International Business Review 20 (2011) 213225

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International Business Review

journal homepage: www.elsevier.com/locate/ibusrev

Impact of TQM and organizational learning on innovation performance in

the high-tech industry
Richard Yu Yuan Hung a,1, Bella Ya-Hui Lien b,*, Baiyin Yang c, Chi-Min Wu d, Yu-Ming Kuo b,2
a

San Kuei Investment Pty Ltd., No. 77, Wen Sin Rd., Chia-Yi 600, Taiwan, ROC
Department of Business Administration, National Chung Cheng University, 168 University Rd., Min-Hsiung Chia-Yi County, Taiwan, ROC
c
Department of Human Resources and Organizational Behavior, Tsinghua University, Beijing, PR China
d
Department of Recreation and Health-Care Management, Chia Nan University of Pharmacy & Science, Taiwan, ROC
b

A R T I C L E I N F O

A B S T R A C T

Article history:
Received 22 May 2006
Received in revised form 29 June 2010
Accepted 6 July 2010
Available online 1 August 2010

Many scholars have suggested that both total quality management (TQM) and
organizational learning can individually and effectively promote innovation. However,
the question remains as to whether a relationship exists between TQM and organizational
learning. This study has three main goals: (1) to determine the relationships between
TQM, organizational learning, and innovation performance; (2) to determine if
organizational learning fosters innovation performance and plays a mediating role
between TQM and innovation performance, and (3) to test a proposed model explaining
the relationships among TQM, organizational learning, and innovation performance
through empirical examination.
Using a self-administered survey to sample Taiwanese high-tech industry companies,
this study examines four hypotheses and tests the proposed model. The principal ndings
of this study are as follows; (1) SEM analysis shows that the TQM-organizational learninginnovation performance model has goodness-of-t, (2) TQM has signicant and positive
effects on organizational learning, and (3) TQM and organizational learning have both
signicant and positive effects on innovation performance.
2010 Elsevier Ltd. All rights reserved.

Keywords:
Innovation performance
Organizational learning
Total quality management

1. Introduction
Many researchers have stated that the total quality management (TQM) strategy is a potentially useful tool for fostering
learning and increasing a companys competitive advantage (Hendricks & Singhal, 2001; Martinez-Costa & Jimenez-Jimenez,
2008; Martinez-Lorente, Dewhurst, & Gallego-Rodriguez, 2000; Terziovski & Samson, 2000; Walley, 2000). Rapidly changing
markets require the development of technological innovation, and shorter product lifecycles constantly challenge the
competitive advantage (Baker & Sinkula, 1999; Prajogo & Sohal, 2003; Tidd, Bessant, & Pavitt, 1997). According to Bontis,
Crossan, and Hulland (2002) and Nonaka and Takeuchi (1995), learning ability can stimulate organizational innovation
capability and maintain a competitive advantage in turbulent environments.
Learning promotes innovation activities, and quality is the principal determinant of success in competitive
environments (Deming, 1986). Consequently, enterprises can sustain a competitive advantage by continually reproducing

* Corresponding author. Tel.: +886 5 2720411x34315; fax: +886 5 2720564.

E-mail addresses: ryyhung@yahoo.com.tw (R.Y.Y. Hung), bmayhl@ccu.edu.tw (B.-H. Lien), Baiyin@umn.edu (B. Yang), wuchimin@mail.chna.edu.tw
(C.-M. Wu), tzustu@gamil.com (Y.-M. Kuo).
1
Tel.: +886 5 2719987.
2
Tel.: +886 5 2720411x34315; fax: +886 5 2720564.
0969-5931/$ see front matter 2010 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ibusrev.2010.07.001

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product and management quality. Although Barrow (1993) suggested that organizational learning is the principal outcome
of TQM, only three empirical and quantitative studies examine the relationship between TQM and organizational learning
(Martinez-Costa & Jimenez-Jimenez, 2008, 2009; Ruiz-Moreno, Garca Morales, & Llorens-Montes, 2005). In addition, above
quantitative studies only focused on three types of rms. Most of these rms were in the manufacturing sector, with some in
the service sector, and included small-to-mid sized enterprises. National economies are increasingly recognizing the
contributions of the high-tech industry for achieving and sustaining growth and performance (Collins & Clark, 2003; DAveni,
1998; Lien, Hung, & McLean, 2007). Taiwans high-tech industry has a reputation for high product quality and high
innovation performance (Hung, Lien, & McLean, 2009). Whether the proposed relationship among TQM, organizational
learning, and innovation applies to Taiwans high-tech industry requires further conrmation.
Although some TQM practices have proven unsuccessful, previous empirical research shows that TQM has a positive
effect on organizational performance, including innovational performance (Martinez-Costa & Jimenez-Jimenez, 2008;
McAdam & Armstrong, 2001; Prajogo & Sohal, 2003). Some studies indicate a relationship between organizational learning
and innovation (Baker & Sinkula, 1999; Hung et al., 2009). Consequently, both TQM and organizational learning can
individually and effectively promote innovation. However, no previous empirical studies investigate whether organizational
learning mediates TQM and innovation performance. Nevertheless, how do TQM and organizational learning jointly affect
organization innovation performance? Determining whether such a mediating relationship exists is worthy of further study.
The purpose of this study is to examine three things. This study focuses on (1) determining the relationships between
TQM, organizational learning, and innovation performance, (2) examining if organizational learning foster innovation
performance play a mediating role between TQM and innovation performance, and (3) testing a proposed model to explain
the relationships among TQM, organizational learning, and innovation performance through an empirical examination. This
paper begins with a literature review that examines the current state of TQM, organizational learning, and innovation
performance. An empirical research using structural equation modeling to test the proposed model follows. The nal section
presents the ndings, theoretical and managerial implications, and limitations of this study, and provides recommendations
for future research.
2. Literature review
2.1. Total quality management
Various approaches to TQM concept have led to different denitions. For example, Persico (1989) presented TQM as a
method for reforming corporate culture, enhancing employee involvement in each business sector, and continuously
improving quality to attain specic organizational goals through teamwork. Evans and Lindsay (1996) pointed out that TQM
is a management approach that focuses on quality and aims at improving organizational effectiveness and exibility. Easton
and Jarrell (1998) suggested that TQM generates high-quality products, reduces costs, increases customer and employee
satisfaction, and improves nancial performance. Although TQM has a variety of denitions, Rahman (2004) showed that
TQM is a management approach for improving organizational performance that encompasses a variety of both technical and
behavioral topics.
Different researchers have adopted different dimensions of TQM (EscrigTena, BouLlusar, & RocaPuig, 2001; MartinezLorente et al., 2000; Mohrman, Tenkasi, Lawler, & Ledford, 1995; Zairi, 1997) to test its effects on company product quality
and other non-nancial results (Terziovski & Samson, 2000; Zhang, 2000). Prajogo and Sohal (2003) examined
manufacturing rms by measuring and assessing TQM using the following six dimensions; leadership, strategic planning,
customer focus, information technology and analysis, people management, and process management. Lee and Asllani (1997)
showed that top management must take a leadership role and show a strong commitment when initially implementing
TQM. According to Zairi (1997), TQM also focuses on the level of support of top management and emphasizes complete
employee involvement in the related continuing improvement initiatives.
However, most previous studies agree that the most inuential dimensions of TQM include; (a) top management support,
(b) employee involvement, (c) continuous improvement, and (d) customer focus (Juran, 1988; McAdam & Armstrong, 2001;
Prajogo & Sohal, 2003; Zairi, 1997).
2.2. Organizational learning
Argyris and Schon (1996) noticed that when all of the members become aware of the cognitive outcomes and newly
shared mental models, including work processes and individual jobs, learning develops into organizational learning.
Therefore, a learning culture in which people work together can support an organization by nurturing and sustaining a
knowledge-creating system (Wang, Yang, & McLean, 2007). However, organizational learning has a variety of denitions.
From a strategic perspective, according to Crossan, Lane, White, and Djurfeldt (1995), organizational learning strategies and
company culture should be adaptable to the company environment. From a systematic perspective, Senge (1990) dened
organizational learning as a dynamically balanced relationship in which organizations acquire external knowledge and
further adjust organization activities. This relationship helps to balance the environment and organizational operation
process while the organization struggles to survive. In addition, organizational learning can be divided into individual, team,
and organization levels (Inkpen, 1998). From a process perspective, Dodgeson (1993) pointed out that organizational

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215

learning is a process of establishing organization knowledge and norms in an organizational culture that alters and generates
organizational effectiveness by improving human skills.
In summary, a culture of organizational learning begins with individuals and resonates throughout the organization, and
therefore, is embedded in the organizational structure. Developing a culture of organizational learning requires the
establishment of clear organizational goals, a culture of sharing, and a connection among organizational subsystems,
structures, and cultures (Preskill & Torres, 1999). As a strategy, organizational learning can facilitate new organization
methods and procedures for learning and change (Morgan, Katsikeas, & Appiah-Adu, 1998).
The literature review above indicates that organizational learning is a continuous and dynamic process. Because learning
strategy can cause organizations to change their actions due to the acquisition of knowledge and insight, organizations
become learned (Bohmer & Edmondson, 2001). At the same time, the culture of organizational learning affects continuous
learning, such that organizational internal and external knowledge transforms into sustainable knowledge.
2.3. TQM and organizational learning
Senge (1990) argued that since a corporation cannot achieve a state of sustainable excellence, they require continuous
learning while pursuing quality excellence. Barrow (1993) noted that TQM closely relates to organizational learning and
expresses organizational learning as an expected product of TQM. Barrows study demonstrates that when instituting TQM
principles, companies should focus on learning at three levels; the individual, group, and organization levels. This process
familiarizes individuals with new techniques and information and assists organizational groups in completing projects and
distributing relevant knowledge. The implementation of TQM principles also helps organizations learn methods for
improving productivity.
Alternatively, the diversity of TQM dimensions reects the wide-ranging characteristics of organizational cultures (Zeitz,
Johannesson, & Ritchie, 1997). Additionally, many consider TQM to be an enabler and initial factor in shaping corporate
learning culture. Mechanisms for organizational learning allow companies to apply cooperative relationships and acquire
resources that compliment organization or capabilities in cooperative research and development processes (Van Aken &
Weggeman, 2000). Organizations that successfully implement TQM can easily develop cultures that foster knowledge
sharing and are suited to cross-functional team knowledge transfer (ODell & Grayson, 1998). According to Martinez-Costa
and Jimenez-Jimenez (2008), TQM companies tend to learn more than other companies. Therefore, this study suggests that
TQM has a positive effect on organizational learning.
Hypothesis 1. Total quality management practice positively relates to organizational learning.
2.4. Innovation performance
Innovation can occur in three broad domains; products, processes, and organizations, and is an idea, product or process,
system or device that is perceived to be new to an individual, a group of people or rms, an industrial sector, or a society as a
whole (Rogers, 1995, p. 11). According to Damanpour (1991), organizational innovation combines the development and
implementation of new ideas, systems, products, or technologies.
In competitive markets, enterprises must increase their knowledge to adapt to new products and technology, and
continuously distribute this knowledge to all employees. Based on an organizations internal factors, the nature of
innovation can involve technical, product, and process innovation. These internal factors include knowledge and skill
resources, physical and management systems, and values and norms. The external factors include customers,
competitors, statutes, and technology. A considerable debate exists regarding how to best measure innovation
performance (Kanji, 1996; Prajogo & Sohal, 2003; Tang, 1998). An objective measurement index for innovation
performance usually evaluates the number of patents obtained, reports published, and new projects approved.
A subjective index compares quality and function of new products and processes with those of the competitors. It
also measures innovation performance based on market share and reputation (Moser, 1984; Olson, Walker, & Rueker,
1995).
2.5. Organizational learning and innovative performance
Numerous studies show that cultures that promote organizational learning improve individual, team, and organizational
learning, and as a result, improve organizational performance (Egan, Yang, & Bartlett, 2004; Ellinger, Ellinger, Yang, & Howto,
2002). From the perspective of organizational learning, the concrete output via knowledge capacity promotes innovative
performance. Consequently, innovation often stems from knowledge absorption in the research and design (R&D) and other
corporate units (Manseld, 1983). The learning ability of employees enhances absorption and assimilation of internal
information (Cohen & Levinthal, 1990). It also improves an organizations ability to learn and promotes innovation activity
efciency, efcacy, and capabilities (Dodgeson, 1993). Rothaermel and Deeds (2004) showed that promoting learning from a
relationship with external partners, positively affected new product development and innovation. According to Baker and
Sinkula (1999), companies with learning orientation can scan the external environment for new technological paradigms
that result in innovation.

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Implementing a market-oriented perspective to examine the impact of organizational learning on performance shows
that organizational learning improves sales, prot growth, customer satisfaction, and innovation. Companies promote new
product development by generating organizational value in learning and actively encouraging employees to collect market
data and share/exchange it unselshly. In addition, innovation itself becomes a process for solving existing problems. Argyris
and Schon (1978) suggested that problem solving is a learning process that integrates diverse knowledge types and becomes
a basis for establishing knowledge. Acquiring new knowledge is the primary innovation resource (Nonaka & Takeuchi, 1995;
Teece, Pisano, & Shuen, 1997). Consequently, whether knowledge ows freely, or organizations utilize existing knowledge to
develop new ideas, it promotes productivity and stimulates creation (Davenport & Prusak, 1998). Some empirical studies
demonstrate a positive relationship between the creation of new knowledge, and the performance of a rm (Bontis et al.,
2002; Tippins & Sohi, 2003). This study proposes that promoting organizational learning improves knowledge capability and
enhances innovation performance.
Hypothesis 2. Organizational learning positively relates to innovation performance.
2.6. TQM and innovative performance
While some studies suggest that TQM and innovation performance have a negative relationship (Tidd et al., 1997), others
argue that TQM is consistent with innovation principles. According to Kanji (1996), introducing TQM creates an
organizational system and culture that promotes innovation. Previous empirical studies indicate that introducing TQM
positively affected innovation. Gustafson and Hundt (1995) observed that customer focus, management/leadership, quality
focus, employee focus, process focus, and continuous improvement from TQM were the factors critical to innovation success.
Prajogo and Sohal (2003) identied the relationship between TQM and innovation performance and showed that TQM
enhanced innovation performance.
Implementing a customer-focused action induces continual research into customer needs can result in organization
development and new product development (Juran, 1988). Continual improvement promoted by organizations can
stimulate organization members to creatively evaluate how tasks are organized and performed (Prajogo & Sohal, 2003).
Finally, the commitment of top management and employee involvement is also critical to the success of organizational
innovation. Consequently, whether or not enterprises introduce TQM directly affects innovation performance. Quality
management is not only an important foundation of innovation development, but also a key catalyst in the innovation
process (McAdam & Armstrong, 2001). In sum, many scholars studying innovation management suggest that the context of
innovation management was similar to, and correlated with, TQM (Tang, 1998; Tidd et al., 1997).
TQM success requires an organizational culture based on trust and knowledge sharing (Conner & Prahalad, 1996).
Organizational learning aims to create mutual trust and a knowledge sharing culture among organizational members to
become an important mediating role for TQM on improving innovation. When utilizing a knowledge-based perspective,
Linderman, Schroeder, Zaheer, Liedtke, and Choo (2004) proposed that enterprises created knowledge and promoted
organizational performance via quality management. Therefore, as top managers promote the introduction of TQM, an
organizations staff becomes stimulated and promotes organizational learning. As a result, organizational learning exists as a
mediating variable between TQM and innovation performance. Based on the literature review, this study proposes
Hypotheses 3 and 4. Fig. 1 presents the conceptual framework of the research and depicts the major research hypotheses of
the study.
Hypothesis 3. Total quality management practice positively relates to innovation performance.
Hypothesis 4. Organizational learning mediates the relationship between total quality management practice and innovation performance.
3. Method
This study applies a survey research method to examine the relationships among TQM, organizational learning, and
organizational innovation performance. This study also uses a self-administered survey to sample Taiwanese high-tech
industry companies.
3.1. Sample and procedure
Samples were collected from Taiwanese high-tech companies selected from 2004 Taiwanese Top 5000 Companies
published by the China Credit Information Service database (CCIS) (CCIS, 2004), according to their market capitalization. This
study selected 1139 high-tech companies for evaluation. Since the top administrators provide reliable information regarding
the basic environmental and organizational characteristics of their organizations (Mintzberg & Waters, 1985), senior
managers or rm presidents represent the most appropriate sources of information for this study. A questionnaire and cover
letter was mailed to the managing director or chief executive ofcer of each company. This study employed a variety of
methods to encourage respondents to complete and return the questionnaires, such as follow-up telephone calls, faxes, and

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217

Fig. 1. Conceptual framework.

personal connections. Of the 235 questionnaires returned, researchers excluded 12 due to incomplete data. In total,
this study used 223 out of 1139 surveys for nal analysis (response rate, 19.6%). This response rate compared
favorably with other surveys in the TQM and continuing improvement eld, which yielded response rates between 9% and
28%, with an average of 18% (Drew, 1996; Lawler, Mohrman, & Ledford, 1998; Lok, Hung, Walsh, Wang, & Crawford, 2005;
ONeill & Sohal, 1998; Zairi & Sinclair, 1995). However, the response rate in Martinez-Costa and Jimenez-Jimenezs (2008,
2009) TQM related study, with a population located in Spain, were comparatively higher (45.4% and 43.8%, respectively) than
this study.
To know whether the effect of non-response bias is signicant between those who responded early, with those who
responded late, this study compared the total sales volume, size of the organization, age of rms, and sub-type of industrial
classication in high-tech industries with those who responded early and those who responded late. This study performed
both chi-square tests and t tests. The null hypothesis of this analysis is that an early respondent has the same characteristics
as a late respondent. The observed signicant level p for all variables is much higher than 0.05. This indicates that in this
study, the extent of a non-response bias is insignicant, and the results adjust to the sampling frame.
3.2. Measures
This subsection outlines the measures used in this study, describes the initial selection of measurement items, and the
process adopted to identify nal measures through item analysis. This subsection also provides the internal consistency
reliability estimates.
3.2.1. Total quality management
In this study, TQM is an integrated management philosophy and set of practices that includes incremental and radical
change in business processes. TQM focuses on continuous improvement, customer satisfaction, top management support,
and employee involvement (Ross, 1993). Therefore, this study utilizes the following dimensions to measure the effectiveness
of TQM in Taiwans high-tech industry. These dimensions include, (a) top management support, (b) employee involvement,
(c) continuous improvement, and (d) customer focus.
This study assessed TQM using 16 measurement items adopted from previous studies (Coyle-Shapiro, 2002; Zeitz et al.,
1997). Four items for each of the dimensions measured TQM. Respondents were asked to indicate their levels of agreement
with descriptive statements using a 5-point Likert scale (range, 1 = strongly disagree to 5 = strongly agree). The following
displays the measurements of the four dimensions for every phase of TQM. These include top management support
(rcSCR = 0.87, rcAVE = 0.62), employee involvement (rcSCR = 0.83, rcAVE = 0.55), (c) continuous improvement (rcSCR = 0.80,
rcAVE = 0.51), and (d) customer focus (rcSCR = 0.81, rcAVE = 0.52). Second-order conrmatory factor analysis (CFA)
demonstrates a reasonable t between the four-dimensional factor structure of TQM and the data (x2 (98) = 386.46,
p < 0.001; RMR = 0.04, GFI = 0.91, NFI = 0.83, CFI = 0.86, IFI = 0.86, AGFI = 0.74, RMSEA = 0.11). In order to improve the model
t values, modication index (MI) provided by LISREL were suggested (Medsker, Williams, & Holahan, 1994). The
modication index for a xed parameter tells how much the overall x2 for a model would decrease if one reestimated the
model with that parameter free (i.e., included or estimated), while all other parameters are held xed at the same estimated
values (Joreskog & Sorbom, 1996). The revised model t values are: x2 (86) = 190.72, p < 0.001; RMR = 0.03, GFI = 0.91,
NFI = 0.91, CFI = 0.95, IFI = 0.95, AGFI = 0.85, RMSEA = 0.07. Therefore, a goodness-of-t exists in the TQM measure scale.
Table 1 shows the results of a second-order CFA and the scale reliability on TQM dimensions that reached statistical
signicance. This indicates that criteria had a signicant correlation with dimensions, and that the scale had convergent
validity (Anderson & Gerbing, 1988).
3.2.2. Organizational learning
This study adopted the learning culture and learning strategy as dimensions for measuring organizational learning. This
study used nine items to assess organizational learning and adopted the measurement items from previous studies (Rhodes,
Hung, Lok, Lien, & Wu, 2008; Watkins & Marsick, 2003). This study required respondents to signify their levels of agreement
with descriptive statements using a 5-point Likert scale (range, 1 = strongly disagree to 5 = strongly agree). This study
employed ve (5) items to determine learning culture (rcSCR = 0.82, rcAVE = 0.48), and utilized four items to measure learning
strategy (rc SCR = 0.85, rcAVE = 0.58). Second-order conrmatory factor analysis indicated an adequate t between the
suggested model of organizational learning culture for three levels and the current data (x2 (26) = 105.84, p < 0.01;

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Table 1
Results of the rst-order and second-order conrmatory factor analysis of TQM.
Items

Top management support

1
2
3
4
Employee involvement
1
2
3
4
Continuous improvement
1
2
3
4
Customer focus
1
2
3
4

First-order

Second-order

Standardized loading

t-value

Standardized loading

t-value

0.72
0.85
0.79
0.78

/a
12.06***
11.30***
11.12***

0.78

11.12

0.76
0.76
0.76
0.68

/a
11.61***
11.66***
10.18***

0.88

8.95

0.60
0.80
0.73
0.71

/a
8.90***
8.42***
8.24***

0.98

6.78

0.615
0.631
0.796
0.833

/a
9.35***
9.11***
7.73***

0.85

6.61

Chi-square = 190.72 (p < 0.001); df = 86; GFI = 0.91; CFI = 0.95; IFI = 0.95; AGFI = 0.85; NFI = 0.91; RMR = 0.03, RMSEA = 0.07.
a
Fixed parameter.
***
p < 0.001.
Table 2
Results of the rst-order and second-order conrmatory factor analysis of OL.
Dimensions and items

Learning culture
L1
L2
L3
L4
L5
Learning strategy
L6
L7
L8
L9

First-order

Second-order

Standardized loading

t-value

Standardized loading

t-value

0.67
0.64
0.78
0.62
0.77

9.93***
9.36***
11.61***
9.03***
/a

0.96

13.54

0.76
0.83
0.79
0.69

10.13***
10.94***
10.46***
/a

0.93

13.17

Chi-square = 54.98 (p < 0.001); df = 24; GFI = 0.95; CFI = 0.97; NFI = 0.95; IFI = 0.97; AGFI = 0.91; RMR = 0.02, RMSEA = 0.07.
a
Fixed parameter.
***
p < 0.001.

RMR = 0.03, GFI = 0.90, CFI = 0.92, NFI = 0.90, IFI = 0.92, AGFI = 0.83, RMSEA = 0.12). In order to improve the model t value, we
use modication index to improve the model t. The revised model t values are: x2 (24) = 54.98, p < 0.001; RMR = 0.02,
GFI = 0.95, CFI = 0.97, NFI = 0.95, IFI = 0.97, AGFI = 0.91, RMSEA = 0.07. Thus, the organizational learning scale had goodnessof-t. Table 2 presents all standardized regression weights. When these weights reach statistical signicance, the scale has
convergent validity (Anderson & Gerbing, 1988).
3.2.3. Innovation performance
In measuring innovation performance, Prajogo, Power, and Sohal (2004), Moser (1984), and Olson et al. (1995)
determined innovation performance by measuring production and process innovation using quantitative and qualitative
indices. Conversely, Wu (1998) utilized the following four indices to measure innovation performance; (1) product
innovation (production development capability, commercial speed, and control over customer need characteristics), (2)
process innovation (hit rate, quality production, and processes, process exibility and ability to reduce costs, (3)
organizational innovation (international sales/service, international brand, experience, and ability to establish/manage
international distribution), and (4) strategy innovation (new production processes, new use, and development of value
activity chains). Synthesizing previous studies, this study employed product, process, technical, administration, and overall
organizational innovation as analytical dimensions.
This study measured innovation performance using 16 items adapted from Baker and Sinkula (1999), and Prajogo et al.
(2004). Each item utilized a 5-point Likert scale (range, 1 = strongly disagree to 5 = strongly agree). Six (6) items were

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219

Table 3
Results of the rst-order and second-order conrmatory factor analysis of innovation performance.
Items

First-order
Standardized loading

Product innovation
1
0.73
2
0.78
3
0.77
4
0.80
5
0.77
6
0.70
Process innovation
1
0.71
2
0.82
3
0.79
4
0.75
5
0.60
Overall organizational innovation
1
0.78
2
0.81
3
0.76
4
0.80
5
0.81

Second-order
t-value

Standardized loading

t-value

/a
11.41***
11.30***
11.68***
11.17***
10.12***

0.98

9.36

/a
11.47***
11.11***
10.54***
8.44***

0.96

10.09

/a
12.74***
11.89***
12.63***
12.71***

0.76

7.68

Chi-square = 224.75 (p < 0.001); df = 93; GFI = 0.90; CFI = 0.94; IFI = 0.94; AGFI = 0.84; NFI = 0.91; RMR = 0.04, RMSEA = 0.08.
a
Fixed parameter.
***
p < 0.001.

employed to determine product innovation performance (rcSCR = 0.89, rcAVE = 0.52), and ve items were utilized to measure
process innovation performance (rcSCR = 0.85, rcAVE = 0.54). Overall, this study also assessed organizational performance
using ve items (rcSCR = 0.89, rcAVE = 0.63). The results of second-order conrmatory factor analysis indicate a moderate t
between the three dimensions of organizational innovation performance and the data (x2 (101) = 372.90, p < 0.001;
RMR = 0.04, GFI = 0.83, NFI = 0.85, CFI = 0.88, IFI = 0.86, AGFI = 0.77, RMSEA = 0.11). In order to improve the model t value, we
use modication index to improve the model t. The revised model t values are: x2 (93) = 224.75, p < 0.001; RMR = 0.04,
GFI = 0.90, NFI = 0.91, CFI = 0.94, IFI = 0.94, AGFI = 0.84, RMSEA = 0.08. The goodness-of-t exists for the measurement scale of
innovation performance. Table 3 displays all of the standardized regression weights that reached statistical signicance. This
implies that the criterion signicantly correlates with the dimensions and the scale had convergent validity (Anderson &
Gerbing, 1988).
Table 4 shows a construct measurement summary, indicating that the scale composite reliability among each dimension
was >0.80 (Bagozzi & Yi, 1998). The average variance extracted from all variables was higher than, or close to 0.5 (Fornell &
Larcker, 1981). This variance implies that the TQM, organizational learning, and innovation performance scales all had
adequate validity and reliability.
Finally, to prove discriminant validity, this study follows the procedure recommended by Anderson and Gerbing (1988).
They suggested using the chi-square difference test to test the null hypothesis. The researchers tested the proposed model
against an alternative model where organizational learning was treated as a mediate variable between TQM and innovation
performance, and the direct relationship between TQM and innovation performance was omitted. Discriminant validity is
achieved if the chi-square difference (with 1 df) is signicant, meaning that the model in which the two constructs were
viewed as distinct (but correlated) factors is superior. Table 5 reports a signicant change in chi-square between proposed
model and alternative model. The chi-square difference test presents a p < 0.01 which permits the conclusion that proposed
model is preferred as the greater alternative model.
4. Results
This study used AMOS 5.0 software to examine the data. This section presents the mean, standard deviation, and
correlation of variables analyzed by descriptive statistics. This paper then discusses the structural equation model (SEM)
analysis results, including the indices for each construct in reference to the basic goodness-of-t test, and the relationship
among constructs via the internal goodness-of-t test. Finally, this study identies the goodness-of-t between the
theoretical model and the observed data by referring to the overall goodness-of-t analysis.
4.1. Descriptive and correlation analysis
Table 6 displays the means, standard deviation, and correlation among the variables. The four-dimension scores for TQM
were 3.663.90. The learning culture mean for organizational learning was 3.47, and 3.50 for learning strategy. This indicates
that respondents believed that a learning strategy is a signicant feature that promotes organizational learning. The threedimension scores for innovation performance were 3.713.85, and overall organizational innovation had the highest score.

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Table 4
Construct measurement summary: conrmatory factor analysis and scale reliability.
Items

Standardized
loading

t-value

Reliability
SCRa, AVEb

0.76

10.82

SCR = 0.87,
AVE = 0.62

2. Top managers in this organization follow-up on suggestions for improvement

3. Top managers in this organization allocate resources to improve quality
4. Top management is supportive of suggestions for improving the way things are done
Employee involvement
1. There is a strong commitment to quality at all levels of this organization

0.88
0.78
0.72

12.57
11.47
10.47

0.77

10.19

2. People are encouraged to verbalize how things could improve supervisory reinforcement
3. People in this organization have a relatively high level of authority over their
work-related decisions
4. People in this organization constantly look for ways to improve their work
Continuous improvement
1. Continuous quality improvement is an important goal of this organization

0.78
0.73

10.64
10.09

0.68

9.36

0.54

6.13

2. People in this organization are continually looking for better ways of doing
their work to avoid errors
3. People in this organization are constantly improving their business process
4. People in my work unit analyze their work products to look for ways of doing a better job
Customer focus
1. This company refer customer needs to develop their business strategies

0.79

7.40

0.74
0.75

7.24
7.29

0.57

6.21

2. This company encourages people to listen to customer when they need to make decisions
3. People in my work unit know their customers
4. I think of my customers while working
Learning culture
1. The company appreciates employees contribution and affect

0.62
0.80
0.87

7.04
8.14
8.26

0.65

8.12

2. The senior managers support employees when suggesting alternative perspectives

3. The company encourages employee learning and tolerates employee mistakes
4. The supervisor of my department trusts the abilities of their employees
5. The atmosphere of the company encourages employees to trust each other
Learning strategy
1. Employees help each other to learn

0.69
0.82
0.59
0.71

8.38
9.34
7.44
8.56

0.71

10.11

2. The company encourages employee discussion and team learning

3. The company offers a good learning environment for helping the
innovation development
4. Continuous learning is an important strategy for our company
Product innovation
1. The speed of R&D of our company is faster than our competitors

0.80
0.82

12.57
11.47

0.72

10.47

0.83

13.97

0.85
0.77
0.69
0.73

14.37
12.62
11.01
11.89

0.66

10.501

0.68

8.54

0.85
0.80
0.74
0.59

10.55
10.15
9.55
7.85

0.77

11.63

0.80
0.77
0.80
0.83

12.20
11.63
12.10
12.60

Top management support

1. Top managers in my department set clear goals for quality improvement

2.
3.
4.
5.

The speed of production improvement is faster than our competitors

The speed of innovating a new logistic way is faster than the competitive
R&D has improved production innovation skills
Compared to our competitors, production in our company is more
customized to the customers
6. Compared to our competitors, the production in our company offers more innovative
products to the customers
Process innovation
1. The company has continuously used innovative technology to improve the
quality and speed of production and services to our customers
2. The latest Human resource practices are adopted in this organization
3. The job design innovation is more diverse than our competitors
4. The organizational structure innovation is more exible than the competitors
5. During the last three years, our patent registration has increased signicantly
Overall organizational innovation
1. During the last three years, the comparative advantage of our company has
signicantly improved
2. During the last three years, our company protability has improved
3. During the last three years, our companys unit cost of production or service has decreased
4. During the last three years, turnover of our organization have been improved signicantly
5. During the last three years, employee productivity has improved signicantly
a

Scale composite reliability rc = (Sli)2 var(j)/[(Sli)2 var(j) + Suii] (Bagozzi & Yi, 1998).

Average variance extracted rc = (Sli)2 var(j)/[(Sli)2 var(j) + Suii] (Fornell & Larcker, 1981).

SCR = 0.83,
AVE = 0.55

SCR = 0.80,
AVE = 0.51

SCR = 0.81,
AVE = 0.52

SCR = 0.82,
AVE = 0.48

SCR = 0.85,
AVE = 0.58

SCR = 0.89,
AVE = 0.52

SCR = 0.85,
AVE = 0.54

SCR = 0.89,
AVE = 0.63

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Table 5
Test of discriminant validity.
Model

Chi-square

Degrees of freedom

Chi-square difference

Degrees of freedom difference

Probability

Proposed model
Alternative model

95.95
105.513

24
25

9.563

0.000a

Compared to the proposed model, the alternative model presents a signicantly worse t.

Table 6
Descriptive and correlation matrix.

TQM1
TQM2
TQM3
TQM4
OL1
OL2
IN1
IN2
IN3

Mean

S.D.

TQM1

TQM2

TQM3

TQM4

OL1

OL2

IN1

IN2

IN3

3.90
3.66
3.79
3.75
3.47
3.50
3.71
3.78
3.85

0.63
0.64
0.57
0.60
0.64
0.68
0.71
0.57
0.62

1.00
0.76**
0.64**
0.58**
0.53**
0.63**
0.51**
0.55**
0.51**

1.00
0.72**
0.63**
0.57**
0.63**
0.49**
0.60**
0.48**

1.00
0.70**
0.44**
0.59**
0.45**
0.56**
0.60**

1.00
0.57**
0.62**
0.53**
0.60**
0.58**

1.00
0.74**
0.57**
0.53**
0.43**

1.00
0.54**
0.56**
0.48**

1.00
0.76**
0.62**

1.00
0.66**

1.00

TQM1: top management support; TQM2: employee involvement; TQM3: continuous improvement; TQM4: customer focus; OL1: learning culture; OL2:
learning strategy; IN1: product innovation; IN2: process innovation; IN3: overall organizational innovation. **p < 0.01. n = 223.
Table 7
Structural equation modeling results.

TQM ! top managers support (lx1)

TQM ! employee involvement (lx2)
TQM ! Continuous improvement (lx3)
TQM ! customer focus (lx4)
Organizational learning ! learning culture (ly1)
Organizational learning ! learning strategy (ly2)
Innovation performance ! product innovation (l5)
Innovation performance ! process innovation (ly6)
Innovation performance ! overall organizational innovation (ly7)
TQM ! organizational learning (g1)
Organizational learning ! innovation performance (g2)
TQM ! innovation performance (b1)

Standardized regression weight

Standardized bias

t-value

0.82
0.87
0.82
0.78
0.81
0.91
0.84
0.90
0.75
0.81
0.27
0.55

0.08
0.08
0.08
/
0.06
/
0.08
0.07
/
0.09
0.11
0.13

13.12***
14.11***
13.11***
/
13.82***
/
12.39***
15.63***
/
11.47***
2.36*
4.75***

CMIN = 95.95; df = 24; GFI = 0.91; AGFI = 0.84; CFI = 0.95; NFI = 0.93; IFI = 0.95; TLI = 0.92; RMSR = 0.02: RMSEA = 0.08.
*
p < 0.05.
***
p < 0.001.

For the correlation coefcients of the variables, the four dimensions of TQM and the two dimensions of organizational
learning correlated both signicantly, and positively. Individually, the coefcients for top manager support in TQM and
learning strategy in organizational learning dimensions, correlated strongly (r = 0.63). The correlation coefcient between
employee involvement and learning culture was 0.57. For the four dimensions of TQM and the three dimensions of
innovation performance correlated both signicantly, and positively. The correlation coefcients for customer focus and
process innovation performance, and continuous improvement and overall organizational innovation performance were
both 0.60. Furthermore, the two dimensions of organizational learning and the three dimensions of innovation performance
correlated both signicantly, and positively. In particular, the correlation coefcient for leaning culture and product
performance was 0.57.
4.2. Testing research hypotheses
This study conducted a CFA on the returned survey data using the AMOS 5.0 software. This study tested the proposed
research hypotheses and structural model by using the structural equation modeling technique. According to the SEM index
suggested by Bagozzi and Yi (1998), the p-value of chi-square should be larger than 0.05, the value of CFI, GFI, IFI, NFI should
be 0.90, and the value of RMR should be less than 0.05. Table 5 displays a set of goodness-of-t indices and estimates of the
structural coefcients. This study proved that employee involvement (lx2 = 0.87) was the primary factor in TQM. This shows
that by allowing an organizations members to participate in the decision-making process, or by increasing the autonomy of
the employees, the TQM effect is positive. Learning strategy (ly2 = 0.91) also plays a signicant role in promoting
organizational learning. For enhancing the effectiveness of learning, organizations must promote both learning mechanisms,
and an environment that fosters learning. The process innovation (ly6 = 0.90) was the most important factor in affecting
innovation performance.

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222

Fig. 2. Structural equation modeling results.

Table 8
Total effects of TQM on organizational learning and innovation performance.
Independent variable

Dependent variable (endogenous variables)

Exogenous variables

Total quality management

Direct effect
Indirect effect
Total effect

Endogenous variables

Organizational learning

Direct effect
Indirect effect
Total effect

***

Organizational learning

Innovation performance

0.81***
_
0.81***

0.55***
0.22***
0.77***
0.27***
_
0.27***

p < 0.001.

Table 7 presents the analytical results of the causal relationships among the three key constructs. TQM directly affected
organizational learning (g1 = 0.81) and organizational learning directly affected innovation performance (g2 = 0.27). The
TQM also directly affected innovation performance (b1 = 0.55). These analytical results indicate that introducing TQM
promotes organizational learning and innovation performance. In addition, the promotion of organizational learning could
enhance innovation performance. These analytical results support Hypotheses 13.
Most of the t indices met the commonly accepted standard (for example, GFI = 0.91, CFI = 0.95, NFI = 0.93, IFI = 0.95,
TLI = 0.92) as all relative t indices are greater than 0.90 and residuals were small enough (RMR = 0.02 was less than 0.05.
However, CMIN = 95.95 (p < 0.05). However, AGFI = 0.84 did not comply with each criterion, but were close to the standard
values (see Table 7). Based on the analytical results, the tness of the theoretical model was deemed adequate.
4.3. Mediating effect
Structural equation models generally apply ellipses to represent the constructs (latent variables). A line with one arrow
between the two constructs signies the inuence of one construct on another. The number contiguous to the line represents
the standardized path coefcients (SPC) and is a standardized regression coefcient for one latent variable related to another
when the effects of all other variables are eliminated. This study suggests that TQM signicantly and positively contribute to
organizational learning (SPC = 0.81, p < 0.001). Furthermore, the TQM positively inuence organizational innovation
performance (SPC = 0.55, p < 0.0001). Finally, organizational learning signicantly contributed to innovation performance
(SPC = 0.27, p < 0.0001). However, the direct effect of TQM on innovation performance was 0.55. The indirect effect of TQM
on innovation performance via organizational learning is decreased to 0.22 (0.81  0.27). Consequently, according to Baron
and Kenny (1986), this mediating effect of organizational learning exists, but limited in this theoretical model. Therefore, this
studys results partially support Hypothesis 4. This paper also concludes that organizational learning only partially mediated
the affect of TQM on innovation performance. Fig. 2 and Table 8 present the combined SEM and analytical results.

R.Y.Y. Hung et al. / International Business Review 20 (2011) 213225

223

To assess the overall t of the data with the model, this study reports chi-square statistics along with
several other different types of t indices. This study chose three incremental t indices; the TuckerLewis Index (TLI)
(Tucker & Lewis, 1973), the Incremental Fit Index (IFI) (Bollen, 1989), and the Comparative Fit Index (CFI) (Bentler,
1990). This experiment also assessed two other residual types of t indices. These include the Root Mean Squared
Residuals (RMR) of Joreskog and Sorboms (1996) and the Root Mean Square Error of Approximation (RMSEA) of
Steigers (1990). A t comparison of the hypothesized model with the null baseline model is the basis for all three of the
incremental indices. Furthermore, each of the incremental t indices ranges from zero to 1.0, with values exceeding
0.90. This indicates an adequate model-data t. The RMR measures the average of the tted residuals, and the RMSEA
indicates the proximity of the t between the model and the population. These two indices describe the degree in which
the covariance matrix, implied by the model, matches the observed covariance matrix. A value of zero indicates an
optimal t and values of the indices below 0.08, indicate a reasonably well tting model (Browne & Cudeck, 1993;
Byrne, 1998).
5. Conclusion
This study used Taiwanese high-tech rms as its subjects and examined the relationship among TQM practice,
organizational learning, and innovation performance. The principal ndings are as follows: (1) the theoretical model for
TQMorganizational learning-innovation performance model has adequate goodness-of-t via SEM analysis, (2) TQM has a
signicant and positive impact on organizational learning, (3) TQM has a signicant and positive effect on innovation
performance and organizational learning partially mediate such effect, and (4) organizational learning has a signicant and
positive effect on innovation performance.
This study showed that the proposed model for TQM, organizational learning, and innovation performance could be
supported from the literature and subsequent discussion. The model has goodness-of-t via SEM with an empirical data set
collected from Taiwan. Therefore, the theoretical model is suitable and rational.
This study also showed that TQM signicantly and positively affects organizational learning. This result is
consistent with the results obtained by Barrow (1993). This study is also consistent with Conner and Prahalads (1996)
study, which indicates that the primary function of TQM is to generate an organizational culture of trust and
sharing. This culture encourages employee involvement and fosters an identication of individual goals. It also
contributes to improvements in the organizational process, inducing quality promotion, knowledge creation, and
knowledge transfer/integration that further stimulate innovation. SEM analysis indicates that employee involvement
(lx2 = 0.87) play a critical role in the TQM process. When introducing the TQM concept, it is extremely important to
enhance employee autonomy and encouraging employees to suggest possible methods of improving task quality. With
the exception of constructing an organizational culture through the learning focus, this study demonstrates that making
the learning strategically is an important aspect inuencing organizational learning (ly2 = 0.91). Therefore,
organization management teams must form and conrm the direction and goals of learning, and develop cultures
that promote it. This result conrms Watkins and Marsicks (1993) and Lien et al. (2007) theoretical framework of
learning organization that assumes providing strategic leadership of learning is a crucial factor in building learning
organization.
Furthermore, TQM practice can signicantly enhance innovation performance. This analytical result is consistent with
those obtained by Prajogo and Sohal (2003) and Juran (1988). Therefore, TQM is not simply a management tool for promoting
and improving quality, but can also promote a culture of sharing, trust, openness, and innovation when supported by top
management, employee involvement, continuous improvement, and customer focus. This stimulates employees to enhance
products, processes, and organizational innovation performance.
Additionally, this study proves the hypothesis that organizational learning promotes innovation performance. Other
scholars note that organizational learning theory assumes that organizational learning is the process of acquiring and
developing new knowledge and capabilities, and this process can enhance organization actions (Garvin, 1993; Lien, Hung,
Yang, & Li, 2006). The development of knowledge is also favorable for facilitating innovation performance and improving
innovation efciency, efcacy, and ability. Efcient knowledge sharing and transfer provide members of an organization an
opportunity to learn and cooperate, stimulate employees to create new knowledge, apply knowledge to product innovation,
and transfer knowledge to co-workers (Tsai, 2000, 2001).
While this study assesses the affect of TQM on the organizational learning and innovation performance of high-tech
companies in Taiwan, it is not completely free from limitations. Since the study sample consisted of only homogenous
high-tech rms, extraneous factors associated with different organizations in different industries were not a factor.
Another limitation of this study is that it does not objectively measure organizational performance. Future studies
should include a broad sample of rms from other industries and some objective assessments of organizational
performance, not unlike prior studies (Ellinger et al., 2002). One more limitation of this study is that the study collects
the measures using the same method (self-report). A common method variance might exaggerate the relationships
among the variables.
Besides the research and theoretical implications, this study provides the following practical implications for business:
(1) Emphasis on employee involvement

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The practices of TQM demonstrated that employee involvement was the principal factor affecting TQM success. This
implies that organizations should encourage employee involvement in TQM practices to generate the core values of TQM
and organizational learning activities.
To improve innovation performance, organizations should form strategies for implementing organizational learning.
The results of this study demonstrate that the learning strategy is a critical factor for forming organizational learning.
Practitioners frequently suggested that a low level of trust, a low degree of knowledge sharing, and a fear of innovating, were
all factors that impeded organizational learning and knowledge management (Tang, 1998). Reconstructing or establishing a
culture of trust, sharing, and innovation is extremely important for the survival of high-tech rms.
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