Quality management approaches and their impact on firms׳ financial performance – An Australian study

Abstract

The study of small manufacturing firms typically focuses on issues of entrepreneurship, business or operations strategy. Alternate issues remain scarce, and the implications for organisational performance are modest. In the Australian context, managers have often been criticised for their failure to recognise that quality and innovation are a key driving force to performance. This research utilises the work of several authors to develop quality orientations for small Australian manufacturing firms (SAMFs) to purposefully bridge the gaps in the business literature, and enable the evaluation of various performance outcomes. Specifically, this study investigates whether a firm׳s stated quality orientation is useful in differentiating firm performance. The research utilises longitudinal panel data gathered by the Australian Bureau of Statistics growth and performance survey over four years from financial year 1995 to 1998. We demonstrate that firm quality management orientation does provide a statistically significant financial performance advantage (and by inference survival advantage) over those SAMFs who do not engage in quality management. The research is a significant addition to the quality – financial performance literature, and provides a pathway forward for the use of two new financial (productivity) ratios as performance measures.