The effects of legal-political factors and market competition on supply chain performance: some findings from firms in a free trade zone

This paper investigates the effects of legal‐political factors and market competition on supply chain performance. The data were collected from firms in the electrical and electronics (E&E) sector in an Indonesian free trade zone (FTZ) on the island of Batam. The E&E firms were chosen because of their significant contribution to Indonesian exports. The sampling of this study was E&E firms involved in exporting activities. As part of survey research, hypothesis‐testing was undertaken to explain the variance in the legal‐political factors and market competition to predict the two measurements of supply chain performance of the E&E firms in Batam. Since structural equation modelling (SEM‐PLS) path modelling 2.0 works efficiently with small sample sizes and complex models, this analytical tool was employed in the study. The findings reveal that legal‐political factors and market competition were positively significant on supply chain performance‐efficiency and supply chain performance‐flexibility. This study suggests that firm success is not necessarily tied to the size of its investment. Rather, it is the interrelationship amongst the factors that influences the supply chain.