Relationship Between Quality Management Practices And Innovation

Abstract

The purpose of this study is to examine the associations among different quality management (QM) practices and investigate which QM practices directly or indirectly relate to five types of innovation: radical product, radical process, incremental product, incremental process, and administrative innovation. We test the proposed framework and hypotheses using empirical data from ISO 9001 certified manufacturing and service firms. The results show that a set of QM practices through process management has a positive relationship with all of these five types of innovation. It was found that process management directly and positively relates to incremental, radical, and administrative innovation. Organizational capability to manage processes may play a vital role in identifying routines, establishing a learning base, and supporting innovative activities. The findings also reveal that the value of an individual QM practice is tied to other QM practices. Therefore, highlighting just one or a few QM practices or techniques may not result in creative problem solving and innovation.

Keywords

Quality management practices;

Radical product innovation;

Radical process innovation;

Incremental product innovation;

Incremental process innovation;

Administrative innovation

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1. Introduction

Over the last 30 years, innovation has caught the attention of researchers and practitioners (Gatignon et al., 2002 and Damanpour, 1987). In a turbulent economic environment, innovation is a strategic driver in seizing new opportunities and protecting knowledge assets (Hurmelinna-Laukkanen et al., 2008 and Teece, 2000). Specifically, innovation plays a key role in providing unique products and services by creating greater value than was previously recognized and establishing entry barriers (Lloréns Montes et al., 2005). The importance of innovation has motivated researchers to identify the various driving forces of innovation (Becheikh et al., 2006). Some researchers contend that quality management (QM) could be one of the prerequisites of innovation (Hoang et al., 2006 and Perdomo-Ortiz et al., 2006). QM practices contribute to operational and financial performance, allowing a firm to achieve a competitive advantage (Lagrosen and Lagrosen, 2005 and Kaynak, 2003). It is not surprising that many manufacturing and service firms around the world (e.g., Xerox, Ford, Motorola, and Federal Express) have adopted QM over the last two decades (Rahman, 2004 and Powell, 1995).

Since the early 2000s, researchers have conducted empirical studies on the relationship between QM and innovation. While previous studies have provided interesting insight into the role of QM practices in innovation, a few shortcomings in these studies emerge from the literature review. First of all, earlier studies failed to explain which QM practices are directly or indirectly associated with innovation. Most studies examined only the direct relationship between QM practices and innovation. Researchers have tended to identify whether the implementation of QM practices is positively related to innovation (e.g., Abrunhosa et al., 2008, Martinez-Costa and Martinez-Lorente, 2008 and Hoang et al., 2006) or which QM practice is directly related to innovation (Moura et al., 2007 and Prajogo and Sohal, 2004). Second, researchers were limited to assessing only a few types of innovation. Some studies examined a single type of innovation, such as process innovation (e.g., Abrunhosa et al., 2008) or product innovation (e.g., Prajogo and Sohal, 2004), whereas others explored both process and product innovation (e.g., Feng et al., 2006 and Martinez-Costa and Martinez-Lorente, 2008). Looking at the earlier studies, two questions arise: Is it worthwhile to examine QM practices that can lead to only product and process innovations? If not, what other types of innovation should be explored to clearly address an association between QM and innovation? These studies devoted only limited attention to examining various types of innovation. This narrow view of innovation may be a barrier that causes a misunderstanding of the contribution of QM to innovation. The multidimensional types of innovation need to be tested to correctly understand the real value of QM on innovation. Third, earlier studies on the relationship between QM and innovation have provided inconsistent findings (See Appendix A). Some found that QM practices are positively related to innovation (e.g., Perdomo-Ortiz et al., 2006 and Martinez-Costa and Martinez-Lorente, 2008), whereas others concluded that there is no evidence linking QM activities and innovation (e.g., Singh and Smith, 2004, Moura et al., 2007, Prajogo and Sohal, 2004 and Santos-Vijande and Álvarez-González, 2007).

This study explores the following two questions: What relationship exists among QM practices? Which QM practices are directly or indirectly related to innovation? We concentrate on the research questions by conducting an empirical study of manufacturing and service firms. The objective of this study is to empirically investigate the relationships among QM practices and to explore which QM practices are directly or indirectly associated with five types of innovation: radical product, radical process, incremental product, incremental process, and administrative. The remainder of this study is organized as follows. The following section describes the extant literature, gives a research model, and presents hypotheses. The next section presents methodology, including data collection, measurement scales, measurement analysis, and hypothesis testing. Finally, this study concludes with a discussion, notes the implications of the results, and gives suggestions for future research.

2. Theoretical background and hypotheses

This section discusses four topics: QM practices, classification of innovation, the relationship between QM and innovation, and a research model.

2.1. QM practices

QM is a holistic management philosophy that fosters all functions of an organization through continuing improvement and organizational change (Kaynak and Hartley, 2005). QM captures features from distinct organizational models and extends them by offering principles, methodologies, and techniques (Spencer, 1994). Researchers emphasize that it is necessary for firms to define and develop QM practices that can assist a multi-dimensional management philosophy. QM practices refer to critical activities that are expected to lead, directly or indirectly, to improved quality performance and competitive advantage (Flynn et al., 1995).

Much attention in the research has been devoted to developing measurement constructs of QM and examining the association between QM practices and performance. Saraph et al. (1989) provide the first attempt to explore the measurement of QM practices (Perdomo-Ortiz et al., 2006). Their motivation is fuelled by the lack of a systematic attempt to organize a set of QM practices and the need to develop measures of the overall QM efforts in the literature. Using a survey of 162 general managers and quality managers, they propose and test eight critical factors of QM: the role of management leadership, the role of the quality department, training, employee relations, quality data and reporting, supplier quality management, product/service design, and process management. Similarly, Flynn et al. (1994), in their survey of 716 respondents, argue that QM studies on theory development and measurement failed to yield conclusive evidence related to validity and reliability. They suggest seven key dimensions of QM and scales: top management support, quality information systems, process management, product design, workforce management, supplier involvement, and customer involvement. Although there is little agreement on the list of QM practices (Samson and Terziovski, 1999), the efforts to develop a set of QM practices provide a theoretical foundation to scientifically connect traditional QM philosophies with practical activities.

The existing empirical research on the relationship between QM practices and performance is characterized by examinations of the interdependent nature of QM practices. Researchers view an organization to be a system of interlocking processes. The research, called linkage-oriented research, mainly tests associations among QM practices (Sila and Ebrahimpour, 2005). The linkage-oriented research relies on sophisticated analysis techniques, such as structural equation modeling, path analysis, and partial least square method (e.g., Flynn et al., 1995 and Ravichandran and Rai, 2000) because the research mainly includes a complex research model with many variables. Actually, researchers have provided mixed findings on the relationships among QM practices. We, however, find two common views in the literature. The first view is that the successful implementation of QM can be attributed to the strong support of a combination of a series of practices, not just a few practices separately (Ravichandran, 2007, Nair, 2006, Schendel, 1994 and Douglas and Judge, 2001). The second view is that QM practices could lead to improved performance in areas such as quality, operations, innovation, and business results (Flynn et al., 1995, Ravichandran and Rai, 2000, Hoang et al., 2006 and Kaynak, 2003). We regard these views as basic assumptions in this study.

2.2. Classification of innovation

Innovation refers to new applications of knowledge, ideas, methods, and skills that can generate unique capabilities and leverage an organization's competitiveness

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