What determines the degree of product customization? An empirical investigation

The external environment is of primary importance in determining the strategic decisions that a company intends to pursue, which in turn affect the organizational design choices. The degree of product customization that a firm provides to its customer is widely recognized as a key strategic decision in the context of mass customization. However, the external environmental factors that determine the degree of product customization have yet to be investigated empirically. To narrow this research gap, the present paper empirically examines the impacts of three external, environmental factors, namely competitive intensity, heterogeneity of customer demands and dynamism of customer demands, on the degree of product customization using survey data from 195 manufacturing plants in three industries and eight countries. The paper identifies the dynamism of customer demands as the key factor that pushes firms to increase the degree of product customization they provide to their customers.