Creating customer value through functional integration: The effects of organizational design factors on organizational marketing.

Abstract

Do functionally integrated firms produce greater customer value? If so, how do firms organize to become functionally integrated? This dissertation examines empirically these two important questions in the context of business-to-business relationship marketing settings. To address these questions, theory from the marketing and organizational behavior literatures is combined to develop a conceptual framework, research framework and empirically testable model. This research contributes to the solution of a critical management problem with the theoretical support of two disciplines. The model tested postulates that customer value is a function of psychological integration and structural integration which are combined to represent functional integration. The first research question is addressed by examining the relative impact of the two integration constructs on customer value. The second research question is addressed by examining the relative impact of interdependence, structure and process constructs on the two integration constructs. A major consumer durable manufacturer endorsed the data collection and their supplier performance scores were the measures of customer value. The scores were part of their supply management program and measured product, engineering, delivery and commercial quality to provide a standardized method for comparing suppliers based on the customer's view. Fifty suppliers were surveyed to collect data regarding the organization constructs. The survey sought responses from purchasing, engineering, manufacturing, and sales informants who provided answers regarding their function's interaction with the other three functions. This approach provided numerous perspectives to determine the degree of functional integration and how it is achieved. The model was tested using Partial Least Squares, a latent variable structural equation modeling technique. This procedure was useful for assessing direct and indirect effects and was appropriate due to the small sample size and the predictive nature of the research questions. The model was generally supported with nine of ten hypotheses supported in the expected direction. Based on these results, functionally integrated firms do appear to produce greater customer value, and interdependence, structure and process constructs are important organizational design predictors of functional integration.