TQM and performance: Is the relationship so obvious?

Abstract

The aim of this study is to explore more fully the relationship between total quality management (TQM) and firm performance, taking TQM as an internally consistent system of practices. The paper tests the link between the two variables using the universal approach, analyzes whether the most competitive firms are those adopting TQM, and tests for an isomorphic effect on other firms. The study uses a sample of Spanish firms that have received TQM prizes at the national or regional level between 1997 and 2003 and a control sample for comparison. The findings indicate that in the absence of any evidence to confirm the universal hypothesis, TQM pioneers experience performance gains, because of the early implementation of the system; however, late adopters do not experience similar results. Firms using a TQM system are not necessarily better than their counterparts are, before putting the system into action. One important aspect of the contribution of this study is of a methodological nature, since it uses panel data, which takes into account the unobservable heterogeneity between individuals and the dynamics of firms’ financial variables.