The impact of supply chain practices and quality management on firm performance: Evidence from China's small and medium manufacturing enterprises

Abstract

In China, small and medium enterprises (SME) contribute to more than 75% of urban employment opportunities and more than 50% national fiscal revenue. This study uses survey data from 138 small and medium firms in China to explore the impact of supply chain practices and quality management on firm business performances. Business performances include market share performance and innovation performance. The analysis results show that (1) supply chain information sharing has significant positive impact on quality management practices and supplier specific investment; and (2) quality management practices and supplier specific investment have significant positive impact on both market share performance and innovation performance. This study also finds that not only the market share performance and innovation performance but also the level of quality management practice and supplier's specific investment are higher at the coastal Zhejiang province than seven inland provinces. Regarding the supplier specific investment, firms facing severe intense competition tend not to invest as much as those facing fair level of competition. For the firms with different levels of supplier specific investment (i.e. low, and high), this study finds no difference in quality management practice, supply chain information sharing, and business performances. Finally, innovation performance is found to be positively correlated with market share performance. Hopefully, this study reveals the factors how the sample firms achieved sustained success as the average number of years the sample firms existed was 17.5 years which is much longer than the 3.7 years average life cycle of Chinese SMEs.