Impacts of quality management practices on competitive performance in manufacturing companies experiences from the united states, japan, germany, italy, and korea

In order to heave better understanding on quality management, this research investigates the relationship between quality management practices, quality performance, and competitive perfo

1

PHAN CHI ANH (PhD)

Impacts of Quality Management Practices

on Competitive Performance in Manufacturing Companies - Experiences from the United States,

Japan, Germany, Italy, and Korea

VIETNAM UNIVERSITY PUBLISHER HOUSE, HA NOI

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LIST OF CONTENTS

L I GI I THI U 7

PREFACE 11

LIST OF TABLES 17

LIST OF FIGURES 20

Chapter 1 Introduction 21

1.1 Motivation and Objectives of This Research 21

1.2 Research Methodology 22

1.3 Structure of the Book 25

Chapter 2 Literature Review 27

Chapter 3 Design and Measurement Analysis 41

3.1 Research Framework 41

3.2 Data Collection 50

3.3 Measurement Analysis 56

Chapter 4 Quality Management Practices and Competitive Performance: Empirical Evidence from Japanese Manufacturing Plants 66

4.1 Introduction 66

4.2 Analytical Framework 68

4.3 Plant Characteristics 74

4.4 Hypotheses Testing 80

4.5 Implications and Discussions 91

4.6 Limitations and Further Research 94

4.7 Conclusion 94

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Chapter 5.International Comparison on Quality Management Practices in Manufacturing Companies: Empirical Evidences

from the United States, Japan, Germany, Italy, and Korea 96

5.1 Introduction 96

5.2 Analytical Framework 98

5.3 Hypothesis Testing 106

5.4 Discussions and Implications 129

5.5 Limitations and Future Research 131

5.6 Conclusions 131

Chapter 6.Empirical Study on Effect of Quality Management Practices and Just-In-Time Production Practices on Competitive Performance in Manufacturing Companies 133

6.1 Introduction 133

6.2 Background 135

6.3 Analytical Framework 138

6.4 Hypothesis Testing 144

6.5 Implications and Discussions 159

6.6 Limitations and Future Research 163

6.7 Conclusions 163

Chapter 7 The relationship between Quality Management Practices and Their Effects on Competitive Performance 165

7.1 Introduction 165

7.2 Background 167

7.3 Analytical Framework 170

7.4 Hypotheses Testing 174

7.5 Discussions and Conclusions 185

Chapter 8 Conclusions 189

8.1 Limitations of the Research 189

8.2 Contributions to Academic Literature and Implications for Practioners 191

8.3 Future Research 193

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REFERENCES 197

Appendix A: Question Items of Quality Management Scales -

Japanese Sample 204

Appendix B: Question Items of Quality Management Scales -

Five Countries Sample 210

Appendix C: Question Items of JIT Production Scales - Five Countries

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8

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tác nghiKp, Fdi m[i và sáng tLo, kinh doanh quCc tB Các giVng viên, nhà nghiên cbu, cán bA quVn lý doanh nghiKp có thR tham khVo tài liKu này khi giVng dLy, nghiên cbu và thHc hành vc quVn trO ch=t l>?ng Tác giV cuCn sách xin bày t| sH cVm qn chân thành t[i các FWng nghiKp thuAc DH án HPM và Trung tâm Nghiên cbu QuVn trO Kinh doanh (CBAS), Tr>Png mLi hEc Kinh tB, mLi hEc QuCc gia Hà NAi, và Ftc biKt là Giáo s> Matsui Yoshiki, Khoa QuVn trO Kinh doanh, mLi hEc Tdng h?p QuCc gia Yokohama Fã h?p tác, h>[ng d~n, góp ý, và hr tr? cho sH thành công cJa nghiên cbu này Trong quá trình biên soLn cuCn sách không thR tránh F>?c mAt sC khiBm khuyBt, tác giV xin trân trEng Fón nh^n và tiBp thu các ý kiBn góp ý cJa FAc giV FR tiBp t\c có nheng nghiên cbu chuyên sâu vc quVn trO ch=t l>?ng và quVn trO kinh doanh

Tác gi6

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PREFACE

Quality is a critical success factor for competition in global markets From the perspective of competitive strategy, quality is often seen as a source of differentiation Quality management consists of a set of systematic activities to improve the quality level of products and works through customer orientation, continuous quality improvement, employees’ involvement, etc so as to establish and sustain a competitive advantage Quality management principles, procedures, and techniques have been widely accepted, applied, and studied In recent years, quality management became one of the most significant research themes in operations management The relationship among quality management, quality performance, operational performance, and financial performance has been widely investigated by many scholars, who agreed that quality management practices have a significant effect on quality and operational performances Quality management studies have utilized different analytical frameworks, measurement constructs, and methodologies so far Quality management literature suggested that, however, the effect of quality management practices on business performance is contingent on some external factors such as the national culture, market environment, and organizational context

In order to heave better understanding on quality management, this research investigates the relationship between quality management practices, quality performance, and competitive performance in the context of manufacturing plants The objectives of this research are to contribute to quality management by conducting several studies in the following areas:

- To study the interrelationships among quality management practices, particularly relations between human resource management/strategy-

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oriented practices (infrastructure practices) and oriented aspects (core quality practices) as suggested in the cited literature of quality management

techniques/process To investigate the direct and indirect effects of specific quality management practices on different dimensions of competitive performance

- To study the international aspects of quality management for better understanding the argument on “universality in applicability of quality management.”

- To study the relationship among quality management and other manufacturing management systems to know whether integrated implementation of quality management practices and other improvement practices yield a synergy effect on competitive performance of manufacturing plants

This research adopts the survey research method to accomplish the objectives mentioned above Data using in these studies had been gathered from one hundred and sixty-three manufacturing plants in five countries: the United States, Japan, Germany, Italy, and Korea in the framework of High Performance Manufacturing (HPM) Project This is

an ongoing international research project that focuses on studying the

“best practices” and their contributions to high performance

This research underlines the approach “competing by best practices” (Hayes and Wheelwright, 1984; Schroeder and Flynn, 2001) The results of statistical analysis suggest that the ability to attain competitive advantages can be built through the development of consistent practices focused on designing, implementing, and continuously improving processes to produce high quality products This research provides the new evidences of successful quality implementation in Japanese plants where quality management is used

as a platform for achieving strength in other aspects of competitive performance

This research proposed and tested a framework of seven aspects of quality management: top management support, information analysis,

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strategic planning, workforce management, customer relationship, supplier relationship, and process management Interrelationships among quality management practices were analyzed It revealed the significance of top management support and information analysis to workforce management, customer relationship, and supplier relationship In addition, successful process management highly depended on the development and deployment of information analysis and workforce management activities The statistical analysis results also indicated significant effects of process management, information analysis, and workforce management on several performance indicators regarding quality, cost, delivery, and flexibility

The evidence of the synergy effect was found on the simultaneous implementation of quality management practices and JIT production practices, which supports the integration approach for improvement (Schroeder and Flynn, 2001) The plants should select their own improvement path by adopting quality management practices, JIT practices, Total Preventive Maintenance (TPM) practices, etc For the manufacturing plant already started its improvement program with the implementation of JIT production practices (or quality management practices), additional implementation of quality management practices (or JIT production practices) leads to the significant improvement of manufacturing cost, volume flexibility, and cycle time

The overall findings of this research may bring some implications for quality practitioners and manufacturing managers who are looking for solutions to improve manufacturing efficiency and effectiveness Beside of these, this research produces some significant contributions

to quality management studies as follows:

Firstly, this research proposed and tested a set of eleven constructs measuring quality management practices These constructs are all present in the frameworks used for Malcolm Baldrige National Quality Award in the United States and the European Quality Award Statistical testing reveals that those scales are reliable and valid for data of twenty-

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seven Japanese plants and one hundred and sixty-three plants in five countries These measurement scales should be considered to use in future quality management studies

Secondly, this research tested and validated the Garvin’s concept

of eight dimensions of quality This concept could be used for measuring quality performance and the international comparison of quality management in future research In addition, the set of cumulative capabilities suggested by Flynn and Schroeder (2001) has been tested These results provide the evidences that quality performance and competitive performance should be treated as multifaceted constructs in quality management studies

Thirdly, this research provided a framework for the longitudinal study on Japanese quality management Continuing the work of Matsui (2002), this research investigated industry-effect and time-effect on ten specific quality management practices in Japanese plants In addition, effects of quality management practices on competitive performance were compared for both periods of study

Fourthly, this research provided an analytical framework for international comparison of quality management The similarities and differences of quality management practices were identified not only

by evaluating the degree of implementation of specific quality management practices but also by comparing their effects on different dimensions of quality performance Comparing the effects of quality management practices, on quality performance allow the researchers

to identify the critical determinants for product quality

This research found some statistical evidences related to the argument on “universality in applicability of quality management” mentioned in the cited literature We found the evidence of significant differences of quality management practices across the countries: the United States, Japan, Germany, Italy, and Korea In addition, evidence

of moderate effect of contextual factors on the implementation of quality management practices and JIT production practices was found These findings may lead to the conclusion that effective

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implementation of quality management practices should be contingent upon plant’s environment and characteristics Successful implementation of quality management depends on socio-economic situation, technological evolvement, and national culture The manufacturing plants should select and implement the quality management practices with respect to their customers and particular situations

The structure of this book is as follows: The first three sections present the introductions, quality management literature, and analytical framework of this study Chapter 4 is entitled as “Quality Management Practices and Competitive Performance: Empirical Evidence from Japanese Manufacturing Plants.” Chapter 5 is entitled as

“International Comparison on Quality Management Practices in Manufacturing Companies: Empirical Evidence from the United States, Japan, Germany, Italy, and Korea.” Chapter 6 is entitled as “Empirical Study on Effect of Quality Management Practices and Just-in-Time Production Practices on Competitive Performance in Manufacturing Companies.” Chapter 7 is entitled as “The relationship between Quality

Management Practices and Their Effects on Competitive Performance.”

Finally, Chapter 8 concludes this research by discussing its limitations, contributions to quality management studies, implications for quality practitioners, and suggesting directions for future research

This book would be used for business administration courses at bachelor and master levels, especially useful for the following modules: Management, Quality Management, Operations Management, Innovation and Creative Management, and International Business It covers the essentials that lecturers, researchers, and business managers need to know in teaching, researches, and practices about quality management

The author would like to express his sincere thanks to the colleagues at the HPM Project and Research, Center of Business Administration Studies (CBAS), Economics University, Hanoi National University, and especially Professor Yoshiki Matsui, Faculty of Business Administration, National University of Yokohama for their cooperation,

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encouragement and suggestions during the research process As shortcomings are not unavoidable in compiling this book, the author would like to welcome comments and opinions from the readers to help us further study the issues of productivity and quality in Vietnam

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LIST OF TABLES

Table 2.1: Summary of Major Instruments for Measuring the

Degree of the Use of Quality Management Practices 29 Table 2.2: Summaries of Studies on the relationship between

Quality Management and Organizational Performance 35 Table 3.1: Characteristic of Survey’s Respondents in “5 Countries

Sample” 51 Table 3.2: Survey Respondents 54 Table 3.3: Measurement Analysis of Individual Scales for Japanese

Sample 59 Table 3.4: Measurement Analysis of Individual Scales

for Country-Wise Samples and Pooled Sample 61 Table 3.5: Correlation Analysis-Five Countries Sample 63 Table 3.6: Measurement Analyses of Super Scales — Five Countries

Sample 63 Table 3.7: Measurement Analysis of Quality Performance

and Competitive Performance 65 Table 4.1: Characteristic of Survey’s Respondents in Japanese

Sample 76 Table 4.2: Quality Practices in Japanese Plants between 1990’s

and 2000’s 78 Table 4.3: Testing for Industry- Effect on Quality Management

Practices in Japanese Plants 83 Table 4.4: Testing for Time- Effect on Quality Management

Practices in Japanese Plants 83 Table 4.5: Test for Industry- Effect and Time- Effect on Quality

Management Practices in Japanese Plants 84 Table 4.6: Competitive Performance in Japanese Plants

in 1990’s and 2000’s 85

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Table 4.7: Correlation Analysis of Quality Management and

Competitive Performance in Japanese Plants 86

Table 4.8: Stepwise Regression Analysis on Relationship between Quality Management and Competitive Performance in Japanese Plants 88

Table 5.1: Quality Management Practices Classified by Countries 104

Table 5.2: Post-hoc Tukey Test Values for Country Comparison 105

Table 5.3: Correlation Analysis of Quality Practices and Quality Performance 109

Table 5.4: Regression Analysis with Country Dummy Variables (US, GER, ITA, KOR) 115

Table 5.5: Regression Analysis of Product Performance (PERF) 121

Table 5.6: Regression Analysis of Product Features (FETR) 122

Table 5.7: Regression Analysis of Product Reliability (RELB) 123

Table 5.8: Regression Analysis of Conformance to Standards (CFSD) 124

Table 5.9: Regression Analysis of Product Durability (DURB) 125

Table 5.10: Regression Analysis of Serviceability (SRVA) 126

Table 5.11: Regression Analysis of Aesthetics (AEST) 127

Table 5.12: Regression Analysis of Perceived Quality (PCQT) 128

Table 6.1: Summary of Literatures of Quality Management and JIT Production 137

Table 6.2: Correlation Analysis 146

Table 6.3: Quality Management Practices Classified by Groups 149

Table 6.4: JIT Production Practices Classified by Groups 149

Table 6.5: Competitive Performance classified by High and Low Implementation of Quality Management Practices 150

Table 6.6: Competitive Performance classified by High and Low Implementation of JIT Production Practices 150

Table 6.7: Testing the Difference in Competitive Performance between High and Low Implementation of Quality Management Practices 151

Table 6.8: Testing the Difference in Competitive Performance between Higher and Lower Implementation of JIT Production Practices 152

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Table 6.9: Testing the Difference in Competitive Performance

between Higher and Lower Implementation of Both Quality Management and JIT Production Practices 153 Table 6.10: Quality Management Practices and JIT Production

Practices Classified by Plant Size 155 Table 6.11: Quality Management Practices and JIT Production

Practices Classified by Production Type 157 Table 6.12: Effect of Contextual Factors on Implementation of

Quality Management Practices and JIT Production Practices 158 Table 7.1: Correlations and Descriptive Analysis 175 Table 7.2: Summary of Path Analysis (Relationship among

Quality Management Practices) 178 Table 7.3: Summary of Path Analysis (Relationship between

Quality Management Practices and Competitive Performance) 179 Table 7.4: Decompositions of Path Coefficient and Model Fits 180

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LIST OF FIGURES Figure 3.1: Research Framework of Study on Effects of Quality

Management, JIT production, Quality Performance and Competitive Performance 43

Figure 4.1: Framework of Study on Japanese Quality Management 70

Figure 5.1: Framework of Comparative Study on Relationship of

Quality Management and Competitive Performance 99

Figure 6.1: Analytical Framework of Study Quality Management

and 140

Figure 7.1: Proposed Framework 172

Figure 7.2: Summarization of Direct Effects among Variables 111

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INTRODUCTION

1.1 Motivation and Objectives of This Research

Quality is a critical success factor for competition in global markets From the perspective of competitive strategy, quality is often seen as a source of differentiation Quality management consists of a set of systematic activities to improve the quality level of products and works through customer orientation, continuous quality improvement, employees’ involvement, etc so as to establish and sustain a competitive advantage Quality management principles, procedures, and techniques have been widely accepted, applied, and studied In recent years quality management became one of the most significant research themes in operations management The relationship among quality management, quality performance, operational performance, and financial performance has been widely investigated by many scholars, who agreed that quality management practices have a significant effect on quality and operational performances Some of them suggested that, however, the effect of quality management practices on business performance are contingent on some external factors such as the national culture, market environment, and

organizational context (Rungtusanatham et al., 2005; Flynn and Saladin, 2006, Zhao et al 2006) Quality management studies have

utilized different analytical frameworks, measurement constructs, and methodologies so far A decade ago Filippini (1997) suggested that

“there were, and still are, many questions left unanswered, among which are: the component of total quality and their measurements, the impact of different practices on performance, condition under which various interventions can be applied and their effects” More recently, Sousa and Voss (2002) conducted an intensive review the existing quality management literature and suggested that three areas of quality

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management need more studies They include the linkages between the several quality management practices, interactions between quality management and other best practices, and relations between the implementation of quality management practices and performance In order to meet this requirement, this research investigates the relationship between quality management practices and competitive performance in the context of manufacturing plants The objectives of this research are to contribute to quality management by conducting several studies in the following areas:

- To study the interrelationships among quality management practices, particularly relations between human resource management/strategy-oriented practices (infrastructure practices) and techniques/process-oriented aspects (core quality practices) as suggested in the cited literature of quality management

- To investigate the direct and indirect effects of specific quality management practices on different dimensions of competitive performance

- To study the international aspect of quality management for better understanding the argument on “universality in applicability of quality management.”

- To study the relationship among quality management and other manufacturing management systems to know whether integrated implementation of quality management practices and other improvement practices yield a synergy effect on competitive performance of manufacturing plants

1.2 Research Methodology

The empirical research method is a useful approach to fill the gap

between operations management theory and practices (Flynn et al.,

1990) Since the 1980s, the operations management discipline has witnessed increased deployment of empirical research particularly survey research These empirical studies provided rich contributions to the literature of operations management Many empirical studies on

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quality management have been conducted since 1990s The early stages

of empirical research in quality management created constructs for measuring quality management practices and performance, which are reflected in the evaluation criteria used for the national quality awards, such as the Malcolm Baldridge National Quality Award in the United States and the European Quality Award Using these constructs, many scholars have examined the relationship between quality management practices and performance This study would like to adopt the survey research method to accomplish the objectives mentioned in the previous subsection A framework of using measurement constructs for quality management practices and competitive performance in manufacturing plants is introduced and tested later in Chapter 3 This research is organized in four complementary sub-studies which focus on investigating the relationship among quality management practices, JIT production practices, quality performance, and competitive performance from different perspectives

The first sub-study focuses on Japanese quality management Japanese manufacturing organizations started their growth path by implementing company-wide quality improvement activities since 1950s The successful implementation of quality management was a critical factor enabling Japanese manufacturing plants to achieve the outstanding performance during 1970s-1980s, which was studied by many scholars both inside and outside Japan The first sub-study continues this stream by investigating the implementation of quality management practices and their effect on competitive performance during 1990s-2000s when Japanese economy encountered several crises This study intends to answer the following research questions:

- Is there any difference and similarity in quality management practices among different Japanese industries recently?

- Is there any difference and similarity in Japanese quality management of manufacturing plants during 1990’s and 2000’s?

- Does the Japanese quality management still contribute to competitive performance of the manufacturing plants?

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Analysis of Variance (ANOVA) and regression techniques were used

to explore the questions The findings of this study highlight the robustness and stability of quality management practices and their significant effects on competitive performance of Japanese manufacturing plants

The second sub-study focuses on the international aspect of quality management It aims to investigate “the universality in applicability of quality management” by comparing the quality management practices in manufacturing plants across the developed countries such as the United States, Japan, Germany, Italy, and Korea This sub-study focuses to answer the following research questions:

- Is there any difference or similarity in the implementation of quality management practices among countries?

- Is the effect of quality management practices on different dimensions of quality performance similar across the countries?

Simple correlation analysis and regression analysis were conducted for answering the questions, which indicated the significant impacts of quality management practices on different dimensions of quality performance In addition, significant differences on determinants of quality performance across the countries were detected

The third sub-study focuses on investigating relations between two improvement programs in manufacturing plants: quality management and JIT production The research question is “Does the simultaneous implementation of quality management and JIT production yield a synergy effect on competitive performance?” Correlation analysis and Analysis of Variance (ANOVA) technique were used to answer the question The results indicate that the simultaneous implementation of quality management and JIT production practices result in significantly higher competitive performance than the implementation of practices from either quality management or JIT production

The fourth sub-study focuses on analyzing the direct and indirect relations among quality management practices and effects of these practices on different dimensions of competitive performance by

on competitive performance was found

This research is based on the database of the High Performance Manufacturing (HPM) Project This is an ongoing international research project which focuses on studying the “best practices” and their contributions to high performance Several empirical studies on quality management have been already conducted based on the HPM database In this research, the first sub-study was accomplished by analyzing the data which had been gathered from two surveys including the common sample of twenty-seven Japanese manufacturing plants in 1993-1994 and 2003-2004 The second, third and fourth sub-studies were accomplished by analyzing the data which had been gathered from one hundred and sixty-three manufacturing plants in five countries: the United States, Japan, Germany, Italy, and Korea Prior to addressing these questions, measurement scales had been tested against reliability and validity

1.3 Structure of the Book

The structure of this book is as follows First, the intensive literature review of empirical studies on the relationship between quality management and competitive performance is summarized in Chapter 2 It presents the development of the quality management constructs and the utilizations of these constructs in empirical studies

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on the relationship among quality management practices and competitive performance Chapter 3 summarizes the analytical framework and research variables, which are followed by descriptions

of data collection and measurement analysis From Chapter 4 to Chapter 5, four complementary sub-studies are presented respectively Chapter 4 is entitled as “Quality Management Practices and Competitive Performance: Empirical Evidence from Japanese Manufacturing Plants.” Chapter 5 is entitled as “International Comparison on Quality Management in Manufacturing Companies: Empirical Evidence from the United States, Japan, Germany, Italy, and Korea.” Chapter 6 is entitled as “Empirical Study on Effect of Quality Management Practices and Just-in-Time Production Practices on Competitive Performance in Manufacturing Companies.” Chapter 7 is entitled as “The relationship between Quality Management Practices

and Their Effects on Competitive Performance.” Finally, Chapter 8

concludes this research by discussing its limitations, contributions to quality management studies, implications for quality practitioners, and suggesting directions for future research

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LITERATURE REVIEW

Quality management was born almost three decades ago with the core ideas of W Edwards Deming, Joseph Juran, Philip Crosby, and Kaoru Ishikawa Since then, it has become a management philosophy finding its way into most sectors of today’s business society (Sousa and Voss, 2002) Many companies have now embedded quality management practices into their normal operations Study on the relationship between quality management and competitive performance has received a high degree of attention in extant literature Several research papers attribute superior firm performance

to adoption of quality management practices In this chapter, the author would like to summarize the recent empirical literatures on the relationship between quality management and competitive performance, which could be used later as a foundation for developing the framework of this research

Much has been written about how quality should be measured, controlled, and improved In the early stages of empirical research on

quality management, Saraph et al (1989) pioneered the effort to

validate Total Quality Management (TQM) constructs using the quality prescriptions of quality gurus They described quality management by such measures as management leadership, role of quality department, training, product/service design, supplier quality management, process management, quality data and reporting, employee relation More

recently, Flynn et al (1995) used practitioner-oriented and empirical

literatures to develop a quality management framework for manufacturing companies, including top management support, workforce management, quality information, supplier involvement, product design, process flow management, and customer involvement

Based on Deming’s works, Anderson et al (1995) measured quality

28

management by such instruments as: visual leadership, internal cooperation, employee fulfillment, learning, and process management

Ahire et al (1996), based on conceptual, empirical, and

practitioner-oriented literatures, have developed the instrument for quality management, using top management commitment, supplier quality management, supplier performance, customer focus, statistical process control, benchmarking, and internal quality information usage Table

2.1 compares four major studies (Saraph et al., 1989; Anderson et al., 1995; Flynn et al.1995; Ahire et al., 1996) and provides an approximate

correspondence between the quality management practice constructs that were identified These constructs are all present in the frameworks used for national quality awards, such as the Malcolm Baldrige National Quality Award in the United States and the European Quality Award (Sousa and Voss, 2002)

Table 2.1: Summary of Major Instruments for Measuring the Degree of the Use

of Quality Management Practices

Saraph et al (1989) Anderson et al

(1995) Flynn et al (1995) Ahire et al (1996)

Main literature

base

Theoretical work of quality gurus (Deming, Juran, Crosby, Ishikawa)

Deming’s work Practitioner and

Visionary Leadership Top management

support

Top management commitment

Customer relationship Customer focus Supplier quality

Supplier quality management

Saraph et al (1989) Anderson et al

(1995) Flynn et al (1995) Ahire et al (1996)

Training Employee relations

Internal cooperation Employee fulfillment Learning

Workforce management Work attitude

Employee involvement Employee empowerment Employee training

Process management

Process management

Process flow management SPC/feedback

SPC usage Infernal quality information usage

Design quality management Benchmarking

31

Using these constructs developed by Saraph et al (1989), Anderson

et al (1995), Flynn et al (1995), and Ahire et al (1996), many research

studies have examined the link between quality management practices and performance Scholars have investigated both direct and indirect effects of quality management practices on performance Many literatures highlight the positive impacts of quality management

practices on performance (Anderson et al., 1995; Flynn et al., 1995; Choi and Eboch, 1998; Das et al., 2000; Cua et al., 2001; Matsui, 2002;

Kaynak, 2003)

A review of literature indicated that the studies differed in terms of conceptualizing quality practices and firm performance Several studies operationalized QM as a multi-dimensional construct

(Anderson et al., 1995; Flynn et al., 1995; Powell, 1995; 1998; Forza and Flippini, 1998; Rungtusanatham et al., 1998; Samson and Terziovski, 1999; Das et al., 2000; Wilson and Collier, 2000; Cua et al 2001; Matsui,

2002; Kaynak, 2003) while others conceptualized it as a single construct (Choi and Eboch, 1998; Douglas and Judge, 2001)

Performance was also conceptualized in different way across studies (Nair, 2006) Some studies considered operational performance measured in terms of product quality, time performance, and inventory

performance (Flynn et al., 1995; Choi and Eboch, 1998; Forza and Flippini, 1998; Dow et al., 1999; Samson and Terziovski, 1999; Kaynak,

2003) and financial performance measured in terms of growth in

market share, profitability, return on assets (Powell, 1995; Das et al.,

2000; Wilson and Collier, 2000; Kaynak, 2003) Meanwhile, other studies

considered customer satisfaction measures (Anderson et al., 1995; Choi and Eboch, 1998; Forza and Flippini, 1998; Rungtusanatham et al., 1998; Wilson and Collier, 2000; Das et al., 2000) to capture performance

benefits accrued from quality management practices In some studies, a multidimensional operationalization of performance is considered (Das

et al., 2000; Wilson and Collier, 2000) while others considered performance as single construct (Anderson et al., 1995; Rungtusanatham

et al., 1998)

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The papers also differ in terms of level of analysis and research methodology used to test hypothesized relationships between quality management practices and firm performance Generally, it is observed that most of the studies have either focused on manufacturing plant-level data or on firm-level data for investigating the relationship between quality management practices and firm performance The methodologies considered for research investigations include path

analysis (Anderson et al., 1995; Flynn et al., 1995; Rungtusanatham et al., 1998); regression analysis (Samson and Terziovski, 1999), correlation analysis (Powell, 1995), discriminant analysis (Cua et al.,

2001), canonical analysis (Matsui, 2002), and structural equations

modeling (Choi and Eboch, 1998; Forza and Flippini, 1998; Dow et al., 1999; Das et al., 2000; Wilson and Collier, 2000; Kaynak, 2003) These

diversities exist in research methodologies, sample characteristics, and hypothesized relationships potentially lead to variations in study findings

Quality performance is a difficult concept to define precisely

(Flynn et al., 1995) Recently quality performance has been examined in

quality management studied as a multidimensional construct (Sousa and Voss, 2002) Garvin (1983) proposed a list of eight critical dimensions of quality dimension as follows:

Product Performance: primary operating characteristics of product Product Features: characteristics that supplement the basic functioning of the product

Product Reliability: the probability of product malfunctioning or failing within a specified period

Conformance to Product Standard: the degree to which the product’s design and operating characteristic meet established standards

Product Durability: amount of use before the product deteriorates

or needs to be replaced

Serviceability: the speed, courtesy, competence and ease of repair

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Aesthetics: how the product looks, feels, sounds, tastes or smells Perceived Quality: overall product quality perceived by customers based on image, brand name and advertising that makes inferences about quality

Competitive performance is an important issue on management studies Porter (1985) describes two distinct competitive advantages: low cost and differentiation, which may include quality, features, delivery, and service Hayes and Wheelwright (1984) suggested that there are five manufacturing - based competitive advantages: low cost, high quality, dependability, flexibility, and innovativeness Recently, there have been some attempts to conceptualize competitive performance as multidimensional construct (Sousa and Voss, 2002) In the framework of High Performance Manufacturing (HPM) Project, Schroeder and Flynn (2001) suggested a list of thirteen indicators of competitive performance as follows:

Unit cost of manufacturing

Conformance to product specifications

On time delivery performance

Fast delivery

Flexibility to change product mix

Flexibility to change volume

Inventory turnover

Cycle time (from raw materials to delivery)

Speed of new product introduction into the plant (development lead time)

Product capability and performance

On time new product launch

Productinnovativeness

Customer support and service

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This framework provides a broad-range of competitive performance indicators for manufacturing organization Many scholars have adopted this framework to study quality management and competitive

performance (Cua et al., 2001; Ahmad et al., 1999; Matsui, 2002, etc)

Table 2.2 shows the summary of recent empirical studies about quality management and competitive performance

Based on recent empirical literatures, some remarks on the relationship between quality management and competitive performance could be summarized as follows:

Quality management is an integrated, inter-functional approach of establishing and sustaining a competitive advantage In order to attain the excellences in competitive performance, manufacturing companies should implement quality management practices covering various perspectives such as top management support, human perspectives, strategy planning, process management, quality information analysis, supplier quality management, and customer involvement Those factors were found as the key determinants for improving competitive position of the companies as mentioned in cited literatures

The cited literatures indicate that competitive performance generally refers to the ability of a business organization to survive in a competitive marketplace by providing product or service that satisfy customer Beside market and financial perspectives, the operational performance with such indicators as conformance quality, design quality, manufacturing cost, delivery, and volume and product flexibility are the key performance indexes of manufacturing companies that strive for high competitive position

Table 2.2: Summaries of Studies on Relationship between Quality Management and Organizational Performance

Visionary leadership Internal and external cooperation Learning Employee fulfillment

Operating performance Customer satisfaction

Questionnaires Path analysis

Employee fulfillment has a significant direct effect on customer satisfaction

No significant relationship exists between continuous improvement and customer satisfaction

Flynn et

al (1995)

Multidimensional construct includes core

quality management practices and infrastructure practices:

Process flow management Product design process

SPC/feedback Customer relationship

Supplier relationship Work attitudes

Operating performance Quality market outcomes, Percent-passed final inspection with no rework Competitive advantage (Unit cost, fast delivery, volume flexibility, inventory turnover, cycle time)

Questionnaires Path analysis

-Process flow management and the product design process have positive effects on perceived quality market outcomes while internal measure of the percentthat passed final inspection without requiring rework is impacted by the process flow management

- Both perceived quality market outcomes and percent-passed final inspection with no rework have significant effects on competitive

information and analysis

Plant performance (Quality, cost, delivery) Customer satisfaction (Quality, cost, delivery)

Questionnaire Structural equation modeling

TQM practices have a stronger effect on customer satisfaction than they do on plant performance Plant performance fails to show significant impact on customer

Orientation towards quality TQM linked with customer

TQM links with supplier Process control Human resource

Two dimension of competitive performance:

Quality conformance Customer satisfaction

Questionnaire Structural equation modeling

Process control has a significant effect on quality conformance, and TQM links with customers has a significant effect on customer

Operating performance Product quality Customer satisfaction, Employee morale

Questionnaire Multiple regression analysis

Employee commitment, shared vision, and customer focus in combination has a positive impact

on quality outcomes Leadership, human resources management,

Productivity Delivery performance

and customer focus (soft factors) are significantly and positively related to operating performance

Dow et al

(1999)

Multidimensional construct:

Employee commitment

Shared vision Customer focus Use of team Personal training Cooperative supplier relations Use of benchmarking Use of advanced manufacturing system Use of JIT principles

Quality outcome Percentage of defects

at final assembly The cost of warranty claims The total cost of quality

An assessment of the defect rate relative to competitors

Questionnaire Structural equation modeling

Employee commitment, shared vision, and customer focus combine

to yield a positive correlation with

quality outcomes

Other practices such as benchmarking and use of advanced manufacturing system not significantly contribute to superior

quality outcomes

Cua et al

(2001)

Multidimensional construct:

Cross-functional product

design

Operating performance Quality Cost

Questionnaire Multiple discriminant analysis

The results of study indicate strong link between quality management practices and operating performance Integration of quality

Delivery Flexibility

management, JIT, and TPM should

be adopted for better performance

Matsui

(2002)

Multidimensional construct:

Cleanliness and organization Continuous improvement

Customer involvement Customer satisfaction Feedback Maintenance Process control Quality in new products Rewards for quality Supplier quality involvement Supplier quality involvement Top management

Competitive performance:

Unit cost of manufacturing, Quality of product conformance Delivery performance Fast delivery, Product mix flexibility Volume flexibility Inventory turnover Cycle time, Speed of new product introduction Customer support and service, Product capability and

Questionnaire Canonical analysis

Quality management is strongly influenced by certain organizational characteristics, human resource management, information systems, and manufacturing strategy, and that it plays an important role in determining the competitive performance of the manufacturing companies, partly through the impacts upon just-in-time production, information systems, and technology development Quality management depends on commitment, coordination of decision-making, task-related training for employees, small group problem solving, multi-functional employees, distinctive competence,

leadership for quality TQM link with customers

among others

Kaynat

(2003)

Multidimensional construct Management leadership

Training, employee relation Quality data& report Supplier quality management Process management

Product design

Financial & market performance Competitive performance Inventory performance

Questionnaire Structural equation modeling

Total quality management gives positive impact on financial and market performance through operating performance

Yeung et

al (2005)

Multidimensional construct:

Top management leadership Cultural elements Operational support systems Process control and improvement

Operational Performance Time-based operational efficiency Customer satisfaction Cost-related operational efficiency Business results Financial performance

Questionnaire Path analysis

Study indicated the chain effects on organization performance of four quality management modules Quality constructs are context dependent In electronic industry, process management and customer focus are more important than other elements

Quality leadership Quality information analysis Strategic planning Human resource Quality assurance of product and service Supplier quality General matters

Quality results Customer satisfaction

Questionnaire Analysis of variance Stepwise regression analysis

The study indicated the differences between critical success factors of quality management practices within the United States and Mexico In both countries social responsibility and supplier quality were found that significantly explain variability of quality results Similarities on effect of quality management practices on customer focus and satisfaction were found