NEW RESEARCH TQM practices, …

1 NEW RESEARCHThe relationship between TQMpractices, qualityperformance, and innovationperformanceAn empirical examinationDaniel I. PrajogoBowater School of Management and Marketing, Deakin University,Greelong, Australia, andAmrik S. SohalDepartment of Management, Monash University, Caulfield East, AustraliaKeywordsTotal quality management, innovation , ModelingAbstractThis empirical study examines the relationship between total quality management(TQM) and innovation performance and compares the nature of this relationship against qualityperformance. The empirical data were obtained from a survey of 194 managers in Australianindustry encompassing both manufacturing and non-manufacturing sectors. The structuralequation modeling technique was used to examine the relationships between TQM and qualityperformance as well as innovation performance , simultaneously. The findings suggest that TQMsignificantly and positively relates to both product quality and product innovation performancealthough it appears that the magnitude of the relationship is greater against product quality .

2 Inaddition, significant causal relationships between quality performance and innovationperformance were found, suggesting that achievement of one aspect of performance couldimpact the IntroductionThe emergence of total quality management (TQM) has been one of the majordevelopments in management practice. The recognition of TQM as acompetitive advantage is wide spread around the world, especially in Westerncountries, and today very few (especially manufacturing) companies can affordto ignore the term TQM (Dean and Bowen, 1994). Despite numerous storiesabout TQM failures, previous empirical studies on the relationship betweenTQM and organizational performance , and in particular, quality , haveindicated strong and positive results (Ahireet al., 1996; Flynnet al., 1994;Samson and Terziovski, 1999). On the other hand, innovation has also receivedconsiderable attention as having a crucial role in securing sustainablecompetitive advantage in the current market (Tushman and Nadler, 1986).

3 The Emerald RESEARCH Register for this journal is available atThe current issue and full text archive of this journal is available athttp://www .emeraldinsight .com/researchregister http:// practices , quality andinnovation901 Received April 2002 Revised September 2002 Accepted September2002 International Journal of quality &Reliability ManagementVol. 20 No. 8, 2003pp. 901-918qMCB UP Limited0265-671 XDOI these two facts, there is a need to re-assess the role of TQM indetermining innovation performance . Several rationales behind this need are asfollows. First, as argued by several scholars (Bolwijn and Kumpe, 1990; Hameland Prahalad, 1994; Tiddet al., 1997), market conditions have changed, and sohas the basis of competition with quality being considered more as a qualifying criterion a term suggested by Hill (1985) and has beenreplaced by other aspects such as flexibility, responsiveness, and particularlyinnovation, which function as winning order criteria.

4 As a result, TQM as theprimary resource behind quality has also received a similar challenge in thesense that organizations would ask: should we continue to implement TQM asa management model in the future, particularly if we want to pursue a higherlevel of innovation performance ? Second, the need to address this inquiry isfurther substantiated by the fact that there are conflicting theoreticalarguments appearing in the literature with regard to the relationship betweenTQM and innovation with one group of arguments affirming that TQM is notcompatible with innovation because managing innovation is fundamentallydifferent from managing quality , as asserted below (Maguire and Hagen, 1999,p. 30):For quality practitioners, this explosion of innovation activity represents significantchallenges. While they can expect to see increased demand for some of their specializedknowledge and skills, they must be prepared to master new tools and techniques while alsogiving serious consideration to how quality may be redefined in this environment of rapidchange and rising customer extension of this claim is that organizations may need to choose betweenquality and innovation as they could not be successful with both.

5 Finally,despite the fact that a number of studies have been conducted on TQM, onlyvery few of these (Flynn, 1994; Gustafson and Hundt, 1995; McAdamet al.,1998) have been focused on testing the relationship between TQM andinnovation performance . This provides further opportunities for examiningthis the above reasons, this paper presents an empirical study with thefollowing objectives: to examine the nature of the relationship between TQMand innovation performance ; to compare the strength of this relationship withthat between TQM and quality performance ; and to examine the relationshipbetween quality and innovation remainder of this paper is structured as follows. Section 2 discusses thetheoretical argumentsconcerning the relationship between TQM andinnovation. Both positive and negative arguments in this respect arepresented. Section 3 presents the RESEARCH framework and RESEARCH 4 describes the empirical RESEARCH design and the development of theresearch instrument.

6 Section 5 presents the quantitative analysis, followed bySection 6 which presents the discussion of the findings. Section 7 concludes thispaper with several major conclusions drawn from the ,89022. Literature review on the relationship between TQM and innovationA review of the literature discussing the relationship between TQM andinnovation suggests that there are conflicting arguments concerning therelationship between TQM and innovation (Prajogo and Sohal, 2001).Arguments that support a positive relationship between TQM andinnovation contend that companies embracing TQM in their system andculture will provide a fertile environment for innovation because TQMembodies principles that are congruent with innovation (Dean and Evans, 1994;Kanji, 1996; Mahesh, 1993; Roffe, 1999; Tang, 1998). The principle of customerfocus encourages organizations to consistently search for new customer needsand expectations, and therefore, leads organizations to be innovative in termsof developing and introducing new products as a continual adaptation to themarket s changing needs (Juran, 1988).

7 Likewise, continuous improvementencourages change and creative thinking in how work is being organized andconducted. Finally, the principles of empowerment, involvement, andteamwork are also substantial in determining the success of contrast to the above arguments, several scholars reject the positiverelationship between TQM and innovation for the reason that it possessesprinciples and practices that could hinder innovation . Slater and Narver (1998)and Wind and Mahajan (1997) agree that a customer focus philosophy couldeasily lead organizations to focus only on incremental improvements in theircurrent products and service activities rather than trying to create novelsolutions. Consequently, this leads to the development of uncompetitive me-too products rather than the development of real innovation . Customerfocus, therefore, could build a tyranny of the served market in whichmanagers see the world only through their current customers eyes.

8 In this way,such firms could fail to explore customers latent needs. As a result, they fail todrive generative learning through the search for the unserved, untappedpotential in markets. Similarly, continuous improvement requires regulatorystandards and activities that are sufficiently routine to be well , control and stability is the core of the continuous improvement process(Imai, 1986; Jhaet al., 1996). Whilst standardization is necessary forconformance and error reduction, from the innovation point of view, it couldtrap people into staying with what is workable; resulting in rigidity (Glynn,1996; Kanter, 1983). In addition, Lawler (1994) and Samaha (1996) suggest thatthe concept of continuous improvement is basically aimed at simplifying orstreamlining a process and carrying it out in a better or faster manner. Such anapproach could be detrimental to innovation because companies maycontinually work upon, and improve, processes that are alreadyfundamentally contest of these opposing arguments can also be extended to addressthe relationship between quality performance and innovation performance ;TQM practices , quality andinnovation903whether they are positively associated with each other or not.

9 The implicationis that one can question whether organizations can excel in both types ofperformance, or they have to prioritize one over the other. Flynn (1994) notesthat the conventional wisdom suggests that fast product innovation andquality cannot be simultaneously achieved. Williams (1992) argues thatorganizations that focus their strategy on making frequent and fastinnovations would not have time to learn about the processes in order tostatistically control them to achieve a high level of it is difficult to accept that a company can be successful withinnovation if it cannot produce products that meet acceptable qualitystandards, it is argued here that in certain situations, companies have toprioritize quality over innovation or vice versa. This is particularly true whenindustry and market conditions are taken into consideration (Nowak, 1997).

10 3. RESEARCH framework and questionsBased on the above literature review, a RESEARCH framework is developed tosimultaneously examine the relationship between TQM practices and qualityperformance as well as innovation performance . The framework is presented inFigure primary RESEARCH questions of this study can be articulated as follows:RQ1. Do TQM practices that have been successfully proven assignificantly and positively related to quality performance have asimilar predictive power against innovation performance ?RQ2. Is there any significant relationship between quality performance andinnovation performance ? If yes, what is the nature of this relationship?4. RESEARCH instrumentIn designing a survey instrument, the use of constructs has played animportant role in management RESEARCH . Constructs or scales are defined aslatent variables that cannot be measured directly (Ahireet al.)