The performance effects of supply chain agility with sensing and responding as formative capabilities

Purpose The study presents a conceptual model of a firm's supply chain agility (FSCA) as a formative construct formed by sensing and responding capabilities. Both construct validity and predictive validity of the model are tested by investigating nuanced effects of FSCA on business performance. The study aims to empirically validate the sensing-responding theoretical framework of Overby et al. (2006) and extend the emergent stream on sensing-responding frameworks for supply chain agility. Design/methodology/approach Survey research is employed. Data are analysed using partial least squares technique and mediation tests by Hayes PROCESS macro. Findings FSCA is established as a revised construct formed by the distinct capabilities of sensing and responding. The efficacy of utilizing FSCA as a formative 2nd order construct was established. In addition, FSCA is shown to affect business performance through mediations of cost efficiency and customer effectiveness, establishing its predictive validity. Originality/value This study contributes significantly to the literature on supply chain agility in terms of both theory and practice for cultivating supply chain agility. Drawing on resource-based view and resource-advantage theories, as reformulation of supply chain agility as a formative construct of sensing and responding capabilities, this research opens up new lines of inquiry on agility.