International Research Journal of Engineering and Technology (IRJET)
e-ISSN: 2395-0056
Volume: 04 Issue: 07 | July -2017
p-ISSN: 2395-0072
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Effect of TQM Practices on Financial Performance through Innovation Performance - In Indian Manufacturing Context Farish K A1, Anu P Anil 2, Dr. Satish K P3 M.Tech Student, Dept. of Production Engineering, GEC Trichur, Thrissur, Kerala, India PhD Research scholar Dept. of Mechanical Engineering, GEC Trichur, Thrissur, Kerala, India 3 Professor, Dept. of Production Engineering, GEC Trichur, Thrissur, Kerala, India ---------------------------------------------------------------------***--------------------------------------------------------------------1
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Abstract - Total quality management (TQM) is a
services etc. All successful organizations adopt TQM in one form or other. It has helped people, organizations and nations to alter their destiny and attain superiority, prosperity, and international performance. In recent years, with the emergence of globalization, market competition, and the improvement in communication flows, total quality management (TQM) has become a crucial strategy for companies to maintain their market position Santos Vijande et al. (2007). At the same time, innovation has been widely used as a winning order criterion for companies to gain sustained competition and financial benefits.This study attempts to understand the effect of TQM practices on firm performance (financial performance (FP) and innovation performance (IP)), asking whether TQM practices foster or hinder the FP and IP. Even though there has been significant research into this area, the conclusions are still argued. For example, research scholars such as Prajogo and Sohal (2001) have debated that, organizations that implementing TQM practices will promote a rich situation for innovation, enable knowledge sharing, and introduce positive organizational change. Hence TQM practices are viewed as a driver for organizational innovation. But Slater and Narver (1994), and some others debate that total quality management practices obstruct creativity, as they involve the implementation of standards, which can grow into a “stickiness” regarding repeated or established procedures or processes; it is thus supposed that employees will be less likely to explore new way of changing. Some authors found that effectively implementation of TQM improved financial performance (Barker and Cagwin, 2000; Hendricks and Singhal, 2001b; York and Miree, 2004). However, some companies did not gain from TQM implementation. For example, Chapman et al. (1997), Yeung and Chan (1998) found from case studies that manufacturing companies with a quality management system in Hong Kong did not gain any financial benefits. Hence, its claims are debatable. From there, this study aims to investigate the direct and indirect effect of TQM practices on financial and innovation performance in the Indian
management approach of an organization, centered on quality, based on the participation of all its members and aiming at long term success through customer satisfaction and benefits to all members in the organization and to society. This study examines the direct and indirect effects of TQM practices on financial and innovation performance by using structural equation modelling (SEM). Previous literatures described different results of the relationship between TQM practices and these two performance measures. Thus, the scope of this study is to investigate the relationship between the TQM practices and organization performance more precisely, Indian manufacturing context. The data was collected from a survey of 260 Indian manufacturing organizations using a self-structured detailed questionnaire. Based on review of TQM literatures, 13 TQM constructs were identified and selected for this study. From results of the survey, the data was analyzed and hypotheses were tested using SEM. Overall, findings of this study highlight that, TQM practices has a direct and significant effect on both financial performance and innovation performance. The results also shows that, there is an indirect and significant effect of TQM practices on financial performance through innovation performance. The study also revealed that supplier quality management, continuous improvement, quality information analysis, quality assurance and knowledge management were perceived as the most dominant TQM practices associated with both financial and innovation performance.
Key Words:
Total quality management practices, Financial performance, Innovation performance, Structural equation modelling, Supplier quality management, Quality assurance.
1. INTRODUCTION Total Quality Management (TQM) is a system of managing quality in organizations in order to improve products and services. Crosby (1979) stated “QM is a logical way of ensuring that organized activities happen the way they are planned.”. It provides lasting solutions to the organizations plagued with problems of defects, high costs on account of rework and waste, and delayed delivery of products and
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