Total Quality Management and Just-in-Time Purchasing

Their Effects on Performance of Firms Operating in the U.S.

Hale Kaynak

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9780815330486
• eBook ISBN: 9781135666897
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This study investigates the relation of total quality management (TQM) and just-in-time purchasing (JITP) with respect to firms' performance, based on theories from operations management, organization theory, strategic management and marketing. U.S. companies have implemented TQM and JITP techniques to improve their global competitive position. The lack of empirical research on how these techniques effect firms performance makes it necessary to explain their strategic values as management innovations.

In this study, a cross-sectional mail survey was used with the target population of firms in the continental United States that have implemented either technique, or both. The results indicate that the extent of TQM and JITP implementation positively correlates with a firm's performance. Furthermore, the relation between JITP and financial and market performance is more significant in those industries that face high as opposed to low foreign competition.

In this study, the validity of findings was assessed in four parts: statistical conclusion, internal, construct, and external validity. Each validity type is defined and its threats are discussed. Based on the findings, a revised research model is offered. The author also notes likely avenues of future research for theorists and practitioners.

II
Literature Review

As Ford pointed out, people follow tradition. This might be acceptable in private life, but in industry, outdated customs must be eliminated.

Ohno, 1988, p. 107

Four main sections are included in this chapter. In the first section, the theoretical foundation of this study is presented through a literature review on innovation and a brief discussion of JIT purchasing and TQM as management innovations. Furthermore, literature on business and operations strategies is discussed, including strategic use of JIT purchasing and TQM systems. The last part of this first section consists of a comprehensive literature review on performance in three functional areas: business strategy, marketing, and operations management. In the second main section, a literature review on JIT purchasing as a strategic innovation is presented. Following a historical development of JIT and JIT purchasing, a review of the characteristics of JIT purchasing is detailed. In the third section, a literature review on TQM as a strategic innovation is offered that includes a historical development and characteristics of TQM. In both sections, literature is analyzed from two perspectives: (1) research design and methodology, and (2) research content. The fourth section begins with a discussion of the relationship between JIT purchasing and TQM and is followed by the benefits of these two techniques pertaining to firm performance. In this section, hypotheses relating to main effects of JIT purchasing and TQM are presented based on a proposed research model. Furthermore, industry type, firm size, firm type, and duration of JIT purchasing and of TQM as potential moderators are discussed and hypotheses relating to their effects are developed. Figures and tables are incorporated to facilitate the presentation of this chapter.

Innovation, Strategy and Performance

In this section, studies on innovation, strategy and performance are reviewed. The literature review on these three concepts lays the groundwork for the main premise that TQM and JIT purchasing are strategic management innovations that can be used to increase firm performance.

Innovation

Although there is a vast array of literature on innovation, it is difficult to find agreement on the definition of innovation, on types of innovation, or on innovation process. The main disparity in the definition of innovations relates to the generation of ideas for the first time in an organization.

According to one school (Pierce & Delbecq, 1977; Thompson, 1965), innovation is the generation, acceptance and implementation of new ideas, processes, products or services for the first time within an organizational setting. Another school (Becker & Whisler, 1967; Bigoness & Perreault, 1981; Damanpour & Evan, 1984; Knight, 1967; Mohr, 1969; Rogers, 1983; Van de Ven, 1986) does not include the generation of ideas in its definition of innovation but simply defines innovation as a practice or concept that is considered new. In this study, the definition of innovation is the one adopted by Damanpour and Evan (1984): "the implementation of an internally generated or a borrowed idea—whether pertaining to a product, device, system, process, policy, program, or service—that was new to the organization at the time of adoption" (p. 393).

The disparity in classifying types of innovations is even more profound. Several researchers (Aiken, Bacharach, & French, 1980; Kimberly & Evanisko, 1981; Thompson, 1965) classify the types of the innovation as either technological or administrative. Technological innovations involve change in the technology of organizations. Administrative innovations relate to changes in an organization's structure or its administrative processes (Damanpour, 1987). Damanpour (1987) adds a third type, ancillary innovations, which are organization-environmental boundary innovations, such as services provided to the community by a library. Other innovation scholars (Dewar & Dutton, 1986; Ettlie, 1983; Ettlie, Bridges, & O'Keefe, 1984) distinguish radical process innovations from incremental process innovations. Radical innovations require fundamental changes in technology, whereas incremental innovations are small or simple changes in the existing technology (Dewar & Dutton, 1986). According to Dewar and Dutton (1986), the main difference between radical and incremental innovations is the degree of knowledge contained in the innovation. Normann (1971) names incremental innovations as variation innovations and radical innovations as reorientation variations. Kaluzny, Veney, and Gentry (1974) differentiate high-risk innovations from low-risk innovations. Knight (1967) proposes four types of interrelated innovations: product or service innovations, production-process innovations, organizational-structure innovations and people innovations. The innovation types and their definitions are summarized in Table 1.

Although there are numerous classifications of the innovation process, researchers agree that the innovation process starts with awareness of the innovation (Becker & Whisler, 1967; Knight, 1967; Meyer & Goes, 1988; Rowe & Boise, 1974). Knight (1967) suggests that the innovation process in an organization consists of two major stages: the creation of the idea and its development, and the introduction and adoption of the idea. According to Becker and Whisler (1967), the innovation process consists of four stages: stimulus, conception, proposal and adoption. Stimulus to the organization occurs when the use of a new idea is influenced through an individual. Some members of the organization may develop a new idea through participating in professional organizations, or through a need for organizational achievement (Becker & Whisler, 1967). Meyer and Goes (1988) use the term assimilation of innovations for the innovation process and divide the process into three stages: the knowledge-awareness stage, the evaluation-choice stage and the adoption-implementation stage. The knowledge-awareness stage starts with organization members learning the existence of the innovation. The evaluation-choice stage refers to the proposition and evaluation of innovations in an organization. In the adoption-implementation stage, innovations are tried, accepted and expanded. Rowe and Boise (1974)

describe a more comprehensive conceptualization of the innovation process: knowledge accumulation, formulation of innovation, decision, implementation and diffusion. By summarizing all the classifications and adopting Knight's classification, the innovation process can be divided into two stages: awareness of the innovation, and the introduction and adoption of the innovation. Some scholars of innovation suggest that there may not be a universal theory of the innovation process that can be applied to all types of innovations (Dewar & Dutton, 1986; Downs & Molir, 1976; Kimberly & Evanisko, 1981; Zaltman, Duncan, & Holbek, 1981).

D. M. Schroeder (1990) argues that, although scholars recognize the importance of innovation in competitive markets, there is a lack of research on the innovation-strategy link. Based on the literature, D. M. Schroeder (1990) identifies three patterns that drive concurrently the evolving effect of innovations: (1) innovations have a characteristic of ongoing development rather than emerging in their final form; (2) innovations achieve full potential by developing in clusters, depending on each other for synergy; (3) innovations diffuse gradually (see Figure 2). According to D. M. Schroeder (1990), as complementary innovations emanate and co-develop, the effect of innovations changes to a great extent. Abernathy and Utterback (1978) suggest that although there is a relationship between innovation and competitive strategy, this relationship changes over time. As firms grow and change, their competitive environment, their resources and their constraints may vary; in turn, there may be systematic changes in the innovation process (Utterback & Abernathy, 1975).

Lengnick-Hall (1992) examines the relationship between innovation and strategy through the link between innovation and competitive advantage. She discusses four factors which link innovation to competitive advantage:

(1) capitalizing on the strategic configuration, (2) making product/market choices that emphasize high value factors and exclude both low value factors and excessive differentiation, (3) capitalizing on industry-specific timing advantages, and (4) nurturing the specific organizational capabilities that enable the firm to exploit the results of innovation activity, (p. 417)

Figure 2. Dynamic Forces Model of Innovation's Competitive Impact. "A Dynamic Perspective on the Impact of Process Innovation upon Competitive Strategies," by D. M. Schroeder, 1990, Strategic Management Journal, 11, p. 27. Copyright by John Wiley & Sons Limited. Reproduced with permission.

Although Lengnick-Hall (1992) discusses the role of product quality and the buyer/supplier relationship in innovation and competitive advantage, she focuses more on the relation of product and technology innovations to competitive advantage rather than the linkage of management innovations to competitive advantage. TQM and JIT purchasing, however, are management innovations (e.g., Bartezzaghi & Turco, 1989; Cusumano, 1988; R. G. Schroeder, Scudder, & Elm, 1989) which facilitate the achievement of the desired product quality and a supplier/buyer relationship. It appears that TQM and JIT purchasing as management innovations breed more product and technology innovations in the companies in which they are implemented. In this study, the focus is on the linkage between management innovations and strategy, rather than product innovations and strategy.

As a matter of fact, Butler (1988) recognizes the greater effect of a set of innovations on performance than that of a single innovation as a strategic tool. Each new innovation adds more value to others. Because each innovation is also improving continuously, not only does it increase its own value, but also it enhances the value of related innovations (Butler, 1988). About half of the 58 plants which Ettlie (1990) studied adopted some kind of technological and administrative innovation in order to promote competitiveness. The firms achieved on average a 30 percent improvement in quality where measured...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• TABLES
• ILLUSTRATIONS
• PREFACE
• ORGANIZATION OF THE BOOK
• ACKNOWLEDGMENTS
• INTRODUCTION
• LITERATURE REVIEW
• RESEARCH DESIGN AND METHODOLOGY
• RESULTS OF DATA ANALYSES
• DISCUSSION AND IMPLICATIONS OF FINDINGS
• APPENDIX A
• APPENDIX B
• APPENDIX C
• APPENDIX D
• APPENDIX E
• APPENDIX F
• REFERENCES
• DISSERTATION REFERENCES
• NAME INDEX
• SUBJECT INDEX