An empirical test of the materials supply strategy construct with application to the U.S. railroad crosstie industry

Materials supply strategy in the domestic railroad industry was modeled using a post-test-only control group field experiment. A pre-defined set of product price increase scenarios was presented to experimental groups made up of key railroad industry executives with responsibility for the crosstie purchase decision. The theoretical construct was operationalized using a 20-variable measure developed by the authors. Principal components analysis was used to test the validity of the construct and to compare the experimental groups along four theoretical dimensions of materials supply strategy: 1) improvements in procedural efficiencies; 2) product life-cycle extension; 3) product substitution; and 4) product and process innovation. The reliability of the scales used to measure the individual factors was analyzed using Cronbach’s alpha. Alpha values ranged from 0.74 to 0.85, indicating sufficient internal reliability. The four factors explained 67.7 percent of the total variance in the materials supply strategy model. Case values were standardized and the variables comprising each factor were pooled to generate group mean importance scores for each factor. The product substitution dimension exhibited a highly significant difference in importance between the control group and the 30 percent price increase group and between the control group and the 45 percent price increase group. On a post hoc basis, the smallest railroad firms intended to place less emphasis on substitution and innovation activities than the largest firms in the sample. Overall, intended materials supply strategy was identified as a serious threat to hardwood crosstie market share under scenarios of real price increases greater than the historical benchmark.

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