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23 IPBJ Vol. 6 (2), 23-43 (2014)
TQM AND KNOWLEDGE MANAGEMENT
IMPACTS ON SME PERFORMANCE
RUBINA JABEEN1, ALIYU MUKHTAR SHEHU2
1/2Othmam Yeop Abdullah Graduate School of Business,
Universiti Utara Malaysia
ROSLI MAHMOOD3
3School of Business Management, College of Business,
Universiti Utara Malaysia
BALA ADO KOFAR MATA4
4Department of Business Administration and Entrepreneurship,
Bayero University
ABSTRACT
The purpose of this study is to examine the impact of Total quality management,
Knowledge management and business performance of small and medium
enterprises in Nigeria. SMEs are important to the economic growth of Nigeria,
they are the major source of employment, innovation, poverty alleviation as well
as the improvement of living standards. The study employed cross sectional
research design, using structured questionnaire survey with a sample of 640
SMEs fully operational in Kano state, a total of 511 valid questionnaires were
completed and returned representing 79.8 percent response rate. The nding
from the study shows that the relationship between TQM, KM and business
performance was found to be signicant. The nding of this study will benet
owner/managers of SMEs, regulatory agencies, government at all levels and
will also serve as a frame to future studies. Research limitations and direction
for future studies discussed.
Keywords: Total Quality Management, Knowledge Management, Business
Performance, SMEs.
INTRODUCTION
In today’s dynamic competitive and rapidly changing economic
environment, rm’s aention is increasingly focused on how to manage
their tangible and intangible assets and resources to enhance their
performance and create competitive edge. Total quality management
24 IPBJ Vol. 6 (2), 23-43 (2014)
(TQM) and knowledge management (KM) are considered as
important organizational resources and capabilities used to increase
competitiveness and higher performance. On the one hand, TQM is one
of the important factor that can inuence rm’s performance, while on the
other hand knowledge management has been recognized as an enabler
that contribute to higher performance by creating, storing, transferring
and applying knowledge. Thus it is appropriate to say that both TQM
and KM have similar aims and objectives that is of gaining competitive
advantage and improved performance (Waddell & Stewart, 2008).
According to resource-based view, strategic capabilities are a pool of
internal resources that create competitive advantages (Barney, 1991).
So, these unimitated and unique combination of resources within a
rm have potential to enhance rm’s performance and create sustained
competitive advantages (Barney, 1995; Miller & Shamsie, 1996). In the
view of the resource-based view of the rm (RBV), TQM and KM can be
viewed as important strategic capabilities and organizational intangible
resources. In this empirical study TQM and KM as key strategies have
been associated together and it is expected that the synergy of these two
dierent management approaches will improve the eectiveness and
performance of the rm. However, each strategy is often studied as a
separate discipline in the literature.
LITERATURE REVIEW
Business performance
Generally business performance refers to meeting the rm’s objective or
the success of the business. According to Alchian and Demse (1972)
business performance of a rm can be dened as “the comparison of
the value created by a rm with the value owners expected to receive
from the rm”. On the other hand, Flapper, Fortuin and Stoop (1996)
performance is “the way organization carries its objectives into eect”.
According to (Daft, 2000) business performance is the rm’s ability and
capacity to achieve organizational objectives. Previous studies have
widely investigated how to improve business performance and dierent
predictors and factors of rm performance. In the literature dierent
performance measures such as nancial or non nancial or subjective
measures have been used to measure the business performance of a rm.
In the present challenging dynamic business environment, the
competition has been signicantly increasing in quantity and quality
of products and services. The main purpose of any rm is to provide
IPBJ Vol. 6 (2), 23-43 (2014) 25
customers with products and services that meet and satisfy their needs
and wants (Al-Marri et al., 2007). In the eld of organizational studies and
strategic management literature, performance is considered as one of the
most important constructs (Combs, Crook & Shook, 2005). Therefore,
researchers have conducted considerable amount of research work on
rm’s performance seeking to understand the factors, processes, and
other antecedents that can increase the rm’s outcomes (Jing & Avery,
2008). According to Rogers and Wright (1998); March and Suon (1997)
business performance of a rm has widely been studied as a dependent
variable in organizational research studies.
Total quality management (TQM)
Total Quality Management (TQM) is a management strategy which is
gaining an increasing aention and interest by many researchers (Ehigie
& McAndrew, 2005). TQM is considered as a critical determinant of
the success and survival and a source of competitive advantage of both
manufacturing and service organizations (Douglas & Judge, 2001).
According to Juran (1995) in the global challenging business environment
the signicance of TQM implementation can full the needs and demand
of customers by providing them with quality products and services. In a
similar context, Williams, Wiele, Iwaardeen and Visser (2004) examined
that TQM is one of the main factor in the creation of sustainable
competitive advantage. Total quality management (TQM) is a holistic
approach to continuously improving the quality of products and
services through the involvement of all the stakeholders at all levels and
functions of an organisation (Pfau, 1989). According to Yusuf et al., (2007)
TQM is business management philosophy for the whole organization
to maximize customer satisfaction, gain beer product quality, and to
obtain higher productivity through the systematic removal of waste and
the reduction of non-productive activities.
Knowledge management
Knowledge is debatably as the asset most directly relate to overall
organizational performance (Assudani, 2005; Drucker, 1993). An
increasing body of literature also advocates that in highly dynamic
environments, increased organizational knowledge can reduce risks and
uncertainties (Liebeskind, 1996; Collins, Worthington, Reyes & Romero,
2010). Thus, rms capable of acquiring, storing, utilizing, and integrating
newly discovered knowledge add to their existing knowledge stock
(Ketchen, Snow & Street, 2004). Combining the rm’s current knowledge
resource-stock with newly acquired knowledge-stock can lead to the
26 IPBJ Vol. 6 (2), 23-43 (2014)
creation of new knowledge within the rm (Ketchen et al., 2004) and
the discovery or creation of entrepreneurial opportunities (Zahra, 2008).
While knowledge is a vital resource for any rm, knowledge management
is the level necessary in transforming resource into capability.
The key for eective knowledge application, comprise one of the primary
avenues through which rms eectively utilize their knowledge-based
resources. These capabilities can be particularly valuable to rms in many
competitive contexts (Makino & Delios, 1996; Reed & DeFillippi, 1990).
Firms that have used their knowledge management capability are likely
to succed and survive a myriad of competitive threats in the external
environment (Kogut & Zander, 1993). In particular, eectively managing
the rm’s stocks of knowledge is associated with improved decision
making within the rm (Ling, 2013). In highly competitive industries,
rms need to focus on enhancing their knowledge management
capability to ensure survival. These rms are more likely to integrate
matching resources and achieve superior performance (Harrison et
al., 2001; Ireland et al., 2002). Firms can meet this challenge by actively
managing their knowledge inventories; to do so eectively require that
they focus on building and diusing knowledge. Thus, the development
of knowledge management expertise involves multiplesteps associated
to the acquisition and utilization of knowledge within the rm.
Organizations that actively utilize knowledge management tools can
enhance their ability to create new knowledge within the rm and
achieve superior rm’s performance (Wiltbank et al., 2006).
Total quality management and business performance
In a competitive business environment, businesses need to emphasis
more on quality by geing the information from customers about
their requirements, timely delivery of products and to respond to the
market changes (Martin-Pena & Diaz-Garrido, 2008). According to
Deming (1986) quality is major determinant of success in competitive
environment. Feng et al., (2006) argued that in today’s dynamic market
place, rms must focus on improving quality and innovativeness.
Total quality management is the main factor for gaining sustainable
competitive advantage (Reed et al., 2000). It was also suggested that there
is a relationship between quality and productivity. As quality improves,
there will be less wastage or rework and customer satisfaction will also
be enhanced. Deming (1986) stated that TQM would generate improved
products and services, reduced costs, more satised customers and
employees and improved boom line nancial performance.
IPBJ Vol. 6 (2), 23-43 (2014) 27
Small and medium sized enterprises (SMEs) play a dominant role in
the current global economy and have been considered as the back bone
in most developed and developing countries (Ghobadian & Gallear,
1996). Several researchers such as Fening et al., (2008); Ahire and Golhar
(1996); Bayati and Taghavi (2007) and Temtime and Solomon (2002)
have emphasized that TQM practices can help small and medium sized
enterprises, to be more ecient and more market-focused. Rahman
(2001) explored that most of the literature focused on the implementation
of TQM in large organizations and lile aention has been paid to their
implementation in SMEs. In a similar context, Demirbag et al., (2006)
also noted that there is dearth of literature investigating the relationship
between TQM business performance of SMEs. Moreover, many studies
regarding the implementation of TQM in SMEs were conducted in the
context of developed countries such as US, UK and other European
countries.
Temtime and Solomon (2002) in their study on 52 SMEs in Ethiopia
identied eight critical TQM factors namely; managerial leadership
and commitment; customer satisfaction; continuous improvement;
employees empowerment and involvement; supplier partnership;
quality culture and philosophy; and measurement and feedback. Their
ndings supported that SMEs should adopt TQM for growth and long
term sustainability. Fening, Pesakovic and Amaria (2008) in their aempt
to investigate the relationship between TQM and performance of SMEs
in Ghana, concluded that there are positive signicant relationships
between the seven management practices used in the study namely,
leadership; strategic planning; information and analysis; human resource
management; customer and market focus; quality process management;
and business results and the SMEs business performance. Similarly,
the ndings of empirical study conducted by Salaheldin (2009) on 139
Qatari SMEs revealed that there is a signicant eect of TQM factors on
operational and the organizational performance of SMEs.
Demirbag et al., (2006) examined the relationship between TQM and
performance on 163 SMEs in Turkey and their ndings supported the
existence of strong positive relationship between TQM critical factors
and non-nancial performance of SMEs. Moreover, Lee (2004) carried
out an empirical research on 112 SMEs in China and identied many
diculties in TQM implementation such as the lack of resources, lack
of knowledge, and ineective quality training and poor employee
involvement. However, there has been a consensus among SMEs’ owners
about the importance of TQM for higher business outcomes. In addition,
the ndings of his study showed a positive relationship between TQM
28 IPBJ Vol. 6 (2), 23-43 (2014)
and performance of SMEs. While some studies empirically support that
the successful implementation of TQM can improve performance of rms
(Hendrick & Singhal, 2001; Douglas & Judge, 2001) Kaynak, 2003). On
the contrary, Harari (1993) and Salegna and Fazel (1995) found no aect
of TQM on performance. Similary, McCabe and Wilkinson (1998) and
Yeung and Chan, 1998) found negative relationship amid TQM and the
business performance. In the light of above discussion, it is hypothesized
that,
H1: TQM has a signicant relationship with business performance of
SMEs.
Knowledge management and business performance
Several studies been conducted on knowledge management and
organizational performance, the ndings form the previous studies
appeared to be mixed. Lin and Lee (2005) assessed the inuence of
organizational learning factors and knowledge management process
on e – business adoption. A survey of two hundred and two executives
from Taiwan was used with structural equation modelling for data
analysis. The ndings indicated that organizational learning factors and
KM process are related to the level of e – business adoption. However,
knowledge sharing did nit signicantly aects e – business adoption
system level. Choi, Lee and Yoo (2010) examined information technology
and transactive memory system on knowledge sharing, application and
team performance. A sample of one hundred and thirty nine on – going
teams of seven hundred and forty three indiduals from two major rms
in South Korea was employed. The nding indicated that IT support
in organizations has a positive impact on the development of TMS in
teams, and that both TMS and IT support have a positive inuence on
knowledge sharing and knowledge application. Further, knowledge
sharing has a positive impact on on knowledge application, which has
a direct impact on team performance. Additionally, knowledge sharing
does not have impact on team performance, and team performance was
fully mediated by knowledge application. Similarly, the nding of
Arising from these, Jain (2011) reported a perfect negative relationship
between personal knowledge management and organizational KM and
productivity. Wu and Hu (2012) supported the KM to performance
relationships. Klaas, Semadeni, Klinchak and Ward (2012) examined
the impact of high – performance work systems in SMEs based on
leaders capacity to obtain additional human resource knowledge from
an external experts. A sample of two hundred and ninety four small
IPBJ Vol. 6 (2), 23-43 (2014) 29
business organizations was used. Leaders perceptions of HR eectiveness
are positively related to the use of HPWSs, and that the relationship
is moderated both by the communication pateerns between small
business leaders. The study of Yang (2013) investigated how dierent
knowledge management processes of knowledge acquisition and
dissemination aects manufacturer’s performance. Knowledge based
view and transaction cost economics were employed as the theoretical
underpinnings. The ndings from the study reported a signicant and
positive relationship between KM process and performance relationship.
Additionally, Ling (2013) purposively sampled one thousand top
Taiwanese companies, with one hundred and forty six questionnaire
response. The outcome from the study shows that intellectual capital
positively relate to performance, and knowledge management was found
to moderatebetween intellectual capital and organizational performance.
Aiken, Gu and Wang (2013) established that task technology ts mediates
between knowledge sharing and team satisfaction, but no eect found
on team performance. However, Nawaz, Hassan and Shaukat (2014)
argued on the inuence of three knowledge management practice of
knowledge acquisition, dessimination and responsiveness to knowledge
on innovation and rm performance. Data is collected from four hundred
and seven manufacturing organizations listed in Karachi stock exchange.
Correlation and regression analysis were used for data analysis. The
result shows a positive and signicant relationship between the study
variables, innovation was found to partially mediates the association
between knowledge management practices and rm performance. Based
on these argumenets; the following hypothesis formulated:
H2: Knowledge management has a signicant relationship with
business performance of SMEs.
METHODOLOGY
Research Design
This study employed cross – sectional research design as the data was
generated in a single point at a given time (Kumar, Abdul Talib &
Ramayah, 2013; Zikmund, Babin, Car & Grin, 2013; Sekaran & Bougie,
2003). The study also adopts quantitative research approach (Sekaran,
Robert & Brain, 2001), which was mostly used in social sciences.
Other previous studies used quantitative research method, Shehu and
Mahmood (2014a), Shehu and Mahmood (2014b); Kheng, June and
Mahmood (2013) and Shukr Bakr and Mahmood (2014)
30 IPBJ Vol. 6 (2), 23-43 (2014)
Population and Sampling Technique
The population of this study covers the entire 1829 SMEs (SMEDAN,
2012) fully operational in Kano – Nigeria. Systematic sampling technique
was adopted to select 320 respondents using Krejice and Morgan (1970)
which was later doubled to 640 as recommended by Hair, Wolnger and
Ortinal (2008); Sekaran et al., (2001).
The unit of analysis for this study is at organizational level which cover
the entire SME owner/managers. A self – administered questionnaire
also called drop- o and pick procedure served as the data collection
method. The present study has a response rate of 79.8 percent, which is
considered adequate (Shehu & Mahmood, 2014c).
Measurement of Constructs
In this study, all variables were measured using the 5- point scale,
ranging from 1 (strongly disagree) to 5 (strongly agree) based on the
previous works of Noor and Muhammad (2005), Awang, Isma’il and
Mansoor (2014). There are three variable in this study, as regard to
business performance, a total of six items adopted from Suliyanto and
Rahab (2012). Total quality management measures were adopted from
Idar and Mahmood with nine items, Knowledge management, fourteen
items adopted from Wang, Hult, Ketechen and Ahmad (2009).
STATISTICAL ANALYSIS AND RESULT
Content validity
Content validity simply refers to an intense in which all the items
designed to measure a given construct should have a high loading in the
construct were designed to measure. Thus, factor loading could be used
to assess the content validity as recommended by Hair, et al., (2010) and
Chin (1998). Table 1 indicated that all the variable signicantly loaded
on their respective constructs and possess a good value of 0.5 and above.
Table 1 Cross – loading of the items
BP TQM KM
BP01 0.740671 0.411315 0.113813
BP02 0.725697 0.365271 0.103346
(Continued)
IPBJ Vol. 6 (2), 23-43 (2014) 31
BP TQM KM
BP05 0.716426 0.356853 0.064999
BP06 0.699282 0.448878 0.044330
TQM01 0.344120 0.695461 0.046025
TQM12 0.434699 0.754461 -0.009246
TQM02 0.426398 0.774398 0.059973
TQM24 0.366208 0.623105 -0.002154
KM03 0.088521 -0.000068 0.812104
KM05 0.085753 0.047025 0.592225
KM07 0.059646 0.023315 0.736443
The convergent validity
Bagozzi, Yi and Philips (1991) and Hair et al., (2010), sees convergent
validity as the extent to which a set of variables meets in measuring the
concept on the construct. The convergent validity can be established,
based on SEM literature, by using items reliability, composite reliability
and the average variance extracted. That is, the item of each construct are
highly loaded and statistically signicant in measuring their respective
constructs (Bagozzi, et al., 1991; Hair, et al., 2010). Table 2, shows that the
average variance extracted values are more than 0.5 and the composite
reliability values of the constructs exceeded the recommended value of
0.7, it can be conrmed that the measurement model has an adequate
level of convergent validity.
Table 2 Convergent validity analysis
Constructs Items Loading Cronbach’s
Alpha
Composite
Reliability
AVE
Business
performance
BP01 0.740 0.692 0.812 0.519
BP02 0.725
BP05 0.716
BP06 0.699
TQM Tqm01 0.695 0.677 0.805 0.510
Tqm12 0.754
Tqm02 0.774
Tqm24 0.623
Knowledge
management
KM03 0.812 0.626 0.759 0.517
KM05 0.592
KM07 0.736
32 IPBJ Vol. 6 (2), 23-43 (2014)
The discriminant validity
Discriminant validity is considered to be the degree to which a set of items
dier from one construct to other construct. In examining discriminant
validity of the measurement model, the Fornell and Lacker (1981) criteria
was used. Table 3. Indicate the correlation matrix in which the diagonal
element represent the square root of the average variance extracted of
the latent constructs. The result of the correlation matrix indicated in the
table below ensures that the discriminant validity is conrmed.
Table 3 Correlation matrix of the variables
Variable BP TQM KM
1Business performance 0.72
2Total quality management 0.553 0.714
3Knowledge management 0.325 0.252 0.719
The measurement and hypothesized model
TQM1
0.000
TQM12
TQM2
TQM24
0.695
0.754
0.774
0.623
Busp
0.316
KM03
KM05
KM09
BP1
BP2
BP5
BP6
Busp
0.000
0.551
0.812
0.592
0.736 Kmgt
0.741
0.726
0.716
0.699
0.095
IPBJ Vol. 6 (2), 23-43 (2014) 33
Table 5 Hypotheses testing
Path
Coecient
Std. Error T Value P Value Decision
TQM <- Busp 0.550641 0.036867 14.935 0.000 Supported
Kmgt -> Busp 0.094624 0.041081 2.303 0.022 Supported
DISCUSSION AND RESEARCH IMPLICATIONS
This study examined the impact of total quality management and
knowledge management on small and medium enterprises performance
in Nigeria. The study found support for the direct relation between TQM
and business performance. This result was consistent with previous
study by Lee (2003); Joiner (2007); Salahdin (2009); Malik et al., (2010);
Volmohammadi (2011) and Yunis, Jung and Chen (2013). However, the
relationship between knowledge management and business performance
was also supported. This nding is in line with the previous study by Lin
(2005); Wu and Hu (2012); Choi, Lee and Yoo (2010); Yang (2013) and
TQM1
TQM12
TQM2
TQM24
16.268
26.817
27.870
15.604
Busp
KM03
KM05
KM09
BP1
BP2
BP5
BP6
Busp
14.936
3.815
2.306
3.007 Kmgt
25.152
24.439
19.647
23.821
2.303
34 IPBJ Vol. 6 (2), 23-43 (2014)
Ling (2013). The signicance of TQM and knowledge management (KM)
and their contribution to rm’s performance is increasingly gaining
recognition worldwide.
Summers (2006) explored that TQM tends to improve the quality of
products, beer use of resources, decrease in cost, fewer number of
mistakes, reduced delays in production and delivery. This in turn
enables a rm to acquire more market share and boost the performance
which guarantees its continuous stay in business and provision of
more jobs. Likewise, KM practices are important drivers of business
performance as it plays a key role not only inuencing and directing the
conduct of routine business operations, but also provides a foundation
for long-term business success (Sinkovics & Roath, 2004). The ndings
of this research provides an in depth understanding for the academia
and researchers regarding implementation of TQM and KM in SMEs for
higher performance. The results of this study will give a guide map for
the policy makers and practitioners to devise those policies which can
help and support the current and future entrepreneurs. The theoretical
implication can be that the study extends the existing body of knowledge
by examining TQM and Knowledge management relationship to business
performance of SMEs. It has also tested and validated the instrument
that were developed by previous researchers and validated in US and
European context.
LIMITATION AND FUTURE RESEARCH
This study is limited only to those SMEs operating in Kano, north western
part of Nigeria. A cross – sectional research design was employed, which
collect data only ones. Future studies may consider other countries.
The study recommends the use of moderating and mediating variables
between the TQM, KM and business performance. A longitudinal study
is suggested, that may allow data collection activity over a long period
of time. The use of other statistical packages could be used in examining
this model in the future.
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