Total Quality Management Performance in Multinational Companies - A Learning Perspective PDF
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TQM
27,3
Total quality management
performance in multinational
companies
328
A learning perspective
Received 7 January 2014
Revised 3 June 2014 Daniel Jimnez-Jimnez and Micaela Martinez-Costa
Accepted 11 June 2014 Departamento de Organizacin de Empresas y Finanzas,
Universidad de Murcia, Murcia, Spain
Angel R. Martnez-Lorente
Departamento de Economa de la Empresa,
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Abstract
Purpose Multinational corporations face a more intense competence and a higher number of changes in
the different countries they operate. In this regard, organizational learning and quality management are key
elements that could help them to survive in the market. Convinced by the numerous benefits and competitive
potential of total quality management (TQM) programmes, corporations have promoted its implementation.
The purpose of this paper is to analyse the interaction between these programmes and organizational
learning, more precisely with exploitation and exploration capabilities, in order to understand the way in
which quality management programmes could help to develop learning in the companies.
Design/methodology/approach Structural equation modelling was used to test the proposed
model. The sample comprised 111 medium-sized Spanish companies, with four different responses
each. Constructs are measured with Likert scales previously tested in the literature.
Findings The results show that TQM is positively and strongly related to both exploitation and
exploration and that the relationship between TQM and exploitation is higher. Concerning the effects
of exploitation and exploration on firm performance; results of the analysis show that only exploration
capability positively affects organizational performance. It is also confirmed a positive effect of a TQM
system in performance.
Originality/value This research covers a gap in the literature regarding the relationship between
organizational learning and TQM, particularly with the concepts of exploitation and exploration in the
context of multinational companies.
Keywords Total quality management, Multinational companies, Exploration, Exploitation,
Performance improvement
Paper type Research paper
1. Introduction
The environment in which companies operate nowadays is changing and dynamic; and
consequently, surviving in it becomes a firms main goal (Millson and Wilemon, 2002;
Ali, 2000; Garrett et al., 2009). Multinational companies (MNCs) are considered to have
The TQM Journal better opportunities to acquire and exploit knowledge than domestic organizations
Vol. 27 No. 3, 2015
pp. 328-340
Emerald Group Publishing Limited
1754-2731
The authors acknowledge the funding received from the Spanish Ministry of Science and
DOI 10.1108/TQM-01-2014-0002 Technology (research project ECO2009-12825) to undertake this research.
since they are open to new experiences, markets, cultures, and ideas (Bonache and Total quality
Zrraga-Oberty, 2008). Many organizational theories have been formulated along the management
recent knowledge-based economy, seeking an answer to the most organizational
effective credentials to cope with change requirements. This paper draws on
performance
knowledge-based (Grant, 1996) and quality-based (Deming, 1981) views. Both in MNCs
approaches prioritize organizational learning and improvement as an efficient tool
for monitoring internal and external surroundings, and then generating performance. 329
The general conclusion of total quality management (TQM) and organizational
performance literature indicates positive interactions. The implementation of a TQM is
a key source of competitive advantages (Terziovski and Samson, 2000; Martinez-
Lorente et al., 2000; Martnez-Costa and Jimnez-Jimnez, 2008a, b; Hung et al., 2011).
Although quality management is a key determinant of success in competitive
environments such as nowadays ones (Deming, 1981), according to some authors
(Slater and Narver, 1995; Andreu and Ciborra, 1996; Baker and Sinkula, 1999; Akgn
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et al., 2006; Barney, 1991) learning is the most influential competitiveness source
mechanism. However, the literature studying their connexions is scarce. The present
paper deals with an empirical study tackling the simultaneous effect of both TQM and
learning capabilities on firm performance. More precisely, the main purpose of this
contribution is to empirically analyse if organizational learning capabilities and TQM
simultaneously affect firm performance. This means to examine if TQM fosters
performance through organizational learning capabilities enhancement. Additionally,
the direct implications of TQM and exploitation/ exploration capabilities in organizational
performance are studied. In doing so, a proposed model explaining these relationships is
empirically checked.
The paper begins with a literature review pointing out the current state of literature
about TQM, organizational learning capabilities (i.e. exploitation/exploration), and
performance. Work hypotheses are posed after reviewing literature. Next, the methodology
to test hypotheses is explained and finally results, findings, implications, limitations, and
the potential future research lines are provided.
2. Literature review
MNCs are considered to have better opportunities to acquire and exploit knowledge
than domestic organizations since they are in contact with different sources of
knowledge in different countries (foreign suppliers, customers, competences,
institutions, etc.). Some authors even affirm that there is a relationship between the
degree of internationalization and performance (Riahi-Belkaoui, 1998; Gomes and
Ramaswamy, 1999; Yip et al., 2000; Cadogan et al., 2002), what suggest that MNC could
attain better competitive advantages than local companies.
A TQM implementation could provide MNC a philosophy that focuses on customer
satisfaction, continuous improvement and the concept of the company as a whole
system (Dean and Snell, 1991), in order to develop successful products and processes
for different markets and countries.
Hendricks and Singhal, 2001b). A recent paper (Zhang and Xia, 2013) have replicated
the longitudinal study of Hendricks and Singhal (1997) to explore whether the results
were still relevant and found that results were largely consistent. This is a confirmation
that TQM is still useful in the new competitive environment.
The first hypothesis of the present study arises as a new confirmation about the
effect of a TQM system in the company performance:
H1. The implementation of a TQM programme increases firm performance.
2.2 The mediation of exploitation and exploration
Exploitation and exploration are widely cited in literature as learning mechanisms
(March, 1991; Benner and Tushman, 2003; Andriopoulos and Lewis, 2009; Gupta et al.,
2006) or learning capabilities (Yalcinkaya et al., 2007; Auh and Menguc, 2005; Lisboa
et al., 2011). The present paper; adopts the classification offered by Yalcinkaya et al.
(2007) subdividing the learning capabilities into two main categories: exploitation and
exploration capabilities. A similar adoption was assumed by Lisboa et al. (2011) and
Auh and Menguc (2005), considering exploitation and exploration to be the two main
organizational learning capabilities.
Examining the organizational internal and external learning focus; March (1991)
defines exploitation as an enhancement-focus learning, while he presents exploration to
be a new alternatives seeking learning mechanism. In other words, exploitation is a
localized learning whilst exploration seeks innovative and ground-breaking ideas
and forms as a kind of learning-by-experimentation (Kim et al., 2011). Moreover,
exploration entails activities such as search, variation, risk-taking, discovery,
innovation, and research and development, while exploitation includes activities
such as the reuse, reorganization, re-enhancement, refinement, production, efficiency,
selection, implementation, and execution of existing assets and competences (March,
1991; Benner and Tushman, 2003; Auh and Menguc, 2005).
Although many scholars have pointed out the rewards and importance of
exploitation, there are also negative views that consider that a too much focus
on exploitation carries some strategic risks. In this regard, Raisch et al. (2009) pointed
out that a focus on exploitation activities likely hinders the development of new
knowledge and processes. March (1991) points out that firms that neglect exploration
and focus on exploitation may lack the capability to adapt to an evolving environment.
Levinthal and March (1993) consider that exploitation is inherently self-reinforcing,
causing a success trap, which hinders exploration activities.
An important aspect of the TQM approach is orientating companies to know their Total quality
weaknesses and strong points, involving new organizational measures in order to management
enhance their operations and then generate performance. Barrow (1993) and
Martnez-Costa and Jimnez-Jimnez (2008a, b) concluded that organizational learning
performance
is an important outcome of TQM. However, matching the above-mentioned definitions, in MNCs
delimitations and implications of exploitation, exploration and TQM, clearly allows
recognizing the stretchiness of the main goals of exploitation and TQM system 331
implementation. The tenet of both prioritizes the improvement of routines reusing the
existing assets within companies. In this regard, the second hypothesis of the present
research is stated as follows:
H2. Exploitation capability plays a mediator role in the relationship between TQM
and performance.
In contrast with exploitation, exploration begins from the logic of creating new
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knowledge and strategic competences and new tools; and require fresh organization
(Benner and Tushman, 2003; Lynn et al., 1996). It relies basically on outsourcing
(March, 1991), and reflects the experimentation of totally different technological
trajectories (Benner and Tushman, 2003), or experimentation with new alternatives
(Yamakawa et al., 2011). Moreover, requires a flexible organizational form, a creativity-
stimulating culture, and the ability of appreciating longer term and uncertain
outcomes. Exploration has been associated with flexibility and decentralization
cultures (Benner and Tushman, 2003), and results from experimentation, flexibility,
and divergent thinking (March, 1991).
Many scholars have argued the effects that exploration has on organizational
performance, as it a process of knowledge development. However, others consider that
it is a risky and uncertain activity, claiming that a too much focus on exploration
involves many risks (March, 1991). In this sense, Raisch et al. (2009) pointed out that a
focus on exploration activities likely fosters the development of new knowledge and
processes, March (1991) points out that firms that neglect exploration and focus on
exploitation may lack the capability to adapt to an evolving environment. Renewing
firms technological and organizational assets base is susceptible to increase firm
performance through the new knowledge and other assets acquired.
In this paper it is argued that exploration could complement TQM systems, with
positive interactions between the practices of both patterns. Avoiding the failure trap
defined in Levinthal and Marchs (1993), exploration capability may provide the
missing corner of TQM practices. In this regard it has been stated the third hypothesis:
H3. Exploration capability plays a mediator role in the relationship between TQM
and performance.
3. Methodology
3.1 Population
The population used in this study includes MNC Spanish manufacturing organizations
with between 50 and 500 employees according to SABI (Sistema de Anlisis de
Balances Ibricos) database. This study was designed to cover a wide spectrum
of industries.
The information was collected with a structured questionnaire via a web page
designed for this purpose. Multiple informants from each company have been used
enhancing the validity of the research findings. Four managers in the same company
TQM answered the survey (supply, production, marketing, and human resource managers).
27,3 Every manager answered to a common part of the questionnaire (i.e. performance
measures) and a specific part (i.e. operation managers provide information about
TQM; and marketing managers answer exploitation and exploration information).
In total, 444 questionnaires were collected (four for each one of the 111 companies that
participated on the study).
332
3.2 Measures
This study used existing scales taken from former works within the same field.
TQM. The scale of Flynn et al. (1994) was adopted to measure TQM implementation
in organizations.
Exploitation and exploration capabilities. Different scales have been used for
measuring exploitation and exploration (Rosenkopf and Nerkar, 2001; Katila and
Ahuja, 2002; Sidhu et al., 2004; He and Wong, 2004). Some papers used a combined
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27,3
334
TQM
Table I.
Construct
correlation matrix
Reliability Correlation matrix
Construct Mean SD Cronbach SCRa AVEb 1 2 3 4 5 6 7
1. TQM 4.128 0.331 0.813 0.878 0.512 1
2. Exploitation capability 3.189 0.660 0.916 0.922 0.706 0.462 1
3. Exploration capability 3.404 0.505 0.893 0.894 0.629 0.363 0.305 1
4. Performance 4.038 0.355 0.841 0.854 0.601 0.652 0.338 0.470 1
5. Internationalization 3.009 1.411 0.110 0.154 0.031 0.235 1
6. Age 3.288 1.371 0.317 0.345 0.295 0.342 0.055 1
7. Size 3.234 1.414 0.167 0.250 0.017 0.055 0.097 0.143 1
2
Notes: Fit statistics for measurement modelPof 21 indicators for four constructs:
P (183) 312.902; BBNFI 0.940; GFI 0.875; RMSEA 0.060; CFI 0.948;
a 2 P 2 b P 2 P 2
IFI 0.948.
P Scale composite reliability (rc=( i) var ()/ [( i) var () + yii]; (Bagozzi and Yi, 1998)); average variance extracted (rc=( i var ())/[ i
var () + yii], (Fornell and Larcker, 1981))
The results show that TQM is positively and strongly related to both exploitation and Total quality
exploration and that the relationship between TQM and exploitation is higher. This, in management
turn, explains the nature and main targets of TQM as a processes management system
that are basically exploitative more than explorative (Benner and Tushman, 2003).
performance
However, this study indicates that TQM, exploitation and exploration are compatible in MNCs
and fit each other, as they have many common intersections in nature
and application. 335
Moreover, based on the previously argued relationship, TQM, in addition to its
argued benefits, can serve as an organizational learning platform for increasing firm
results and performance.
Although, the findings underline a higher relationship between TQM and
exploitation, this cannot imply that companies adopting TQM should focus solely on
exploitative learning. TQM may induce and motivate leveraging the different internal
assets in concordance with the main target of TQM. However, there has not been found
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Internationalization
Size Exploitation
Age
Standard parameter
Linkages in the model Estimate t-value
TQMperformance 0.685 4.393***
TQMexploitation capability 0.461 4.059***
Exploitation capabilityperformance 0.129 1.354
TQMexploration capability 0.379 3.147***
Exploration capabilityperformance 0.216 2.442**
InternationalizationTQM 0.121 1.229
Internationalizationperformance 0.141 1.963**
AgeTQM 0.178 1.753*
Ageperformance 0.051 0.693
SizeTQM 0.328 3.141***
Sizeperformance 0.156 1.956*
Notes: Fit statistics for measurement model of 21 indicators for four constructs: 2(237) 360.766; Table II.
BBNFI 0.901; RMR 0.037; RMSEA 0.069; CFI 0.915; IFI 0.917. *p o0.1; **p o0.05; Construct structural
***p o0.01 model
TQM Broadly, TQM is seen as a quality operational enhancement model, able to generate
27,3 performance. The argued compatibility and positive interaction with exploitation
and exploration may open new gates towards a potential integration, to fulfil the
missing strategic dimension of TQM as the focus of the latter in mainly internal while
exploration targets external required assets and capabilities.
336
References
Adams, G., McQueen, G. and Seawright, K. (1999), Revisiting the price impact of quality
awards, Omega, Vol. 27 No. 6, pp. 595-604.
Akgn, A.E., Lynn, G.S. and Yilmaz, C. (2006), Learning process in new product development
teams and effects on product success: a socio-cognitive perspective, Industrial Marketing
Management, Vol. 35, pp. 210-224.
Ali, A. (2000), The impact of innovativeness and development time on new product performance
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Corresponding author
Dr Micaela Martinez-Costa can be contacted at: [email protected]
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