Replication as a strategy in capital intensive industries

Abstract

Researchers describing replication strategies have proposed theoretical constructs that are positively associated with successful replication. In a rigorous quantitative exploration of replication in capital intensive industries, this study is the first of its kind and seeks to prove the applicability of the theoretical frameworks. Responses to questionnaires sent to petrochemical refining sites, coupled with an independent performance metric (the Solomon Associates Comparative Performance Assessment Index) were used to model the impact of replication practices on site performance. This model is used to show that firms attempting to centrally define an Arrow Core suffer a performance penalty. Furthermore, the model shows that a clear differentiation between the phases of exploration and exploitation is not a requirement for successful replication in capital intensive industries. The model helps to explain why barriers exist preventing the conceptualisation of the core capabilities within capital intensive industries; why companies seeking to locally control deleterious practices are negatively impacted compared to those implementing centralised mechanisms; and why the effective use of a template yields a performance advantage even in the absence of a well defined Arrow Core. The analysis also suggests appropriate practices for managers seeking to expand in capital intensive sectors.