International Journal of Quality & Reliability Management

Emerald Article: The relationship between TQM practices, quality

performance, and innovation performance: An empirical examination
Daniel I. Prajogo, Amrik S. Sohal

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NEW RESEARCH TQM practices,

quality and
The relationship between TQM innovation

practices, quality 901

performance, and innovation Received April 2002
performance Revised September 2002
Accepted September
2002
An empirical examination
Daniel I. Prajogo
Bowater School of Management and Marketing, Deakin University,
Greelong, Australia, and
Amrik S. Sohal
Department of Management, Monash University, Caulfield East, Australia

Keywords Total quality management, Innovation, Modeling

Abstract This empirical study examines the relationship between total quality management
(TQM) and innovation performance and compares the nature of this relationship against quality
performance. The empirical data were obtained from a survey of 194 managers in Australian
industry encompassing both manufacturing and non-manufacturing sectors. The structural
equation modeling technique was used to examine the relationships between TQM and quality
performance as well as innovation performance, simultaneously. The findings suggest that TQM
significantly and positively relates to both product quality and product innovation performance
although it appears that the magnitude of the relationship is greater against product quality. In
addition, significant causal relationships between quality performance and innovation
performance were found, suggesting that achievement of one aspect of performance could
impact the other.

1. Introduction
The emergence of total quality management (TQM) has been one of the major
developments in management practice. The recognition of TQM as a
competitive advantage is wide spread around the world, especially in Western
countries, and today very few (especially manufacturing) companies can afford
to ignore the term TQM (Dean and Bowen, 1994). Despite numerous stories
about TQM failures, previous empirical studies on the relationship between
TQM and organizational performance, and in particular, quality, have
International Journal of Quality &
indicated strong and positive results (Ahire et al., 1996; Flynn et al., 1994; Reliability Management
Samson and Terziovski, 1999). On the other hand, innovation has also received Vol. 20 No. 8, 2003
pp. 901-918
considerable attention as having a crucial role in securing sustainable q MCB UP Limited
0265-671X
competitive advantage in the current market (Tushman and Nadler, 1986). DOI 10.1108/02656710310493625
IJQRM Given these two facts, there is a need to re-assess the role of TQM in
20,8 determining innovation performance. Several rationales behind this need are as
follows. First, as argued by several scholars (Bolwijn and Kumpe, 1990; Hamel
and Prahalad, 1994; Tidd et al., 1997), market conditions have changed, and so
has the basis of competition with quality being considered more as a
“qualifying criterion” – a term suggested by Hill (1985) – and has been
902 replaced by other aspects such as flexibility, responsiveness, and particularly
innovation, which function as “winning order criteria”. As a result, TQM as the
primary resource behind quality has also received a similar challenge in the
sense that organizations would ask: should we continue to implement TQM as
a management model in the future, particularly if we want to pursue a higher
level of innovation performance? Second, the need to address this inquiry is
further substantiated by the fact that there are conflicting theoretical
arguments appearing in the literature with regard to the relationship between
TQM and innovation with one group of arguments affirming that TQM is not
compatible with innovation because managing innovation is fundamentally
different from managing quality, as asserted below (Maguire and Hagen, 1999,
p. 30):
For quality practitioners, this explosion of innovation activity represents significant
challenges. While they can expect to see increased demand for some of their specialized
knowledge and skills, they must be prepared to master new tools and techniques while also
giving serious consideration to how quality may be redefined in this environment of rapid
change and rising customer expectations.
The extension of this claim is that organizations may need to choose between
quality and innovation as they could not be successful with both. Finally,
despite the fact that a number of studies have been conducted on TQM, only
very few of these (Flynn, 1994; Gustafson and Hundt, 1995; McAdam et al.,
1998) have been focused on testing the relationship between TQM and
innovation performance. This provides further opportunities for examining
this relationship.
Given the above reasons, this paper presents an empirical study with the
following objectives: to examine the nature of the relationship between TQM
and innovation performance; to compare the strength of this relationship with
that between TQM and quality performance; and to examine the relationship
between quality and innovation performance.
The remainder of this paper is structured as follows. Section 2 discusses the
theoretical arguments concerning the relationship between TQM and
innovation. Both positive and negative arguments in this respect are
presented. Section 3 presents the research framework and research questions.
Section 4 describes the empirical research design and the development of the
research instrument. Section 5 presents the quantitative analysis, followed by
Section 6 which presents the discussion of the findings. Section 7 concludes this
paper with several major conclusions drawn from the research.
2. Literature review on the relationship between TQM and innovation TQM practices,
A review of the literature discussing the relationship between TQM and quality and
innovation suggests that there are conflicting arguments concerning the innovation
relationship between TQM and innovation (Prajogo and Sohal, 2001).
Arguments that support a positive relationship between TQM and
innovation contend that companies embracing TQM in their system and
culture will provide a fertile environment for innovation because TQM
903
embodies principles that are congruent with innovation (Dean and Evans, 1994;
Kanji, 1996; Mahesh, 1993; Roffe, 1999; Tang, 1998). The principle of customer
focus encourages organizations to consistently search for new customer needs
and expectations, and therefore, leads organizations to be innovative in terms
of developing and introducing new products as a continual adaptation to the
market’s changing needs (Juran, 1988). Likewise, continuous improvement
encourages change and creative thinking in how work is being organized and
conducted. Finally, the principles of empowerment, involvement, and
teamwork are also substantial in determining the success of organizational
innovation.
In contrast to the above arguments, several scholars reject the positive
relationship between TQM and innovation for the reason that it possesses
principles and practices that could hinder innovation. Slater and Narver (1998)
and Wind and Mahajan (1997) agree that a customer focus philosophy could
easily lead organizations to focus only on incremental improvements in their
current products and service activities rather than trying to create novel
solutions. Consequently, this leads to the development of uncompetitive
“me-too” products rather than the development of real innovation. Customer
focus, therefore, could build a “tyranny of the served market” in which
managers see the world only through their current customers’ eyes. In this way,
such firms could fail to explore customers’ latent needs. As a result, they fail to
drive generative learning through the search for the unserved, untapped
potential in markets. Similarly, continuous improvement requires regulatory
standards and activities that are sufficiently routine to be well understood.
Hence, control and stability is the core of the continuous improvement process
(Imai, 1986; Jha et al., 1996). Whilst standardization is necessary for
conformance and error reduction, from the innovation point of view, it could
trap people into staying with what is workable; resulting in rigidity (Glynn,
1996; Kanter, 1983). In addition, Lawler (1994) and Samaha (1996) suggest that
the concept of continuous improvement is basically aimed at simplifying or
streamlining a process and carrying it out in a better or faster manner. Such an
approach could be detrimental to innovation because companies may
continually work upon, and improve, processes that are already
fundamentally flawed.
The contest of these opposing arguments can also be extended to address
the relationship between quality performance and innovation performance;
IJQRM whether they are positively associated with each other or not. The implication
20,8 is that one can question whether organizations can excel in both types of
performance, or they have to prioritize one over the other. Flynn (1994) notes
that the conventional wisdom suggests that fast product innovation and
quality cannot be simultaneously achieved. Williams (1992) argues that
organizations that focus their strategy on making frequent and fast
904 innovations would not have time to learn about the processes in order to
statistically control them to achieve a high level of conformance.
While it is difficult to accept that a company can be successful with
innovation if it cannot produce products that meet acceptable quality
standards, it is argued here that in certain situations, companies have to
prioritize quality over innovation or vice versa. This is particularly true when
industry and market conditions are taken into consideration (Nowak, 1997).

3. Research framework and questions

Based on the above literature review, a research framework is developed to
simultaneously examine the relationship between TQM practices and quality
performance as well as innovation performance. The framework is presented in
Figure 1.
The primary research questions of this study can be articulated as follows:
RQ1. Do TQM practices – that have been successfully proven as
significantly and positively related to quality performance – have a
similar predictive power against innovation performance?
RQ2. Is there any significant relationship between quality performance and
innovation performance? If yes, what is the nature of this relationship?

4. Research instrument
In designing a survey instrument, the use of constructs has played an
important role in management research. Constructs or scales are defined as
latent variables that cannot be measured directly (Ahire et al., 1996). In any

Figure 1.
Research framework
research concerning behavioral elements, there is no device that can precisely TQM practices,
produce measurement through a single metric unit. Therefore, researchers quality and
usually employ two or more measures to gauge a construct or scale. Working innovation
with constructs or scales of measurement, however, is a complex task, moving
from development to final validation. Following a suggestion made by Tata
et al. (1999), this study attempted, wherever possible, to use pre-tested
constructs from previous empirical studies to ensure their validity and
905
reliability.
The instrument developed in this study consists of two major parts. The
first part comprises six constructs measuring TQM practices and the second
part comprises three constructs measuring three different types of
performance: quality, product innovation, and process innovation
performances (details can be found in the Data Reduction Process section).
The instrument used is a five-point Likert scale, representing a range of
attitudes from strongly disagree to strongly agree.

4.1 TQM measures

A review of the previous empirical studies on TQM suggests that researchers
have defined TQM construct in numerous ways although they are
complementary to each other. In this study, we decided to use one of these
models as a skeleton or framework for the TQM construct and supplemented
by several other models. The framework used by Samson and Terziovski
(1999) was selected as representing the core of TQM construct in this study for
the reason that it has been used in the largest study of Australian companies
conducted so far. Moreover, Samson and Terziovski argue that their model
constitutes the criteria of the Malcolm Baldrige National Quality Award
(MBNQA) that is accepted as representing TQM practices by several scholars
such as Ahire et al. (1995), Dean and Bowen (1994), Evans and Lindsay (1999),
and Juran (1995). The MBNQA consists of six criteria of organizational
practices and one criterion of organizational performance. The TQM practices
embodied in these six criteria are leadership, strategy and planning, customer
focus, information and analysis, people management, and process
management. Most of the contents of our instrument for measuring TQM
practices are similar to those used by Samson and Terziovski (1999), except in
the case of the criteria of information and analysis. Their scale only addressed
benchmarking issues, whilst the criteria set out on the MBNQA guideline
covers wider issues than benchmarking. Based on the three elements of the
information and analysis criteria (Brown, 1997), three items were added into
this scale in addition to one item addressing benchmarking, namely the
company’s strategy in measuring performance, the availability of data and
information about performance, and the use of information in decision-making
processes conducted by senior management.
IJQRM 4.2 Quality performance measures
20,8 Similar to TQM, quality performance has been reflected and measured in
various ways in past empirical studies on TQM (Ahire et al., 1996; Dow et al.,
1999; Flynn et al., 1994; Saraph et al., 1989). However, most of the typical
dependent variables used in these studies are associated with a model focused
on quality by conformance, such as the percentage of defects and the cost of
906 quality. Among this variation, the construct for measuring quality performance
developed by Ahire et al. (1996) was the one that most closely matched to our
purpose. This construct showed good validity and reliability and it defined
quality performance as composed of four indicators: reliability, performance,
durability, and conformance to specification.

4.3 Innovation performance measures

A review of past research on organizational innovation also indicates that there
has been variations in measuring innovation performance in organizations. For
the purpose of comprehensively capturing the aspects of innovation
performance, this study built the construct for measuring product and
process innovation on the basis of several criteria which are conceptualized and
used in previous empirical studies of innovation, such as Avlonitis et al. (1994),
Karagozoglu and Brown (1998), Cohn (1980), Deshpande et al. (1993),
Hollenstein (1996), Kleinschmidt and Cooper (1991), Miller and Friesen (1982),
and Subramanian and Nilakanta (1996). These criteria are the number of
innovations, speed of innovation, level of innovativeness (novelty or newness of
the technological aspect), and being the “first” in the market. By including the
last two criteria, the scope of the innovation performance measures captured
areas that could be considered as “radical” innovation. These four
characteristics of innovation were applied in two major areas of innovation,
namely product and process innovations. The distinction between these two
areas of innovation has been articulated in the literature on innovation (Gobeli
and Brown, 1994; Yamin et al., 1997). The scales to gauge both product and
process innovation performance are summarized in Table I.

Product innovation Process innovation

The level of newness (novelty) of new products The technological competitiveness

The use of latest technological innovations in The updated-ness or novelty of technology
new product development used in processes
The speed of new product development The speed of adoption of the latest
Table I. technological innovations in processes
The scales to measure The number of new products introduced to the The rate of change in processes, techniques and
product innovation and market technology
process innovation The number of new products that is
performance first-to-market (early market entrants)
Regarding the measurement approach, perceptual data were used in which TQM practices,
respondents were asked to evaluate the company’s innovation performance quality and
against the major competitor in the industry in order to minimize industry innovation
effects. The advantages of this approach were discussed in detail by Kraft
(1990).

4.4 Source of empirical data 907

Empirical data were obtained through a random survey of 1,000 managers,
most of whom were senior managers who had knowledge of past and present
organizational practices relating to continuous improvement and innovation in
the organization. The sample was selected randomly Australian-wide and
encompassed various industry sectors, including both manufacturing and
non-manufacturing sectors. The focus of this study was limited to one site (or
plant) per organization. A total of 194 managers responded, whilst 150
questionnaires were returned to the researchers with return to sender (RTS)
messages, indicating that the addresses were no longer valid. By discounting
the number of RTS mails, the final response rate accounted for 22.8 percent.
The proportion of the respondents was nearly equal between manufacturing
and non-manufacturing sectors (52.5 and 47.5 percent, respectively). Regarding
the position of the respondent in the organization, half of the respondents were
quality managers and/or production/operations managers, one-third of them
were senior managers (general manager or managing director), and the rest
were managers from other areas, such as marketing, finance, human resource,
and administration. Out of 194 companies, 190 companies which responded to
the survey were certified ISO 9000.

5. Data analysis
Data analysis for this study involved two major steps: the data reduction
process and the structural relationship analysis. The data reduction process
aimed to reduce the number of variables and parameters in the research model
to a manageable number in terms of the ratio between sample size and
parameters estimated in the structural equation modeling (SEM). The
structural relationship analysis was used to examine the simultaneous
relationship between TQM and product quality performance, product
innovation performance, and process innovation performance, as well as
assessing the relationships among those three performance variables.

5.1 Data reduction process

The data reduction process was conducted in order to collapse the nine
constructs – each consisting of four to six items – employed in this study into
composite variables. Six constructs (leadership, strategic planning, customer
focus, information and analysis, people management, and process
management) constituted TQM latent variables, and three constructs
(product quality, product innovation, and process innovation) constituted
IJQRM three organizational performance measures. These nine constructs were
20,8 subjected to validity and reliability tests before a single score can be calculated
to represent each construct. Confirmatory factor analysis (CFA) using LISREL
8.30 was employed for examining construct validity of each scale by assessing
how well the individual item measured the scale. During this process, only one
item in customer focus scale was deleted due to poor loading on its latent
908 variable. The goodness of fit indices (GFI) of the nine constructs exceeded the
0.9 criterion suggested by Kelloway (1998), hence, establishing the construct
validity. The reliability analysis was conducted by calculating the Cronbach’s
alpha for each scale. The result shows that the Cronbach’s alpha measure for
the nine constructs exceed the threshold point of 0.7 suggested by Nunnally
(1967), and this is very encouraging given that the product innovation and
process innovation constructs are still in the exploratory stage. The final
results of construct validity and reliability tests of the nine constructs are
reported in Table II.
Having met the requirement of construct validity and reliability, the
composite measure of each construct can be measured by calculating their
mean values (Hair et al., 1998). The results are presented in Table II.

5.2 Structural relationship analysis

5.2.1 The relationship between TQM and organization performance. SEM using
LISREL 8.30 was employed for examining the relationship between a set of
TQM practices and three types of organizational performance (i.e. product
quality, product innovation and process innovation) simultaneously, as shown
in Figure 2. In this model, TQM is represented as a single latent construct
composed of six variables, regressed against three latent constructs of
organization performance, each measured by a single variable.
The path coefficient between TQM and each of the five variables (lx2,1, lx3,1,
lx4,1, lx5,1, and lx6,1) and the respective error variances were estimated, except
that between TQM and leadership variable (lx1,1) that was fixed to 1. On the
other hand, none of the paths of the endogenous variables (i.e. organizational

No. of items Goodness Standard Cronbach’s

Construct (final) of fit index Means deviation alpha

Leadership 4 0.980 3.756 0.825 0.8580

Strategic planning 4 0.998 3.567 0.901 0.8242
Customer focus 5 0.976 3.918 0.684 0.7853
Information and analysis 4 0.991 3.543 0.878 0.7992
Table II. People management 5 0.974 3.431 0.802 0.8303
Construct validity and Process management 6 0.978 3.601 0.707 0.7922
reliability and the Product quality 4 0.983 4.197 0.547 0.8839
values for composite Product innovation 5 0.970 3.377 0.697 0.8684
measures Process innovation 4 0.953 3.533 0.676 0.8909
performance) were estimated since each of the organizational performance TQM practices,
constructs was explained by a single observed variable. As such, the path quality and
coefficients between observed and latent variables in organization performance innovation
(ly1,1, ly2,2, and ly3,3) were set at a fixed value using the square root of the
construct reliability (presented in Table II), and their error variances were
calculated using the formula: error variance¼(1 2 construct reliability) £ the 909
variance of the variable (Germain and Spears, 1999, p. 380). In addition, three
error correlations (c) were also estimated: between product quality and product
innovation, between product quality and process innovation, and between
product innovation and process innovation constructs in order to examine the
causal relationship among these three performance measures
Table III presents a summary of the standardized values of estimation as well
as GFI. The three GFI justify the robustness of the overall model with the GFI
well exceeding 0.9, and both RSMEA and SRMR are well below 0.05. The path
coefficients between the six variables and the TQM latent variable are all highly
significant as well as being reasonably high, thus validating the measurement
model of TQM practices. This indicates that TQM is normally implemented as a
set of practices instead of loosely, as concluded in previous studies (Ahire et al.,
1996; Grandzol and Gershon, 1998; Samson and Terziovski, 1999).
The most important result in this model is the significant relationship
between TQM and the three performance constructs (all t-values . 2.581),
suggesting that TQM significantly and positively relates to quality performance
as well as innovation performance. This provides a criterion validity on the
relationship between TQM and the three organization performance measures as
well as supporting the positive arguments on the relationship between TQM
and innovation performance as discussed in the literature. It is important to
note, however, that the results also indicate that the strengths of the relationship
between TQM and quality performance and those between TQM and
innovation performance are different. The path coefficient between TQM and
product quality (g11 ¼ 0.572) has the highest value, followed by that between

Figure 2.
LISREL model of the
relationship between
TQM practices and
organizational
performance
IJQRM
Latent construct Observed variable Parameter Estimatea t-value
20,8
TQM lead (leadership) lx11 0.799 –
TQM plan (strategic planning) lx21 0.750 11.763
TQM cust (customer focus) lx31 0.680 10.229
TQM info (information and analysis) lx41 0.730 11.241
910 TQM peop (people management) lx51 0.860 14.413
TQM proc (process management) lx61 0.805 12.998
QUAL (product quality) qual (product quality) ly11 0.941b –
PDIN (product innovation) pdin (product innovation) ly22 0.932b –
PCIN (process innovation) pcin (process innovation) ly33 0.945b –
Exogenous latent construct Endogenous latent construct
TQM QUAL (product quality) g11 0.572 7.695
TQM PDIN (product innovation) g21 0.449 5.771
TQM PCIN (process innovation) g31 0.466 6.112
Endogenous latent construct Endogenous latent construct
QUAL (product quality) PDIN (product innovation) c12 0.130 1.965
QUAL (product quality) PCIN (process innovation) c13 0.394 5.573
PDIN (product innovation) PCIN (process innovation) c23 0.425 5.608
Goodness of fit statistics Value
Table III. Root mean square error
Summary of LISREL approximation (RMSEA) 0.056
output of the Standardized root mean square
relationship between residual (SRMR) 0.034
TQM practices and GFI 0.963
organizational Notes: a Standardized results; b estimated by calculating the square root of the reliability of the
performance respective construct

TQM and process innovation (g31 ¼ 0.466), and finally between TQM and
product innovation (g21 ¼ 0.449), suggesting that TQM has a higher
explanatory power on quality performance than on innovation performance.
5.2.2 The relationship between quality and innovation performance.
Regarding the relationship between quality performance and innovation
performance, it is necessary to verify whether the causal relationship among
these organizational performance measures was a genuine connection, or
whether it was spurious due to the influence of TQM as their common
antecedent. This test was conducted using partial correlation among the three
types of performance when TQM was controlled (Bagozzi, 1980). The results,
as presented in Table IV, yield significant values at 0.05 level or better,

Table IV. V1 V2 V3
Partial correlations
among organizational Product quality (qual) 1.000
performance measures Product innovation (pdin) 0.169* 1.000
controlling for the six Process innovation (pcin) 0.469** 0.454** 1.000
TQM variables Notes: * Significant at p , 0.05; ** significant at p , 0.01
suggesting that the causal relationships among the organizational performance TQM practices,
measures are genuine. However, the result also indicates that the correlation quality and
between product quality and product innovation is weaker than the other two innovation
correlations.
The strengths of the three causal relationships among the three performance
variables are examined by observing the value of error correlations (c)
identified in the result of SEM. The result in Table III shows that the three 911
correlations are significant at 0.05 or better, indicating that the variance in each
of the performance variables is explained by the other type of performance, in
addition to what is contributed by their common antecedent (i.e. TQM). The
results also indicate that the causal relationship between product quality and
product innovation (t-value ¼ 1.965 and c12 ¼ 0.130) is weaker compared to
the other two relationships between product quality and process innovation
(t-value ¼ 5.573 and c13 ¼ 0.394) and between product innovation and process
innovation (t-value ¼ 5.608 and c23 ¼ 0.425), and therefore confirms the
previous finding of the partial correlation.
These findings of significant causal relationships among the three performance
variables not only negate the theoretical proposition suggesting a negative
relationship between quality and innovation performance, but also indicates
cross-fertilization between quality and innovation performance, particularly that
involves process innovation. This means that achievement in quality performance
impacts on innovation performance, and vice versa. Whilst the strong and
positive association between product and process innovation confirms the
findings of the study by Kraft (1990). The overall result in this section indicates
that process innovation is strongly related to both product quality and product
innovation performance and therefore it could be inferred that process innovation
mediates the relationship between the other two performance variables.

6. Discussion
Overall, the results of the SEM indicate that TQM significantly and positively
relates to quality performance as well as innovation performance, hence
supporting the positive argument for the relationship between TQM and
innovation performance outlined in the literature review section. This result
also confirms the findings of several previous studies in this area, such as
Baldwin and Johnson (1996), Flynn (1994), Gustafson and Hundt (1995), and
McAdam et al. (1998). The SEM result, however also indicates that the
explanatory power of TQM is higher toward quality performance than
innovation performance. This is plausible as TQM was originally intended by
its advocates (e.g. Deming, Juran, Crosby, and Ishikawa) for achieving quality
performance (in terms of conformance) rather than innovation (novelty or
newness), as asserted by Wilkinson et al. (1998, p. 8):
In terms of TQM, however, it is essential to appreciate that the quality gurus’ conception of
quality is meeting reliable and consistent standards in line with customer requirements.
IJQRM Although Bounds et al. (1994) argue that TQM has evolved from being focused
20,8 on quality control to capturing more comprehensive and wider organizational
aspects, it seems that its principal course remains on quality control and
assurance. Focusing on quality by conformance means that organizations need
to emphasize the use of certain techniques (e.g. SPC) and standards to reduce or
eliminate variation, something that cannot be applied in innovation with a
912 similar fashion (Kanter, 1983; Morgan, 1993). Therefore, while the results have
demonstrated that TQM has a positive and significant relationship with
innovation performance, it also implies that TQM in its own right is less
effective for organizations to maximize their innovation performance.
From the innovation point of view, the positive result on the relationship
between TQM and innovation also provides an important confirmation. Under
the context of innovation studies, TQM is considered as one form of innovation
(Cooper, 1998; Westphal et al., 1997; Yamin et al., 1997), and innovation scholars
have expressed their interest in examining the impact of adoption and
implementation of particular innovation. This is because they suggest that a
successful adoption of innovation in terms of implementation of a set of
practices will result in a wide range of consequences, the intended or
anticipated ones as well as the unintended ones (Tornazky and Flischer, 1990).
Given the fact that TQM was initially intended more for achieving quality (by
conformance) performance, innovation performance can be considered as the
intended result or a secondary effect resulting from the adoption of TQM.
The positive result on the relationship between TQM and innovation
performance is augmented by the finding responding to the RQ2 that shows a
causal relationship between quality performance and innovation performance.
This suggests that the variance in both product innovation and process
innovation performance is also explained by product quality performance on
top of what is contributed by their common antecedent, TQM. This result
therefore rejects the proposition suggesting that organizations need to choose
between quality and innovation, and even focusing on one at the expense of the
other; instead, it implies that organizations that excel in quality are likely to
also excel in innovation, as Nowak (1997, p. 132) suggests:
Division of quality and innovation is, to some substantial extent, largely theoretical, not
practical. In practice, because of self-reinforcing and dual-direction character of the impact
quality management and innovation have on one another, firms seek quality through
innovation or innovate through quality improvement.
Finally, we attempt to build a link between the two parts of this study by
analyzing the difference in the degree of relationships between TQM and
organizational performance as well as the associations among the three types of
organizational performance. As identified by the results, TQM has a strongest
relationship with product quality, followed by process innovation, and finally
product innovation. At the same time, product quality demonstrates a stronger
association with process innovation rather than with product innovation.
 Particularly, the weakest relationship between TQM and product innovation TQM practices,
is consistent with the weakest association between product quality and product quality and
innovation. Therefore, it can be concluded that product is the area where TQM innovation
provides least support for innovation. In their literature review, Prajogo and
Sohal (2001) note that the major difference between TQM and innovation in
terms of behavioral traits, ways of thinking, approaches, and principles is
concerned with the area of product innovation with TQM being more
913
market-pull whilst innovation is more product-push. More specifically, it can be
argued that the more radical the product innovation, the less the contribution
which can be expected from TQM. As mentioned in the earlier section, the
scope of product innovation in our study captures several characteristics of
radical innovation, for example, the early entrant market that reflects the
first-mover strategy. Such strategy cannot fit to the philosophy of TQM,
particularly customer focus, as well as the principle of quality by conformance.
On the other hand, the link between TQM, product quality, and process
innovation indicates a better coherence. This suggests that a strategy focusing
on improving processes to enhance the performance of product quality (i.e.
conformance to specification) could lead companies to the adoption and
implementation of process innovation, even the radical ones, in terms of new
technology in the purpose of enhancing process capability. Although
emphasizing the importance of incremental improvement on processes, Imai
(1986) suggests the combination between incremental and breakthrough
improvement. Similarly, Jha et al. (1996) also suggest that continuous
improvement provides a solid foundation on which radical innovations can be
successfully implemented. Smed (1997) even argues that the accumulation of
systematic and incremental steps of innovations would eventually result in
radical innovations. From an innovation point of view, in order to yield a
significant benefit, the implementation of an innovation must consider the fit of
the innovation to the organizational values and objectives (Klein and Sorra,
1996). In this context, we argue that quality can serve such a fit to ensure that
process innovation, for example, the adoption of new technology, is
implemented within a clear context of organizational strategic objectives.
The combination of these results supports the proposition suggested by
Gobeli and Brown (1994) that from an innovation point of view TQM principles
fits into the category of value-leader which places high emphasis on process
innovation and low emphasis on product innovation. This notion is also
plausible when viewed from a value-chain perspective, particularly between
upstream (design and development) and downstream (production) processes.
As mentioned earlier, TQM is closely related to process control as its origin
was rooted in the principle of statistical process control (SPC) which is mostly
applied at production process although this does not necessarily imply that
TQM ignores upstream processes. At the same time, process innovation is also
closely related to downstream processes with the aim being to enhance its
IJQRM effectiveness and efficiency. On the other hand, product innovation is more
20,8 related to design and development processes where ideas and creativity are
accumulated. However, given that the result has indicated that process
innovation is strongly related to both product quality and product innovation,
this closely binds the overall link between TQM, quality and innovation, and
therefore reinforces the positive relationship between TQM and innovation.
914
7. Conclusion
In response to RQ1, the findings provide empirical evidence that TQM
significantly and positively contributes to innovation performance, in terms of
both product and process. Its contribution to innovation performance, however,
seems to be inferior to that of quality performance. Therefore, while the result
rejected the arguments suggesting that TQM could hinder innovation
performance, care needs to be taken before claiming that TQM in its own right
is sufficient for achieving high innovation performance. In response to RQ2, the
findings indicate a positive and significant relationship between quality
performance and innovation performance, particularly process innovation.
This suggests that the achievement of quality performance as a result of the
implementation of TQM practices does, to certain degree, lead to realization of
innovation performance. Given that TQM was originally intended for realizing
quality performance, innovation performance could then be considered as the
“unintended” result of the implementation of TQM practices, thus providing
further support to the positive notion of the relationship between TQM and
innovation performance. Combining the two sections of the above analysis
provides a plausible evidence and explanation on the positive and significant
relationship between TQM practices and innovation performance because not
only TQM itself would lead to innovation performance, but the quality
performance resulting from TQM practices also contributes to innovation
performance.
Even for those who are still skeptical as to whether TQM could directly lead
to innovation performance, the result of this study strongly suggests that
TQM, at least, establishes a “precondition” for innovation in order to achieve a
real competitive advantage. This means that although quality management
does not directly result in innovation, organizations that want to pursue a high
innovation performance must have the capability to manage quality
requirements of their products before hand, as asserted by Bolwijn and
Kumpe (1990) and Ferdows and DeMeyer (1990). In other words, quality
management is a prerequisite for innovation management, and, therefore, TQM
is necessary although not sufficient for innovation. As such, we strongly argue
that organizations should not decline TQM even though in their industry
quality is no longer considered as a winning order criterion.
The overall implication is that TQM certainly provides a sound systemic
foundation for managing quality on which organizations can further build their
competence and capabilities as well as other strategies to achieve TQM practices,
multidimensional competitive advantage, including innovation. From a quality and
practical point of view, organizations that want to pursue innovation innovation
performance are recommended to adopt TQM and co-align it with other
practices and techniques relating to research and development (R&D) and
technology management. Future studies in this area therefore should be
focused on investigating the compatibility of TQM with those practices in
915
determining innovation performance.

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