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Technovation 21 (2001) 539558

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TQM and innovation: a literature review and research framework


Daniel I. Prajogo, Amrik S. Sohal

Department of Management, Monash University, PO Box 197, Caulfield East, VIC 3145, Australia
Received 3 July 2000; accepted 6 October 2000

Abstract
This paper discusses the relationship between the implementation of Total Quality Management (TQM) and innovation performance. The discussion arises primarily based on the considerable controversy concerning this relationship that appears in the literature.
As of interest to resolve this controversy, a research framework is developed preceded by a theoretical discussion of the multidimensionality of TQM when applied in different organizational contexts. The primary proposition of this framework is that the implementation of TQM practices will be influenced by the external and internal environment as well as the strategy adopted by the firm.
The model of TQM implemented is then reflected in terms of different outcomes relating to quality performance and innovation
performance. 2001 Elsevier Science Ltd. All rights reserved.
Keywords: TQM; Innovation; Relationships; Literature review

1. Introduction
The emergence of Total Quality Management
(TQM) has been one of the major developments in
management practice. TQM began to be introduced in
the US around 1980, primarily in response to severe
competitive challenges from Japanese companies. The
recognition of TQM as a competitive advantage is
widespread around the world, especially in Western
countries, and today very few (especially
manufacturing) companies can afford to ignore the
term TQM (Dean and Bowen, 1994). On the other
hand, innovation has also received considerable attention as having a crucial role in securing sustainable
competitive advantage in todays competition. As
Tushman and Nadler (1986, p. 74) assert:
In todays business environment, there is no executive
task more vital and demanding than the sustained
management of innovation and change. . . . To compete in this ever-changing environment, companies
must create new products, services, and processes; to

* Corresponding author. Tel.: +61-3-9903-2033; fax: +61-3-99032979.


E-mail address: amrik.sohal@buseco.monash.edu.au
(A.S.
Sohal).

dominate they must adopt innovation as a way of corporate life.


This paper discusses the relationship between TQM
and innovation. We believe that such a discussion is
important for the following three reasons: to assess the
relevance of TQM for management of innovation; to
determine the usefulness of TQM as a resource for innovation; and to clarify conflicting accounts of the relationship between TQM and innovation. First, from a TQM
perspective, this discussion provides a reassessment of
the need for implementing TQM in organizations. Basically, TQM has been widely accepted as a management
model that provides a competitive advantage, if
implemented successfully. However, as market conditions change, it is expected that the basis of competition will also change with quality becoming one of the
qualifying criteria and flexibility, responsiveness and
particularly innovation taking over as winning order
criteria1 (Bolwijn and Kumpe, 1990; Hamel and Prahalad, 1994; Tidd et al., 1997). In this respect, a question
can then be raised: Should organizations continue to
implement TQM as a management model in the future,

1
Qualifying criteria and winning order criteria were first formulated
by Hill (1985).

0166-4972/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved.
PII: S 0 1 6 6 - 4 9 7 2 ( 0 0 ) 0 0 0 7 0 - 5

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

particularly if they want to achieve a high innovation


performance?
Second, from the point of view of innovation, testing
the suitability of TQM as a management model for managing innovation could enrich the perspective of managerial practices in innovative organizations. As Cooper
(1998) suggests, academics as well as practitioners have
devoted significant amount of time to continually seeking and identifying organizational factors, practices and
resources that support and enhance innovation. In this
respect, a particular question can thus arise: Can TQM
function as a specific resource that allows organizations
to build their competence and competitiveness in innovation?
Third, the discussion on the relationship between
TQM and innovation is important from the point of view
of innovation based also on the fact that innovation studies consider TQM itself as one form of innovation
(Westphal et al., 1997; Yamin et al., 1997; Cooper,
1998). At the same time, innovation scholars have an
interest to examine the impact of adoption and
implementation of a particular innovation, as suggested
by Wolfe (1994, p. 417):
A logical extension to moving from adoption to extent
of implementation as the focus of innovation research
would be to consider the influence of an innovation
on organizational performance.
This is because, as Tornazky and Flischer (1990)
argue, innovation will have a wide range of consequences, the intended or anticipated ones as well as the
unintended ones. Similarly, Flynn et al. (1995a, p. 1325)
also affirm that
Use of a given set of practices should affect the
intended type of performance, but it may also affect
other types of performance.
Honoring these arguments with respect to TQM and
innovation, it should be worthwhile investigating
the relationship between TQM practices and innovation performance. It would be interesting then to
examine the impact of TQM adoption particularly in
organizations, and particularly in terms of innovation
performance.
Finally, this discussion on the relationship between
TQM and innovation is important because conflicting
arguments appear in the literature in regard to this
relationship. This paper, therefore, seeks to resolve this
debate from a theoretical perspective, thus leading to the
development of an appropriate research framework for
examining the relationship between TQM and innovation.
The remainder of this paper is structured as follows.
Section 2 discusses the relationship between TQM and

innovation. Both positive and negative arguments in this


respect are presented. Section 3 discusses the multidimensionality of TQM with respect to innovation. The
three factors, namely external environment, organizations strategy, and internal environment, that impact on
TQM implementation are also addressed. Finally, Section 4 presents our research framework and hypotheses
to be examined.

2. Literature review on the relationship between


TQM and innovation
Before discussing the literature review on the relationship between TQM and innovation, it is necessary to
clarify what we mean by TQM and innovation. Defining
what is TQM is quite problematic because the most
serious problem with TQM is the absence of a uniform
definition (Lau and Anderson, 1998). The problem in
defining TQM then results in another problem of establishing a clear-cut boundary to distinguish TQM from
not TQM, and what belongs to TQM and what does
not. As such, we constrain the scope of TQM by referring to the work of several TQM scholars, such as Dean
and Bowen (1994), Hackman and Wageman (1995),
Plenert (1996) and Lau and Anderson (1998), who
recognize that TQM concepts and practices are shaped
by a number of individuals who are honored as quality
gurus based on their views and prescriptions about
modern quality management, namely Deming (1982,
1986), Juran (1988), Juran and Gyrna (1993), Crosby
(1979, 1984), Feigenbaum (1983), Ishikawa (1985,
1986) and Imai (1986).
On the other hand, the review of the literature on innovation also results in various definitions of innovation
from different perspectives, even though they are satisfactorily coherent. In this regard, we adopt the definition
suggested by Damanpour (1991, p. 556) who defines
innovation as adoption of an internally generated or purchased device, system, policy, program, process, product, or service that is new to the adopting organization.
In addition, innovation scholars also recognize that there
are numerous typologies of innovation (Wolfe, 1994).
In this paper, we constrain our focus on two types of
innovationproduct versus process, and incremental
versus radicalbecause they are found to be central in
innovation studies (Ettlie et al., 1984; Abernathy and
Utterback, 1988; Tushman and Nadler, 1986; Zairi,
1995; Tidd et al., 1997; Huiban and Bouhsina, 1998;
Sciulli, 1998).
Discussions on the relationship between TQM and
innovation do not appear very often in the literature.
Essentially, there is only a small amount of such literature which is supported by theoretical concepts or by
empirical evidence. A review of these papers has led
to a conclusion that there are conflicting arguments

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

concerning the relationship between TQM and innovation. As presented in the next section, one group of
arguments supports the positive relationship between
TQM and innovation, implying that organizations that
implement TQM will be successful in innovation. The
opposite group of arguments claims that TQM will hinder organizations from being innovative due to several
inherent elements that are not congruent with the spirit
of innovation. These two arguments are each considered in turn.
2.1. Arguments in support of the positive relationship
between TQM and innovation
Arguments that support a positive relationship
between TQM and innovation suggest that companies
embracing TQM in their system and culture will provide
a fertile environment for innovation (growth) because
TQM embodies principles that are congruent with innovation (Mahesh, 1993; Dean and Evans, 1994; Kanji,
1996; Tang, 1998; Roffe, 1999). In this regard, the principle of customer focus encourages organizations to
search consistently for new customer needs and expectations and therefore leads organizations to be innovative
in terms of developing and introducing new products as
a continual adaptation to the markets changing needs
(Juran, 1988). Customer focus also suggests the importance of delighting customers. This means that suppliers
not only need to meet customers basic and stated
requirements but to do so creatively to exceed those
needs and expectations (i.e. going beyond conformance).
This is a strategy very much associated with innovation.
Likewise, continuous improvement encourages change
and creative thinking in how work is organized and conducted. Finally, the principles of empowerment, involvement, and teamwork are also substantial in determining
the success of organizational innovation.
A study on best practice of innovation management
(Zairi, 1999) among several world-class organizations,
including D2D, Rover Group, IBM (UK) Ltd, 3M,
Ford, AT&T, Cadillac, Hewlett Packard, Rank Xerox,
Exxon Chemical, and Kodak Ltd, reveals that some of
the practices are well recognized as TQM elements.
These practices include an implementation of such
principles as quality culture, learning organization,
customer-driven organization, and continuous
improvement. More specifically, a wide variety of the
so-called quality tools, including quality function
deployment (QFD), Taguchi methods, design of experiments, statistical process control (SPC), failure mode
and effect analysis (FMEA), Poka Yoke, benchmarking, six-sigma design, seven problem-solving
tools, seven planning tools, ISO 9001 quality system
standards, employee empowerment and involvement,
multifunctional teamwork, and supplier partnership, are
also included in these practices.

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The argument supporting the positive relationship


between TQM and innovation is also substantiated by
several empirical studies. Flynn (1994) reports on the
relationship between quality management and the speed
of product innovation. Her findings suggest that there
are significant differences between fast, medium and
slow product innovators based on TQM elements in
terms of top management quality leadership, feedback,
cleanliness and organization, and product design
characteristics. Similarly, the findings of Gustafson and
Hundt (1995) suggest that such elements as customermindedness, management/leadership, benchmarking,
constancy of purpose, data/information, quality mindedness, employee mindedness, process mindedness, and
continuous improvement are central to successful innovation and improvement, although not all of them are
of equal importance in predicting success. McAdam et
al. (1998), in comparing TQMas represented by continuous improvementto innovation in 15 companies
in Ireland, report two important results. First, they find
that there is a significant and very high correlation
between the overall continuous improvement score and
innovation score, suggesting that continuous improvement can act as a solid foundation on which to build an
innovative organization. Second, through a qualitative
study, they find that certain practices reflecting a culture of continuous improvement exist in the organizations deemed to be innovative. They conclude, therefore, that the strong correlation between continuous
improvement and innovation scores is not simply a correlation but suggests a causal relationship, meaning that
the introduction of continuous improvement over a period of time will lead to increased innovation. Baldwin
and Johnson (1996) find that the adoption of TQM as
a management strategy contributes significantly in differentiating the more-innovative organizations from the
less-innovative ones.
2.2. Arguments in support of the negative relationship
between TQM and innovation
In contrast to the above, arguments that reject the
positive relationship between TQM and innovation are
raised by several scholars such as Lawton and Parasuraman (1980), Bennett and Cooper (1981), Hamel and Prahalad (1994), Lynn et al. (1996), Wind and Mahajan
(1997), Slater and Narver (1998), and Tidd et al. (1997).
These negative arguments are summarized below.
2.2.1. TQM could trap organizations in
improvement or incremental innovations
The customer focus philosophy could easily lead
organizations to focus only on incremental improvements in their current products and service activities
rather than trying to create novel solutions. In other
words, such behavior leads to the development of

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

Fig. 1. The company and market perceptions of product innovation (Davis and Moe, 1997, p. 340).

uncompetitive me-too products rather than the


development of real innovation (Wind and Mahajan,
1997). Davis and Moe (1997, p. 340) define product
newness, or innovativeness, in terms of risk from both
company and market perspective, as depicted in Fig.
1. On this mapping, product innovativeness can be categorized based on the degree of the products newness
to both the market and the company. The newer the
products are, the greater the risk the company must
bear in investing its resources for developing such
products.
The findings of a study by Atuahene-Gima (1996)
support this argument by concluding that market orientation has an insignificantand negativerelationship
with product newness in the manufacturing sector. On
the other hand, it appears that market orientation has a
positive relationship with product advantage (i.e.
conformance). This confirms the notion that customer
focus will result in product conformance rather than product innovation.
Likewise, continuous improvement is perceived as
possessing several key weaknesses in relation to innovation because it could hinder the introduction of more
radical innovations as it stresses a level of change that
is incremental. The emphasis on incremental change is
central to the philosophy of process improvement
(kaizen) developed by Imai (1986). He strongly contrasted the idea of radical and discontinuous breakthrough, which he termed as innovation as is usually
implemented by Western companies, with the idea of
small and continuous improvement. This comparison is
presented in Table 1. Imai (1986) has argued, however,
that kaizen is not intended as a substitution for innovation; instead, kaizen is needed to sustain the benefits
resulting from innovation.
Nevertheless, his idea in contrasting continuous
improvement with breakthrough innovation has invited
a number of arguments highlighting the negative aspects
of TQM. For example, Harari (1993a) argue strongly
that the stress on incremental improvement could lead

people to work on unambitious goals and derive solutions that are not novel. Harari (1993b; p. 37) furthermore suggests that
obsessing internally until one achieves a zero-defects
do-it-right-first-time routine is a dangerous luxury
that often slows down new breakthrough development
in products and services.
From a strategic perspective, incremental improvement
may allow business to catch up to its competitors, but
it cannot achieve breakthrough performance that will
permit it to leapfrog past them. Therefore, it is suggested
that any business culture that emphasizes catch-up strategies, without consideration of the need for breakthrough change, will soon be outdated (Fuchs, 1993; Jha
et al., 1996).
2.2.2. TQM could lead organizations to be narrowminded
Customer focus could lead organizations to be
reactive and short term in focus in terms of serving the
current and stated needs of customers. As Reed et al.
(1996, p. 178) suggest:
Because quality means both producing products to
specifications and meeting customers expectations,
the needs of customers becomes a key input to TQM.
In this way, such firms would fail to search customers
latent needs. As a result, they fail to drive a generative
learning by searching for the unserved, untapped potential in markets. Customer focus, therefore, could build a
tyranny of the served market in which managers see
the world only through their current customers eyes
(Slater and Narver, 1998). As such, those companies
may not be aware of the uncertainties of the future in a
dynamic and turbulent market and, thus, not be prepared
to deal with market discontinuity (Kim and Marbougne,
1999). Finally, customer focus also strongly enforces the

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

543

Table 1
Features of kaizen and innovation (Imai, 1986, p. 24)
Kaizen

Innovation
Short-term, but dramatic
Big steps
Intermittent and non-incremental
Abrupt and volatile
Select few champions
Rugged individualism, individual ideas and efforts
Scrap and rebuild
Technological breakthroughs, new inventions, new
theories
Requires large investment, but little effort to
maintain it
Technology
Results for profits
Better suited to fast-growth economy

1
2
3
4
5
6
7
8

Effect
Pace
Time frame
Change
Involvement
Approach
Mode
Spark

Long-term and long-lasting, but undramatic


Small steps
Continuous and incremental
Gradual and constant
Everybody
Collectivism, group efforts, systems approach
Maintenance and improvement
Conventional know-how and state of the art

Practical requirements

Requires little investment, but great effort to


maintain it
People
Process and efforts for better results
Works well in slow-growth economy

10
11
12

Effort orientation
Evaluation criteria
Advantage

maintenance of long-term relationship with existing customers. Whilst this sounds quite logical, existing customers, however, can substantially constrain a firms
ability to innovate because a company will fear that producing innovations may disturb the way of doing business with the current customer (Wind and Mahajan,
1997). Focusing on the majority of customers could
result in perceiving risk of losing existing customers and
will, therefore, prevent companies from being innovative
by pursuing conformance at the cost of innovativeness.
As a matter of interest, Christensen and Bower (1996)
report findings that strongly challenge the prevailing
concept of customer focus by having revealed that firms
lost their position as industry leaders because they listened too carefully to their customers.
2.2.3. Based on the issue of risk avoidance and
adaptive approach, TQM could strategically lead
organizations to be imitators or followers rather than
innovators or leaders
The pursuit of customer satisfaction can overwhelm
other strategic performance indicators such as those concerned with new product success, for example Miles and
Snows (1978) prospector strategy. This particular strategy is closely associated with producing radical innovation for new markets that clearly involves a high
degree of risk. By suggesting that customer focus does
not encourage organizations to consider radical product
innovation, it also implies that customer focus does not
support the concept of prospector strategy. In addition,
as discussed before, customer focus drives organizations
to serve the existing market. Whilst pursuing a customer
satisfaction strategy is undeniably important, the point
to note here is that in satisfying its customers, an organization can also offer them something that they have
never experienced or expected before which is clearly

valuable to them (Kim and Marbougne, 1999). Innovative companies, therefore, will emphasize more on
informing and educating customers rather than listening
to them with regard to the introduction of new products
into the market (Wind and Mahajan, 1997). Likewise,
adoption of new technology to improve the process that
leads to radical change is unlikely to obtain support due
to perceived risk, which is not solely concerned with
cost but also with wider issues in relation to the impact
of the change.
2.2.4. TQM could hinder creativity due to the
enforcement of standards, or formalization
Imai (1986) strongly suggests that continuous
improvement requires standardization. He proposes a
combined approach between the improvement (PDCA)
cycle and the standardization (SDCA) cycle.2 As such,
continuous improvement requires a regulatory standard
and activities that are sufficiently routine to be well
understood. Therefore, control and stability is the core
of the continuous improvement process (Jha et al.,
1996). Whilst standardization is necessitated for conformance and error reduction, from an innovation point
of view it could trap people into staying with what is
workable and believe this to be the best solution, as
asserted by Kanter (1983, p. 70):
Organizations with a formula that works well are
doomed to replicate it, handing over their operations
to people who control things so that there are no deviations from the formula.

PDCA stands for Plan-Do-Check-Act, and SDCA stands for Standardize-Do-Check-Act. Further details can be found in Imai (1986, pp.
6065).

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

Standardization, therefore, could inhibit innovation


because it reduces the ambiguity of any task that is
necessary to enforce innovation. In addition, standardization will raise the fear of breaking rules because
of possible punishment for doing so (Morgan, 1993).
In this way, standardization will produce conformists
and law-abiding workers, yet Morgan (1993) holds that
very few innovations have occurred when people
accepted the status quo. The primary effect of such
standardization is the establishment of routines. Whilst
there is an advantage in having routines with which an
organization can operate continuously and smoothly,
there is also a potential danger in which an organization
will develop a stickiness on repeated or established
procedures or processes and not, thereby, explore new
ways of doing things. As asserted by Morgan (1993,
p. 124):
When it comes to thinking, rules are probably the last
thing we need for our survival. Rules make us lazy
in the way we think. They encourage us to accept the
status quo. They stop us thinking outside the rules.
In relation to algorithmic tasks, where task behavior
is governed by fixed and specific rules, innovation would
be inhibited because the stickiness on established and
repeated rules will subsequently produce the Not
Invented Here (NIH) syndrome (Tushman and Moore,
1988, p. 293; Woodman et al., 1993). This is referred to
as rigidity and relates to a certain behavioral pattern that
is developed over time. As held by Morgan (1993), such
rigidity will inhibit creativity which is the primary
source of innovation. Katz (1988, in Tushman and
Moore, 1988, p. 204) gives a strong conclusion with
regard to the end result of the standardized problem
solving approach, as follows:
As a result, there may develop over time increasing
rigidity in ones problem solving activitiesa kind
of functional fixedness that reduces the individuals
capacity for flexibility and openness to change. . . .
Furthermore, as individuals continue to work by their
well-established problem-solving strategies and procedures, the more committed they may become to
such existing methods.

2.2.5. TQM promotes single-loop learning rather than


double-loop learning
The failure of continuous improvement in producing
innovation can also be attributed to the associated
learning process. The popular quality improvement
tools mentioned earlier that always accompany discussions on continuous improvement usually emphasize analytical, structured and linear thinking, whilst
innovation is more synthetical, unstructured and non-

linear (Bookman, 1994). Incremental improvements


tend to emphasize starting with factual information
(left-brain thinking), whilst breakthrough and radical
thinking both start with intuitive insights (right-brain
thinking), a process which is then followed by factual
verification (Miller, 1995). It is also the case that continuous improvement is more analytical, whilst innovation is more experimental, allowing trial and error
due to uncertainty (Ahanotu, 1998). The problem solving method taught by TQM emphasizes the use of data,
indeed one of the most famous terms used in TQM
literature is management by fact. This term strongly
promotes the idea of rational thinking supported by a
set of data, tools, and techniques. The danger of too
much emphasis on rational thinking, however, is that
people will try to place creative and chaotic processes
into systematic and rational sequences that may not be
compatible with each other (Roffe, 1999). Furthermore,
Glynn (1996) suggests that in situations where a problem is familiar, prior experience may lead to the direct
retrieval of the prior solutionas in the case of routinized problem solving. This means that if workers are
allowed to deal only with routine operational problems,
then it would be unlikely that they would produce
innovative solutions.
The emphasis on single-loop learning leads continuous improvement practices to focus on the existing system. As mentioned before, certain critics of TQM suggest that the focus on incremental improvement could
well hinder people to consider more radical change. In
this context, the failure to explore any radical change is
caused by overemphasizing the improvement of existing
systems. For example, Lawler (1994) and Samaha
(1996) suggest that the concept of continuous improvement is aimed basically at simplifying or streamlining a
process and carrying it out in a better or faster manner.
Such an approach could be detrimental to breakthrough
innovation that, in turn, leads companies to continually
work upon, and improve, processes that are fundamentally flawed. Similarly, Ahanotu (1998) asserts that in
practice the TQM approach results in a situation where
the learning of production workers is typically constrained within a given pre-designed production regime.
Consequently, this brings employees to focus on the
details of the quality process instead of on new ideas that
represent a substantial change from current functions and
structural ways of working. The best that they can do,
therefore, is to improve the existing system incrementally. With regard to the learning process involved in
TQM, Burdett (1994, p. 8) provides the following conclusive statement:
A more subtle potential shortfall in TQM is the extent
to which an ethos of continuous improvement impacts
on organizational learning . . . A question that is
framed in terms of How can we improve this? by

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

implication moves those involved away from what


may be a more insightful question, Do we need to
do this at all?
This incremental and single-loop learning concept is
in contrast to the idea of re-engineering. Rather than
working within the framework of a companys existing
processes and trying to find ways to enhance them, reengineering seeks a breakthrough, not by enhancing
existing process but by discarding them and replacing
them with entirely new ones (Hammer and Champy,
1993).
2.2.6. From a strategic point of view, TQM focuses on
cost efficiency that could limit the capacity and
opportunity for innovation
The underlying concept of process improvement is to
eliminate waste and, therefore, promote efficiency. In
this regard, Imai (1986) even expands the understanding
of waste beyond the case of defective products to also
include resources. Essentially, the overemphasis on
efficiency could minimize, if not eliminate, the availability of slack resources, something that has been found
to be instrumental in organizational innovation (Rogers,
1983; Mintzberg and Quinn, 1991; Nohria and Gulati,
1996). For example, there is no idle time and energy
allowing workers to be involved in non-production
activities, thus substantially reducing their opportunities
to participate in the processes of innovation (Ahanotu,
1998).
The comparison between the two opposing views of
the relationship between TQM and innovation is summarized in Table 2. What is presented in that table does
not capture all aspects on which the conflict is
grounded. However, the three elementscustomer
focus; continuous improvement; and empowerment,
involvement and teamworkare selected because they
represent the core principles of TQM as suggested by
such scholars as Gobeli and Brown (1994), Dean and
Bowen (1994), Sitkin et al. (1994), and Kim and
Chang (1995).
2.3. Discussion
When discussing the debate presented above, a greater
concern is placed on the negative arguments rather than
the positive ones as the former are more controversial
and challenging. Moreover, whilst the two groups of
arguments appear to be antagonistic to each other, the
negative arguments do not totally reject the positive view
that TQM supports innovation. However, the negative
view posits that TQM will only support innovation on
a very limited basis and, to a certain degree, suggest that
the implementation of TQM is likely to be detrimental
for innovation. Therefore, it seems that conflict between
the two schools of thought occurs because of the differ-

545

ence in defining what innovation is, particularly in differentiating the incremental and radical types of innovation. It must be noted, however, that while the
distinction between these two types of innovation has
been acknowledged in innovation studies, to differentiate
them is, in itself, quite problematic (Dewar and Dutton,
1986). Even so, TQM scholars commonly refer to any
type of change as the result of innovation, therefore
arguing that continuous improvement is one type of
innovation (Dean and Evans, 1994). On the other hand,
innovation scholars prefer to confine innovation in terms
of radical change and to distinguish it from incremental
change which they prefer to label as improvement
(Abernathy and Utterback, 1988). They commonly argue
that improvement is simply doing something in a better
way, but innovation is about doing something differently (Kirton, 1976). As an example, the distinction
between continuous improvement and re-engineering is
based on the principle that the first focuses on the existing system and continually seeks ways to enhance its
performance, whilst the latter re-starts everything from
the beginning and thus establishes discontinuity with
the past.
The essence of the negative arguments raised against
TQM above, however, is more profound than solely distinguishing the radicalness of change. What have been
highlighted above are the different behavioral traits,
ways of thinking, approaches, and principles embodied
in TQM in contrast to innovation. For example, the difference is clearly seen in the issue of product innovation.
Whilst TQM does support the importance of product
innovation, the approach is more reactive than proactive,
meaning that TQM tends to encourage new product
development only when there is such an explicit demand
from customers. This is quite in contrast to the philosophy of innovative companies which creates demand
through innovation. In essence, TQM is more marketpull (or customer-driven) whilst innovation is more product-push.
By and large, the debate on the relationship between
TQM and innovation warrants a rigorous study if there
is to be obtained a definite yes/no answer regarding that
relationship. While this could result in a clear conclusion
from a practical perspective to accept or reject the applicability of TQM for innovative organizations, this is
hardly possible to achieve in view of the unclear definition and boundaries of TQM itself. Moreover, a number of scholars (for example, Sitkin et al., 1994; Spencer,
1994; Moreno-Luzon and Peris, 1998) have argued that
this conflict can be resolved if we can accept the idea
of perceiving TQM as a multidimensional model instead
of a single exclusive one. They suggest that TQM has
different facets, and this can be seen from various terminologies that have been introduced in the area of quality management, such as quality control, quality assurance, total quality control, company-wide quality

Customer focus will encourage organizations to be innovative because they


have to seek a better way to meet and exceed customers requirements
Customer focus will provide a clear focus for innovation by linking innovation
with customers needs

Continuous improvement will encourage change, innovation, and creative


thinking in how work is organized and conducted

Customer focus

Continuous
improvement

Teamwork,
Empowerment should make people feel they have a certain degree of
empowerment and autonomy, are less constrained by technical or rule-bound aspects, and selfinvolvement
efficacious in doing their work, which will make them innovative
Cross-functional teamwork is one of the most effective channels of
communication, and communication is recognized as the primary determinant
in organizational innovation

Positive arguments

TQM elements

Table 2
Summary of conflicting arguments on the relationship between TQM and innovation

Customer focus could lead organizations to be reactive in responding to customers


needs
Customer focus may prevent organizations from exploring unserved needs and
markets
Customer focus may prevent organizations from developing radical new products
(first-mover) because of its inherent risk-avoidance philosophy
Customer focus could not help organizations to cope with turbulence and
discontinuity of the market
The emphasis of efficiency in continuous improvement would minimize, if not
eliminate, the availability of slack resources that are required for innovation
The stress on incremental improvement could lead teams to work on unambitious
goals and derive solutions which are not novel
Continuous improvement process is only workable when the underlying system of
production is stable and repetitive, and not in a particular environment where there
is a high degree of uncertainty
The establishment of a regulatory standard could inhibit innovation because it
reduces the ambiguity of a task that is necessitated to enforce innovation
Continuous improvement could also result in routinization and rigidity of activities
that will cause an organization to lose its flexibility
Continuous improvement only supports single-loop learning and not double-loop
learning
Whilst conceptually empowerment and involvement are very much congruent with
innovation, in practice workers are usually empowered and involved to deal only
with execution and small scale of improvement
The cultural tendency toward group working which has contributed towards stressing
total quality control to a certain degree will inhibit independent entrepreneurship and
individual creativity, resulting in a detrimental effect upon radical innovations and
inventions

Negative arguments

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

control, total quality management, and strategic quality


management. Understanding the multifacetedness of
TQM could provide a solution to resolving the conflict
in the relationship between TQM and innovation as well
as challenging the traditional concept formulated by the
quality gurus who tend to adopt a universalistic
approach to TQM, assuming that it is a fixed entity
which can be applied to any company in any set of circumstances.
In particular to this respect, Spencer (1994) asserts
that the issue of the extent to which all components of
the practice must be applied in different situations will
lead to an important research question regarding the
effectiveness of the implementation of TQM. Therefore, the real question is not whether all TQM components are required or not, but whether there is some
necessary pairing among elements for achieving certain
goals. This argument is supported by empirical findings
of past research on TQM (see, for example, Flynn et
al., 1995b; Samson and Terziovski, 1999; Dow et al.,
1999). The primary conclusion is that although in general TQM elements positively relate to quality performance, only certain elements have a power to differentiate between high- and low-quality performing
organizations.

3. The multidimensionality and contingency of


TQM in its relation to innovation
The multidimensionality and contingency of TQM, as
addressed by several scholars, is based on the argument
that TQM consists of a set of principles, practices, and
techniques (Dean and Bowen, 1994; Lau and Anderson,
1998). Organizations then have to distinguish the understanding of TQM between a conceptual or philosophical
level and a practical or technical level when
implementing it. This is because although at a philosophical level TQM is very much homogeneous or
convergent, when deployed into practices it is not a
method that can be unthinkingly used without a clear
sense of the context where it is implemented (Sitkin et
al., 1994; Watson and Korukonda, 1995; Reed et al.,
1996; Lau and Anderson, 1998). Lau and Anderson
(1998) even strongly recommend that the key to successful design of TQM programs thus depends on the
extending analysis from the philosophical concepts
advocated by many TQM proponents to the formulation
of specific quality programs that are tailored to the
industry and product or service involved as well as the
companys unique strategic focus.
This argument is supported by an empirical study by
Benson et al. (1991) who investigated the organizational
context that affects managers perceptions of both actual
quality management and their belief concerning ideal
quality management. Benson et al. (1991) hypothesized

547

that, based on the existing literature, ideal quality management should not be affected by the organizational
context, meaning that good quality management applies
to all types of companies and situations regardless of
industry sector, competition, or types of products. On
the other hand, the organizational context may affect the
practice of quality management. Their findings supported their hypotheses well and, in particular, the result
suggested that the actual quality management practices
of manufacturing organizations are affected by both
internal contextual factors, such as corporate support for
quality, past quality performance, and management
knowledge, as well as external contextual factors, such
as extent of entry barriers and degree of external quality demands.
In the context of its relationship with innovation, the
multidimensionality and contingency of TQM is discussed by several scholars, prominently by Sitkin et al.
(1994) and Spencer (1994). Sitkin et al. (1994) argue
that TQM, as a philosophy which consists of three basic
preceptscustomer focus, continuous improvement, and
total systemembodies two distinctive and antagonistic
orientations, namely control and learning. They propose
that although guided under similar (three) underlying
TQM precepts, organizations can apply two significantly
different goals and practices based on two different
orientations, labeled as TQC (Total Quality Control) and
TQL (Total Quality Learning). TQC is associated more
with quality in terms of conformance, and TQL is connected more with innovation. Sitkin et al. (1994)
strongly argue, however, that the singular emphasis on
control has characterized traditional approaches to TQM
implementation and this is something that has resulted
in the rise of the negative arguments concerning the
relationship between TQM and innovation presented
above.
In the same respect, Spencer (1994) discusses TQM
practices in relation to three organization models,
namely mechanistic, organismic, and cultural. She
believes that an organization that adopts TQM can be
characterized by any of these models because there is
a linkage between TQM practices, as advocated by its
proponents, with each of the three models. She argues,
however, that this does not mean that organizations that
practice TQM may hold strictly any one of these models;
rather, they may oscillate among them or have an
orientation toward one of them. For example, the stated
goal of TQM to improve quality is associated with the
mechanistic model, because in practice the real objective
of pursuing quality could well shift into productivity and
efficiency, something on which mechanistic organizations focus. On the other hand, the ideas of employees
empowerment and cross-functional teamwork are linked
closely to the organismic model.
A link between what is posited by Sitkin et al. (1994)
and Spencer (1994) can then be built. It appears that

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what is conceived as control-orientation essentially is


strongly associated with the mechanistic model. As
Spencer (1994, p. 453) affirms:
In the mechanistic model, stability is prized because
it increases predictability, which, in turn, increases
control.
On the other hand, Spencer (1994) refers the organismic model to the organic model3 proposed by Burns
and Stalker (1961), a typical model of organizations that
are supporting innovation. It then appears that the organismic model is closely linked to the learning-orientation.
In this regard, when referring to a mechanistic or control-oriented model, TQM will focus more on quality by
conformance, and thus appear to meet all negative arguments concerning its relationship with innovation. It then
has to be concluded that, rather than attempting to support or reject the notion as to whether TQM is positively
related with innovation performance, the focus should be
more emphasized on studying the multidimensionality of
TQM.
The logical sequence then is to ask: What factors
affect the multidimensionality of TQM implementation?
The literature suggests that there are perhaps three factors that could potentially affect the multidimensionality
of TQM. These factors are discussed in the following
sections, particularly concerning their role in affecting
the implementation of TQM resulting in two different
outcomesquality and innovation.
3.1. The role of the external environment
The impact of the environment on organizations has
been recognized in the classical works of Burns and
Stalker (1961), Thompson (1967), Perrow (1974),
Khandwalla (1977), Miles and Snow (1978) and Lawrence and Lorsch (1986). The primary postulate is that the
environment poses challenges with which organizations
must deal. With respect to TQM, some scholars (for
example, Hill and Wilkinson, 1995; Reed et al., 1996)
suggest that TQM is contingent with different versions
of manifestations in different sectors under different
market conditions in organizations. Similarly, Sitkin et
al. (1994) argue that this also applies in the case of TQM
in relation to quality and innovation. They suggest that
organizations will be driven toward innovation (referred
to as learning-oriented) when they perceive a certain
degree of uncertainty in their environment. A low level
of uncertainty will direct organizations toward the control approach, whilst a high level of uncertainty will lead
companies to employ the learning, or innovative,

3
From this sentence onward, the term organismic and organic
will be used interchangeably.

approach. As an example, they take the case of SPC


(Statistical Process Control) implementation. Underlying
the SPC method is the belief that the production process
best operates under stable and predictable condition. The
use of SPC is therefore generally only applicable to a
stable process based on a high-volume repetitive
assembly line, for example an automobile production
process, but would not be appropriate for custom production systems. On the other hand, in the computer
industry, the product life cycle is so short that production
techniques frequently become outmoded before they
have a chance to settle into a condition that would be
amenable to the use of TQM tools and techniques, particularly SPC.
In a similar mode, Arthur (1997) suggests that quality
management and innovation have strategically different
roles. Innovation should be emphasized in strategically
volatile conditions. In such a situation, strategic necessity would be to introduce change which can amend the
rules of competition and other elements of the strategic
paradigm of the industry in which the company operates.
On the other hand, quality management can be emphasized, even at the expense of revolutionary innovation, in
strategically stable industries.
From the point of view of innovation, the maturity
of a market has long been perceived as a factor affecting the type of innovation. Abernathy and Utterback
(1988) suggest that as a market grows toward maturity,
two shifts occur in terms of types of innovation: from
product into process innovation and from a revolutionary into an evolutionary level, accompanied by heightened price competition. Major process innovation,
combined with incremental product innovation, allows
firms to enhance the product and open the market to a
more diverse customer base until it reaches the mature
stage. At this point, the pattern of incremental product
and major process innovation continues until the product and its associated production processes are so
intertwined that only incremental product and process
innovations are possible. During this period, even
small changes in the product or process can lead to
significantly decreased costs or higher quality. The
mature phase of the product life cycle, with its emphasis on incremental innovation, lasts until some external
shocks occur, such as technological change or a new
wave of major product innovations. The speed of this
cycle varies from one industry to another. A market
with a fast product cycle is usually termed as turbulent
or dynamic, and several studies on innovation (see, for
example, Miller and Friesen, 1982; Ozsomer et al.,
1997) have concluded that this condition forces participating organizations to be innovative. Similarly, Williams (1992) argues that companies competing in the
fast-cycle resources class have to be very innovative
because their resources are easily imitable and the only
way to outperform their competitors is to innovate con-

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549

tinually. He further suggests that such organization


must make frequent and fast innovation, as they would
not have time to learn about the process in order to
bring it into one that is statistically controlled.
It is, therefore, argued here that the external environment of organizations significantly affects their innovativeness. Applying this conclusion in the context of the
discussion thus far, it can be inferred that the implementation of TQM in different business environments is
likely to produce different outcomes, particularly with
regard to quality and innovation.

Similar arguments are proffered by Crosby (1979) and


Juran and Gyrna (1993) when they introduce the concept of quality cost. With regard to the TQM focus on
cost efficiency, Hackman and Wageman (1995, p. 310)
conclude that:

3.2. The role of an organizations strategy

The notion that TQM is closer to a cost leadership


strategy is also related to another argument suggesting
that TQM puts more emphasis on process rather than
product (Gobeli and Brown, 1994). This view can be
traced back to the origins of TQM in the idea of SPC
(introduced by Shewhart in 1964) which was so clearly
oriented toward process. A company will focus on
improving the process to make it more efficient if its
primary strategy is pursuing cost leadership (Porter,
1980; Reed et al., 1996). This proposition is supported
by the study by Yamin et al. (1997) whose findings suggest that, although not significant, the correlation
between low cost strategy and process innovation is
high.
In contrast to TQM, innovation builds a competitive
advantage based on differentiation strategy rather than
cost leadership strategy (Porter, 1980). This argument
can also be inferred from what Abernathy and Utterback
(1988, p. 28) assert with regard to innovative companies:

The relationship between an organizations environment and its strategy has been formulated and examined
in the strategic management field. Most findings suggest
that organizations will implement different strategies
contingent with the condition of the environment wherein they operate (see, for example, Swamidass and Newell, 1987; Miller, 1988; Ward et al., 1995). In the context
of an organizations strategy, some scholars have given
strong support to the view that TQM must be adopted
as a strategic model in an organization (Garvin, 1988;
Schonberger, 1992). TQM, therefore, has successfully
elevated the implementation of quality management
from an operational level to a strategic level. Dean and
Bowen (1994), however, argue that from a strategic
management perspective, TQM emphasizes strategy
implementation, or deployment, rather than strategic
choice, or content. This view arises because TQM proponents have so elevated the role of quality that TQM
appears to transcend strategy. The implication is that by
putting quality forward as an ultimate strategy, it will
eventually drive improvements on other sources of competitive advantage, such as cost. Belohlav (1993) and
Reed et al. (1996) even argue that TQM simultaneously
encompasses more than one of the generic strategies in
Porters (1980) model, particularly cost leadership and
differentiation. When quality is concerned with providing better products that satisfy customers needs, the
orientation of the strategy is differentiation. TQM, at the
same time, also leads organizations to reduce cost as a
result of the elimination of defects and wastes and, therefore, also leads them to the adoption of a cost leadership strategy.
By contrast, however, reviewing the literature by
TQM proponents (Crosby, 1979; Deming, 1982, 1986;
Juran and Gyrna, 1993; Feigenbaum, 1983) suggests
that even though TQM may encompass both a cost
leadership and differentiation strategy, the emphasis is
primarily directed towards cost leadership. As Deming
(1982) suggests in his quality improvement chain
concept, organizations can enhance their competitiveness by improving quality resulting in cost
reduction through the elimination of scrap and rework.

A fundamental premise of TQM is that the costs of


poor quality (such as inspection, rework, lost customers, and so on) are far greater than the costs of
developing processes that produce high-quality products and services.

Their competitive advantage over predecessor products is based on superior functional performance
rather than lower initial cost, and so these radical
innovations tend to offer higher unit profit margins.
With respect to the differentiation strategy, innovative
companies also tend to emphasize new product development (Miller, 1988; Gobeli and Brown, 1994). For
example, Sony introduces 200 new products and major
enhancements to 800 existing products each year, whilst
3M has determined its corporate goal to derive 30% of
its revenue from products introduced within the past four
years (Higgins, 1995).
Apparently, arguments suggesting that TQM puts
more emphasis on a cost leadership strategy rather than
differentiation or that it pays more attention to process
improvement than product development have a strong
basis. However, considering the multifacetedness of
TQM, it is hardly possible to ascribe to TQM in such
an exclusive position. The problem with TQM is not
rooted solely in the difficulty of defining what TQM is
but, more fundamentally, the confusion in defining
quality (Watson and Korukonda, 1995). Reeves and
Bednar (1994) affirm that a search for the definition of

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quality has yielded inconsistent results, and they suggest that there are, at least, four definitions of quality,
each leading to different implications in terms of a
firms strategy and practice. The four different definitions are: quality as excellence, quality as value, quality as conformance to specifications, and quality as
meeting or exceeding a customers expectations. Dean
and Bowen (1994) suggest that when quality is defined
as meeting or exceeding customer expectations, it can
be seen as encapsulating any source of competitiveness,
including innovation. However, when quality is defined
narrowly as, for example, conformance to specificationas asserted by Crosby (1979)it is clear that
it will lead to a different strategy from that pursued by
innovation. Reeves and Bednar (1994), however,
strongly believe that the definition of quality as meeting
or exceeding customers expectations is the most complex definition of quality and, thus, is the most difficult
to measure. The primary reason for this view is that
determining and measuring customer expectations is a
complex task. It is complex not only when dealing with
the multiple attributes and preferences of different individuals but also because customers themselves often do
not know what their real expectations are. Moreover,
by contrast, measuring quality as conformance to specifications is relatively straightforward for monitoring
performance within an organization but is also useful
in benchmarking exercises, particularly in the manufacturing sector.
Nevertheless, what is argued here is that the discussion of an organizations strategy with respect to
TQM and innovation does not seek a conclusion as to
whether TQM supports or hinders innovation. Instead, it
has been posited that TQM can be used in a different
strategic context, such as service, speed, and cost, as well
as quality and innovation. Porter (1980) argues that an
organizations strategy will have a significant influence
on organizational structure and, thus, each particular
strategy has different implications for organizational
structure and practice. In this context, then it can be
argued that organizations that adopt different strategies
will implement TQM with different emphasis on certain
practices or elements.
3.3. The role of organizational culture
The role of organizational culture in understanding
how firms work has received considerable attention in
the TQM and innovation literature. From the innovation
point of view, Hauser (1998) asserts that in managing
innovation, management is restricted mainly to creating
innovative contexts. The associated implication is that
the propensity for innovation is something inherent in
the members of the organization, such as in their personality or psychological substance. Innovative culture has
been variously defined in the literature. For example,

Claver et al. (1998, p. 61) give the definition of innovative culture as:
a way of thinking and behaving that creates, develops
and establishes values and attitudes within a firm,
which may in turn raise, accept and support ideas and
changes involving an improvement in the functioning
and efficiency of the firm, even though such changes
may mean a conflict with conventional and traditional behaviour.
Herbig and Dunphy (1998) summarize the works of
several innovation scholars who specify typical cultural
traits in the organization that are associated with innovation, such as individualism and competition, willingness to take risks, readiness to accept change, long-term
orientation, weak uncertainty avoidance, openness to
new information, and the value of education.
Literature on organizational innovation, both anecdotal and empirical, emphasizes the importance of culture as a major determinant in innovation performance
(for example, Robertson and Wind, 1980; Kanter, 1983;
Branen, 1991; Feldman, 1988). Miller and Friesen
(1982) even postulated that innovations in firms with
entrepreneurial culture are more internally, rather than
externally, driven. Their findings support the notion that,
while environmental hostility and dynamism significantly impact on the promotion of innovation, it is the
strategic choice involved more so than the environmental
pressures that plays a greater role in promoting innovation in entrepreneurial firms.
Similarly, organizational culture is also an important
part of TQM. Much of the earlier focus of its studies
was on the hard aspects, such as the tools, techniques,
and systems. More recently, the emphasis has shifted to
consider its soft, behavioral and cultural aspects (see,
for example, van Donk and Sanders, 1993; Westbrook
and Utley, 1995; McNabb and Sepic, 1995). This shift of
emphasis has resulted because implementations of TQM
have failed, thus preventing companies from realizing
the potential benefits of TQM (Tata and Prasad, 1998).
Kekale and Kekale (1995) argue that perceiving TQM
narrowly as a set of tools and techniques (i.e. hard
aspects) has proven to be one of the primary failures of
TQM implementation.
Despite the recognition of the importance of culture
in TQM discussions, there is still no clear definition
of a TQM-type culture. Except for a few recent works
(Chang and Wiebe, 1996; Zeits et al., 1997), most
TQM writerswhilst emphasizing the importance of
cultural change in TQM implementationfailed to
delineate the characteristics of the TQM culture
(Waldman, 1993). Empirical studies tend to focus on
the articulation of TQM practices and not TQM culture. While this does not indicate the ignorance or
abandonment of the importance of defining TQM-type

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

culture, it may be that the result of the imprecise


boundary between TQM as management practices and
TQM as an organizational culture is not well defined.
Therefore, many TQM elements contain dimensions
that could be classified as reflecting organizational culture (Zeits et al., 1997). As discussed earlier, Spencer
(1994) argues that TQM can be perceived from a
mechanistic perspective, which embraces tools and
techniques, as well as from a cultural perspective, such
as that of values, beliefs, and mindsets. Does this mean
that TQM-type culture can be identified rigorously
through the observation of TQM practices?
Before answering this question, it is important to
explain why it is important in the present context. A
review of the literature on innovation management practices (for examples, see Schroeder et al., 1989; Vrakking,
1990; Galbraith, 1982; Chiesa et al., 1996; Tidd et al.,
1997; Ahmed, 1998; Tang, 1998) suggests that many
practices in innovation management are similar to those
recognized as TQM practices. Can it then be concluded
that implementation of TQM practices will lead organizations to high innovation performance based on the
similarity of the practices? If the answer is yes, it must
be concluded that the implementation of TQM practices
will certainly lead to the development of the innovative
culture because, as asserted before, an innovative culture
is an essential determinant of innovation performance. It
then must also be implied that practices and culture are
intertwined with each other.
In this respect, however, Zeits et al. (1997) strongly
reject the notion that organizational culture is indistinguishable from TQM practices even though the two
often overlap each other. They view TQM practices as
formal, programmatic, and behavioral, whereas culture
refers to attitudes, beliefs, and situational interactions.
This argument is supported by scholars from the field of
organizational culture. Schein (1985), for example,
asserts that although practice can be a reflection of
organizational culture, it can only capture its surface
level. For Schein, organizational culture is concerned
with something deeper, particularly when considering
such elements as mindset, values, and beliefs. The problem is that not only are these elements more difficult to
observe, but they are also harder to change. It can be
implied, therefore, that similar practices are not necessarily the reflection of similar cultures. Thus, despite
apparent similarities, there is not yet sufficient evidence
to support the notion that TQM practice is the reflection
of innovative culture. If this is the case, then TQM practices and innovative culture must be considered as separate entities.
In further appreciation to the relationship between culture and practices, Sathe (1985) holds that the value of
artifacts and behaviors depends on the deeper levels of
culture, meaning that practices will not produce what is
expected if they are not rooted in pertinent mindset or

551

values. Bringing this notion into the context of TQM, it


can be implied that it is the organizational culture that
will determine the implementation of TQM practices.
Kekale and Kekale (1995) support this notion by suggesting that different types of culture will lead to different types of TQM approach in the organization. For
example, what they called behavioristic culture will
lead organizations to emphasize certain TQM practices,
such as systematic measurement, control of work, standard and statistical procedures, whilst cognitive culture will emphasize soft qualitative characters, such as
open management styles, delegated responsibility and
autonomy.
Further support can be obtained from the study by
Powell (1995), in which he argues that TQM practices
have to be implemented within a suitable environment
(i.e. culture) that emphasizes open communication,
which he believes did not originally belong to TQM, but
is imperative for implementation success. As he suggests
(Powell, 1995, p. 21):
Potential TQM adopters may not appreciate that TQM
success depends not only on adopting TQM attributes,
but also on the pre-existence of complementary factors apparently unrelated to TQM, yet more difficult
to imitate than TQM itself. [emphasis added]
His findings strikingly demonstrate that the soft and
intangible elements of a culture are more powerful in
determining organizational performance than the hard
aspectsmost features and observable practices and
techniquessuch as SPC and benchmarking that have
been associated with TQM. This study also carries an
important implication that it is the organizational culture
that will affect the implementation of TQM practices,
and not the opposite.
Capitalizing on the results of Powells study, it can
be inferred that TQM practices can be implemented in
organizations with different cultures that will result in
different outcomes. The concept of organizational culture, therefore, could be employed as an explanatory factor in demystifying the relationship between TQM practices and innovation performance. This also implies that
the implementation of TQM does not necessarily lead
organizations to achieve a high level of innovation performance because of the absence of the particular culture
that supports it.

4. Summary and research model


This paper has demonstrated an apparent contradiction existing in the literature concerning the relationship between TQM and innovation. Following this juxtaposition is a theoretical discussion focusing on the
implementation of TQM as a multidimensional model

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

Fig. 2.

Research framework.

that could provide a solution to resolve this conflict.


For example, when TQM is directed toward a controloriented or mechanistic model, it is suitable for pursuing qualityby way of conformancebut not innovation. The previous discussion has also addressed
three particular factors that affect the implementation
of TQM, namely the external environment, the organizational strategy, and the internal environment. The
associated conclusion is that there is insufficient theoretical support to acceptor rejecta clear-cut hypothesis as to whether TQM practices support innovation
performance. Instead, it is suggested that when considering TQM and innovation as two different fields of
knowledge, there is an overlap between them. This
leads to the development of a several specific questions
that are worthy of investigation. These areas of
research interest are as follows:
To what extent are TQM practices positively related
to innovation and what is the nature of the relationship?
Do TQM practices that lead to high quality performance have different configuration from those that lead
to high innovation performance? To what extent can
the difference be examined?
To what extent are TQM practices affected by different organizational contexts, particularly the business
environment and the organizational strategy as well
as the organizational culture? Can these factors
explain the different outcomes resulting from various
configurations of TQM practices?
Given the literature survey conducted thus far, these
questions have not been addressed rigorously in the past
studies involving TQM and innovation fields. These
questions posed above, therefore, represent the gap in
the literature on TQM and innovation. In the interest of
filling this gap, a research framework is devised, as
shown in Fig. 2. As illustrated in this figure, this framework presents TQM as a central piece of the model. On
the right-hand side can be seen the relationship between
TQM practices and organizational performance, in terms

of quality and innovation performance. On the left-hand


side, the relationship between TQM practices and probable associated influences, such as the business environment, organizational strategy, and the internal environment and the implementation will also be examined.
Basically, the primary proposition is that TQM is a
multidimensional management model that can be
adjusted in contingency with the environment wherein
organizations operate through the choice of strategy, as
well as being affected by the particular internal environment of the organizations. The multidimensionality of
TQM is then reflected in terms of different outcomes,
especially those of quality and innovation.
With regards to the multidimensionality of TQM, it
is important to note, however, that TQM was originally
prescribed by its advocates to promote the pursuit of
quality by conformance, as asserted by Wilkinson et al.
(1998, p. 8):
In terms of TQM, however, it is essential to appreciate that the quality gurus conception of quality is
meeting reliable and consistent standards in line with
customer requirements; standards which may or may
not be usually identified as exceptionally high but
which nevertheless represent what customers say
they want.
Focusing on quality by conformance means that
organizations will emphasize the use of certain techniques or procedures to reduce or eliminate variation.
These include systematic measurement and control of
work, setting standards of performance and using statistical procedures to assess quality. The empirical
constructs of TQM that were developed and tested in
the past studies (Saraph et al., 1989; Flynn et al.,
1994; Adam, 1994; Powell, 1995; Ahire et al., 1996;
Samson and Terziovski, 1999; Dow et al., 1999) also
appear to be associated with a model focused on quality by conformance, as indicated by typical dependent
variables used, such as the percentage of defects and
the cost of quality. This does not mean, however, that
these constructs are exclusively applicable to qual-

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

ity performance since their relationship with other


performanceparticularly innovationwas not a
part of such past studies. Therefore, re-examining
these TQM elementswith respect to innovation performancewill be useful in providing further insights
into the impact of TQM practices on organizational
performance. This poses the following question: Do
TQM practicesthat have been successfully proven
as significantly and positively related to quality performancealso have a positive impact on innovation
performance, meaning that the implementation of
TQM supports the organizational innovativeness?
As such, the hypotheses concerning the TQM
quality/innovation performance relationship are as follows:
Hypothesis 1. There is a significant relationship between
TQM practices and quality performance.
Hypothesis 2. There is a significant relationship between
TQM practices and innovation performance.
Further investigation can be carried out to address a
more specific inquiry; in particular, which aspects of
TQM practices support or hinder innovation? Based on
Spencers (1994) analysis of multidimensional models
of TQM, it can be proposed that TQM practices
reflecting an organismic model are supportive of innovation, whilst those practices that are associated with a
mechanistic model will hinder innovation. Given the
presumption that pursuing innovation requires different
practices from those required for pursuing quality, it can
be expected that the configuration of TQM elements
would be different in organizations that achieve high
quality performance from those that attain high innovation performance. Comparing particular TQM
elements that respectively work as strong predictors of
quality performance and innovation performance would
reveal the multidimensionality of TQM.
In order to further appreciate the previous inquiry,
additional analysis on the relationship between TQM
practices and innovation performance can also be done
by investigating the correlation between quality performance and innovation performance. In this respect,
several authors (Williams, 1992; Sitkin et al., 1994;
Arthur, 1997) suggest that organizations must focus on
either quality or innovation, doing so at the expense of
the other. As such, the following hypothesis is
developed:
Hypothesis 3. There is a significant relationship between
quality performance and innovation performance.
The left-hand side of the research framework presented
in Fig. 2, the impact of the three factors, namely the
external environment, the organizational strategy, and

553

the organizational culture, on TQM practices will be


examined. The hypotheses concerning the relationship
existing among these factors are derived from the study
by Miller (1988). The study concludes that there is a
correlation between an organizations strategy and its
environment, and there is also a correlation between an
organizations strategy and its structure. In addition,
there is no significant correlation found in the relationship between an organizations environment and its
structure. Therefore, the relationship between TQM
practices and the business environment is mediated by
the organizational strategy. As such, the following
hypotheses are proposed:
Hypothesis 4. There is a relationship between the business environment and an organizations strategy.
Hypothesis 5. There is a relationship between an organizations strategy and TQM practices.
As a peripheral interest to this research, the relationship
between organizational culture and organizational strategy can also be investigated. According to the resourcebased view theory, the essence of strategy formulation
is to design a strategy that makes the most effective use
of these core resources and capabilities. This may imply
that the firm will limit its strategic scope to those
resources and capabilities that provide a clear competitive advantage (Grant, 1991). In this respect, strategic
management scholars have considered organizational
culture as intangible resources (Barney, 1986a,b; Hall,
1993), meaning that organizational culture does influence the strategic choice and content of the firm. Other
scholars also support the notion that culture affects
organizational adaptation to the external environment in
the process of strategy formulation (Schwartz and Davis,
1981; Shrivastava, 1985; Saffold, 1988; Bates et al.,
1995). As such, an additional hypothesis is proposed
as follows:
Hypothesis 6. There is a relationship between organizational culture and an organizations strategy.
As discussed in the previous section, the relationship
between TQM practices and organizational culture is
well acknowledged. It is also the case that TQM practices and organizational culture must be considered as
separate entities although they overlap with each other.
However, what matters here is the nature of the relationship. Several scholars argue that TQM needs to be
implemented in a suitable organizational culture in order
to be successfully beneficial for the organization. This
means that it is the organizational culture that will determine the results of TQM implementation rather than it
being TQM implementation that brings a cultural change
(McNabb and Sepic, 1995; Westbrook and Utley, 1995;

554

D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

Powell, 1995). As discussed in the Section 3, Benson et


al. (1991) have concluded that it is the organizational
context that will explaineven determinethe actual
quality management practices. As such, the following
hypothesis is proposed:
Hypothesis 7. There is a relationship between organizational culture and TQM practices.
In summary, the objective of the research is to examine
the overall appropriateness of the model, as shown in
Fig. 2, by linking the left-end and the right-end relationships.
Currently, the authors are designing a questionnaire
that will be used to collect data from a large sample of
Australian manufacturing organizations. These data will
be used to test the relationships shown in Fig. 2 subsequently and as hypothesized. The results will be
reported in future articles.

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Daniel Prajogo is a PhD student in the Department of Management at Monash University. His
bachelors degree is in electrical engineering
and he completed his Master of Engineering in
Quality Management at RMIT University, Melbourne, Australia, in 1996. He is currently on
study leave from the Department of Industrial
Engineering at Petra Christian University in Surabaya, Indonesia, where he has been working as
a lecturer since 1992. His areas of interest
include TQM, ISO 9000, statistical process control and service quality, and his current research
topic is focused on examining the multidimensionality of TQM practices
in relation to quality and innovation performance.
Amrik S. Sohal is a Professor in the Department of Management and an
Associate Dean (Research) in the Faculty of Business and Economics at
Monash University, Melbourne, Australia. He is also co-director of the
newly formed Australian Consortium for Effective Organizations (AECO).
From 1991 to 2000, Professor Sohal was director of the Quality Management Research Unit and from 1993 to 1997 served as Associate Dean
(Research Development and Graduate Teaching) for the Faculty of Busi-

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D.I. Prajogo, A.S. Sohal / Technovation 21 (2001) 539558

ness and Economics at Monash University. He holds a PhD in


Manufacturing/Operations Management from the University of Bradford
Management Centre in the UK, as well as a BEng (Hons) and MBA, also
from the University of Bradford.
Professor Sohal is Associate Editor for the journal Technovation and
Asia Pacific Editor of the International Journal of Quality and Reliability
Management. He is a member of the Editorial Board of a number of journals in the area of quality management, technology management and oper-

ations management. He has authored or co-authored over 90 papers published in refereed journals, as well as three books and a number of chapters
contributed to books. His current research interests are in
manufacturing/operations strategy, technology/information management,
quality management, supply chain management and lean/agile production
systems. He has received research grants from the State and Federal
Governments, the Australian Research Council and Monash University.