Professional Documents
Culture Documents
Khan2020 Chapter InfluenceOfSupplyChainManageme
Khan2020 Chapter InfluenceOfSupplyChainManageme
net/publication/340677439
CITATIONS READS
2 1,175
4 authors:
Some of the authors of this publication are also working on these related projects:
Empirische Untersuchung aktueller und zukünftiger Nutzungsgrade mobiler Computersysteme zur Unterstützung älterer Arbeitnehmer in Produktion und Logistik
(EUNA) View project
All content following this page was uploaded by Ayesha Khan on 23 April 2020.
Abstract. China Pakistan Economic Corridor (CPEC) is one of the six corri-
dors of China’s Belt and Road Initiative (BRI) and it consists of several
infrastructural, logistics, energy, transportation and port related projects. This
paper relies on survey data from 270 respondents working in different industries
in Pakistan. Structural Equation Modeling (SEM) is applied to analyze the
pertaining hypotheses. First, a measurement model is conducted by Confirma-
tory Factor Analysis (CFA) and then a structural model is estimated to test the
hypotheses and model fit. The results show that despite the popular belief that
Pakistan’s domestic industry will expand with progress in projects of CPEC,
there is also a valid concern that the CPEC might present more opportunities to
China than to Pakistan, especially in terms of employment opportunities. The
government of Pakistan needs to consolidate this concern in future policy
designs and also work on some external factors such as poor governance and
corruption.
1 Introduction
© The Editor(s) (if applicable) and The Author(s), under exclusive license
to Springer Nature Switzerland AG 2020
M. Freitag et al. (Eds.): LDIC 2020, LNLO, pp. 175–185, 2020.
https://doi.org/10.1007/978-3-030-44783-0_17
176 A. Khan et al.
local industrial development indirectly. Considering all these factors, five hypotheses
are developed. This research examines a relatively new research question which has
been emerged after CPEC.
The aim is to know the influence of China’s advances in logistics and supply chain
management practices on the domestic industry of Pakistan in the wake of the CPEC
through a survey study. With this aim in mind, we applied Structural Equation
Modeling (SEM) on the survey data which was collected from persons working in
different industries in Pakistan. The analysis was conducted by Confirmatory Factor
Analysis (CFA) and then a structural model is estimated to test the hypotheses and
model fit.
2 Model Development
CPEC and its effects on the domestic market in Pakistan can be studied through
analyzing several variables such as its impact on Logistics & Supply Chain,
Employment & Labor, Innovation & Technology, International Trade, Foreign Direct
Investment, and Sustainability. These variables collectively represent CPEC in terms of
the domestic market as CPEC will affect these sectors through different infrastructural
projects. These variables are perceived in post-CPEC or after the CPEC scenario and it
is shown in Fig. 1.
The conceptual model of this paper is illustrated in Fig. 2. Local industry denoted
by (A) can be affected by Logistics & supply chain (B), employment & labor market
(C), international trade (E) and FDI (F). The resultant Local industry will affect
Innovation and Technology (D) which in turn will affect sustainability (G) in Pakistan.
Moreover, another possible relation exists i.e. improved logistics & supply chain and
international trade will attract more FDI. These possible five relationship paths are the
five hypotheses that are tested in the next section.
178 A. Khan et al.
Hypothesis 1: Logistics & SC, employment & labor market, international trade, and
foreign investment have a significant impact on the local industry.
Hypothesis 2: Local industry has a significant impact on Innovation and techno-
logical up-gradation.
Hypothesis 3: International Trade and Logistics & SC have a significant impact on
foreign investment.
Hypothesis 4: Innovation & technological up-gradation and foreign investment
have a significant impact on the Employment & labor force.
Hypothesis 5: Innovation & technological up-gradation has a significant impact on
sustainability.
Since the variables involved in this paper are qualitative in nature, therefore, it is
imperative to use a statistical technique that helps in the measurement of those qual-
itative variables such as structural equation modeling (SEM).
3 Research Methodology
Structural equation modeling (SEM) is a statistical technique that is used to estimate the
complex relationship between a set of latent and manifest variables. Latent variables
are variables that cannot be directly measured, in other words, they are not quantifiable.
On the other hand, manifest, factor or observed variables can take numerical values [5].
In this paper, we use the following four steps to present the estimated SEM results
(Fig. 3).
Influence of Supply Chain Management & Logistics 179
According to the literature [22], the acceptable value of Cronbach’s Alpha is 0.70,
and it can be seen that all variables have Cronbach’s alpha more than 0.70 except for
the third construct i.e., employment and labor force but the difference is negligible as
the value is 0.694. Moreover, the overall reliability of the measurement model is 0.930
that is quite good.
because the factors loadings for the two were even less than 0.2. Now that we have
estimated CFA with acceptable factors loading for each construct, we can move to the
next step, which is the estimation of the structural equation model (SEM).
d1 d2 d3 d4 d5 g1 g2
0.556 0.792 0.778 0.798 0.593 1.612 0.359
Sustainability
Inn & Tech (G)
(D)
a1
a3
0.590
0.624
a4
0.635 b1
b2
c6
a5
0.677
c5 b3
0.638 0.652
a6
0.662
Local Industry
0.611 0.689 b4
c2 (A)
0.590
c1 0.619
0.639
b5
Emp & Lab Log & SC
0.612
(C) (B) 0.664 b6
0.538
b7
e1 0.644
e2 0.696 Int Trade
e3 0.715 (E)
e4 0.694
0.584
e5 0.523
e6 0.583
e10
FDI
(F)
0.698
0.874 .0.822
f1 f2 f3
The same results are shown in Table 2. All variables are significant except for
foreign investment in hypothesis 1 and logistics & supply chain management in
hypothesis 3.
Comparative fit index (CFI) value is 0.925 > 0.90, Tucker-Lewis index (TLI) is
0.913 > 0.90, Adjusted Goodness-of-fit Index (AGFI) is 0.974 > 0.95, and Standard-
ized Root Mean Square Residual (SRMR) is 0.057 < 0.08. The rule of thumb values
are taken from literature [4, 8, 14, 19–22].
The SEM results from the previous section show that local industrial development has a
positive and significant relationship with logistics and supply chain management,
whereas employment and labor market conditions have a negative and significant
impact on the local industry. Interestingly, although labor market conditions have a
significant impact on the local industry, the results show that the direction of the
relation is negative, therefore, the common fear among the local population that the
Chinese workforce will take over the market is reflected in the results. Foreign
investment from other countries depicted a negative relationship with local industrial
development but it is insignificant. People think that other countries may not be that
interested in investing in Pakistan.
Once there is a boost in the productivity of the local industry due to CPEC, it will
promote innovative behavior and technological up-gradation. It could be due to col-
laboration with already innovative Chinese industries via knowledge transfer. More-
over, the inflow of foreign investment will increase when there is an increase in the
volume of international trade; the relationship is positive and significant. But the
improvement in logistics & supply chain management due to infrastructural projects
would not be a significant factor in attracting foreign investment from other countries.
Other internal conditions, such as poor governance, corruption, and law and order
could be the important factors for those countries.
When the local industry will start working on technological up-gradation and there
will be inflow of foreign investment, it will generate employment opportunities for
locals because by this time, not only the CPEC related industries but other sectors and
industries will also be active in contributing towards economic activity in the country.
And people will feel more optimistic about these employment opportunities. Lastly, it
is unwise to think of technological up-gradation without incorporating sustainability
into it. So, it will have a positive and significant role in promoting sustainable business
opportunities in Pakistan.
It can be seen that the development of the local industry depends positively on the
conditions of logistics and supply chain and international trade but it has a negative
relationship with employment and foreign investment. Moreover, foreign investment is
insignificant. That is probably justified because people have concerns that although
CPEC will improve the local industry however the Chinese workers will take over the
labor market. In turn, the local industry will have a positive and significant impact on
technological up-gradation which in turn will positively impact sustainability. Inter-
national trade has a positive influence on foreign investment but the conditions of
logistics and supply chain are insignificant to attract any foreign investment.
Employment conditions in the labor market are influenced positively and significantly
184 A. Khan et al.
5 Conclusion
CPEC as a flagship project of the Belt and Road initiative of China is considered very
crucial for regional logistics and supply chain management. But the main concern of
this study is to examine its influence on the domestic industry in Pakistan. For this
purpose, SEM is used, results show that developments in the logistics sector, labor
market, and international trade have a significant role to play in the expansion of the
local industry. Pakistan’s government needs to ensure the labor security of locals and
execute planned projects in such a way that the local community is involved in it. The
process of development in the local industry will affect the innovation and techno-
logical status of Pakistan which will result in adopting more sustainable business
practices. The results of this study can help the government of Pakistan in designing
future policies pertaining to CPEC. It needs to work on governance issues such as
corruption and red tape in order to attract foreign investment from other countries
which will boost industrial capacity outside the CPEC-related industries and it will
create employment opportunities for the locals. The government needs to take locals as
well as foreign investors into confidence by disclosing the terms and conditions of the
official agreement of CPEC. Moreover, from a future perspective, it is crucial to adopt
sustainable innovation techniques. In addition to that, it can also help the managers and
industrialists in planning their future business strategies in the wake of CPEC.
References
1. Ashfaq, M., Abid, A.: CPEC: challenges and opportunities for Pakistan. Pakistan Vis. 16(2),
142–169 (2016)
2. Baumgartner, H., Homburg, C.: Applications of structural equation modeling in marketing
and consumer research: A review. Int. J. Res. Mark. 13, 139–161 (1996). https://doi.org/10.
1016/0167-8116(95)00038-0
3. Calamur, K.: High traffic, high risk in the strait of Malacca. In: The Atlantic (2017)
4. Civelek, M.E.: Essentials of Structural Equation Modeling. Zea Books, London (2018)
5. Doll, W.J., Xia, W., Torkzadeh, G.: A confirmatory factor analysis of the EUCS instrument.
MIS Q. 18, 453–461 (2011)
6. Bete Georgise, F., Klaus-Dieter, T., Hans-Dietrich, H.: Manufacturing Industry Supply
Chain Modeling and Improvement in Developing Countries. Universität Bremen (2015)
7. Freitag, M., Bauer, P.C.: Testing for measurement equivalence in surveys: dimensions of
social trust across cultural contexts. Public Opin. Q. 77, 24–44 (2013). https://doi.org/10.
1093/poq/nfs064
Influence of Supply Chain Management & Logistics 185
8. Frone, M.R., Tidwell, M.C.O.: The meaning and measurement of work fatigue: development
and evaluation of the three-dimensional work fatigue inventory (3d-wfi). J. Occup. Health
Psychol. 20, 273–288 (2015). https://doi.org/10.1037/a0038700
9. Govindan, K., Azevedo, S.G., Carvalho, H., Cruz-Machado, V.: Impact of supply chain
management practices on sustainability. J. Clean. Prod. 85, 212–225 (2014). https://doi.org/
10.1016/j.jclepro.2014.05.068
10. Gul, A.: China Welcomes Saudi Plans to Invest in CPEC Project with Pakistan. VoA (2018)
11. Idrees, M., Salman, A., Makarevic, N.: Copyright © 2017 by Sochi state university
published in the Russian federation Sochi journal of economy has been issued since 2007.
ISSN: 2541–8114. Sochi. J. Econ. 11, 107–115 (2017)
12. Imran, M., ul Hameed, W., ul Haque, A.: Influence of industry 4.0 on the production and
service sectors in Pakistan: evidence from textile and logistics industries. Soc. Sci. 7(12), 46
(2018) https://doi.org/10.3390/socsci7120246
13. Masood, Y.: China Economic Corridor Is Debt Reliever for Pakistan. Telegr (2019)
14. Matsunaga, M.: How to factor-analyze your data right: do’s, don’ts, and how-to’s.
Int J. Psychol. Res. 3, 97–110 (2010)
15. Mishra, A.A., Shah, R.: In union lies strength: collaborative competence in new product
development and its performance effects. J. Oper. Manag. 27, 324–338 (2009). https://doi.
org/10.1016/j.jom.2008.10.001
16. Naseem, I., Khan, J.: Impact of Energy Crisis on Economic Growth of Pakistan. Int. j. Afr.
Asian stud. 7 (2015)
17. Oyewole, P.: Multiattribute dimensions of service quality in the all-you-can-eat buffet
restaurant industry. J. Hosp. Mark. Manag. 22, 1–24 (2013). https://doi.org/10.1080/
19368623.2011.638418
18. Handfield, R., Straube, F., Pfohl, H.-C., Wieland, A.: Trends and Strategies in Logistics and
Supply Chain Management: Embracing Global Logistics Complexity to Drive Market
Advantage. DDV Media Group, Bremen (2013)
19. Sahin, M., Todiras, A., Nijkamp, P., Neuts, B., Behrens, C.: A structural equations model for
assessing the economic performance of high-tech ethnic entrepreneurs. TI 2013-161/VIII
Tinbergen Institute Discussion Paper
20. Sahin, M., Todiras, A., Nijkamp, P., Neuts, B., Behrens, C.: A structural equations model for
assessing the economic performance of high-tech ethnic entrepreneurs (2013)
21. Schreiber, J.B.: Reporting structural equation modeling and confirmatory factor analysis.
J. Educ. Res. 99, 323–338 (2006)
22. Shahdani, S.M., Khoshkhooy, M.: Structural equation modeling of effective economic and
cultural components on energy consumption behavior in urban societies. J. Urban Econ.
Manag. 5, 95–115 (2019)
23. Su, Q., Li, Z., Zhang, S.X., Liu, Y.Y., Dang, J.X.: The impacts of quality management
practices on business performance: an empirical investigation from China. Int. J. Qual.
Reliab. Manag. 25, 809–823 (2008). https://doi.org/10.1108/02656710810898621
24. Ximénez, C.: Recovery of weak factor loadings when adding the mean structure in
confirmatory factor analysis: a simulation study. Front. Psychol. (2016). https://doi.org/10.
3389/fpsyg.2015.01943
25. The Global Innovation Index: Creating Healthy Lives—The Future of Medical Innovation.
Switzerland, Geneva (2019)