The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0263-5577.htm

IMDS
106,8 TQM and market orientation’s
impact on SMEs’ performance
Mehmet Demirbag and S.C. Lenny Koh
1206 University of Sheffield Management School, Sheffield, UK
Ekrem Tatoglu
Faculty of Business Administration, Bahcesehir University, Istanbul, Turkey, and
Selim Zaim
Faculty of Economics and Administrative Sciences, Fatih University,
Istanbul, Turkey

Industrial Management & Data
Systems
Vol. 106 No. 8, 2006
pp. 1206-1228
q Emerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610710836
Abstract
Purpose – The principal aim of this study is to determine the impact of market orientation (MO) and
implementation of total quality management (TQM) on organizational performance of SMEs.
Design/methodology/approach – Based on theoretical considerations, a model is proposed linking
the MO and TQM constructs to the organizational performance construct. Exploratory and
confirmatory factor analyses empirically verified and validated the underlying dimensions of MO,
TQM and organizational performance. Structural equation modeling was employed to test the model
drawing on a sample of 141 SMEs operating in the Turkish textile industry.
Findings – Data analysis reveals that, while MO has a strong and positive impact on the extent of
TQM implementation, it has no significant impact on organizational performance. Similarly, a strong
and positive relationship was noted between the level of TQM implementation and organizational
performance. It has also been found that the MO has a positive and significant impact on
organizational performance through only a mediating role of TQM implementation.
Research limitations/implications – The data were collected from textile manufacturers in
Turkey, which may restrict to some extent generalizability of findings to other industries or firms
operating in more stable environments. Given the limitations associated with perceptual measures,
findings should be interpreted with some degree of caution. Finally, an implementation of alternative
scales on the same sample would provide further insights into the causal links between MO, TQM and
organizational performance
Practical implications – SMEs should consider TQM as a facilitating management tool for improving
organizational performance in relatively more dynamic environments. Market-oriented SMEs may not
realize an increased performance gains with a successful MO implementation but, when TQM is
implemented alongside MO, better financial performance can be achieved. As increasing number of SMEs
are being involved in global markets, a double track approach (MO at business level and TQM
implementation at functional level) to improve product and management quality becomes inevitable.
Originality/value – A triangulation of MO, TQM and organizational performance outperforms
two-way relationship of MO and organizational performance. Direct and indirect effect of each
construct on organizational performance was discovered. SMEs should consider TQM as having a
mediating role to improve organizational performance under a given set of market orientation.
Keywords Total quality management, Market orientation, Small to medium-sized enterprises
Paper type Research paper
1. Introduction
The quality concept has been a popular research topic in marketing and management
literature where researchers have attempted to identify key dimensions of total quality
management (TQM) practices and performance. Researchers have defined the concept TQM and market
of quality in different ways ranging from perception of value (Feigenbaum, 1951) to orientation’s
conformance to requirements (Crosby, 1996), fitness to use (Juran et al., 1974) and
finally to meeting customer’s expectations (Parasuraman et al., 1985; Adis, 2003). While impact
a number of studies have addressed the desired features of practices, facilities, staffs
that contribute to the TQM implementation and hence organizational performance
(Al-Mashari et al., 2005), the role of market orientation (MO) has received relatively less 1207
attention. There is likely to be a strong logical relationship between MO and
implementation of TQM practices since both constructs explicitly focus on customer
satisfaction. Day (1994) admits that there has been limited engagement in marketing
research to take advantage of the tools, frameworks and implementation methods
associated with TQM. While studies on TQM implementation appear to focus on
identifying the role of TQM practices on organizational success, TQM practices are
still directed from within the organization. MO, however, requires more external
engagement and shares the same ultimate aim as TQM implementations. Thus, MO
and TQM practices appear to complement each other.
Although both MO concept and TQM practices share the same objectives, there is a
paucity of empirical research investigating the two constructs and their association
with organizational performance. Despite its conceptual rigor, TQM’s role in affecting
organizational performance (whether facilitative or causative) particularly within the
context of small businesses requires more research attention. Although the
relationship between MO-TQM implementation and organizational performance has
been discussed in the prior literature (Day, 1994; Mohr-Jackson, 1998) there is no
research hitherto been recorded investigating the topic from the viewpoint of small and
medium size enterprises (SMEs).
The majority of existing research has focused on TQM implementation, leadership
and performance relationships (Hendricks and Singhal, 2001; Vokurka, 2001; Kaynak,
2003; Prybutok and Custshall, 2004; Prajogo and Sohal, 2006), whereas the impact of MO
on TQM and performance relations in the context of SMEs is largely neglected. This
study therefore fills this lacuna and contributes to the extant literature by incorporating
TQM practices in MO and performance relationship within the context of an emerging
country SMEs. Since, previous research in this area tends to focus on larger
organizations (Li et al., 2006; Al-Mashari et al., 2005; Hendricks and Singhal, 1996, 2001;
Easton and Jarrel, 1998), SMEs with their limited resources may not be in a position to
benefit from the findings of previous research based on larger organizations. Further, in
the case of emerging market economies, SMEs operate in relatively more turbulent
environments with greater uncertainties (Koh and Gunesekaran, 2006), therefore, MO
strategy alone may not be sufficient to create better performance.
This study makes a number of contributions to the extant literature. First it focuses
on single industry SMEs in an emerging market economy where firms are exposed to
the same level of environmental uncertainties. This would help eliminate inter-industry
variations. Secondly, this study fills an important gap in the literature by integrating
MO dimension to TQM-performance relationship in SME context, as most studies on
MO were based on larger organizations. Finally, this study also empirically validates
moderating role of TQM in MO-performance relationship in the context of SMEs.
By using structural equation modeling the study analyzes both direct and indirect
effects of each construct on organizational performance.
IMDS The paper is organized as follows: the next section provides a review of the relevant
106,8 theoretical literature and sets out the hypotheses of the study. The research methods
are presented in Section 3. Results are in Section 4 followed by conclusion and
implications.

2. Literature review and hypotheses

1208 The literature review is presented in four sections. The first section deals with the
relationship between MO and organizational performance, followed by the examination
of the impact of MO on the extent of TQM implementation. Third section reviews briefly
the literature on the relationship between TQM implementation and organizational
performance. Finally, the rationale for the mediating impact of TQM implementation on
the link between MO and organizational performance is provided.

2.1 Market orientation and organizational performance

Conceptual and empirical work on MO appears to take on different perspectives
ranging from marketing intelligence perspective (Kohli and Jaworski, 1990; Jaworski
and Kohli, 1993; Jaworski et al., 2000), the culture based behavioral perspective (Narver
and Slater, 1990; Slater and Narver, 1995, 1999) to the customer focused perspective
(Shapiro, 1988; Desphande et al., 1993; Li et al., 2006) and the strategic perspective (Day,
1994; Gatignon and Xuereb, 1997). Each of these perspectives approaches the MO
concept from different angles. For example, Shapiro (1988) suggests that MO be treated
as synonymous to customer orientation, while Kohli and Jaworski (1990) define MO as
the organization wide generation of marketing intelligence pertaining to current and
future customer needs, dissemination of intelligence across departments and
organization wide responsiveness to it. This definition of MO shares some common
dimensions with TQM philosophy (Mandal, 2000) and thus TQM implementation
(Davig et al., 2003; Moreno et al., 2005). The main rationale behind MO and
organizational performance relationship lies within value creation of sellers and
perceived value by buyers of a product and service (Narver and Slater, 1990; Chadam
and Pastuszak, 2005). A similar conceptualization has been used by Parasuraman et al.
(1985) and Zeithaml et al. (1996) in explaining service quality. As firms endeavor to
achieve sustainable competitive advantage through value creation and providing
better value for the customer, they need to develop an organizational culture that will
maintain such a competitive edge in the market place. Market oriented firms also create
potential sources of sustainable competitive advantage by creating intelligence and
communicating the relevant intelligence within their departments. Narver and Slater
(1990, p. 21) point out that a seller creates value for a buyer mainly in two ways: by
increasing benefits to the buyer in relation to the buyer’s cost or by decreasing the
buyer’s cost in relation to buyer’s benefit. Therefore, a market-oriented firm will be in a
position to create superior value for the buyers (Reed et al., 1996), which will in turn
leads to a better organizational performance.
Empirical evidence on the relationship between the extent of MO and organizational
performance appears to be mixed. Some researchers found positive associations
between MO and organizational performance (Jaworski and Kohli, 1993; Narver and
Slater, 1990; Slater and Narver, 1994), while others could not find any direct
relationship between MO and performance measures such as ROI (Greenley, 1995;
Harris, 2001). This led Harris (2001) to conclude that MO did not have a direct effect on
performance in all national cultures, as its influence might not be dependent on TQM and market
environment. Similarly, Diamantopoulos and Hart (1993) and Han et al. (1998) could not orientation’s
find a direct relationship between MO and firm performance. In contrast, relying on the
scale developed by Narver and Slater (1990), some authors reported a positive impact
relationship between MO and business performance in different contexts (Horng and
Chen, 1998; Appiah-Adu and Ranchhod, 1998; Kumar et al., 1998). The MARKOR scale
developed by Kohli et al. (1993), however, appears to be more appropriate for emerging 1209
country context and was already successfully tested by a number of researchers
(Chang and Chen, 1998; Avlonitis and Gounaris, 1997, 1999; Raju and Lonial, 2002) who
reported positive associations between MO and performance. Although empirical
evidence is equivocal, given the complexity and cross-national robustness of studies
reporting positive association between MO and organizational performance, we
hypothesize that:
H1. There is a positive and strong direct relationship between market orientation
and organizational performance of SMEs.

2.2 Market orientation and TQM implementation

There is a paucity of empirical research examining the relationship between MO and
TQM implementation in both quality management and marketing literature. There have
been some descriptive works suggesting the link between MO and TQM practices
(Mohr-Jackson, 1998), though most empirical evidence appears somewhat sketchy (Raju
and Lonial, 2002). Both marketing activities and implementation of TQM practices
require close co-ordination among other departments in the organization and also
necessitate systematic data collection for the purpose of satisfying customer
expectations. Value creation for customers also calls for close co-ordination between
marketing and quality departments (Slater and Narver, 1995; Lai, 2003). Day (1994)
argues that initiatives to enhance market sensing and customer linking capabilities are
integral parts of building a market oriented organization. TQM implementation appears
to facilitate such capabilities and “at the heart of the TQM is the concept of an
organization as an interrelated collection of processes rather than an interacting set of
functional units” (Day, 1994). Both TQM implementation and MO require an
organizational structure to be designed around the flow of value-adding activities and
should also empower employees to manage organizational change. Given the
information oriented nature of TQM practices and market oriented firm, TQM
implementation may offer a rich array of tools that organizations could be transformed
in achieving market orientation. One weakness as Day (1994) identifies in TQM
implementation to achieve MO is that the effectiveness of TQM practices is internally
contained and a repetitive process which may not go beyond the bounds of the
organization. An organizational change toward being more market oriented requires a
steadfast top management commitment and a bottom up change, which could be
facilitated by an effective implementation of TQM practices. Such a change programme
needs to be fostered by cross-functional activities, shared objectives and a decentralized
structure, which may increase the firms’ capabilities to respond to their customers (Day,
1994). Based on these and other supporting arguments we hypothesize that:
H2. There is a positive and direct strong relationship between MO and TQM
implementation in SMEs.
IMDS 2.3 TQM implementation and organizational performance
106,8 Most empirical studies investigating the relationship between TQM practices and
financial performance have produced mixed results. Some of these studies either use stock
price performance (Hendricks and Singhal, 1996, 2001; Easton and Jarrel, 1998) or
perceptual measures developed by researchers themselves (Prajogo and Sohal, 2006;
Powel, 1995; Kaynak, 2003; Samson and Terziovski, 1999). Researchers in this group treat
1210 TQM awards as a proxy for effective TQM implementation (which seem to exclude SMEs)
and tried to establish a link between objective measures of TQM implementation and
performance (stock-price performance) (Hendricks and Singhal, 1996; Easton and Jarrel,
1998). While Hendricks and Singhal (1996) failed to establish any causality between the
two constructs, Easton and Jarrel (1998) found significant relationship between stock-price
performance and TQM implementation. A follow up study by Hendricks and Singhal
(2001) based on a larger dataset revealed that the sample of effective TQM implementers
significantly outperformed the various matched control groups in the post
implementation period. None of these indicators (award winning, stock-price
performance) appears to be available for SMEs, hence researchers in this domain use
perceptual measures. A group of researchers use both expert rated performance measures
alongside perceptual measures (Strubering and Klaus, 1997; Douglas and Judge, 2001,
Kaynak, 2003). There is likely to be a strong correlation between expert rated
performance and perceptual measures of organizational and financial performance
(Douglas and Judge, 2001). Kaynak (2003) also reports a similar correlation between TQM
implementation and the perceptual measures of financial performance. In the case of
SMEs the evidence, however, appears to be equivocal. Some TQM advocates argue that,
due to resource problems (mainly financial and human resources) TQM cannot produce
consistent financial performance for SMEs (Schmidt and Finnigan, 1992; Powel, 1995;
Strubering and Klaus, 1997). Another group of researchers, however, found some
significant performance results of TQM practices in SMEs (Ahire and Golhar, 1996;
Hendricks and Singhal, 2001). In comparing larger firms with smaller firms, Hendricks
and Singhal (2001) argue that smaller firms tend to benefit more from TQM as compared to
larger firms. This argument contradicts with some of the earlier arguments on the role of
TQM in SMEs (that TQM is less beneficial to smaller firms).
While financial performance is the ultimate aim of any business organization, other
indicators such as innovation performance (Llorens et al., 2003), market share and
other non-financial performance indicators may be equally important in implementing
TQM principles. If one treats the TQM implementation as a change programme for SMEs,
the significance of such indicators will become more obvious. Further, implementation of
TQM principles may not have direct but indirect impact on financial performance
(Kaynak, 2003) by increasing innovation (Singh and Smith, 2004), changing organizational
culture (Irani et al., 2004), market competitiveness (Chong and Rundus, 2004), overall
organizational performance (Powel, 1995), market share and growth of market share
(Kaynak, 2003), employee morale (Rahman and Bullock, 2005), productivity (Rahman and
Bullock, 2005; Kaynak, 2003; Rahman, 2001). As innovation performance is related to
financial performance, relationship between innovation and TQM implementation
becomes an important dimension of the argument on treating the TQM as a change
programme. Samson and Terziovski (1999) found support for the relationship between
some non-financial measures (i.e. export growth, market share growth, innovation growth,
cost of quality, etc.) and implementation of TQM practices.
 While some researchers argue that TQM can be positively related to increasing TQM and market
innovation capacity of TQM practicing firms (Singh and Smith, 2004), others develop orientation’s
an argument on the negative relationship between TQM implementation and
innovative performance of firms (Prajogo and Sohal, 2001). The logic behind the impact
argument on the negative impact of TQM on innovation performance is that customer
focus and its principles may trap organizations into captive markets where they focus
only on existing customers, which may result in ignoring the search for innovation and 1211
novel solutions (Prajogo and Sohal, 2006).
In the case of SMEs, however, the evidence is indistinguishable. Choi and Eboch
(1998) argue that the strength of positive relationship between plant performance, as
influenced by TQM practices, and customer satisfaction, is still far from being
conclusive. Terziovski and Samson (1999) noted negative relationship for smaller size
firms, whereas Lee (2004) reports that Chinese SMEs have a favorable perception of the
impact of TQM practices on non-financial measures of performance (i.e. production
performance, cost improvement and sales improvement). While there is no detailed
analysis of the relationship between TQM practices and non-financial performance for
SMEs in the prior literature (Ahire and Golhar, 1996), we rely on the argument of the
first group of researchers and assert the following hypothesis:
H3. There is a positive and direct strong relationship between TQM
implementation and organizational performance in SMEs.

2.4 Mediating role of TQM implementation

Market orientation, by definition, requires intelligence about the market, customers and
competitors. The value of such information is maximized when it is shared between
various functions of an organization implementing TQM practices. Therefore, TQM
implementation appears to play an important mediating role in increasing the strength
of the association between MO and performance. In fact, some of the earlier research
examining market orientation-performance relationship argued that although there may
not be direct relationship between MO and performance measures, when a mediating
variable such as innovation (Hurley and Hult, 1998), uncertainty (Greenley, 1995) or
turbulence (Harris, 2001) is included, then the relationship becomes significant. In this
study, we test Day’s (1994) proposition of the moderating effect of TQM practices on the
relationship between MO and performance. Kohli and Jaworski (1990) argued that:
. . . when there is a fixed set of customers with stable preferences, a MO is likely to have little
effect on performance, because a little adjustment to marketing mix is necessary to cater
effectively to stable preferences of a given set of customers.
Day (1994), however, suggested a moderating role of TQM and asserted that MO coupled
with organizational capabilities (through change in the organization practices such as
TQM) enhances organizational performance. Some empirical support has been found for
a mediating role of TQM. Prajogo and Sohal (2004) identified a mediating impact of
TQM practices on the relationship between organization strategy and performance.
Similarly, Lai (2003) established a causal linkage between MO and TQM implementation
and organizational performance. This discussion leads to the following hypothesis:
H4. The impact of MO on organizational performance increases with a mediating
role of TQM implementation in SMEs.
IMDS 3. Research methodology
106,8 3.1 Survey instrument
The survey instrument is composed of questions relating to the following three
constructs that include MO, the extent of TQM implementation and organizational
performance (PERF). The conceptual definition of MO construct was adopted from the
work of Kohli and Jaworski (1990) due to its wide acceptance (Raju and Lonial, 2002;
1212 Lai, 2003) in the extant literature. They developed a multi-item scale to operationalize
the MO construct in a manufacturing context (Jaworski and Kohli, 1993; Selnes et al.,
1996). Minor modifications were, however, made to some items in the original scale to
adjust for semantic meanings and also two items were deleted resulting in a 30-item
scale that are measured on a five-point Likert scale ranging from “strongly disagree” to
“strongly agree”.
The TQM scale was largely derived from the work of Saraph et al. (1989) with the
purpose of identifying critical factors of TQM in a business unit. In its present form,
the number of items was reduced to 20 from the initial set of 30 items in the original
questionnaire. The basic justification for this lies in the researchers’ impression
(derived from the pilot study) that the SMEs are in the “awakening” stage described by
Crosby (1996). Our interviews corroborated that company management recognized
that quality management might be of value though it was not willing to provide money
or allocate time to make it all happen. Instead, teams were set up to attack major
problems instead of soliciting long range solutions, and that company quality posture
could be summarized as “Is it absolutely necessary to always have problems with
quality?”. These signified a very close alignment with the “awakening” stage of
Crosby’s stages of maturity. Each item related to TQM context was rated on a
five-point scale, ranging from “very low” to “very high”.
Measures of organizational performance (PERF) were based on items derived from a
number of previous studies using this variable (Huang et al., 2006; Rao, 2006; Pearce
et al., 1987; Boyd, 1991; Dess and Robinson, 1984). The level of organizational
performance (PERF) measures was identified using judgmental measures based on
managers’ perceptions of how the organization performed on multiple indicators of
organizational performance relative to its rivals based on a five-point scale, ranging
from “much worse than rivals” through “much better than rivals”. The PERF construct
was composed of financial, non-financial and efficiency indicators which include:
revenue growth over the last three years, net profits, profit to revenue ratio, return on
assets, investment in R&D aimed at new innovations, capacity to develop a unique
competitive profile, new product/service development, market development and
market orientation, cost per adjusted discharge, reject rate and waste and return on
assets. These items are typically employed to measure performance as they are of
interest to, and accessible to, powerful external stakeholders of an organization, such
as its shareholders. Dess and Robinson (1984) found subjective measures of
performance, assessed relative to a company’s main competitors, were well correlated
with objective performance measures. While performance measurement is traditionally
confined to financial performance indices, emerging management paradigms such as
marketing and quality management are stressing the use of multiple indicators of
performance.
The original version of the questionnaire was in English. This questionnaire was
translated into the local language (Turkish). The local version was back translated
until a panel of experts agreed that the two versions were comparable. The TQM and market
questionnaire was pre-tested several times to ensure that the wording, format, and orientation’s
sequencing of questions were appropriate. As the percentage of missing data was
calculated to be relatively small, occasional missing data on variables was handled by impact
replacing them with the mean value.

3.2 The sample 1213

There is no consensus on the definition of SME, as variations exist between countries,
sectors and even different governmental agencies within the same country (Yusof and
Aspinwall, 2000). In line with small business research, this study adopted the number
of employees as the base for the definition of SME. An SME is identified as one that
employs fewer than 100 staff. The minimum of at least ten employees was also chosen
in order to exclude micro firms that would not be suitable for the purposes of this
study. This range is consistent with the definition of an SME adopted by both the
Turkish State Institute of Statistics and Turkish Small Business Administration
(KOSGEB) and also by a number of European countries such as Norway and Northern
Ireland (Sun and Cheng, 2002; McAdam and McKeown, 1999).
Data for this study were collected using a self-administered questionnaire that was
distributed to 500 SMEs operating in textile industry within the city of Istanbul in
Turkey. This sample was selected randomly from the database of Turkish KOSGEB.
As of 2005, the KOSGEB database includes a total of 12,270 SMEs in Istanbul, which
accounts for nearly 28 percent of all SMEs registered throughout Turkey. The
sampling frame consists of 2,482 SMEs operating in the textile industry in Istanbul.
The study focused on the textile industry including textile mill products and apparel
(SIC codes 22 and 23), since it has been a leader in implementing progressive quality
management practices in Turkey. The textile industry has also been the engine of
economic growth and generates the largest volume of export revenues. Although one
could argue that a focus on a single industry may make the results less generalizable,
we ensured a high level of internal validity. Furthermore, within the textile industry
there exist several different manufacturing environments and product types making
the sample much more diverse than what could be expected for a homogenous sample.
It was requested that the questionnaire be completed by a senior officer/executive in
charge of quality management. The responses indicated that a majority of the
respondents completing the questionnaire were in fact members of the top
management. Of the 500 questionnaires posted, a total of 163 questionnaires were
returned after one follow-up. About 22 questionnaires were eliminated due to largely
missing values. The overall response rate was thus 28 percent (141/500), which was
considered satisfactory for subsequent analysis. A comparison of the annual sales
volume, number of employees and sub-industry variation revealed no significant
differences between the responding and non-responding firms ( p . 0.1). Thus, the
responses adequately represented the total sample group.

4. Results, analysis and discussions

The data analysis was conducted in three steps:
(1) Performing an exploratory factor analysis (EFA) with varimax rotation to
determine the underlying dimensions of MO, TQM and PERF constructs.
IMDS (2) Testing of the measurement models for each construct using confirmatory
106,8 factor analysis (CFA) in order to determine if the extracted dimensions in step 1
offered a good fit to the data.
(3) Measuring the direct and indirect impact of TQM implementation on the
relationship between MO and business performance.
1214 The first two steps are discussed in detail in the Appendix.

4.1 Path model

The final step in the analysis was to test the path model as shown in Figure 1.
The hypothesized structural equation model was tested using LISREL software
package (Joreskog and Sorbom, 1993). For each of the MO, TQM and PERF constructs,
the indicator variables were the respective dimensions (factors) as determined by
the exploratory and confirmatory factor analyses. The CFA technique is based on the
comparison of variance-covariance matrix obtained from the sample to the one
obtained from the model. It should be recalled that the factor analysis results revealed
three factors for MO, seven factors for TQM and three factors for PERF, which are all
reliable and empirically validated (see Appendix for details). Model fit determines the
degree to which the structural equation model fits the sample data. The commonly
used model fit criteria are chi-square (x 2), goodness of fit index (GFI), adjusted
goodness of fit index (AGFI) and root mean square residual (RMS) (Schumacker and
Lomax, 1996).

ε1 ε2 ε3 ε4 ε5 ε6 ε7

Quality data Role of top Employee Process

Supplier Training
and reporting management Quality policy
relations quality man management

λ11y λ21y λ31y λ41y λ51y λ61y λ71y

Total quality
manage-
Intelligence ment
δ1 generation H2 (+)
H3 (+) Financial
λ11x ε8
Y11 β21 performance
λ12y
Figure 1. Intelligence
δ2 dissemination λ21
x

The structural Market λ22y Non-financial

Y11 Performance ε9
relationship between mo orientation performance
and performance with λ31x H1 (+)
δ3 Responsive-
mediation of TQM λ32y
ness ε10
implementation Output
The fit indices and construct reliability coefficients are reported in the appendix TQM and market
(Tables AVII and AVIII).The goodness-of-fit indices for the path model orientation’s
(Satorra-Bentler x 2 ¼ 89.555 with df ¼ 58; GFI ¼ 0.917; AGFI ¼ 0.869;
NFI ¼ 0.887; CFI ¼ 0.956; RMR ¼ 0.040) are well within the generally accepted impact
limits, indicating a good fit to the data.

4.2 Hypothesis test results 1215

Figure 2 shows both inner and outer regression weights for the structural relationships
between causal paths, while Table I shows the path coefficients for main paths based
on structural equation modeling. As we can see from Table I, the standardized
regression weight for H1 was found to be 0.016 which is insignificant ( p . 0.1).
This finding does not provide support to H1 that MO has a direct and strong impact on
0.062

0.16
-0.05
-0.04 -0.09

Quality data Role of top Employee Supplier Process

and reporting management Training Quality policy
relations quality man management

0.684 0.672 0.756 0.702 0.762 0.526 0.685

Total quality
Intelligence management
generation Non-Financial
0.513 performance Figure 2.
0.732 0.668 0.987 Inner and outer regression
Intelligence
dissemination 0.884 weights for the structural
Market Financial
orientation
0.016 Performance 0.60
performance relationship between mo
0.509
and performance with a
Responsive-
ness 0.526 mediation of TQM
Output implementation

Hypothesis Causal path Regression weights

H1 MO – performance 0.016
H2 MO – TQM 0.732 *
H3 TQM – performance 0.668 * Table I.
H4 MO – performance (indirect relationship) 0.489 * Inner regression weights
between latent variables
Note: *p , 0.001 in the path model
IMDS organizational performance of SMEs. While the finding that there is no direct
106,8 relationship between MO and performance contrasts with the findings of earlier
research (Jaworski and Kohli, 1993; Narver and Slater, 1990; Slater and Narver, 1994), it
is in line with those of some studies (Diamantopoulos and Hart, 1993; Greenley, 1995;
Han et al., 1998; Harris, 2001).
Table I also presents the relationship between MO and TQM implementation.
1216 The standardized regression weight for the hypothesized relationship between MO
and TQM was found to be positive and significant (b ¼ 0.732, p , 0.001), confirming
H2 that MO had a strong positive direct impact on the level of TQM implementation.
The standardized regression weight for the direct relationship between TQM and
PERF was found to be positive and significant (b ¼ 0.668, p , 0.001), indicating a
strong support for H3 that the level of TQM implementation had a positive and strong
direct impact on organizational performance, as shown in Table I. This finding also
tends to confirm the findings of earlier research that SMEs firms are more likely to
benefit from TQM implementation than large firms (Ahire and Golhar, 1996; Hendricks
and Singhal, 2001).
Organizational performance is also indirectly affected by MO through total quality
management, which is shown in both Figure 2 and Table I. The standardized
regression weight was found to be positive and significant (b ¼ 0.489, p , 0.001),
providing a good deal of support for H4. In other words, with a mediating role of TQM
implementation indirect relationship between MO and business performance has
become significant, which tends to be in conflict with the non-significant finding of the
direct relationship between MO and business performance. This finding tends to
corroborate the Day’s (1994) proposition of the moderating effect of TQM practices on
the link between MO and organizational performance.

5. Conclusion and implications

There is a dearth of empirical research which considers a triangulation of market
orientation, TQM and organizational performance within the context of SMEs, with
previous research however largely examining these constructs either discretely or in a
two-way relationship. The novelty of this research lies in its inclusion of TQM
practices while investigating the relationship between MO and organizational
performance in SMEs. In this study, exploratory and confirmatory factor analyses
were used to produce empirically verified and validated underlying dimensions of MO,
TQM and organizational performance, respectively.
Based on theoretical considerations, a model was proposed linking the two
constructs of MO and TQM to the organizational performance construct. Structural
equation modeling was then applied to test the model drawing on a sample of 141
SMEs operating in Turkish textile industry.
The results indicated that while MO had a strong and positive direct impact on extent
of TQM implementation, no significant direct relationship was found between MO and
organizational performance. Similarly, a strong and positive relationship was noted
between the level of TQM implementation and organizational performance. Finally, it
was found that through only a mediating role of TQM implementation that the MO had a
positive and significant impact on organizational performance. This finding confirms
the view that a triangulation of MO, TQM and organizational performance outperforms
two-way relationship of MO and organizational performance.
5.1 Managerial implications TQM and market
This study offers a number of managerial implications for SMEs. First, although MO is orientation’s
highly emphasized in the marketing literature, MO alone may not create a better
performance in the case of SMEs in an emerging market. If MO is coupled with TQM impact
implementation, then a MO strategy may yield better performance for manufacturing
SMEs. Therefore, SMEs should consider TQM as a facilitating management tool for
improving organizational performance in relatively more dynamic environments. 1217
Second, TQM is likely to act as a catalyst in a change program. While MO requires a
top-down approach, TQM by its very nature is more of a bottom-up approach, which
appears to complement a market oriented change program. Market oriented SMEs may
not realize an increased performance gains (particularly financial performance) with a
successful MO implementation, but when TQM implemented alongside with MO,
better financial performance can be achieved. This implies that the following
dimensions of TQM, which include quality data and reporting, role of top management,
employee relations, supplier quality management, training, quality policy of top
management, and process management all must be planned, managed and controlled
within SMEs in order to create a competitive edge.
Further, as TQM implementation strengthens market orientation’s impact on SME
performance, it is highly likely that TQM implementation acts as inter-functional
co-ordination mechanism. Such a co-ordination and information flow regarding
customer expectations may aid to create a better value for customers. This reinforces
our earlier argument that SMEs should not use marketing strategies only, but also
strengthen their strategy by introducing quality practices.
Finally, findings of this research are also relevant for strategy designers of SMEs.
SMEs’ manufacturing capabilities alone, even with standard quality improvement
programs, may not be sufficient for a superior organizational performance in emerging
market economies. Given the level of uncertainties and turbulent organizational
environment prevailing in many of the emerging market economies, TQM
implementation may not only improve product quality, but also the quality and the
use of information gathered through market orientation. This may aid SMEs to devise
flexible strategies for a global competition. The MO concept used in this study captures
an important dimension of global strategy. Findings presented in this paper further
strengthens the argument that, firms, particularly SMEs, need to find a right balance
between standardization and market responsiveness. As increasing number of SMEs
are being involved in global markets and/or operates within global networks and
supply chains, a double track approach (MO at business level and TQM
implementation at functional level) to improve product and management quality
becomes inevitable.

5.2 Limitations and directions for future research

This study is also subject to some limitations. The data were collected from textile
manufacturers in Turkey, which may restrict to some extent generalizability of
findings to other industries or firms operating in more stable environments. On the
plus side, however, this study highlights the fact that findings from a survey of SMEs
operating in more stable environments may not be applicable to SMEs in relatively
more turbulent environments. This study relied on perceptual measures of
performance. Given the limitations associated with perceptual measures, findings
IMDS should be interpreted with some degree of caution. Furthermore, in this study we
106,8 adopted the MO scale developed by Jaworski and Kohli (1993), though there were other
scales that might also be applicable to SMEs (Narver and Slater, 1990; Desphande and
Farley, 1998). Perhaps an implementation of alternative scales on the same sample
would provide further insights into the causal links between MO, TQM and
organizational performance. As the data used for this study were mainly collected from
1218 SMEs in textile industries, future research relying on a sample of SMEs in service
industries and a comparison between manufacturing and service sector SMEs may
provide further insights into TQM and MO relationship.

References
Adis, W. (2003), “Quality of service middleware”, Industrial Management & Data Systems,
Vol. 103 No. 1, pp. 47-51.
Ahire, S.L. and Golhar, D.Y. (1996), “Quality management in large vs small firms”, Journal of
Small Business Management, Vol. 34 No. 2, pp. 1-11.
Al-Mashari, M., Zairi, M. and Ginn, D. (2005), “Key enablers for the effective implementation of
QFD: a critical analysis”, Industrial Management & Data Systems, Vol. 105 No. 9,
pp. 1245-60.
Anderson, J. and Gerbing, D. (1988), “Structural equation modelling in practice: a review and
recommended two-step approach”, Psychological Bulletin, Vol. 103 No. 3, pp. 411-23.
Appiah-Adu, K. and Ranchhod, A. (1998), “Market orientation and performance in the
biotechnology industry: an exploratory empirical analysis”, Technology Analysis &
Strategic Management, Vol. 10 No. 2, pp. 197-210.
Avlonitis, G.J. and Gounaris, S.P. (1997), “Market orientation and company performance:
industrial vs consumer goods companies”, Industrial Marketing Management, Vol. 26,
pp. 385-402.
Avlonitis, G.J. and Gounaris, S.P. (1999), “Market orientation and its determinants: an empirical
analysis”, European Journal of Marketing, Vol. 33 Nos 11/12, pp. 1003-37.
Bentler, P. (1992), EQS Structural Equations Program Manual, BMDP Statistical Software,
Los Angeles, CA.
Bollen, K.A. (1989), Structural Equations with Latent Variables, Wiley, New York, NY.
Boyd, K.B. (1991), “Strategic planning and financial performance: a meta-analytic review”,
Journal of Management Studies, Vol. 28, pp. 353-74.
Chadam, J. and Pastuszak, Z. (2005), “Marketing aspects of knowledge-based management in
groups of companies: case of Poland”, Industrial Management & Data Systems, Vol. 105,
pp. 459-75.
Chang, T.Z. and Chen, S.J. (1998), “Market orientation, service quality and business profitability:
a conceptual model and empirical evidence”, Journal of Services Marketing, Vol. 12 No. 4,
pp. 246-64.
Choi, T.Y. and Eboch, K. (1998), “The TQM paradox: relations among TQM practices, plant
performance and customer satisfaction”, Journal of Operations Management, Vol. 17,
pp. 59-75.
Chong, V.K. and Rundus, M.J. (2004), “Total quality management, market competition and
organizational performance”, British Accounting Review, Vol. 36, pp. 155-72.
Crosby, P.B. (1996), Quality is Free, McGraw-Hill, New York, NY.
Davig, W., Brown, S., Friel, T. and Tabibzadeh, K. (2003), “Quality management in small TQM and market
manufacturing”, Industrial Management & Data Systems, Vol. 130 No. 2, pp. 68-77.
orientation’s
Day, G.S. (1994), “The capabilities of market-driven organizations”, Journal of Marketing, Vol. 58
No. 4, pp. 37-52. impact
Desphande, R., Farley, J.U. and Webster, F. Jr (1993), “Corporate culture, customer orientation
and innovativeness in Japanese firms: a quadrate analysis”, Journal of Marketing, Vol. 57,
pp. 23-37. 1219
Desphande, R. and Farley, J.U. (1998), “Measuring market orientation: generalization and
synthesis”, Journal of Market Focused Management, Vol. 2, pp. 213-32.
Dess, G.G. and Robinson, R.B. (1984), “Measuring organizational performance in the absence of
objective measures: the case of the privately-held firm and conglomerate business unit”,
Strategic Management Journal, Vol. 5, pp. 265-73.
Diamantopoulos, A. and Hart, S. (1993), “Linking market orientation and company performance:
preliminary evidence on Kohli and Jaworski’s framework”, Journal of Strategic Marketing,
Vol. 1, pp. 93-121.
Douglas, T.J. and Judge, W.Q. Jr (2001), “Total quality management implementation and
competitive advantage: the role of structural control and exploration”, Academy of
Management Journal, Vol. 44 No. 1, pp. 158-69.
Easton, G.S. and Jarrel, S.L. (1998), “The effects of total quality management on corporate
performance: an empirical investigation”, Journal of Business, Vol. 71 No. 2, pp. 253-307.
Feigenbaum, A.V. (1951), Quality Control: Principles, Practice and Administration, McGraw-Hill,
New York, NY.
Gatignon, H. and Xuereb, J. (1997), “Strategic orientation of the firm and new product
performance”, Journal of Marketing Research, Vol. 34, pp. 77-90.
Greenley, G.E. (1995), “Market orientation and company performance: empirical evidence from
UK companies”, British Journal of Management, Vol. 6, pp. 1-13.
Han, J.K., Kim, N. and Srivastava, R.K. (1998), “Market orientation and organizational
performance: is innovation a missing link?”, Journal of Marketing, Vol. 62 No. 4, pp. 30-45.
Harris, L.C. (2001), “Market orientation and performance: objective and subjective empirical
evidence from UK companies”, Journal of Management Studies, Vol. 38, pp. 17-43.
Hendricks, K.B. and Singhal, V.R. (1996), “Quality awards and the market value of the firm: an
empirical investigation”, Management Science, Vol. 42 No. 3, pp. 415-36.
Hendricks, K.B. and Singhal, V.R. (2001), “Firm characteristics, total quality management, and
financial performance”, Journal of Operations Management, Vol. 19, pp. 269-85.
Horng, S-C. and Chen, A.C-H. (1998), “Market orientation of small and medium sized firms in
Taiwan”, Journal of Small Business Management, Vol. 36 No. 3, pp. 79-86.
Huang, S.M., Lee, C.L. and Kao, A.C. (2006), “Balancing performance measures for information
security management: a balanced scorecard framework”, Industrial Management & Data
Systems, Vol. 106 No. 2, pp. 242-55.
Hurley, R.F. and Hult, G.T.M. (1998), “Innovation, market orientation and organizational
learning: an integration and empirical examination”, Journal of Marketing, Vol. 62,
pp. 42-54.
Irani, Z., Beskese, A. and Love, P.E.D. (2004), “Total quality management and corporate culture:
constructs of organizational excellence”, Technovation, Vol. 24, pp. 643-50.
Jaworski, B.J. and Kohli, A.K. (1993), “Market orientation: antecedents and consequences”,
Journal of Marketing, Vol. 57 No. 3, pp. 53-70.
IMDS Jaworski, B.J., Kohli, A.K. and Sahay, A. (2000), “Market-driven versus driving markets”, Journal
of Academy of Marketing Science, Vol. 28 No. 1, pp. 45-54.
106,8
Jöreskog, K.G. and Sörbom, D. (1993), LISREL8: Structural Equation Modeling with the SIMPLIS
Command Language, Lawrence Erlbaum Association, Hillsdale, NJ.
Juran, J.M., Gryna, F. Jr and Bingham, R.S. (1974), Quality Control Handbook, McGraw-Hill, New
York, NY.
1220 Kaynak, H. (2003), “The relationship between total quality management practices and their
effects on firm performance”, Journal of Operations Management, Vol. 21, pp. 405-35.
Koh, S.C.L. and Gunesekaran, A. (2006), “A knowledge management approach for managing
uncertainty in manufacturing”, Industrial Management & Data Systems, Vol. 106 No. 4,
pp. 439-59.
Kohli, A.K. and Jaworski, B.J. (1990), “Market orientation: the construct, research propositions
and managerial implications”, Journal of Marketing, Vol. 54 No. 2, pp. 1-18.
Kohli, A.K., Jaworski, B.J. and Kumar, A. (1993), “MARKOR: a measure of market orientation”,
Journal of Marketing Research, Vol. 30, pp. 467-77.
Kumar, K., Subramanian, R. and Yauger, C. (1998), “Examining the market-performance
relationship: a context specific study”, Journal of Management, Vol. 24 No. 2, pp. 201-34.
Lai, K-H. (2003), “Market orientation in quality-oriented organizations and its impact on their
performance”, International Journal of Production Economics, Vol. 84, pp. 17-34.
Lee, C.Y. (2004), “Perception and development of total quality management in small
manufacturers: an exploratory study in China”, Journal of Small Business Management,
Vol. 42 No. 1, pp. 102-15.
Li, B., Riley, M.W., Lin, B. and Qi, E. (2006), “A comparison study of customer satisfaction
between the UPS and FedEx”, Industrial Management & Data Systems, Vol. 106 No. 2,
pp. 182-99.
Llorens, F.J., Ruiz, A. and Molina, L.M. (2003), “An analysis of the relationship between quality
and perceived innovation: the case of financial firms”, Industrial Management & Data
Systems, Vol. 103, pp. 579-90.
McAdam, R. and McKeown, M. (1999), “Life after ISO 9000: an analysis of the impact of ISO 9000
and total quality management on small businesses in Northern Ireland”, Total Quality
Management, Vol. 10 No. 2, pp. 229-41.
Mandal, P. (2000), “Interfunctional spread of quality in manufacturing”, Industrial Management
& Data Systems, Vol. 100 No. 3, pp. 135-40.
Mohr-Jackson, I. (1998), “Conceptualizing total quality orientation”, European Journal of
Marketing, Vol. 32 Nos 1/2, pp. 13-22.
Moreno, A.R., Morales, V.G. and Montes, F.J.L. (2005), “Learning the quality management
process”, Industrial Management & Data Systems, Vol. 105 No. 8, pp. 1001-21.
Narver, J.C. and Slater, S.F. (1990), “The effect of a market orientation on business profitability”,
Journal of Marketing, Vol. 54 No. 4, pp. 20-35.
Nunnally, J.C. (1978), Psychometric Theory, 2nd ed., McGraw-Hill, New York, NY.
Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1985), “A conceptual model of service quality
and its implications for future research”, Journal of Marketing, Vol. 49, pp. 41-50.
Pearce, J.A. II, Freeman, E.B. and Robinson, R.B. Jr (1987), “The tenuous link between formal
strategic planning and financial performance”, Academy of Management Review, Vol. 12
No. 4, pp. 658-75.
Powel, T.C. (1995), “Total quality management as competitive advantage: a review and empirical TQM and market
study”, Strategic Management Journal, Vol. 16, pp. 15-37.
orientation’s
Prajogo, D.I. and Sohal, A.S. (2001), “TQM and innovation: a literature review and research
framework”, Technovation, Vol. 21, pp. 539-58. impact
Prajogo, D.I. and Sohal, A.S. (2004), “The sustainability and evolution of quality improvement
programmes – an Australian case study”, Total Quality Management and Business
Excellence, Vol. 15 No. 2, pp. 205-20. 1221
Prajogo, D.I. and Sohal, A.S. (2006), “The relationship between organization strategy, total
quality management (TQM) and organization performance-the mediating role of TQM”,
European Journal of Operational Research, Vol. 168 No. 1, pp. 35-50.
Prybutok, V. and Custshall, R. (2004), “Malcolm Baldrige National Quality Award leadership
model”, Industrial Management & Data Systems, Vol. 104 No. 7, pp. 558-67.
Rahman, S. (2001), “A comparative study of TQM practice and organisational performance of
SMEs with and without ISO 9000 certification”, International Journal of Quality and
Reliability, Vol. 18 No. 1, pp. 35-49.
Rahman, S. and Bullock, P. (2005), “The relationship between organization strategy, total quality
management (TQM) and organization performance-the mediating role of TQM”, Omega,
Vol. 33, pp. 73-83.
Raju, P.S. and Lonial, S.C. (2002), “The impact of service quality and marketing on financial
performance in the hospital industry: an empirical examination”, Journal of Retailing and
Consumer Services, Vol. 9, pp. 335-48.
Rao, M.P. (2006), “A performance measurement system using a profit-linked multi-factor
measurement model”, Industrial Management & Data Systems, Vol. 106 No. 3, pp. 362-79.
Reed, R., Lemak, D.J. and Montgomery, J.C. (1996), “Beyond process: TQM content and firm
performance”, Academy of Management Review, Vol. 21 No. 1, pp. 173-202.
Samson, D. and Terziovski, M. (1999), “The relationship between total quality management
practices and operational performance”, Journal of Operations Management, Vol. 17,
pp. 393-409.
Shapiro, B.P. (1988), “What the hell is market oriented?”, Harvard Business Review, Vol. 66 No. 6,
pp. 119-25.
Saraph, J.V., Benson, G.P. and Schroder, R.G. (1989), “An instrument for measuring the critical
factors of quality management”, Decision Sciences, Vol. 20, pp. 810-29.
Schmidt, W. and Finnigan, J. (1992), The Race without a Finish Line: America’s Quest for Total
Quality, Jossey-Bass, San Francisco, CA.
Schumacker, R.E. and Lomax, R.G. (1996), A Beginner’s Guide to Structural Equation Modeling,
Lawrence Erlbaum Associates, Mahwah, NJ.
Selnes, F., Jaworski, B.J. and Kohli, A.K. (1996), “Market orientation in United States and
Scandinavian companies: a cross-cultural study”, Scandinavian Journal of Management,
Vol. 12 No. 2, pp. 139-57.
Singh, P.J. and Smith, A.J.R. (2004), “Relationship between TQM and innovation: an empirical
study”, Journal of Manufacturing Technology Management, Vol. 15 No. 5, pp. 394-401.
Slater, S.F. and Narver, J.C. (1994), “Does competitive environment moderate the market
orientation-performance relationship?”, Journal of Marketing, Vol. 58, pp. 46-55.
Slater, S.F. and Narver, J.C. (1995), “Market orientation and the learning organization”, Journal
of Marketing, Vol. 59, pp. 63-74.
IMDS Slater, S.F. and Narver, J.C. (1999), “Market orientation is more than being customer led”,
Strategic Management Journal, Vol. 20, pp. 1165-8.
106,8 Strubering, L. and Klaus, L.N. (1997), “Small business thinking big”, Quality Progress, Vol. 2, pp. 23-7.
Sun, H. and Cheng, T.K. (2002), “Comparing reasons, practices and effects of ISO 9000
certification and TQM implementation in Norwegian SMEs and large firms”, International
Small Business Journal, Vol. 20 No. 4, pp. 421-40.
1222 Terziovski, M. and Samson, D. (1999), “The link between total quality management practice and
organisational performance”, International Journal of Quality and Reliability Management,
Vol. 16 No. 3, pp. 226-37.
Vokurka, R. (2001), “Using the Baldrige criteria for personal quality improvement”, Industrial
Management & Data Systems, Vol. 101 No. 7, pp. 363-70.
Yusof, S.M. and Aspinwall, E. (2000), “Total quality management implementation frameworks:
comparison and review”, Total Quality Management, Vol. 11 No. 3, pp. 281-94.
Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1996), “The behavioural consequences of
service quality”, Journal of Marketing, Vol. 60, pp. 31-46.

Further reading
Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis,
Prentice-Hall, Englewood Cliffs, NJ.
Narver, J.C., Slater, S.F. and Tietje, B. (1998), “Creating market orientation”, Journal of Market
Focused Management, Vol. 2, pp. 241-55.

Appendix
Exploratory factor analysis
Owing to potential conceptual and statistical overlap (Spearman correlation coefficients between
the constituent items of MO, TQM and PERF constructs revealed a number of low to moderate
inter-correlations) an attempt was made to produce parsimonious set of distinct non-overlapping
variables from the full set of items underlying each construct. EFA with varimax rotation was
performed separately on the MO, TQM and PERF criteria in order to extract the dimensions of
each construct. Tables AI-AIII show the results of EFA.
The EFA on the 30 MO items yielded three factors with eigenvalues greater than 1 and
explaining 59.9 percent of the total variance, as shown in Table AI. From the full set of items only
14 were loaded on these three factors. Based on the item loadings, these factors were, respectively,
labeled as intelligence generation (IG), intelligence dissemination (ID), responsiveness to
customers and competition (RESP). The Cronbach a values of reliability for the underlying factors
range from 0.69 to 0.80 suggesting satisfactory level of construct reliability (Nunnally, 1978).
Similarly, EFA was undertaken to produce a set of parsimonious distinct non-overlapping
dimensions of TQM implementation for Turkish SMEs from the full set of 20 items. The factor
analysis produced seven factors which explained 78.6 percent of the observed variance, as shown
in Table AII. Cronbach a’s for the underlying factors range from 0.75 through 0.86 with all
values being well over 0.70. These factors were labeled as quality data and reporting (factor 1),
role of top management (factor 2), employee relations (factor 3), supplier quality management
(factor 4), training (factor 5), quality policy of top management (factor 6) and process
management (factor 7).
To capture the underlying dimensions of performance construct, the EFA produced a total of
three factors explaining 61 percent of the observed variance, as shown in Table AIII. These
factors were, respectively, labeled as: non-financial performance, financial performance and
output, with Cronbach a values for each factor ranging from 0.55 to 0.89 suggesting satisfactory
level of construct reliability.
 Factors
Symbol Variables IG ID RESP

M1 In our organization we meet with customer at least once a year 0.83

M2 Individuals from our operations interact directly with customer to learn how to serve them 0.81
M3 We do a lot in-house market research 0.45
M7 We collect industry information through informal means 0.43
M11 Marketing personnel in our organization spend time discussing customer’s future needs
with other department 0.59
M12 Our organization periodically circulates documents internally 0.64
M13 When something important happens to a major customer everybody knows about it 0.75
M14 Data on customer satisfaction are disseminated at all levels 0.59
M20 We periodically review our product development efforts to ensure that they are in line with
what customer want 0.74
M22 Several departments get together to plan a response to changes 0.75
M24 If a major competitor were to launch an intensive campaign targeted at our customers we
would implement a response immediately 0.47
M26 Customer complaints fall on deaf ears in our organization 0.80
M28 We are quick to respond to significant changes in our competitors’ pricing structures 0.88
M29 When we find that customers are unhappy with the quality of our product, we take
corrective action 0.87
orientation’s
impact

EFA of MO
TQM and market

1223

Table AI.
 106,8
IMDS

1224

Table AII.
EFA of TQM
implementation
Factors
Symbol Variables 1 2 3 4 5 6 7

Q2 Extent to which quality data are available to managers and supervisors 0.80
Q1 Extent to which quality data are used as tools to manage quality 0.75
Q4 Scope of the quality data includes process/service performance 0.74
Q3 Extent to which quality data are used to evaluate supervisors and managerial
performance 0.71
Q5 Acceptance of responsibility for quality by major department heads 0.76
Q6 Extent to which top management supports a long term quality improvement
process 0.75
Q7 Extent to which top management has objectives for quality performance 0.73
Q8 Amount of feedback provided to the employees on their quality performance 0.76
Q9 Degree of participation in quality decisions by employees 0.72
Q10 Extent to which employees are recognized for superior quality performance 0.51
Q12 Clarity of specifications provided to suppliers 0.81
Q13 Evaluation of performance of suppliers 0.80
Q11 Extent to which longer term relationships are offered to suppliers 0.74
Q14 Training in advanced techniques 0.82
Q15 Training in statistical techniques 0.82
Q16 Specific work-skill training 0.67
Q17 Importance attached to quality by top management in relation to cost/revenue
objectives 0.87
Q18 Degree to which top management considers quality improvement as a way to
increase profits 0.75
Q19 Importance of inspections, review or checking of work 0.80
Q20 Amount of inspections, review or checking of work 0.67
 TQM and market
Factors
Symbol Variables Non-financial Financial Output orientation’s
P18 Market orientation 0.82
impact
P11 New product/service development 0.77
P2 Quality as perceived by customers 0.70
P17 Market share 0.69 1225
P4 Investments in R&D aimed at new innovations 0.68
P12 Market development 0.67
P16 Employee turnover 0.65
P8 Capacity to develop a unique competitive profile 0.64
P7 Reputation among major customer segments 0.51
P1 Revenue growth over the last three years 0.84
P5 Net profits 0.81
P3 Market share gain over the last three years 0.68
P9 Profit to revenue ratio 0.67
P10 Cash flow from operations 0.65
P6 Return on investment 0.58
P14 Reject rate and waste 0.87 Table AIII.
P15 Return on assets 0.52 EFA of organizational
P13 Cost per adjusted discharge 0.49 performance

Confirmatory factor analysis

This stage is also known as testing the measurement model, where MO, TQM and PERF
constructs are tested using the first order confirmatory factor model to assess construct validity
using the method of maximum likelihood. The results consistently supported the factor structure
for all three constructs as noted earlier. The CFA technique is based on the comparison of
variance-covariance matrix obtained from the sample to the one obtained from the model. The
technique is quite sensitive to sample size, and it is recommended to have several cases per free
parameter (Bollen, 1989). The measurement model results at the aggregate level for MO, TQM
and PERF are presented in Tables AIV-AVI, respectively.
The figures in Tables AIV-AVI exhibit the standardized regression weight between each
manifest variable and its corresponding latent variable. We found that all t-values in the CFA are
statistically significant ( p , 0.01).
The goodness-of-fit indices for MO, TQM and PERF are demonstrated in Table AVII. These
indices conform to the normal acceptable standards. The value of x2 statistic ranges from 50.92
through 177.33, with the values of x2/df ratio varying between 1.158 and 1.241. This ratio should
be within the range of 0-3 where lower values indicating a better fit. The results show that our
models indicate a good fit in line with this criterion. In addition, both the GFI and AGFI indices
for the MO, TQM and PERF constructs are highly satisfactory, as they are very close to a value
of 1.0, which denotes a perfect fit. The results attest the construct validity for the measurement
models of MO, TQM and PERF.
As it is readily apparent from Table AVII, most of the fit indices are within the acceptable
range as given by Bentler (1992) for each construct. This provides a first hand support for
reliability and validity of the scales. We further looked at the significance of individual factor
loadings of each constituent item. We found all the individual factor loadings to be highly
significant, giving support to convergent validity (Anderson and Gerbing, 1988). We calculated
the Cronbach a coefficient and average variance extracted (AVE) for each scale. These values are
provided in Table AVIII. The reliability values were higher than the threshold value of 0.70 for
all the constructs. The value of AVE was however slightly less than the recommended value
of 0.50.
 106,8
IMDS

1226

CFA of MO
Table AIV.
Symbol Variables Regression weight t-value *

Intelligence generation
M1 In our organization we meet with customer at least once a year 0.34 –
M2 Individuals from our operations interact directly with customer to learn how to serve them 0.53 5.61
M3 We do a lot in-house market research 0.73 7.51
M7 We collect industry information through informal means 0.32 3.32
Intelligence dissemination
M11 Marketing personnel in our organization spend time discussing customer’s future needs with other department 0.65 –
M12 Our organization periodically circulates documents internally 0.64 7.72
M13 When something important happens to a major customer everybody knows about it 0.75 9.50
M14 Data on customer satisfaction are disseminated at all levels 0.62 7.44
M20 We periodically review our product development efforts to ensure that they are in line with what customer want 0.69 8.36
M22 Several departments get together to plan a response to changes 0.51 5.88
Responsiveness to customers and competitors
M24 If a major competitor were to launch an intensive campaign targeted at our customers we would implement a
response immediately 0.40 –
M26 Customer complaints fall on deaf ears in our organization 0.73 9.16
M28 We are quick to respond to significant changes in our competitors’ pricing structures 0.84 11.02
M29 When we find that customers are unhappy with the quality of our product, we take corrective action 0.86 11.35
Notes: – Fixed for estimation; *p , 0.01
Symbol Description Regression weight t-value *

Quality data and reporting

Q2 Extent to which quality data are available to managers and supervisors 0.79 –
Q1 Extent to which quality data are used as tools to manage quality 0.99 13.2
Q4 Scope of the quality data includes process/service performance 0.79 9.8
Q3 Extent to which quality data are used to evaluate supervisors and managerial performance 0.77 9.1
Role of top management
Q5 Acceptance of responsibility for quality by major department heads 0.63 –
Q6 Extent to which top management supports a long term quality improvement process 0.76 10.2
Q7 Extent to which top management has objectives for quality performance 0.73 10.4
Employee relations
Q8 Amount of feedback provided to the employees on their quality performance 0.70 –
Q9 Degree of participation in quality decisions by employees 0.72 8.1
Q10 Extent to which employees are recognized for superior quality performance 0.84 9.4
Supplier quality management
Q12 Clarity of specifications provided to suppliers 0.69 –
Q13 Evaluation of performance of suppliers 0.90 11.9
Q11 Extent to which longer term relationships are offered to suppliers 0.63 9.2
Training
Q14 Training in advanced techniques 0.91 –
Q15 Training in statistical techniques 0.99 12.2
Q16 Specific work-skill training 0.68 8.5
Quality policy of top management
Q17 Importance attached to quality by top management in relation to cost/revenue objectives 0.70 –
Q18 Degree to which top management considers quality improvement as a way to increase profits 0.84 11.8
Process management
Q19 Importance of inspections, review or checking of work 0.59 –
Q20 Amount of inspections, review or checking of work 0.81 12.1
Notes: – Fixed for estimation; *p , 0.01
orientation’s

CFA of TQM practices

impact
TQM and market

1227

Table AV.
IMDS
Symbol Variables Regression weight t-value *
106,8
Non-financial
P2 Quality as perceived by customers 0.60 –
P4 Investments in R&D aimed at new innovations 0.82 10.55
P8 Capacity to develop a unique competitive profile 0.64 9.10
1228 P11 New product/service development 0.70 9.60
P12 Market development 0.58 8.43
Financial
P1 Revenue growth over the last three years 0.73 –
P5 Net profits 0.84 14.03
P10 Cash flow from operations 0.56 8.44
Output
P13 Cost per adjusted discharge 0.52 7.12
P14 Reject rate and waste 0.29 –
Table AVI. P15 Return on assets 0.60 8.13
CFA of organizational
performance Notes: – Fixed for estimation; *p , 0.01

Model/construct x2 p-value x 2/df RMR GFI AGFI CFI

Table AVII. MO 84.560 0.170 1.158 0.091 0.920 0.880 0.980

Goodness of fit statistics TQM 177.330 0.056 1.190 0.050 0.893 0.849 0.979
(N ¼ 141) PERF 50.920 0.140 1.241 0.051 0.940 0.900 0.980

Constructs Cronbach a AVE

Intelligence generation 0.80 0.43

Intelligence dissemination 0.79 0.46
Responsiveness to customers and competitors 0.69 0.59
Quality data and reporting 0.89 0.56
Role of top management 0.82 0.55
Employee relations 0.80 0.45
Supplier quality management 0.82 0.61
Training 0.74 0.59
Quality policy of top management 0.80 0.66
Process management 0.78 0.54
Table AVIII. Non-financial performance 0.89 0.47
Construct validity and Financial performance 0.86 0.50
reliability Output 0.55 0.42

Corresponding author
S.C. Lenny Koh can be contacted at: S.C.L.Koh@Sheffield.ac.uk

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints