The relationship between effectiveness of quality management and total factor productivity

Abstract

In a large number of companies, quality management (QM) programs and standardization in the field of quality have not led to higher organizational efficiency or better performances; therefore, the goal of this work is to conduct empirical research into whether quality management factors serve as reliable and valid predictors of total factor productivity (TFP) and if so, how they influence it. The data were collected in the period 2004 to 2009 from a stratified random sample drawn from Serbian industrial firms certified according to ISO 9000 with a total number of 176 observations from the research instruments. In order to determine the total factor productivity through the production function, those variables which describe the dependence of added value and labour and capital factors of production were used. For the QM data, the results underwent factor analysis and composite reliability calculations so as to be used later as independent variables in multiple regression. The central finding of this study is that QM factors provide a reliable and valid instrument for predicting total factor productivity. Two of the elements of QM, leadership and management support for quality programs and continuous quality improvement, proved to have a significantly positive effect on TFP, while the other categories in our study did not. The results of the research are directed at showing companies with limited resources which QM elements they should pay more attention to in the aim of achieving higher productivity.