationship with performance.
In terms of the performance measurement, a majority of prior studies focused on the direct
effect of SCI practices on operational performance (Lu et al., 2018; Wong et al., 2011; Flynn
et al., 2010; Swink et al., 2007), supply chain performance (Sundram et al., 2016); customer
performance (Zhu et al., 2018; Huo, 2012; Swink et al., 2007), supplier performance (Romule
et al., 2020; Huang et al., 2014; Huo, 2012) and so on. Chen et al. (2009) identified two key
antecedents, cost orientation and customer orientation, which are drivers of SCI. Cost-saving
results in better financial performance, and customer satisfaction enhances market
performance. In the literature of SCI, market performance and financial performance,
which are the priority goals of most organizations, seem to be less often taken into
consideration. Market performance and financial performance are measurement performance
in a conceptual model by Chen et al. (2009), financial performance is proposed in a research
framework by Khanuja and Jain (2020); these studies, however, confine themselves to a
conceptual level. There are a few empirical studies, such as Dehning et al. (2007) and Huo
(2012), examining the impact of SCM on financial performance, and Flynn et al. (2010),
examining the impact of SCI on business performance (evaluated by both financial and
market measurements). To enrich the literature on SCM and ultimate goals in terms of
financial and market performance, this paper aims at the relationship between SCI practices
and economic performance, which is evaluated based on both financial and market
performance.
There have been many papers on the relationship between SCI and performance in
different developed countries, such as Taiwan (Huang et al., 2014), the USA (Jin et al., 2014;
Swink et al., 2007), Australia (Prajogo and Olhager, 2012) and so on. Also, there has been an
increasing number of papers on SCI in Asian manufacturing plants (Chaudhuri et al., 2018) or
in Asian countries such as China (Zhu et al., 2018; Lu et al., 2018; Flynn et al., 2010), Thailand
(Wong et al., 2011), etc. This is understandable, because Asia is a destination where a majority
of world manufacturing has become located in recent decades (Zhu et al., 2005). Having a
strategic geopolitical position in Asia, Vietnam is increasingly considered a potential node in
the global supply chain. Vietnam is the 21st largest export economy in the world, with an
average annual increase in exports of 13.5% from 2012 to 2017 (OEC, 2019). As the trade war
between the US and China expanded, US imports from China decreased by 13.4% but those
from Vietnam increased by 34.8% in the first nine months of 2019, as compared to 2018 (Shao,
2019). Due to US tariffs on imports from China, many companies with plants in China started
looking to relocate parts of their manufacturing supply chain elsewhere. Vietnam was a
potential candidate because of its political stability as well as its important geopolitical
position. In this situation, SCM in Vietnam is highly concerned for many investors and
multinational corporations.
This study focuses on SCI since SCI practices involve all stages of a product life cycle, from
raw material to end users and would therefore add value to the whole supply chain. Another
reason is that SCI is a critical factor that international companies consider in outsourcing
locations. As Vietnam has relatively poor infrastructure, logistics activities usually require
additional time and cost to travel and move goods around. Logistics costs as a percentage of
BIJ GDP are relatively high in Vietnam, at 16–17% (The Vietnam Logistics Association, 2018),
29,9 compared to 11.7% in South Africa, 12% in Brazil, 13% in India, 18% in China and 20% in
Russia (Pienaar, 2017). Nonetheless, the logistics performance index rank of Vietnam has
improved significantly, from 48 (in 2014) to 39 (in 2018), as compared to other emerging
countries, such as China going from 28 to 26, South Africa from 34 to 33, India from 54 to 44,
Brazil from 65 to 56 and Russia from 90 to 75 during the same period (The World Bank, 2018).
Although Vietnam has been an early adopter of SCM initiatives, these statistics show that
2712 logistics, SCM and SCI in Vietnam are growing and improving dramatically. We expect SCI
practices to make a significant contribution to economic performance in Vietnam.
This study examines the SCI practices and economic performance to answer a research
question: “How do SCI practices have direct and indirect impact on economic performance in
Vietnamese enterprises?”. The findings would suggest implications for not only Vietnamese
managers but also foreign investors seeking to locate a part of their supply chain in Vietnam.
Following the introduction, the next section provides a literature review and hypothesis
development. The third section describes the research methodology, followed by data
analysis results in the fourth section and discussion in the fifth section. Finally, we conclude
with conclusions, implications, limitations and suggestions for future research.

2. Literature review and hypotheses development

2.1 Supply chain integration
SCI is often regarded as either vertical integration or horizontal integration. From the vertical
perspective, a supply chain is “a network of organisations that are involved, through
upstream (suppliers) and downstream (distributions) linkages, in the different processes and
activities that produce value in the form of products and services delivered to the ultimate
consumers” (Christopher, 1992; Mentzer et al., 2001). From a horizontal perspective, on the
other hand, a supply chain is “the systemic, strategic coordination of the traditional business
functions and the tactics across these business functions within a particular company and
across businesses within the supply chain” (Mentzer et al., 2001). Stadtler (2005) views a
supply chain as comprising two aspects: the inter-organizational aspect and the intra-
organizational aspect (Ullrich, 2014). Consistent with the inter-organizational aspect, Simchi-
Levi et al. (2003) define SCM as “a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses, and stores, so that merchandise is produced and distributed at
the right quantities, to the right locations, and at the right time, in order to minimize system
wide costs while satisfying service level requirements”. Consistent with the intra-
organizational aspect, Heizer et al. (2008) define SCM as “the integration of the activities
that procure materials and services, transform them into intermediate goods and final
products, and deliver them to customers”. Generally, SCM aims to “apply a total system
approach to managing the flow of information, materials, and services from raw material
suppliers through factories and warehouses to the end customer” (Jacobs and Chase, 2014,
p. 13).
From either perspective, a central goal of SCM is to remove communication barriers
among supply chain members through the integration of all activities to achieve smooth intra-
and extra-organization processes. This evokes the concept of SCI. Pagell (2004) defines
integration as “interaction”, “collaboration”, or “working together in a cooperative manner” to
gain mutual benefits. In the supply chain setting, Autry et al. (2014) describe different
interaction modes from operational coordination level to strategic integration level. SCI as the
strength of collaboration between supply chain members is characterized as having a very
high level of commitment, a very high degree of resource investment and trust and very high
potential for value creation (Autry et al., 2014). Huang et al. (2014) conceptualize SCI as a
process of “interaction and collaboration across firms” with two important characteristics –
information sharing and interdependence – that bring suppliers and customers into a Economic
cohesive supply network. Flynn et al. (2010) define SCI as a strategic collaboration between a impact of
manufacturer and its supply chain partners to manage intra- and inter-organization activities
in a collaborative manner. The ultimate goal of SCI is to create smooth and efficient flows of
supply chain
information, products and services, cash and decisions in order to maximize value to integration
customers.
There has been substantial variation in capturing and evaluating SCI practices. While
some studies consider SCI a unidimensional construct (Zhu et al., 2018; Huang et al., 2014; Jin 2713
et al., 2014; Lu et al., 2018), some divide SCI into internal integration and external integration
(Huo, 2012; Wong et al., 2011; Chaudhuri et al., 2018; Flynn et al., 2010) and others investigate
further dimensions of SCI (Swink et al., 2007; Li et al., 2005; Min et al., 2007; Prajogo and
Olhager, 2012) (as shown in Table 1). This study views SCI practices from the flow
management point of view to obtain smooth material flows, information flows and decision/
service flows. As such, we found that SCI measurement collapses into three dimensions:
process integration, information integration and external integration. Process integration
refers to how the organization and partners integrate operations with each other and jointly
manage supply chain–related activities. Information integration is the extent to which an
organization is equipped with an information technology enabler and frequently exchanges
information with business partners. External integration refers to integration with suppliers
and customers on the basis of a tight and long-lasting partnership that allows each to
mutually benefit.

2.2 Supply chain integration and economic performance

The relationship between SCI and performance can be explained through the theoretical lens
of transaction cost theory that was originally proposed by Coase (1937). Transaction costs
among partners arise from “opportunistic behaviours and partners’ self-interest generated by
lack of trust” (Khanuja and Jain, 2020). In the SCM context, there are a variety of transaction
costs. Grover and Malhotra (2003) define transaction costs using two components: (1)
coordination costs and (2) transaction risk. Zhao et al. (2008) summarize four types of
transaction costs: (1) search cost, (2) contracting cost, (3) monitoring cost and (4) enforcement
cost. Flynn and Flynn (2005) describe transaction costs in the supply chain as including the
costs of negotiation, implementation, coordination, monitoring, adjustment, enforcement and
termination of agreements between an organization and its supply chain partners. Process
and information integration that builds mutual trust and increases partners’ involvement in
the decision-making process based on facts would lessen the opportunistic activities (Cao and
Zhang, 2011; Khanuja and Jain, 2020). External integration towards long-term relationship
and mutual benefits with both suppliers and customers would reduce the relational costs and
opportunism (Williamson, 1985; Khanuja and Jain, 2020). As such, through SCI, inherent
transaction costs would be lowered by the integration of intra- and inter- organizational
processes and a long-term relationship with supply chain partners (Zhao et al., 2008).
This study examines SCI based on three practices: information integration, process
integration and external integration. The relationship between each practice and economic
performance is discussed as below:
Process integration refers to the extent to which supply chain members integrate their
operations through inter-functional teams and interlocking programs to together manage
activities along the supply chain. This practice helps improve the cooperation among
functional departments to create an integrated system (Ayoub et al., 2017). Also, it plays an
important role in facilitating smooth movement of products, services, resources, cash and
information (Flynn et al., 2010). It enables an organization to accurately formulate business
plans as well as obtain sufficient materials at a minimized inventory and transportation cost
(Chen et al., 2004). Through well-integrated processes between each other, members of the
 BIJ
29,9

2714

Table 1.

performance
integration and
Studies of supply chain
Study SCI practices Performance Methodology Main findings

Zhu et al. Supply chain integration Customer service performance Data collected from 366 cross- The results of this study confirm a
(2018) Innovation performance sectional enterprises in China significant mediating role of inter-
Structural equation model organizational learning in the
relationship between supply chain
integration and firm performance
Chaudhuri Internal integration Manufacturing flexibility Data collected from 342 The study found a direct effect of
et al. (2018) External integration manufacturing plants in Asia internal integration and supply chain
Hierarchical regression risk management on manufacturing
analysis flexibility. Also, supply chain risk
management significantly moderates
the relationship between external
integration and manufacturing
flexibility
Lu et al. Supply chain integration Operational performance Data collected from 357 Findings in this study support the
(2018) manufacturing companies in hypothesis of a “nonlinear”
China relationship between supply chain
Threshold regression analysis integration and operational
performance. Moreover, market
uncertainty significantly moderates
this nonlinear relationship
Ayoub et al. Supplier integration Technical innovation Data collected from 217 The study found significant impact of
(2017) Customer integration companies in electrical, supplier integration and customer
Internal integration electronics, machinery and integration on technical innovation
mechanical appliances
industries in Jordan
Structural equation model

(continued )
Study SCI practices Performance Methodology Main findings

Sundram Supply chain integration Supply chain performance Data collected from 156 Supply chain integration significantly
et al. (2016) Supply chain management (customer electronics firms in Malaysia mediates the relationship between
relationship, supplier strategic Regression analysis supply chain management practices
relationship, information sharing, and supply chain performance
information quality, postponement,
agreed vision and goals, risk and
reward sharing)
Huang et al. Supply chain integration Supplier performance Data collected from 164 Supply chain integration shows a
(2014) suppliers in Taiwan significantly positive impact on
Hierarchical regression supplier performance. This
analysis relationship is weakened by demand
uncertainty but strengthened by
technology uncertainty
Jin et al. (2014) IT-enabled sharing capability Supply chain flexibility Data collected from 198 US IT-enabled sharing capability has a
Competitive advantage manufacturers positive relationship with supply chain
Structural equation model flexibilities, and in turn, supply chain
flexibility has a positive association
with competitive performance
Prajogo and Long-term relationship Performance Data collected from 232 Logistics integration shows significant
Olhager Information technology Australian firms impact on performance. Information
(2012) Information sharing Structural equation model integration through information
Logistics integration technology and information sharing
indicates significant impact on logistics
integration. A long-term relationship
has both direct and indirect impact on
performance, the latter through
information integration and logistics
integration
Huo (2012) Internal integration Customer-oriented Data collected from 617 Internal integration supports external
Customer integration performance companies in China integration, and they have both direct
Supplier integration Supplier-oriented performance Structural equation model and indirect impact on three types of
Financial performance performance
(continued )
Economic

2715
supply chain
impact of
integration

Table 1.
 BIJ
29,9

2716

Table 1.
Study SCI practices Performance Methodology Main findings

Wong et al. Internal integration Delivery Data collected from 151 Thai Analysis shows significantly positive
(2011) Customer integration Production cost automotive manufacturing effect of internal integration, supplier
Supplier integration Product quality plants integration and customer integration
Production flexibility Structural equation model on four dimensions of operational
performance. Moreover, under high
environmental uncertainty, stronger
relationships between customer
integration, supplier integration,
delivery and flexibility; stronger
relationship between internal
integration and product quality; and
recognition of production costs
Flynn et al. Internal integration Operational performance Data collected from 617 Analytical results confirm the
(2010) Customer integration Business performance manufacturing companies in relationship between supply chain
Supplier integration China integration and both operational
Hierarchical regression performance and business
analysis (in contingency performance. Internal integration and
approach) customer integration have stronger
Cluster analysis (in effect on performance improvement
configuration approach) than does supplier integration
Swink et al. Corporate strategy integration Competitive manufacturing Data collected from 224 plant The study shows mixed support for the
(2007) Product-Process technology capabilities: cost efficiency, managers in North America impact of strategic integration on
integration quality, delivery, process Structural equation model competitive manufacturing capabilities
Strategic customer integration flexibility, new product and business performance, with both
Strategic supplier integration flexibility positive and negative relationships
Business performance: market
performance, customer
satisfaction
Li et al. (2005) Strategic partnership Delivery dependability Questionnaire, 196 valid Strategic supplier partnership,
Customer relationship Time to market responses customer relationship, information
Information sharing Structural equation model sharing, information quality and
Information quality testing predictive validity internal lean practices significantly
Internal lean practices relate to delivery dependability and
Postponement time to market
supply chain can develop complementary resources and unique assets (Miguel and Brito, Economic
2011) that allow a single firm to gain benefits throughout the chain (Prajogo and Olhager, impact of
2012). From these arguments, process integration is considered as a source of economic
performance for any organizations. As such, we formulate our hypothesis H1:
supply chain
integration
H1. Process integration has a positive relationship with economic performance.
Prajogo and Olhager (2012) suggest that two aspects of supply chain information integration
should be evaluated: the technical aspect (information technology enabler) and the social 2717
aspect (information sharing). The technical aspect would be evaluated by information
technology, which refers to the usage of technology to facilitate information exchanges
between the organization and partners, such as computer-to-computer links, technology-
enabled transaction processing, telecommunications or electronic devices. Information
technology has blurred the boundary between different supply chain partners (Palomero and
Chalmeta, 2014; Khanuja and Jain, 2020). It allows firms to increase the volume and
complexity of exchanged information (Prajogo and Olhager, 2012) and enables management
to more actively control processes and monitor activities (Jin et al., 2014; Gunasekaran and
Ngai, 2004) by providing accurate and real-time information on market needs, inventory
levels and production availability (Li et al., 2009; Chen and Paulraj, 2004). The social aspect of
information integration can be measured by information sharing, which refers to the
willingness to keep communicating and exchanging necessary information in a timely
manner. Frequent information sharing enables supply chain members work together as in a
single organization (Stein and Sweat, 1998; Sundram et al., 2016). As such, the bullwhip effect
would be reduced as members of a supply chain are able to better understand demand of each
other as well as the needs of the end customer (Li et al., 2005). This, in turn, helps more
accurately develop production plans, leading to lower costs by reducing shortages and
inventories (Prajogo and Olhager, 2012). More important, thanks to effective information
exchange, decision-making would be accelerated along the whole supply chain (Sundram
et al., 2016), management of events will be more effective, and resource allocation would be
more efficient (Kumar et al., 2020). It can be seen that information integration allows
managers to access real-time data and make more optimal decisions within a shorter time.
This practice is considered as an obvious weapon to improve economic performance of any
organizations. Thus, we develop our hypothesis H2 as follows:
H2. Information integration has a positive relationship with economic performance.
External integration, in this study, is viewed from a vertical integration perspective. First,
integration with the upstream supply chain is referred to as supplier integration with a long-
lasting relationship. Since the boundaries of activities between two organizations are
becoming blurred (Prajogo and Olhager, 2012; Khanuja and Jain, 2020), many organizations
tend to invite their suppliers to be involved in key business activities such as new product
development, strategy planning and goal-setting activities, or continuous improvement
programs. Supplier involvement can result in mutual benefits in terms of accurate
information on demand and capacity that allows the reduction of cycle time, eliminating
incoming quality problems and waste (Chen and Paulraj, 2004; Singh and Kumar, 2020) and
being more responsive to customer requirements (Flynn et al., 2010). Second, integration with
the downstream supply chain is referred to as customer integration with a long-term
relationship. Maintaining a close relationship and frequently exchanging information with
customers allow a firm to better understand customers’ preferences and feedback and hence
to promptly respond to market changes (Li et al., 2005). Building a long-term relationship with
both suppliers and customers allows firms to lower transaction costs in terms of searching
and contracting costs, while still having reliable transactions (Zhao et al., 2008). External
integration would build high quality relationship between the organization and its partners
BIJ that improve trust and commitment (Yang et al., 2021), reduce potential optimistic behaviors
29,9 (Yang et al., 2021; Khanuja and Jain, 2020); and improve performance (Kros et al., 2019).
Therefore, we develop our hypothesis H3 as follows:
H3. External integration has a positive relationship with economic performance.
External integration could be considered an extension of internal management into the
supply chain. Schroeder et al. (2002) found significant correlation between internal and
2718 external learning in developing resources that further contribute to manufacturing
performance. It is likely that once an organization has a high capability of internal
integration, they will be able to achieve a high level of external integration. From this point of
view, internal process integrative capabilities would be antecedents to develop external
integration (Huo, 2012), and in turn, influence on organizational performance.
Process integration, likely as an internal capability, could be considered a base for the
development of external integrative capabilities Huo (2012). High quality relationship with
both suppliers and customers could facilitate the integration of process intra- and inter-
organization (Sundram et al., 2016; Yang et al., 2021). Therefore, external integration would
positively mediate the impact of process integration and information integration on economic
performance. Thus, we establish our hypothesis H4 as follows:
H4. Process integration has a positive relationship with economic performance through
external integration.
Information integration is a ground helping organizations communicate and integrate more
effectively with external partners by, for example, understanding customers’ demands and
requirements, sharing expectations about incoming quality with suppliers and so on. Also,
good relationships and collaborative behaviors support accurate information exchange in a
timely fashion, in turn, managers can make and adjust operational decisions to more
efficiently allocate resources (Kumar et al., 2020) as well as quickly respond to any changes in
market demand (Jin et al., 2014). As a result, economic performance, measured by market and
financial performance, is expected to be improved. We state our hypothesis H5 as follows:
H5. Information integration has a positive relationship with economic performance
through external integration.

3. Research design
To investigate the relationship between SCI practices and economic performance, a
questionnaire was designed to collect data. Most of the measurement items utilized in this
study were adopted from previous studies. Measurement items for SCI constructs were
adopted from Li et al. (2005), Chen et al. (2004) and Min et al. (2007). A five-point Likert scale
(from 1 5 strongly disagree to 5 5 strongly agree) measured the extent to which respondents
agree with statements regarding SCI. SCI constructs were measured by
(1) Process integration
(2) Information integration: information sharing and information technology
(3) External integration: supplier integration and customer integration
Measurement items for economic performance were adopted from Zhu and Sarkis (2007) and
Chardine-Baumann and Botta-Genoulaz (2014). A five-point Likert scale (from
1 5 significantly decreased to 5 5 significantly increased) was used to measure the
change in an organization’s financial performance and market performance in the two most
recent years.
 Firm size is a control variable that has been considered in previous SCM studies such as Economic
Younis and Sundarakani (2020), Chaudhuri et al. (2018). In this study, firm sized was impact of
measured based on the number of employees. The whole sample can be divided into three
different groups including small size (less than 50 employees), medium size (from 50 to 300
supply chain
employees) and large-size firms (more than 300 employees). Then, firm size effect in the integration
relationship between SCI and economic performance are examined and compared among the
three groups.
This study collected data from companies in Vietnam. A list of 992 companies with contact 2719
information was collected from the yellow pages of Vietnamese companies. Questionnaires
with cover letters were sent to the list of Vietnamese companies by email. After sending this
email for the first time, reminder email was sent twice after each two weeks, followed by a
phone call as a third reminder. The data collection period was nine months, divided into two
phases: the first phase was from July to September 2016, the second phase was from
November 2016 to March 2017. As written in the cover letter, the target respondents were
people in the company who were knowledgeable about the company’s SCM and performance.
They typically had job titles such as supply chain manager, director, CEO or plant manager.
A total of 158 responses were received. After screening the responses, a sample of 144
responses were accepted as valid and used in the analysis (see Table 2). The response rate
was 14.5%. The other 14 responses were rejected as there were many missing answers in
some responses and some respondents were not target respondents.

4. Data analysis results

4.1 Bias test
4.1.1 Non-response bias. This study evaluates non-response bias using first-phase non-
response bias. The total sample is split into two groups: one group includes responses from
the first phase of data collection, and the other group includes responses from the second
phase. The latter group comprises companies in the original contact list that did not respond
in the first phase of data collection. Thus, the author considers the latter group as the first
phase non-response and tests the non-response bias by comparing these two groups. To test
the non-response bias, a t-test is conducted with two demographic variables (number of
employees and type of industry) and twenty random variables selected from SCI practices
and the triple bottom line. The t-test results show no statistically significant difference
between the two groups (at the 95% significant level), so it can be concluded that non-
response bias does not occur (Table 3).
4.1.2 Common method bias. This issue is addressed at the early stages of questionnaire
design. In the questionnaire, the order of all questions regarding SCI practices and economic
performance is mixed to avoid common-method bias. To detect potential common method
bias after collecting the data, Harman’s single factor test is adopted by loading all variables
into an exploratory factor analysis (Podsakoff et al., 2003). More than a single factor was
extracted, suggesting there is no problem of common method bias.

Firm size (No. of employees) No. of company Type of industry No. of company

No more than 50 58 Industrial 64

51–300 49 Consumer goods 30
More than 300 37 Basic materials 25
Missing 0 Consumer services 22 Table 2.
Missing 3 Characteristics of the
Total 144 Total 144 companies
BIJ t-test for equality of means
29,9 Random question item No t df Sig. (2-Tailed) Mean difference Std. Error difference

1 0.794 142 0.429 0.109 0.137

2
0.552 141 0.582
0.072 0.130
3
0.432 142 0.667
0.061 0.140
4 0.094 140 0.925 0.017 0.178
2720 5 0.024 139 0.981 0.003 0.147
6 0.181 138 0.857 0.026 0.141
7 0.683 138 0.496 0.106 0.155
8
0.895 141 0.372
0.129 0.144
9
0.572 141 0.568
0.081 0.142
10 1.268 141 0.207 0.175 0.138
11 0.253 140 0.801 0.033 0.130
12
1.054 142 0.294
0.156 0.148
13
1.109 142 0.269
0.154 0.139
14 0.442 135 0.659 0.067 0.151
15 0.995 131 0.322 0.224 0.225
16 0.739 127 0.461 0.125 0.169
17
0.455 130 0.650
0.070 0.153
18
0.351 129 0.726
0.049 0.140
19
0.658 129 0.512
0.092 0.140
Table 3. 20
0.099 129 0.922
0.017 0.168
Results of non- Type of industry 1.330 142 0.186 0.32323 0.24312
response bias test Number of employees 1.221 142 0.224 0.35152 0.28782

4.2 Evaluation of measurement model

A structural model describing the relationship between SCI practices and economic
performance has been established. Since SCI practices and economic performance are
multidimensional constructs, it is necessary to distinguish levels of analysis (Svensson et al.,
2018). In this study, supplier integration and customer integration are the first-order
constructs of external integration; information sharing and information technology are the
first-order constructs of information integration; and financial performance and market
performance are the first-order constructs of economic performance.
The literature has established reflective models to describe the relationship between the

higher-order and lower-order constructs of SCI (Swierczek, 2014) and sustainability
performance (Svensson et al., 2018). Similarly, this study represents each second-order
(higher-order) construct as a general concept represented (reflected) by its first-order (lower-
order) constructs, so the relationship between higher and lower constructs should be a
reflective-reflective model (Becker et al., 2012). The two-stage approach suggested by Hair
et al. (2018) is adopted to construct the structural model and test the measurement. At the first
stage, the construct scores of the first-order constructs are calculated, without the second-
order constructs in the model. Then, the latent variable scores of the first-order constructs,
determined by SmartPLS software, serve as reflective indicators for the second-order
constructs in a separate second stage analysis (Becker et al., 2012). The path model is
illustrated in Figure 1.
The reliability of the constructs is tested through Cronbach’s alpha and composite
reliability. The Cronbach’s alpha coefficients of all SCI constructs are greater than 0.7 (see
Table 4). The Cronbach’s alpha coefficients of the triple bottom line constructs exceed 0.7 for
everything except market performance (0.614) and internal social performance (0.646). All
Cronbach’s alpha coefficients exceed the suggested threshold of 0.6 (Nunnally, 1978). In
addition to the Cronbach’ alpha, composite reliability is recommended to test internal
 4 items
Economic
Process
integration impact of
supply chain
Financial
H1 performance
3 items integration
H4
4 items Supplier
integration

H3, H4, H5 Economic

2721
External
integration performance
5 items Customer
integration
H5 H2 Market 3 items
performance
Information
4 items sharing
Information
integration Control variable:
Information Firm size Figure 1.
3 items PLS path model
technology

consistency. In this study, the coefficients of composite reliability are all above 0.7. The
results of the reliability test satisfactorily meet all criteria, and the reliability of all constructs
is confirmed.
To evaluate validity, convergent validity and discriminant validity are examined.
Regarding convergent validity, cross loadings show that each indicator loaded highest on the
construct it is associated with, and the factor loadings are all greater than the suggested
threshold of 0.5 (as shown in Table 4). Moreover, average variance extracted (AVE) values are
above the nominal cut-off point of 0.5. Thereby, the convergent validity of the constructs is
confirmed. Discriminant validity is tested using the Fornell–Larcker criterion. As noted in
Table 5, the square roots of AVE are greater than the correlations of the construct with all
other constructs in the structural model, which confirms the construct’s discriminant validity
(Fornell and Larcker, 1981). Moreover, by employing the PLS structural equation model,
discriminant validity is examined using another, new approach called heterotrait-monotrait
(HTMT) ratio. This estimates the correlation between two constructs, which parallels the
disattenuated construct score correlation (Henseler et al., 2015). In this study, all HTMT
values are smaller than the suggested threshold of 0.85 (Kline, 2011) (as shown in Table 6).
These results confirm the convergent validity and discriminant validity of all constructs in
this study.

4.3 Evaluation of structural path model

The confirmation of reliability and validity permits an assessment of the structural path
model. A complete bootstrapping analysis with 5,000 sub-samples is conducted.
Approximate model fit measurement is the standardized root mean square residual
(SRMR) (Hu and Bentler, 1999, cited in Henseler et al., 2016). If SRMR equals 0, there is a
perfect fit of the PLS model (Byrne, 2008; Henseler et al., 2016). Byrne (2008) indicated that an
acceptable value for SRMR should be less than 0.05 while Henseler et al. (2016) and Hu and
Bentler (1999) provided evidence to propose that 0.08 should be an adequate cut-off value. In
this study, SRMR value is 0.061 illustrating that the PLS model fit is acceptable.
The detailed results of the structural path model are shown in Table 7. Process integration
shows a positive relationship with economic performance, with path coefficients of 0.087; the
BIJ Cronbach’s Composite
29,9 Constructs, items Loadings alpha reliability AVE

Process integration 0.780 0.854 0.595

Information flows smoothly between our partners and
us
Our supply chain members try to integrate operations 0.786
2722 with each other
inter-functional teams from our company and 0.763
partners regularly have meetings to serve mutual
customers better
Our supply chain members develop interlocking
programs with each other
Our supply chain members jointly manage logistics 0.793
activities
Material flows smoothly between our partners and us 0.755
We and suppliers together manage inventory in the
supply chain
Information sharing 0.834 0.886 0.660
We inform trading partners in advance of changing 0.741
needs
Our trading partners share proprietary information
with us
We and our trading partners exchange information 0.826
that helps our business planning
We and our trading partners keep each other 0.873
informed about events that may affect the other party
Sharing information between partners and us takes 0.828
place frequently
We and our trading partner exchange performance
feedback
Information technology 0.777 0.850 0.657
There are direct computer-to-computer links with key
suppliers
inter-organizational coordination is achieved using 0.798
electronic links
We use information technology-enabled transaction
processing
We contact with customers by telecommunications or 0.862
electronic devices
We use electronic transfer of purchase orders 0.834
We transfer invoices by electronic means
Customer integration 0.846 0.890 0.617
We frequently interact with customers to set
standards
We frequently measure customer satisfaction 0.768
We frequently determine future customer 0.799
expectations
We periodically evaluate the importance of our
relationship with our customers
We follow up with customer feedback 0.791
We emphasize the importance of building long-term 0.798
relationships with customers
Table 4. We frequently are in close contact with our customers 0.778
Measurement model
assessment (continued )
 Cronbach’s Composite
Economic
Constructs, items Loadings alpha reliability AVE impact of
supply chain
Supplier integration 0.780 0.847 0.584
We view our suppliers as an extension of our 0.773 integration
company
We involve our key suppliers in goal-setting activities 0.762
We expect our relationship with key suppliers to last a 2723
long time
The suppliers see our relationship as a long-term 0.787
alliance
We actively involve our key suppliers in new product 0.78
development processes
Market performance 0.614 0.794 0.564
Market share 0.773
Customer satisfaction 0.764
Responsiveness to customers’ requirements 0.716
Economic return 0.733 0.848 0.651
Revenue 0.832
Profit 0.817
Return on investment 0.773
Note(s): The items with no loadings are rejected ones during the reliability and validity tests Table 4.

(1) (2) (3) (4) (5) (6) (7)

(1) Customer integration 0.786

(2) Information sharing 0.561 0.812
(3) Information technology 0.349 0.546 0.81
(4) Market performance 0.39 0.332 0.288 0.751 Table 5.
(5) Process integration 0.544 0.652 0.561 0.352 0.771 Fornell-Larker
(6) Financial performance 0.286 0.157 0.207 0.387 0.225 0.807 criterion (correlations
(7) Supplier integration 0.547 0.429 0.414 0.322 0.562 0.318 0.764 among the first-order
Note(s): Values at the diagonal line are square roots of AVE constructs)

(1) (2) (3) (4) (5) (6) (7)

(1) Customer integration

(2) Information sharing 0.66
(3) Information technology 0.411 0.622
(4) Market performance 0.52 0.425 0.352
(5) Process integration 0.647 0.789 0.667 0.476 Table 6.
(6) Financial performance 0.368 0.195 0.272 0.566 0.3 Heterotrait-monotrait
(7) Supplier integration 0.641 0.508 0.545 0.403 0.67 0.422 (HTMT) ratio

impact, however, is not significant. We can conclude that hypothesis H1 is not supported.
There was a similar result for information integration, with a positive effect on economic
performance (path coefficient of 0.014), but the effect is insignificant with p > 0.1. Hypothesis
H2, therefore, is not supported. The PLS results indicated a strong support for hypothesis H3,
with a positive and significant effect of external integration on economic performance (path
coefficient of 0.332, at p < 0.01).
BIJ Propose Pool p-
29,9 direction sample value Results

H1: Process integration has a positive relationship with þ 0.087 0.294 Not
economic performance supported
H2: Information integration has a positive relationship þ 0.014 0.459 Not
with economic performance supported
2724 H3: External integration has a positive relationship with þ 0.332 0.004 Supported
economic performance
H4: Process integration has a positive relationship with þ 0.168 0.008 Supported
Table 7. economic performance through external integration
Hypotheses’ tested H5: Information integration has a positive relationship þ 0.074 0.059 Supported
results with economic performance through external integration

Regarding the indirect relationship between SCI practices and economic performance,
facilitated by external integration, both process integration and information integration
present significantly positive impact on economic performance. Process integration has a
stronger indirect effect on economic performance with a path coefficient of 0.168 (p < 0.01),
followed by information integration with a path coefficient of 0.074 (p < 0.1). As such,
hypotheses H4 and H5 are supported.
To further understand the influence of SCI practices, the authors tested the same PLS path
model for three sub-samples with different firm sizes: small size (less than 50 employees),
medium size (from 50 to 300 employees) and large size (more than 300 employees). Different
impacts of SCI could be found among the three groups (see Appendix). Process integration
shows a significant and positive impact on economic performance in the large-size group
(path coefficient of 0.340, p value is 0.061), but has an insignificant effect in the medium size
group and a negative effect in the small-size group. Information integration shows a
significant and positive impact on economic performance in the small-size group (path
coefficient of 0.368, p value is 0.06), but reveals an insignificant effect in medium size group
and a negative effect in the large-size group (path coefficient of
0.217, p value is 0.097).
External integration has a positive impact in all three sub-groups, with significant
coefficients at the 5% level in the medium and large-size groups (path coefficients of 0.339 and
0.497, respectively).

5. Discussions and implications

This study examines three sets of SCI, namely process integration, information integration
and external integration, to answer the research question on how these SCI practices have
direct and indirect impact on economic performance in Vietnamese enterprises. The
analytical results indicate that among the three SCI practices, external integration shows the
strongest direct impact on economic performance. Information integration and process
integration reveal insignificant direct effects but significant indirect effects through external
integration. Moreover, the impacts of SCI practices on economic performance are different
among small, medium and large-size firms.
Supply chain external integration shows the most significant impact on economic
performance compared to process integration and information integration. The
contribution of external integration was stronger in the medium and large-size groups
compared to the small-size group. Regardless of how one conceptualizes external
integration, either as a single construct (Chaudhuri et al., 2018; Prajogo and Olhager,
2012) or as a multi-part construct of SCI and customer integration (Huo, 2012; Wong et al.,
2011; Flynn et al., 2010; Ayoub et al., 2017), the influence of external relationships on Economic
performance has been widely recognized and discussed in previous studies. Chaudhuri et al. impact of
(2018) find that external integration alone shows only an insignificant impact on flexibility
performance, but integrating it with supply chain risk management creates a positive
supply chain
impact on flexibility in manufacturing plants in Asia. Sundram et al. (2016) provide integration
evidence on the significant impact of supply strategic partnership and customer
relationship management on supply chain performance in Malaysian enterprises. Wong
et al. (2011) illustrate the positive and significant impact of supplier integration and 2725
customer integration on four aspects of operational performance, namely delivery,
production cost, production quality and production flexibility in Thai automotive
manufacturing plants. Flynn et al. (2010) present results supporting the impact of
supplier integration and customer integration on operational performance in Chinese
companies. Prajogo and Olhager (2012) demonstrate a significant and positive impact of the
long-term relationship on performance (measured by product performance, delivery speed,
volume flexibility, product variety and production costs) in Australian firms. These studies
provide evidence on the effect of external integration on various dimensions of operational
performance. Market performance and financial performance, the ultimate goals of any
organization, are somehow less considered in the existing literature. Among a few studies
taking market and financial performance into consideration, our study adds to the
literature by confirming both the significant direct effect of external integration on
economic performance and mediating effect of external integration in the relationship
between process integration and information integration and economic performance in
Vietnamese firms. Supporting evidence could be found by Huo (2012), in which customer
integration and supplier integration positively impact customer-oriented performance and
supplier-oriented performance, respectively, and significantly support financial
performance in Chinese companies. The importance of relationship management in
doing business reflects a relationship-based characteristic of Vietnamese culture.
Consensus views are found in some other Asian countries (Chaudhuri et al., 2018) such
as Malaysia (Sundram et al., 2016), Thai (Wong et al., 2011) and China (Flynn et al., 2010;
Huo, 2012; Zhao et al., 2011).
Despite obtaining an insignificant direct impact of process integration and information
integration on economic performance, further analysis results could not ignore the
significance of these two SCI practices. In the context of Vietnamese enterprises, the
impacts of process and information integration are more obvious in form of indirect effects
through external integration and in specific groups classified by firm size.
Process integration and information sharing reveal the insignificant direct impact on
economic performance whereas their indirect effects through external integration are
recognized as significant in both the pooled sample and all sub-samples. These findings
imply that process integration and information integration, with help from external
integration, can lead to further improvement in financial and market performance.
Supporting this notion, Huo (2012) presents evidence on the strong relationship between
internal integration and external integration to improve supplier-oriented performance and
customer-oriented performance, which in turn results in the improvement in financial
performance. This study illustrates that with support from external integrative capabilities,
the effect of internal capabilities would be more significant. Moreover, the significant linkage
between internal integration and supplier and customer integration is highlighted by Zhao
et al. (2011). To successfully implement effective SCI practices, strong relationship
commitments from supply chain members play a critical role because SCI requires huge
investment in terms of labor resources, money and time. Relationship commitments can
facilitate external integration, enable a smooth trading process, reduce transaction costs and
improve performance (Zhao et al., 2011). In another paper by Swink et al. (2007), a more
BIJ specific effect of product-process technology integration is examined. The study found that
29,9 most of the impacts from product-process technology integration on market performance and
customer satisfaction are indirect ones, and the mediators here are operational performance
aspects such as quality, new product flexibility and delivery. Furthermore, empirical
evidence on the indirect impacts of process integration and information integration are
provided Ayoub et al. (2017), Sundram et al. (2016) and Prajogo and Olhager (2012).
In our in-depth analysis, exploring the impact of process integration and information
2726 integration among the three sub-samples, interestingly, we recognized that both practices
showed a mixed impact on economic performance among the sub-samples. Specifically, the
process presents a significantly positive impact on economic performance in the large-size
group, but a negative impact in the small-size group. It is likely that larger enterprises have
more sufficient resources to invest effectively in process integration in order to integrate and
jointly manage operations with partners. Information integration plays an important role in
the small-size group, as the only SCI practice showing a significant impact on economic
performance whereas it has insignificant, and even negative, direct effect on economic
performance in the medium and large-size groups. It is likely that small enterprises could take
advantage of fewer employees, the information integration and sharing to be easier and more
effective than the larger ones. Opposite results in different sub-samples would be an
explanation for the insignificant overall impact that we found in the pooled sample. Such
interesting findings of our paper also illustrate the operational characteristics and
competitive advantages of Vietnamese firms at different stages in the corporate life cycle
proposed by James (1974). The theory of the corporate life cycle identified a pattern including
four phases of corporate existence – emergence, growth, maturity, regeneration – together
with activities of four major functions of a corporation – finance, marketing, production and
administration (James, 1974). Small enterprises often at the emergent stage, characterized by
a limited number of product lines and administrative activities that tend to be quite flexible
(James, 1974), can take more advantage in terms of information sharing and integration.
Large enterprises are likely at the growth stage, on the other hand, described with capital
ability to invest in additional productive infrastructure to obtain greater economies of scale as
well as started strengthening its administrative control system (James, 1974). More advanced
production capability allows large firms to take advantage of more process synchronization
and integration while the introduction of a strong administrative control system would be
costly for the investment in information technology and integration system.

5.1 Theoretical contribution

Grounded in the transaction cost theory, this study investigates the impact of SCI on
economic performance. The results highlight the importance of external integration in terms
of not only direct effect but also mediating effect on the relationship between process
integration, information integration and economic performance. Analytical results show that
SCI practices, especially integration with suppliers and customers, offer great help to reduce
opportunistic behaviors and relation costs along the supply chain, and in turn, to improve
economic performance of the organization. The results also offer an explanation for the
implication of transaction cost theory in the context of SCM in such a newly industrialized
country as Vietnam.
This study contributes to the existing streams of SCI studies in several ways. First, unlike
some previous studies that operationalized SCI as a unidimensional construct (Zhu et al.,
2018; Huang et al., 2014; Jin et al., 2014; Lu et al., 2018), this study conceptualizes SCI as a
multidimensional construct that includes process integration, information integration and
external integration, allowing a more insightful understanding of SCI mechanism at the
dimensional level. Second, this study evaluates economic performance by the market and
financial indicators that are the priority goals pursued by most organizations. Third, we Economic
make an addition to the existing literature by taking firm size into serious consideration that impact of
helps explain how SCI would improve economic performance at different stages according to
the corporate life cycle theory (James, 1974). The most significant contribution of this paper is
supply chain
probably the development and empirical testing of a theoretical model of direct and indirect integration
relationships between SCI and economic performance in a developing country. The findings
confirm the important role of all SCI practices, especially external integration, which not only
significantly directly impacts economic performance, but also significantly mediates the 2727
effects of other SCI practices on it.

5.2 Managerial implication

In terms of contributions to practice, this paper provides managerial insights into how SCI
operates to achieve higher economic performance in Vietnam – a newly industrialized
country with considerable potential for rapid development in the future. The major
managerial implication of this study is that the enterprises should build up and strengthen
their SCI practices to improve their financial and market performance. The SCI capabilities
could be developed by fostering strategic relationships with supply chain partners and
involving them into the organizations’ business activities, integrating operations across
intra- and inter- organizations and establishing an IT-enable sharing system to keep
exchanging adequate and accurate information timely with all partners. Second, based on the
empirical results of this study, external integration plays a pivotal role in suppressing
opportunism and reduction of transaction costs. This finding implies that in a relationship-
based culture like Vietnam, integration with suppliers and customers on the basis of a close
and long-lasting partnership is a critical factor not only in the field of SCM but also in general
business operations. Also, culture should be deeply concerned by foreign investors if they
plan to locate their production or expand the market in Vietnam. Third, the study explains
how process integration and information integration would have different contributions to
economic performance in different groups classified by firm size. As such, the roles of process
integration and information integration are highlighted, the latter especially in small
enterprises and the former in medium and large enterprises. Understanding the
characteristics and mechanisms of SCI practices with respect to economic performance is
important for not only local managers but also foreign investors who are considering locating
their operations in Vietnam.

6. Conclusions, research limitations and further research

This study examines the relationship between SCI practices and economic performance in
Vietnamese enterprises. Process integration, information integration and external integration
are measurements of SCI practices while financial performance and market performance are
constructs to evaluate economic performance. The empirical results indicate that external
integration has a positively direct impact on economic performance while process integration
and information integration show a positive indirect effect through external integration.
Moreover, the significant effect of process integration is more noticeable in the group of large-
size enterprises whereas that of information integration is obviously recognized in the group
of small-size enterprises. The findings emphasize the importance of external integration
among SCI practices and confirm the unignorable role of process integration and information
integration in organisations.
While this study makes a significant contribution to the SCM literature, as well as having
insightful implications for practice, there are some limitations that open directions for future
research. First, the study confines itself to collecting subjective data from focal enterprises
BIJ about SCI with partners, and the sample population for this study is restricted to Vietnamese
29,9 enterprises. Further research should consider collecting data from not only focal enterprises
but also supply chain partners, including suppliers, distributors and customers. Moreover,
future studies can broaden the scope to examine this topic at an international level;
comparative results among cross-culture respondent groups will be interesting. Second,
although the design of this study is primarily to examine the contribution of SCI practices to
financial and market performance – the ultimate goals of most businesses, other types of
2728 performance such as operational performance and supply chain performance are important
to be taken into consideration in the future studies. As such, the results would be improved
and provide a more insightful understanding of the underlying relationship between SCI
practices and various performance dimensions. Moreover, cultures and other organizational
characteristics such as ownership, industry, objective financial data, etc. are also interesting
factors to be considered in further studies. Last but not least, the implementation of SCI has
changed over time, especially during an era of digital transformation and under devastating
pressures from the COVID-19 pandemic. These challenges also open the door for future
research to investigate longitudinal data on SCM or digital SCM practices in Industry 4.0.

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BIJ Appendix
29,9

Small-size Medium size Large-size

group group group
2732
H1: Process integration has a positive relationship with
0.208 (0.226) 0.299 (0.122) 0.340 (0.061)
economic performance
H2: Information integration has a positive relationship 0.368 (0.06)
0.115 (0.285)
0.217 (0.097)
with economic performance
H3: External integration has a positive relationship 0.069 (0.376) 0.339 (0.046) 0.497 (0.000)
with economic performance
H4: Process integration has a positive relationship with 0.032 (0.373) 0.171 (0.092) 0.303 (0.016)
Table A1. economic performance through external integration
Hypotheses’ tested H5: Information integration has a positive relationship 0.023 (0.407) 0.073 (0.189) 0.027 (0.403)
results with three sub- with economic performance through external
samples integration

Corresponding author
Minh Hue Nguyen can be contacted at: [email protected]

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