Int. J.

Production Economics 135 (2012) 741753

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

The impact of third-party logistics providers capabilities on

exporters performance
Kwong Yeung a,1, Honggeng Zhou b,n, Andy C.L. Yeung a, T.C.E. Cheng a
a
Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
b
15 Academic Way, Whittemore School of Business, University of New Hampshire, Durham, NH, USA

a r t i c l e i n f o abstract

Article history: Third-party logistics (3PL) services have experienced unprecedented growth. However, we are not
Received 28 October 2010 aware of any study that explores the relationships among logistics outsourcing, competitive advantage,
Accepted 27 September 2011 and business performance. We study the mediating role of logistics outsourcing as a strategy to develop
Available online 17 October 2011
rms capabilities in the strategyperformance relationship. Drawing on the resource-based view (RBV)
Keywords: of the rm, we develop a research model grounded in the outsourcing-competitive advantage-
Third-party logistics performance paradigm. We apply structural equation modeling to empirically test the model using
Resource-based view data collected from 150 exporters in Hong Kong and the Pearl River Delta region of China. The results
Strategic orientation show that there are positive relationships among exporters strategic orientation towards third-party
Structural equation modeling
logistics (3PL) providers, 3PL providers basic and augmented capabilities, exporters competitive
advantage, and exporters export performance. We also nd that 3PL providers augmented capabilities
and exporters competitive advantage are strong mediators, supporting the theorized model under-
pinned by RBV.
& 2011 Elsevier B.V. All rights reserved.

1. Introduction and Roath (2004) suggest that it is a potential area to study in

A third-party relationship is a relationship between a rm and
a third party, which, compared with basic services, offers more
customized offerings and a broader number of service functions.
It is a long-term and mutually benecial relationship (Africk and
Calkins, 1994). With burgeoning global trade, erce competition,
higher customer expectations, and ever-expanding supply chains
around the world, third-party logistics (3PL) providers play an
increasingly important role in the prevailing dynamic and volatile
environment (Hsiao et al., 2010; Murphy and Daley, 2001).
Driven by globalization and information technology advances,
3PL services have experienced unprecedented growth. According
to Koh and Tan (2005), the annual growth in this sector in China
has been 25% on average, leading both the U.S. (1015% annual
3PL growth) and the rest of the world (510%). To seamlessly
integrate geographically dispersed production systems, shippers
dependency on 3PL providers to provide customized information
technology such as radio frequency identication (RFID) will grow
(Chen et al., 2010; Koh and Tan, 2005; Yang et al., 2009). Sinkovics
n
Corresponding author. Tel.: 1 603 862 0869; fax: 1 603 862 2776.
E-mail addresses: lgtsunny@inet.polyu.edu.hk (K. Yeung),
Honggeng.zhou@unh.edu (H. Zhou), lgtandyy@inet.polyu.edu.hk (A.C.L. Yeung),
lgtcheng@inet.polyu.edu.hk (T.C.E. Cheng).
1
Tel.: 852 2766 4064; fax: 852 2330 2704.
operations management (OM). Christopher (2005) remarks that
logistics is quite clearly recognized as a major strategic variable.
The recent trend of focusing on core competence has also
contributed to the popularity of logistics outsourcing. Firms rely
on outside logistics specialists to deliver goods to customers so
that they can focus on their own core businesses. They can create
competitive advantage by forming long-term relationships with
3PL providers (Coates and McDermott, 2002; Lambert et al., 1999;
Yeung, 2008). In the logistics service industry, 3PL providers add
value to users by improving operations efciency and/or sharing
resources and information (Berglund et al., 1999). Acting on the
information provided by users, 3PL providers can not only reduce
users inventory and stockout costs, but can also help users better
navigate through the web of government regulations and obtain
customs clearance to avoid unnecessary delay (Selnes and Sallis,
2003). Therefore, logistics outsourcing could bring a handsome
payoff and become a part of corporate strategy (Sahay and
Mohan, 2006).
Despite the well-documented benets of forming long-term
relationships with 3PL providers, we should not assume that the
benets of supply chain collaboration are always positive. Prior
studies have reported that many 3PL providers fail to deliver the
expected cost reduction or meet the increasing demand for a
broader range of logistics services and advanced information
technology (e.g., Wong and Karia, 2009), while many 3PL users

0925-5273/$ - see front matter & 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2011.10.007
742 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753
are uncertain about the service levels and have unrealistic
expectations (Lambert et al., 1999). Many 3PL relationships fail
due to a lack of shared/clear goals, communication, top manage-
ment support, strategic direction, and mutual benets (Lambert
et al., 1999). Fifty-ve percent of the 3PL relationships are
terminated after three to ve years (Gulisano, 1997; Sahay and
Mohan, 2006). These conicting ndings show that the manage-
ment of 3PL relationships should receive greater attention for
efcient supply chain management. Moreover, sixty-nine percent
of 3PL studies have no theoretical foundation (Selviaridis and
Spring, 2007). Therefore, the logistics service industry needs
theories and solutions to achieve sustainable competitive advan-
tages (Wong and Karia, 2009).
However, we are not aware of any study that has yet explored
the relationships among logistics outsourcing, competitive advan-
tage, and business performance (Bustinza et al., 2010). This study
extends the existing literature by studying the implications for
export performance of an exporter that is strategically oriented
towards its 3PL providers through the theoretical lens of the
resource-based view (RBV) of the rm. To the best of our knowl-
edge, this is the rst study to ll this gap. Within OM, this study
answers the calls by researchers to offer a better understanding of
why rms differ in performance (McIvor, 2009; Sinkovics and
Roath, 2004; Vivek et al., 2008). Specically, we seek to address
the following research questions: (1) Are there any relationships
among exporters strategic orientation towards 3PL providers, 3PL
providers capabilities, exporters competitive advantage, and
exporters export performance? (2) Do 3PL providers capabilities
and exporters competitive advantage mediate the relationship
between exporters strategic orientation towards 3PL providers
and exporters export performance? We develop a research model
grounded in the outsourcing-competitive advantage-performance
paradigm of Bustinza et al. (2010) and test the model by applying
structural equation modeling (SEM) to empirical data collected
from a survey of 150 export rms in Hong Kong and the Pearl
River Delta (PRD) region of China.
The rest of the paper is organized as follows: in Section 2 we
provide the research background, review the literature, and
develop the research hypotheses. In Section 3 we introduce the
research methodology, describe the data collection method, and
discuss the development of the measurement scales. Then we
present an analysis of the results in Section 4. In Section 5 we
discuss the research ndings and their implications, conclude the
paper, and suggest topics for future research.
2. Theoretical background and hypothesis development
2.1. Theoretical background
The traditional buyersupplier relationship has four common
characteristics. First, the buyer focuses on low price. Second, the
buyer maintains multiple sources so as to create keen competi-
tion among suppliers. Third, the relationship is short-term
oriented. Finally, the customized effort is low (Jackson, 1985).
Little customization and the adversarial nature in this type of
relationship undoubtedly reduces supply chain responsiveness to
a dynamic market environment. The new paradigm strategic
alliance or partnership is more effective for rms in the time-
sensitive manufacturing industry than the traditional buyer
supplier relationship (Dyer, 1996). A partnership is dened as a
tailored business relationship based upon mutual trust, openness,
shared risk, and shared reward that yield a competitive advan-
tage, resulting in business performance greater than would be
achieved by the rms individually (Lambert et al., 1999). To
better satisfy shippers needs, 3PL providers should perform
logistics services in a better, faster, and cheaper manner for the
exporters (cf. Krakovics et al., 2008) by synchronizing the logistics
activities globally with the support of various information tech-
nologies. Forming strategic alliance with 3PL provider is one of
the most effective business strategies for organizations in China
to achieve cost-effective performance and long-term success
(Chen et al., 2010). However, the literature on strategic alliance
in the PRD region is inadequate (Lo and Yeung, 2004).
For activities for which a rm has no resource or no capability
to deploy the resource, they should be contracted out so that the
rm can (1) avoid investing heavily in assets and new capabilities
(Persson and Virum, 2001), (2) focus on core competences and
acquire complementary capabilities from external providers (Sink
and Langley, 1997), and (3) exploit extra business opportunities
and counter threats in the volatile business environment (Bagchi
and Virum, 1996). Therefore, rms in strategic alliances are more
likely to outperform rms subscribing to the traditional arms-
length approach (Dyer, 1996).
The competitive advantage of a rm is usually attributed to the
rms strategies or process capabilities (e.g., Porter, 1985).
Penrose (1959) suggests that resources can also be one of the
explanatory factors for the competitive advantage of a rm if the
rm can exploit valuable resources. Barney (1991) puts forward
two assumptions: (1) resources (and capabilities) are heteroge-
neously distributed among rms and (2) resources are imper-
fectly mobile, so allowing for differences in rm resource
endowments to both exist and persist over time.
In addition, Barney (1991) posits that resources have four
characteristics. First, resources should be considered as valuable
as they can exploit opportunities and/or neutralize external
threats. Second, resources should be inimitable and non-substi-
tutable. This is because high degrees of tacitness, complexity, or
specicity will produce a high degree of ambiguity. Ambiguity
about the sources of competitive advantage causes other rms to
costly imitate or to replace the resource owners. Finally, resources
should be rare. A rm can achieve better business performance in
the short-term if it can acquire valuable and rare resources. To
sustain better performance in the long run, rms must exploit
resources effectively (Penrose, 1959; Wong and Karia, 2009).
Bustinza et al. (2010) indicate that outsourcing encourages the
development of resources that enable the achievement of a
sustainable competitive advantage, which, in turn, leads to super-
ior rm performance. Mahoney and Pandian (1992) assert that a
rm can achieve an advantage not only because it acquires
resources, but also because it can make better use of its acquired
resources. To understand better the link between resource acqui-
sition and exploitation, Teece et al. (1997) introduce the concept
of dynamic capability, which is the ability to integrate, build, and
recongure internal and external competences to thrive in a
volatile business environment. Sirmon et al. (2007) further
suggest dynamic capability as comprehensive processes in
structuring a rms resources portfolio, bundling resources to
create capabilities, and leveraging those capabilities to realize a
competitive advantage.
Wong and Karia (2009) consider RBV appropriate for explain-
ing competitive advantage in the 3PL service industry because
resources are distributed heterogeneously across different 3PL
providers, freight operators, forwarders, and 3PL users. These
resources are sticky and cannot be transferred from 3PL
providers to others without cost. They identify ve types of
resources, namely physical, human, information, knowledge, and
relational resources, on which competitive advantage is based.
Physical and human resources are tangible resources. Physical
resources include logistics hubs, warehouses, and material hand-
ling devices. They are valuable in creating network coverage,
maintaining control of the logistics activities, and improving the
 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753
speed and reliability of delivery (Wong and Karia, 2009), which
are inimitable due to high capital investments. Human resources
consist of a highly skilled and dedicated workforce, who can
inspire mutual trust, faster service, and better performance. They
are valuable because logistics service is a people-oriented busi-
ness (e.g., Wright et al., 1994) and people with logistics-specic
skills are unique providers of outstanding service and customer
satisfaction. However, tangible resources are of no use if they are
not exploited by intangible resources (Wong and Karia, 2009).
Intangible resources include information, knowledge, and
relational resources, which are difcult to imitate. Information
resources are capabilities of integrating internal and external
processes among suppliers, manufacturers, wholesalers, retailers,
transportation carriers, 3PL providers, and nal users. They
include EDI, computer hardware, communication technology,
technical IT skills, shared IT knowledge, and IT infrastructure
exibility. They are valuable in providing real-time visibility of
demand forecast information, inventory levels, production sche-
dules, and material ows that enables better use of inventory,
transport vehicles, and warehouses, and faster document proces-
sing. They are inimitable and non-substitutable when they are
protected by intellectual property rights or require sophisticated
technological skills (Beinstock et al., 2008). Knowledge resources
are capabilities of gaining access to and bundling with other
resources, like physical, human, and information resources, which
are inimitable and non-substitutable. Buyukozkan et al. (2008)
point out that technical expertise, market knowledge, and man-
agerial experience are essential 3PL selection criteria.
Relational resources are the ability to win new contracts and
maintain long-term friendly relationships with strategic partners,
which is hard to be substituted. Through relational resources,
service users and providers can work together closely to improve
competitive priorities and achieve mutual benets (Africk and
Calkins, 1994; Li, 2011; Min et al., 2005). Prior studies have also
categorized similar types of resources (Coates and McDermott,
2002).
Strategic orientation is dened as the specic approach a rm
implements to create superior and continuous performance
(Gatignon and Xuereb, 1997). Empirical investigations have
supported the notion that strategic orientation and rm perfor-
mance are likely to be associated with each other (Jayaram and
Tan, 2010; Knemeyer et al., 2003; Sinkovics and Roath, 2004).
Sinkovics and Roath (2004) suggest two types of strategic orien-
tation: (1) customer orientation providing superior service
quality to customers and (2) competitor orientation gathering
information about competitors and their reactions to the com-
panys movements. They study 142 manufacturers that are 3PL
users in the UK and nd the following: (1) customer orientation is
positively related to users logistics performance and (2) compe-
titor orientation is positively related to users operations ex-
ibility, logistics performance, and market performance.
While informative, they only study the strategic orientation
towards customers and competitors, not the strategic orientation
towards 3PL providers. They study only logistics performance and
market performance, not export performance. In view of this
research gap, we propose on the basis of RBV that exporters
strategic orientation towards 3PL providers can develop rare and
unique resources/capabilities (cf. Bolumole et al., 2007; Holcomb
and Hitt, 2007) by (1) receiving suppliers deliveries more
frequently and in smaller lot sizes, which, in turn, reduce
inventory carrying cost and waste (Ansari and Modarress, 1990),
(2) involving 3PL providers early to improve product and/or
package designs so as to reduce development cost, damages, lead
time, and waste (Turnbull et al., 1992), (3) exchanging informa-
tion with 3PL providers on quality and/or customers preferences
(Carr and Pearson, 1999; Jayaram and Tan, 2010), and (4) avoiding
743
sacricing economies of scale and exibility (Dyer, 1996; Naim
et al., 2010). More importantly, exporters that make better use of
these resources/capabilities will achieve competitive advantage
(Mahoney and Pandian, 1992; Penrose, 1959).
Berglund et al. (1999) propose that 3PL providers be strategi-
cally segmented into two dimensions, namely standard logistics
services and value-added logistics services. Teece et al. (1997) also
develop two types of competences, namely core and dynamic
competences. Core competence only forms the basis for developing
competitive advantage, whilst dynamic competence allows rms
to obtain and sustain competitive advantage in specic environ-
ments. Based on the ideas of Berglund et al. (1999) and Teece et al.
(1997), we operationalize 3PL providers capabilities in terms of
basic capability and augmented capability in this study. Basic
capability means the ability to provide routine and standard
services, such as accurate and reliable deliveries (cf. Bask, 2001).
Augmented capability refers to the ability to offer additional
customized and value-added services, such as creative solutions
exploration, beyond the necessary functions (cf. Whyte, 1993).
RBV theorists believe that the heterogeneity of resource
portfolios and internal capabilities make a difference to rm
competitiveness (Barney, 1991; Peteraf, 1993). Since the purchase
volume is usually large, it is worthy for 3PL service providers to
invest considerable resources to customize their services in the
B2B context. Gaining competence through the use of 3PL services
is regarded as a key resource for the user rm in the contempor-
ary fast-changing world (Sahay and Mohan, 2006). Lambert et al.
(1999) remark that the complexity of the business environment
is likely to mean that executives will continue to look at relation-
ships with third-party providers as a way of achieving a sustain-
able competitive advantage with scarce resources.
Chen et al. (2010) stated that differences in resources are
causally related to differences in product or service attributes, and
thus, to competitive advantages and differences in performance.
Guided by RBV (Barney, 1991; Penrose, 1959; Wernerfelt, 1984),
rms deploy logistics outsourcing as a strategy to develop their
capabilities (Bolumole et al., 2007), which may mediate the
strategyperformance relationship (Han et al., 1998). We there-
fore speculate that exporters strategic orientation towards 3PL
providers is positively related to the 3PL providers capabilities,
which, in turn, are positively related to exporters competitive
advantage. Subsequently, exporters competitive advantage is
positively related to their export performance. Fig. 1 shows the
research model.
2.2. Development of hypotheses
2.2.1. Exporters strategic orientation towards 3PL providers and 3PL
providers capabilities
Based on RBV, we argue that the supply systems and inter-
organizational relationships between exporters and their 3PL
providers are unique, and therefore are difcult for competitors
to imitate. Prior research has found strategic orientation is an
antecedent to capabilities (Sinkovics and Roath, 2004). When a
rm forms long-term partnership with its 3PL providers, both
parties will improve efciency and achieve competitive advantage
in the global marketplace. The 3PL providers can offer both
economies of scale and exibility (Berglund et al., 1999;
Lambert et al., 1999; Teece et al., 1997). Therefore, we formulate
two hypotheses characterizing the framework in which exporters
strategic orientation is related to 3PL providers basic capability
and augmented capability as follows:
Hypothesis 1. Exporters strategic orientation towards 3PL pro-
viders has a positive relationship with 3PL providers basic
capability.
744 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753
3PL providers
basic capability
H1
Exporters strategic
orientation towards
3PL providers
3PL providers
H2
augmented
capability
Fig. 1. Research model.
Hypothesis 2. Exporters strategic orientation towards 3PL pro-
viders has a positive relationship with 3PL providers augmented
capability.
2.2.2. 3PL providers capabilities and exporters competitive
advantage
RBV suggests that a rm can create competitive advantage by
accessing the resources and capabilities of its suppliers. 3PL
providers have the expertise and resources to perform logistics
activities more efciently and effectively than an in-house team
(Yeung et al., 2006). They are effective in helping rms to improve
customer service, respond faster, and reduce overall logistics cost
(Boyson et al., 1999). Taking a strategic orientation towards 3PL
providers enables exporters to realize the full potential of their
value-added activities and gain signicant competitive advantage
over their competitors (Yeung et al., 2006).
As a basic capability, 3PL providers need to provide timely,
reliable, dependable, and satisfactory deliveries that an exporter
needs. A case study nds that traditional international transpor-
tation by consolidated freight takes 12 day on average. Successful
collaboration with global 3PL providers cuts the delivery lead
time to 2 day (Poirier and Reiter, 1996). Since rms can gain
competitive advantage from the delivery process, we formulate
the following hypothesis:
Hypothesis 3. 3PL providers basic capability has a positive
relationship with exporters competitive advantage.
Besides basic capability, augmented capability is important for
3PL providers to be competitive on the market and provide value
to their users. Service providers should not only be developing a
core service around which to build a customer relationship, but
also augmenting the core service with extra benets (Berry,
1995). Augmented products or services, which are beyond the
buyers expectations, can provide the following benets:
(1) higher customer loyalty, (2) higher customer willingness to
pay a premium price, and (3) a higher ability to meet customers
requests (cf. Stalk and Hout, 1990). Bustinza et al. (2010) state
that outsourcing encourages the development of resources that
enable the achievement of sustainable competitive advantages.
Therefore, we formulate the following hypothesis:
Hypothesis 4. 3PL providers augmented capability has a positive
relationship with exporters competitive advantage.
2.2.3. Exporters competitive advantage and export performance
RBV suggests that a rm possessing competitive advantage
can achieve superior business performance in the long run
H3
Exporters Exporters
competitive export
advantage performance
H5
H4
(McIvor, 2009). Kathuria (2000) nds that different groups of
manufacturers put an emphasis on different sets of competitive
priorities and, in turn, perform differently. Bustinza et al. (2010) nd
that a rms competitive capabilities have a positive impact on its
market share and sales growth. Guan and Ma (2003) nd that reliable
delivery and short lead-time are positively related to a rms export
performance. Thus, we formulate our nal hypothesis:
Hypothesis 5. Exporters competitive advantage has a positive
relationship with their export performance.
3. Methodology
The 3PL industry has expanded robustly in Hong Kong and the
PRD region in the Chinese mainland. According to Zhao et al.,
(2006), China is one of the largest manufacturing centers in the
world. It accounts for about 5% of the total world manufacturing
exports and 29% of the total growth in manufacturing output. The
Chinese 3PL market was expected to reach US$120.8 billion by
2010 (Trunick, 2005).
Since the late 1980s, PRD and Hong Kong have been the bridge
between the Chinese mainland and the outside world (Zhai et al.
2007). According to the Hong Kong Trade Development Council
(2010), PRD accounted for 9.5% of Chinas GDP and 27.1% of Chinas
total export in 2008. It is not only Chinas largest export base, but
also the largest and most sophisticated consumer market. Located
in the PRD region, Hong Kong is one of the busiest logistics hubs in
the world (Lai et al., 2004). Hong Kongs economy is export-
oriented with a small domestic market. Total merchandise trade
amounted to US$661 billion in 2009. In the import and export
trade sector, over 499,695 people are employed by more than
99,477 trading rms. This sector accounts for 21% of Hong Kongs
GDP in real terms. The Hong Kong government regards logistics as
a pillar industry to enhance Hong Kongs strategic competitiveness
(Hong Kong Trade Development Council, 2010).
3.1. Sample and data collection procedures
Before we sent out the survey questionnaires, we conducted a
pilot study with six rms, through which we veried the relevance of
the measurement indicators to their corresponding constructs, appro-
priateness of the questionnaire wording, and clarity of the instruc-
tions to ll in the survey. We then randomly selected 350 exporter
rms from the lists compiled by the Hong Kong Trade Development
Council (Hong Kong Trade Development Council, 2008). Through
 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753 745

multiple contacts (invitation letters and telephone calls), we managed operations management literature. The appendix shows the
to contact the logistics professionals (e.g., logistics managers) in a complete list of the survey questions. All the survey questions
total of 334 rms. We identied 272 rms that had had at least one use the seven-point Likert scale and were found to be the most
dedicated 3PL provider in the past two years prior to our survey. For relevant to the current Hong Kong and PRD contexts in the
each company, we invited its logistics professionals to answer the pilot study.
questions on the companys strategic orientation towards 3PL provi-
ders and the 3PL providers capabilities, and invited its senior 3.2.1. Exporters strategic orientation towards 3PL providers
executives to answer the questions on the companys competitive We dene exporters strategic orientation towards 3PL provi-
advantage and export performance. This helps alleviate single ders as the organizing arrangement that emerges when rms rely
respondent bias (Forza, 2002; Yee et al., 2008). on 3PL providers to provide specialized capabilities (cf. Holcomb
Because of company policies of not responding to surveys of and Hitt, 2007). Common reasons for partnership failures are:
this nature, condentiality of the information sought, or unavail- (1) uncertainty about providers service levels, (2) unrealistic
ability of logistics professionals or senior executives to answer the expectations, (3) lack of shared/clear goals, (4) poor communica-
related questions, we obtained 158 responses. We dropped eight tion (e.g., on scheduling deliveries), (5) lack of top management
responses because some data from either the logistics professionals support, and (6) lack of strategic direction (Lambert et al., 1999).
or senior executives were missing, leaving 150 usable returns, each We thus use a six-item scale to assess logistics professionals
containing two completed questionnaires, yielding an effective perceptions of their rms strategic orientation towards its 3PL
response rate of 55.1% (150 out of 272 sent out). Our response providers.
rate was general higher than those of previous studies as we had
identied the appropriate logistics professionals before sending out
3.2.2. 3PL providers basic capability
the questionnaires and we could follow up directly with them to
This scale assesses the extent to which 3PL providers are able
do the survey. We assessed the non-response bias by performing a
to provide routine or standard services to exporters (cf. Bask,
series of t-tests on the responses between the early and late
2001). 3PL providers that focus on providing standard services
respondents (Armstrong and Overton, 1977). The results show no
tend to create value through operational efciency (Berglund
statistically signicant differences between the early responses and
et al., 1999) but 70% of China-based 3PL providers report declin-
late responses, suggesting that non-response bias was not an issue
ing operational efciency (Zhou et al., 2008). Logistics partnership
in our study. Table 1 shows the sample prole.
is doomed to fail due to 3PL providers poor operational efciency
such as: (1) failure to respond, (2) deliberate attempts to sabo-
3.2. Variable measures tage, (3) under-delivering, and (4) over-promising (Lambert et al.,
1999). Several extant studies have measured these 3PL routine
We adapt the measures used in this study from well-estab- services. For example, all the four items used in this study are
lished instruments in the supply chain management and used in Yeung (2006). To be qualied as an acceptable 3PL
provider, the 3PL provider needs to at least provide timely and
Table 1 reliable deliveries while providing satisfactory services. The four
Sample prole. items measured in this study are the basic capabilities that 3PL
providers need in order to stay in the provider market. Consistent
Company characteristics Frequency Percentage
(n150)
with previous studies, we therefore choose the four items in the
appendix to assess logistics professionals perceptions of their 3PL
Number of employees providers basic capability (Lai et al., 2004; Stank et al., 2003;
Less than 50 83 55.3 Yeung, 2006).
50200 21 14.0
201500 9 6.0
5011000 16 10.7 3.2.3. 3PL providers augmented capability
10012000 8 5.3 Whyte (1993) nds that a 3PL providers ability to provide creative
20015000 8 5.3
solutions and willingness to help are more important than basic
Over 5000 3 2.0
Missing 2 1.4 capability. We believe 3PLs creative solutions are rare, valuable,
inimitable, and non-substitutable to the exporters (Barney, 1991;
Nature of business
Manufacturing 66 44.0
Chen et al., 2010). It helps 3PL providers to distinguish themselves
Trading 75 50.0 from their competitors. Drawing on RBV that 3PL provider should be
Both 8 5.3 able to integrate, build, and recongure resources (Sirmon et al.,
Missing 1 0.7 2007; Teece et al., 1997), a 3PL provider should create value by
Kind of products exporting system integration (Berglund et al., 1999) and provide a one-stop
Electrical machinery and metallic products 17 11.3 web-site for offering logistics services (Marasco, 2008; Murphy and
Electronic goods and components 35 23.3 Daley, 2001). Therefore, we adapt four items from Stank et al. (2003)
Watches and clocks 6 4.0
Jewelry and precious articles 9 6.0
and Wong and Karia (2009) to measure four aspects of augmented
Articles of apparel and clothing accessories 19 12.7 capabilityproviding creative solutions, willing to help, ability to
Toys, games, and sporting goods 13 8.7 build, and integrating information technologies. We use this four-
Footwear 4 2.7 item scale to assess logistics professionals perceptions of their 3PL
Plastic products 8 5.3
providers augmented capability (i.e., the ability of 3PL providers to
Optical products 6 4.0
Gifts and premium 26 17.3 acquire and exploit knowledge, relational, and technology/informa-
Others 7 4.7 tion resources to win and secure contracts).
Modes of transport on average (multiple responses
were allowed) 3.2.4. Exporters competitive advantage
Sea 142 94.7 Firms with different levels of competence or competitive
Air 143 95.3
Land 4 2.7
priorities can be linked to competitive advantage (Ferdows and
De Meyer, 1990; Peteraf, 1993; Skinner, 1966). According to
746 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753

Lambert et al. (1999), the 3PL user indicates that partnership can The cross-factor level EFA resulted in ve eigenvalues that were
create a denite long-term competitive advantage if the 3PL greater than 1. The scree test suggested that ve factors were
provider can provide: (1) exibility, (2) on-time delivery and appropriate as the difference between the fth largest eigenvalue
unloading, and (3) lower per unit cost of delivery. Therefore, we (1.168) and the sixth largest eigenvalue (0.734) was signicant. The
extract items from Michigan State Universitys Global Logistics total variance explained by the ve factors was 69.4%. Table 3 shows
Research Team (1995) to measure three aspects of competitive that each item was well loaded on a single construct (Jambulingam
advantageexibility, delivery, quality, and cost. We use this et al., 2005; Kathuria, 2000). Therefore, the factors extracted from
three-item scale to assess senior executives perceptions of their EFA represent their corresponding items well, and are therefore
rms competitive advantage (i.e., the ability of the exporter in unidimensional.
acquiring and exploiting resources to improve its internal com- Table 4 shows the correlations of the indicators. According to
petitive priorities.). This measure has been found reliable in the Kline (1998), inspection of the correlation matrix shows only
past (Chen et al., 2010 [alpha 0.878]; Fawcett et al., 1997 bivariate multicollinearity, whereas inspection of the variance
[alpha0.90]). ination factor (VIF) reveals multivariate multicollinearity. When
VIF is 4 or above, there is high multivariate multicollinearity and
3.2.5. Exporters export performance
It is imperative to measure an exporters export performance Table 3
Exploratory factor analysis of the constructs.
in comparison with its global competitors. A subjective measure
is acceptable because it can eliminate the impact of the char- Factor loading
acteristics of other exporters, like size and product lines, from the
analysis (Madsen, 1989). Previous studies have used export sales, Itema 3PL 3PL Exporters Exporters Exporters
providers providers strategic competitive export
market share, and protability to assess export performance (e.g.,
basic augmented orientation advantage performance
Guan and Ma, 2003; Nyaga et al., 2010; Yeung et al., 2005). So we capability capability towards 3PL
use a three-item scale adapted from Nyaga et al. (2010) and providers
Yeung (2006) to assess senior executives perceptions of their
rms export sales and growth, relative shares in the target BC1 0.761 0.248 0.121 0.113 0.048
BC2 0.772 0.245 0.025 0.199 0.072
markets, and export protability in comparison with their major BC3 0.780 0.062 0.250 0.088  0.046
competitors. BC4 0.818 0.122 0.157 0.056  0.048
We apply a rigorous process to develop and validate the survey AC1 0.333 0.767 0.091 0.091 0.093
instrument. Adopting a two-step method to test construct relia- AC2 0.240 0.821 0.127 0.156 0.096
AC3 0.219 0.673 0.252 0.291  0.002
bility (Narasimhan and Jayaram, 1998), we rst use Cronbachs
AC4 0.010 0.713 0.202 0.172  0.056
alphas and the corrected item-total correlation (CITC) reliability SO1 0.132 0.252 0.762 0.122 0.048
test to assess their reliability, then use the exploratory factor SO2 0.029 0.207 0.767 0.143 0.118
analysis (EFA) to cross-check the unidimensionality of the con- SO3 0.086 0.177 0.806 0.116 0.112
structs. Table 2 shows that all the measures had a Cronbachs SO4 0.050 0.266 0.763  0.087 0.077
SO5 0.182 0.003 0.719 0.227  0.083
alpha of 0.7 or above (Nunnally and Bernstein, 1994). All the CITC SO6 0.271  0.135 0.660 0.196  0.036
values were larger than 0.4, higher than the minimum acceptable CA1 0.254 0.170 0.121 0.732 0.079
value of 0.30 (Kerlinger, 1986). Based on Cronbachs alpha values CA2 0.199 0.169 0.221 0.732  0.072
and the CITC values, we conclude that the scales are reliable. CA3  0.024 0.233 0.154 0.699 0.183
EP1  0.033 0.012 0.093 0.088 0.923
We conduct the EFA at the cross-factor level. We perform the
EP2  0.007 0.004 0.070 0.020 0.919
principal component analysis with varimax rotation with Kaiser EP3 0.055 0.076 0.003 0.054 0.905
normalization on all the measurement items to determine the main
constructs and their related measurement items (Loehlin, 1998). a
See the appendix for the survey questions of the measurement items.

Table 2
Results of measurement validation.

Scale name Variable name CITC Factor loading Scale statistics

Strategic orientation towards 3PL providers SO1 0.72 0.82 Cronbachs alpha: 0.87
SO2 0.70 0.80 Largest eigenvalue (variance explained): 3.66 (61%)
SO3 0.75 0.85 Second largest eigenvalue (variance explained): 0.74 (12%)
SO4 0.67 0.78
SO5 0.64 0.76
SO6 0.56 0.68

3PL providers basic capability BC1 0.69 0.83 Cronbachs alpha: 0.84
BC2 0.68 0.83 Largest eigenvalue (variance explained): 2.58 (65%)
BC3 0.66 0.77 Second largest eigenvalue (variance explained): 0.64 (16%)
BC4 0.71 0.80
3PL providers augmented capability AC1 0.68 0.84 Cronbachs alpha: 0.83
AC2 0.75 0.88 Largest eigenvalue (variance explained): 2.68 (67%)
AC3 0.67 0.82 Second largest eigenvalue (variance explained): 0.66 (16%)
AC4 0.56 0.74

Exporters competitive advantage CA1 0.54 0.81 Cronbachs alpha: 0.70

CA2 0.53 0.81 Largest eigenvalue (variance explained): 1.87 (62%)
CA3 0.47 0.75 Second largest eigenvalue (variance explained): 0.63 (21%)

Exporters export performance EP1 0.85 0.94 Cronbachs alpha: 0.91

EP2 0.83 0.92 Largest eigenvalue (variance explained): 2.56 (85%)
EP3 0.80 0.91 Second largest eigenvalue (variance explained): 0.26 (9%)
 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753 747

the beta coefcients will not be stable. All the VIF values in this
20

1
study were smaller than 4, which is the common cut-off criterion,

0.547nn
indicating no multicollinearity problem or serious threat to the
study, so we do not report them.
19

1
0.489nn
0.381nn
4. Data analysis and results
18

1
0.641nn
0.491nn
0.450nn
4.1. Measurement model results
17

1
We take Anderson and Gerbings (1988) two-step approach to

0.693nn
0.525nn
0.481nn
0.438nn
estimate a measurement model prior to creating a structural

model. To test the t of the models, we use LISREL 8.5 (Joreskog
16

1

and Sorbom, 2001) to perform SEM based on the maximum

0.591nn

0.579nn
0.558nn
0.448nn
0.620nn
likelihood methods, with the correlation matrix of the indicators
as input. In what follows, we present the results of the measure-
15

1
ment model analysis, structural model analysis, and hypothesis

 0.03
0.071
0.105
0.093

0.029
0.12 testing.
14

We test the construct convergent and discriminant validity

1

using the method outlined in Fornell and Larcker (1981) and Chau
0.748nn

0.171n
0.137
0.122
0.074

0.004

(1997). For the convergent validity test, we link each item to

0.02
13

its corresponding construct and estimate the covariance among

1

the constructs freely. Conrmatory factor analysis (CFA)

0.781nn
0.810nn

0.163n
0.175n
0.184n

yielded w2160,N 139 229:58, w2/df 1.43, non-normed t index

0.091
0.021
0.019
12

(NNFI)0.93, comparative t index (CFI)0.94, and root mean

1

squared error of approximation (RMSEA) 0.056. The w2 =df is a t

0.218nn

0.243nn
0.327nn
0.312nn

0.213nn
0.166n
0.177n

0.161n

index that weights the w2 statistics by the degree of freedom,

0.141
11

where a value of 1.43 suggests a good t to the model (Hu and

1

Bentler, 1999). All the absolute goodness of t values were well

0.398nn

0.319nn
0.296nn
0.266nn
0.253nn
0.295nn
0.303nn
 0.02
0.026

0.033

above 0.90, which suggests a good t between the implied

10

covariance in the model and the observed covariance from the

1

data. The comparative t measures were also well above the

0.496nn
0.411nn

0.213nn
0.275nn

0.366nn
0.310nn
0.132

0.138

0.139
0.098

thresholds, providing evidence against the null hypothesis. All

0.13

these measures suggest that the measurement model has a good

9

t. Besides, all the constructs had eigenvalues exceeding 1.0. All

0.294nn
0.243nn

0.321nn

0.273nn
0.267nn
0.260nn

0.305nn

0.240nn
0.043
0.012

0.093

the factor loadings exceeded the minimum value of 0.30 and were
0.01

signicant at p o0.001. Both provide further evidence of con-

8

vergent validity of the constructs (Hair et al., 1995; Reines-Eudy,

0.553nn
0.363nn
0.444nn
0.328nn

0.418nn

0.365nn
0.311nn
0.238nn
0.278nn
0.340nn
0.066

0.096

2000).
0.04

We test discriminant validity by xing the correlation between

7

any pair of related constructs at 1.0, prior to reestimating the

0.592nn
0.499nn
0.361nn
0.313nn
0.321nn

0.315nn
0.285nn
0.296nn
0.370nn

0.195n
0.190n
0.089
0.085

0.108

modied model (Chau, 1997; Li et al., 2007). A signicant

difference in the chi-square statistics between the xed and
6

unconstrained models indicates high discriminant validity. For

0.746nn
0.546nn
0.413nn

0.249nn

0.315nn
0.232nn
0.265nn
0.277nn
0.306nn

0.320nn

0.186n
0.153

0.133
0.086
0.081

the ve constructs, we conducted a total of 10 different discrimi-

5

nant validity checks. By xing the correlation between any pair of

related constructs in the measurement model to the perfect
 0.022
 0.045
 0.001
0.327nn
0.299nn
0.338nn

0.334nn

0.299nn
0.213nn
0.218nn

0.224nn
0.240nn
0.179n

0.181n
0.200n
0.123

correlation of 1.0, the chi-square values increased from 35.47 to

682.39 (see Table 5). With an increase in one degree of freedom,
4

Correlation is signicant at the 0.01 level (2-tailed).

Correlation is signicant at the 0.05 level (2-tailed).

these chi-square values were highly signicant at p 0.01

 0.022
 0.029
0.685nn
0.323nn
0.277nn
0.329nn

0.267nn

0.337nn
0.261nn

0.267nn
0.336nn
0.308nn
0.300nn

0.178n
0.158

0.131

(Dw2 Z6.635). Therefore, discriminant validity was achieved.

0.019
3

4.2. Structural model results and hypotheses testing

0.495nn
0.555nn
0.461nn
0.437nn
0.352nn
0.222nn
0.329nn
0.351nn

0.221nn
0.287nn
0.199n

0.196n
0.128
0.141
0.151

0.137
0.041
0.067
2

We use a number of t statistics to evaluate the model because

no single measure is adequate (Shah and Goldstein, 2006).
0.663nn
0.516nn

0.433nn
0.366nn
0.359nn
0.258nn
0.315nn
0.328nn

0.267nn

0.248nn
0.262nn
0.228nn
0.560nn

0.220nn
0.188n
0.159
0.038
0.063
0.082

Browne and Cudeck (1993) recommend that an absolute RMSEA

Correlations of the indicators.

value of less than 0.08 indicates a reasonable t. The RMSEA

measures the sample discrepancy function value per degree of
11. Total costs incurred
9. Customized services
8. Provide automation

16. Meet to cooperate

10. Arrive completely
4. Perform accurately

6. Improve efciency

15. Review regularly

19. Important in top

freedom. Other t indices include non-normed t index (NNFI)

5. Creative solutions
3. Reliable delivery

18. Share schedule

7. Provide package
1. Respond timely
2. Complete close

and comparative t index (CFI) (Shah and Goldstein, 2006). Hair

17. Discuss goals
13. Market share

20. Long relation

14. Export prot
12. Export sales

et al. (1995) suggest that the model t is good if NNFI and CFI are
above 0.9.
Table 6 shows the goodness-of-t statistics for our hypothe-
Table 4

Items

nn

sized models. The overall t of our structural model was good:

n

w2165,N 139 263, w2/df1.59, RMSEA 0.062, NNFI0.92, and

748 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753

Table 5
Discriminant validity: chi-square differences between constrained and unconstrained models.

AC SO EP CA

3PL providers basic capability (BC) 157.38 195.52 241.48 51.12

3PL providers augmented capability (AC) 200.31 241.04 35.47
Strategic orientation towards 3PL providers (SO) 682.39 43.42
Exporters export performance (EP) 61.71
Exporters competitive advantage (CA)

All chi-square differences are different at the 0.05 level.

Table 6 Table 7
Fit measures of the overall model. Estimations of the measurement model parameters in Fig. 2.

Goodness of t measures Criteria Baseline Alternative Scale name Effect Path coefcient estimate
model model indicator (t-value)

Absolute t measure Strategic orientation towards 3PL SO1 0.78 (10.56)

Chi-square (w2) of estimated model 263 262 providers
Degree of freedom (df) 165 164 SO2 0.79 (10.72)
Chi-square/degree of freedom (w2/df) [1, 3] 1.59 1.60 SO3 0.82 (11.28)
Root mean squared error of r 0.08 0.062 0.062 SO4 0.74 (9.70)
approximation (RMSEA) SO5 0.67 (8.57)
SO6 0.60 (7.35)
Comparative t measures
Non-normed t index (NNFI) Z 0.90 0.92 0.92 3PL providers basic capability BC1 0.71
Comparative t index (CFI) Z 0.90 0.93 0.93 BC2 0.69 (7.17)
BC3 0.77 (7.88)
BC4 0.80 (8.08)
CFI0.93. All t statistics were within the desirable ranges. We 3PL providers augmented AC1 0.78
test the hypothesized relationships using their associated capability
t-statistics. t-values 41.98 and 1.645 are considered to be AC2 0.86 (9.89)
AC3 0.74 (8.66)
signicant at the 0.05 and 0.10 levels, respectively (Hair et al., AC4 0.65 (7.48)
1995). The Q-plot for the structural model was approximately
Exporters competitive advantage CA1 0.70
linear with a slope near 1, conrming that no major misspecica-
CA2 0.64 (5.50)
tions had been made (Bagozzi and Yi, 1988; Bentler, 1990). Fig. 2 CA3 0.59 (5.28)
shows the path estimates of the hypothesized model.
Exporters export performance EP1 0.93
However, Bentler and Chou (1987) point out that in an ideal EP2 0.87 (14.64)
situation, a researcher should build and compare a series of sub- EP3 0.85 (13.94)
models that shed light on the key features of a general model. If
the models are a t, then the most parsimonious model is chosen
because it represents the theory better. Penrose (1959) suggests 3PL providers to 3PL providers augmented capability was statis-
that possession of resources alone cannot create competitive tically signicant and in the expected direction (b 0.50;
advantage unless the rm can deploy them effectively. We po0.05). However, Hypothesis 3 proposing a relationship
therefore posit that, without deploying 3PL providers basic and between 3PL providers basic capability and exporters competi-
augmented capabilities, exporters strategic orientation towards tive advantage was only marginally signicant (b0.20; p o0.10),
3PL providers cannot create competitive advantage. Therefore, although the sign of the coefcient was in the expected direction.
there is no direct path from exporters strategic orientation Hypothesis 4 proposing a relationship between 3PL providers
towards 3PL providers to exporters competitive advantage. augmented capability and exporters competitive advantage was
In the alternative model, we set a path between exporters supported (b0.53; p o0.05). Finally, Hypothesis 5 linking expor-
strategic orientation towards 3PL providers and exporters export ters competitive advantage to their own export performance was
performance. Fig. 3 shows the alternative model. The original statistically signicant and in the expected direction (b0.23;
baseline model is nested within the alternative model in this po0.05).
study (Widaman and Thompson, 2003). The goodness-of-t
statistics for our alternative model were good but the w2 differ- 4.3. Results of mediating effects testing
ence was insignicant (Dw2 1, p40.05) in Table 6. Also the
path coefcient of the alternative model conrms that the path Baron and Kenny (1986) point out that correlation is not
from exporters strategic orientation towards 3PL providers to sufcient to determine mediation. The mediation effects can be
exporters export performance is insignicant. Therefore, we conrmed by Sobels (1982) asymptotic z test. Mediation occurs
choose the original baseline model, which is the most parsimo- when there is a reduction in the effect of the initial variable on the
nious. Table 7 shows the hypothesized model and the path outcome after controlling for the mediator (indirect effect). An
coefcient estimates. Fig. 2 and Table 8 show that four out of indirect effect of a variable x on a variable z through a variable y
ve of the hypothesized relationships were found to be signicant can be expressed as ab, with a being the effect of x on y and b
at the 0.05 level and one relationship was signicant at the 0.10 being the effect of y on z. The Sobel test provides a z statistic for
level. this indirect effect by dividing the product of the regression
Hypothesis 1 linking exporters strategic orientation towards weights a and b by its estimated standard error, the square root
2
3PL providers to 3PL providers basic capability was statistically of b SE2a a2 SE2b . The Sobel test reveals signicant indirect
signicant and in the expected direction (b 0.44; p o0.05). effects if the p value is smaller than 0.05. The Sobel (1982) test
Hypothesis 2 linking exporters strategic orientation towards statistic was calculated for each path to determine the following:
 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753 749

3PL providers
basic capability

Exporters Exporters
Exporters strategic 0.44** 0.20*
(t = 4.37) (t = 1.94) competitive export
orientation towards advantage performance
3PL providers
0.23**
(t = 2.22)

3PL providers 0.53**

0.50** (t = 4.56)
(t = 5.18) augmented
capability

**p <0.05 *p <0.10

Fig. 2. Hypothesized model and its path estimates.

3PL providers
basic capability

Exporters
Exporters strategic competitive
orientation towards advantage
3PL providers

Exporters
3PL providers export
augmented performance
capability

Fig. 3. Alternative model.

Table 8 export performance. The results of the mediation analyses are

Summary of statistical tests of the hypotheses in Fig. 2. presented in Table 9.
Comparing Fig. 2 and Table 9, it is apparent that exporters
Paths in the structural model Point t-Value
strategic orientation towards 3PL providers is positively but
estimate
indirectly related to their export performance. 3PL providers
Strategic orientation towards 3PL providers-3PL 0.44 4.37nn basic capability is a weak mediator of this relationship. Their p
providers basic capability (H1) values were 0.069 and 0.148, respectively. The rst major media-
Strategic orientation towards 3PL providers-3PL 0.50 5.18nn tion process involves 3PL providers augmented capability as a
providers augmented capability (H2)
very strong mediator of exporters strategic orientation towards
3PL providers basic capability-exporters 0.20 1.94n
competitive advantage (H3) 3PL providers on exporters competitive advantage. The p value
3PL providers augmented capability-exporters 0.53 4.56nn was smaller than 0.001. In other words, exporters strategic
competitive advantage (H4) orientation towards 3PL providers could enhance 3PL providers
Exporters competitive advantage-exporters 0.23 2.22nn
augmented capability, which, in turn, could improve exporters
export performance (H5)
competitive advantage. This is consistent with prior studies.
n
Signicant at po 0.1 level. Intangible resources such as knowledge, relational, and informa-
nn
Signicant at p o 0.05 level. tion resources are not only valuable and rare, but also difcult to
imitate and substitute, so they confer competitive advantage
(cf. Li, 2011; Wong and Karia, 2009).
(1) which 3PL providers capability, basic and/or augmented, A second major mediation process involves exporters competi-
mediates the relationships between exporters strategic orienta- tive advantage as a strong mediator of 3PL providers augmented
tion towards 3PL providers and exporters competitive advantage capability on exporters export performance. The p value was 0.059.
and (2) whether exporters competitive advantage mediates the The results indicate that 3PL providers augmented capability could
relationship between 3PL providers capabilities and exporters enhance exporters competitive advantage, which, in turn, could
750 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753

Table 9
Test of hypothesized mediation effects (N 150).

Path-a Beta Path-b Beta Indirect SEa SEb SEa  b Z p-Value

effect

Exporters strategic orientation towards 3PL 0.44 3PL providers basic capability- 0.2 0.088 0.1 0.1 0.048 1.82 0.069
providers-3PL providers basic capability exporters competitive advantage
Exporters strategic orientation towards 3PL 0.5 3PL providers augmented capability- 0.53 0.265 0.09 0.12 0.079 3.35 0.001
providers-3PL providers augmented capability exporters competitive advantage
3PL providers basic capability-exporters 0.2 Exporters competitive advantage-exporters 0.23 0.046 0.1 0.11 0.032 1.45 0.148
competitive advantage export performance
3PL providers augmented capability-exporters 0.53 Exporters competitive advantage-exporters 0.23 0.122 0.12 0.11 0.065 1.89 0.059
competitive advantage export performance

improve exporters export performance. This is consistent with
Bustinza et al.s (2010) model. The ndings demonstrate the
mediation effects (to some extent) of 3PL providers augmented
capability and exporters competitive advantage on this relationship.
A prior study states that 50% of the articles that attempted to test
the RBV theory provided insignicant support for the theory. Many
of them focus only on the characteristics of the resources, not the
exploitation of the resources (Newbert, 2007). To ll in this research
gap, the present study contributes by providing compelling support
for RBV by unveiling the underlying mechanism that forges the
relationship between exporters strategic orientation towards 3PL
providers and export performance.
5. Discussion and conclusions
A major concern of RBV is how a rm develops its resources to
craft its competitive position, which, in turn, affects its performance
(McIvor, 2009). Drawing on RBV, we use SEM fed with data from 150
exporters in Hong Kong and PRD region to analyze the relationships
among exporters strategic orientation towards 3PL providers, 3PL
providers capabilities, exporters competitive advantage, and expor-
ters export performance. The SEM results show that (1) exporters
strategic orientation towards 3PL providers has signicant positive
relationships with both 3PL providers basic capability and augmen-
ted capability, (2) only 3PL providers augmented capability has a
signicant positive relationship with exporters competitive advan-
tage, and (3) exporters competitive advantage has a signicant
positive relationship with their own export performance.
Comparing the path coefcients in the structural equation model,
we see that the path coefcient between 3PL providers augmented
capability and exporters competitive advantage was the largest. The
path coefcient between 3PL providers basic capability and expor-
ters competitive advantage was the smallest. The ndings are
consistent with prior studies. According to Hill (2000), 3PL providers
basic and augmented capabilities can be viewed as the order
qualier and order winner for 3PL providers, respectively. Augmen-
ted capability is more important than basic capability because the
latter is necessary but not sufcient for sustaining long-term
relationships. The basic capability is reliable and timely delivery,
which is a necessary function that 3PL providers need to provide to
exporters. The augmented capability enhances the basic capability
by providing additional value-added services.
Our analysis shows that the mean scores of the four basic
capability survey questions were quite high while their standard
deviations were quite low. This means that the variance of 3PL
providers basic capability was relatively small. When 3PL provi-
ders perform at about the same level of basic capability, the
importance of 3PL providers augmented capability to exporters
becomes signicant. The appendix shows that (1) the mean scores
of the four augmented capability questions (ranging between 3.92
and 4.31) were lower than those of basic capability (ranging
between 4.70 and 4.98) and (2) the standard deviations of the
augmented capability questions (ranging between 1.18 and 1.26)
were higher than those of the basic capability questions (ranging
between 0.95 and 1.11).
These data show that (1) the overall level of 3PL providers
augmented capability is lower than that of their basic capability
and (2) the variability of 3PL providers augmented capability is
much larger than that of their basic capability. Therefore, caution
should be exercised when interpreting the relative importance of
basic capability and augmented capability. Our results do not
necessarily suggest that augmented capability is more important
than basic capability. The results in this study only suggest that
3PL providers augmented capability has a signicant positive
relationship with exporters competitive advantage when the
difference in 3PL providers basic capability is small. It is likely
that 3PL providers need to build up their basic capability rst and
then develop their augmented capability.
Our ndings bear some theoretical implications and answer the
calls from researchers to ground theoretical concepts within practice
frameworks (Holcomb and Hitt, 2007; Selviaridis and Spring, 2007).
RBV theorists propose that rms can create competitive advantage
by sharing and deploying rare resources with partners to improve
performance, but little has been done to examine the capabilities
and the underlying mechanism (Coates and McDermott, 2002).
Although the core capability concept is well documented in other
elds such as strategic management (Yang et al., 2009) and market-
ing (e.g., Srivastava et al., 2001), this study plugs a gap in the OM
literature, particularly in the context of the export sector.
If an exporter is strategically oriented towards its 3PL providers,
both parties will meet and share information. 3PL providers can learn
from their strategic relationships with users to deploy resources
better and improve their basic and augmented capabilities. 3PL
providers augmented capability will enhance exporters competitive
advantage. By improving its competitive advantage, an exporter can
improve its export performance, in terms of sales and growth, market
share, and protability. This indirect effect has been conrmed by
alternative model analysis and mediation test in this study, and
therefore, supports RBV theory. Lambert et al. (1999) advocate that
partnership studies would benet from research designs aimed at
identication and explication of integrative processes that serve to
bond partners and strengthen inter-organizational relationships.
Our ndings also bear some practical implications. Lambert
et al. (1999) comment that this is a good partnership if both
people are winning and both sides are getting what they want.
For 3PL providers, the results of this study provide evidence that
they can improve their basic and augmented capability via
collaborating with exporters. Their augmented capability plays
an important mediating role in the effect of exporters strategic
orientation towards 3PL providers on the exporters competitive
advantage. However, only 20% of China-based 3PL providers
report that they currently offer value-added services (Chen
et al., 2010). Basic capability is only regarded as an order qualier,
not an order winner (Stank et al., 2003). Therefore, 3PL providers
should have more customized offerings. They should put a greater
 K. Yeung et al. / Int. J. Production Economics 135 (2012) 741753 751

Table A1
Survey questions and descriptive statistics.

Survey question Mean S.D.

How do you manage/coordinate with your 3PL provider? (1 strongly disagree, 7 strongly agree)
SO1. We review regularly our 3PL providers service capability 4.54 1.22
SO2. We regularly meet our 3PL provider to review and improve our cooperation 4.07 1.46
SO3. We discuss regularly with our 3PL provider on the methods of ensuring that performance goals are being met 4.01 1.49
SO4. We share our future delivery schedule with our 3PL provider 4.14 1.44
SO5. Logistics performance of 3PL providers is considered important in most top management 4.59 1.24
SO6. We expect our relationship with this 3PL provider will last for a long time 4.98 1.25

About the performance of 3PL provider used by the company, please rate the performance of your companys major 3PL provider (1 poor, 7 excellent)
BC1. Respond timely and accurately on issues 4.74 1.11
BC2. Bring service issues to a complete and satisfactory close 4.70 1.07
BC3. Provide on time and reliable deliveries 4.98 1.01
BC4. Perform promised service with dependability and accurately 4.91 0.95

About the performance of 3PL provider used by the company, please rate the performance of your companys major 3PL provider (1 poor, 7 excellent)
AC1. Explore and provide creative solutions 4.13 1.18
AC2. Help customer improve operations efciency 4.09 1.21
AC3. Provide total package one-stop service 4.31 1.18
AC4. Provide automation and advance information technology service 3.92 1.26

Please indicate the competitive advantage of your company in comparison with industrial norms and major competitors (1 much worst, 7 much better)
CA1. Ability to accommodate customized services to customers 4.83 0.99
CA2. Customers orders arrive completely on time and in good condition 5.05 1.05
CA3. Total costs incurred in delivering goods to customers 4.52 1.00

Please indicate the export performance of your company in comparison with major competitors (1much better, 7 much worst)
EP1a. Export sales and growth performance 4.21 1.31
EP2a. Market shares in target oversea markets 4.23 1.23
EP3a. Perception of export protability 4.20 1.23

a
EP1, EP2, and EP3 are reversely coded.

emphasis on acquiring and exploiting knowledge, as well as
relational and information resources, in order to win contracts
and secure continuity of the contracts.
For exporters, senior executives should be committed to collabor-
ating with their 3PL providers that have superior logistics expertise
and resources on a long-term basis in order to gain competitive
advantage. They should meet regularly to share related information
and work together to improve logistics operations in a proactive and
non-adversarial manner. It is the better use of resources that creates
competitive advantage, not the resources themselves. Strategically
oriented towards 3PL providers, exporters can enhance their compe-
titive advantage (internal competitive priorities), which, in turn,
improves their export performance (Coates and McDermott, 2002;
Penrose, 1959). Therefore, we posit that many 3PL relationships fail
due to incompatibility of partners. Collaborating with the right 3PL
providers that can acquire and exploit knowledge, relational, and
information resources determines whether the exporters can succeed.
This paper contributes to an area of logistics research that has
received very little attention or that has been undervalued
(Bustinza et al., 2010; Buyukozkan et al., 2008).
While the ndings of this study are representative of 3PL
providers and exporters in the PRD region, the conclusions are
not readily generalized to other contexts such as Europe or the
U.S.A. Another limitation is that we examined only a particular
period of the 3PL providerexporter relationship. A longitudinal
study of the 3PL providerexporter relationship may provide more
insights on how the relationship develops and its effects on non-
nancial rm performance such as customer service. We used only
four items to measure resources. More items should be operatio-
nalized to manifest resources in more detail in future studies.
Acknowledgments
We thank the anonymous referees for their many helpful
comments on an earlier version of our paper. This paper was
supported in part by the Hong Kong Polytechnic University under
Grant number J-BB7K.
Appendix
See Table A1.
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