1. and mining, eventually resulting in strengthened regional

1.      Introduction

“ONE BELT ONE ROAD”  project will encourage
investments in transportation, trade, energy and mining, eventually resulting
in strengthened regional cooperation, superior economic growth, trade
diversification and political flexibility (Ferdinand 2016). China will invest $46 billion
in China-Pakistan economic corridor and the completion of this mega project
will pull foreign investment and hence promote logistics, energy, and
resources, information & capital flow exchange among countries (Dong).  The project will link Chinese city Kashgar
and Pakistani sea port Gawadar with railways, highways and pipelines, thus, encouraging
inland trade in the country (Markey and West 2016).

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project like CPEC highly depends on the performance of the companies offering
logistics services. If they cannot render services efficiently and effectively,
project implementation could delay and put extra economic burdens on project
partners (Asnaashari, Knight et al. 2009). These companies will face
highly uncertain environment when trends in supply, demand and local
regulations is increasingly dynamic and complex (Wagner and Bode 2008).  These uncertainties force companies to
innovate (Kimberly and Evanisko 1981)


hence they adopt technology to control uncertainties (Zhu and Weyant 2003). Governments can also
influence this innovation process as they can discourage or encourage
technological innovations through regulations (Tornatzky, Fleischer et al. 1990).  Therefore, innovation in logistics processes
is influenced by environmental uncertainties and Govt. regulations (Lin 2007). These innovations will in
turn cause enhanced logistics performance (Grawe, Daugherty et al. 2011) However, terrorism and
instability impact logistics performance of the entities (Wagner and Bode 2008) where terrorism especially
creates fears in the minds of employees working in these organizations and
would eventually influence the performance (De Clercq, Haq et al. 2017).

civil and military leadership have shown serious concerns towards the success
of CPEC and tender full support because the project is linked to economic, political
and security benefits for the country (Markey and West 2016). Past studies have explored into
the role of external factors to logistics innovation (Lin 2007), relationship of logistics
innovation with logistics performance (Fugate, Mentzer et al. 2010) and examination of logistics
performance along with several risk dimensions (Wagner and Bode 2008).  The current research will contemplate if fear
of terrorism has any effect on the relationship of logistics innovation and
logistics performance of 3PL companies. The study will also examine
relationship of environmental uncertainty and government support to
technological advancements in logistics field. 
Answers to these questions will give direction to managers for finding
ways to tackle fear of terrorism and its impacts.

ONE ROAD” Project of china is aimed at linking several countries across Asia,
Africa, Europe and Middle-East  (Markey and West 2016). All the countries globally
are facing critical issues linked to political instability and terrorism since
9/11 (Pyszczynski, Solomon et al. 2003). Therefore, the results of the
study will have wider significance for the managers not only in Pakistan but
also across the world. If the proposed model (Fig. 1) stands true, 3PL
companies should seek greater support from civil-military leadership for better
logistics performance. The research will also add new dimension to the existing
theory by confirming the impact of fear of terrorism on logistics performance
of 3PL companies operating in similar scenarios.









(Fig. 1)


3PL, Environmental
uncertainty and Government Support

(Third party logistics) provider is an external party which works as a
middleman between seller and buyer. It provides logistics services on behalf of
the seller, without taking title of the goods for mutual benefit and continuous



services could include all or at the least management of transport and
warehousing components. The performance of these 3PL is guaranteed by strategic
alliance between the service provider and the client (Hertz and Alfredsson 2003).

environment constitutes of elements which are not part of an organization,
however, they influence the ways an entity operates. A slight change in this
environment can force companies to change their systems accordingly (Ewusi-Mensah 1981). Environmental uncertainty is
perceived to be related to external environment and is characterized as a
situation where an individual or an entity is not able to predict ‘something’
in their external environment.  This
‘something’ could be related to consumers, Government, suppliers, competitors,
distributors, technology etc. There are three types of environmental
uncertainties including state, effect and response uncertainties. State
uncertainty represents unpredictable organizational environment overall or one
particular component of it.  Whereas,
effect and response uncertainties are linked to individual’s ability to predict
impact of uncertainty on organization and available options to respond to it
respectively  (Milliken 1987).

environment will become highly uncertain when customers’ preferences, likes and
dislikes are changing quickly. (Oke, Walumbwa et al. 2012). Highly dynamic and complex
environment causes higher level of uncertainty for the managers in
organizations (Damanpour, 1996) (Freel 2005). Environmental uncertainty is
a measure of dynamism and complexity relative to customers, suppliers,
competitors, Government, regulatory agencies, financial markets and trade
unions (Freel 2005). When companies face
uncertainty in their environment, they tend to enhance their R and
marketing activities and this helps companies to develop new products in order
to sustain in the market (Souder, Sherman et al. 1998). Numerous studies have
explained that companies have to adapt themselves to changing environment in
order to be viable entity and recommend strategic decision making in order to
deal with such uncertainties. This strategic formulation in turn helps organizations
achieve increased organizational performance (Swamidass and Newell 1987). Literature also suggests that
increased uncertainty would compel companies to safeguard their market position
and bring innovative and new products for the sustainable competitive advantage
(Freel 2005). 

studies has shown that more than 50% of product or process innovations by
companies were influenced by competition, market and other environmental
factors (Myers and Marquis, 1969, in Miller and Friesen, 1982) (Freel 2005). Hence, greater the
uncertainty, greater the chances of companies involving in innovating their
products or services (Bhide, 2000; Miller and Friesen, 1982;) (Freel 2005). Service innovation through
technology is caused by highly uncertain environment as this would require
business concerns to change their processes as per changing market trends (Lin 2007). Miles and Snow (1978) had
argued that entities would engage in more innovative services when facing
instability and uncertainty. Firms facing environmental uncertainty are
required to adapt themselves and look for more innovative processes. This leads
to increased level of perceived uncertainty in the minds of managers and they,
therefore, they become proactive and seek opportunities to differentiate their
products (Freel 2005). Other resources of logistics
innovation for an organization could be knowledge, technology, financial
resources, management resources and relationship network factors (Grawe 2009)

studies have shown that Govt. regulations and support can generate long lasting
effects because these regulations would eventually promote technological
innovations (Tornatzky and Fleischer, 1990) (Lin 2007). Government can support companies
in the form of subsidies, tax rebates and low interest loans for R projects
in related activities (Beugelsdijk and Cornet, 2002; Romijn and Albaladejo, 2002;
Souitaris, 2002) (Kang and Park 2012). Feldman and Kelley (2006)
suggest that Govt. would encourage innovation for better economic growth and
higher social returns (Kang and Park 2012). Governments can also intervene
innovation process by regulating education system, competition policies and by
offering R & D services in public universities & laboratories (Abramovsky, Harrison et al. 2004).

Hence, in
the light of above explanations following hypotheses are consequently proposed;

H1: Environmental
uncertainties and logistics innovation in 3PL companies have positive

Government Support and logistics innovation in 3PL companies have positive

Innovation and Performance

is anything which is new to a company in the form of machine, technology,
process services, products or projects (Lin 2007). Potter (1990) suggested that
innovation can lead companies to attain competitive advantage and they can
offer innovative services through new technologies or by doing new things (Lin 2007). (Drucker 1985) suggested that innovation can
be defined as a tool to exploit change in market treating it a business
opportunity. Betz (2003) Introduced innovation as a process to offer new or
improved products, services and/or processes into a market segment (Betz 2003).

is supply of products or services to end user at the right time, right place, with
right quantity and quality (Lin 2007). On the other hand, Logistics
management could be defined as a strategic process of managing procurement,
movement and storage of materials, parts and finished goods through
organizations in a cost efficient manner 
in order to maximize future profitability (Christopher 2016). Council of logistics
management USA (1996) defined logistics as a process of flow of goods, services
and/or information from the seller to the end consumer for the sake of
satisfying customer requirements (Bowersox and Closs 1996).

innovation means the introduction of logistics related services which are new
and helpful for focal audience. This focal audience could be internal for
improved operation efficiencies or external for better customer services (Flint, Larsson et al. 2005). Logistics innovation is not
only the provision of new products/services but also improving existing services
in such a way that creates ease for the customers. This could be done through
adopting latest technologies and application of processes from different fields
(Zaltman, Duncan et al. 1973).

innovation can lead companies to attain superior logistics performance (Grawe, Daugherty et al. 2011) and help them gain competitive
advantage (Persson 1991). Logistics innovation is also
strongly correlated with strategic performance, operation service quality and
operational responsiveness (Richey et al. 2005). Another research proved that an
organization where logistics processes were efficient, effective and
differentiated from competitors was able to draw greater logistics performance
and consequently better organizational performance (Fugate, Mentzer et al. 2010)

Fugate et
al. (2010) defined logistics performance as a pursuit of efficiency,
effectiveness and differentiation in logistics offerings. Whereas, others have
defined it as a degree of what level of efficiency and effectiveness a firm provides
in its logistics activities (Mentzer and Konrad 1991). Traditionally, different
authors have explained logistics performance as a ‘hard’ measure of cost,
services and return on assets and ‘soft’ measures such as perception of
manager’s to customer loyalty and satisfaction (Fugate, Mentzer et al. 2010).

researchers have proved that better logistics services helped companies achieve
better organizational performance through enhanced customer satisfaction, loyal
and market share (Stank, Daugherty et al. 1998, Stank, Goldsby et al.
2003). From a
different perspective, logistics performance is also positively related to marketing
performance and financial performance pushing an organization to achieve higher
returns (Green Jr, Whitten et al. 2008). Thus, based on the
theoretical background given above, we propose;

H3: Logistics
innovation in a 3PL company is positively related to logistics performance of
the company.


risk including natural hazards, socio-economic unrest, political instability
and terrorism can directly impact the performance of logistics firms (Wagner and Bode 2008). Terror attacks especially
affect logistics performance either directly (by destruction of infrastructure)
or indirectly (by closure of logistics ports and other related facilities)(Czinkota, Knight et al. 2005). Morever, terrorism and perceived
fear as a result can result in employees’ burnout, reduced work efficiencies
and compromised abilities to handle difficult situations. It is also further
proved that higher the perceived threat of terrorism higher will be the work
related anxiety (De Clercq, Haq et al. 2017). Researchers have proved that
increased job related stressors will directly impact employees’ performance as
they will feel nervous about their organizational functioning (McCarthy et al.,
2016; Xie & Johns, 1995).

(1993, pp. 701-02) recommends that management must have a social responsibility
towards employees and avoid on the job stress which could cause a non
productive behavior by the employees. Here, we further draw our assumption from
terror management theory (Greenberg and Arndt 2011)  which explains that people will suffer from
extreme stress in the presence of threat of terrorism due to increased
awareness of death. Several other studies have suggested that employees facing
different mental strains either due to work or family, it directly impacts
their performance at work (De Clercq, Haq et al. 2017).

In the
light of the above mentioned theories, we will investigate the effect of FOT on
the positive relationship between logistics innovation and logistics
performance. We assume that in an environment where employees involved in
managing logistics services have mental strain due to fear of terrorism,
despite innovative logistics process they will not be able to give desired
performance. Therefore, as a result performance of logistics services will be
affected. We, therefore, propose following hypothesis;

H4: Fear
of terrorism moderates the positive relationship between logistics innovation
and logistics performance of 3PL companies.