QM Practices

Decision Sciences
Volume 45 Number 1
February 2014
2014 Decision Sciences Institute
Customizing Quality Management

Practices: A Conceptual and Measurement
Framework
Dongli Zhang
Gabelli School of Business, Fordham University, 441 East Fordham Road, Hughes Hall 510,
Bronx, NY 10458, e-mail: dzhang@fordham.edu
Kevin Linderman
Carlson School of Management, University of Minnesota, 3150 CarlSMgmt Building
32119th Avenue, South Minneapolis, MN 55455, e-mail: linde037@umn.edu
Roger G. Schroeder
Department of Organization and Strategy, Tilburg University, Tilburg, the Netherlands,
e-mail: rschroed@umn.edu
ABSTRACT
Quality management (QM) has often been promoted as a universal remedy, where organizations adopt these practices to enhance performance. However, implementation
of QM has led to mixed results with some high-profile failures. Some suggest that
customizing QM practices to fit the organizations situational context can help avoid
implementation failure and improve performance. However, research has not fully investigated how organizations should go about customizing quality practices. This article
addresses this question by conceptualizing two fundamental yet different aspects of QM
practices that have different learning objectives: quality exploitation (QEI) and quality
exploration (QER). Drawing on experts and empirical data, we develop a reliable and
valid set of measures for QEI and QER. Furthermore, the analysis shows the performance differences in the two sets of QM practices across different contextual settings.
Specifically, the empirical results show that the benefits of different QM orientations
depend on the level of competition and rate of product change. This research challenges prior conceptualizations of QM, and suggests a practical framework to guide
decision makers in customizing QM practices. [Submitted: February 28, 2012. Revised:
December 7, 2012. Accepted: March 13, 2013.]
Subject Areas: Exploitation, Exploration, Organizational Learning, and

Quality Management.
Corresponding
author.
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Customizing Quality Management Practices
INTRODUCTION
Organizations increasingly search for new ways to improve products and processes
to increase customer satisfaction and competitive performance. Various organizations have implemented a number of different quality management (QM) practices.
Successful implementation of QM by some leading companies has led many other
organizations to emulate their QM practices. However, despite the success of some
organizations with QM practices, a number of studies show a pattern of failure
(Goldman, 2005; Foster, 2007; Zu, 2009). Studies show that only about a third
of the companies that implement QM practices achieve the expected results. For
instance, Taylor and Wright (2003) found failure rates of implementing QM as
high as 6070%. In some studies the failure rate was even higher when customers
and suppliers evaluated performance rather than the companies themselves (Hayes,
Pisano, Upton, & Wheelwright, 2003).
Researchers have noticed this problem and have begun to offer explanations
for the mixed results. Contingency theory offers one possible theory to understand
the differences in performance of QM practices (Foster, 2010; Sousa & Voss, 2008).
According to Sousa and Voss (2008), research should take a contingency approach
rather than assume universal applicability of QM practices. However, most of
the empirical work treats QM as a single set of practices and does not allow for
customization. Sitkin, Sutcliffe, and Schroeder (1994) point out that the existing
studies treat QM as a single set of practices, which limits our understanding
of the relationship between QM and performance. Most conceptualizations and
measurement schemes of QM practices assume that all organizations implement
the same type of quality practices. For instance, Flynn, Schroeder, and Sakakibara
(1995) develop scales to measure QM practices, but this approach assumes that
all firms have the same orientation to implementing their QM practices. As QM
has matured it has become recognized that firms can benefit from tailoring their
QM practices to their situational needs. But how to tailor QM practices has not
been adequately understood. This study broadly investigates how to customize and
measure QM practices. Although many would agree that firms should customize
their QM practices, there has been little research on developing frameworks and
measurement models to customize QM.
Drawing upon Marchs (1991) notion of exploitation and exploration, this
research empirically discriminates and measures two different yet related sets
of QM practices: quality exploitation (QEI) and quality exploration (QER). On
the one hand, organizations need to control and improve the efficiency of processes, the QEI practices include the QM practices that focus on these objectives. On the other hand, organizations need new insights to innovate and explore new products and processes. The QER practices include the QM practices
that focus on this learning objective. QER keeps organizations open and flexible to new ideas, whereas QEI maintains control and improves efficiency. These
two bundles of quality practices are different yet related to each other. Organizations can choose a mix of the two kinds with different focus to enhance
quality and competitive performance, and we argue the focus of QEI or QER
should depend on the organizations business context. This research builds on
prior work (Dean & Bowen, 1994; Flynn, Schroeder, & Sakakibara, 1994; Sitkin
Zhang, Linderman, and Schroeder
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et al., 1994) to develop a more refined understanding of how to customize QM

practices.
Although scholars note the need to distinguish different QM practices and
customize them to the organizations situational context (e.g., QEI and QER)
(Sitkin et al., 1994), none have developed the appropriate measurement schemes
or demonstrated how these practices vary across different contextual settings.
This article develops measures for the two different orientations of QM based
on different learning goals. It challenges prior measurement schemes that assume
a universal approach to QM, and offers an explanation for the inconsistent performance results in prior studies. It argues that organizations can benefit from
adapting QM practices to their situational context. This general approach can help
decision makers determine how to customize QM practices. More generally, several scholars have argued for the need to consider context (Sila, 2007; Sousa &
Voss, 2008) and customize operations management practices (e.g., Lean), but few
have conceptualized and developed the measurement schemes to customize these
practices.
Based on our measurement scheme, we introduce two contextual variables:
competitive pressure and the rate of product change. The combination of these two
variables provides different environments in which the companies operate. We propose that in each of the environmental settings, different QM practices contribute
to performance in different degrees. This provides guidelines for organizations to
customize their QM practices based on their contextual factors. Besides competitive pressure and the rate of product change, we believe scholars can apply this
more general approach to a wider array of settings.
The rest of the article has the following organization. In the next section, we
will describe the theory of customizing QM practices, the QEI/QER measurement
scheme, and will develop hypotheses. Then we explain the steps of instrument
development and research methods used to examine the reliability and validity
of the measurement model. Next, we further support the QEI/QER measurement
scheme by investigating the different performance implications of QEI and QER
when organizations face different levels of competitive pressure and rate of product
change. Finally, we discuss the contributions and limitations of the research and
future research directions.
THEORY OF CUSTOMIZING QUALITY PRACTICES

Differentiating Quality Practices
Theory for QEI/QER based on learning orientation
Scholars have developed measurement schemes of QM which have provided a
foundational understanding of these practices (e.g., Anderson, Rungtusanatham,
Schroeder, & Devaraj, 1995; Flynn et al., 1995). Although QM practices can
improve organizational performance, several organizations have had mixed performance results in implementing QM (Zu, 2009). Simply benchmarking other
organizations QM practices may not result in the desired performance benefits
(Talib, Rahman, & Qureshi, 2011). Scholars have recognized the need to customize
QM to contextual factors (Sitkin et al., 1994; Sutcliffe, Sitkin, & Browning, 2000;
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Westphal, Gulati, & Shortell, 1997; Zhang, Linderman, & Schroder, 2012), but
few have provided insights on how organizations can customize QM practices to
their situational needs. This study conceptualizes two bundles of QM practices
based on their learning goals. The exact mix of QM practices will depend on the
organizations fundamental learning goals.
March (1991) proposed that organizations have two fundamental types of
learning goals: the exploration of new possibilities and the exploitation of old certainties. The notion of exploitation and exploration has emerged as an underlying
theme in research on organizational learning (Calantone & Rubera, 2012; Kim,
Song, & Nerkar, 2012; Vera & Crossan, 2004). Exploitation learning goals emphasize the need for efficiency, customerresponsiveness, and reliable processes;
whereas exploration learning goals anticipate changing requirements and innovation (Benner & Tushman, 2003; He & Wong, 2004; OReilly & Tushman, 2011).
The general concept of explorationexploitation offers a conceptual framework
for understanding how to customize QM practices. This study conceptualizes two
bundles of QM practices based on their learning goals.
According to March (1991), exploitation refers to activities such as refinement, choice, production, efficiency, and execution; whereas exploration refers
to activities such as search, discovery, experimentation, variation, and innovation. Posen and Levinthal (2012) further develop Marchs notion of exploitation
exploration and provide insights into the relative benefits of these two learning
goals in different contextual settings. QM practices can also be viewed from an
exploitationexploration perspective. On the one hand, organizations need to control and improve efficiency of existing processes to enhance customer satisfaction
and competitiveness. So QEI refers to the QM practices that aim to control and
improve existing processes. On the other hand, organizations need to develop new
processes and explore the unknown. Thus, QER refers to the QM practices that
aim to explore the unknown and to identify and pursue novel solutions. The two
types of practices are not totally exclusive of each other, which implies that organizations can have a mix of these practices that fit their learning goals. However,
the degree to which they need to address these different learning goals depends on
contextual factors that the organization confronts. Understanding these two fundamental learning orientations helps decision makers determine how to customize
QM practices to their contextual setting. The following sections differentiate quality practices based on their learning orientations.
Common QM precepts
In order to define the QEI and QER constructs, the underlying precepts of QM need
to be outlined first, and then the precepts can be parceled into QEI and QER. QM has
been defined differently in literature. However, the underlying precepts of QM have
gained consistency in their meaning. Sousa and Voss (2002, p. 106) state that QM
can be reliably distinguished from other strategies for organizational improvement
and there is substantial agreement in the literature as to which practices fall under
the QM umbrella. A good definition of QM should be parsimonious and based
on prior theory (Wacker, 1998, 2004). Snell and Dean (1992, p. 470) succinctly
define QM as a management approach that can be characterized by a few basic
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Table 1: Most commonly used QM elements.

QM Elements
Leadership
Customer focus
Process management
Employee
involvement/Team
work
Training
Supplier QM
Descriptions
Creation of quality awareness, establishment of quality goals,
acceptance of quality responsibility, participation in the
quality initiative
Fulfillment of customer needs, input from customer
requirements, feedback from customers
Process definition, statistical process control, process
improvement
Employee participation on quality teams, employee
responsibility for quality, employee suggestions
Employee training in problem solving techniques,
communication, and skills
Long-term, cooperative relationships with suppliers, a small
number of reliable suppliers, supplier involvement in
production and design
Supporting Literature: Dean and Bowen (1994); Flynn et al. (1994); Flynn et al. (1995);
Anderson et al. (1995); Powell (1995); Ahire et al. (1996); Ahire and OShaughnessy
(1998); Rungtusanathan et al. (1998); Malcolm Baldrige National Quality Award Criteria
(2000); Ahire and Dreyfus (2000); Douglas and Judge (2001); Kaynak (2003); Sila (2007).
principles as well as a number of associated practices. The fundamental principles

of QM generally include customer focus, process focus, and teamwork (Dean &
Bowen, 1994; Evans & Lindsay, 2011). In addition to Dean and Bowens (1994)
framework, scholars have developed more detailed and complex frameworks of
QM practices (e.g., Ahire, Golhar, & Waller, 1996; Ahire & OShaughnessy, 1998;
Flynn et al., 1994; Kaynak, 2003; Powell, 1995; Rungtusanatham, Forza, Filippini,
& Anderson, 1998). Table 1 gives a parsimonious yet comprehensive list of the
most commonly used elements identified in the QM literature.
Four commonly used dimensions of QM that are adaptable within an organizational unit have been identified in this study: customer focus, process management, teamwork, and training. These dimensions are relevant to both theory
(Dean & Bowen, 1994) and practice (Evans & Lindsay, 2011). They address the
dimensions of well-established theories in QM (Dean & Bowen, 1994; Sitkin et al.,
1994).
Define QEI versus QER

Customer focus. The customer is the principal and ultimate judge of quality
performance. The goal of fulfilling customer needs is fundamental to QM (Dean
& Bowen, 1994; Escrig-Tena & Bou-Llusar, 2005). Organizations need to design
and deliver products that fulfill customer needs. Organizations that understand
both internal and external customers wants and needs can develop a competitive
advantage (Wheelwright, 1989). To create satisfied customers, organizations need
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to identify customers needs, design the production and service systems to meet
those needs, and measure the results as the basis for improvement.
QM practices related to customer focus have different goals or objectives.
For example, some practices focus on satisfying current customer requirements,
whereas other practices focus on identifying emergent customer requirements.
When organizations face different contextual situations, one type of customer
practice can contribute more to performance than the other. Although both
types of practices could be called customer focus, they have different goals.
Exploitative-oriented customer practices focus on the customers current needs
and wantsconsistent with conformance quality or meeting specifications. In
contrast, exploratory-oriented customer practices aim to identify customers new
needs and desires. These practices occur in the early stages of product design and
are consistent with the concept of design for quality, where early involvement
of the customer becomes vital to understanding their emergent needs.
Process management. Organizations can be viewed as a set of interlinked
processes or a system, and QM focuses on controlling and improving these processes (Ahire et al., 1996; Ahire & OShaughnessy, 1998; Flynn et al., 1994;
Kaynak, 2003; Powell, 1995; Rungtusanatham et al., 1998). A process orientation reflects an organizations commitment to enhance the reliability and control
of processes, whereas at the same time searching for better ways to change and
improve them. Sitkin et al. (1994) emphasize both process control and process
improvement when they define the QM principle of continuous improvement of
a system. According to Sitkin et al. (1994), continuous improvement includes the
firms desire for reliability, control, and at the same time, the pursuit of learning and
experimentation. Dean and Bowens (1994) framework discusses the principle of
continuous improvement and includes the practices of process analysis, reengineering, problem solving, and plan/do/check/act, which also reflects a process focus
of the improvement effort. In practice, several quality practices enhance organizational performance by controlling and improving processes. Implementing process
control and improvement tools exposes employees to data about their work processes, and encourages them to use scientific methods to analyze and improve these
processes.
Process management practices involve not only the activities necessary to
achieve consistent performance on key processes, but also help identify opportunities for process improvement. For example, statistical process control (SPC) helps
monitor and stabilize process which leads to predictable performance, whereas
practices like business process reengineering (BPR) seek to change and improve
processes. Therefore, practices related to process management might have different objectives which could be differentiated by exploitationexploration. For
process management, exploitation oriented practices focus on increasing control
and consistency of existing processes, whereas exploration oriented practices focus
on changing and improving processes.
Teamwork. QM efforts depend heavily on teamwork (Evans & Lindsay,
2011; Kull & Narasimhan, 2010). Quality tools and techniques are implemented
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through teamwork. Teams provide opportunities for workers to solve problems that
cannot be solved by individuals. A single person rarely has enough knowledge or
experience to understand all aspects of work processes. Therefore, teams provide
an essential ingredient for organizational learning and performance improvement.
Teamwork may occur locally within a function or across multiple functions
to solve problems (Dean & Bowen, 1994). Local teams within a function can best
address production problems and resolve issues that emerge within the immediate
process. These teams have the detailed technical and process knowledge to address
emerging issues and resolve problems. Developing a cross functional team would
only slow down the resolution time for this type of team. In some situations,
organizational learning occurs from the local knowledge of people with detailed
process knowledge within a function (Majchrzak, More, & Faraj, 2012). These
teams can better cooperate, communicate, and make better decisions for the process
they all work on, which may result in a more efficient work process. Other teams,
like cross-functional teams, work more broadly to break down barriers between
departments and functions. When team members come from different functions,
they can generate more diverse ideas and creative thoughts (Thompson, 2008).
These teams can better create new processes and make system wide changes that
take into account the tradeoffs between functions. Wruck and Jensen (1994, 1998)
note the importance of allocating decision rights to organizational members with
the specific knowledge of the problem, and the hazards of letting the wrong people
solve the problem. Although research has recognized the importance of crossfunctional teams that include members from different functions of the organization,
this might not be appropriate for a detailed process problem like equipment failure.
When examining teamwork from the lens of exploitationexploration, exploitation
oriented practices encourage employees within a function to work closely as a
team. This helps them address local problems in their function and enhances
consistency of outcomes. In contrast, exploration oriented practices emphasize
cross-functional interactions and cooperation. These teams have more expertise
about tradeoffs between functions and across systems and can better create new
processes and products.
Training. Scholars have found that training and education play a critical
role in QM (Bowen & Lawler, 1992; Kaynak, 2003). Employees learn both jobspecific skills and quality improvement techniques and tools through training
programs. Training helps employees better understand their job requirements,
gain more job-specific skills, and improve their work efficiency. Training also
engages employees in a learning process to come up with creative improvement
ideas (Evans & Lindsay, 2011).
Some of the training activities focus on the reinforcement of knowledge
used in the employees current job position. This training is designed to improve employee effectiveness and efficiency. In contrast, other training practices help deal with cross-functional problems, where an employee gets trained
on a variety of tasks. Both types of training practices will contribute to better employee performance, however, in different ways. When differentiating
from an exploitationexploration perspective, training for exploitation focuses on
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Table 2: Description of the constructs of QEI/QER and support literature.

QEI
QER
Customer Focus
Identify existing
Explore new needs for customers
customers
Assess customers needs
Involve customers in the early
Better understand
stage of product development
customer expectations
Respond to customer
needs and
expectations
Dean and Bowen (1994); Sitkin et al. (1994); Powell (1995);
Anderson, Jerman, and Crum (1998); Ahire and
OShaughnessy (1998); Douglas and Judge (2001); Sila
(2007)
Process Management
Increase process control

Increase process
reliability
Teamwork
Focus on cross-functional
Focus on within
cooperation
functional problem
solving
Sitkin et al. (1994); Dean and Bowen (1994); Hackman and
Wageman (1995); Dow, Samson, and Ford (1999);
Martinez-Lorente, Gallego-Rodriguez, and Dale (1998); Lai,
Ip, and Lee (2001)
Training
Conduct training on
Conduct training on multiple skills
existing skills
Ahire and OShaughnessy (1998); Dow et al. (1999); Ahire and
Dreyfus (2000); Douglas and Judge (2001); Kaynak (2003);
Linderman, Schroeder, Zaheer, Liedtke, and Choo, (2004)
Explore new improvement of

products and processes
Dynamic change of the
organization
Dean and Bowen (1994); Flynn et al. (1995); Powell (1995);
Ahire et al. (1996); Ahire and OShaughnessy (1998);
Rungtusanatham et al. (1998); Kaynak (2003)
enhancing skills for their current job position, which helps employees understand
their job requirements and become more efficient in their work. In contrast, training for exploration emphasizes multiskill training. Through multitask training,
employees will actively teach and learn from one another, which help employees
think creatively and search for novel solutions to complex system problems (Hackman & Wageman, 1995). In multiskill training, workers learn a wider variety of
tasks and get a broader systems perspective of the organization. This helps them
address, solve, and develop broader systemwide solutions.
Table 2 gives the description of the constructs and the supporting literature. Measurement scales are developed based on the description of the eight constructs and a literature review of the existing measurement instruments in QM. The
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overarching concepts of exploration and exploitation help differentiate the practices based on different learning goals. This suggests the following hypothesis:
H1: QEI and QER are distinct bundles of practices (QM is not a universal
set of practices).
The above framework is parsimonious and at the same time has content validity. The focus of the framework is on the QM elements that an organizational
unit can customize to their situational needs. However, some elements of quality
are beneficial to all quality systems and do not need to be or cannot be customized
within the organizational unit. For instance, quality leadership has been well established in the QM literature (Ahire & OShaughnessy, 1998) and plays a central
role in any organizational change and learning effort (Carlos, Fuentes, & Bojica,
2011). Leaders help set the quality vision and policies, approve the major quality
goals, provide resources, establish rewards, and serve on project teams (Juran &
Godfrey, 1999). Regardless of the context, all quality systems benefit from strong
leadership. As a result, both QEI and QER benefit from strong leadership. In addition to leadership, suppliers can also affect quality. However, suppliers might
confront different environmental challenges and may implement a different mix
of QER/QEI within their organizational units. Organizations that develop longterm relationships with their suppliers should help their quality efforts regardless
of the mix of QEI or QER that they implement. Because both quality leadership
and supplier QM are universally viewed as important components of QM, we include them as control variables when investigating the performance implications
of customizing QEI/QER.
Contextual Settings of an Organization: Competition and Rate of

Product Change
Scholars recognize that environmental context influences the performance benefits of QM practices. For instance, Foster (2006, 2010) advocated a contingency
perspective and noted that environmental factors should be considered when implementing QM practices. Jayaram, Ahire, Nicolae, and Ataseven (2012) found
that the performance benefits of quality practices vary if the production system is
make-to-order or make-to-stock. Wang, Chen, and Chen (2012) also found that
changes in external environment act as a moderator between QM and hotel performance. Sila (2007) empirically tested the influences of five contextual factors
(QM implementation, ISO 9000 registration, country of origin, company size, and
scope of operations) on the implementation of QM practices, but their results show
no significant differences across subgroups of companies. Sila (2007), and others,
conceptualized and measured QM practices as a single higher order factor (i.e.,
the universal perspective), which may have affected the results of the study. In
fact, all of these studies conceptualize and measure QM as one type or set of
practices and do not allow for customization of the quality system. Sitkin et al.
(1994) argue that the implementation of QM practices should be customized to the
organizations environment. Building on Sitkin et al. (1994), we investigate the
performance implication of QEI and QER based on different environmental levels
of competition and product change. The relative effect of QEI and QER should
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be different across different contextual settings, that is, organizations may need to
customize their quality system to the contextual environment.
Prior research shows that both competitive pressure (Banker, Khosla, &
Sinha, 1998) and the rate of product change influence the relationship between
QM practices and performance (Benson, Saraph, & Schroeder, 1991; Nair, 2006).
Competition has been a well-established contextual factor in organizational theory (Donaldson, 2001). Rate of product change has also been well established
as a contextual factor in the operations management literature (Guimaraes, Cook,
& Natarajan, 2002; Souza, Bayus, & Wagner, 2004). These two important environmental factors affect the benefits of different learning orientations in the QM
system. In general, research shows that exploration helps organizations more in
more competitive environments (Anand, Mesquita, & Vassolo, 2009; Danneels
& Sethi, 2011) and in environments with high rates of product change (MolinaCastillo, Jimenez-Jimenez, & Munuera-Aleman, 2011; Yamakawa, Yang, & Lin,
2011). In contrast, as the competition or the rate of product change decreases,
organizations benefit more from exploitation learning. To evaluate all possible
combinations of high/low competition and rate of product change, we classify
these different environments into four groups. The stable environmental group has
low competition and a low rate of product change, whereas the turbulent group has
both high competition and a high rate of product change. The competitive group
has high competition but a low rate of product change. Finally, the innovative
group has low competition but a high rate of product change.
When operating in a stable environment (low-product change, low competition), organizations benefit more from exploitation rather than exploration;
they need to focus on the existing customer requirements to maintain quality and
customer satisfaction. Exploitive activities that emphasize refining existing competencies may lead to higher quality performance. Stable and reliable processes
generate fewer defects, which leads to fewer customer complaints. Therefore, for
organizations that operate in stable environment, QEI practices contribute more to
quality performance than QER.
When operating in the competitive group (low-product change, high competition), organizations need to quickly learn and adapt to competitor actions in
order to maintain quality and customer satisfaction. As Andy Grove famously
stated, only the paranoid survive in highly competitive environments (Grove,
1996). Therefore, organizations facing high competitive pressures should develop
a learning goal that focuses more on exploration, and they benefit more from QER
practices than QEI practices.
Organizations in the innovative group (high-product change, low competition) should also benefit more from exploration. In this setting, short product
life cycles and rapid changes in products/processes require identifying new customer requirements and changing product/processes. Therefore, these organizations should benefit more from QER than QEI.
Finally, when operating in the turbulent group (high-product change, high
competition), organizations will also benefit more from exploration than exploitation because it is high in both competition and the rate of product change. However,
this is also a much more complex environment than the others, which may have
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Figure 1: Performance implications of QEI/QER in different environmental

settings.
High Competitive
Competitive
Pressure
Turbulent
QER contributes to quality

performance more than QEI
Both are important, however,

QER contributes more
Stable
Innovative
QEI contributes to quality

performance more than QER
QER contributes to quality

performance more than QEI
Low
Long
Short
Product Life Cycle
specific implications for the quality system. In complexity theory, the Law of
Requisite Variety argues that more complex environments need more complex
systems (Ashby, 1956). As a result, we argue that both QER and QEI affect performance, but with QER having a stronger effect than QEI. Turbulent environments
are the most demanding and organizations benefit from a stronger and more comprehensive QM system.
Figure 1 reflects the proposed framework of performance implications of
QEI/QER for different environmental settings. In summary, the focus on QEI or
QER needs to fit the external environment to get expected performance benefits. As
a result, the relative benefits from QEI and QER will vary as the level of competition
and rate of product change varies. The following hypotheses summarize the above
arguments.
H2a: When operating in a stable environment, QEI contributes more to quality
performance than QER.
H2b: When operating in a competitive environment, QER contributes more to
quality performance than QEI.
H2c: When operating in an innovative environment, QER contributes more to
quality performance than QEI.
H2d: When operating in a turbulent environment, both QER and QEI contribute to quality performance, while QER contributes more.
DATA AND MEASUREMENT

Data
Unit of analysis
The unit of analysis in this study is a manufacturing plant. Most studies on QM
have either focused on plant level data or firm level data (Nair, 2006). A firm with
multiple manufacturing plants may use a predominance of QER in one plant and a
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Table 3: Sample distribution.

Industry
Country
Austria
Finland
Germany
Italy
Japan
Korea
Sweden
USA
Total
Auto Suppliers
Electronics
Machinery
Total
4
10
19
7
13
11
7
9
80
10
14
9
10
10
10
7
9
79
7
6
13
10
12
10
10
11
79
21
30
41
27
35
31
24
29
238
predominance of QEI in another plant. For instance, 3M has some manufacturing

plants that make sand paper, whereas other plants make high-tech laminate
materialsthese different plants may benefit from a different quality system.
Aggregating data from these plants to the firm level compounds these effects.
Therefore, plant level data is more appropriate than firm level data in developing
a measurement instrument and also in further research on customization of QM
practices.
Data description
The data used in this study come from a comprehensive project conducted by
a team of international researchers in the field of operations management. The
project has lasted for more than 15 years and collected data for three rounds. The
first and second rounds are called the World Class Manufacturing (WCM) project
and the third round is called the High Performance Manufacturing (HPM) project.
The third round data are used in this study.
The HPM project collects data from a stratified sample consisting of traditional and world-class reputation plants. The plant size is restricted to plants with
at least 250 employees. The data include 238 manufacturing plants located in eight
countries: Austria, Finland, Germany, Italy, Japan, Korea, Sweden, and the United
States. The plants are selected in three industries: automobile suppliers, electronics, and machinery. In each industry, there is approximately the same number of
plants. The distribution by country and industry of the 238 plants is shown in
Table 3.
The HPM data includes only one plant per firm in the sample, which helps
to maximize the independence of units in the study. Multiple respondents and
multiple measurement methods (subjective and objective) are used in the project
to reduce the common method bias.
The response rate of the HPM project is 65% which ensures a representative
sample. This high response rate is the result of efforts such as calling the plant
managers and offering each plant a profile report that indicates its performance
relative to other plants in the same industry.
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Figure 2: Roadmap for instrument development.

Instrument development
Literature review
Experts review
Exploratory analysis
(exploratory sample n=68)
Corrected item-total correlations

Reliability through Cronbachs alpha
Factor analysis within block
Factor analysis on subset
Exploratory factor analysis of entire set
Confirmatory analysis
(validation sample n=170)
Composite alpha
t-value for each loading
Fit Indices
Standardized residuals
Pair-wise comparison
QEI/QER Measurement Scheme

Scale development and content validity
Scale development for QEI/QER in this study draws on existing theory, previous
literature, and discussions with QM experts. Figure 2 shows a roadmap of the
instrument development approach and research methods.
Nunnally and Bernstein (1994) and Churchill (1979) note that an effective
instrument should cover the content domain of each construct. Therefore, the
first stage of scale development involves content validity. According to Nunnally
and Bernstein (1994), content validity determines if the instrument is truly a
comprehensive measure of the constructs. Determining content validity generally
involves subjective and rational judgment (Emory, 1980). This study demonstrates
content validity in two ways. First, the scales for QEI and QER are developed
from a comprehensive literature review. Second, to assure consistency between the
construct and its conceptualization, QM experts reviewed all the scales (Robinson,
Shaver, & Wrightsman, 1991). The experts were given a conceptual description of
each construct and the measurement items. They then made suggestions to drop or
keep the items. They also offered suggestions to add additional items. Thirty-one
items emerge from this stage (Appendix A includes all 31 items).
Besides content validity, the items that measure a construct should also
agree with each other (convergent validity), and the items of one construct should
94
Table 4: Descriptive statistics of potential measurement items.

Measurement Item
Mean (SD)
Measurement Item
Mean (SD)
CFQEI1
CFQEI2
CFQEI3
PMQEI1
PMQEI2
PMQEI3
TWQEI1
TWQEI2
TWQEI3
TWQEI4
TRQEI1
TRQEI2
TRQEI3
TRQEI4
5.33 (0.78)
5.69 (0.70)
5.23 (0.68)
4.52 (1.09)
4.81 (1.10)
4.74 (1.22)
5.40 (0.74)
5.37 (0.66)
4.89 (0.87)
4.45 (1.55)
5.09 (0.84)
5.72 (0.75)
5.01 (0.80)
5.01 (0.90)
CFQER1
CFQER2
CFQER3
CFQER4
CFQER5
PMQER1
PMQER2
PMQER3
PMQER4
TWQER1
TWQER2
TWQER3
TWQER4
TRQER1
TRQER2
TRQER3
TRQER4
5.06 (1.46)
4.71 (1.68)
4.65 (1.50)
4.81 (1.52)
4.70 (2.11)
5.50 (0.70)
6.24 (0.45)
6.09 (0.49)
5.44 (0.65)
5.52 (0.69)
3.99 (1.05)
5.38 (0.68)
5.45 (0.74)
5.26 (0.77)
5.18 (0.71)
5.18 (0.76)
5.16 (1.51)
discriminate from measures of other constructs (discriminate validity). Each construct should be reliable, which means its scales have the ability to consistently
yield the same response (Flynn et al., 1994; Scullen, Mount, & Judge, 2003). These
validity and reliability issues are addressed in both exploratory and confirmatory
analysis below.
Exploratory analysis
All potential measurement items for QEI and QER are assessed using 7-point
Likert scales. Table 4 gives descriptive statistics for the 31 potential measurement
items (refer to Appendix A for the description of the 31 items).
For exploratory purposes, 30% of the entire dataset is randomly selected,
which results in a sample of 68 plants. The methods employed for exploratory
evaluation of measurement scales include corrected item-total correlations (CITC),
reliability estimation using Cronbachs alpha, exploratory factor analysis within
block, exploratory factor analysis on subset, and exploratory factor analysis on the
entire set.
CITC is the correlation of the item to the summated scale score. It is a
diagnostic measure used for purification purposes (Hair, Black, Babin, & Anderson,
2010). Rules of thumb suggest that the item-to-total correlations should exceed
.5 (Hair et al., 2010). Six items have CITC scores less than .5 and are eliminated
from the analysis (items in italics in Appendix A).
Reliability is broadly defined as the degree to which scales are free from error
and, therefore, consistent (Chen & Paulraj, 2004; Flynn et al., 1994; Nunnally
& Bernstein, 1994). The Cronbachs coefficient (Cronbach, 1951) is used to
evaluate the internal consistency reliability of the scales. Traditionally, a scale is
95
Table 5: Reliability and convergent validity of exploratory analysis.

Scale
Customer focus for
quality exploitation
Customer focus for
quality exploration
Process management for
quality exploitation
Process management for
quality exploration
Teamwork for quality
exploitation
Teamwork for quality
exploration
Training for quality
exploitation
Training for quality
exploration
Total
Number
of Items
Cronbachs
Eigenvalue
Percentage
of Variance
.700
1.87
62.33
.801
2.515
62.887
.874
2.397
79.884
.721
1.941
64.702
.846
2.318
77.269
.841
2.277
75.915
.897
2.507
83.578
.801
2.15
71.678
25
considered reliable if the value is .70 or higher (Nunnally & Bernstein, 1994).
Table 5 shows that the Cronbachs reliabilities for the eight scales met the
acceptable criteria of values greater than .7.
Within block factor analysis, which addresses the internal rule of unidimensionality, shows whether one or more than one factor can be identified in a given
block of items. The analysis result shows that only one factor has emerged from
each block of items. The loadings, eigenvalues, and percentages of variance explained were all checked to assess the convergent validity of the items, and the
results show no problems with convergent validity (Table 5).
To address the discriminant validity between the constructs, we conduct
factor analysis on both the subsets and the entire set (Campbell & Fiske, 1959).
QEI and QER on the same dimension are treated as a subset. Four subsets emerge
from the analysis: customer focus, process management, teamwork, and training.
Because the main purpose of the article is to distinguish between QEI and QER,
the subset analysis provides useful information to discriminate between the two.
Table 6 shows the results of factor analysis on the subsets. Based on the sample
size, a factor loading should be higher than .65 in order to be significant at the
.05 significance level and have a power level of at least 80% (Hair et al., 2010).
Table 6 shows that all items are loaded to the intended factor with factor loadings
higher than .7, and no cross-loading in the subset analysis is higher than .4. Subset
analysis shows good discriminant validity between QEI and QER.
Table 7 gives the factor analysis for the entire data set. Our theory predicts
eight factors from the analysis, but only seven emerge. As a general rule in exploratory factor analysis, the minimum is to have five times as many observations
96
Table 6: Exploratory factor analysis on subsets.
Item
CFQEI1
CFQEI2
CFQEI3
CFQER1
CFQER2
CFQER3
CFQER4
Subset 1
Subset 2
(CFQEI vs. CFQER)
(PMQEI vs. PMQER)
Factor 1
Factor 2
.100
.174
.263
.817
.764
.796
.781
.782
.819
.783
.114
.149
.145
.098
Item
PMQEI1
PMQEI2
PMQEI3
PMQER1
PMQER3
PMQER4
Factor 1
Factor 2
.917
.768
.944
.218
.019
.171
.092
.330
.058
.828
.743
.795
Subset 3
Subset 4
(TWQEI vs. TWQER)
(TRQEI vs. TRQER)
Item
TWQEI1
TWQEI2
TWQEI3
TWQER1
TWQER3
TWQER4
Factor 1
Factor 2
.167
.343
.030
.864
.832
.870
.876
.829
.874
.089
.198
.181
Item
TRQEI1
TRQEI2
TRQEI4
TRQER1
TRQER2
TRQER3
Factor 1
Factor 2
.881
.890
.866
.153
.170
.294
.288
.069
.383
.888
.734
.829
as the number of variables to be analyzed (Hair et al., 2010). Based on the 25 items,
a sample size of at least 125 is needed to have enough power to do the analysis. So
the small sample size could be one reason why the expected eight factors did not
emerge. Customer focus for quality exploitation (CFQEI) and process management for quality exploration (PMQER) are not distinguished well in the analysis.
A correlation matrix of the eight factors is shown in Table 8. CFQEI and PMQER
have a correlation of .664, which is significant at the .01 significance level. A 95%
confidence interval is constructed for the correlation. The confidence interval (.48,
.85) does not include 1, providing evidence that the two constructs are different.
In the next section of confirmatory analysis, a pairwise comparison between the
two constructs shows further evidence on the discriminant validity (Bagozzi &
Phillips, 1982).
Confirmatory analysis
The confirmatory analysis uses the validation sample of the remaining 170 plants.
The software LISREL 8.8 is used for the confirmatory factor analysis (CFA). The
t-values associated with each of the loadings are all significant at the .01 significance level. All items are significantly related to their specified constructs with
factor loadings greater than .5 (Table 9), which verifies the proposed relationship among indicators and constructs. Reliability of each construct is examined
97
Table 7: Exploratory factor analysis on the entire set.

Component
CFQEI1
CFQEI2
CFQEI3
PMQEI1
PMQEI2
PMQEI3
TWQEI1
TWQEI2
TWQEI3
TRQEI1
TRQEI2
TRQEI4
CFQER1
CFQER2
CFQER3
CFQER4
PMQER1
PMQER3
PMQER4
TWQER1
TWQER3
TWQER4
TRQER1
TRQER2
TRQER3
.715
.604
.377
.023
.314
.061
.257
.235
.224
.239
.186
.216
.028
.304
.113
.197
.789
.509
.586
.063
.125
.132
.160
.148
.366
.140
.322
.419
.178
.086
.106
.787
.729
.770
.041
.265
.116
.134
.282
.162
.099
.115
.261
.377
.073
.105
.160
.345
.192
.117
.189
.273
.252
.116
.007
.081
.132
.224
.301
.420
.049
.458
.033
.077
.075
.051
.203
.199
.246
.026
.157
.025
.763
.781
.734
.110
.196
.180
.024
.088
.076
.010
.034
.025
.028
.002
.160
.798
.723
.779
.830
.070
.190
.044
.124
.001
.087
.003
.078
.030
.005
.112
.311
.872
.756
.904
.236
.096
.109
.163
.247
.171
.230
.067
.079
.089
.150
.018
.069
.106
.175
.029
.019
.048
.152
.198
.043
.186
.156
.008
.154
.114
.283
.053
.215
.238
.270
.008
.102
.178
.033
.068
.143
.018
.792
.869
.796
.007
.206
.115
.028
.147
.135
.121
.079
.155
.087
.355
.038
.711
.796
.710
.074
.098
.192
.125
.175
.399
.232
.270
.053
.346
.203
.001
.291
Notes: Extraction method: Principal component analysis. Rotation method: Varimax with
Kaiser normalization. Rotation converged in eight iterations. See Appendix A for definition
of terms.
Table 8: Pearson correlations of the eight constructs from exploratory analysis.

CFQEI PMQEI
CFQEI
PMQEI
TWQEI
TRQEI
CFQER
PMQER
TWQER
TRQER
1
.339**
.612**
.530**
.026
.664**
.347**
.548**
TWQEI TRQEI CFQER PMQER TWQER TRQER
1
.362**
1
.294*
.464**
.098
.064
.338**
.569**
**
.336
.378**
*
.288
.535**
1
.034
.474**
.461**
.498**
1
.044
.148
.001
*Correlation is significant at the .05 level (2-tailed).

**Correlation is significant at the .01 level (2-tailed).
1
.354**
.517**
1
.229
98
Table 9: Standardized factor loadings and reliability estimates.

CFQEI CFQER PMQEI PMQER TWQEI TWQER TRQEI TRQER
CFQEI1
CFQEI2
CFQEI3
CFQER1
CFQER2
CFQER3
CFQER4
PMQEI1
PMQEI2
PMPEI3
PMQER1
PMQER3
PMQER4
TWQEI1
TWQEI2
TWQEI3
TWQER1
TWQER3
TWQER4
TRQEI1
TRQEI2
TRQEI4
TRQER1
TRQER2
TRQER3
Composite
Reliability
.76
.80
.56
.78
.74
.62
.85
.90
.67
.90
.60
.59
.64
.88
.77
.66
.73
.80
.77
.93
.77
.86
.75
.83
.87
.64
.82
.81
.89
.89
.53
.78
.79
Note: All item loadings are significant at the .01 level.
again by computing its composite reliability (Fornell & Larcker, 1981; Hair et al.,
2010). Composite reliability is an aggregate measure of the degree of internal
consistency among measurement items of the same construct. A reliability value
of greater than .70 is recommended, whereas a value between .60 and .70 is also
acceptable provided that other indicators of reliability are good (Hair et al., 2010;
Nunnally, 1978). All constructs have composite reliability greater than .70 except
one (PMQER) with a reliability value of .64 (Table 9). However, in the exploratory
analysis PMQER shows good reliability with a Cronbachs alpha value of .721.
Overall, the constructs show good reliability.
The fit indices of the CFA model also suggest a good fit. Absolute, incremental, and parsimonious indices help evaluate the overall model fit, where each
measure assesses a different aspect of model fit (Maruyama, 1998; Shah & Goldstein, 2006). Absolute fit measures such as root mean square error of approximation
(RMSEA) assess how well the a priori model reproduces or fits the sample data.
Typically models with RMSEA value below .10 are treated as acceptable (Hair
et al., 2010,). The RMSEA of this model is .047. Using the 90% confidence interval
for this RMSEA, we conclude the true value of this index is between .034 and
99
.059. Even the upper bound of this RMSEA is well within the recommended levels
for a good fit.
Incremental fit measures, such as comparative fit index (CFI), incremental
fit index (IFI), and non-normed fit index (NNFI), assess the model by comparing
it with some alternative baseline model, such as a null model which assumes all
observed variables are unrelated. This model has a CFI of .94, an IFI of .94, and
an NNFI of .92. All of them are above the recommended cutoff point of .9.
Parsimonious fit measures such as normed 2 ( 2 /d.f.) assess the parsimony
of the proposed model by evaluating the fit of the model versus the number of
estimated coefficients needed to achieve the level of fit (complexity). This model
has a normed 2 of 1.38. Generally, 2 /d.f. ratios below 2 are associated with
good-fitting models (Hair et al., 2010).
The above fit measures suggest that the model has a good fit, which means it
adequately captures the relationships of the observed variables. To further check
the model fit, standardized residuals are examined as a diagnostic measure. It is
generally recommended that no more than 10% of the absolute values of standardized residuals are greater than 2.5 (Hu & Bentler, 1995). An absolute residual
value greater than 4.0 may suggest a potentially unacceptable degree of error (Hair
et al., 2010). In this CFA model, out of 300 standardized residuals, the absolute
values of 12 residuals are larger than 2.5, which is about 4%. There is no absolute
residual value greater than 4.0 in this model. Overall, the results of the CFA model
show good model fit and convergent validity.
Discriminant validity refers to the uniqueness and the separation of the measures (Bagozzi & Phillips, 1991). In other words, it stands for the extent to which
the measures are distinctly different from each other. Assessing discriminant validity of the measurement instrument is an important part of this research, because
QM practices usually are treated as one set. Showing that QEI and QER can be
discriminated both conceptually and empirically provides the foundation of this
study.
To assess discriminant validity in CFA, a pairwise comparison between
two constructs is used (Bagozzi & Phillips, 1982). The analysis is performed by
comparing the model with each pairwise correlation constrained to equal 1.0 with
an unconstrained model. The difference between the 2 values of the two models
is checked to see if the discriminant validity is supported or not. For the eight
constructs of the model, 28 pairs are compared. All 2 differences between the
constructs are significant (p < .01), providing sufficient evidence of discriminant
validity between the constructs.
A second-order factor model

The first-order factor model shows a good fit. However, we are empirically examining if there exist two different aspects of QM: QEI and QER. To be consistent
with the conceptualization of the two constructs, each of them is modeled as a
second-order latent factor measured through the four first-order factors we have
identified. CFA is used to check the model fit, and absolute, incremental, and parsimonious measures are used to evaluate the fit results. The RMSEA is .059, and
a 90% confidence interval for RMSEA is (.048, .07). The normed 2 ( 2 /d.f.) is
100
Figure 3: Second-order factor model.

cfqei1
cfqei3
pmqei1
CFQEI
pmqei3
PMQEI
TWQEI
0.58
0.68
twqei3
twqei1
trqei1
trqei4
TRQEI
0.60
0.61
QEI
0.75
QER
0.30
0.54
0.55
0.76
PMQER
CFQER
cfqer1
cfqer4
pmqer1
pmqer4
TRQER
TWQER
twqer1
twqer4
trqer1
trqer3
1.59. The model also has an NNFI of .90, a CFI of .91, and an IFI of .91. The
loadings of the first-order factors on the two second-order factors are shown in
Figure 3. These different indices suggest a good model fit.
A pairwise comparison between the two second-order factors helps assess
discriminate validity of the second order factors (Bagozzi & Phillips, 1982). The
comparison made between the model with correlation constrained to equal 1.0
with an unconstrained model helps assess discriminate validity. A significant 2
difference demonstrates the uniqueness of the two factors. Discriminant validity
between the two second-order factors in this model is significant ( 2 = 12.6,
d.f. = 1) with a p value less than .01.
The correlation between the two second-order factors is also checked to further assess the distinctiveness of the two factors. The two factors have a correlation
of .75, which has a 95% confidence interval of (.63, .845). The upper bound of the
confidence interval is below the suggested cut-off value of .90 (Bagozzi & Phillips,
1991), which further suggests the distinctiveness of the two second-order factors.
The results of construct reliability, convergent validity, and discriminant
validity show that the measurement instrument we developed for QEI and QER
is reliable and valid. Furthermore, the results support the theory that there exist
two different yet related aspects of QM, QEI and QER, which is contrary to the
universal view of QM. H1 is supported.
101
Measurement of Competitive Pressure and Rate of Product Change

Appendix B gives the measurement items of competitive pressure and rate of
product change. A factor score of two items is used to assess competitive pressure.
The average product life cycle is used to measure the rate of product change. A
shorter cycle indicates that the product changes faster. Each of these measures are
divided into high and low based on the median value. The four combinations define
the four groups of manufacturing plants that face different contextual settings based
on competitive pressure and rate of product change: stable, innovative, competitive,
and turbulent.
Quality Performance Measure
Although there are a number of ways to measure quality performance, the American
National Standards Institute (ANSI Standard A3, 1978) defines quality as the
totality of features and characteristics of a product or service that bears on its
ability to satisfy given needs. Evans and Lindsay (2011, p. 9) further state that
quality is meeting or exceeding customer expectations. As a result, we measure
quality performance as the customers perception of quality results to assess the
performance implication of QEI and QER. Appendix B gives the measurement
items for the quality performance measure.
Measurement of Control Variables
Several control variables commonly used for plant level studies are considered:
size and age of the plant, industry type, and country. Size is operationalized by
number of personnel employed (Ettlie, 1995). Plant age is measured as the number
of years elapsed since the plant was built. There are three industry types and eight
countries in the dataset. We also control for quality leadership and supplier QM
because they might affect the performance benefits of QEI and QER practices.
Appendix B gives the items that measure quality leadership and supplier QM.
The items show good reliability and validity to measure the factors, and the factor
scores are used in further analysis.
DATA ANALYSIS ON PERFORMANCE IMPLICATIONS OF
QEI/QER
To examine the contextual influence on QEI and QER effectiveness, we classify
the sample organizations into four subgroups: competitive, innovative, stable, and
turbulent. The analysis begins by first introducing control variables before examining the performance benefits of QEI and QER. The following regression model
relates the predictor variables to quality performance for each of the subgroups.
Quality Performance = 0 + 1 Size + 2 Age + 3 Industry1 + 4 Industry2
+ 5 Country1 + 6 Country2 + 7 Country3 + 8 Country4
+ 9 Country5 + 10 Country6 + 11 Country7 + 12 Leadership
+ 13 Supplier QM + 14 QualityExploitation + 15 QualityExploration
(1)
102
Table 10: Regression results within four groups.

Dependent variable: Quality Performance
Competitive
(n = 54)
Turbulent
(n = 58)
Stable
(n = 56)
Innovative
(n = 49)
.09
.01
.09
.24*
.22
.64***
.45
<.01
.15
.06
.11
.06
.25*
.48***
.47
<.01
.19*
.01
.05
.07
.55***
.10
.33
.02
.16
.11
.15
.49***
.13
.28**
.53
<.01
IndustryMachinery
IndustryElectronics
Leadership
Supplier Quality Mgmt
QualityExploitation
QualityExploration
R2
p Value of overall model
*
p < .1; ** P < .05; *** P < .01.
Of the six control variables, the Industry dummy variables and Supplier
QM have significant coefficients in the above regression models. Country, size,
age, and quality leadership are nonsignificant. As a result, to get a more parsimonious model the nonsignificant control variables of country, size, and age were
dropped. Because prior QM theory argues that quality leadership plays an important role in any quality efforts, the variable of Leadership is maintained in the
model. The final model has six predictors as shown in the following:
Customer satisfaction = 0 + 1 IndustryMachinery + 2 IndustryElectronics
+ 3 Leadership + 4 Supplier QM + 5 QualityExploitation
+ 6 QualityExploration
(2)
Table 10 gives the regression analysis results within each of the four groups.
The analysis did not reveal any problems with the assumptions of regression
analysis (e.g., normality and multicollinearityall variance inflation factors [VIF]
ranged from 1 to 2.5). A power analysis shows that the regression equations all
have a power above 95% (this comes from the observed significance level of the
model, number of predictors, observed R2 , and the sample size) (Onwuegbuzie &
Leech, 2004).
Table 10 shows that in the competitive group QER has a significant positive
relationship with the quality performance measure, whereas the QEI regression
coefficient is not significant. In the turbulent group, both QER and QEI have
significant and positive relationships with performance. A post hoc analysis to
compare the regression coefficients of QEI and QER shows that the coefficient of
QER is significantly higher than the coefficient of QEI (with a p value <.05). In
the stable group, QEI shows a significant positive relationship with performance,
whereas the regression coefficient of QER is insignificant. In the innovative group,
QER shows a significant contribution to performance but QEI does not.
The results show that the relative benefits of QEI and QER vary across the
groups, which reinforces the importance of customizing QM to the manufacturing
103
plants learning needs. In the turbulent group (high competition and high rate of
product change), these organizations benefit from implementing both QEI and QER
to enhance performance. This result is consistent with the law of requisite variety
in complexity theory. Although they benefit from both, QER (exploration learning
goal) still has a stronger effect on performance than QEI (exploitation learning
goal). In the innovative group (low competition and high rate of product change),
these organizations benefit from QER practices whereas QEI does not significantly
affect performance. Similar results are found for organizations in the competitive
group (high competition and low rate of product change). For this group, QER
still shows significant contribution to performance whereas QEI does not. In these
settings, QEI does not significantly affect performance and manufacturers benefit
from a mix of QM practices that emphasize QER. From a learning perspective these
manufacturers benefit from learning goals that emphasize creating new products
and processes. The result from the stable group shows that manufacturers in this
group benefit from QEI, but not QER. The results of the subgroup analysis support
H2aH2d.
In general, QEI/QER affects performance differently across different environmental conditions, which supports the QEI/QER measurement scheme and that
organizations benefit from customizing QM practices. Prior measurement schemes
of QM practices did not account for the possibility of customizing these practices.
This can, in part, explain the mixed results from prior research on the link between
QM practices and performance.
DISCUSSION AND CONCLUSIONS

Increasingly organizations implement QM practices to improve performance. Although QM practices have been advocated as universally applicable to all firms,
taking a one-size-fits-all approach may not lead to the high performance benefits.
Scholars and practitioners have begun to recognize the importance of customizing
QM practices, but little research has addressed how to customize QM practices.
This research bundles QM practices based on different learning goals: exploration
and exploitation. The appropriate mix of QEI and QER practices depends on the
learning needs of the organization. Although there exists well developed theories
and measurement scales of QM, these measures assume a universal or one size fits
all approach to QM. This study argues that the learning goals of an organization
can provide decision makers with a foundation to customize QM practices to their
contextual environment.
Theoretical development and empirical analyses suggest that QM practices
have two different learning orientations: QEI and QER. The effective use of these
practices depends on the business context. Ignoring this may result in inappropriate
implementation of QM practices, where performance does not improve. The major
contribution of this study is that it empirically supports the theory for two different
yet related aspects of QMQEI and QERand challenges the universal view of
QM practices. It develops a valid and reliable set of measures for operationalizing
QEI and QER. The analysis supports H1, which offers evidence of discriminate
validity between the two learning orientations of QM practices. Furthermore, this
study offers evidence for performance implications of QEI and QER under different
104
environmental conditions (H2aH2d), which supports the predictive validity of the

QEI/QER measurement scheme.
This study is the first empirical test for measuring and discriminating between
the two concepts in QM literature. Research on the performance implications based
on the discrimination of QEI and QER will hopefully shed light on what contingencies should be considered. Research on this will help researchers and practitioners
understand the underlying conditions needed to implement different QM practices.
It also provides a solid foundation for further research on customization of QM
practices. It can offer insights into how other types of OM practices can capture
the effect of customization (e.g., Lean). The explorationexploitation theoretical
lens captures two fundamental objectives that have the potential to be applied to a
wider array of practices. The different performance implications of QEI and QER
within different contextual settings provides strong support for the contingency
argument of QM, and more specifically the benefits of customizing QM practices
to the organizational units needs.
This study also contributes to the learning literature on exploitation
exploration. Recent development of exploitationexploration (Posen & Levinthal,
2012) investigates firms response to a turbulent environment and concludes that
organizations may underestimate the value of exploitation in these environments.
Instead, organizations may benefit from exploitation in settings which have traditionally assumed better for exploration. The findings of this study offer empirical
support for these emerging ideas in the learning literature. When facing a turbulent
environment, the results suggest that firms benefit from a more complex quality
system that can achieve both learning goals.
From a practical point of view, this research has important managerial implications. Despite the increasing popularity of QM practices, practitioners still suffer
from mixed performance results, particularly in the situation when customization
is important. Maybe the question that decision makers face should be less about
whether to implement a quality system and more about what type of quality system
to implement. By distinguishing QEI from QER, this study offers practitioners a
conceptual foundation to customize QM practices according to their situational
factors. The analysis offers evidence of the different performance implications of
QEI and QER under different situational conditions. It gives guidelines on how to
customize QM practices.
The results show that different types of QM practices may contribute to quality performance differently when organizations face varying levels of competitive
pressure or rate of product change. Organizations facing both a high level of competitive pressure and rate of product change have more challenges when managing
their quality programs. This dual pressure benefits from the pursuit of both exploitation and exploration activities. These organizations may need to develop a
more complex quality system that can achieve both learning goals. Organizations
facing both a low level of competitive pressure and rate of product change benefit
from exploitative practices to enhance quality performance. For organizations with
mixed environmentshigh level of competition but low rate of product change
or low level of competition but high rate of product changeexploratory activities significantly affect performance. Exploratory practices promote second-order
105
learning and help them survive in the high competitive pressure or a fast changing
market.
It should also be noted that QEI and QER are positively correlated to each
other. As a result, the results should not be simply interpreted as an either/or
decision, where firms only implement QEI or QER practices. But instead, organizations should implement a mix of practices and the appropriate emphasis of
one type of practice over the other will result in higher performance. Some organizations may need a customized quality system to be successful, and the focus of
QEI or QER depends on their specific environmental context and learning needs.
Finding the appropriate mix of quality practices might be a source of competitive
advantage that could not be achieved by simply benchmarking other successful
firms. In a sense, most organizations have a unique journey into QM, and this
research begins to offer a guide on how organizations can develop their unique
quality system. This research suggests that the best quality systems are home
grown systems that are uniquely adapted to the organizational units situational
needs.
Finally, this study has implications for implementing QM in large multidivisional corporations. Different divisions or units within a large corporation may
face different contexts and may benefit from different QM systems. Taking a onesize-fits-all approach may create challenges when deploying QM practices in large
corporations. These organizations need to balance the benefits of having a common
approach to quality across business units, while allowing for some degree of customization within business units. The deployment of Six Sigma in 3M illustrates
some of these challenges. The deployment went well in some units, but then faced
challenges when implemented in the R&D units (Hindo, 2007). The authors had
discussions with the chief corporate scientist at 3M, who indicated that manufacturing had more of an exploitation view of the customer whereas the R&D units
had more of exploration view of the customer which created problems. Adapting
the right mix of QEI/QER to different environments of the business units may have
improved performance and reduced conflicts.
This study also has some limitations. For example, the data from the study
comes only from manufacturing plants. The discrimination between QEI and QER
cannot be generalized to the service industry at this point. However, manufacturing
plants have a longer history of implementing QM practices and provide a more
mature setting for this research. We use the manufacturing industry as a starting
point.
Future research can make several extensions to this study. First, the research
could be extended to other settings such as service and health care. Would the
exploitationexploration context-dependent perspective hold in these situations?
Second, as Sousa and Voss (2008) point out, more key contingency variables
need to be identified in the operations management discipline. This article investigates competitive pressure and speed of product change. Future research could
develop a stronger theoretical understanding of how the contextual environment
affects the performance implications of QEI and QER. It is hoped that future research will continue to expand our understanding of the contingent effects of QM
practices.
106
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APPENDIX A: POTENTIAL MEASUREMENT ITEMS FOR QEI

AND QER
This appendix includes a list of the measures of research constructs (dropped
items appear in italics). Respondents were asked to indicate the extent to which
they agree or disagree (1: strongly disagree, 4: neutral, 7: strongly agree) with each
of the following statements about their plant and organization:
Customer Focus for Quality Exploitation (CFQEI)
CFQEI1: we frequently are in close contact with our customers
CFQEI2: our customers give us feedback on our quality and delivery performance
CFQEI3: we regularly survey our customers needs.
Customer Focus for Quality Exploration (CFQER)
CFQER1: we consulted customers early in the design efforts for this product.
CFQER2: we partnered with customers for the design of this product
CFQER3: customers were frequently consulted about the design of this product.
CFQER4: customers were an integral part of the design effort for this project.
CFQER5: customers became involved in this project only after the design was
completed. (CITC: 0.205)
Process Management for Quality Exploitation (PMQEI)
PMQEI1: we make extensive use of statistical techniques to reduce variance in
processes.
PMQEI2: we use charts to determine whether our manufacturing processes are in
control.
PMQEI3: we monitor our processes using statistical process control.
Process Management for Quality Exploration (PMQER)
112
PMQER1: we strive to continually improve all aspects of products and processes,

rather than taking a static approach.
PMQER2: If we arent constantly improving and learning, our performance will
suffer in the long term. (CITC: 0.417)
PMQER3: we believe that improvement of a process is never complete; there is
always room for more incremental improvement.
PMQER4: our organization is not a static entity, but engages in dynamically
changing itself to better serve its customers.
Teamwork for Quality Exploitation (TWQEI)
TWQEI1: our supervisors encourage the people who work for them to work as a
team.
TWQEI2: our supervisors encourage the people who work for them to exchange
opinions and ideas.
TWQEI3: our supervisors frequently hold group meetings where the people who
work for them can really discuss things together.
TWQEI4: our supervisors rarely encourage us to get together to solve problems.
(CITC: 0.145)
Teamwork for Quality Exploration (TWQER)
TWQER1: the functions in our plant cooperate to solve conflicts between them,
when they arise
TWQER2: the marketing and finance areas know a great deal about manufacturing.
(CITC: 0.474)
TWQER3: our plants functions coordinate their activities
TWQER4: our plants functions work interactively with each other.
Training for Quality Exploitation (TRQEI)
TRQEI1: Our plant employees receive training and development in workplace
skills, on a regular basis.
TRQEI2: management at this plant believes that continual training and upgrading
of employee skills is important.
TRQEI3: employees at this plant have skills that are above average, in this industry.
(CITC: 0.302)
TRQEI4: our employees regularly receive training to improve their skills.
Training for Quality Exploration (TRQER)
TRQER1: employees at this plant learn how to perform a variety of tasks.
TRQER2: the longer an employee has been at this plant, the more tasks they learn
to perform.
TRQER3: employees are cross-trained at this plant, so that they can fill in for
others, if necessary.
TRQER4: at this plant, each employee only learns how to do one job. (CITC:
0.062)
113
APPENDIX B: MEASUREMENT ITEMS OF QUALITY

PERFORMANCE, COMPETITIVE PRESSURE, RATE
OF PRODUCT CHANGE, AND CONTROL VARIABLES
The following is a list of the measures of quality performance, competitive pressure,
quality leadership, and supplier QM. Respondents were asked to indicate the extent
to which they agree or disagree (1: strongly disagree, 4: neutral, 7: strongly agree)
with each of these statements about their plant and organization:
Quality performance (Cronbachs alpha = .87)

Our customers are pleased with the products and
services we provide for them.
Our customers seem happy with our
responsiveness to their problems.
Customer standards are always met by our plant.
Our customers have been well satisfied with the
quality of our products, over the past three
years.
Competitive pressure (Cronbachs alpha = .77)
We are in a highly competitive industry
Our competitive pressures are extremely high
Quality leadership (Cronbachs alpha = .86)
All major department heads within the plant
accept their responsibility for quality.
Plant management provides personal leadership
for quality products and quality improvement.
Our plant management creates and communicates
a vision focused on quality improvement.
Our plant management is personally involved in
quality improvement projects.
Supplier QM (Cronbachs alpha = .78)
We maintain cooperative relationships with our
suppliers.
We help our suppliers to improve their quality.
We strive to establish long-term relationships with
suppliers.
We actively engage suppliers in our quality
improvement efforts
Factor Loading
.894
.816
.828
.887
.903
.903
.776
.880
.869
.822
.693
.826
.824
.772
The following is a list of the measures of rate of product change (product

life cycle). Respondents were asked to answer the following questions about their
plant and organization.
What is the average life cycle of your products (years)?

Average lifetime of a product configuration (number of years)
114
Dongli Zhang is an assistant professor in the Management Systems Department at

Fordham University, New York. She received her PhD in the Operations and Management Science Department from the Carlson School of Management, University
of Minnesota, in 2009. Her research focuses on quality management, process improvement, supply chain management, implementation of organizational theory in
operations management, and culture. She has published in Production and Operations Management, Journal of Operations Management, Decision Sciences, and
several other major academic journals.
Kevin Linderman is a professor at the Carlson School of Management at the
University of Minnesota. He has a BA in mathematics and philosophy from Minnesota State University, an MS in mathematics from Miami University, and an MS
and PhD in operations research and operations management from Case Western
Reserve University. His publications have appeared in Decision Sciences, Management Science, Journal of Operations Management, Production and Operations
Management, European Journal of Operations Research, IIE Transactions, and
Journal of Quality Technology. His research interests include process management
and improvement, quality management, Six Sigma, knowledge management, innovation, and operations management theory.
Roger G. Schroeder is the Carlson Chair in Operations Management Emeritus at the Carlson School of Management, University of Minnesota. He is also
a professor at the Tilburg University in the Netherlands. He received his PhD
from Northwestern University and has publications in major academic journals
including Management Science, Journal of Operations Management, Academy of
Management Journal, and Production and Operations Management. He is a fellow
of the Decision Sciences Institute and of the Production and Operations Management Society. He received the Lifetime Scholarship Achievement Award from the
Academy of Management, Operations Management Division, and a Career Research Award from the Carlson School of Management. He has been inducted into
the University of Minnesota Academy of Distinguished Teachers and received a
lifetime research award from the Carlson School of Management.
This document is a scanned copy of a printed document. No warranty is given about the
accuracy of the copy. Users should refer to the original published version of the material.

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Decision Sciences

2014 Decision Sciences Institute

Customizing Quality Management

Subject Areas: Exploitation, Exploration, Organizational Learning, and

Customizing Quality Management Practices

Zhang, Linderman, and Schroeder

et al., 1994) to develop a more refined understanding of how to customize QM

THEORY OF CUSTOMIZING QUALITY PRACTICES

Customizing Quality Management Practices

Zhang, Linderman, and Schroeder

Table 1: Most commonly used QM elements.

principles as well as a number of associated practices. The fundamental principles

Define QEI versus QER

Customizing Quality Management Practices

Zhang, Linderman, and Schroeder

Customizing Quality Management Practices

Table 2: Description of the constructs of QEI/QER and support literature.

Increase process control

Explore new improvement of

Zhang, Linderman, and Schroeder

Contextual Settings of an Organization: Competition and Rate of

Customizing Quality Management Practices

Zhang, Linderman, and Schroeder

Figure 1: Performance implications of QEI/QER in different environmental

QER contributes to quality

Both are important, however,

QEI contributes to quality

QER contributes to quality

DATA AND MEASUREMENT

Customizing Quality Management Practices

Table 3: Sample distribution.

predominance of QEI in another plant. For instance, 3M has some manufacturing

Zhang, Linderman, and Schroeder

Figure 2: Roadmap for instrument development.

Corrected item-total correlations

QEI/QER Measurement Scheme

Customizing Quality Management Practices

Table 4: Descriptive statistics of potential measurement items.

Zhang, Linderman, and Schroeder

Table 5: Reliability and convergent validity of exploratory analysis.

Customizing Quality Management Practices

Table 6: Exploratory factor analysis on subsets.

(CFQEI vs. CFQER)

(PMQEI vs. PMQER)

(TWQEI vs. TWQER)

(TRQEI vs. TRQER)

Zhang, Linderman, and Schroeder

Table 7: Exploratory factor analysis on the entire set.

Table 8: Pearson correlations of the eight constructs from exploratory analysis.

TWQEI TRQEI CFQER PMQER TWQER TRQER

*Correlation is significant at the .05 level (2-tailed).

Customizing Quality Management Practices

Table 9: Standardized factor loadings and reliability estimates.

Note: All item loadings are significant at the .01 level.

Zhang, Linderman, and Schroeder

A second-order factor model

Customizing Quality Management Practices

Figure 3: Second-order factor model.

Zhang, Linderman, and Schroeder

Measurement of Competitive Pressure and Rate of Product Change

Customizing Quality Management Practices

Table 10: Regression results within four groups.

p < .1; ** P < .05; *** P < .01.

Zhang, Linderman, and Schroeder

p < .1; P < .05; * P < .01.