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An empirical investigation of the China Quality

Award causal model

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 An empirical investigation of the China Quality Award causal model

Jun-Yong Xiang1, Sang-Chul Lee2, Jae-Kyeong Kim1, Yung-Ho Suh1, Zhen He3
1
School of Business Administration, Kyung Hee University,
1 Hoegi-Dong, Dongdaemoon-Gu, Seoul 130-701, South Korea
gysang@yahoo.com, {jaek, suhy}@khu.ac.kr
2 Department of Management Information Systems, Korea Christian University,

San 204, Hwagok 6-Dong, Kangseo-Ku, Seoul 157-722, South Korea

leecho@kcu.ac.kr
3 School of Management, Tianjin University,

92 Weijin Road, Nankai District, Tianjin 300-072, P.R. China

zhheeyou@eyou.com

Abstract. The objective of this study is to analyze the causal relationship among categories in the
China Quality Award (CQA) model. The survey instrument consists of 65 questions from the seven
CQA categories. Structural Equation Modeling (SEM) is used to analyze the empirical data and esti-
mate the path coefficients among CQA categories. This study identifies seven factors from seven
CQA categories; Leadership, Strategic Planning, Human-Resource Focus, Process Management, Cus-
tomer & Market Focus, Information & Analysis, and Results. Extending the basic Baldrige theory
“Leadership drives the system that creates results”, this study divides systems into Direction (Strateg-
ic planning), Foundation (Information & Analysis), and System (Human Resource Focus, Process
Management, and Customer & Market Focus). The results support the Baldrige theory. First, Leader-
ship has not only a direct influence on Results, but also has an indirect influence on results through
system. The causal relationships between Leadership (Driver) and Information and Analysis (Founda-
tion) and Strategic Planning (Direction) were statically significant. Second, Strategic Planning (Direc-
tion) affected Human Resource Focus and Customer and Market Focus of system while had no influ-
ence on Process Management. Third, Human Resource Focus and Customer and Market Focus both
affected Process Management, and Process Management had a significant impact on results. Fourth,
Information and Analysis (foundation) affected all of the categories of Direction and System.

1 Introduction

Globalization has led to increased international competition. To succeed in today’s more competitive and
globalized economic environment, any business must adapt to the empowered consumer and establish
customer oriented strategies. In many markets, quality has already become the key to having a competitive
edge [47]. Quality standards can be of significant help in achieving the objectives associated with such
strategies since they clearly define the contractual, functional and technical requirements for all quality
activities which will ensure that a product, process, service, or system is fit for its intended purpose [7].
In order to help organizations use an integrated approach to organizational performance management
that results in delivery of ever-improving value to customers and improvement of overall organizational
effectiveness and capabilities, many nations and regions have established quality awards [26, 35]. Up to
date, more than sixty countries and regions have established quality awards, among which National Quali-
ty Awards (NQAs) are a means by which countries promote quality awareness. The Deming Prize in Japan,
the Malcolm Baldrige National Quality Award in the USA and the European Quality Award are the most
renowned NQAs, which have played a key role in the quality revolution and the development of NQAs [6,
18, 39, 42, 50, 53]. The NQA improves the inner and outer environment of the enterprises, which allows
them to be in a better position in terms of competition. For example, companies that have won the
MBNQA have shown good financial growth [52]. Hence, other developed and developing countries have
also launched their own NQAs based on frameworks of these three established NQAs [13, 33, 38, 48, 49].
In 2001, China Association for Quality (CAQ) acquired the commission of the General Administration
of Quality Supervision, Inspection and Quarantine (AQSIQ) and started to set up a model of excellence to

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enhance enterprises’ international competitiveness. Accordingly, the China Quality Award (CQA) was
established through benchmarking the MBNQA. In 2004, AQSIQ and Standardization Administration of
the People’s Republic of China (SAC) published Criteria for performance excellence and Guidelines for
criteria for performance excellence as the basis for organizational self-assessments, for making Awards,
and for giving feedback to applicants [19, 20]. This CQA model is based on the 2003 MBNQA model
which consists of seven categories, namely Leadership, Strategic Planning, Customer and Market Focus,
Resources, Process Management, Measurement, Analysis, and Improvement, and Business Results [19,
34].
Many studies have tested the validity of MBNQA model [6, 11, 17, 21, 30, 41, 44, 48, 52]. However,
because previous research mainly focused on U.S companies, this study cannot be entirely accepted with-
out making adaptations for globally diverse culture and social differences [9]. Many countries who ac-
cepted the MBNQA model should have to develop an assessment model to test its feasibility in their own
contexts. Therefore, they have subsequently inspected their national quality award to verify its validity [15,
30, 41, 44].
To date, China has insufficient research in regard to adapting the MBNQA model. Many previous re-
searchers focused only on quality control and other specific parts of the CQA [28, 29, 46]. The purpose of
this study is to identify the causal relationships among seven categories in the CQA model based on the
MBNQA theory.

2 Literature Review and Hypothesis Development

When the MBNQA criteria are used to address organizational quality, it is assumed that there is a link
between quality management practices and operational and market performance [36]. Evans [16] provided
a theoretical foundation for causal models based on the 1997 MBNQA criteria. The causal models sug-
gested by Evans reflect the direct and indirect effect of the leadership triad (leadership, strategic planning,
customer and market focus) on human resource development and management and process management
and the effect of all the categories on internal (business) and external (market) results. Wilson and Collier
[52] tested the theory and causal performance linkages implied by the 1995 MBNQA. They analyzed the
model in terms of Driver (i.e., Leadership), System (i.e., Process Management, Human Resource Devel-
opment and Management, Strategies Planning, and Information & Analysis), and Results (i.e., Customer
Focus & Satisfaction and Financial Results). Flynn and Saladin [17] evaluated the MBNQA model in
three different years to test the validity of the theoretical model underlying the Baldrige framework. Pan-
nirselvam and Ferguson [36] empirically tested the underlying relationships between the various quality
management constructs and between quality management and organization performance presented in the
MBNQA criteria.
Based on previous studies [17, 36, 44, 52] and the Baldrige theory of “Leadership drives the system
that creates result”, the CQA framework is divided into five basic elements of Driver, Direction, Quality
System, Business Results, and Foundation.
The hypotheses established for verification in this study are as follows. First, Leadership is the Driver
which guides all categories such as Direction, Quality System, Business Results, and Foundation in the
CQA framework. Leadership is the only exogenous variable of the CQA framework which retains direct
and indirect effects upon the rest of the six categories [14, 19, 20, 35, 44, 52].

H1: Leadership influences Information & Analysis.

H2: Leadership influences Strategic Planning.
H3: Leadership influences Customer & Market Focus.
H4: Leadership influences Human Resources Focus.
H5: Leadership influences Process Management.
H6: Leadership influences Results.

Strategic Planning is the direction which guides Quality System comprised of Human Resources Focus,
Customer & Market Focus, and Process Management. Thus, Strategic Planning retains a direct effect upon
Human Resources Focus, Customer & Market Focus, and Process Management. Strategic Planning rein-
forces business plans between employees, customers, and performance. A long-range plan which improves

982
employee and customer satisfaction and product quality is established through strategy, and provides a
corporation with competitive advantage over its competitors in the market [4, 12, 25, 27, 40, 51].

H7: Strategic Planning influences Customer & Market Focus.

H8: Strategic Planning influences Human Resources Focus.
H9: Strategic Planning influences Process Management.

According to the relationship between quality system and performance, Quality System retains direct
effect upon Business Results as well as upon different categories within the System [17, 36, 44, 52].
`
H10: Customer & Market Focus influences Process Management.
H11: Customer & Market Focus influences Results.
H12: Human Resources Focus influences Process Management.
H13: Human Resources Focus influences Results.
H14: Process Management influences Results.

Information and analysis is the Foundation for performance management System to manage organiza-
tions effectively. It is a factor which improves corporate intellectual property such as data collection,
analysis, and management required by the organization, and is a core fundamental concept which retains
effect upon other categories in the Baldrige model [35]. Information and analysis is affected by Leader-
ship and it directly affects all of the other categories of the CQA model. Information and analysis rein-
forces corporate decision making abilities through information collection and provision on customer needs
and operational problems [41]. Moreover, Information and analysis affects Strategic Planning when an
organization can obtain appropriate data under Strategic Planning since it can reduce organizational risk
[31]. Information and analysis also affects Human Resources Focus as it offers feedback on analysis re-
sults and information on quality performance to the employees.

H15: Information & Analysis influences Strategic Planning.

H16: Information & Analysis influences Customer & Market Focus.
H17: Information & Analysis influences Human Resources Focus.
H18: Information & Analysis influences Process Management.

3 Research Method

3.1 Research Framework

To estimate and develop the methodology for measuring the effectiveness of CQA, our research approach
is categorized into two phases. Firstly, the feature of demographic and validity of measure instruments are
analyzed using SPSS 12.0. Second, the confirmatory factor analysis (CFA) and structural equation model
(SEM) are used to confirm the validity of the CQA framework.

3.2 Data

This research uses data collected jointly by the China Association of Quality and our research team. The
survey started on September 1st in 2006 and ended on June 1st in 2007. The survey respondents were
quality managers or senior executives in charge of quality management in their firms. We received 230
replies, however, 38 of them whose contents were considered unreliable were dropped from the further
analysis, and thus a total of 192 were used in the final analysis.

983
4 Results

4.1 Measurement Model

To verify feasibility of CQA measurement model, we used AMOS 4.0 in CFA. The validity of the mea-
surement model is evaluated by investigating convergent and discriminant validity. The convergent validi-
ty is evaluated by investigating the value of standardized factor loadings, standardized residual covariance
and reliability. The survey questions should load at least 0.60 on their respective hypothesized component
and all loadings need to be significant (p<0.05, t>2.0) [3, 45]. The survey questions with over ±2.57 with-
in SRC matrix should be deleted from the model. Reliability for all the survey questions of a construct
should be evaluated jointly by investigating composite reliability (CR) and the average variance extracted
(AVE). For a construct to possess good reliability, CR should be at least 0.70 and the AVE should be at
least 0.50 [2, 5, 22, 43].
The survey questions which loaded on multiple constructs or had low item-to-construct loadings were
deleted from the model. After twenty-six items were deleted, 65 questions remained within this model.
The results were summarized in Table 1.

Table 1. Overall fit static factor analysis statistics

Cronbach’s The number Final
Factor Items x2 p GFI AGFI NFI RMRS
alpha of items items
1. Leadership 1-9(9) 0.965 9 6 18.487 0.01 0.968 0.916 0.965 0.082
2. Strategic Planning 10-18(9) 0.951 9 7 38.196 0.00 0.946 0.891 0.951 0.053
3. Customer & Market Focus 19-28(10) 0.947 10 8 64.719 0.00 0.923 0.861 0.947 0.063
4. Information & Analysis 29-42(14) 0.933 14 10 98.105 0.00 0.908 0.841 0.933 0.065
5. Human Resource
43-54(12) 0.954 12 9 53.412 0.00 0.940 0.888 0.954 0.051
Management
6. Process Management 55-73(19) 0.936 19 14 131.600 0.00 0.915 0.876 0.936 0.068
7. Results 74-91(18) 0.94 18 11 92.930 0.00 0.919 0.867 0.904 0.096
Total 1-91 0.960 91 65

Table 2 shows the results of convergent validity and reliability in CQA categories. The results indicated
that all the factor loadings, CR and AVE were over 0.60, 0.70 and 0.50, respectively.

Table 2. Results of the Confirmatory Factor Analysis

Factor FL CR AVE
1. Leadership 0.707 0.552
1.1 Senior Leadership 0.627
1.2 Governance and Social Responsibility 0.839
2. Strategic Planning 0.959 0.921
2.1 Strategy Development 0.995
2.2 Strategy Deployment 0.884
3. Customer & Market Focus 0.886 0.797
3.1 Customer & Market Knowledge 0.791
3.2 Customer Relationships and Satisfaction 0.996
4. Information & Analysis 0.938 0.835
4.1 Gathering and Measurement of Organizational Performance 0.888
4.2 Analysis and Using of Organizational Performance 0.954
4.3 Information and Knowledge Management 0.839
5. Human Resource Focus 0.875 0.752
5.1 Work Systems 0.911
5.2 Employee Learning and Motivation 0.899
5.3 Employee Well-Being and Satisfaction 0.676

984
 6. Process Management 0.901 0.598
6.1 Process Management 0.736
6.2 Manufacture and Delivery Processes 0.843
6.3 Support Processes 0.853
6.4 Supplier/Partner Process 0.921
6.5 Voluntary improvement 0.770
7. Results 0.860 0.512
7.1 Human Resource Results 0.717
7.2 Products and Service Results 0.908
7.3 Customer Satisfaction 0.667
7.4 Financial Results 0.629

The purpose of discriminant validity is to identify if the correlation between constructs is not equal to
1.0 and if the constructs differ from each other [8, 10]. It is tested by two subsequent procedures. First, we
check whether correlations among the latent constructs are significantly less than 1 [1]. The coefficient of
the correlations should be under 0.9. The results of correlations indicate that all of the correlations among
seven CQA categories are not unduly vast (The highest is 0.750 in Table 3).

Table 3. Descriptive Statistics and Correlation

Mean S.D LS SP C&MF I&A HRF PM R

LS 5.253 0.946 1
SP 5.334 0.899 0.557** 1
C&MF 5.601 0.943 0.450** 0.663** 1
I& A 5.096 0.955 0.453** 0.712** 0.687** 1
HRF 5.300 0.917 0.612** 0.613** 0.544** 0.636** 1
PM 5.178 0.897 0.561** 0.598** 0.649** 0.694** 0.750** 1
R 4.584 0.771 0.523** 0.451** 0.475** 0.469** 0.565** 0.651** 1
*<0.05, **<0.01.
LS: Leadership, SP: Strategic Planning, C&MF: Customer & Market Focus, I&A: Information & Analysis, PM: Process Management,
R: Results

Secondly, this study conducted a chi-square difference test where the chi-square measurements with
two analyses were compared. One analysis used a constrained model in which the correlation between two
constructs set 1.0 and the other used an unconstrained model in which the correlation was freely estimated
[8, 24]. Thus, the difference in degrees of freedom between the two models was 1. When a value of chi-
square difference was over 3.84 with d.f of 1 (p<0.05), the two constructs were statistically different. The
seven constructs paired against one another were tested and all constructs were different (p<0.05). Con-
clusively, the CQA measurement model was converged well.

4.2 Structural Equation Model

Based on the theory of MBNQA, we hypothesize Driver influences on Direction, Foundation, Systems
and Results. Second, Foundation influences on Direction and Systems. Third, Direction influences on
Systems. Fourth, System influences on Results. To test the research hypotheses and identify the casual
relationships between the CQA Categories, we use AMOS 5.0 in Structural Equation Model (SEM).
When the measurement model is satisfied, this structural model in Figure 2 can be tested [22].
The fit statistics of the model were shown as Table 4. Based on the indicators, the structural model
(Figure 1) is reasonable.

Table 4. Overall model fit statistics

Overall model fit statistic Statistic value

p-value of test statistic 0.776

985
 GFI 0.998
AGFI 0.984
RMR 0.006
RMSEA 0.000
Test statistic/degree of freedom (x2/df) 0.369

As shown in Table 5, five of six paths from Leadership (Driver) were statistically significant (p<0.05 or
better): the path to Information & Analysis (H1), Strategic Planning (H2), Human Resource Focus (H4),
Process Management (H5), and Results (H6). However, one of six paths (H3) from Leadership was statis-
tically insignificant. For Direction, two of three paths from Strategic Planning were statistically signifi-
cant: the path to Customer & Market Focus (H7), and Human Resource Focus (H8), with another one
(H9) presented to be statistically insignificant. For Systems, three of five paths were statistically signifi-
cant: the path from Customer & Market Focus to Process Management (H10), the path from Human Re-
source Focus to Process Management (H12), and Process Management to Results (H14). Two of five
paths (H11 and H13) were statistically insignificant. For Foundation, all paths from Information & Analy-
sis were statistically significant: the path to Strategic Planning (H15), Customer & Market Focus (H16),
Human Resource Focus (H17), and Process Management (H18).

Table 5. Statistical tests for China Quality Award causal model

Point Hypothesis
Hypothesis Path T-value P-value
Estimate Supported
H1 Leadership → Information & Analysis 0.453 7.021 0.000 **
H2 Leadership → Strategic Planning 0.295 5.582 0.000 **
H3 Leadership → Customer & Market Focus 0.082 1.379 0.168 ns
H4 Leadership → Human Resource Focus 0.363 6.164 0.000 **
H5 Leadership → Process Management 0.114 2.069 0.039 *
H6 Leadership → Results 0.201 2.909 0.004 **
H7 Strategic Planning → Customer & Market Focus 0.312 4.133 0.000 **
H8 Strategic Planning → Human Resource Focus 0.152 2.028 0.043 *
H9 Strategic Planning → Process Management -0.063 -0.946 0.344 ns
H10 Customer & Market Focus → Process Management 0.231 3.792 0.000 **
H11 Customer & Market Focus → Results 0.053 0.762 0.446 ns
H12 Human Resource Focus → Process Management 0.433 7.053 0.000 **
H13 Human Resource Focus → Results 0.080 0.948 0.343 ns
H14 Process Management → Results 0.443 4.952 0.000 **
H15 Information & Analysis → Strategic Planning 0.578 10.945 0.000 **
H16 Information & Analysis → Customer & Market Focus 0.428 6.083 0.000 **
H17 Information & Analysis → Human Resource Focus 0.363 5.214 0.000 **
H18 Information & Analysis → Process Management 0.255 3.730 0.000 **
*: p<0.05, **: p<0.01, ns: not significant

Conclusively, fourteen hypotheses among eighteen hypotheses were supported at 0.05 significant levels
and four hypotheses were rejected.

986
 Direction
0.578 (**)
1. Leadership 2. Strategic Planning
0.295 (**)

Driver 0.152 (*)

0.363 (**)
System
0.363 (**)
5. Human Resource 0.201 (**)

Focus

Results
0.433 (**)
0.114 (*) 0.080 (ns)
0.255 (**) 7.1 Results
6. Process 0.443 (**)
Management
-0.063 (ns)
0.053 (ns)
0.231 (**)

0.082 (ns)

3. Customer &
Market Focus
0.312 (**)

0.428 (**)

0.453 (**)
Foundation
4. Information
& Analysis

1. * p<0.05, ** p<0.01, ns: not significant

Figure 1. The China Quality Award causal model

5 Discussion

In this study, measurement instruments to measure the contents of the CQA criteria were developed, and
causal relationships among the categories of the CQA criteria were identified based upon the theory of
Baldrige causal model. The results of this study also provided evidence that the MBNQA criteria are
consistent predictors of organizational performance in China. The underlying theory that “leadership
drives the system that causes results” was supported by this study. This was also consistent with previous
studies [17, 44, 52].
First, the findings showed that Leadership not only had a direct impact on Results but also had an indi-
rect impact on Results by influencing Foundation, Direction, and Systems. The causal relationships be-
tween Leadership (Driver) and Information and Analysis (Foundation) and Strategic Planning (Direction)
were statically significant. This finding was identical to the existing findings of other NQA models [17, 44,
52]. To perceive competitive advantages, the CEO must concentrate on customer needs and use informa-
tion well in order to respond to the needs quickly and rationally [35, 44]. In other words, strong Informa-
tion and Analysis reduces processing time and cost and improves organizational performance from an
internal-corporate perspective, and provides competitive advantage against competitors and prepares the
organization for prospective customer and market from an external-corporate perspective [44, 52]. The
CEO collects data on customer dissatisfaction or needs through Information and Analysis, and reflects
them on decision making process through Strategic Planning. However, Information and Analysis requires
extensive investment cost, and thus it requires strong leadership from the CEO. And organizational strate-
gy is affected greatly by the CEO [32, 44, 52]. Therefore, Leadership (Driver) affects Information and
Analysis (Foundation) and Strategic Planning (Direction), but affects Customer and Market Focus indi-
rectly through Direction and Foundation.
The results indicated that Leadership only affected Human Resource Focus and Process Management
directly among the three categories of System, and affected Customer and Market Focus indirectly
through Direction and Foundation. Strong and abundant human resources and employees, actively partici-

987
pating in a corporation, are absolute factors for quality management of the corporation [36]. The CEO
induces employee motivation through various methods such as technical development and incentive pro-
grams. In addition, the CEO is also responsible for selecting production functions and processes of a cor-
poration [23, 52]. Thus, Leadership had direct effects on Human Resource Focus and Process Manage-
ment.
Second, Strategic Planning (Direction) affected Human Resource Focus and Customer and Market Fo-
cus of system but did not affect Process Management. The existing studies [17, 44, 52] also indicated that
Strategic Planning had an indirect effect on Results by influencing Human Resources Focus, which in turn
influences Process Management. This study also found that strategic Planning had an indirect effect on
Results by influencing Customer and Market Focus, which in turn influences Process Management. It
implies that companies must communicate continuously with customers to build up a learning relationship
in which a company can acquire useful information by appreciating customers’ behaviors and offering
appropriate products and developing new markets [44]. The recent MBNQA criteria also emphasize the
importance of customer focus, and these affects planning and execution of other quality management [35].
Third, Human Resource Focus and Customer and Market Focus both affected Process Management,
and Process Management had a significant impact on results. Management of production and process of
an organization is decided by corporate employees, and thus securing strong human resources through
employee training and employee participation play an important role in improving organizational quality
[18, 36]. Customer and Market Focus can satisfy Customer Satisfaction and find a new market simulta-
neously by offering products and services to customers at the right time in a right place through consistent
communication with the customers [44]. In addition, Process Management was shown to directly affect
Results since productivity increase, error rate decrease, supplier’s JIT (Just in Time), and new product
development-time decrease directly affect company’s organizational performance [37, 52].
Fourth, Information and Analysis (foundation) affected all of the categories of Direction and System.
Organizations are easily exposed to hazy situations. Thus, organizations must establish appropriate strate-
gy, and quality information is crucial for such strategy. The System which consistently manages employee
information with proper communication channel is necessary for employee management. A corporation
must obtain useful information of customers in order to understand customer behavior or to offer good
products and services through appropriate channel to customers. In order to efficiently operate a corpora-
tion’s internal processes, well-designed information systems which can manage production processes are
required [44]. Hence, Information & Analysis acts as Foundation for improving both Direction and Sys-
tem.

6 Conclusion and Limitation

This study identified the causal relationships among categories of the CQA model. The results confirmed
that the underlying Baldrige theory “leadership drives the system that causes results” was also applicable
in China.
Although this study showed some significant results, there were still some limitations which may affect
the outcomes. First, this study had been focused on firms in manufacturing and service industries of China.
The results, however, may not be applicable for those companies in the medical, educational, or public
sectors. Therefore, further research should be conducted in these areas. Secondly, due to the characteris-
tics of this study itself, only a small amount of data was able to be analyzed. Hence, future research is
suggested to obtain larger data set. Only then can the structural model be properly tested and evaluated.

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