Entrepreneurial Orientation of SMES, Total Quality Management and Firm Performance

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Article in Journal of Manufacturing Technology Management · September 2017

DOI: 10.1108/JMTM-04-2017-0064
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Journal of Manufacturing Technology Management
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Entrepreneurial orientation of SMES, total quality
management and firm performance
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Journal: Journal of Manufacturing Technology Management

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Manuscript ID JMTM-04-2017-0064.R1
Manuscript Type: Article

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Small and Medium Sized Enterprises, Total Quality Management,
Keywords:
Manufacturing industry, Strategy formulation
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http://mc.manuscriptcentral.com/jmtm
Page 1 of 32 Journal of Manufacturing Technology Management
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5 1. INTRODUCTION
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7 The process of globalization prevalent in today’s manufacturing market is one of the major
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9 forces impacting on an organization’s business (Aspinwall & Elgharib, 2013). Indian
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11 manufacturing sector in recent years, has flourished and displayed “extra-ordinary” growth
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capabilities (Sharma, et al., 2015) and many companies are seeking ways to increase the value
14 of their product by adopting innovative strategies for quality and manufacturing excellence. As
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16 present manufacturing environment, is getting increasingly competitive than ever before, most
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18 manufacturing small and medium enterprises (SMEs) are under severe competitive pressure due
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20 to more sophisticated market and changing customer needs, as a result of which the SMEs
21 manufacturing segment has received wide attention for scope of further research by several
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23 authors and practitioners (Mishra, 2016). Also, the concept of entrepreneurial orientation (EO)
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25 and its influence on organizational performance has received substantial attention in
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27 organizational sciences (Gupta & Batra, 2016; Messersmith & Wales, 2011; Stam & Elfring,
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2008; Wang & Altinay, 2012). In today’s changing business environment, entrepreneurship gets
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30 more significance, because of its positive effect on organizational performance and sustainable
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32 competitive advantage (Al-Dhaafri, et al., 2016; Wiklund & Shepherd, 2003; Zahra, 1986). The
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34 function of entrepreneur is to reform or revolutionize the pattern of production process by
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36 exploiting an invention or adopting innovative practices or, more generally untried technological
37 possibility for producing a new commodity or producing an old one in a new way, by opening up
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39 a new source of supply of materials or a new outlet for products, by reorganizing the industry
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41 and so on (Zehir, et al., 2015). Therefore, the development of entrepreneurial orientation (EO) is
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43 a firm level concept which refers to a firm’s strategic orientation, acquiring specific
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entrepreneurial aspects of decision-making styles, practice and methods (Li, et al., 2009;
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46 Lumpkin & Dess, 1996). EO is rooted in the notion that specific management philosophies and
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48 strategy making processes together represent an organizing structure through which knowledge
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50 is combined and embodied in new products, processes and operational activities (Gupta & Batra,
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2016; Wiklund & Shepherd, 2005).
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54 Conceptually speaking, EO should lead to superior performance (Covin & Lumpkin, 2011;
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56 Edmond & Wiklund, 2010; Gupta & Batra, 2016; Shan, et al., 2016; Tang & Tang, 2012) i.e.
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58 manufacturing SMEs with strong EO will perform better than those who do not adopt EO.
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Journal of Manufacturing Technology Management Page 2 of 32
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Entrepreneurial success mainly depends upon action, attitude, commitment, knowledge and
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5 experience of top management (Azyan, et al., 2017) who understand quality management
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7 practices to be a staged implementation, which they call the ‘journey’, with a belief that the
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9 proper execution of quality management system will yield fruitful results in operational as well
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as business performance in a long run (Sahoo & Yadav, 2017). While there are many successes
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12 and there are also many failures being reported in scholarly articles (George, 2011; Li, et al.,
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14 2005; Rauch, et al., 2009; Smart & Conant, 1994). The problem of not achieving the desired
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16 performance through EO is due to lack of other strategies and practices (Al-Dhaafri, et al., 2016).
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18 Our perspective is that, while EO determines specific strategic decisions and resource allocations
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19 in organizations (Edmond & Wiklund, 2010), effective actualization of EO requires alignment
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21 with operational context (Gupta & Batra, 2016; Prajogo & Sohal, 2006). For example, the
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23 entrepreneurial vision, capabilities and activities, alone, will not be enough to achieve success,
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25 unless there is a quality management philosophy in the organization (Al-Dhaafri, et al., 2016).
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With more and more manufacturing firms striving to remain competitive, the concepts and
28 practices of quality management have received increased attention by Indian manufacturing
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30 sector (Basu & Bhola, 2015). Under the pressure of present global competitive environment, for
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32 a manufacturing firm, it is being more difficult to exceed their rivals and outperform. In order to
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34 perform better than rivals, firms should gain competitive advantage by adopting quality
35 management practices. With ever increasing demand on manufacturing small and medium sized
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37 firms on quality, price and delivery, the most effective way to enhance the confidence of
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39 customers is through a structured certified quality management system (Pearson, 2015). Within a
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41 production setup, entrepreneurial competence, vision and culture influence the decision-oriented
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readiness of embarking on TQM strategy for finding the balance between quality, cost and
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44 delivery (Shokri, et al., 2016) in a continuous-breakthrough improvement approach (Assarlind, et

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al., 2013). These decisions typically relate to the overall configuration of the manufacturing-
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48 operation systems in terms of people, investment and other resources, business processes and
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50 technology, as well as work routines and organizational culture (Jagoda & Kiridena, 2015).
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51 Hence, quality management practices can help small-medium business entrepreneurs and
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53 managers to manage their organizations in the interest of improving the operational performance
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55 and production efficiency to accomplish world class manufacturing status (Konecny & Thun,
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57 2011).
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Compared to large organizations, SMEs have been slow to adopt TQM (Ghobadian &
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5 Gallear, 1996; Majumdar & Manohar, 2016), without sufficient conviction, as they consider
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7 implementation of the quality management system to be a daunting and expensive prospect, with
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9 high on-going operational costs (Pearson, 2015). Owner-managers of Indian SMEs often do not
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have enough managerial expertise and organizational capabilities which implies poor strategic
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12 business planning and human resources management resulting in reluctance in adopting TQM
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14 (Majumdar & Manohar, 2016). Lack of product quality supplied by such SMEs could adversely
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16 affect their competitive ability, which in turn would also adversely affect the entire
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18 manufacturing supply chain as they are highly flexible and responsive suppliers to large firms,
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19 customers of large firms and suppliers to end-user customers in their own right (Aoki, 2008;
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21 Kumar, et al., 2014). Quality management adoption in SMEs, therefore may be crucial so as to
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23 facilitate the strong entrepreneurial cultures in SMEs, by enabling them to better understand the
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25 technical aspect of superior grade manufacturing practices and benchmark their progress.
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However, based upon current production system of individual manufacturing SMEs,
28 implementing a quality management system could be low cost and low maintenance with little
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30 documentation needed (Pearson, 2015), providing scope for significant business improvement. In
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32 practice, TQM has generated positive results in many manufacturing firms (Kober, et al., 2012;
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34 Konecny & Thun, 2011; Prajogo & Hong, 2008). A small-medium sized manufacturing firm
35 with effective quality management system is expected to be more efficient in using its resources
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37 (Psomas, et al., 2013) than the firm without an effective management system (Bell & Omachonu,
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39 2011). Therefore, in an effort to address the present fierce competition and implement best
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41 practices in the manufacturing sector, SMEs need to consistently transfer EO into feasible
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strategic activities to fulfill the firm’s objectives and achieve superior performance by focusing
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44 attention on the implementation of quality management practices to meet the requirement of

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quality demanding customers. Since quality management is a condition inherent in domain of
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48 manufacturing entrepreneurship which reflects a firm’s ability to deliver quality products, it
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50 would be imperative to examine the ability of TQM to strengthen the effect of EO on firm
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51 performance.
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54 Given the importance of quality management practices, more exploration into the EO-TQM-
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56 performance relationship is needed to provide further theoretical insights and practical guidance.
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Previous studies have paid little or no attention to indirect effects of quality management
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practices in their examination of the EO-performance relationship, particularly in the context of
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5 manufacturing sector. But because the robustness of direct relationship between EO and
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7 performance is unclear, it is more desirable to have a better understanding of indirect effects of
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9 TQM affecting EO-performance relationship. We focus on TQM practices as potential mediators
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on their critical role in transmitting EO into real performance outcomes. By exploring the
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12 intersection between EO and TQM, this study represents cross-disciplinary research between
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14 entrepreneurship and operation management practices, which could potentially lead to new
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16 insights and tangible benefits for both theory and practices.
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19 2. LITERATURE REVIEW AND HYPOTHESES
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On a paper on SMEs, it is also useful to examine how SMEs are defined. SMEs in both
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developed and developing economies are defined by a number of factors and criteria, such as
25 location, size, age, structure, organization, number of employees, sales volume, worth of assets,
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27 ownership through innovation and technology (Rahman, 2001). Indian manufacturing sector are
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classified by worth of assets, based on their investment in plant and machinery (original cost
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31 excluding land and building and the items specified by the Ministry of Small Scale Industries).
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32 Enterprises with investment between twenty-five lakh rupees and five crore rupees are
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34 categorized as small enterprises, while the enterprises with investment between five crore and ten
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36 crore rupees are categorized as medium enterprises. Indian SMEs contribution to the India’s
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38 GDP is about 22 percent, with a share of almost 40 to 45 percent manufactured output and
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exports (Ministry of MSMEs,Gov. of India, 2016). Hence, SMEs are very important within
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41 India’s economic structure, but they are facing significant challenges as present global
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43 manufacturing environment is getting increasingly competitive than ever before.
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In today’s sharp business competition, firms are continuously looking for strategies to
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47 improve firm’s performance and gain competitive advantage. EO represents an organizational
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49 phenomenon that reflects a managerial capability by which firms embark on proactive and
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51 aggressive initiatives to alter the competitive scene to their advantage (Atuahene-Gima & Ko,
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53 2001; Avlonitis & Salavou, 2007). Entrepreneurial attitudes and behaviors are critical for
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54 manufacturing SMEs to facilitate the utilization of TQM strategy to enhance small and medium
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56 sized firm’s market focus, manufacturing productivity, human resource management practices
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and competitive advantage creation (Demirbag, et al., 2006; Ebrahimi & Sadeghi, 2013;
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5 Rahman, 2001). For the purpose of achieving a better understanding of firm performance, small
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7 and medium sized business manufacturing firm should attempt to link EO with TQM. Moreover,
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9 TQM and EO can be considered as intangible resources and capabilities that lead firms to
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achieve competitive advantage (Abdi, et al., 2008; Al-Dhaafri, et al., 2016; Runyan, et al., 2006).
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12 With respect to various aspects of above thematic discussion, the literature review is presented in
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14 three sections. The first section deals with the relationship between EO and firm performance.
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16 The second section deals with the relationship between TQM and firm performance as this
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18 provides a basis for understanding the interrelationships between the EO, TQM and firm
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19 performance, that will follow the second section. Also, we have introduced our hypotheses
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21 regarding direct and mediating effects in these sections.
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24 2.1 ENTREPRENEURIAL ORIENTATION AND FIRM PERFORMANCE
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In the past four decades, EO has become a central concept in the entrepreneurship domain
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28 (Covin, et al., 2006; Gupta & Batra, 2016; Jiang, et al., 2016; Lumpkin & Dess, 1996; Miller,
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1983; Wiklund & Shepherd, 2003). The importance of entrepreneurial orientation to the survival
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31 and performance of firms has been acknowledged in several entrepreneurship literature, that
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33 focuses on understanding the relationship between EO and organizational performance because
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35 of the belief that firms with stronger EO perform much better that those that do not adopt an EO
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37 (Covin & Slevin, 1986; Hult, et al., 2003; Shan, et al., 2016; Tat, et al., 2007; Wiklund &
38 Shepherd, 2003; Wiklund & Shepherd, 2005). Firms with high levels of EO tend to constantly
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40 scan and monitor their operating environment in order to find new opportunities and strengthen
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42 their competitive positions (Covin & Miles, 1999; Keh, et al., 2007). In scholarly literature,
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44 many researchers have focused on examining the entrepreneurial traits and activities and their
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positive effect on performance outcomes (Lumpkin & Dess, 2001). EO as a process that explains
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47 the content of entrepreneurship, is the demonstration of the organization’s innovativeness,
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49 proactiveness and risk-taking (Al-Dhaafri, et al., 2016; Covin & Slevin, 1989; Miller, 1983). EO
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51 represents how a firm operates rather than what it does (Lumpkin & Dess, 1996). EO describes
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firm level processes of strategic-making that supports the organization’s entrepreneurial actions
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54 and decisions (Al-Dhaafri, et al., 2016; Wiklund & Shepherd, 2003). Entrepreneurial orientation
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56 involves a willingness to innovate, search for risks, take self-directed actions, and be more
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proactive and aggressive than competitors toward new marketplace opportunities (Covin &
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5 Slevin, 1989; Jiang, et al., 2016; Li, et al., 2009; Lumpkin & Dess, 1996; Miller, 1983; Wiklund
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7 & Shepherd, 2005). Hence EO can be viewed as the entrepreneurial strategy-making process that
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9 concerns the “methods, practices and decision-making styles” and the “intentions and actions of
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key players functioning in a dynamic generative process” (Lumpkin & Dess, 1996).
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12 Accordingly, EO can partly explain managerial strategic behaviors that allows firm to outpace
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14 the competition by being receptive to innovations, tolerant to risk, and highly proactive to market
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16 opportunities (Jiang, et al., 2016; Matsuno, et al., 2002; Wiklund & Shepherd, 2003). Therefore,
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18 from comprehensive review of literature, we can conclude that EO has been operationalized
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19 through five dimensions namely: innovativeness, pro-activeness, risk taking, autonomy and
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21 competitive aggressiveness. Thus, entrepreneurial orientation is essential for manufacturing
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23 firms to discover new entrepreneurial opportunities and compete with other firms. If small
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25 businesses have more aptitude for innovativeness, risk-taking, proactiveness, competitive
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aggressiveness and autonomy, they will gain greater competitive advantage and accomplish
28 higher firm performance. These argument lead to the following hypothesis:
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31 Hypothesis 1: Entrepreneurial orientation (EO) positively affects firm performance (FP).
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33 2.2 TOTAL QUALITY MANAGEMENT AND FIRM PERFORMANCE
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36 In operation management literature, firm performance reflects an operations system’s

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capacity and capability to support the chosen competitive priorities of an organization such as
39 product or service price, quality and delivery time (Jagoda & Kiridena, 2015). On the other hand,
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41 quality management is a concept as old as the industry itself. Total quality management has been
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43 widely adopted by firms in the last 50 years (Jayaram, et al., 2010) and there is a mixed support
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45 for the influence of TQM on firm performance relationship. In TQM research literature, most of
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46 firms claims positive relationship between the TQM improvement program and performance
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48 (Al-Dhaafri, et al., 2016; Bou & Beltrán, 2005; Curkovic, et al., 2000; Konecny & Thun, 2011;
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50 Prajogo & Hong, 2008; Reed, et al., 1996; Sadikoglu & Zehir, 2010; Samson & Terziovski,
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52 1999), and yet some firm also report less than optimal results (Hendricks & Singhal, 2001;
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Kannan & Tan, 2005; Powell, 1995; Sila, 2007; Sousa & Voss, 2008; Yang, et al., 2009). Total
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55 quality management (TQM) is a philosophy mainly dominated by large companies (Yosuf &
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57 Aspinwall, 2000) but the fear of losing contracts from large companies prompts SMEs to bring
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quality into their system (Singh, et al., 2008). TQM has been defined as a holistic approach and a
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5 management philosophy that seeks continuous improvement in all the organizational functions
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7 and operations to produce and deliver products and services that satisfy the customer’s needs and
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9 meet their expectations (Al-Dhaafri, et al., 2016; Demirbag, et al., 2006). Irrespective of how it
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is perceived in large firms, the concept of TQM has unarguably been fairly discussed by very
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12 few researchers in the context of SMEs in the past few decades. Many studies found that TQM
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14 could be adopted by SMEs with considerable success (Ghobadian & Gallear, 1996; Herzallah, et
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16 al., 2014; Kumar & Antony, 2008; O’Neill, et al., 2016; Quazi & Padibjo, 1998; Rahman, 2001;
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18 Temtime & Solomon, 2002; Yusof & Aspinwall, 1999). However, other studies have also
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19 reported adverse impact of TQM on SMEs performance (Kober, et al., 2012; Prajogo & Brown,
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21 2006). These inconsistent findings in the literature call for further scholarly examination of the
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23 relationship between TQM and firm performance in the context of SMEs, which leads to the
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25 following hypothesis:
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27 Hypothesis 2: Total quality management (TQM) positively affects firm performance (FP).
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30 2.3 EO, TQM AND FIRM PERFORMANCE RELATIONSHIP
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32 The expectation is that as the entrepreneurship paradigm expands, organizations, per se,
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34 behave in entrepreneurial manners (Jennings & Lumpkin, 1989). EO reflect these manners
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36 (Lumpkin & Dess, 1996) which is a salient strategy-making and decision-making process (Dess,
37 et al., 1997; Lyon, et al., 2000). Empirically, many studies supported the significant positive
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39 impact of TQM (Agus, 2005; Arumugam, et al., 2008; Demirbag, et al., 2006; Li, et al., 2003;
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41 Sila, 2007) and EO (Covin & Slevin, 1991; George, 2011; Keh, et al., 2007; Lumpkin & Dess,
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43 1996; Shan, et al., 2016; Wiklund & Shepherd, 2003) on the firm performance. Surprisingly, few
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research studies focus on combining the key concepts of EO and TQM. TQM and EO are
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46 important strategies and practices for organizations to achieve competitive advantage (Al-
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48 Dhaafri, et al., 2016; Reed, et al., 2000; Weerawardena & Coote, 2001). Several empirical
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50 studies have indicated that the success of any quality improvement programme depends much
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upon top management commitment and leadership (Ebrahimi & Sadeghi, 2013; Hasan & Kerr,
53 2003; Sharma & Gadenne, 2008; Wilson & Collier, 2000). Adaptation to total quality
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55 management by manufacturing firms, through aspects of entrepreneurship and successful
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57 leadership is of major concern for all enterprises, especially for small and medium-sized firms,
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that are dominant in most Asian economies. Therefore, EO profiles of firm adopting strategic
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5 quality improvement initiatives such as TQM may be crucial to become the subject of
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7 investigation, in order to provide additional explanations of how small manufacturing firms
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9 should be driven by such entrepreneurial based strategy implementation initiatives with an
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objective to seize an opportunity in the highly competitive market. Hence the following
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12 hypothesis is proposed to be empirically tested:
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15 Hypothesis 3: Entrepreneurial orientation (EO) positively affects Total quality management
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(TQM).
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19 Although the literature on entrepreneurship includes a rich spectrum of works, there is no
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21 consensus on the EO-performance relationship. Some researchers made longitudinal researches
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and found that the positive influence of EO on performance increases over time (Gupta & Batra,
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24 2016; Wiklund, 2006; Zahra & Covin, 1995; Zehir, et al., 2015). On the other hand, some studies
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26 were unable to find any significant relationship between EO and performance (George, 2011;
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28 George, et al., 2001; Li, et al., 2005; Rauch, et al., 2009). Thus, there is a variation in previous
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30 research findings. Substantiating this argument, some researchers have suggested that the
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relationship between EO and firm performance may be more complex than a simple effect
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33 (Jalali, et al., 2013; Li, et al., 2009; Lumpkin & Dess, 1996; Wiklund & Shepherd, 2005).
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35 Supporting this argument, several internal and external factors, for e.g. innovation management
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37 (Avlonitis & Salavou, 2007; Sadikoglu & Zehir, 2010; Shan, et al., 2016), strategic alliance
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(Jiang, et al., 2016), customer capital (Jalali, et al., 2013), marketing information (Keh, et al.,
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40 2007), environment and industry life-cycle (Lumpkin & Dess, 2001), knowledge management
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42 (Li, et al., 2009; Wiklund & Shepherd, 2003), human resource management (Messersmith &
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44 Wales, 2011), intra- and extra industry social capital (Stam & Elfring, 2008), organizational
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strategy (Tang & Tang, 2012; Zehir, et al., 2015), total quality management (Al-Dhaafri, et al.,
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47 2016; Calvo-Mora, et al., 2014; Prajogo & Sohal, 2006) etc. were found to mediate the EO-
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49 performance relationship in entrepreneurship literature. Moving a step further, great importance
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51 has been assigned to technological innovation management (Avlonitis & Salavou, 2007), which
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53 is positively associated with quality management practices (Prajogo & Sohal, 2006;
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Schniederjans & Schniederjans, 2015). Prajogo and Sohal (2006) via a structural equation model,
56 analyzed the mediating effect of TQM practices on the relationship between technology/R&D
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management and performance, where they found TQM shows a strong predictive power against
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5 quality performance. They have also argued that the ability of a firm to capitalize on the co-
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7 alignment of TQM and technology/R&D management will determine its competitiveness and
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9 sustainability of its performance over time. The mediation of TQM technical factor as strategic
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source between TQM social factors (Leadership, culture and human resources) and firm
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12 performance was also examined by Calvo-Mora et al. (2014), where they found a partial
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14 mediation. Although, a study done by Al-Dhaafri et al. (2016) have examined how quality
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16 management practice in Dubai police department impacts entrepreneurial process and how the
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18 entrepreneurial process impacts the organization performance, where they also found a partial
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19 mediation of TQM in the relationship between EO and firm performance. So, based upon the
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21 above discussion and evidences from previous researches, we have reasonably considered TQM
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23 as a potential mediator between EO-firm performance relationship. Also, as noted previously,
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25 Hypothesis 2 states that TQM will be positively related to firm performance and hypothesis 3
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states that EO will be positively related to TQM. These two hypotheses link EO with TQM, and
28 TQM with firm performance. This means that relationship between EO and firm performance is
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30 hypothesized to be indirect. Therefore, TQM plays the role of intermediate variable to mediate
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32 the relationship between independent variables of EO and dependent variable of firm

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34 performance. These discussions lead to examine the mediating effect of TQM between EO and
35 firm performance by proposing the following hypotheses:
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38 Hypothesis 4: Total quality management (TQM) practices mediates the relationship between
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40 entrepreneurial orientation (EO) and firm performance (FP).

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42 Based on the above discussion, this study attempts to examine the relationships between
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44 entrepreneurial orientation (EO), total quality management (TQM) and firm’s performance (FP)
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in the context of Indian SMEs. The conceptual model is shown in figure 1. The contention of
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47 this model is that total quality management practices mediates the effect of EO on small
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49 businesses firm’s performance.
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52 [Insert figure 1]
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55 3. RESEARCH INSTRUMENT AND DATA COLLECTION
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3.1 SAMPLE AND DATA COLLECTION

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The focal point of this research is on SMEs, which constitute the vast majority of enterprises
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5 in India, as in most Asian countries. The pool of business owners contacted was selected
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7 randomly from different industries in India. The sample population of the research study focused
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9 upon small and medium sized business firms with fewer than 250 employees, where the
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likelihood of strategic influence on the company by the business owner was higher. Survey data
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12 were collected from 121 small and medium sized manufacturing firms in India, referring to
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14 database, that was obtained from the 2016 SME business directory (Manufacturing) of Small &
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16 Medium Business Development Chamber of India. Snowball sampling technique was also used
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18 for identification of respondents. The data were collected by visiting the manufacturing firms and
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19 interviewing entrepreneurs and managers at different organizational levels. Table 1 shows
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21 general background of the respondent companies. Responses on the survey questionnaire were
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23 collected personally through verbal interaction and personal meeting with the respondent,
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25 explaining them the context of present research work, its significance and to clarify any
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doubts/queries, such as to facilitate comprehensive and clear-cut responses. These data from 121
28 SMEs were analyzed through SPSS statistical package program and hypotheses were tested
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30 through AMOS 20.0.
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[Insert table 1]
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35 3.2 MEASURES – VALIDITY AND RELIABILITY
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Measurements of variables have been employed from the previous literature. Entrepreneurial
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39 orientation (EO) scales has been adopted from Hughes and Morgan (2007) and Y. H. Li et al.
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41 (2009). Similarly, measurement for total quality management (TQM) and firm performance (FP)
42
43 has been adopted from Jayaram et al. (2010). Likert scale with five-point scale that ranged from
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1 =” strongly disagree”, through 3 =” neutral”, to 5 =” strongly agree” was used to measure the
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46 responses. The validation process for the survey instruments was completed in three steps:
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48 content validity, construct validity and reliability (Carmines & Zeller, 1979; Chavez, et al., 2015;
49
50 O'Leary-Kelly & Vokurka, 1998; Zhou & Benton, 2007). For content validity, a draft
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52 questionnaire was reviewed to enhance clarity by academic experts from entrepreneurship and
53 operational management domain. This was followed by a pilot test to ensure high level of
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55 content validity.
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Confirmatory factor analysis was carried to reduce each set of measured variables into the
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5 appropriate construct of interest. Principal components analysis with varimax rotation was used
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7 to test the uni-dimensionality of the constructs. In the interests of convergent and discriminant
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9 validity, only items that had a factor loading of at least 0.50 were retained (Bagozzi & Yi, 1988;
10
11
Kannan & Tan, 2005), i.e. the items with factor loading less than 0.50 were omitted. The EO
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12 scale composed of five factors: innovativeness, proactiveness, risk taking, competitive
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14 aggressiveness and autonomy, that explains 61.3% of total variance (table 2). Five TQM factors
15
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16 namely, cross-functional product design, process quality management, quality empowerment,
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18 organization-wide employee training and quality information usage, explained 66.4 % of total
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19 variance (table 3). Firm performance factors reflected by design performance, process quality,
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21 product quality and customer satisfaction, explains 64.4 % of total variance (table 4). During the
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22
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23 analysis, two questions i.e. item PM6 from total quality management construct and item CS1
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25 from firm performance construct were deleted (table 5), due to weak factor loading.
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27 In our second approach, we used Cronbach’s coefficient α to evaluate the reliability of the
28
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29 construct. The α scores (table 5) for each construct range from 0.706 to 0.843. Since all α scores
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31 were considerably higher than the acceptable level of 0.70 (McKone, et al., 2001; Nunnaly,
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1978), all scales exhibit a high degree of reliability. In the validity test results shown in table 5,
34 the KMO values of each construct are varying from 0.660 to 0.777, all exceeding the minimum
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36 score of 0.50 (So & Sun, 2010), demonstrating that all these constructs are valid and reliable.
37
38
39 4. ANALYSIS AND RESULTS
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Table 6 contains a correlation matrix of all the constructs to illustrate the inter-relationships
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among these constructs. In this table, there were significant positive correlations among all EO,
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45 TQM and firm performance constructs. Nevertheless, these are only bivariate relationship. To
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47 test the hypothesized relationship between the various constructs, structural equation modeling
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49 (SEM) was used. SEM estimates were generated through AMOS 20.0 with maximum likelihood
50 estimation method. Each stage of our analysis resulted into a new model, the result of which is
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52 summarized in table 7. At each stage of the model testing process, we verified that the
53
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54 assumptions required for SEM were met. For SEM model evaluation, we used several standard
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56 model evaluation criteria. For assessment of overall model quality, one common test of model fit
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is the chi-square value. The chi-square value should be divided by the degrees of freedom and be
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less than 2.5 (Baumgartner & Homburg, 1996; Konecny & Thun, 2011) indicates acceptable fit.
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5 This is fulfilled by all models having no values higher than 2.34. Also, all the models are good-
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7 fitting model as most considered indices of the model fit are above the threshold recommended
8
9 values by some authors (Konecny & Thun, 2011; McKone, et al., 2001). With regard to the
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considered fit indices, it is explicitly mentioned in the literature that not all of the fit criteria have
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12 to be invariably fulfilled by the models (Konecny & Thun, 2011). In particular, the fact that
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14 single local fit criteria fall slightly below the threshold value, should not result in a rejection of a
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16 model (Baumgartner & Homburg, 1996). Hence all indices of goodness-of-fit of structural
17
18 equation modelling suggest acceptable fit for all our proposed models for hypothesis testing.
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20 [Insert table 7]
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The goal of hypotheses H1-H3 was to see if there is direct relationship between EO, TQM
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24 and firm performance constructs, the result of which is summarized in table 8. First, we discuss
25
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26 our test for hypothesis H1 i.e. direct relationship between EO and firm performance. The fit of
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28 the model without TQM was good, with χ2/df = 2.12, GFI = 0.93, NFI = 0.91, CFI = 0.94, RMR
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29
30 = 0.06 and RMSEA = 0.05. As hypothesized, there is a positive relationship between
31
entrepreneurial orientation (EO) and firm performance. Therefore, H1 (β = 0.740, t =10.007, p <
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33 0.001) is supported. Result uphold the proposition that the two concepts are indeed related and,
34
35 therefore, support the conclusions, which postulate that EO is important to enhance firm
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36
37 performance. Next, we tested hypotheses H2 i.e. direct relationship between TQM and firm
38
39
performance without EO in the model. Model 2 with an acceptable model fit (χ2/df = 1.93, GFI =
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40 0.91, NFI = 0.90, CFI = 0.93, RMR = 0.04 and RMSEA = 0.05), permits TQM to positively
41
42 influence firm performance. As scholars, have postulated, small and medium sized
43
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44 manufacturing firms may be served better by adopting TQM practices, which was found to be
45
significantly enhancing firm performance. Therefore, H2 (β = 0.803, t =14.923, p < 0.001) is
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46
47 supported. Next, we tested hypotheses H3 i.e. direct relationship between EO and TQM without
48
49 firm performance in the model. The fit of the model 3 is good, despite some of the model fit
50
indices (χ2/df = 2.34, GFI = 0.89, NFI = 0.91, CFI = 0.92, RMR = 0.07 and RMSEA = 0.07) are
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52
53 negligibly outside the good-fitting model values. Results show that EO has significant and
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55
positive relationship (β = 0.974, t =21.167, p < 0.001) with TQM. Therefore, Hypothesis H3 is
56 supported. The finding may add to understanding that the positive effect of EO on successful
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adoption of TQM practices is indeed necessary and may be further linked to positive effect on
4
5 firm performance
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7
8 [Insert table 8]
9
10 For the purpose of examining the mediating effect of TQM on the relationship between EO
11
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12 and firm performance, the result shown in table 9 showed that, TQM has partial mediating effect
13
14 on firm performance. We tested three conditions using AMOS analysis to claim mediation is
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occurring (Little, et al., 2007). First, we examined the relationship between EO and TQM to
16
17 determine if they had significant relationship. Results show that EO has significant positive
18
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19 relation with TQM (β = 1.177, p < 0.001). Thus, the first condition for mediating effect is met.
20
21 Then, the relationship between the independent and dependent variable show that TQM has
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positive relationship with firm performance (β = 0.681, p < 0.001), also supporting the second
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23
24 condition. In the third condition, EO has significantly positive relationship with firm
25
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26 performance (β = 0.494, p < 0.001). It has been noted from the analysis (table 7) that the
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28 significance of direct effect of EO on FP has reduced when the indirect effect of EO through
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30 TQM on firm performance is included in the total effect model. With regard to hypothesis 4, this
31
model demonstrates that TQM mediates the relationship between EO and firm performance (total
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33 effect = 1.065, indirect effect=0.571, direct effect =0.494, p<0.01). In the case, the indirect
34
35 effect is significant, and the direct path remains significant (although reduced) in the presence of
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37 TQM in the model. Although the direct effect remains significant, it comprises only 46.3 % of
38
39
the total effect, with the remaining 53.7% occurring though the mediating variable of TQM.
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40 Hence, from these results, TQM is regarded as partial mediator in the relationship between EO
41
42 and firm performance. Overall, these results support hypotheses 4.
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45
[Insert table 9]
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47
48 5. DISCUSSIONS AND CONCLUSIONS
49
50 This research study has been undertaken through rigorous primary data collection in Indian
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52 manufacturing SMEs sector and has responded to the call for more empirical work to be done in
53
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54 understanding the relationship between TQM, EO and firm performance. This research provides
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new insights not only about the direct impact of EO, but also indirect impact of EO on firm
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performance of manufacturing SMEs via the mediating effect of TQM. Overall, these findings
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3
contribute to a better understanding of entrepreneurial orientation and its impact on firm
4
5 performance. For most entrepreneurs/managers of SMEs, achieving superior growth from
6
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7 entrepreneurial behaviors may be a function of their ability to closely align their operational
8
9 strategy. Quality management approach, self-assessment and benchmarking can be taken by
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entrepreneurs & managers of manufacturing SMEs for a higher firm performance in industrial
an
12 setting.
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15 Our study contributes to theoretical development in several ways. As reported in literature
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review section, the empirical evidence supporting the relationship between EO and firm
18
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performance has been mixed. As such this study has sought to test a potentially mediating
19
20 variable that could explain the differences in findings; namely TQM. This study therefore
21
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22 complements the published empirical studies (Al-Dhaafri, et al., 2016; Calvo-Mora, et al., 2014;
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24 Prajogo & Sohal, 2006) by illuminating TQM’s role in EO-firm performance relationship. TQM
25
is a catalyst that shapes the strategy choice of superior grade manufacturing realized through
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27 entrepreneurial responsive actions. Strong EO diffused with TQM strategy enables SMEs to
28
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29 explore different patterns of business and growth conditions and prospects that are likely to
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31 induce new strategic initiatives that leads manufacturing SMEs to gain competitive advantage
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33
and maintain a stronger position relative to competition. Also, prior research has often examined
34 EO-TQM-performance relationship through the prism of developed economies, and particularly
35
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36 there were little or no studies that focusses on small-medium sized manufacturing enterprises in
37
38 the context of developing economy like India. With a view to fill this knowledge void, this study
39
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40 contributes to theoretical body of knowledge in the field of entrepreneurship in the context of

41 emerging economies. The study also augments current research on strategic and operations
42
43 management by including manufacturing SMEs in emerging markets like India.
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The study also provides important implication for entrepreneurial practice. First, our study
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47 calls on entrepreneurs & managers of manufacturing SMEs to be aware of the importance of
48
49 quality management practices i.e. SMEs must know themselves and what TQM really means for
50
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51 them before they start the TQM journey. Compared to large organizations, SMEs have flat
52
53 organizational structure with lack of bureaucracy and this has a positive impact on flexibility,
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54
55
adaptability and rapidity in responding to the changing TQM environment (Majumdar &
56 Manohar, 2016) and building a supportive culture (Al-Dhaafri, et al., 2016). Moreover, the
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3
relationship between quality management practices, entrepreneurial strategy and performance
4
5 can change and evolve over time, especially when the setting is a dynamic one involving a vast
6
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7 array of behavioral, organizational and environmental factors that might all influence the
8
9 relationship (Yunis, et al., 2012). Since resources are scarce, manufacturing small-medium sized
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firms, therefore should carefully design strategic plans and nurture an entrepreneurial climate
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12 and leadership to facilitate quality management practices. As for TQM designers and
13
14 practitioners, understanding the links between TQM and various organizational strategies and
15
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16 core processes could be a mission critical for designing TQM projects that are well aligned to the
17
18 culture of the organization as well as strategic management processes (Yunis, et al., 2012).
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20 Apart from its managerial implications, the empirical evidence reported here, could be used
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22 nationwide by policy-makers to design support programs and initiatives of entrepreneurship and
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24 quality management for manufacturing SMEs, that widens these key customer-oriented concepts
25
beyond the notion of traditional cost-cutting manufacturing practices. The only way a developing
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27 economy can improve its trade activities and sustain it for further development, is to improve the
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29 quality of its product and services (Temtime & Solomon, 2002). Therefore, mechanisms that
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31 equip more and more Indian SMEs to sustain a more proactive orientation along with relevant
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training on enhancing uniqueness in product offering through quality management, could be set-
34 up by establishing a national level institution as a knowledge-exchange community of such
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36 manufacturing entrepreneurs. Taking it further, they could create an ecosystem to disseminate

37
38 best practices through technical consultation and financial support to small and medium sized
39
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40 firms, as there is a need to raise the global competitiveness of the Indian manufacturing sector
41 which is a key imperative for the country’s long-term growth.
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6. LIMITATIONS AND FUTURE RESEARCH DIRECTIONS
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47 Despite of its important contributions, our results must be viewed in the light of the study’s
48
49 limitations. Our sample includes only small and medium manufacturing businesses. The work
50 carried out within our study might also be applicable to the service sector. This specific research
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52 study could also be extended to further analysis of two different sectors of manufacturing SMES
53
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54 or between two different countries and with a triangulation methodology, which enables both a
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56 quantitative and qualitative approach towards data collection. However, other mediators can also
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be considered for further research on EO-performance relationship. It is clear that this work can
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be carried out on a much larger scale in the future to be generalized to a wider population in
4
5 terms of increasing number of case studies, sectors and also broadening the reach to different
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7 countries in the Asian region. Also, our data are cross-sectional, longitudinal data could be
8
9 helpful to test the true causality of our research model.
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11
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46 Lyon, D. W., Lumpkin, G. & Dess, G. G., 2000. Enhancing entrepreneurial orientation research:
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51 Majumdar, J. P. & Manohar, B. M., 2016. Why Indian manufacturing SMEs are still reluctant in adopting
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55 Matsuno, K., Mentzer, J. T. & Özsomer, A., 2002. The effects of entrepreneurial proclivity and market
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24 O’Neill, P., Sohal, A. & Teng, C. W., 2016. Quality management approaches and their impact on firms ‫׳‬
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8 Rahman, S.-U., 2001. Total quality management practices and business outcome: Evidence from small
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19 Reed, R., Lemak, D. J. & Montgomery, J. C., 1996. Beyond process: TQM content and firm performance.
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22 Runyan, R., Huddlestone, P. & Swinney, J., 2006. Entrepreneurial orientation and social capital as small
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26 Sadikoglu, E. & Zehir, C., 2010. Investigating the effects of innovation and employee performance on the
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3 Sila, I., 2007. Examining the effects of contextual factors on TQM and performance through the lens of
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6
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10 Smart, D. T. & Conant, J. S., 1994. Entrepreneurial orientation (EO), distinctive marketing competencies
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13 So, S. & Sun, H., 2010. Supplier integration strategy for lean manufacturing adoption in electronic-
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16 Sousa, R. & Voss, C., 2008. Contingency research in operations management practices. Journal of
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19 Stam, W. & Elfring, T., 2008. Entrepreneurial orientation and new venture performance: The moderating
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30 developing economies. The TQM Magazine, 14(3), pp. 181-191.
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32 Wang, C. & Altinay, L., 2012. Social embeddedness, entrepreneurial orientation and firm growth in
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41 Entrepreneurship and the growth of firms, 7(3), pp. 141-155.
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44 performance of small and medium-sized business. Strategic Management Journal, 24(13), pp. 1307-
45 1314.
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47 Wiklund, J. & Shepherd, D., 2005. Entrepreneurial orientation and small business performance : A
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50 Wilson, D. D. & Collier, D. A., 2000. An empirical investigation of Malcom Bridge National quality award
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56 Economics, 120(1), pp. 243-251.
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3 Yosuf, S. & Aspinwall, E., 2000. TQM implementation issues: review and case study. International Journal
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5 of Operations and Production Management , 21(11), pp. 1404-16.
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Yunis, M., Jung, J. & Chen, S., 2012. TQM, strategy and performance : A firm-level analysis. International
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8 Journal of Quality & Reliability Management, 30(6), pp. 690-714.
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10 Yusof, S. M. & Aspinwall, E., 1999. Critical success factors for total quality management implementation
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13 Zahra, S., 1986. A canonical analysis of corporate entrepreneurship antecedants and impact on
14 performance. Academy of management proceedings, 1986(1), pp. 71-75.
15
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16 Zahra, S. A. & Covin, J. G., 1995. Contextual influences on the corporate entrepreneurship - performance
17 analysis : A longitudinal analysis. Journal of Business Venturing, 10(1), pp. 43-58.
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19 Zehir, C., Can, E. & Karaboga, T., 2015. Linking entrepreneurial orientation to firm performance : the role
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of differentiation strategy and innovation performance. Procedia - Social and Behavioral Sciences,
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22 Volume 210, pp. 358-367.
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24 Zhou, K. & Benton, W., 2007. Supply chain practice and information sharing. Journal of Operation
25 Management, 25(6), pp. 1348-1365.
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7 Entrepreneurial Total quality management Firm
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9 Orientation Cross-Functional Product
Performance
10 Design
Innovativeness Design
11
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Risk-taking Process Quality Management Performance
12 Quality Empowerment
Proactiveness Process Quality
13 Organization-wide employee
Competitive Product Quality
14 training
aggressiveness Customer
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Autonomy Quality Information Usage Satisfaction
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22 Figure 1 Research model
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TABLE 1 DEMOGRAPHICS OF THE SAMPLE
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7
8
Sample Sample
9 (%) (%)
10 Respondent Job title Industry Sector
11 President/ COO/Director 18.9 Automotive 9.5
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12
Quality manager 22.8 Electronics parts 16.5
13
14 Production manager 33.1 Electrical parts 11.8
15
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Lean specialist 4.7 Chemical 11.0
16
Consultant 4.7 Packaging 3.9
17
18 Others 15.8 Food 12.6
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19 Polymer products
No. of employees 8.7
20
21 < 50 29.2 Metal components 6.3
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22 50 –100 20.5 Building components 4.7
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23 101–150 Industrial equipment
24
22.8 12.6
25 151–200 11.0 Others 2.4
in
26 > 200 16.5 Ownership type of Firm

27
Firm Sales (In Indian Rupees) 100 % local 65.4
28
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29 < 25 lakhs 11.0 100 % foreign 11.8

30 25 –100 Lakhs 22.8 Joint Venture 22.8
31
1– 5 Crores 47.2
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32 Quality management system certification

33 5–10 Crores 10.2 No certification 39.4
34 > 10 Crores ISO 9001/14001
8.8 60.6
35
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7 TABLE 2 ENTREPRENEURIAL ORIENTATION (EO) - FACTOR ANALYSIS
8
9
10
11 Factor Scale item Factor
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12 loadings
13 Innovativeness I1 - Our firm is creative in its method of operation. 0.70
14
I2 - Our firm seeks out new ways to do things. 0.72
15
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16 I3 - The top managers favor a strong emphasis on R&D, technological 0.88
17 leadership, and innovations.
18
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I4 - Our firm has very many new lines of products/services marketed in the 0.74
19 past 3 years.
20 I5 - Changes in product or service lines have usually been quite dramatic. 0.87
21
Proactiveness P1 - In dealing with competitors, our firm usually initiates actions which 0.76
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22
competitors then respond to.
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23
24 P2 - In dealing with competitors, our firm is very often the first business to 0.79
25 introduce new products/services, administrative techniques, operating
in
26 technologies, etc.
27 P3 - In general, top managers of our firm have strong tendency to be ahead of 0.85
28 others in introducing novel ideas or products.
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29 Risk taking R1 - The term “risk taker” is considered a positive attribute for people in our 0.84
30
business.
31
R2 - People in our business are encouraged to take calculated risks with new 0.81
Te
32
33 ideas.
34 R3 - Our firm emphasizes both exploration and experimentation for 0.88
35 opportunities.
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36 Competitive C1 - Our firm is very aggressive and intensely competitive. 0.90

37 Aggressiveness C2 - In general, our firm takes a bold or aggressive approach when competing. 0.95
38
39 C3 - We try to undo and out-maneuver the competition as best we can. 0.83
no
40 Autonomy A1 - Employees of our firm are permitted to act and think without 0.78
41 interference.
42 A2 - Employees perform jobs that allow them to make and investigate 0.81
43 changes in the way they perform their work tasks.
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44 A3 - Employees of our firm are given freedom to communicate without 0.75

45 interference.
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A4 - Employees have access to all vital information. 0.62
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TABLE 3 TOTAL QUALITY MANAGEMENT (TQM) - FACTOR ANALYSIS
4
5
Factor Scale item Factor
6
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7 loadings
8 Cross- CF1 - At our firm, management at all levels is involved in product quality planning 0.80
9 Functional process.
10 CF2 - At our firm, employees are involved in product quality planning process. 0.82
Product Design
11
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12 CF3 - Suppliers are involved in the product quality planning process. 0.66
13 CF4 - Product quality improvement plan includes all functional areas (marketing, 0.65
14 finance, operations etc.) .
15
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CF5 - Competitive benchmarking is used to develop product quality improvement 0.60
16 plans.
17 CF6 - Customer requirements and expectations of the company’s product are used 0.61
18
ac
in strategic plans and goals during Quality Function Deployment.
19
20 Process PM1 - Causes of scrap and rework are identified. 0.62
21 Quality PM2 - At our firm, corrective action is taken immediately when a quality problem 0.79
t
22 Management is identified.
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23 PM3 - At our firm, key processes are systematic improved to achieve better 0.62
24 product quality and performance.
25 PM4 - At our firm, manufacturing processes are controlled using defect prevention 0.65
in
26 tools (such as Statistical Quality Control)

27
PM5 - At our firm, improvement in quality of products and processes is regularly 0.56
28
monitored using Informative charts & Statistical Process Control.
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30 PM6 - Materials are purchased from suppliers who quality has been formally 0.44
31 certified.
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32 PM7 - Key suppliers have a quality assurance plan or manuals with written 0.64
33 procedures.
34 Quality QE1 - At our firm, Quality improvement teams are used as a major vehicle of 0.81
35 Empowerment improving quality.
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36 QE2 - Our employees inspect their work for defects. 0.62

37
38 QE3 - Our employees have the authority to halt the production process, in case of 0.82
39 production defects/error detected.
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40 QE4 - Independent decision-making by employees is encouraged in the company. 0.67

41 Organization- OT1 - Our human resource programs integrate quality training into employee 0.73
42 wide employee training.
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training OT2 - There is formal quality training program for our employees. 0.75
44
45 OT3 - Our employees are evaluated on continual professional development. 0.80
OT4 - Employees are trained to do more than one job. 0.67
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46
47 Quality QU1 - Information about product performance and quality is collected in order to 0.73
48 identify root causes of problems.
information
49 QU2 - Progress toward achieving quality goals is monitored for most of company’s 0.77
50 usage
product.
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52 QU3 - There are effectively and time methods of communicating quality / 0.82
53 performance goals from management to employees.
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54 QU4 - There are effectively and time methods of communicating quality / 0.79
55 performance problems from employees to management.
56 QU5 - Management gives timely feedback regarding employee’s product or 0.81
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process quality improvement suggestions.

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6 TABLE 4 FIRM PERFORMANCE (FP) - FACTOR ANALYSIS
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7
8
9
10
11
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12 Factor Scale item Factor
13
loadings
14
15 Design DP1 - We have successfully reduced our product development time. 0.66
uf
16 performance DP2 - We have reduced number of components used in our products. 0.68
17 DP3 - New products developed during last 3 years have improved our market share. 0.58
18
ac
19 Process quality PQ1 - Our scrap rate has been reduced over the last 3 years. 0.79
20 PQ2 - Our rework rate has been reduced over the last 3 years. 0.77
21 PQ3 - Our production schedules are consistently met. 0.66
t
22
PQ4 - Inventory has decreased over the last 3 years. 0.70
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23
24 Product PQQ1 - There has been a steady reduction in the product reject rates from the 0.75
25 quality customer during the last 3 years.
PQQ2 - There has been a steady decline in the number of warranty claims during 0.72
in
26
27 the last 3 years.
28 PQQ3 - There has been a steady decline in the number of product litigation claims 0.79
g
29 during the last 3 years.

30 PQQ4 -The firm’s quality program has improved the external product reliability (i.e. 0.75
31
the products are performing as expected (tested) in the hands of the customers).
Te
32
33 Customer CS1 - Customers believe the company’s product or service guarantees are superior 0.48
34 Satisfaction to those of the competition.
35 CS2 - There is an overall high level of customer satisfaction with company’s 0.81
ch
36 products.
37 CS3 - Customer satisfaction ratings have shown steady improvement over the last 3 0.78
38 years.
39 CS4 - The company’s product quality improvement program has decreased the 0.71
no
40 product liability cost.

41 CS5 - The company’s quality improvement program has improved market share. 0.75
42
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9 TABLE 5 RELIABILITY AND VALIDITY ANALYSIS
10
11 Construct Factor/dimension Items Cronbach KMO Notes
an
12 α
13 Innovativeness 5 .841 .705
14 Proactiveness 3 .729 .660
15
uf
Entrepreneurial Risk taking 3 .799 .696
16 Orientation
Competitive Aggressiveness 3 .869 .644
17
18 Autonomy 4 .727 .742
ac
19 Cross-Functional Product Design 6 .785 .777
20 Total Quality Process Quality Management 6 .739 .759 Item PM6 dropped
21 Management Quality Empowerment 4 .711 .721 due to poor factor
t
22 loading
Organization-wide employee training 4 .722 .741
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23
Quality Information Usage 5 .843 .754
24
25 Design performance 3 .725 .673
Firm Process quality 4 .706 .740 Item CS1 dropped due
in
26
27 Performance Product quality 4 .744 .767 to poor factor loading
28 Customer Satisfaction 4 .779 .762
g
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31
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33
34
35
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36
37
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39
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40
41
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TABLE 6 DESCRIPTIVE STATISTICS AND INTER-FACTOR CORRELATIONS
4
5
6
7
8
Measure
Construct
an 1
Entrepreneurial Orientation (EO)
2 3 4 5 6
Total Quality Management (TQM)
7 8 9 10 11
Firm Performance (FP)
12 13 14
uf
Mean 3.72 3.63 3.55 3.69 3.75 3.80 3.78 3.53 3.75 3.69 3.74 3.79 3.72 3.78
9
Standard Deviation 0.70 0.73 0.81 0.79 0.57 0.58 0.54 0.59 0.63 0.71 0.64 0.54 0.60 0.53
10
ac
Number of items 5 4 3 3 4 6 6 4 4 5 3 4 4 4
11
12
13 Correlations
14
15
1.Innovativeness
2.Proactiveness
1
0.561*
tu
1
16
17
18
3.Risk taking
4.Competitive aggressiveness
5.Autonomy
0.428* 0.335*
0.894* 0.466*
0.486* 0.401*
1
rin
0.473*
0.574*
1
0.488* 1
19
20
6.Cross functional product design
7.Process quality management
0.783* 0.499*
0.581* 0.482*
0.261*
0.366*
0.536*
0.480* g
0.298*
0.336*
1
0.694* 1
21
22
23
8.Quality empowerment
9.Employee training
0.547* 0.306*
0.698* 0.604*
0.445*
0.484*
0.566*
0.670*
0.376*
0.475* Te
0.481*
0.562*
0.502*
0.559*
1
0.586* 1
24
25
26
10.Quality information usage
11.Design performance
12.Process quality
0.820* 0.575*
0.546* 0.335*
0.589* 0.404*
0.604*
0.556*
0.578*
0.834*
0.582*
0.561*
0.615*
0.575*
0.622*
0.548*
0.380*
0.539* ch0.577*
0.441*
0.582*
0.562*
0.369*
0.419*
0.727*
0.459*
0.486*
1
0.584*
0.627*
1
0.619* 1
27
28
29
13.Product quality
14.Customer satisfaction
0.508* 0.291*
0.511* 0.473*
0.404*
0.601*
0.520*
0.480*
0.540*
0.539*
0.411*
0.465*
0.519*
0.551* no
0.401*
0.373*
0.451*
0.483*
0.550*
0.603*
0.734*
0.621*
0.643*
0.728*
1
0.602* 1
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* Correlation is significant at the 0.01 level (2-tailed)
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TABLE 7 PARAMETER ESTIMATES AND GOODNESS-OF-FIT OF STRUCTURAL EQUATION MODELS
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Parameter estimates
Model 1:
EO related to FP without
Model 2:
Models
TQM related to FP without

Model 3:
EO related to TQM without
Model 4:
EO related to FP with
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uf TQM in the model EO in the model FP in the model indirect effect through
TQM
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Path coefficients (β)
ac
tu
EO FP 0.740 0.494
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15
TQM FP 0.803 0.681
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EO TQM
Evaluation criteria
rin 0.974 1.177
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Indices
χ /df
Threshold
x<2.5 2.12
g 1.93 2.34 1.85
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22
23
GFI
NFI
x>0.9
x>0.9
0.93
0.91
Te
0.91
0.90
0.89
0.91
0.92
0.93
ch
24 CFI x>0.9 0.94 0.93 0.92 0.96
25 RMR X<0.05 0.06 0.04 0.07 0.05
26 RMSEA X<0.08 0.05 0.05 0.07 0.06
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TABLE 8 STANDARDIZED PATH ESTIMATES: RESULTS OF HYPOTHESIS 1-3 (DIRECT RELATIONSHIP)
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Hypothesis Direct Hypothesis Path t- value p-value Decision
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7 No. effect Coefficient
8 β
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H1
H2
EO FP
TQM FP uf Entrepreneurial orientation positively affects firm performance
Total quality management positively affects firm performance
0.740*
0.803*
10.007
14.923
0.000
0.000
Supported
Supported
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12
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H3 EO TQM
ac
Entrepreneurial orientation positively affects total quality management
*significant at p<0.001 (two-tailed test)
0.974* 21.167 0.000 Supported
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tu
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TABLE 9 STANDARDIZED PATH ESTIMATES: RESULTS OF HYPOTHESIS 4 (MEDIATING RELATIONSHIP)
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20 Hypothesis Hypothesis
g Path Decision
Te
21 No. Coefficient
22 Β
23 H4 TQM mediates the relationship between EO and firm EOTQM TQM FP EO FP Partial
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performance
ch
1.177* 0.681* 0.494*
mediation
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*significant at p<0.001(two-tailed test)
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Entrepreneurial Orientation of SMES, Total Quality Management and Firm Performance

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Article in Journal of Manufacturing Technology Management · September 2017

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44 delivery (Shokri, et al., 2016) in a continuous-breakthrough improvement approach (Assarlind, et

44 attention on the implementation of quality management practices to meet the requirement of

36 In operation management literature, firm performance reflects an operations system’s

32 the relationship between independent variables of EO and dependent variable of firm

40 entrepreneurial orientation (EO) and firm performance (FP).

3.1 SAMPLE AND DATA COLLECTION

40 contributes to theoretical body of knowledge in the field of entrepreneurship in the context of

36 manufacturing entrepreneurs. Taking it further, they could create an ecosystem to disseminate

44 performance. Journal of Business Research, 60(5), pp. 566-575.

51 Science, 16(1), pp. 74-94.

54 Service SMEs. Journal of Enterprising Culture, 23(2), pp. 199-235.

36 Theory and Practice, 16(7), pp. 7-25.

Performance and Firm Performance. Decision Sciences, 31(4), p. 885–902.

29 Quality Management & Business Excellence, 25(5-6), pp. 635-649.

40 performance. Academy of Management Review, 21(1), pp. 135-172.

36 Journal, 16(1), pp. 15-37.

44 perspective from South Korean firms. Technovation, 28(12), p. 855–863.

44 missing link?. Journal of Business Research, 69(2), pp. 683-690.

Wiklund, J., 2006. The sustainability of the entrepreneurial orientation-performance relationship.

26 > 200 16.5 Ownership type of Firm

29 < 25 lakhs 11.0 100 % foreign 11.8

32 Quality management system certification

36 Competitive C1 - Our firm is very aggressive and intensely competitive. 0.90

44 A3 - Employees of our firm are given freedom to communicate without 0.75

26 tools (such as Statistical Quality Control)

36 QE2 - Our employees inspect their work for defects. 0.62

40 QE4 - Independent decision-making by employees is encouraged in the company. 0.67

process quality improvement suggestions.

29 during the last 3 years.

40 product liability cost.

TQM related to FP without

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