1. IntroductionChina’s”ONE BELT ONE ROAD” project will encourageinvestments in transportation, trade, energy and mining, eventually resultingin strengthened regional cooperation, superior economic growth, tradediversification and political flexibility (Ferdinand 2016). China will invest $46 billionin China-Pakistan economic corridor and the completion of this mega projectwill pull foreign investment and hence promote logistics, energy, andresources, information & capital flow exchange among countries (Dong). The project will link Chinese city Kashgarand Pakistani sea port Gawadar with railways, highways and pipelines, thus, encouraginginland trade in the country (Markey and West 2016). Aproject like CPEC highly depends on the performance of the companies offeringlogistics services. If they cannot render services efficiently and effectively,project implementation could delay and put extra economic burdens on projectpartners (Asnaashari, Knight et al.
2009). These companies will facehighly uncertain environment when trends in supply, demand and localregulations is increasingly dynamic and complex (Wagner and Bode 2008). These uncertainties force companies toinnovate (Kimberly and Evanisko 1981) andhence they adopt technology to control uncertainties (Zhu and Weyant 2003). Governments can alsoinfluence this innovation process as they can discourage or encouragetechnological innovations through regulations (Tornatzky, Fleischer et al. 1990). Therefore, innovation in logistics processesis influenced by environmental uncertainties and Govt.
regulations (Lin 2007). These innovations will inturn cause enhanced logistics performance (Grawe, Daugherty et al. 2011) However, terrorism andinstability impact logistics performance of the entities (Wagner and Bode 2008) where terrorism especiallycreates fears in the minds of employees working in these organizations andwould eventually influence the performance (De Clercq, Haq et al. 2017).Pakistanicivil and military leadership have shown serious concerns towards the successof CPEC and tender full support because the project is linked to economic, politicaland security benefits for the country (Markey and West 2016). Past studies have explored intothe role of external factors to logistics innovation (Lin 2007), relationship of logisticsinnovation with logistics performance (Fugate, Mentzer et al.
2010) and examination of logisticsperformance along with several risk dimensions (Wagner and Bode 2008). The current research will contemplate if fearof terrorism has any effect on the relationship of logistics innovation andlogistics performance of 3PL companies. The study will also examinerelationship of environmental uncertainty and government support totechnological advancements in logistics field.
Answers to these questions will give direction to managers for findingways to tackle fear of terrorism and its impacts. “ONE BELTONE ROAD” Project of china is aimed at linking several countries across Asia,Africa, Europe and Middle-East (Markey and West 2016). All the countries globallyare facing critical issues linked to political instability and terrorism since9/11 (Pyszczynski, Solomon et al.
2003). Therefore, the results of thestudy will have wider significance for the managers not only in Pakistan butalso across the world. If the proposed model (Fig. 1) stands true, 3PLcompanies should seek greater support from civil-military leadership for betterlogistics performance. The research will also add new dimension to the existingtheory by confirming the impact of fear of terrorism on logistics performanceof 3PL companies operating in similar scenarios. (Fig. 1)1. Hypothesis3PL, Environmentaluncertainty and Government Support TPL(Third party logistics) provider is an external party which works as amiddleman between seller and buyer.
It provides logistics services on behalf ofthe seller, without taking title of the goods for mutual benefit and continuousrelationship. Logisticsservices could include all or at the least management of transport andwarehousing components. The performance of these 3PL is guaranteed by strategicalliance between the service provider and the client (Hertz and Alfredsson 2003).
Externalenvironment constitutes of elements which are not part of an organization,however, they influence the ways an entity operates. A slight change in thisenvironment can force companies to change their systems accordingly (Ewusi-Mensah 1981). Environmental uncertainty isperceived to be related to external environment and is characterized as asituation 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 environmentaluncertainties including state, effect and response uncertainties. Stateuncertainty represents unpredictable organizational environment overall or oneparticular component of it.
Whereas,effect and response uncertainties are linked to individual’s ability to predictimpact of uncertainty on organization and available options to respond to itrespectively (Milliken 1987). Anenvironment will become highly uncertain when customers’ preferences, likes anddislikes are changing quickly. (Oke, Walumbwa et al. 2012). Highly dynamic and complexenvironment causes higher level of uncertainty for the managers inorganizations (Damanpour, 1996) (Freel 2005). Environmental uncertainty isa measure of dynamism and complexity relative to customers, suppliers,competitors, Government, regulatory agencies, financial markets and tradeunions (Freel 2005). When companies faceuncertainty in their environment, they tend to enhance their R andmarketing activities and this helps companies to develop new products in orderto sustain in the market (Souder, Sherman et al.
1998). Numerous studies haveexplained that companies have to adapt themselves to changing environment inorder to be viable entity and recommend strategic decision making in order todeal with such uncertainties. This strategic formulation in turn helps organizationsachieve increased organizational performance (Swamidass and Newell 1987). Literature also suggests thatincreased uncertainty would compel companies to safeguard their market positionand bring innovative and new products for the sustainable competitive advantage(Freel 2005). Severalstudies has shown that more than 50% of product or process innovations bycompanies were influenced by competition, market and other environmentalfactors (Myers and Marquis, 1969, in Miller and Friesen, 1982) (Freel 2005). Hence, greater theuncertainty, greater the chances of companies involving in innovating theirproducts or services (Bhide, 2000; Miller and Friesen, 1982;) (Freel 2005).
Service innovation throughtechnology is caused by highly uncertain environment as this would requirebusiness concerns to change their processes as per changing market trends (Lin 2007). Miles and Snow (1978) hadargued that entities would engage in more innovative services when facinginstability and uncertainty. Firms facing environmental uncertainty arerequired to adapt themselves and look for more innovative processes. This leadsto increased level of perceived uncertainty in the minds of managers and they,therefore, they become proactive and seek opportunities to differentiate theirproducts (Freel 2005).
Other resources of logisticsinnovation for an organization could be knowledge, technology, financialresources, management resources and relationship network factors (Grawe 2009)Similary,studies have shown that Govt. regulations and support can generate long lastingeffects because these regulations would eventually promote technologicalinnovations (Tornatzky and Fleischer, 1990) (Lin 2007). Government can support companiesin the form of subsidies, tax rebates and low interest loans for R projectsin 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 andhigher social returns (Kang and Park 2012). Governments can also interveneinnovation process by regulating education system, competition policies and byoffering R & D services in public universities & laboratories (Abramovsky, Harrison et al.
2004). Hence, inthe light of above explanations following hypotheses are consequently proposed;H1: Environmentaluncertainties and logistics innovation in 3PL companies have positiverelationship. H2:Government Support and logistics innovation in 3PL companies have positiverelationship. LogisticsInnovation and Performance Innovationis anything which is new to a company in the form of machine, technology,process services, products or projects (Lin 2007).
Potter (1990) suggested thatinnovation can lead companies to attain competitive advantage and they canoffer innovative services through new technologies or by doing new things (Lin 2007). (Drucker 1985) suggested that innovation canbe defined as a tool to exploit change in market treating it a businessopportunity. Betz (2003) Introduced innovation as a process to offer new orimproved products, services and/or processes into a market segment (Betz 2003). Logisticsis supply of products or services to end user at the right time, right place, withright quantity and quality (Lin 2007).
On the other hand, Logisticsmanagement could be defined as a strategic process of managing procurement,movement and storage of materials, parts and finished goods throughorganizations in a cost efficient manner in order to maximize future profitability (Christopher 2016). Council of logisticsmanagement USA (1996) defined logistics as a process of flow of goods, servicesand/or information from the seller to the end consumer for the sake ofsatisfying customer requirements (Bowersox and Closs 1996). Logisticsinnovation means the introduction of logistics related services which are newand helpful for focal audience. This focal audience could be internal forimproved operation efficiencies or external for better customer services (Flint, Larsson et al.
2005). Logistics innovation is notonly the provision of new products/services but also improving existing servicesin such a way that creates ease for the customers. This could be done throughadopting latest technologies and application of processes from different fields(Zaltman, Duncan et al.
1973). Logisticsinnovation can lead companies to attain superior logistics performance (Grawe, Daugherty et al. 2011) and help them gain competitiveadvantage (Persson 1991). Logistics innovation is alsostrongly correlated with strategic performance, operation service quality andoperational responsiveness (Richey et al. 2005). Another research proved that anorganization where logistics processes were efficient, effective anddifferentiated from competitors was able to draw greater logistics performanceand consequently better organizational performance (Fugate, Mentzer et al.
2010)Fugate etal. (2010) defined logistics performance as a pursuit of efficiency,effectiveness and differentiation in logistics offerings. Whereas, others havedefined it as a degree of what level of efficiency and effectiveness a firm providesin its logistics activities (Mentzer and Konrad 1991). Traditionally, differentauthors have explained logistics performance as a ‘hard’ measure of cost,services and return on assets and ‘soft’ measures such as perception ofmanager’s to customer loyalty and satisfaction (Fugate, Mentzer et al. 2010). Pastresearchers have proved that better logistics services helped companies achievebetter organizational performance through enhanced customer satisfaction, loyaland market share (Stank, Daugherty et al.
1998, Stank, Goldsby et al.2003). From adifferent perspective, logistics performance is also positively related to marketingperformance and financial performance pushing an organization to achieve higherreturns (Green Jr, Whitten et al. 2008). Thus, based on thetheoretical background given above, we propose;H3: Logisticsinnovation in a 3PL company is positively related to logistics performance ofthe company. Moderatingeffect of FEAR OF TERRORISM (FOT)Catastrophicrisk including natural hazards, socio-economic unrest, political instabilityand terrorism can directly impact the performance of logistics firms (Wagner and Bode 2008). Terror attacks especiallyaffect 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 perceivedfear as a result can result in employees’ burnout, reduced work efficienciesand compromised abilities to handle difficult situations. It is also furtherproved that higher the perceived threat of terrorism higher will be the workrelated anxiety (De Clercq, Haq et al. 2017). Researchers have proved thatincreased job related stressors will directly impact employees’ performance asthey will feel nervous about their organizational functioning (McCarthy et al.,2016; Xie & Johns, 1995).Schermerhorn(1993, pp.
701-02) recommends that management must have a social responsibilitytowards employees and avoid on the job stress which could cause a nonproductive behavior by the employees. Here, we further draw our assumption fromterror management theory (Greenberg and Arndt 2011) which explains that people will suffer fromextreme stress in the presence of threat of terrorism due to increasedawareness of death. Several other studies have suggested that employees facingdifferent mental strains either due to work or family, it directly impactstheir performance at work (De Clercq, Haq et al. 2017).
In thelight of the above mentioned theories, we will investigate the effect of FOT onthe positive relationship between logistics innovation and logisticsperformance. We assume that in an environment where employees involved inmanaging logistics services have mental strain due to fear of terrorism,despite innovative logistics process they will not be able to give desiredperformance. Therefore, as a result performance of logistics services will beaffected.
We, therefore, propose following hypothesis;H4: Fearof terrorism moderates the positive relationship between logistics innovationand logistics performance of 3PL companies.