Journal of Operations Management 30 (2012) 437453

Contents lists available at SciVerse ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

Six Sigma adoption: Operating performance impacts and contextual

drivers of success
Morgan Swink a, , Brian W. Jacobs b,1
a
b

Neeley Business School, TCU, PO Box 298530, Fort Worth, TX 76129, United States
Broad College of Business, Michigan State University, N370 North Business Complex, East Lansing, MI 48824-1122, United States

a r t i c l e

i n f o

Article history:
Received 18 October 2011
Received in revised form 24 February 2012
Accepted 25 May 2012
Available online 4 June 2012
Keywords:
Six sigma
Process innovation
Operating performance
Event study

a b s t r a c t
We assess the operational impacts of Six Sigma program adoptions through an event study methodology,
comparing nancial data for 200 Six Sigma adopting rms against data for matched rms, which serve as
control groups for the analyses. We employ various matching procedures using different combinations
of pre-adoption return on assets (ROA), industry, and size as matching criteria. By comparing performance outcomes across a hierarchy of operating metrics, we establish a pattern of Six Sigma adoption
effects that provides strong evidence of a positive impact on ROA. Interestingly, these ROA improvements arise mostly from signicant reductions in indirect costs; signicant improvements in direct costs
and asset productivity are not evident. We also nd small improvements in sales growth due to Six
Sigma adoption. Cross-sectional analyses of the performance results reveal that distinctions in Six Sigma
impacts across manufacturing and service rms are negligible. Interestingly, we nd that the performance
impact of Six Sigma adoption is negatively correlated to the rms quality system maturity (indicated by
prior ISO 9000 certication). Further analyses of manufacturing and service rms reveals that Six Sigma
benets are signicantly correlated with intensity in manufacturing, and with nancial performance
before adoption in services. We discuss the implications of these ndings for practice and for future
research.
2012 Published by Elsevier B.V.

1. Introduction
Since its origins in the mid-1980s, the Six Sigma program
for process improvement has become widely embraced. One
report suggests that many Fortune 500 rms have adopted Six
Sigma (Nakhai and Neves, 2009). Early successes in high prole companies such as Motorola, Allied Signal (now Honeywell),
and General Electric helped to both popularize and legitimize
the approach, and dozens of books have been devoted to the
topic.
The practitioner literature documents substantial cost savings
and other benets from Six Sigma program adoptions (Pande
et al., 2000; Harry and Schroeder, 2000). However, some still
question whether these benets sufciently exceed the costs of
adoption. Corporate-wide adoption of Six Sigma often involves
considerable investments in consulting support, training, organizational restructurings, and associated information and reporting
systems. For example, over a four year period (19961999)

Corresponding author. Tel.: +1 817 257 7463.

E-mail addresses: m.swink@tcu.edu (M. Swink), jacobsb@bus.msu.edu
(B.W. Jacobs).
1
Tel.: +1 517 884 6370.
0272-6963/$ see front matter. 2012 Published by Elsevier B.V.
http://dx.doi.org/10.1016/j.jom.2012.05.001

General Electric reportedly spent more than $1.6 billion on Six

Sigma investments. Researchers report that training costs are typically as much as $50,000 per trained worker (Antony, 2006; Fahmy,
2006). The net operating effects of these types of investments
have not been rigorously examined. Most scholarly work to date
involves perceptual data from surveys, or nancial studies of a
few select companies (Goh et al., 2003; Zu et al., 2008; Gutierrez
et al., 2009; Braunscheidel et al., 2011). In fact, some writers have
even questioned the validity and originality of Six Sigma, calling it
repackaging, a fad, and a PR ploy (Clifford, 2001; Rowlands,
2003).
Other questions pertain to the types of benets provided by
Six Sigma, and their limitations. A number of researchers discuss
the potential for capability gains in one area of performance to be
offset by added constraints or losses in another. In particular, Six
Sigma potentially creates a trade-off between gains in efciency
versus growth. Several important studies suggest that process
improvement regimes can stie innovative exploration in favor
of exploitation, thus impeding sales growth (Abernathy, 1978;
Tushman and OReilly, 1996; Benner and Tushman, 2002, 2003;
Naveh and Erez, 2004). Moreover, recent anecdotes from companies like General Electric and 3 M indicate that managers believe
Six Sigma practices may severely constrain innovation needed to
drive growth (Brady, 2005; Hindo, 2007).

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M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

Limitations might also stem from the context within which Six
Sigma is adopted. Like many process improvement programs, Six
Sigma originated in manufacturing rms; many of its principles and
tenets were developed in a setting of asset-intensive, repeatable
processes. The name itself, Six Sigma, refers to limits in measurable variations of outputs that were established in Motorolas
manufacturing processes. In addition, researchers maintain that
a rm must possess certain resources and make certain commitments in order to make Six Sigma successful (Antony et al., 2008;
Schroeder et al., 2008). Hence, Six Sigma methods and tools may
be more or less effective in certain technological and operational
contexts.
In this article, we examine the operating performance impacts of
Six Sigma adoptions. The study seeks answers to the following three
research questions. First, does Six Sigma adoption consistently produce a signicant net effect on operating performance? Given the
widespread adoption and continued popularity of this program, we
consider this a very important question. A sizable literature on the
efcacy of other process management strategies exists, providing
mixed results. However, researchers argue that Six Sigma is different from other process management approaches; it is distinguished
by its requisite organizational structures, structured methods, and
emphasis on customer-oriented metrics (Linderman et al., 2003;
Sinha and Van de Ven, 2005; Schroeder et al., 2008). Given these
proposed distinctions, it is important to determine whether or not
managers should have reason to expect that Six Sigma will provide
benets that exceed alternative programs for improvement.
Our second research question addresses the nature of Six
Sigmas impacts. What types of benecial impacts are manifested in
the operating data of Six Sigma adopters? By examining the components of both prot and growth-oriented nancial outcomes of Six
Sigma adopters, we develop insights into the types of impacts provided by the program. These results serve to inform the debate over
the roles of process management programs in creating competitive
advantages for their adopters; they also point to some interesting
propositions for future research.
Our third research question is: are Six Sigma impacts related to
operating contexts? As Six Sigma adoptions have grown to include
a wider scope of businesses, researchers have begun to question
the applicability and effectiveness of related tools and techniques
in certain contexts. In addition, case studies and anecdotal evidence is suggestive of factors that may be critical to successful
implementation. We study differences in Six Sigma success associated with industry (manufacturing or service), labor intensity,
R&D intensity, prior operating performance, and quality maturity.
Our examination of these factors provides insights into the sources
of, and constraints on, process improvements emerging from Six
Sigma adoption.
We address the foregoing questions through an event study
methodology, comparing nancial data for about 200 Six Sigma
adopting rms against data for matched rms, which provide
control groups for the analyses. We employ various matching procedures using different combinations of pre-adoption operating
performance (measured by return on assets (ROA)), industry, and
size as matching criteria. By comparing performance outcomes
across a hierarchy of operating metrics, we establish a pattern
of Six Sigma adoption effects that provides strong evidence of a
positive impact on ROA. Interestingly, these ROA improvements
arise mostly from signicant reductions in indirect costs. Improvements in direct costs and asset productivities are not evident. We
also nd small improvements in sales growth due to Six Sigma
adoption. From cross-sectional analyses, we determine that performance improvement due to Six Sigma adoption is not signicantly
related to industry (manufacturing or service) or R&D intensity.
However, changes in performance are signicantly correlated with
the quality maturity of the adopting rms. Interestingly, rms with

greater quality experience (as indicated by ISO 9000 certication)

appear to benet less from Six Sigma. For rms in service industries,
operating performance before Six Sigma adoption is a signicant
determinant of performance changes. However, labor intensity is
the most signicant driver of performance benets in manufacturing rms.
In the next section, we formulate hypotheses relating Six Sigma
adoption to operating performance by drawing upon the literatures
on process improvement in general, and Six Sigma in particular.
Section 3 describes the sample data and event study method. Section 4 presents the results. Section 5 discusses the ndings and their
implications. Section 6 summarizes the conclusions and limitations
of the study, and identies opportunities for future research.
2. Theory development and hypotheses
Researchers have placed Six Sigma in the realm of operational
improvement programs that are oriented toward improvements in
quality or variability of process outcomes (Zu et al., 2008). There
are several scholarly studies of the impacts of process improvement programs, yet none provide a rigorous examination of Six
Sigma adoptions. The existing literature can be classied into
three streams addressing the performance impacts of: (1) general process management strategies (Ittner and Larcker, 1997;
Schmenner, 1991), (2) Total Quality Management (TQM) implementations (Hendricks and Singhal, 1996, 1997, 2001a,b; Ittner
et al., 2001; Powell, 1995; Sila, 2007; York and Miree, 2004; Nair,
2006), and (3) ISO 9000 and other quality certications (Corbett
et al., 2005; Martinez-Costa et al., 2009; Westphal et al., 1997;
Yeung et al., 2006; Naveh and Erez, 2004; Benner and Tushman,
2002; Benner and Veloso, 2008; Levine and Toffel, 2010). These
research streams provide an overall positive, though mixed, set
of conclusions regarding the effectiveness of respective process
improvement programs. Importantly, however, researchers have
argued that Six Sigma is distinguished from these other programs
by several characteristics.
2.1. The distinctive characteristics of Six Sigma
Researchers describe Six Sigma as a data driven approach to
problem solving, as a business process, as a disciplined statistical
approach, and as a management strategy (Blakeslee, 1999; Hahn
et al., 1999; Harry and Schroeder, 2000; Braunscheidel et al., 2011).
While these monikers have been applied to other process improvement strategies as well, proponents and researchers argue that
Six Sigma is different than other process improvement programs
because it is exclusively a customer-driven and data-dened system (Breyfogle, 2003). Schroeder et al. (2008) suggest that Six Sigma
must be different by virtue of the fact that it has been adopted by
many rms that had already possessed quite mature quality management processes (e.g., 3M, Ford, Honeywell, American Express).
Perhaps more compellingly, Schroeder et al. (2008) and Zu
et al. (2008) argue that, while Six Sigma shares some philosophical underpinnings and techniques with other quality and process
management approaches, it is distinguished by four attributes
of its unique organizational approach. Schroeder et al. (2008, p.
540) dene Six Sigma as an organized, parallel-meso structure
used to reduce variation in organizational processes by employing
improvement specialists, a structured method, and customeroriented performance metrics with the aim of achieving strategic
objectives. The typical parallel-meso structure for Six Sigma
includes a centralized ofce within the rm that oversees a dispersed training and project execution hierarchy. The central ofce
has several purposes. It creates an authority structure that acquires,
develops, and assigns resources for training and improvement

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

projects. It also usually assembles an executive team (or teams) that

sets criteria and guides improvement project selection (Carnell,
2003; Snee and Hoerl, 2003). In addition, this structure enables
top management engagement and status reviews (Schroeder et al.,
2008). By engaging high level managers in a centralized way, Six
Sigma projects are thought to be less myopic and more aligned with
business strategy. Finally, the structure purportedly affords more
effective diffusion of lessons learned from projects, thus creating
greater multi-level understanding (Sinha and Van de Ven, 2005).
Six Sigma programs involve a variety of both part-time and
full-time improvement specialists, including champions (executive project sponsors), master black belts, black belts, green belts,
and lower level designations. The different belts denote different
levels of training and experience with Six Sigma methods. Master black belts are typically full-time trainers and project mentors,
while black belts and green belts are workers who may apply Six
Sigma concepts and tools to drive improvements in their respective
areas of functional responsibility. Black belts often have the same
leadership characteristics as heavyweight project managers (Clark
and Fujimoto, 1991). This hierarchy of improvement specialists
is thought to enhance the coordination of work across organizational levels (Sinha and Van de Ven, 2005; Barney, 2002), and again
to ensure the matching of tactical tasks with business strategy
(Henderson and Evans, 2000; Linderman et al., 2003).
Six Sigma improvement projects follow a structured method
which has been recognized as a variation of the Plan, Do, Check,
Act (PDCA) cycle (Shewhart, 1931; Schroeder et al., 2008). The
Six Sigma method includes ve steps known as Dene, Measure,
Analyze, Improve, and Control (DMAIC). A variant of the method
used in design-oriented processes is Dene, Measure, Analyze,
Design, and Verify (DMADV). Choo et al. (2007) suggest that the Six
Sigma method provides an effective learning framework to guide
knowledge acquisition and to ensure that project team members
execute a more complete search of problem solving alternatives.
It also provides a common language enabling workers to effectively communicate project status and to make comparisons across
improvement efforts.
Finally, Six Sigma projects are guided and assessed by a mixture of common and unique performance metrics. In addition
to using typical nancial and operational project metrics, Six
Sigma applies unique measures including process sigma, criticalto-quality (CTQ) attributes, and defects per million opportunities
(DPMO). Researchers argue that such metrics establish challenging goals and guidance for project teams (Linderman et al., 2003;
Pande et al., 2000), that they focus on objective data which tend to
mitigate political agendas (Brewer, 2004), that they embody outcomes at business, process, and project levels, and ultimately that
they prioritize a customer focus.
2.2. Six Sigmas operating performance impact
While the popular press contains examples of both positive
and negative Six Sigma impacts on performance (e.g., Pande et al.,
2000; Harry and Schroeder, 2000; Chakravorty, 2010), few rigorous studies exist. A study of twenty rms by Goh et al. (2003)
indicates that announcements of Six Sigma adoption produce no
signicant changes in stock returns on announcement day. A further analysis of six of the rms shows that their long run stock
performance is not better than the S&P 500. Zu et al. (2008, p.
643) nd that Six Sigma practices and traditional QM practices
work together to generate improved quality performance, which
then leads to higher business performance. However, they base
these conclusions on self reported, perceptual measures of quality
and performance. Also using a survey with perceptual measures,
Gutierrez et al. (2009) nd that Six Sigma improves shared vision,
but relationships to self-reported organizational performance are

439

not signicant. Braunscheidel et al. (2011) conducts case studies

of seven rms and concludes that Six Sigma leads to documented
savings and perceived innovation benets.
The fundamental argument for net positive nancial impacts
of Six Sigma adoption is that it creates new learning and adaptation capabilities within the rm. In short, Six Sigma is thought
to both provide a structure and promote a culture that fosters
problem/opportunity identication, process analysis, and the creation of sustained improvements. Gowen and Tallon (2005) use
the dynamic capabilities theoretical perspective to describe the
learning and adaptation capabilities associated with Six Sigma
adoption. This perspective emphasizes the need for organizations
to dynamically align their processes with changes in the business environment. Dynamic capability is dened as a learned and
stable pattern of collective activity through which the organization systematically generates and modies its operating routines
in pursuit of improved effectiveness (Zollo and Winter, 2002,
p. 340). Dynamic capabilities enable organizations to efciently
adapt, integrate, and recongure resources (Teece et al., 1997).
Gowen and Tallon (2005) argue that, by addressing both technical designs and human resources, the structured approach of Six
Sigma imbues the adopting organization with greater dynamic
capabilities. In essence, the structured attributes of best practice
identication, customer focus, and disciplined project selection
and execution provide organizational architecture needed for these
capabilities. Gowen and Tallon (2005) further suggest that effective
Six Sigma implementations embody the value, rareness, inimitability, and non-substitutability (VRIN) characteristics associated with
resources that provide competitive advantage, as specied in the
resource-based view (Barney, 2002). Their survey data indicate that
managers perceive this to be true; they nd signicant correlations
between various Six Sigma program design factors and each of the
VRIN elements.
More generally, Anand et al. (2009) describe infrastructural elements of continuous improvement programs that foster dynamic
capabilities. Indeed, they represent continuous improvement itself
as a dynamic capability, when it is embedded in a comprehensive organizational context (p. 445). They further identify and
study Six Sigma as a particular continuous improvement initiative that provides such a context. Their case study analyses
indicate that infrastructural elements such as balanced innovation and improvement, a constant change culture, standardized
improvement processes, and training are important enablers of
organizational learning and dynamic capabilities.
Consistent with the above arguments, other researchers also
suggest that structured improvement methods lead to better organizational learning and knowledge transfer (Ittner et al., 2001; Choo
et al., 2007; Molina et al., 2007), as well as overall improved job
quality (Levine and Toffel, 2010). Linderman et al. (2003, 2006)
demonstrate that the interaction of the structured method and
rigorous goal setting of Six Sigma explains its impact on the performance of specic projects. Other researchers argue that advantages
from process improvement programs derive mainly from social
aspects (Powell, 1995), including a supportive learning culture
(Detert et al., 2000; Schroeder et al., 2008; Naor et al., 2008) and
cooperative values (Kull and Narasimhan, 2010). Gutierrez et al.
(2009) maintain that Six Sigma adoption creates a shared vision
that impels team members to work together to achieve common
goals.
An integration of these arguments and ndings suggests that
Six Sigma adoption provides a structured approach to organizational learning that creates dynamic capabilities, specically,
capabilities to consistently improve current processes (Ittner and
Larcker, 1997), thereby raising quality and lowering costs. Teece
(2007) maintains that such capabilities are critical for business
success; due to the increasing pace and complexity of business

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environments, organizations no longer compete on processes, but

on the ability to continually improve processes.
In order to test this proposition, our starting point is to test the
hypothesis that Six Sigma adoption positively impacts overall profitability, as commonly measured by ROA (e.g., Corbett et al., 2005;
Hendricks and Singhal, 1997), and dened as operating income per
total assets, assessed before depreciation.
Hypothesis 1. Six Sigma adoption produces a signicant positive
effect on protability (ROA).
Protability (ROA) is determined by return on sales (ROS,
dened as operating income/sales) and asset turnover (ATO,
dened as sales/assets). In turn, both ROS and ATO can also be
broken down into their components, including cost of goods sold
(COGS), sales, general, and administrative expenses (SG&A), current
and xed assets, etc. Consistent with our second research question,
should hypothesis H1 be supported, we plan to examine signicant
differences in the constituent elements of ROA in order to develop
insights into the nature of contributions attributable to Six Sigma
adoption.
In addition to prot, companies commonly seek growth, often
measured by year-on-year increases in sales. A debate has emerged
over the effects of process management programs on the growth
of adopting rms. Researchers suggest that the disciplined structure of process management programs tends to crowd out growth
oriented innovation in favor of exploitation (Benner and Tushman,
2002, 2003). Emphases on waste reduction, standardization, and
continuous improvement are sometimes considered incompatible
with the slack resources, exibility, and risk taking propensities
needed to support more explorative efforts. At least two studies provide evidence of such effects from ISO 9000 certication.
Benner and Tushman (2002) posit that an emphasis on process
management biases innovation project selection toward incremental improvements and away from more exploratory efforts.
In a longitudinal study of patent activity in the photography and
paint industries, they document an increased share of the rms
total innovations that are exploitative and build upon existing rm
knowledge, post ISO 9000 certication. Similarly, Naveh and Erez
(2004) nd that ISO 9000 certication is positively associated with
greater process control, but negatively associated with innovation
outcomes.
As a process management strategy, Six Sigma has been criticized as being narrowly designed to improve existing processes,
and not being helpful in the development of new products or disruptive technologies needed to drive sales growth (Morris, 2006).
Hence, the dynamic capabilities stemming from Six Sigma adoption could be considered to be limited to continuous improvement,
rather than also applying to more radical changes (Anand et al.,
2009). Indeed, reports from well-known companies such as General
Electric and 3M document managers feelings that they need to protect growth-oriented functions in the rm (e.g., marketing, R&D)
from possible strictures imposed by Six Sigmas disciplined structure (Brady, 2005; Hindo, 2007; Parast, 2011). However, Schroeder
et al. (2008) counter these concerns by maintaining that Six Sigma
provides switching structures that simultaneously promote the
conicting demands of exploration and control in the improvement effort (p. 537). Further, they identify Six Sigma black belts as
boundary spanning actors, who integrate strategic concerns with
tactical improvement efforts, thus facilitating exploration (Manev
and Stevenson, 2001). Finally, the active engagement of top managers in project selection and monitoring are thought to foster more
strategic and exploratory efforts. These conicting views leave open
the question of whether Six Sigma adoption aids growth from innovation, whether it sties it, or whether it has no signicant effect
at all.

Six Sigma adoption may produce other effects on sales growth

that are independent of its effects on innovation and exploration.
Six Sigma adoption can also serve as a signal to customer markets
of improved product quality. First, as Six Sigma has gained notoriety (Gowen and Tallon, 2005), the reputational effects of adoption
have potentially created greater pricing power for adopting rms.
Second, real increases in product quality can be expected to lead to
higher customer satisfaction. As a result, customers may be willing
to pay more or to buy more; both outcomes increase sales revenue.
These expectations are consistent with the ndings of Hendricks
and Singhal (1997) and Corbett et al. (2005); these two studies show
signicant increases in sales for rms that won quality awards and
obtained ISO 9000 certications, respectively.
In sum, the foregoing discussion describes three mechanisms
through which Six Sigma adoption might foster greater sales
growth: (1) through supporting product innovation (though this
is contested in the literature), (2) through reputational enhancements that improve product and brand image, and (3) through
process improvements that create better product quality (fewer
defects). All three effects presumably lead to improved customer
satisfaction and associated growth in sales.
Hypothesis 2. Six Sigma adoption produces a signicant positive
effect on sales growth.
2.3. Contextual drivers of Six Sigma implementation success
Our nal research question addresses potential relationships
between Six Sigma impacts and the operating context of adoption. The nature of our study affords us the opportunity to examine
a number of contextual factors that can enhance or impede an
adopting rms abilities to extract real benets from Six Sigma
implementation.
2.3.1. Manufacturing versus service
Of particular interest are differences in adoptions by primarily
manufacturing versus primarily service rms. Case studies document Six Sigma adoptions in a wide variety of service rms
including hospitals, government, banks and nancial services, utilities, tness clubs, retailers, and so on. Some researchers study Six
Sigma programs and projects in both manufacturing and service
rms as if they are universal (Schroeder et al., 2008; Nair et al.,
2011). However, others identify limitations and challenges of Six
Sigma methodology and tools in service settings. Some argue that
it is harder to measure outcomes, collect reliable data, and control
service processes (Hensley and Dobie, 2005; Antony et al., 2007).
The ambiguous and customer-specic nature of critical-to-quality
service features can make them difcult to dene, such that Six
Sigma metrics such as DPMO are unnecessarily stringent and difcult to apply (Nakhai and Neves, 2009). Moreover, common Six
Sigma tools and training topics may not adequately address differences between service customers expectations and perceptions.
For example, Six Sigma does not typically address marketing communications or other inuencers of customers expectations. In
addition, Six Sigma rarely addresses softer dimensions of service
quality such as empathy (Nakhai and Neves, 2009). A survey by
Antony et al. (2007) indicates that core Six Sigma methods such as
statistical tools, process capability, and design of experiments are
among the least commonly used tools in services. Their research
also suggests that service process improvements are more dependent on organizational changes than manufacturing improvements
are, and service organizations are at the same time more resistant
to change because of the higher personal involvement of workers.
Accordingly, we posit:
Hypothesis 3. The positive effect on protability from Six Sigma
adoption is greater for manufacturing rms than for service rms.

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

2.3.2. Labor intensity

Rather than drawing contrasts between manufacturing and service rms, the more salient differentiator might be whether rms
in heavier, more asset-intensive industries experience different
results from Six Sigma adoption than those of rms in more laborintensive industries. Hendricks and Singhal (2001b) argue that
labor-intense rms provide more fertile ground for quality process improvements because they have more process options and
because they depend more on training and skills. Because laborintensive processes are inherently more variable, they likely offer
a greater range of variance reduction opportunities. Indeed, variance reduction is the essential value in the Six Sigma paradigm. On
the other hand, highly automated processes tend to be less variable.
Furthermore, because of their high xed costs, processes employing
heavy and automated equipment typically already receive specialized attention by highly trained process and manufacturing
engineers, even in the absence of Six Sigma. Therefore, the impacts
of Six Sigma adoption in these contexts may be muted by comparison.
Hypothesis 4. The effect on protability from Six Sigma adoption
is positively associated with the rms labor intensity.
2.3.3. R&D intensity
Given the debate over the effects of Six Sigma adoption on innovation and growth, we are motivated to evaluate the relationship
between R&D intensity and the performance effects of Six Sigma
adoption. As noted in the discussion for hypothesis H2, a stream of
research indicates that process management programs such as Six
Sigma can exert a stiing effect on more exploratory innovation
efforts. We would expect this effect to be particularly damaging
to overall rm performance if the rm has strategically positioned
itself as a leading innovator. As was the case documented at 3M
(Hindo, 2007), if advanced R&D is the rms lifeblood, then Six
Sigmas highly structured approach to continuous improvement
might be regarded negatively by employees, potentially raising
resistance to change and hampering implementation. On the other
hand, if Six Sigma is embraced, organizational units might be
at least implicitly encouraged to favor incremental exploitation
projects over more radical exploratory efforts, thus destroying the
innovative rms competitive advantage.
Similarly, the benets of Six Sigmas program structure might
be heightened or lessened by the importance of staying technologically current. Again, if a rm positions itself as a technology
leader, danger is associated with becoming too focused on the status quo. In such a context, continuous improvement efforts that
focus on process renement might be less important to success
than efforts aimed at uncovering replacement technologies and
entirely new opportunities. As mentioned earlier, researchers argue
that Six Sigma builds dynamic capabilities and an organizational
learning infrastructure that enables adopting rms to adapt more
readily to changing environmental conditions (Gowen and Tallon,
2005; Anand et al., 2009). The central question becomes whether
these abilities are limited to incremental changes, or whether they
also apply to more dynamic, technologically intensive contexts.
We forward the following hypothesis as a frame for testing these
competing propositions.
Hypothesis 5. The effect on protability from Six Sigma adoption
is associated with the rms R&D intensity.
2.3.4. Prior nancial performance
Following the logic of Hendricks and Singhal (2008), we recognize that prior operating performance can potentially affect the
impacts of Six Sigma on performance, in two different ways. First,
implementation resources can be a function of the rms preadoption protability. Highly protable rms likely have greater

441

reserves of cash and other needed resources to invest in process

management infrastructural changes, training, and administration
(Hendricks and Singhal, 2008). Therefore, such rms are likely to
affect broader and more complete implementations. In addition,
available resources enable adoption on a larger scale. For example,
protable rms will likely have the capital needed to fund a larger
number of simultaneous improvement projects. In these ways,
protable rms can attain greater leverage from Six Sigma adoptions, thus leading to greater abnormal operating performance.
On the other hand, poor performing rms may be better positioned for the changes required by Six Sigma adoption. Poor
protability can be a source of motivation; i.e., employees in a
loss-making rm might have a greater sense of urgency needed
to implement organization changes like Six Sigma. Kotter (1995)
suggests that poor business results can increase the probability of
successful implementation of organizational changes, because the
need for change is more apparent, and consequently the urgency
and motivation required for successful implementations is more
readily found in poor performers. As a result, levels of top management and organizational commitment may be higher, leading to
more aggressive goal setting and a more effective implementation.
Numerous writers highlight the importance of such commitment
to Six Sigma success (e.g., Chakravorty, 2009; Antony et al., 2008;
Linderman et al., 2006; Kumar and Antony, 2009)
Hypothesis 6. The effect on protability from Six Sigma adoption
is associated with the rms prior nancial performance.

2.3.5. Quality maturity

Schroeder et al. (2008) note that some rms adopting Six Sigma
already have quite mature quality management processes. This
prompts the question of whether the impacts of Six Sigma on
rm performance are contingent upon the rms prior quality
management knowledge. If Six Sigma simply replicates the capabilities engendered by other quality management programs, then
we might expect little additional performance gain from Six Sigma
adoption. If, on the other hand, Six Sigmas program attributes are
truly distinctive, as a number of researchers assert (Breyfogle, 2003;
Schroeder et al., 2008; Zu et al., 2008), then we might expect unique
performance gains.
Operating on the premise that Six Sigma is related to, but truly
distinctive from, other programs, an absorptive capacity perspective would suggest that more quality mature rms possess greater
abilities to acquire, evaluate, assimilate, and exploit Six Sigma process knowledge (Zahra and George, 2002). Cohen and Levinthal
(1990) describe absorptive capacity as an organizational ability to
embrace and exploit new knowledge. Further, they argue that this
ability depends on prior knowledge and experience. Related knowledge and experience provides a foundation for new knowledge
absorption, as it creates familiarity and lessens causal ambiguities.
For example, organizations experienced in quality management
programs would likely speak much of the language of Six Sigma,
even before adoption. In addition, employees who have gone
through similar organizational transformations are likely to feel
less threatened by Six Sigma-driven changes. For these reasons,
we expect that rms experienced with quality oriented process
management programs will implement Six Sigma faster, more completely, and perhaps more effectively. As a result, they should enjoy
greater performance benets from Six Sigma program adoption
than their less experienced counterparts.
Hypothesis 7. The effect on protability from Six Sigma adoption is positively associated with the rms quality maturity (prior
quality program experience).

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M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

3. Research method
3.1. Sample collection and description
We used multiple sources web searches, books, practitioner
journals, and academic journals to identify a preliminary list of
over 600 companies named as adopters of the Six Sigma philosophy and methodologies. While the list is certainly not exhaustive,
it appears to be fairly representative, as it includes a wide range
of industries, rm sizes, and adoption years. Of the identied
rms, 421 are publicly traded companies with nancial data in
Compustat.
To corroborate whether the identied rms actually adopted
Six Sigma, and to determine their Six Sigma adoption dates, we
used key words such as Six Sigma in conjunction with history
or adoption to thoroughly search publicly available documents
(e.g., all publication sources in the Factiva database, corporate 10K reports, corporate websites, the Internet) for each of the 421
publicly traded rms. We retained in the sample only rms that
had adopted Six Sigma in 2007 or earlier, in order to have sufcient data to establish post-adoption performance. Using these
sources, we found denite, pre-2008 adoption years for 214 of
the 421 rms (50.8%). For 143 rms (34.0%), we could not determine a specic adoption year, but we found enough evidence
of Six Sigma activity to establish a late bound for adoption. For
the remaining 64 rms (15.2%), we did not nd sufcient information to establish either an adoption date or a late bound for
adoption.
Because the available public information sometimes required
interpretation and/or was conicting from different sources, each
rm was researched independently by two members of our
research team. The two independent researchers agreed on 351 of
421 ndings (83.4%) of adoption dates, late bounds, or no adoption
dates. For the remaining 70 rms with disputed adoption dates or
late bounds, the mean (median) difference in designated adoption
years was 0.6 (1.0) years. To resolve the differences, we supplied the
data sources discovered by the two researchers to a third researcher
who independently weighed the evidence and determined the specic adoption years for use in our analyses.
Early on in this research, we sent a survey to each publicly
held Six Sigma adopter for which we could identify a credible
contact person. The survey asked about adoption date and extent
of adoption of the aforementioned practices that are distinct to
Six Sigma (centralized team structure, improvement specialists,
structured methods/DMAIC, and customer-focused metrics). We
secured survey responses from 58 of the 214 publicly traded rms
with identied adoption dates (23.8% of our sample). Of the 58
single respondents: 38 (65.5%) agreed with our identied adoption years; 9 (17.6%) were unable to provide a specic adoption
year; 7 (12.1%) supplied an adoption date one year earlier than our
nding; 3 (5.9%) supplied an adoption date more than one year
later than our nding; and 1 (1.7%) supplied an adoption date one
year later than our nding. We note that all three respondents
with adoption dates greater than one year later from our nding
were reporting only for their division within the overall rm. To be
conservative, we used the earliest adoption year identied. Furthermore, the survey data indicate a remarkably uniform application
of Six Sigma practices across the respondents. For example, over
90% of the respondents indicated that they employed a black/green
belt structure, and over 95% designated that DMAIC and other Six
Sigma tools were used on at least 80% of improvement projects.
These results reinforce our overall condence in the accuracy of
our estimates for both the timing and extent of adoptions in our
sample rms.
For the 214 rms with specic adoption years, Panel A of
Table 1 presents the number of adopting rms by year. The earliest

Table 1
Sample description for 214 rms with specic Six Sigma adoption years.
Panel A: Frequency of Six Sigma adoption years
Year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996

Frequency
2
0
2
1
1
1
1
0
0
2
3

Year

Frequency

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

16
12
18
38
40
18
18
15
9
13
4

Panel B: Occurrence (percentage) of most-frequent SIC codes

2-Digit code

Frequency

35
36
28
37
38

24 (11.2%)
23 (10.7%)
21 (9.8%)
21 (9.8%)
14 (6.5%)

3-Digit code
371
602
357
283
367

Frequency
12 (5.6%)
11 (5.1%)
10 (4.7%)
6 (2.8%)
6 (2.8%)

adoption year in our sample is 1986 and the most frequently occurring adoption year is 2001. We note the drop-off in Six Sigma
adoptions in our sample post-2001. Given the continued interest
and relevance of Six Sigma, as evidenced by academic publications,
current business school textbooks and curriculums, and practitioner seminar offerings, we suspect that the drop-off of Six Sigma
adoptions in our sample is indicative of non-newsworthiness. In
other words, Six Sigma has become an accepted part of everyday
business, much like TQM or Lean. This highlights the importance
of rigorously studying the impact Six Sigma adoption on operating
performance.
Table 1 Panel B presents the most frequently occurring SIC codes
within the sample rms. The sample contains rms from 47 unique
two-digit SIC codes and 101 unique three-digit SIC codes. Though
the majority of rms represent manufacturing industries, about
one-third of the rms are services. Table 1 provides more information on the most frequently represented industries. Table 2 Panel
A presents descriptive statistics for our sample based on the 2001
scal year, the most common Six Sigma adoption year in our sample. The median observation in the sample represents a rm with
$5.6B in market value, $7.5B in total assets, $6.2B in annual sales,
$0.8B in annual operating income, and 28,300 employees. For comparison, Table 2 Panel B presents descriptive statistics for the 207
suspected Six Sigma adopters for which we could not determine a
specic adoption year. In addition, Table 2 Panel C presents descriptive statistics for all rms listed in the New York Stock Exchange
(NYSE), also for the 2001 scal year. In summary, our sample represents a wide variety of industries, and is not signicantly different
from the suspected Six Sigma adopters for which we could not
determine a specic adoption year. However, when compared to all
NYSE rms, our sample is not representative of smaller enterprises.
This outcome raises a question regarding the generalizability of our
ndings, as the cause of the difference is not known. Research indicates that small and medium sized rms are less likely to adopt Six
Sigma, mainly because they lack requisite resources and knowledge
(Antony et al., 2008; Kumar and Antony, 2009). Thus, our sample
rms might be larger because of sampling bias (i.e., larger rms
are more likely to be identied by our sources), but the sample
rms might also be larger because they truly represent the population (i.e., larger rms are more likely to adopt Six Sigma). We
note that large-rm bias is common in OM research. We discuss
this limitation further in Section 6.

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

443

Table 2
Descriptive statistics for 2001, the most frequent sample Six Sigma adoption year.
Market value ($M)

Total assets ($M)

Panel A: Sample rms (N = 214)

Median
5616.4
7477.1
Mean
19,394.2
38,370.3
Std Dev
42,211.0
102,806.9
693,575.0
Max
397,831.6
Min
0.1
44.2
Panel B: Suspected Six Sigma adopting rms without known adoption years (N = 207)
4764.1
4684.2
Median
24,763.0
Mean
23,233.4
Std Dev
52,321.7
76,197.4
695,877.0
Max
392,959.0
0.4
0.2
Min
Panel C: All NYSE rms (N = 2704)
673.2
1228.3
Median
13,040.7
Mean
5311.1
19,581.8
59,367.3
Std Dev
397,831.6
1,051,450.0
Max
0.1
Min
0.2

3.2. Event study method

This section describes our choices for the period over which to
measure the operating performance effects due to Six Sigma adoption, the approach to estimate the performance effects, and the
statistical analyses we conducted to determine the signicance of
the results. To pool data over time, we translated each rms scal
years into event years as follows. We designated the scal year of
Six Sigma adoption as year 0. The subsequent (previous) scal year
is year +1 (year 1), etc. We analyzed data for the 6-year period
from year 1 through year +4.
Process management programs such as Six Sigma are often
implemented over a period of months or years. Accordingly, we
examined operating performance effects at two levels, on a yearto-year basis, and over aggregated multi-year periods, beginning
with the change in performance from year 1 to year 0. In order to
isolate the nancial impacts of Six Sigma adoption from the impacts
of economic conditions and other external factors, we examined
the abnormal operating performance of adopting rms. We dene
abnormal operating performance for a rm as:
Abnormal operating performance = Actual operating
performance with Six Sigma adoption Expected operating
performance if Six Sigma adoption had not occurred

The conventional approach to establishing expected operating performance is to use rms similar to the sample rms as
benchmarks (controls). In their comprehensive, simulation-based
research, Barber and Lyon (1996) described their three most
important ndings to accurately determine expected operating
performance and abnormal operating performance: (1) nonparametric Wilcoxon test statistics are more powerful than parametric
t-statistics; (2) test statistics for the change in operating performance relative to an appropriate benchmark are more powerful
than those based on the level of operating performance relative to
the same benchmark; and (3) benchmark rms are best determined
by matching on prior performance and industry. We employed each
of these recommendations in our analyses.
Using multiple criteria such as prior performance and industry presents a challenge when establishing benchmark groups, and
sometimes require trade-offs. The multi-step process we used to
establish our benchmark groups is as recommended by Barber
and Lyon (1996). We label it as our performance-industry matching
method:

Sales ($M)

Operating income ($M)

Employees (000s)

6204.9
14,205.1
21,799.3
162,412.0
49.1

760.2
2337.4
4695.6
37,966.0
(5062.0)

28.3
51.9
69.2
395.0
0.4

3986.3
11,625.6
24,409.1
218,529.0
<0.01

494.0
1754.2
3429.2
29,602.0
(326.3)

17.8
47.6
119.6
1383.0
<0.01

864.8
4507.9
13,149.7
218,529.0
<0.01

137.4
838.5
2743.6
45,732.0
(5743.0)

3.9
17.9
50.7
1383.0
<0.01

Step 1. For each sample rm, we identied all rms within the
same two-digit SIC code as the sample rm, and whose
ROA in year 2 (the scal year immediately prior to the
study period) was within 90110% of the sample rms ROA.
The 10% requirement provides a tight match on operating
performance.
Step 2. If no rms were found in Step 1, we then matched performance within the 90110% performance range using all
rms in the same one-digit SIC code.
Step 3. If no rms were found in Step 2, we then matched performance within the 90110% performance range regardless
of SIC code.
Since we were interested in determining the effects of Six Sigma
adoption, we excluded the 421 identied public Six Sigma-adopting
rms from our benchmark groups. A limitation of our study is that
we could not denitively determine that all benchmark rms were
not also Six Sigma-adopters in the time frame studied. Because it is
possible that at least some of the benchmark rms were adopters,
our estimates of abnormal performance should be considered conservative. In order to dilute the effects of adopters who may be
present in the benchmark groups, we set our matching criteria to
maximize the number of rms in each group, thus limiting the
number of one-on-one matching comparisons. In addition, we perform a separate analysis with one-to-one matching of adopters and
conrmed non-adopters for a subset of the sample (described later).
In order to evaluate the robustness of the results, we used two
other matching methods that added controls to the matching criteria specied above. First, rather than matching on ROA only in
year 2, we matched on the median ROA in years 2, 3, and
4, with the requirement that we had data for the sample and
benchmark rms in at least two of the three years. We labeled this
approach as the median-performance-industry matching method;
this approach provides an even stricter performance control. Second, we added the matching criteria of rm size to each step. We
measured rm size as median year-end total assets in years 2,
3, and 4, again with the requirement that we had data for the
sample and benchmark rms in at least two of the three years. We
selected benchmark rms with total assets within a factor of 25 of
the assets of the sample rm. We labeled this matching method as
median-performance-size-industry.
Of the 214 public rms with identied Six Sigma adoption
dates, we dropped rms with insufcient data in Compustat in
either year 2, or years 2, 3, and 4 to compute the baseline ROA or size metrics. We eliminated ve rms from the
performance-industry matching analysis, and eight rms from

444

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

Table 3
Matching process and benchmark group statistics.
Matching method

Step 1 matchesd
Step 2 matchese
Step 3 matchesf
Total rms matched
Mean group size
Median group size
Maximum group size
No. of groups with a single rm
a
b
c
d
e
f

Performance in
year 2a , and
industry

Performance in
years 2, 3, 4b ,
and industry

Performance and size in

years 2, 3, 4c , and
industry

203
6
0
209
34.3
18.0
470
6

200
6
0
206
34.1
21.5
423
2

198
7
1
206
14.9
9.0
86
8

Performance dened as ROA in year 2; matching range is 90110%.

Performance dened as median ROA in years 2, 3, and 4; data required in at least two years.
Size dened as median Total Assets in years 2, 3, and 4; data required in at least two years; matching range is within factor of 25.
All rms within the same two-digit SIC code as the sample rm, and whose performance and/or size are within the specied range of the sample rm.
All rms within the same one-digit SIC code as the sample rm, and whose performance and/or size are within the specied range of the sample rm.
All rms whose performance and/or size are within the specied range of the sample rm regardless of SIC code.

Table 4
Median descriptive statistics for the matching period (years 2, 3, and 4) prior to Six Sigma adoption.
ROA

Total assets ($M)

Market value ($M)

Sales ($M)

Panel A: Sample rms (N = 214)

0.1362
12,932.2
23,086.6
10,450.9
Mean
0.1333
4303.1
5356.9
4889.7
Median
0.0755
23,901.5
52,784.0
16,311.7
Std Dev
250,138.5
303,989.0
146,991.0
Max
0.4627
Min
(0.2629)
22.1
8.3
15.7
Panel B: Benchmark rms (obtained from median-performance-size-industry matching method (N = 3077)
0.1313
9869.5
3981.7
2928.1
Mean
0.1307
915.1
735.9
738.1
Median
0.0605
44,271.1
20,646.7
8732.1
Std Dev
0.4331
933,559.1
911,494.2
174,694.0
Max
5.1
1.5
0.2
Min
(0.2736)

both the median-performance-industry and median-performancesize-industry matching analyses. Table 3 presents the results of each
matching process. In each process, the vast majority of matches
were accomplished in Step 1, using the tightest matching criteria.
In the performance-industry matching, for example, 203 of the 209
benchmark groups were generated using Step 1 of our matching
process, and the remaining six benchmark groups were generated using Step 2. The mean (median) benchmark group size was
34.3 (18.0), and only six rms were benchmarked against a single rm. The other matching methods produced similar results,
though notably in the median-performance-size-industry matching, the mean (median) matching group size dropped to 14.9
(9.0), and one rm required Step 3 for matching. Table 4 presents
median descriptive statistics for the pre-adoption matching period
(years 2, 3, and 4) for both the sample rms and the benchmark rms obtained using the median-performance-size-industry
matching method. The sample rms and benchmark rms are wellmatched on ROA and assets within the stated criteria (10% and
factor of 25, respectively).
Due to the common occurrence of extreme outliers in
accounting-based performance measures, we used the median
(versus the mean) change in the benchmark rms to estimate the
sample rms expected operating performance without Six Sigma
adoption. The sample rms expected operating performance without Six Sigma adoption is the sum of its actual performance in
the base year(s) plus the median change in operating performance
for the rms in the benchmark group over the period of interest. The sample rms abnormal operating performance with Six
Sigma adoption is then the difference between the sample rms
actual performance (with Six Sigma adoption) and the sample
rms expected performance (without Six Sigma adoption). As an

Operating income ($M)

Employees (000s)

1882.1
761.9
3672.0
32,291.0
(22.2)

47.9
25.5
64.5
413.0
0.3

625.2
122.0
2014.6
31,750.0
(9.8)

11.1
3.2
28.4
775.1
<0.01

example, if a sample rms benchmark group experienced a 3.0%

median increase in ROA from year 1 to year 0, we would expect the
sample rm to also increase its ROA by 3.0%. If the sample rm actually experienced a 3.5% ROA increase over this period, we would
estimate its abnormal performance due to Six Sigma adoption to
be 0.5%.
To control for outliers and non-normality, we trimmed the data
at the 2.5% level in each tail for all analyses. Although we report
means and changes in means using t-statistics, we emphasize nonparametric statistics and tests. We used the Wilcoxon signed-rank
test to determine whether the median of a single group was significantly different from zero, and the binomial sign test to examine
whether the percentage of sample rms experiencing positive
operating performance was signicantly greater or less than the
null of 50%. Given that we hypothesize an improvement in operating performance due to Six Sigma, we report one-tailed tests of
signicance except where noted.
3.3. Measures
Using Compustat and other sources, we collected data describing the contextual factors addressed in hypotheses H3H7. First, to
test hypothesis H3, we employ a dummy variable to denote rms
that are primarily focused on the production of goods (manufacturing) from those that are primarily focused on the provision of
services. The industry dummy variable has the value 1 if the rm is
in a manufacturing industry, and the value 0 if the rm is in a service industry. We identify rms as being primarily manufacturers
if their SIC codes begin with 2 or 3. The service rms include rms
in the transportation, communications, and utilities industries (SIC
codes beginning with 4), wholesale trade and retail trade industries

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

(SIC codes beginning with 5), nance, insurance, and real estate
industries (SIC codes beginning with 6), and other service industries (SIC codes beginning with 7 and 8). We evaluated each of the
remaining rms in the agriculture, forestry, and sheries industries
(SIC codes beginning with 0), mining and construction industries
(SIC codes beginning with 1), and the public administration industry (SIC codes beginning with 9) to determine whether its primary
business is the production of goods or the provision of services.
Thus, we identied 144 rms in manufacturing industries and 70
rms in services industries.
To test hypothesis H4, we consider the rms labor intensity. We
measure labor intensity as the rms number of employees in year
2 divided by its sales in year 2.
We use the rms R&D intensity to provide testing of hypothesis
H5. We dene R&D intensity as the rms R&D expenses in year
2 divided by its sales in year 2. We note that this analysis is
limited to manufacturing rms, because few service rms report
R&D expenditures.
To examine the possibility of different response coefcients
for prot- and loss-making rms (H6), we follow the method of
Hendricks and Singhal (2008). For each adopting rm, we compute
industry-adjusted ROA as the rm ROA in year 2 minus the median
ROA of its industry in year 2. Using these scores, we created two
prior operating performance variables as follows. If the industryadjusted ROA is positive, we used the value as our positive nancial
performance variable, and 0 otherwise. If the industry-adjusted
ROA is negative, we used the value as our negative nancial performance variable, and 0 otherwise.
Finally, we use ISO 9000 certication status as an indicator
of quality maturity (H7). Using the method employed by Corbett
et al. (2005), we determined the year of initial ISO certication for
each rm in our sample. We then computed the number of years
between initial ISO certication and Six Sigma adoption as a proxy
for the rms maturity in applying quality management principles
and techniques. We coded rms as 1 if they were not ISO certied,
or if they were certied only after Six Sigma adoption.
In addition to the above factors, we include three control variables in the analysis. Larger rms likely have more implementation
resources, and economies of scale to better exploit improvements.
Conversely, smaller rms tend to be more focused and agile, easing
adoption of new improvement philosophies. In addition, if wellimplemented, the relative impact of any one improvement program
such as Six Sigma is likely to be greater in a small rm. Hence, we
control for the effects of rm size, operationalizing it as the natural log of the rms market value at the end of year 2. Market
value provides a suitable measure of size, given that rm sales,
assets, and number of employees are already represented in the
independent and dependent variables described earlier. We also
include the year of Six Sigma adoption as a control for changes in
economic, business environment, and other time-related variables
that might confound the results. Lastly, we control for leadership changes in adopting rms. It can be argued that, if Six Sigma
adoption is instigated by new leadership, then observed benecial effects might be attributable to new leadership competencies
or motivational factors, rather than to Six Sigma adoption per se.
To control for this possibility, we used the Execucomp database
to determine sample rm CEO changes in years 0, 1 and 2.
For the 32 sample rms not listed in Execucomp, we searched
all sources in the Factiva database for evidence of CEO turnover
in the three-year time period. In total, 90 rms in our sample
(42.4%) experienced a CEO change within the specied period. We
note that the mean (median) CEO turnover rate in Execucomp is
40.4% (52.9%) for a three-year period, suggesting that our sample
rms are not more prone to CEO changes than other rms. Sample rms with a CEO change were coded as 1; other rms were
coded as 0.

445

4. Results
We begin the discussion of our empirical results by focusing on
the effects of Six Sigma adoption on the rm protability measure,
ROA, on both an annual basis and for the aggregated multiple-year
periods. We then decompose ROA into its constituent components
to determine whether changes in ROA are due to changes in ROS,
COGS/sales, SG&A/sales, ATO, or a combination thereof. We also
examine the impact of Six Sigma adoption on rm growth by
considering year-on-year changes in sales. Lastly, we present our
results contingent on the contextual factors of industry, and preadoption labor intensity, R&D intensity, nancial performance, and
quality maturity.

4.1. Overall performance effects

Table 5 presents the results for abnormal changes in the
level of ROA on an annual basis, for each of our three matching
methods. Given that our baseline period to establish benchmark
groups is year 2 for the performance-industry match, and years
2, 3, and 4 for the median-performance-industry and medianperformance-size-industry matches, we consider the ve annual
changes beginning with the change from year 1 to year 0 and continuing through the change from year +3 to year +4. As aggregate
measures, we also consider the change per rm for three multipleyear periods: from year 1 to year +4; year 0 to year +4; and
year +1 to year +4. By comparing results across the annual and
multiple-year periods, we can see whether the operating performance impacts of Six Sigma adoption begin immediately or are
lagged, and whether the effects are persistent.
Our rst observation is that, regardless of matching method, the
annual changes in abnormal ROA for the sample rms are consistently positive. For performance-industry matching, 5 of 5 (4 of 5)
median (mean) annual changes are positive, and the % rms with
positive changes is greater than 50% for 5 of 5 annual changes. Two
of the 5 annual changes (from year 0 to +1, and year +3 to +4) are
statistically signicant in all three tests for median, mean, and %
positive. For median-performance-industry matching, 4 of 5 median
and mean annual changes are positive, and the % rms with positive changes is greater than 50% for 4 of 5 annual changes. Three
of the 5 annual changes (from year 0 to +1, year +1 to +2, and year
+3 to +4) are statistically signicant in the median, mean, and %
positive test. For median-performance-size-industry matching, 4 of
5 median and mean annual changes are positive, and the % rms
with positive changes is greater than 50% for 5 of 5 annual changes.
However, only 1 of the 5 annual changes (from year +3 to +4) is
statistically signicant for the median, mean, and % positive.
We next consider the results for the multiple-year periods. For
all three matching methods, the change per rm over the 6-year
period (from year 1 to +4) is signicantly positive for both the
mean and median, and the % rms with positive 6-year changes
are signicantly greater than 50% for two of the three matching methods. For performance-industry matching, the median and
mean changes per rm over the 6-year period are 0.355% and
1.214%, respectively, both signicantly positive at the 1% level, and
55.69% of sample rms experience positive changes, signicantly
greater than 50% at the 10% level. For median-performance-industry
matching, the median (mean) change per rm is 0.703% (1.294%)
over the 6-year period, signicantly positive at the 1% (1%) level,
and 56.10% of sample rms experience positive median annual
changes, signicantly greater than 50% at the 10% level. For medianperformance-size-industry matching, the median (mean) change per
rm is 0.433% (1.029%) over the 6-year period, signicantly positive
at the 5% (5%) level, and 53.99% of sample rms experience positive
changes, insignicantly greater than 50%.

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M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

Table 5
Annual abnormal changes in ROA for sample rms for year 1 through year +4.
From year:

Median

Z-Statistic

Mean

t-Statistic

% Positive

Panel A: Performance-industry matching

197
0.121%
0.674
0.001%
0.004
52.28%
1 to 0
0 to +1
194
0.469%
2.741***
0.600%
2.884***
59.28%
+1 to +2
191
0.180%
1.040
0.129%
0.633
53.40%
181
0.113%
0.578
0.115%
0.491
51.93%
+2 to +3
166
0.423%
2.192**
0.447%
1.947**
58.43%
+3 to +4
1 to +4
167
0.355%
2.390***
1.214%
2.729***
55.69%
*
**
0 to +4
167
0.077%
1.639
0.994%
2.314
52.10%
*
+1 to +4
167
0.030%
0.917
0.540%
1.406
50.30%
Panel B: Median-performance-industry matching
194
0.256%
1.002
0.130%
0.568
55.67%
1 to 0
0 to +1
191
0.378%
2.208**
0.391%
1.904**
58.64%
+1 to +2
189
0.241%
2.120**
0.367%
1.834**
56.61%
+2 to +3
181
0.099%
0.634
0.034%
0.170
48.07%
**
*
+3 to +4
164
0.552%
1.679
0.336%
1.497
57.93%
***
***
1 to +4
164
0.703%
2.632
1.294%
3.108
56.10%
0 to +4
164
0.530%
2.019**
0.901%
2.262**
56.71%
+1 to +4
164
0.411%
1.541*
0.559%
1.730**
55.49%
Panel C: Median-performance-size-industry matching
194
0.055%
0.415
0.049%
0.190
51.03%
1 to 0
0 to +1
191
0.080%
0.482
0.021%
0.103
50.79%
188
0.061%
0.989
0.223%
1.071
51.60%
+1 to +2
179
0.000%
0.172
0.017%
0.086
50.28%
+2 to +3
163
0.465%
1.995**
0.471%
1.897**
59.51%
+3 to +4
1 to +4
163
0.433%
1.900**
1.029%
2.322**
53.99%
0 to +4
163
0.479%
1.569*
0.914%
2.097**
52.76%
163
0.395%
1.696**
0.826%
2.223**
53.99%
+1 to +4
Panel D: One-on-one median-performance-size-industry matching using only early adopters matched against sample rms that adopted at least ve years later
1 to 0
34
0.150%
0.244
0.111%
0.222
55.88%
0 to +1
34
0.592%
1.362*
0.932%
1.488*
62.16%
+1 to +2
34
0.172%
0.904
0.717%
1.244
61.54%
+2 to +3
34
0.413%
0.962
0.280%
0.588
41.67%
+3 to +4
34
1.197%
2.039**
1.220%
2.370***
58.82%
1 to +4
34
1.383%
1.406*
1.784%
1.628*
55.88%
0 to +4
34
1.740%
1.863**
2.025%
2.220**
62.86%
**
***
+1 to +4
34
1.759%
2.101
2.211%
2.362
66.67%

Z-Statistic
0.641
2.585***
0.941
0.520
2.173**
1.470*
0.542
0.077
1.580*
2.388***
1.818**
0.520
2.030**
1.562*
1.718**
1.406*
0.287
0.217
0.438
0.075
2.428***
1.018
0.705
1.018
0.686
1.480*
1.441*
1.000
1.029
0.686
1.521*
2.000**

All samples trimmed at 2.5% each tail.

Z-Statistics for medians are obtained using Wilcoxon Signed-Rank tests.
Z-Statistics for % positive are obtained using Binomial Sign tests.
*
Signicance is one-tailed: p .10
**
Signicance is one-tailed: p .05.
***
Signicance is one-tailed: p .01.

The change per rm over the 5-year period (from year 0 to +4) is
also signicantly positive for both the mean and median, using all
three matching methods. The % rms with positive 5-year changes
are signicantly greater than 50% using the median-performanceindustry matching method. As expected, the magnitudes of the 5year changes are generally less than those of the 6-year changes.
The change per rm over the 4-year period (from year +1 to +4)
follows a similar pattern and is again generally lesser in magnitude
and signicance than the 5-year changes.
As we noted in Section 3.2, a limitation of our study is that we
could not denitively determine that all benchmark rms were not
also Six Sigma-adopters during the sampling time frame. If many of
the benchmark rms were truly adopters, then estimates of abnormal performance would be muted, making signicant differences
difcult to detect. The fact that we do nd signicant differences
suggests that, in the worst case, our ndings of abnormal performance due to Six Sigma adoption are conservative.
To address this limitation, we would ideally match known
adopters only with known non-adopters. Such a pure comparison
would produce a more reliable estimate of expected performance
improvement from Six Sigma adoption. To approximate this pure
comparison, we identied known non-adopters as rms from our
sample that adopted Six Sigma at least ve years later than earlier
sample adopter rms. The ve-year delay allows us to consider
operating performance impacts to the early adopters during the
post-adoption period through year +4. Given that we are limited to

only the 214 rms in our sample, and to permit the greatest number of comparisons, we matched each adopter against only a single
rm, and did not use data from any one rm more than once; this
method permitted 41 matches using the ROA, assets, and industry
criteria from median-performance-size-industry matching. Table 5
Panel D presents the results for abnormal changes in ROA for year
1 through year +4. The ROA improvements are signicant and generally stronger than in our other matching methods. These results
should be regarded as somewhat tentative, given the small sample
size, and the confounding with time due to this matching methodology (the adopters all adopted prior to 2003). However, the results
do strongly reinforce the conclusion that the estimated improvements from our larger analyses are real, albeit conservative.
Considering both the annual changes and multiple-year changes
indicates that Six Sigma adoption produces an immediate and persistent positive effect on ROA. These results provide support for
hypothesis H1.
4.2. Decomposition of ROA effects
For brevity in presenting and discussing the remainder of
our results, we concentrate on our most conservative matching
method, median-performance-size-industry, noting that the pattern
of results is similar regardless of matching method. Table 6 Panel
A presents the results for the abnormal changes in the level of ROS
on an annual basis and for multiple-year periods. For the 6-year

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

447

Table 6
Annual abnormal changes in ROS, COGS/sales, SG&A/sales, and ATO for sample rms for year 1 through year +4 using the median-performance-size-industry matching
method.
From year:

Panel A: Changes in abnormal ROS

194
1 to 0
0 to +1
191
188
+1 to +2
179
+2 to +3
163
+3 to +4
1 to +4
163
0 to +4
163
+1 to +4
163
+1 to +4 effecta
163
Panel B: Changes in abnormal COGS/sales
160
1 to 0
159
0 to +1
+1 to +2
157
149
+2 to +3
135
+3 to +4
132
1 to +4
0 to +4
133
132
+1 to +4
Panel C: Changes in abnormal SG&A/sales
160
1 to 0
159
0 to +1
+1 to +2
157
+2 to +3
149
+3 to +4
135
1 to +4
132
0 to +4
133
+1 to +4
132
Panel D: Changes in abnormal ATO
194
1 to 0
0 to +1
191
+1 to +2
188
+2 to +3
179
163
+3 to +4
163
1 to +4
163
0 to +4
+1 to +4
163

Median

Z-Statistic

Mean

t-Statistic

% Positive

Z-Statistic

0.117%
0.048%
0.127%
0.167%
0.482%
0.899%
0.632%
0.892%
0.528%

0.320
0.009
1.151
0.249
1.955**
0.937
1.363*
1.761**
2.063**

0.324%
0.117%
0.328%
0.065%
0.364%
0.342%
0.490%
0.596%
0.645%

1.406*
0.492
1.449*
0.287
1.639*
0.774
1.114
1.563*
1.976**

51.55%
50.79%
51.60%
52.51%
59.51%
52.76%
56.44%
56.44%
56.44%

0.260%
0.214%
0.200%
0.173%
0.095%
0.533%
0.336%
0.438%

0.106
0.193
1.927**
0.344
0.738
0.374
0.225
0.018

0.222%
0.006%
0.447%
0.086%
0.211%
0.281%
0.150%
0.033%

0.987
0.026
2.346***
0.407
0.952
0.539
0.317
0.087

45.00%
45.91%
45.86%
46.98%
48.89%
53.03%
51.13%
46.97%

1.265
1.031
1.038
0.737
0.258
0.696
0.260
0.696

0.007%
0.096%
0.155%
0.149%
0.219%
0.842%
0.639%
0.604%

0.319
0.061
0.762
2.277**
1.979**
2.846***
2.140**
2.476***

0.051%
0.123%
0.023%
0.342%
0.297%
1.094%
0.771%
0.747%

0.370
0.855
0.156
2.639***
2.190**
2.832***
2.108**
2.707***

49.38%
55.35%
47.13%
41.61%
40.00%
38.64%
42.86%
38.64%

0.158
1.348*
0.718
2.048**
2.324**
2.611***
1.648**
2.611***

0.295%
0.055%
0.633%
0.605%
0.130%
0.004%
0.027%
0.253%

0.882
0.512
1.299*
0.626
0.802
0.715
0.367
0.095

0.200%
0.866%
0.680%
0.164%
1.067%
1.944%
1.120%
0.026%

0.203
1.112
0.795
0.184
1.199
0.992
0.634
0.018

44.33%
49.74%
44.68%
45.25%
51.53%
49.69%
49.08%
48.47%

1.580*
0.072
1.459*
1.271
0.392
0.078
0.235
0.392

0.431
0.217
0.438
0.673
2.428***
0.705
1.645*
1.645*
1.645*

All samples trimmed at 2.5% each tail.

Z-Statistics for medians are obtained using Wilcoxon Signed-Rank tests.
Z-Statistics for % positive are obtained using Binomial Sign tests.
a
Effect on ROA computed per rm as ROS Change +1 to +4 Firm ATO in year 0.
*
Signicance is one-tailed: p .10.
**
Signicance is one-tailed: p .05.
***
Signicance is one-tailed: p .01.

period from year 1 to +4, the median and mean change per adopting rm, and the % of sample rms experiencing positive change,
are all positive but insignicant. For the 5-year period from year 0
to +4, the median change is 0.632%, signicantly positive at the 10%
level. The mean change is 0.490%, positive but insignicant, and
56.44% of rms experience positive changes, signicantly greater
than 50% at the 10% level. For the 4-year period from year +1 to +4,
the median and mean changes are 0.528% and 0.645%, respectively,
both signicantly positive at the 5% level, and 56.44% of rms experience positive changes, signicantly greater than 50% at the 10%
level.
To determine whether the improvement in ROS from year +1
to +4 contributes signicantly to the improvement in ROA, we
employ the method of Kinney and Wempe (2002). For each adopting rm, we compute the effect of ROS on ROA by multiplying the
change in abnormal ROS from year +1 to +4 with the rms ATO at
adoption (year 0). The median and mean ROS effects over the 4year period are 0.528% and 0.645%, respectively, both signicantly
positive at the 5% level, and 56.44% of sample rms experience positive ROS effects, signicantly greater than 50% at the 10% level.
These results indicate that the ROS improvement from Six Sigma
adoption signicantly contributes to the overall improvement
in ROA.

The primary cost components that impact operating income

(and hence, ROS and ROA) are COGS and SG&A. To determine the
contributions of both components, we examined abnormal changes
in COGS/sales and SG&A/sales. Given that all rms do not consistently report COGS and SG&A separately each year, we included
only adopting rms and benchmark rms in our analyses that did
report both accounts. This eliminated approximately 35 adopting
rms from our sample. Table 6 Panels B and C present the results for
the abnormal changes in the level of COGS/sales and SG&A/sales,
respectively, on an annual basis and for the multiple-year periods
of interest. Although the median annual changes in COGS/sales are
all negative, only the change from year +1 to +2 is signicant. The
mean (median) abnormal change from year +1 to +2 is 0.200%
(0.444%), signicant at the 5% (1%) level. For the 6-year period
(year 1 to +4) and the 5-year period (year 0 to +4), the median,
mean, and % positive changes are all positive but insignicant. For
the 4-year period (year +1 to +4), the change statistics are negative
but insignicant. The evidence provides no support that Six Sigma
adoption produces signicant reductions in COGS.
Considering the annual abnormal changes in SG&A/sales for the
sample rms, we see that they are consistently negative. Four of
5 (5 of 5) median (mean) annual SG&A/sales changes are negative,
and the % rms with positive changes is less than 50% for 4 of 5

448

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

Table 7
Annual abnormal changes in sales growth for sample rms for year 1 through year +4.
From year:

Median

Panel A: Performance-industry matching

197
1.398%
1 to 0
0 to +1
194
0.646%
+1 to +2
191
0.664%
181
0.305%
+2 to +3
166
0.689%
+3 to +4
167
5.718%
1 to +4
0 to +4
167
0.094%
+1 to +4
167
1.533%
Panel B: Median-performance-industry matching
194
0.710%
1 to 0
191
0.532%
0 to +1
189
0.486%
+1 to +2
181
0.030%
+2 to +3
+3 to +4
164
1.540%
1 to +4
164
2.463%
164
3.485%
0 to +4
164
5.631%
+1 to +4
Panel C: Median-performance-size-industry matching
194
0.008%
1 to 0
0 to +1
191
1.485%
188
0.271%
+1 to +2
179
0.030%
+2 to +3
163
1.259%
+3 to +4
163
0.695%
1 to +4
0 to +4
163
3.502%
163
6.182%
+1 to +4

Z-Statistic

Mean

t-Statistic

% Positive

Z-Statistic

1.693 **
0.570
0.753
1.278
0.250
0.229
0.103
0.378

0.555%
1.148%
0.498%
1.613%
0.749%
3.179%
1.985%
0.034%

0.589
1.284*
0.501
1.536*
0.853
0.704
0.545
0.012

43.65%
46.91%
47.64%
47.51%
46.39%
43.11%
49.70%
48.50%

1.781**
0.862
0.651
0.669
0.931
1.780**
0.077
0.387

0.260
0.225
0.856
0.396
2.681***
1.725**
1.876**
1.952**

0.957%
1.101%
0.417%
0.208%
3.138%
11.897%
8.118%
5.344%

0.950
1.182
0.411
0.217
3.296***
2.803***
2.416***
2.028**

47.94%
46.60%
48.15%
49.72%
57.32%
52.44%
54.88%
56.71%

0.574
0.941
0.509
0.074
1.874**
0.625
1.249
1.718**

0.575
0.326
0.158
0.046
1.410*
1.483*
1.078
1.403*

2.127%
0.774%
0.237%
0.071%
2.098%
11.022%
5.006%
3.759%

1.973**
0.859
0.234
0.072
2.345***
2.485***
1.422*
1.441*

50.00%
46.07%
51.06%
49.72%
53.37%
50.92%
53.99%
55.83%

0.000
1.085
0.292
0.075
0.862
0.235
1.018
1.488*

All samples trimmed at 2.5% each tail.

Z-Statistics for medians are obtained using Wilcoxon Signed-Rank tests.
Z-Statistics for % positive are obtained using Binomial Sign tests.
*
Signicance is one-tailed: p .10.
**
Signicance is one-tailed: p .05.
***
Signicance is one-tailed: p .01.

annual changes. Two of the 5 annual changes (from year +2 to +3,

and year +3 to +4) are statistically signicant in all three tests for
median, mean, and % positive. For the 6-year period from year 1 to
+4, the median (mean) change is 0.842% (1.094%), signicantly
negative at the 1% (1%) level, and 38.64% of sample rms experience
positive median annual changes, signicantly less than 50% at the
1% level. For the 5-year period from year 0 to +4, the median and
mean changes are 0.639% and 0.771%, respectively, both signicant at the 5% level. 42.86% of rms experience positive changes in
SG&A/sales for the 5-year period, signicantly less than 50% at the
5% level. Similarly, the mean, median, and % positive changes for
the 4-year period from year +1 to +4 are all negative and signicant
at the 1% level. These results suggest that Six Sigma improvements
signicantly and persistently reduce SG&A costs.
Table 6 Panel D presents the results for the abnormal changes
in the level of ATO. Interestingly, the annual changes in abnormal
ATO for the sample rms are generally negative. Five of 5 (2 of
5) median (mean) annual changes are negative, and the % rms
with positive changes is less than 50% for 4 of 5 annual changes.
However, only the change from year +1 to +2 is marginally signicant. For the multiple-year periods, the median and % positive
changes are all negative but insignicant. The results therefore indicate no signicant relationship between Six Sigma adoption and
ATO.
4.3. Sales growth effects
In order to test hypothesis H2, we next consider the effect of Six
Sigma adoption on changes in sales. Table 7 presents the results
for abnormal sales growth on an annual basis, for each of our three
matching methods. We note that, more so than for any other of

our performance measures, the results for abnormal sales growth

appear somewhat sensitive to the matching method employed.
There are at least two plausible reasons for this discrepancy: (1)
sales growth data are inherently noisier than our other measures
since they are percentage changes in absolute numbers rather than
differences in ratios and (2) changes in sales are correlated with rm
size, so the size control added in median-performance-size-industry
matching has a greater effect. Accordingly, we again concentrate
our discussion on the results from the most conservative matching method, median-performance-size-industry, presented in Panel
C. The annual abnormal % changes in sales for the sample rms are
neither consistently positive nor negative. Two of 5 (5 of 5) median
(mean) annual changes are positive, and the % rms with positive
changes is greater than 50% for 3 of 5 annual changes. Only the positive change from year +3 to +4 is statistically signicant in the tests
for median and mean. For the 6-year period from year 1 to +4, the
median (mean) change is 0.695% (11.022%), signicantly different
from zero at the 10% (1%) level; 50.92% of sample rms experience
positive changes, insignicantly different from 50%. For the 5-year
period from year 0 to +4, the median and % positive changes are
positive but insignicant; the mean change is 5.006%, signicant at
the 10% level. For the 4-year period from year 0 to +4, the median,
mean, and % positive changes are all signicantly positive at the
10% level. We conclude that the results provide only limited support for Hypothesis 2, that Six Sigma adoption positively impacts
sales growth.
The foregoing ndings collectively indicate that signicantly
improved ROA in adopting rms is primarily due to indirect cost
reductions (SG&A), and perhaps mildly due to positive sales growth.
Both of these changes are reected in improved ROS, rather than to
improvements in ATO.

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

449

Table 8
Estimated coefcients (standardized, t-Statistics in parentheses) from regressions of abnormal ROA change from year 1 to year +4 using the median-performance-size-industry
matching method.
Independent variables

Operationalization

Intercept
Manufacturing or services
Labor intensity
R&D intensity

Positive nancial performance

1 if manufacturing,
0 if services
Employees/sales
R&D/sales

Firm size

Industry-adjusted
ROA if positive,
0 otherwise
Industry-adjusted
ROA if negative,
0 otherwise
Six Sigma adoption
year minus 1st
ISO9000
certication
ln(market value)a

Adoption year

YearO

New CEO

1 if new CEO in
years 0, 1, or 2,
0 otherwise
Number of
observations
Model F value
R2
Adjusted R2

Negative nancial performance

ISO9000 experience

Model 1
manufacturing and
Services

Model 2 services
only

Model 3
manufacturing
only

Model 4
manufacturing
only

3.875
(1.203)
0.074
(0.790)
0.242
(2.932)***

7.646
(1.565)

3.830
(0.907)

5.589
(1.175)

0.128
(0.852)

0.343
(3.199)***

0.059
(0.725)

0.358
(2.483)***

0.081
(0.831)

0.325
(2.661)***
0.042
(0.383)
0.115
(0.934)

0.136
(1.664)*

0.374
(2.499)**

0.103
(1.083)

0.118
(1.131)

0.254
(2.551)**

0.201
(1.278)

0.207
(1.755)*

0.264
(2.024)**

0.027
(0.317)
0.113
(1.200)
0.049
(0.612)

0.192
(1.307)
0.219
(1.553)
0.134
(0.954)

0.000
(1.000)
0.110
(0.903)
0.037
(0.385)

0.067
(0.542)
0.168
(1.172)
0.023
(0.220)1

156

47

109

97

2.418**
11.63%
6.82%

2.346**
29.63%
17.01%

2.758**
16.05%
10.23%

2.181**
16.55%
8.96%

All samples trimmed at 2.5% each tail.

a
Alternative operationalizations of rm size [ln(Sales), ln(Employees), ln(Total Assets)] yield substantively similar results.
*
Signicance is two-tailed: p .10.
**
Signicance is two-tailed: p .05.
***
Signicance is two-tailed: p .01.

4.4. Relating abnormal ROA performance to Six Sigma adopter

context
To examine the data for support of hypotheses H3H7, which
address the potential roles of contextual factors in Six Sigma adoptions, we perform cross-sectional analyses. To assess the impacts
to operating performance over the entire study period, we use
the abnormal ROA change from year 1 to +4, obtained using the
median-performance-industry-size matching method, as our dependent variable.
Table 8 shows the results for regressions of the abnormal performance of Six Sigma adopters on the contextual variables for the
entire sample (Model 1), the service and manufacturing subsamples
(Models 2 and 3, respectively), and the manufacturing subsample
with rms reporting R&D intensity (Model 4). We note that all four
models are signicant at the 5% level. We review the results in
the order of our hypotheses and discuss them further in the next
section.
In Model 1, the coefcient for the dummy indicator of manufacturing or service industry is not statistically signicant, indicating
that the ROA benets of Six Sigma adoption are not signicantly greater for manufacturing rms than for service rms.
This fails to support hypothesis H3. Despite the lack of signicant difference in the overall benet of Six Sigma adoption
between manufacturing and service rms, we examine Models
2, 3, and 4 to determine whether the contextual factors that can
impact an adopting rms abilities to extract benets from Six
Sigma implementation differ between rms in manufacturing or
services.

A signicant association indicated in the results presented in

Table 8 pertains to labor intensity. The labor intensity coefcient is
positive and signicantly different from zero at the 1% level for the
total sample and manufacturing subsamples (Models 1, 3, and 4).
Labor intensity is positive but insignicant for the service industry
subsample (Model 2). Thus, hypothesis H4 is supported, but only
for manufacturing rms.
As noted previously, the impact of R&D intensity can only be
evaluated for our manufacturing subsample as most services rms
do not report R&D expenses. The results from Model 4 indicate no
signicant effect of R&D intensity on abnormal ROA changes. Thus,
hypothesis H5 is not supported.
The results from Model 1 indicate that pre-adoption protability is signicantly correlated with abnormal ROA from Six Sigma
adoption by sample rms, but only at a marginal level (p 0.10)
and only for rms with negative nancial performance. Given that
the values of the negative nancial performance variable are nonpositive by denition, the negative coefcient indicates greater
benets for Six Sigma adopters with more negative prior nancial
performance. The results from Model 2 demonstrate that both positive and negative pre-adoption nancial performance is associated
with greater abnormal performance for service rms. These results
suggest that, while overall effects of Six Sigma adoption are typically positive in service rms, they may be amplied by either the
nancial strength or weakness of the rm at the time of adoption.
Interestingly, these ndings are not signicant for manufacturing
rms. Thus, hypothesis H6 is supported, but only for service rms.
The cross-sectional analyses yield signicant results for the ISO
9000 experience variable. The ISO 9000 experience coefcients for

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the total sample and manufacturing subsamples (Models 1, 3, and 4)

are signicantly negative at the 5%, 10%, and 5% levels, respectively.
To understand this counter-intuitive result better, we examined
the raw data. For the 21 rms that were certied to ISO 9000 after
Six Sigma adoption, the median and mean abnormal ROA changes
from year 1 to year +4 are 2.615% and 3.579%, respectively, both
signicantly greater than zero at the 1% level. For the 124 rms that
were ISO 9000 certied prior to Six Sigma adoption, the median and
mean abnormal ROA changes are 0.501% and 0.471%, neither significantly different from zero. The differences in medians and means
between these two groups are both signicantly different from zero
at the 1% level. This suggests that rms with greater quality maturity benet less from Six Sigma adoption, a nding counter to our
hypothesis H7.
We note that none of our control factors rm size, adoption
year, new CEO signicantly impact the benets from Six Sigma
adoption.

5. Discussion of the results

Overall, the results indicate that the benets of Six Sigma
adoption tend to more than compensate for associated costs and
required investments. Recalling that our estimates are conservative, Six Sigma adopters should expect an addition to ROA of at least
0.20.3 percentage points each year on average. These magnitudes
of change are both statistically and economically signicant. The
results from the median-performance-size-industry method, which
are the most conservative, indicate that the sample rms abnormal ROA increased on average by 1.029 percentage points in total
over the 6-year period from year 1 to +4, or an average of 0.206
percentage points improvement per year. Given that the median
sample rm had an ROA of 13.22% in year 2, this change represents
a 7.8% improvement relative to non-adopting rms. For the median
sample rm with $7.0B in assets in year 2, such an improvement
translates into roughly $220M in additional operating income over
the 6-year period for the same asset base.
While quite signicant, this ROA boost nevertheless appears to
be modest in comparison to results indicated in other process management event studies. Corbett et al. (2005) nd an average yearly
ROA increase of 0.89 percentage points associated with ISO 9000
certication. Hendricks and Singhal (1997) nd an average yearly
ROA increase of 5.01 percentage points in years 1 to +3 for winners
of quality awards. We hesitate to conclude that Six Sigma actually
offers less of an impact than these other programs, however. As we
noted earlier, estimates from our study are conservative, given the
possibility that some rms populating our benchmark groups could
have also adopted Six Sigma before or during the sampled time
horizon. Indeed, the average ROA boost indicated from our one-onone matching process (Table 5 Panel D) is nearly double that of the
more conservative matching process. While Hendricks and Singhal
(1997) cite similar potential pollution of benchmark groups as a
limitation of their study, it is important to note that they study quality award winners, i.e., successful purveyors of quality initiatives.
Thus, their sample is upwardly biased. There is no reason to believe
that our sample is similarly upward biased; our results may represent a more varied and realistic success rate in process management
implementation. Also important, our performance matching criterion (3-year median) is stricter than the criteria used by either of
the other two studies.
Six Sigma is a relative newcomer to the ranks of process
improvement programs. It is likely that many Six Sigma adopters
have already put TQM, lean, or other strategies in place prior to
Six Sigma. In these rms, manager may have already targeted
low hanging fruit in previous process improvements, and we
should therefore not be surprised by the relatively small operating

performance improvements associated with Six Sigma reected in

our overall sample. Indeed, our nding regarding quality maturity
calls into question the argument that Six Sigma is truly distinctive
from other quality oriented management processes. Using the
absorptive capacity perspective, we argued that rms with greater
experience in quality management should benet more from Six
Sigma adoption, because Six Sigma is at the same time similar to,
yet distinct from, prior quality management programs. Since the
empirical evidence demonstrates less benet for rms with greater
quality maturity, a more likely conclusion is that the capabilities
stemming from Six Sigma adoption add little measurable value over
and above those that emanate from ISO 9000 certication. Thus,
while Six Sigma may entail distinctive organizational structures,
problem solving tools, and metrics, these attributes appear to be
less important for already experienced rms. The managerial implications of this nding for rms with and without mature quality
systems could be far-reaching, and thus require further research.
Our ndings support the theory that Six Sigma structure engenders the development of dynamic learning capabilities. However,
one might still question whether the positive returns from these
capability developments justify risks and opportunity costs associated with Six Sigma adoption. By using matched, presumed
non-adopting rms as benchmarks in our analysis, we have constructed proxies that incorporate such risks and opportunity costs.
However, a given manager considering Six Sigma adoption will
want to consider the specic risks and foregone opportunities that
are relevant to his/her rm. For example, the prots projected by
our study might not clear the desired rate of return (hurdle rate) for
a given rm. Moreover, for a given rm a Six Sigma program might
be an inferior investment to a new distribution center, an ERP system, a more fuel efcient eet of trucks, or other such investments
if they have more certain or faster paybacks.2 Our results do suggest
that positive returns from Six Sigma adoption take time. The most
signicant driver of ROA in our data, savings in SG&A, rst materializes signicantly only in years +2 through +4 (see Table 6 Panel
C). Similarly, with one exception, signicant improvements in sales
growth emerge only in years +3 and +4 (see Table 7). Thus, it appears
that dynamic capabilities emerge gradually, or at least take time to
be manifested in operating performance improvements. It is also
possible that Six Sigma is rolled out sequentially across divisions,
extending the time for impacts to manifest in overall corporate performance. Though these ndings should be regarded as tentative,
they do suggest that managers should be willing to wait at least 23
years before net impacts of Six Sigma adoption become signicantly
positive.
Other insights into the nature of Six Sigmas operational impacts
provided by our study are also quite interesting, and somewhat
surprising. Six Sigma is widely recognized as a methodology for cutting costs and eliminating defects (Byrne and Norris, 2003; Pande
et al., 2000). Six Sigma focuses organizational efforts on process
improvement, especially through reducing variance for outputs of
product (or service) features that are deemed to critically inuence customers perceptions of quality. At its core, the DMAIC
method aims to measure and analyze the deviation of a given process from its critical-to-quality goals so that workers can install
preventive measures that eliminate the root cause of defects. Such
preventive measures involve the implementation of training, procedures, monitoring and control systems, tools, technologies, and
product redesign. One would expect that this focus on structural
control would yield improvements in process efciencies. Reductions in variation and associated defects are known to create cost
savings in areas of internal product rework, inventories, capacity

We thank one of the reviewers for offering this observation.

M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

buffers, warranties, and repair work. These also include material

costs savings from reduced scrap and labor savings from reduced
appraisal, material handling, and supervision. We expected that
such efciency improvements would be reected in overall lowered product or service costs and associated higher margins.
Surprisingly, our results clearly show that efciencies gained
from Six Sigma adoption are reected more strongly in indirect
cost savings (SG&A), as opposed to savings in direct operating costs
(COGS). We note that COGS includes direct purchase, labor, and
operating expenses, while SG&A captures indirect expenses associated with governance, logistics, advertising, overhead, and other
indirect activities. It is important to note that most SG&A processes
in manufacturing rms are in fact, repeatable service processes
(e.g., customer service, billing, transportation, etc.). Nakhai and
Neves (2009) identify a number of non-manufacturing applications
of Six Sigma inside manufacturing rms. Such processes tend to be
labor-intensive and repetitive. A related nding in our data is that
Six Sigma benets are strongly correlated with labor-intensity in
manufacturing rms, yet this same correlation is not signicant
in service rms. Taken together, both ndings suggest that laborintensive, repeatable processes offer the greatest opportunities for
applications of Six Sigma methods.
We offer several explanations for this nding, which at rst
glance may seem somewhat counter-intuitive. First, Hendricks and
Singhal (2001b) argue that labor-intense rms provide more fertile grounds for quality process improvements because they have
more process options and depend more on training and skills. As
we explained in our motivation for hypothesis H4, processes that
are more automated and less labor-intensive tend to be inherently
less variable. As a result, these processes provide less overall opportunity for improvement from Six Sigma structured methods, which
are mostly aimed at variance reduction.
Second, back-ofce (SG&A) operations tend to be less inuenced
by specic customer requirements and idiosyncrasies, i.e., they are
more repeatable. Consequently, they may present more attractive
targets for Six Sigma projects. Indeed, many of the service rm
examples of Six Sigma applications described in the literature are
actually in back-ofce or business-to-business contexts (Nakhai
and Neves, 2009; Antony et al., 2007). Given the supposed challenges of implementing Six Sigma in highly personalized services,
future studies that directly compare Six Sigma implementations
in back-ofce versus more direct personal service contexts could
reveal important differences in how Six Sigma concepts are operationalized.
Finally, there is logic suggesting that process variance reductions will reduce indirect costs, perhaps even more strongly than
direct costs. Schmenner (1988, 1991) notes that overhead costs
often exceed direct costs. Further, he argues that slow moving and highly variable process ows are the primary drivers
of indirect overhead costs. For example, variable process ows
create requirements for many transactions (purchasing, inventory control, production control, quality control) as well as other
added overheads (inventory, space, material handling, management attention). These arguments are echoed in swift-even-ow
theory (Schmenner and Swink, 1998), which states that processes with faster and less variable ows will be more productive
and efcient. Consider, for example, how quality improvements
from Six Sigma variance reduction efforts would be reected in
indirect costs. A rm making these improvements would enjoy
lowered safety stocks, lowered quality assurance costs, lowered
material handling costs, and so on. These cost savings could conceivably exceed the direct savings attributable to product quality
improvements. Again, future research which explores these possible explanations is needed.
The foregoing arguments connect Six Sigma efforts to indirect
costs, but why would Six Sigma impacts not also be signicantly

451

manifested in the direct costs (COGS) of our sample rms? We

offer two possible explanations. First, in most manufacturing rms
the largest component of COGS is the cost of purchased items.
It is likely that many Six Sigma projects, particularly in the rst
few years of Six Sigma implementation, are inwardly focused, not
involving suppliers directly, and thus produce only limited, if any,
impacts on purchased item costs. Second, we noted earlier that
many adopters of Six Sigma are already mature organizations in
terms of quality management. Many of the preceding quality and
process improvement approaches may have already been aimed
at direct production processes. As a result, the potential additional
impacts of Six Sigma project are likely lessened in these areas. Supporting this conjecture, our cross-sectional analyses show that Six
Sigma benets are reduced in rms with greater quality maturity.
More research is needed to investigate these and other possible
explanations of this nding.
Two studies, Hendricks and Singhal (1997) and Corbett et al.
(2005), demonstrate signicant increases in sales associated with
quality awards and ISO 9000 certications, respectively. Similarly,
our results indicate that sales improvements from Six Sigma adoptions are at least marginally signicant. Such effects on sales growth
may stem from improved product quality and customer satisfaction, or from reputation and image-related halo effects associated
with adoption. To the extent that product innovation drives sales
growth, our results suggest that Six Sigma adoption at least does no
consistent harm to innovation; to the contrary, it may be compatible
with or even supportive of growth-oriented innovation. This nding is consistent with the expectations of Schroeder et al. (2008)
and Manev and Stevenson (2001), and provides no support for arguments that Six Sigmas narrow and disciplined focus may hamper
growth (Brady, 2005; Hindo, 2007; Parast, 2011). On the other hand,
the positive effects of Six Sigma on sales growth may be entirely
due to improvements in product quality and the rms reputation.
Future research efforts should focus on parsing out these different
effects.
Statistically indistinguishable positive ROA impacts of Six Sigma
adoption between manufacturing and services rms suggest that
adoption impacts are more a function of the programs overall
structural and cultural aspects, and less about the focused statistical tools and techniques that may be more frequently applied in
manufacturing contexts (Schroeder et al., 2008; Naor et al., 2008;
Gutierrez et al., 2009; Nakhai and Neves, 2009; Antony et al., 2008).
The positive benets of Six Sigma appear to also be robust to other
contextual factors including R&D intensity, rm size, adoption year,
and CEO turnover. However, our results do indicate that Six Sigma
adoption impacts may be related to the rms absolute nancial
performance level at the time of adoption. Both protable and
loss-making service rms appear to gain more from Six Sigma adoption. We hypothesized that protable rms have ample resources
to support a broader and more thorough adoption of Six Sigma,
while loss-making rms may be better able to overcome inertia
and resistance to change, because their managers and employees
have a greater sense of urgency to implement required organizational changes. Our results indicate that effects of prior nancial
performance can be signicant, but only in service rms. Perhaps
the organizational changes required to implement Six Sigma are
more far-reaching in services than they are in manufacturing, or at
least managers may perceive them as such. This is an interesting
nding that deserves further attention.

6. Conclusions, limitations, and future research

Our study provides solid support for the hypothesis that Six
Sigma adoption tends to produce signicant abnormal benets
to rm protability. These benets appear to be persistent over

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M. Swink, B.W. Jacobs / Journal of Operations Management 30 (2012) 437453

the time horizon we studied, as positive ROA changes were frequently evidenced in latter periods (years +3 and +4). Further, the
results indicate that overall protability impacts stem primarily
from improved indirect cost efciencies, rather than from direct
cost improvements or from improved asset productivities. The
results also manifested marginally signicant positive effects on
sales growth. These ndings hint at potential differences in how
Six Sigma programs are possibly being applied in front-ofce versus
back-ofce contexts.
In addition, our ndings identify some important contextual
factors. In general, our ndings hint that Six Sigma methods may
be most benecial when applied to labor-intensive, repeatable
processes. However, the results suggest that less labor-intensive,
quality experienced, manufacturing rms will not experience the
prot impact from Six Sigma adoption that others will. On the other
hand, service rms contemplating Six Sigma adoption should pay
close attention to how their current performance can be leveraged to maximize Six Sigmas potential. Managers in these rms
would do well to identify and exploit either resource-based or
motivational advantages that come from positive or negative prior
nancial performance, respectively.
Our study is limited in ways that can be addressed in future
research. First, our sample of service rms is somewhat small and
grossly aggregated across service types (e.g., logistics providers and
banks). Future research that directly compares Six Sigma implementations in personal and non-personal services might extend
our understanding of its applicability limits and particular sources
of impact.
Second, our sample may be biased toward larger rms. We cannot verify the bias, as it may be that only larger rms are likely to
adopt Six Sigma due to the sizable investments required. Moreover,
in our analysis, our control for rm size was not signicant, suggesting that size is not a strong driver of Six Sigma impact. However,
our limited sample prevents us assessing the effects of rm size for
relatively small rms. Given the difculty in obtaining secondary
data on small and medium sized enterprises (SMEs), a primary data
collection approach might be benecial.
Third, our study is limited by its focus on operational performance impacts over a six-year time horizon. As time passes,
future studies should be able to study whether Six Sigma effects
persist over even longer periods. Moreover, there are a host of
other performance effects that should be examined, including
the stock markets valuation of future cash ows and intangible
assets associated with Six Sigma, as well as impacts on corporate
social responsibility and other concerns. Though we investigated
effects on sales growth, this serves as a poor proxy for innovation
performance. Future studies might also build on our method by
comparing patent activity, new product introductions, and other
more direct measures of explorative innovation across adopters
and non-adopters of Six Sigma.
We explored associations of abnormal performance due to Six
Sigma with manufacturing and service contexts and with a number
of other contextual factors. Others factors may also be important.
Several researchers have pointed to important differences in the
timing of adoption of such programs (Westphal et al., 1997; Yeung
et al., 2006; Benner and Veloso, 2008), thus warranting a study
comparing early versus late adopters. Though our results did not
relate another size variable (market value) to abnormal performance, yet other size-related factors such as resource slack and
inertia may moderate Six Sigma impacts (Hendricks and Singhal,
2001b). In addition, the process management literature points
out other potentially important moderators, including diversication (Hendricks and Singhal, 2001b), technology strategy (Ittner
and Larcker, 1997; Benner and Veloso, 2008), and technological dynamism (Benner and Tushman, 2002; Benner, 2009; Parast,
2011). Finally, numerous writers have identied implementation

factors associated with an effective Six Sigma program, including

motivation, t with culture, and conformance to program structure.

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