The relationship between internal and supplier integration: effects on product quality, cost efficiency and market performance

This paper examines the interaction of internal integration and supplier integration and investigates the causal impact of their relationship on the competitive capabilities of product quality and low cost and, also, on market performance. An empirical study was carried out in Thailand’s automotive industry and structural equation modelling was employed to analyze the theoretical model. The findings indicate that internal integration is a prerequisite for supplier integration and, furthermore, internal integration has a positive relationship with product quality capability. Low cost capability was found to be important for improving market performance and requires the prior achievement of a high level of product quality capability. These findings contribute to a body of literature in which the interaction between internal integration and supplier integration is little studied, particularly in emerging economies.