TQM and performance in small medium enterprises: The mediating effect of customer orientation and innovation

The purpose of this paper is to analyse the importance of developing a quality management approach as a way to enhance the bottom line results of small and medium sized enterprises (SMEs). The main goal is to examine the synergistic relationships between TQM, performance, consumer orientation and innovation.

A structural equation modelling using a single‐indicator analysis corrected for measurement error is used to test a number of antecedents of SME performance.

The findings reveal that the most relevant TQM components impacting on SME performance and consumer orientation are measuring results, quality assurance systems, top‐manager training programmes and leadership initiatives. Results also confirm both the impact of innovation on performance as well as that of consumer orientation on innovation. Furthermore, no statistical evidence was found to either confirm the effect of TQM on innovation, or that of consumer orientation on performance.

The present study considers a key‐informant approach, which may raise uncertainty about potential single‐method bias. Future research should extend the sample to multiple regions and consider a larger pool of respondents.

Findings of the present study may assist public policy‐makers to evaluate the importance of TQM and of consumer orientation and innovation in enhancing SME performance, which serve as the best potential sources of jobs and growth in the European economy.

This study finds particular relevance in emphasizing that TQM should not be viewed as the only critical factor leading to performance and that more complex relationships need to be considered by integrating other constructs as major antecedents of SME performance.