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Tourism Management 46 (2015) 148e157

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Tourism Management

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

The antecedents and outcomes of the medical tourism supply chain

Hwee Khei Lee, Yudi Fernando*

Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia

h i g h l i g h t s

� We examine the antecedents and outcomes of the Medical Tourism Supply Chain (MTSC).� Supply chain coordination and information sharing have a direct effect on organizational performance.� Lack of collaboration and integration in the MTSC.� Firms cannot act as independent entities in competition with other firms.

a r t i c l e i n f o

Article history:Received 30 December 2013Accepted 25 June 2014Available online

Keywords:MedicalTourismSupply chainCoordinationIntegrationMalaysia

* Corresponding author.E-mail addresses: hkhei05@gmail.com (H.K. Lee

gmail.com (Y. Fernando).

http://dx.doi.org/10.1016/j.tourman.2014.06.0140261-5177/© 2014 Elsevier Ltd. All rights reserved.

a b s t r a c t

A model for the medical tourism supply chain with the antecedents and outcomes was developed andempirically investigated in this paper. The theoretical model was tested using Structural EquationModelling with Partial Least Squares. A self-administered questionnaire was designed and collected from133 organizations representing various industries that are part of the medical tourism industry inMalaysia. The results show that mutual dependency has the strongest effect of the antecedent variables;and that medical tourism supply chain coordination and medical tourism supply chain informationsharing have a direct effect on organizational performance. This paper provides practitioners withguidelines to improve their organizational performance, and ends with recommendations for futurestudy.

© 2014 Elsevier Ltd. All rights reserved.

1. Introduction

Supply chain management (SCM) is one of the most advanta-geous management approaches for integrating and coordinatingrelevant suppliers and producers and business activities to deliverproducts and services in a timely manner to the end-user (Chen,2009). Derived from SCM, tourism supply chain (TSC) has intro-duced a new area of interdisciplinary research: the medical tourismsupply chain (MTSC). The TSC is dissimilar to common businesssupply chains, in that suppliers in the TSC aremore complex than inother sectors and compete independently (Chen, 2009). MTSC has acomplex structure comprising a network of entities including atleast five different sectors identified as being involved in the MTSCe accommodation, chemistry and pharmaceuticals, hospital,transportation, and insurance.

According to Ferrer and Medhekar (2012), many operationalobjectives discovered in manufacturing supply chains are readily

), yudi@usm.my, yudhitjoa@

applicable to the MTSC to a certain extent. Supplier partnershipsand strategic alliances, with the objectives of reducing uncertaintyand enhancing the control of the supply and distribution channels,are usually formed to increase the financial and operational per-formance of each channel member. This occurs through a reductionin the total cost and inventory and to increase the sharing of in-formation (Maloni & Benton, 1997). Antecedents for partnershipsand alliances for members within the supply chain are a certainlevel of trust, commitment and dependency to form long-termrelationships within a supply chain to increase the competitive-ness of the industry as well as the organization itself.

The issues concerning the tourism supply chain have attractedattention and interest from both scholars and practitioners alike.While earlier papers have been published (Chen, 2009;Piboonrungroj & Disney, 2009; Zhang, Song, & Huang, 2009), thestudy of supply chains in the context of the tourism industry hasreceived little attention, as the published studies mostly havefocused on marketing and product development research (Zhanget al., 2009). Furthermore, previous studies concerning medicaltourism mostly pertain to developed countries with only a fewstudies addressing the issues in developing countries. For instance,Piboonrungroj and Disney (2009) determined that half of the

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157 149

studies were conducted in Europe and only about one-third of thestudies were undertaken in Asia. Asia medical tourists arrivals areexpected to exceed 10 million in 2015, with Thailand, India andSingapore forecast to control more than 80% market share(Reportlinker, 2012).

The history of Malaysia's participation in the industry of medicaltourism dates back more than a decade to the Asian Financial crisisin 1997, which led to the private healthcare sector targeting foreigncustomers. Simultaneously, the government realized that thehealthcare sector was a worthwhile and feasible venture that mustbe given support to help overcome the economic crisis (Suleiman,Lye, Yon, Teoh & Alias, 1998). Since then, the Government hasprovided considerable support and made aggressive efforts tomarket the medical tourism industry (Dahlui & Aziz, 2011).

Today, Malaysia is among the most preferred prime medicaltourism destinations in the world (Ormond, 2011; Dahlui & Aziz,2011) due to the short waiting period for surgery, a favourableexchange rate, highly qualified medical specialists, state-of-the-artfacilities, international credentialed safety and quality services, andaffordable medical costs compared to nearby regions (Dahlui &Aziz, 2011). However, Thailand and Singapore are well establishedwith good reputations as medical tourism destinations and stillconstitute themajor regional competitors toMalaysia in its attemptto become the health-services hub in the ASEAN region.

Nevertheless, Malaysia still retains certain advantages over theregional competitors, mainly related to cost factors, and its effortsto continuously improve the medical qualities, services and facil-ities. In summary, medical tourism in Malaysia has good prospectsdue to the strong support from the Government, low-cost treat-ment with high quality medical services, modernization of thehealthcare infrastructure to propel medical tourism, and its goodreputation and ranking as one of the top medical tourism desti-nations. According to Heung, Kucukusta, and Song (2011), Malaysiais one of the developing countries that is already actively promot-ing medical tourism; however, very few studies have been con-ducted about medical tourism in Malaysia. In addition, the existingarticles on the medical tourism supply chain that were empiricallytested are limited in nature.

Although the number of healthcare visitors has been increasing,Malaysia lags far behind the neighbouring countries (e.g., Thailandand Singapore) and still is not the most chosen destination formedical tourism (Othman, 2009; Shamini & Puspavathy, 2010).Thus, the MTSC in Asia is an emerging topic, and worthy of furtherinvestigation in that the medical tourism industry has beenreceiving increasing attention, and is emerging as one of the keysocio-economic contributors in Asian countries. This paper isamong the earliest studies that focus on the MTSC specifically, inthat previous studies drivers of the tourism supply chain man-agement (TSCM), and largely ignored the participation of at leastfive industries involved in MTSC. Hence, this paper enhances theawareness of academics and practitioners in the field of tourismindustry as well as provides a clearer understanding of the conceptof MTSC in advancing the industry. This study not only offers newinsights into tourism and SCM areas but also constitutes the firsteffort to develop an antecedent and outcome model for MTSC.

The paper is organized as follows. This paper reviews the relatedliterature on MTSC and evaluates the influence of trust, commit-ment and mutual dependency on organizational performance. Thenext section discusses the methodology of the integrated analyticalframework used for the analysis. The section on findings providesan empirical study in which the theoretical model is divided intotwo stages e antecedents and outcome e for further examination.The first stage concerns the testing of the relationship between thedrivers of MTSC practices and MTSC practices, while the secondstage is about the relationship between the MTSC practices and

organizational performance. The end of the paper provides theconclusion, limitations of the study and implications for managersand policy makers alike.

2. Literature review

2.1. Overview of Tourism Supply Chain (TSC)

According to Page (2011), the tourism industry is different fromother industries because the industry comprises a mobile popula-tion who visit destination areas to consume a product, service orexperience, whereas the supply elements are often fixedgeographically at certain places. On the other hand, Chan and Chan(2010) have viewed a supply chain as a network of organizationsthat are connected from the ultimate supplier(s) to the ultimatecustomer(s). SCM is one of the most advantageous managementapproaches that could integrate all the players in the supply chainto deliver goods and services in a timely manner to the respectivecustomers, which has inspired the use of TSCM as an integratingsystem for the coordination of relevant activities (Chen, 2009). Inaddition, business management in terms of supply chain in thetourism industry critically needs to increase industrial efficiency,profitability, and ensure sustainability (Piboonrungroj & Disney,2009) as the network is being segregated into upstream anddownstream, in which both business and non-business entities areinvolved (Zhang et al., 2009).

Peng, Xu, and Chen (2011) have determined that TSC consists ofa series of organizations like attraction providers, transportationand hospitality suppliers, souvenir shops, travel agencies, publicsectors and so forth, which supply the goods and services for thetourists. Chen (2009) also stated that TSC is not persistent as thedemands of the customers are insatiable and different. Thesequalities indeed make the industry special in that different sup-pliers from different sectors supply the products and services(NEAC, 2010).

2.2. Medical Tourism Supply Chain (MTSC)

The supply chain plays a vital role in the healthcare industry(Kumar, Ozdamar, & Zhang, 2008). The structure of MTSC is ascomplex as TSC and requires support from different sectors toprovide goods and services to the customers. MTSC is also similar toall other supply chains, such as the manufacturing and servicesupply chains in that they operate through business-to-businessrelationships and work together to improve the business opera-tions in the supply chain (Tapper & Font, 2004). The MTSC is anetwork of entities that organizes, sources, funds, distributesmedical services, manages associated information, and financesfrom manufacturers to medical service delivery points (Ferrer &Medhekar, 2012). Medical costs, waiting time, privacy, and reli-ability have also been identified as highly important factors thatimpact MTSC (Ferrer & Medhekar, 2012).

With respect to medical tourism and the supply chain, the MTSCcan be described as a supply chain that consists of various membersof the medical tourism industry that collaborate with each other toperform a complete medical and holiday service to the user,thereby serving health-care communities, reducing supply chaincosts, and increasing efficiencies among suppliers. The collabora-tion of MTSC members normally consists of five different sectors.

MTSC in developing countries is driven mainly by an increasingavailability of high health-care quality at affordable costs, whichposes challenges for medical systems in developed countries(Ferrer & Medhekar, 2012). Participants in the MTSC need to un-derstand the factors that contribute to industry growth as well asthe demands of medical tourists in order to be chosen by those

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medical tourists. In order to predict the demand for the globalmedical tourism service supply chain, Ferrer and Medhekar (2012)have used cost, waiting time and privacy factors related choices byindividuals as metrics. Their study was insufficient for a holisticreview of the medical tourism supply chain. Indeed, greatercollaboration among chains of medical tourism is urgently neededto support the medical tourism service of a country. MTSC practicesshould be adopted by medical organizations to improve organiza-tional performance and sustain the industry. If such organizationscould sustain such businesses, a country would gain competitiveadvantages through being recognized as a medical tourismdestination.

2.3. Drivers of medical tourism supply chain practices and medicaltourism supply chain practices

Trust contributes to the long-term stability of a supply chain andis a top priority in upholding relationships among the supply chainmembers (Yeung, Selen, Zhang, & Huo, 2009). The organizations inthe chain should establish trustworthy relationships because thesecould reduce costs, promote cooperation, enhance timely reactions,and strengthen competitive abilities (Chen, 2009). Moreover, trustis acknowledged to be a key element for the success of an alliance(Naesens et al., 2007), and essential to the existence of a collabo-rative supply chain relationship (Bowersox, Closs, & Cooper, 2012).Trust is the basis for achieving supply chain integration (SCI)through joint strategic planning by all the members of the supplychain working together (Banerjee, 2004). Trust has also been dis-cussed in the context of playing a major role in supply chain in-formation sharing (Ebrahim-Khanjari, Hopp, & Iravani, 2011). Iftrust is present, supply chain members will have confidence insharing information with each other (Kalyar, Naveed, Anwar, &Iftikhar, 2013).

The supply chain partners typically build relationship traits,such as trust and commitment (Ogulin, Selen, & Ashayeri, 2012).The essential elements of SCI are trust and commitment (Chen, Yen,Rajkumar, & Tomochko, 2011). Thus, commitment is also a keyelement in maintaining a relationship in a supply chain (Xiao,Zheng, Pan, & Xie, 2010). Commitment in a supply chain isdescribed as a promise or agreement in the supply network and isvital for the long-term success of a supply chain relationship(Salam, 2011). Additionally, collaboration may be formed throughcommitment and trust among the supply chain members (Agan,2011). Wu, Chiag, Wu, and Tu (2004) have stated that commit-ment can lead to an increase in supply chain coordination, andMoshkdanian and Molahosseini's (2013) study found thatcommitment significantly relates to supply chain informationsharing. Vijayasarathy (2010) also found that trust, commitmentand mutual dependency significantly influence SCI.

According to Arshinder, Kanda, and Deshmukh (2009), mutualdependency is inherent in supply chains. In general, the supplychain members are dependent upon each other for resources andinformation, and cannot compete as independent members(Arshinder, Kanda, & Deshmukh, 2011). Therefore, managingdependence has become a critical process in collaboration. Theemergence of collaborative relationships among members in asupply chain is the recognition of mutual dependence, in which thedependency also makes the SCI work and creates a willingness toshare information (Bowersox et al., 2012). Xu and Beamon (2006)also stated that supply chain coordination arises from the mutualdependencies of the supply chain members, while No�emi (2012)has indicated that mutual dependence must exist so that the sup-ply chain members will share information with each other.Furthermore, interdependence is related to supply chain informa-tion sharing and collaboration to maintain the supply chain

relationships to achieve the firm's goals (Chae, Yen, & Sheu, 2005;Mentzer, 2004). Choi (2012) also indicated that an organizationwould share information with their supply chain partners when ahigh interdependence exists among the supply chain partners.Accordingly, hypothesis one (H1) is proposed.

H1. The drivers of medical tourism supply chain practices have apositive impact on medical tourism supply chain practices.

2.4. Medical tourism supply chain practices and organizationalperformance

The importance of collaboration in the supply chain has beenstressed in many previous studies. Ha, Park, and Cho (2011) havestated that mutually beneficial outcomes can be created throughstrategic collaboration fromsupplychain relationships. It is essentialto understand the nature and characteristics of collaboration in thesupply chain as well as the importance of information sharing, theintegratingprocess, communication, and jointlycreatingknowledgewith partners in the supply chain (Cao, Vonderembse, Zhang &Nathan, 2010). As collaboration plays a vital role in the supplychain, good collaboration is crucial in TSCs and MTSCs due to thecomplexity of the networks that consist of many players. Myhr andSpekman (2005) have stated that collaborative supply chain part-nerships can increase the overall competitiveness of the organiza-tion. According to Barratt (2004) and Simatupang and Sridharan(2005), supply chain collaboration plays a vital role in improvingoverall performance, which benefits all the chain members.

Meanwhile, coordination is referred to as decision alignmentthrough cooperation from separate entities to enhance the per-formance as awhole (Moharana, Murty, Senapati,& Khuntia, 2012).Nowadays, the supply chain has to be well coordinated in order tobe competitive in the global market and assist in making the supplychain responsive to the demands of customers (Singh, 2011). As thetourism industry is a mixture of products that combines servicesand goods and consists of various players that are highly attached,coordination in TSCs is highly intensive (Piboonrungroj & Disney,2009). TSC coordination is said to be the most important in TSCMfor the performance of a TSC, because TSCM depends critically onthe coordination among the supply chain members in decision-making and can develop a sustainable competitive advantage forthe tourism industry (Peng et al., 2011). In addition, Heung et al.(2011) have stated that strategic coordination between healthcareand tourism is crucial. Simatupang, Wright, and Sridharan (2002)also noted that supply chain coordination could only contributeto both operational and financial performance when the collection,processing and dissemination of information are complemented bythe readiness of the supply chain members to use such informationin their businesses.

In relationship to MTSC, when each member begins sharingrelevant information in a timely manner, this information sharingfacilitates and enhances the performance of the medical tourismindustry. Information sharing (IS) involves sharing the downstreamdemand informationwith the upstream supplier (Zhang& Cheung,2010). Meanwhile, the enabling of IS in supply chains can lead to areduction in cost and inventory, and enhance customer service andvalue at the same time (Chan & Chan, 2009; Fawcett, Osterhaus,Magnan, Brau, & McCarter, 2007; Zhang & Cheung, 2010). MTSCconsists of upstream suppliers who supply the services/productsfor medical tourism (e.g., hotels, airlines, hospitals) and down-stream suppliers who promote and sell the products of medicaltourism (e.g., travel agents, intermediaries). Therefore, IS amongthese suppliers in the network is critical in facilitating the industry.Accurate information sharing in a timely manner can also increasethe organization's performance because it can provide value to the

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business and reduce operating errors (Zhao, 2002). Baihaqi,Beaumont, and Sohal (2008) also stated that supply chain infor-mation sharing is highly valuable in achieving good operationalperformance for organizations.

Considerable research to examine the integration of firmswithin a tourism supply chain has been conducted over the pasttwo decades (Zhang et al., 2009), and SCI is considered an impor-tant approach to build and sustain competitive advantage in anorganization (Yeung et al., 2009). The majority of the existingstudies have found a positive relationship between SCI and orga-nizational performance (Gimenez, Vaart, & Donk, 2012). AlSagheer,Mohammed and Ahli (2011) have analysed 21 research papers,which empirically prove that SCI has led to better business per-formance. In addition, Vaart and Donk (2008) have reviewed 33survey-based studies and found that SCI greatly improves organi-zational performance. Because SCI has been recognized as animportant driver in supply chains, various members of the MTSCmust be integrated into the whole to contribute to the industry. Inaddition, SCI can be seen as an internal strategic resource that couldimprove competitive advantage and firm performance (Leuschner,Rogers, & Charvet, 2013). Hence, hypothesis two (H2) is proposed.

H2. The medical tourism supply chain practices have a positiveimpact on organizational performance.

Based upon the proposed hypotheses, Fig. 1 below presents thetheoretical framework of this study with the relational view (RV),resource-based view (RBV), transaction cost theory (TST), and so-cial exchange theory (SET) as supporting theories. The RV considersrelationships as potential sources of superior performance andidentifies four sources of relational rents e investments in relation-specific assets, substantial knowledge exchange, complementaryand rare resources, and lower transaction costs (Miguel & Brito,2011). Through RV, value-creating linkages between organizationscan be explored, which assists a network of firms to develop re-lationships and sustain competitive advantage. In addition, thistheory has been widely used to identify the factors affecting thesupply chain performance and to support the impact of SCM onfirm performance. The RBV theory argues, “differential firm per-formance is fundamentally due to firm heterogeneity rather thanindustry structure” (Dyer & Singh, 1998). Chen (2009) has statedthat the paramount attractive aspects to tourists are regional dif-ferences and rareness, and that TSC can overcome the contradictionof resource scarcity and economic development of regionaltourism. The individual firm has to utilize the four “must have”resource attributes (rare, valuable, inimitable, and non-

Fig. 1. Theoretica

substitutable) within their organization to develop distinctivecore competencies and enhance customer value. The transactioncosts comprise the expenditures generated by identifying fairmarket prices, bargaining and carrying out economic exchange(Leuschner et al., 2013). TST states that transaction costs includetime, money, human resources and risk, as well as human andenvironmental elements, and information issues. Zhao, Huo, Flynn,and Yeung (2008) said that SET is driven by the principal idea ofexchanging resources through a relationship interchange, and thattrust and commitment have important roles in a supply chainrelationship under the perspective of SET. All the theories explainthe complexity of collaboration among industries with limited andunique internal resources for each company. The collaboration isdesigned for the long-term perspective and the ultimate goal is toenhance organizational performance and sustainability.

3. Methodology

3.1. Participants, procedure and measures

The stratified random sampling technique was used in the studyas the population was heterogeneous and was drawn from varioustypes of sectors. Currently, no exact number or official directory onthe number of organizations involved in theMalaysianMTSC exists.During a visit to the government tourism agency, the officersmentioned that around 670 organizations were currently involved.However, many of these organizations were no longer active inindustry. A self-administered online questionnaire using thestratified random sampling method was employed as the instru-ment for collecting data between July and August 2013 from asample of organizations that are either directly or indirectlyinvolved in the medical tourism industry in Malaysia.

These organizations comprise healthcare, tourism, manufac-turers, and services. Hence, they were divided into subgroups andcategorized (e.g., accommodation, transportation, hospitals, andtravel agency), and each subgroup was arranged to be as homo-geneous as possible. The sources used to obtain respondent di-rectories were varied. Contacts for the sample were found in themagazine of HealthCare Malaysia. In addition, this study obtainedsupport from the Malaysian Association of Hotels (MAH) that hel-ped raise awareness of this study from MAH members, and contactinformation for MAH's members was collected from its officialwebsite. Contact information for respondents also was obtainedfrom official Government websites, including the PharmaceuticalAssociation of Malaysia (PhAMA), Association of Private Hospitals

l framework.

Table 1Summary result of the measurement model and convergent validity.

Constructs Items Loadings Constructreliability (CR)

Averagevarianceextracted(AVE)

Cronbach'salpha

Trust (T) T1 0.733 0.899 0.641 0.860T2 0.808T3 0.814T4 0.848T5 0.797

Commitment (C) C1 0.810 0.907 0.661 0.871C2 0.821C3 0.806C4 0.763C5 0.862

MutualDependency(MD)

MD1 0.853 0.894 0.630 0.851MD2 0.860MD3 0.815MD4 0.647MD5 0.774

Collaboration (CL) CL1 0.831 0.925 0.673 0.903CL2 0.843CL3 0.803CL4 0.839CL5 0.771CL6 0.833

Coordination (CD) CD1 0.694 0.876 0.588 0.823CD2 0.819CD3 0.679CD4 0.818CD5 0.811

InformationSharing (IS)

IS1 0.852 0.929 0.723 0.904IS2 0.863IS3 0.852IS4 0.881IS5 0.803

Integration (I) I1 0.887 0.939 0.754 0.919I2 0.881I3 0.853I4 0.869I5 0.851

FinancialPerformance (FP)

F1 0.805 0.906 0.659 0.870F2 0.849F3 0.838F4 0.791F5 0.772

Non-FinancialPerformance(NFP)

NF1 0.820 0.888 0.614 0.842NF2 0.830NF3 0.801NF4 0.686NF5 0.771

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157152

of Malaysia (APHM), and MATRADE, among others The remainderwere gathered mainly through Internet websites by using theGoogle search engine and phone directories.

The unit of analysis of this study was organization, and thesurveywas addressed to the topmanagement who had authority inthe organization and understood the organization's operations. Thequestionnaire was self-administered and conducted through theGoogle form, online. The survey link was distributed with a dead-line for submission by email, together with a cover letter stating theintention of the study and a guarantee to the respondents ofconfidentiality. Then, the questionnaire was sent to the re-spondents through email along with a cover letter containing anonline survey link generated by Google. Filter questions were askedconcerning the company and how long it had been involved withthe medical tourism industry. Potential respondents were notincluded in the study if they were not involved in MTSC activities.

Each of the measurement constructs in the survey had five to sixitems, which were measured using a five-point Likert-type scaleranging from strongly agree (5) to strongly disagree (1). In addition,somedemographic informationabout theorganizationswas includedin thequestionnaire. Themeasurementconstructsusedwereadaptedfrom previous studies. The antecedent variables comprised trust(adapted fromChenet al., 2011andVijayasarathy,2010), commitment(adapted from Chen et al., 2011 and Vijayasarathy, 2010), and mutualdependency (adapted from Hoejmose, Grosvold, & Millington, 2013and Vijayasarathy, 2010). The measurement constructs used for thefour independent variables of the medical tourism supply chain e

collaboration (adapted from Cao & Zhang, 2011; Francois & Charvet,2008; Jayaram, Xu, & Nicolae, 2011), medical tourism supply chaincoordination (adapted fromFrancois&Charvet, 2008& Jayaramet al.,2011), medical tourism supply chain information sharing (adaptedfrom Fawcett et al., 2007 and Sezen, 2008), and medical tourismsupply chain integration (adapted from Chen, 2009 and Choi, 2012),were also adapted from previous studies. The two elements to mea-sure organizational performance as the dependent variable werefinancial performance (adapted from Cao & Zhang, 2011; Gilaniniaet al., 2011; Lee, Kim, & Choi, 2012; Panayides & Venus, 2009) andnon-financial performance (adapted from Lee et al., 2012;Wiengarten, Humphreys, Cao, Fynes, & McKittricks, 2010; Zelbst,Green, Sower, & Baker, 2010; Zhu & Sarkis, 2007).

3.2. Data analyses

This study was conducted based on confirmatory factor analysis(CFA), which tests whether a specified set of constructs influencesthe responses in a predicted way. This study used StructuralEquation Modelling with Partial Least Squares (PLS-SEM) version2.0. The PLS-SEM algorithm was used to estimate the path co-efficients and other model parameters in a way that maximizes theexplained variance or minimizes the amount of unexplained vari-ance (Hair, Hult, Ringle, & Sarstedt, 2014). In order to test the co-efficient for the significance of the path modelling, thebootstrapping method was applied. The output from bootstrappingalso shows the paths corresponding to each hypothesis. Theassumed significance level of the t-value for each path of 1.645assumes a significant difference at a significance level of 5%, and2.326 assumes a significant difference at a significance level of 1%.The convergent validity is demonstrated by loadings greater than0.708, and the average variance extracted (AVE) should be greaterthan 0.50 (Hair et al., 2014). Discriminant validity refers to thedegree of specific construct, which is different to other constructs,and demonstrated by the square root of the AVE being greater thanany of the inter-construct correlations (Fornell& Larcker,1981; Hairet al., 2014). Meanwhile, the composite reliability is generallyinterpreted in the same way as Cronbach's alpha and varies

between 0 and 1, in which higher values indicate higher levels ofreliability (Hair et al., 2014).

4. Findings

A total of 500 questionnaires were distributed and 133 re-sponses were received, resulting in a response rate of 26.6%. Mostorganizations were located in Penang (43.6%) and involved in thehospital and clinics sector (16.5%), which are mainly locally regis-tered companies (58.6%). The majority have between five and 50employees (31.6%) and more than ten years experience in thebusiness (39.8%). However, most of them have only participated inthe medical tourism industry for a period of one to five years(34.6%) and have more than 45 business partners (36.8%). Never-theless, 39.1% provide consultation and service and 89.5% use dis-tribution channels with the end-user (57.9%) as customer based.These organizations are generally involved in hospital and clinics(22 organizations, 16.5%), followed by accommodation (19 organi-zations, 14.3%), chemistry and pharmaceutical (13 organizations,9.8%), marketing/public relations/promotion (13 organizations,

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157 153

9.8%), medical equipment manufacturers (11 organizations, 8.3%),food and beverage (10 organizations, 7.5%), and insurance (9 or-ganizations, 6.8%).

Table 1 summarizes the results of the measurement model. Theitem reliability, construct reliability (CR), and average varianceextracted (AVE) (Hair et al., 2014) support the convergent validity ofthe CFA results. The CR,which shows the degree towhich constructsindicators demonstrate the latent construct, ranged from 0.876 to0.939, which was above the cutoff value of 0.7. The average varianceextracted (AVE) ranged from 0.588 to 0.754, whichwas greater than0.50, justifying the use of the construct. Overall, these results indi-cate that the measurement model has good convergent validity.

To examine the discriminant validity, the study followed theFornell-Larcker criterion. The square root of the AVE for eachconstruct was compared; if they are greater than the correlationcoefficients of the corresponding inter constructs, discriminantvalidity is achieved. Table 2 presents the correlation matrix,showing the correlations between the constructs and the squareroot of AVE on the diagonal in bold.

All the Cronbach's alpha values were greater than 0.70 indi-cating the good reliability of all measures. The construct with thehighest Cronbach's alpha was Integration (0.919), which indicates agood internal consistency of the items in this construct; the lowestCronbach's alpha was coordination (0.823), which indicates lowinter-item correlations (Table 1).

4.1. Hypotheses testing

Table 3 illustrates all the hypothesized relationships in thisstudy. In terms of the effects of the antecedents on MTSC collabo-ration, both trust and mutual dependency appear to have signifi-cant effects, supporting H1a (t-value 2.056) and H1i (t-value 5.581).In addition, both commitment and mutual dependency have asignificant impact on MTSC coordination and MTSC informationsharing, supporting H1f (t-value 4.382), H1g (t-value 2.525), H1j (t-value 3.489) and H1k (t-value 7.629). However, for the effects of theantecedents onMTSC integration, onlymutual dependency appearsto have a significant impact, supporting H1l (t-value 5.902).Meanwhile, the significant path from MTSC coordination to orga-nizational financial performance indicates support for H2c (t-value1.755), and MTSC information sharing to organizational non-financial performance indicates support for H2g (t-value 1.734).

5. Discussion and conclusion

SCM is becoming an important key for increasing the perfor-mance of an industry. The pattern of competition has changed frombetween the individual firms to supply chain versus supply chain,as firms cannot act in isolation or as independent entities incompetition with other firms (Antai, 2011). Globalization is forcingfirms to work together to improve the performance of the industry.

Table 2Discriminant validity.

1 2 3 4

1. Collaboration 0.8202. Commitment 0.639 0.8133. Coordination 0.731 0.725 0.7674. Financial Performance 0.612 0.471 0.603 05. Information Sharing 0.785 0.677 0.764 06. Integration 0.801 0.618 0.716 07. Mutual Dependency 0.722 0.703 0.694 08. Non-Financial Performance 0.642 0.576 0.633 09. Trust 0.631 0.708 0.604 0

Note: Diagonal (in bold) represent the square root of average variance extracted (AVE) w

The findings of this study provide additional support for the val-idity of the causal relationship stated in the hypotheses, particu-larly in the medical tourism industry. This paper focused on theantecedents and consequences of the drivers of MTSC practices andMTSC practices among the organizations in the medical tourismindustry. The results confirmed that mutual dependency is crucialin a MTSC and that members still lack trust and commitment in theMTSC, a finding not completely reflected in previous studies.Meanwhile, MTSC coordination and MTSC information sharingplayed significant roles in improving organizational performance.However, the members still lack certain collaboration and inte-gration in MTSC. Because of these deficiencies, medical tourism as abusiness and a key sub-sector of the Malaysian tourism industryhas to further improve the SCM in its operations to gain competi-tive advantage, and outperform rival countries.

The result of this study has shown that trust and MTSC collab-oration have a significant relationship and the hypothesis wassupported. This finding is consistent with previous studies anddemonstrated that trust is essential in creating MTSC collaborationto contribute to long-term cooperation. However, the relationshipbetween trust and MTSC coordination, MTSC information sharing,and MTSC integration were unrelated to each other. These resultscontradicted previous studies, which had found that trust is crucialin these three supply chain practices (Ebrahim-Khanjari et al., 2011;Kalyar et al., 2013; Yeung et al., 2009). As most organizationsparticipating in this study were still young, where most of themhad only been involved for less than 6 years in the medical tourismindustry, a sense of trust between supply chain partners may nothave been generated yet. Because of their newness, these organi-zations were perhaps more reluctant to coordinate and integratewith the other partners, and did not share important industry andmarket information with their partners. When organizations staylonger in the MTSC, trust with the partners may increase over time,thus improving MTSC practices.

This current study has found that commitment has a significantrelationship with MTSC coordination and MTSC informationsharing. This is consistent with previous studies (Agrell, Lindroth,&Norrman, 2004; Moshkdanian & Molahosseini, 2013; Salam, 2011;Wu et al., 2004), which showed that commitment had a positiverelationship with supply chain coordination and informationsharing. On the other hand, commitment was found to have anegative relationship with MTSC collaboration and MTSC integra-tion, which contradicted previous studies (Kwon & Suh, 2005;Salam, 2011). Commitment also requires a long-term relationshipin a supply chain. However, the organizations that participated inthis study perhaps were less committed to the MTSC due to theshort duration of their involvement (less than 6 years) in themedical tourism industry.

The findings have proven that mutual dependency is inherent inthe supply chains with aligns with the findings of Arshinder et al.(2009). Mutual dependency was found to have a positive

5 6 7 8 9

.812

.573 0.850

.647 0.838 0.868

.568 0.800 0.739 0.794

.722 0.686 0.683 0.690 0.784

.518 0.584 0.559 0.648 0.534 0.801

hile the other entries represent the squared correlations.

Table 3Hypotheses testing.

Hypothesis Relationship Coefficient Standard error t-value Supported

H1a Trust / Collaboration 0.214 0.104 2.056* YesH1b Trust / Coordination 0.078 0.114 0.685 NoH1c Trust / Information sharing 0.017 0.102 0.171 NoH1d Trust / Integration 0.069 0.107 0.640 NoH1e Commitment / Collaboration 0.153 0.100 1.527 NoH1f Commitment / Coordination 0.429 0.098 4.382** YesH1g Commitment / Information sharing 0.218 0.086 2.525** YesH1h Commitment / Integration 0.161 0.109 1.476 NoH1i Mutual dependency / Collaboration 0.476 0.085 5.581** YesH1j Mutual dependency / Coordination 0.342 0.098 3.489** YesH1k Mutual dependency / Information sharing 0.636 0.083 7.629** YesH1l Mutual dependency / Integration 0.581 0.098 5.902** YesH2a Collaboration / Financial performance 0.146 0.147 0.993 NoH2b Collaboration / Non-financial performance 0.168 0.146 1.153 NoH2c Coordination / Financial performance 0.186 0.106 1.755* YesH2d Coordination / Non-financial performance 0.049 0.111 0.436 NoH2e Information sharing / Financial performance 0.040 0.149 0.269 NoH2f Information sharing / Non-financial performance 0.265 0.153 1.734* YesH2g Integration / Financial performance 0.257 0.161 1.597 NoH2h Integration / Non-financial performance 0.210 0.173 1.213 No

Note: *p < 0.05; **p < 0.01(One-Tailed).

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157154

relationship with all the MTSC practices: MTSC collaboration, MTSCcoordination, MTSC information sharing, and MTSC integration,and all the hypotheses regarding mutual dependency and MTSCpractices were accepted. The results are consistent with previousfindings (Arshinder et al., 2009; Bowersox et al., 2012; Chae et al.,2005; D€oring, Feix, Stadtler, Ulijn, & Calvi, 2002; Mentzer, 2004;No�emi, 2012; Spekman, Kamauff, & Myhr, 1998; Xu & Beamon,2006), and have shown that the members of the supply chain areinterdependent and require each other in the MTSC. The positiverelationship between mutual dependency and MTSC practices hasalso demonstrated that the members within the MTSC are impor-tant to each other in the industry and in making Malaysian medicaltourism a sustainable industry. Thus, the organizations within theMTSC collaborate to contribute to the growth of the medicaltourism industry.

Supply Chain collaboration has been discussed widely in pre-vious studies as the main contributor to organizational perfor-mance. However, this study found that MTSC collaboration did nothave a significant relationship with both financial and non-financial performances of the organization. Although many previ-ous studies have shown that supply chain collaboration has manypotential advantages, this collaboration also has potential risks anddoes not always meet expected results for the supply chain (Betts&Tadisina, 2009). Cao et al. (2010) and Agan (2011) indicated thatcollaboration required two or more firms working together to meetmutual goals and make decisions. However, different businessesoften have different goals. Although these organizations work mayclosely and share some common goals in MTSC, this does notnecessarily mean that they are moving in the same direction toachieve mutual advantages, which can cause a lack of collaborationin the MTSC.

Furthermore, Naesens, Pintelon, and Taillieu (2007) stated thatdeveloping a collaborative initiative within a supply chain is timeconsuming, and Sabath and Fontanella (2002) found that collabo-ration in a supply chain is difficult to implement due to a failure todifferentiate with whom to collaborate more d either profitablecustomers or suppliers. Barratt (2002) also found that trust isimportant in supply chain collaboration and an absence of trust in asupply chain relationship will lead to failure in implementingcollaboration. When supply chain collaboration cannot be imple-mented, the potential positive impacts of that collaboration toorganizational performance will be absent. To achieve the expected

benefits of supply chain collaboration increased levels of trust,commitment and mutual dependency should be increased amongthe partners in the supply chain. Increased levels may be attainedthrough open communication and interaction among supply chainmembers to increase these drivers of best MTSC practices.

This study found that MTSC coordination is related positively toorganizational financial performance but has a negative relation-ship with organizational non-financial performance. This findingcontradicts those of Jayaram et al. (2011), who found that goodsupply chain coordination has a positive relationship with an or-ganization's operational performance. According to Arshinder et al.(2011), when supply chain coordination is still in its infancyexerting more effort is required to develop a holistic view of co-ordination within the members of the supply chain. Consistentwith this, poor performances and dysfunctional supply chain ac-tivities such as low customer satisfaction and low competitive po-sition may be due to poor coordination in supply chain (Arshinderet al., 2009; Ballou, Gilbert, & Mukherjee, 2000; Simatupang et al.,2002). Excellent coordination in MTSC is vital because MTSC ishighly dependent on coordination among the partners in decision-making and developing a competitive advantage in the medicaltourism industry. A lack of coordination in decision-making inoperational performance has led to a negative relationship betweenMTSC coordination and organizational non-financial performance.

MTSC information sharing has been found to be related posi-tively to organizational non-financial performance, but was foundto be related negatively to organizational financial performance.Many types of information could be shared between organizationswhile some cannot be shared, even though these organizations arewithin the same supply chain. A firm may choose not to revealrelevant proprietary information, that might reduce business rev-enue, and irrelevant data instead may be shared to protect that afirm's financial position. If this happens, incorrect decisions mightbe made, leading to poor financial performance. However, sharingoperational information is different because such information isless harmful to business revenue. Hence, the drivers of MTSCpractices suggested in this study (trust, commitment and mutualdependency) have come into the focus as the areas in which or-ganizations should exert more effort in improving their MTSCrelationships.

The hypotheses with respect to the relationship of MTSC inte-gration to both organizational financial and non-financial

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157 155

performance was rejected, as they do not have any positive rela-tionship with each other. The findings of this study contradictedwith previous research (Fabbe-Costes& Jahre, 2008; Gimenez et al.,2012; Vaart& Donk, 2008; Yeung et al., 2009). One reason for this isperhaps that the medical tourism industry comprises manydifferent businesses that are difficult to integrate. Thus, the fact thatMTSC integration was not related significantly to overall organi-zational performance is not surprising.

Overall, members of the MTSC should exert more efforts inimproving their supply chain relationships. The findings in thisstudy about MTSC coordination align with Arshinder et al. (2011)and Simatupang et al. (2002), in which supply chain coordinationwas found to improve the organization's financial performance.Meanwhile, the findings about MTSC information sharing alignswith that Zhou and Benton (2007) and Baihaqi et al. (2008), inwhich information sharing could enhance an organization's non-financial performance. Although MTSC coordination and informa-tion were found to enhance the organizational performance, thesepractices must be improved to better contribute to both financialand non-financial performance. On the other hand, MTSC collabo-ration and MTSC integration were not related to organizationalperformance, which contradicted previous findings on supply chain(Barratt, 2002; Gimenez et al., 2012; McCarthy & Golicic, 2002;Myhr & Spekman, 2005; Vereecke & Muylle, 2006; Yunus, 2013).With these factors in mind, members of the MTSC in Malaysiashould engage in proper planning and improve their supply chainstrategies among each member to enhance organizationalperformance.

5.1. Managerial implications

The roles and functions of the respondents and their organiza-tions are varied. Hospitals and clinics play a vital role in medicaltourism, providing medical treatment by trained and certifiedphysicians and equipment. Besides favourable exchange rates,medical tourists are looking for lower costs. Medical equipmentmanufacturers, chemistry and pharmaceutical companies provideassurance for the quality and technology used to support world-class medical treatment by the hospitals and clinics. Insurancecompanies typically provide connections between patients and thetreatment services abroad and the hospital facilities in accordancewith their insurance plans. The Malaysia Tourism Promotion Board(MTPB)and travel agenciesoffer a combinationofmedical treatmentand tourism packages liaising with business partners to promoteMalaysia as a preferred treatment destination. Hoteliers and travelagencies work together closely to influence medical tourists/busi-ness partners purchasing decisions. A travel agent provides assis-tance from meeting a medical tourist from the airport until they flyback home. Thus, a travel agent's function is highly interwovenwiththose of other partners in themedical tourism supply. In the presentglobal economic environment, collaborationwith various membersin the medical tourism industry increases efficiencies, and workingalone is more costly than working together.

This study provides practitioners with an improved under-standing of the importance of the supply chain in the medicaltourism industry and of the benefits that MTSC can bring to theirorganizations. With the proposed theoretical framework, thepractitioners could better form and manage their operationalpractices to create a better supply chain relationship with medicaltourism business partners. Practitioners could also use the findingsto align MTSC with business strategy and gain an insight for betterutilization of the available resources and technology to performbetter. They could also realize the ways bywhich to improve overallperformance for local customers and international patients, and

increase organizational profitability and competitiveness as well asthat of the medical tourism industry.

Even though Malaysia has participated in the medical tourismindustry since 1997, a lack of understanding of the advantagesbrought about by themedical tourism supply chain still plagues theindustry. Additionally, several types of businesses that are actuallypart of the medical tourism industry do not even realize that theyare part of the industry and should be practicing supply chainmanagement for that industry. Clearer understandings of the con-cepts of medical tourism as well as the supply chain can be gained ifthey follow the recommendations included in this study.

As supply chains become increasingly critical to businesscompetitiveness, the findings of study are vital in assessing andinvestigating the level of supply chain implementation and theimpact upon firm performance for those involved in the industry.Efficient and effective supply chain management is also beingrecognized as imperative in both the financial and non-financialperformance of an organization within a supply chain. The practi-tioners who are involved in the MTSC will benefit by applying thelessons learnt here for improving the effectiveness of the supplychain strategy. For instance, they could better create and manageoperational practices and develop a better business relationshipwith business partners. Practitioners could use the findings to alignMTSC with business strategies and gain an insight into effectiveusage of the resources or, in other words, better utilize availableresources and technology to improve performance of servicesdelivered to the local and international customers and patients andincrease the profitability of the industry in Malaysia. Meanwhile,operational costs could be minimized and the value of the marketcould be increased.

5.2. Limitations and directions for future research

The study has several limitations. First, the data were collectedthrough an online form. The process of completing the onlinesurvey form was not monitored, meaning that personnel who hadlittle or no knowledge about theMTSC practices in the organizationcould have been answered the survey. Second, some of the orga-nizations refused to assist in the study due to organizational policy,which restricts them from disclosing useful information. Third, thisstudy is entirely dependent on the willingness of the respondentsto participate openly. The tendency in answering the online surveymay have been biased towards providing a more positive answerrather than expressing the real practices of the organization.Fourth, no actual official directory showed which organizationsparticipate in the medical tourism industry, thus the respondentpopulation had to be developed from a mixture of resources. Fifth,filter questions were asked concerning the involvement of thecompany with the medical tourism industry. Therefore, some or-ganizations involved in the medical tourism industry might nothave been included in this study, and, hence, any informationconcerning theMTSC practices in their organizations was excluded.

This paper extends TSC research by focussing upon the medicaltourism industry. As medical tourism is a key sub-sector of thetourism industry and contributes much to the socio-economics inMalaysia, a study on medical tourism in terms of the supply chainperspective is a critical area in tourism and SCM research. The paperdiscovered the antecedents and outcomes of MTSC, which couldenable further studies in MTSC to explore and examine the medicaltourism industry in-depth. Future researchers may considerstudying such areas as the energy efficiency initiative on MTSC forits potential to reduce cost and consider the environmental impactfor the five industries considered to be the main participants inMTSC (accommodation, chemistry and pharmaceutical, hospital,transportation, and insurance). Besides studying energy efficiency,

H.K. Lee, Y. Fernando / Tourism Management 46 (2015) 148e157156

the impact of TSC structure upon its upstream and downstreamsuppliers has been identified previously but not in MTSC. As a keysocio-economic contributor, the structure needs to be identified.Lastly, MTSC deals with different suppliers in the supply chain andthe changes in the economy and environment; thus identifying therisks and uncertainties in MTSC is essential for implementing thenecessary prevention arrangements.

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Lee Hwee Khei obtained a BBA in tourism managementfrom Universiti Utara Malaysia (UUM) and a MBA fromUniversiti Sains Malaysia (USM). She is currently workingfor Motorola Solutions e Malaysia.

Yudi Fernando is a Senior Lecturer in Operations Manage-ment at the Graduate School of Business, Universiti SainsMalaysia (USM). He received his MBA and PhD from theSchool ofManagement at USM also holds a Bachelor's degreein Business and Management from UNAND, Indonesia. Dr.Yudi alsoworked for several years in the electronics industry.