The critical link between products related factors and machinery investments

Stergios Vranakis


Purpose: The main goal is to understand the way the machinery investment decision making process is affected by specific organisational and, mainly, product related factors.

Design/methodology/approach: The proposed framework is empirically tested using a sample of 248 Greek manufacturing firms that have invested in new machinery and equipment during the past five years. Structural Equation Modelling (SEM) has been used for testing the appropriateness and validity of the proposed model.

Findings: The results indicate that new product development, new product innovation and manufacturing flexibility directly affect investment decision on machinery and equipment. Further, the positive influence of machinery and equipment investments on firm performance is also highlighted.

Originality/value: This study proposes a new conceptual framework for examining the reasons manufacturing firms decide to invest on the acquisition of new machinery and equipment. The machinery and equipment investment model that derives from the present study, presents a complex yet clear picture of important organisational definitions that can affect management’s way of thinking and can also be used for the evaluation of future strategies.


Keywords: Machinery & Equipment Investments, Firm Performance, New Product Development, Manufacturing Flexibility, New Product Pricing Policy, New Product Innovation.




Título: "O elo crítico entre fatores relacionados a produtos e investimentos em máquinas"


Objetivos: O objetivo principal é entender como o processo de tomada de decisão sobre investimento em máquinas é afetado por fatores organizacionais específicos e, principalmente, relacionados ao produto.

Desenho/metodologia/abordagem: a estrutura proposta é testada empiricamente usando uma amostra de 248 empresas de fabricação gregas que investiram em novas máquinas e equipamentos nos últimos cinco anos. A Modelagem de Equações Estruturais (MEV) foi usada para testar a adequação e a validade do modelo proposto.

Resultados: Os resultados indicam que o desenvolvimento de novos produtos, a inovação de novos produtos e a flexibilidade de fabricação afetam diretamente a decisão de investimento em máquinas e equipamentos. Além disso, a influência positiva dos investimentos em máquinas e equipamentos no desempenho da empresa também é destacada.

Originalidade/valor: Este estudo propõe uma nova estrutura conceitual para examinar os motivos pelos quais as empresas fabricantes decidem investir na aquisição de novas máquinas e equipamentos. O modelo de investimento em máquinas e equipamentos que deriva do presente estudo, apresenta uma imagem complexa, porém clara, de definições organizacionais importantes que podem afetar o modo de pensar da gerência e também pode ser usado para a avaliação de estratégias futuras.


Palavras-chave: Investimentos em máquinas e equipamentos, desempenho da empresa, desenvolvimento de novos produtos, flexibilidade de fabricação, política de preços de novos produtos, inovação de novos produtos.

Full Text:



Abdi, T. (2008). ‘Machinery & equipment investment and growth: evidence from the Canadian manufacturing sector’, Applied Economics, 40(1), 465-478.

Anderson, J.C. and Gerbing, D.W. (1998), ‘Structural equation modeling in practice: a review and recommended two-step approach’, Psychological Bulletin, Vol. 103 No. 3, pp. 411-23.

Ayers D., Dahlstrom R., Skinner S. J. (1997). ‘An exploratory investigation of organizational antecedents to new product success’, Journal of Marketing Research, 34(4),107 – 116.

Bengtsson, J. (2001). ‘Manufacturing flexibility and real options: A review’, International Journal of Production Economics,74(1),213–224.

Bengtsson, J., Olhager, J. (2002). ‘Valuation of product-mix flexibility using real options’, International Journal of Production Economics,78(1), 13–28.

Bergstein H., Estelami H. (2002). ‘A survey of emerging technologies for pricing new-to-world products’, Journal of Product & Brand Management, 11(5), 303 – 318.

Brannick, M.T. (1995), ‘Critical comments on applying covariance structure modeling’, Journal of Organizational Behavior, Vol. 16 No. 3, pp. 201-13.

Carbonell-Foulquie, P., Munuera-Alema J.L., Rodri-Escudero A. I. (2004). ‘Criteria employed for go/no-go decisions when developing successful highly innovative products’, Industrial Marketing Management, 33(1), 307–316.

Cooper L. P. (2003). ‘A research agenda to reduce risk in new product development through knowledge management: a practitioner perspective’ Research Technology Management, 20(1), 117 – 140.

Cooper, R. G., Kleinschmidt, E. J. (1996). ‘Winning businesses in product development: The critical success factors’, Research Technology Management, 39(4), 18-29.

Cooper, R. G. (1999). ‘From experience. The invisible success factor in product innovation’,Journal of product Innovation Management, 16(1), 115–133.

Curran, R., Gomis, G., Castagne, S., Butterfield, J., Edgar, T., Higgins, C., McKeever, C. (2007).‘Integrated digital design for manufacturing for reduced lifecycle cost’,International Journal of Production Economics, 27–40.

Delong, B. J., Summers, L. (1991). ‘Equipment investment and economic growth’,Quarterly Journal of Economics, Vol. 106 (1), pp. 445–502.

Dzakiria, H., (2016). “Exploring the Effects of Macro-Environment on the Predisposition to Adopt Strategic Orientation among Small Medium Size Hotel Entrepreneurs”, International Journal of Economics and Financial Issues, Vol. 6 (7), pp.67-71.

Gerwin, D. (1993). ‘Manufacturing flexibility: a strategic perspective’,Management Science, Vol. 39 (4), pp. 395-410.

Gort, M., Greenwood, J., Rupert, P. (1999).‘Measuring the rate of technological progress in structures’,Review of Economic Dynamics, 2(1), 207–30.

Gupta, Y., Somers, T. (1992). ‘The measurement of manufacturing flexibility’, European Journal of Operational Research, 60(1), 166–182.

Hu, G., Bidanda, B. (2009). ‘Modeling sustainable product lifecycle decision support systems’, International Journal of Production Economics, 122(1), 366-375.

Hui, H., Radzi, M., Jenatabadi, H.S., Kasim, F.A., Radu, S., (2013). “The Impact of Firm Age and Size on the Relationship among Organizational Innovation, Learning, and Performance: A Moderation Analysis in Asian Food Manufacturing Companies”, Interdisciplinary Journal of Contemporary Research in Business, Vol. 5 (4), pp. 166-174.

Jalilian, H., Odedokun, M. O. (2000). ‘Equipment and non-equipment private investment: a generalized Solow model’, Applied Economics, ,32(3), 23-34.

Llorens, F. J, Molina, L. M., Verdu, A. J. (2005). ‘Flexibility of manufacturing systems, strategic change and performance’, International Journal of Production Economics, 98(1), 273-289.

Lumpkin, G. T., Dess, G. G. (1996). ‘Clarifying the entrepreneurial orientation construct and linking it to performance’,Academy of Management Review, Vol. 21 (1), pp. 135–172.

Meliciani, V. (2000).‘The relationship between R&D, investment and patents: a panel data analysis’, Applied Economics, 32(11), 35-55.

Muchiri, P., Pintelon, L., (2008). ‘Performance measurement using overall equipment effectiveness (OEE): literature review and practical application discussion’, International Journal of Production Research, 46(13), 3517-3535.

Page, A. L. (1993). ‘Assessing New Product Development Practices and Performance: Establishing Crucial Norms’,Journal of Product Innovation Management, 10(4), 273-290.

Prahinski, C., Kocabasoglou, C. (2006). ‘Empirical research opportunities in reverse supply chains’, Omega, 34(1), 519-532.

Prajogo, D. I., Sohal, A. S. (2006). ‘The integration of TQM and technology/R&D management in determining quality and innovation performance’, Omega, 34(1), 296–312.

Pratono, A.H., & Mahmood, R. (2014). "The Moderating Effect of Environmental Turbulence in the Relationship between Entrepreneurial Management and Firm Performance”, Universal Journal of Management, Vol. 2 (7), pp. 285-292.

Rolfe J., Bretherton P., Hyland P., Soosay C. (2006). ‘Statistical techniques to facilitate the launch price of fresh fruit’, British Food Journal, 108(3), 200 – 212.

Sabherwal, R, Jeyaraj, A., (2015). “Information Technology Impacts on Firm Performance: An Extension of Kohli and Devaraj (2003)”, MIS Quarterly, Vol. 39 (4), pp. 1-30.

Sala-i-Martin, X. (1997). ‘I just ran four million regressions’, American Economic Review, 87(1), 178–83.

Sargent, T., James, S. (1997). Potential Output, Productivity, and the New Growth Theory, Economic Studies and Policy Analysis Division, Department of Finance, Canada, November.

Schilling, M., Hill, C. (1998).‘Managing the new product development process: strategic imperatives’, The Academy of Management Executive, 12(3), 67–82.

Sethi, A. K., Sethi, S. P. (1990). ‘Flexibility in manufacturing: A survey’, International Journal of Flexible Manufacturing Systems, 2(1), 289–328.

Sohn, S. Y., Joo, Y. G., Han, H. K. (2007). ‘Structural Equation Model for the evaluation of national funding on R&D project of SMEs in consideration with MBNQA criteria’,Evaluation and Program Planning, 30(1), 10-20.

Sundin, E., Lindahl, M., Ijomah, W. (2009). ‘Product design for product / service systems: Design from Swedish Industry’, Journal of Manufacturing Technology Management, 20(5), 723-753.

Suomala, P, Jokioinen, L. (2003). ‘The patterns of success in product development: a case study’, European journal of innovation management, 6(4), 213-227.

Thornhill, S. (2006). ‘Knowledge, innovation and firm performance in high- and low-technology regimes’, Journal of Business Venturing, 21, 687– 703

Upton, D. M. (1997). ‘Process range in manufacturing: an empirical study of flexibility’, Management Science, 43(8), 1079–1092.

Young, A. (1992). A tale of two cities: factor accumulation and technical change in Hong Kong and Singapore NBER Macroeconomics Annuals, MIT Press, Cambridge, MA.

Waweru, Z.K. (2016). “Assessing the Influence of Aligning It Strategy, Performance Contract and It Organizational Structure on Institutional Performance. Case of Kenyan Public Universities”, University of Nairobi, School of Computing and Informatics, Master of Science in Information Systems.

Wraikat, H., Bellamy, A., Tang, A. (2017). “Exploring Organizational Readiness Factors for New Technology Implementation within Non-Profit Organizations”, Open Journal of Social Sciences, Vol. 5 (1), pp. 1-13.

Zirger, B. J., Madique, M. A. (1990). ‘A Model of new Product Development: An Empirical Test’,the institute of management science, 36(1), 867-883.

Copyright (c)

ISSN: 2183-5594