The Impact of TQM on Innovation - Hoang Et Al

The impact of total qualitymanagement on innovationFindings from a developing country

Dinh Thai Hoang and Barbara IgelSchool of Management, Asian Institute of Technology, Klong Luang,

Pathumthani, Thailand, and

Tritos LaosirihongthongIndustrial Engineering Department, Faculty of Engineering,

Thammasat University, Klong Luang, Pathumthani, Thailand

Abstract

Purpose – The purpose of this paper is to investigate the relationship between total qualitymanagement (TQM) practices and innovation performance in the Vietnamese industry context.

Design/methodology/approach – The method of confirmatory factor analysis was applied torefine TQM and innovation scales for empirical analysis in Vietnam. The structural equationmodelling method was applied to test the theoretical models.

Findings – This study confirms the results of previous studies that considered TQM as a set ofpractices. It confirms that TQM – considered as a set of practices – has a positive impact on the firm’sinnovativeness. It discovers that not all TQM practices enhance firm innovativeness. Only leadershipand people management, process and strategic management, and open organization showed a positiveimpact on the firm’s innovation performance.

Research limitations/implications – The sample was not random. Future research should selectdifferent random samples to allow for more generalization of the results. The study assessed theconcept of “newness” with the company boundaries. Future research should measure “newness”within the boundaries of the specific industry. The unclear evidence found in this study on the impactof the firm’s education and training policy on innovation needs to be further investigated.

Practical implications – The findings are useful for business managers in developing countriessuch as Vietnam, who want to enhance business performance through implementing TQM practicesthat support their firm’s product and services innovation efforts.

Originality/ value – The study has contributed to develop a measurement system of TQM practicesand innovation performance that facilitates more quality management research in developingcountries. It has contributed to clarifying the disputed relationship between TQM practices and thefirm’s innovativeness, and shows empirical evidence in Vietnam to confirm that the TQM practice setdeployed by a firm has a positive impact on its innovation performance.

Keywords Vietnam, Total quality management, Developing countries, Organizational innovation

Paper type Research paper

IntroductionThe introduction of total quality management (TQM) has played an important role inthe development of contemporary management practices. Quality is considered as akey strategic factor in acieving business success. In order to enhance the competitiveposition and improve business performance, companies worldwide, large and small,manufacturing and service, have applied the principles of total quality (Dean and

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Received February 2005Revised August 2005

International Journal of Quality &Reliability ManagementVol. 23 No. 9, 2006pp. 1092-1117q Emerald Group Publishing Limited0265-671XDOI 10.1108/02656710610704230

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Evans, 1994). However, in the knowledge-based society, high quality alone is notsufficient. The basis for sustainable competitive advantage has shifted from quality toinnovation as a fundamental component of entrepreneurship.

In the last decade, the theme of innovation has been a major concern of bothacademics and practitioners (Kanter, 1985; Drazin and Schoonhoven, 1996), but theliterature provides conflicting theoretical arguments about the relationship betweenTQM and innovation, i.e. whether the firm’s TQM practices support or hinder it indeveloping innovations. The contribution of TQM to innovation has not been exploredsufficiently in previous research (Prajogo and Sohal, 2003a), especially, empiricalstudies are rare. The purpose of this study was to investigate the impact TQM has as awhole on the firm’s innovation performance, as well as the contribution that specificTQM practices may have. The following research questions were explored inmanufacturing and service companies in Vietnam:

. Does TQM, considered as a set of practices, have a significant impact on thefirm’s innovation performance?

. How significant is the influence of specific TQM practices on the firm’sinnovation performance?

There are two opposite schools of thought concerning the relationship between TQMand innovation. One school believes that TQM supports innovation, implying thatorganizations that implement TQM will be successful in innovation. The alternativeschool argues that TQM impedes innovation. The main debate issue is in the argumentwhether the nature of TQM practices does support innovation or not.

The impact of TQM on innovationThe positive relationship between TQM and innovationThis perspective is based on the argument that the TQM practices, in both its humanand technology dimensions, help to create an environment and culture that supportinnovation. One of the core components of TQM is customer satisfaction. Companiesthat implement TQM have to explore and find ways to serve customer needs andexpectations at the best. This creates the impetus for companies to be innovative indeveloping and launching new products or services to match the customer’s needs.Several studies also identified a positive relationship between TQM and innovation interms of the speed to market (Flynn, 1994), and the level of innovation in organizations(Baldwin and Johnson, 1996). Terziovski and Samson (1999) tested the strength of therelationship between TQM practices (independent variables) and organizationalperformance (dependent variables) in a large random sample of manufacturingcompanies in Australia and New Zealand. They considered innovation as a dependentvariable that represents organizational performance measured by the number of newproducts produced, but could not confirm a significantly positive effect on innovationacross the whole sample. However, when covaried for industry type, the strength of therelationship between TQM and innovation changed from insignificantly positive tosignificantly positive, suggesting that the relationship between TQM and innovation isstrengthened when investigated for a specific industry type.

In a survey of 194 managers in Australia who worked in both manufacturing andnon-manufacturing companies, Prajogo and Sohal (2003b) found that TQM had asignificantly positive relationship with both product quality and product innovation

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performance, although the magnitude of the relationship appeared to be greateragainst the product quality.

Innovation is the result of the combination of different activities, such as researchand development, process development, design, marketing, organizationalrestructuring, resource management, and employee development (Szeto, 2000; Mitra,2000) and thus it is likely supported by TQM practices that enhance the combinationamong multifunctional activities.

The negative relationship between TQM and innovationBesides the above arguments that propose a positive relationship between TQM andinnovation, there is an opposite school of thought, represented by Wind and Mahajan(1997), Tidd et al. (1997), Slater and Narver (1998), Kim and Marbougne (1999) whobelieved that TQM can hinder innovation. Atuahene-Gima (1996) argued that customerfocus is concerned with product conformance (product quality), but not with productnewness (product innovation). Recent research in 418 Australian manufacturing firmsby Singh and Smith (2004) seems to confirm these earlier studies. Singh and Smith didnot find sufficient statistical evidence to suggest that TQM is related to the firms’innovation performance and suggested that there could be a more complex relationshipbetween these concepts.

The negative school of thought, however, does not completely reject arguments thatTQM may support innovation and admit that TQM may facilitate innovation, but onlyon a very limited basis. Kruger (1996) observed that the industry in Japan, besidespracticing large-scale absorption of new technology, also invested heavily in people,recognizing that technological innovation needs committed well-trained people, notonly to make the technology work but also to maintain its advantage through Kaizen (acontinuous improvement process, that is smaller-scale, and people-based). In addition,McAdam et al. (1998) identified many cases in which learning associated withcontinuous improvement helped employees to increase their knowledge of customers,competitors and markets and resulted in generating new ideas for innovative products.

Despite admitting evidence for such positive influence on innovation, proponents ofthe negative school believe that the implementation of TQM is likely to create moredisadvantages for innovation than support (Prajogo and Sohal, 2001).

Research methodologyThis section describes the development of scales for measuring the TQM andinnovation constructs, the process of collecting data, and testing for non-respondentbias.

TQM measuresAn extensive literature review was conducted prior to operationalizing the constructsfor measuring the implementation of TQM in a firm and assessing its innovationperformance.

There are many definitions of TQM in the literature, and a variety of approaches havebeen used by researchers to assess its implementation. Inconsistencies in this priorresearch make it difficult to reach a consensus on the elements and dimensions of TQM.According to Motwani (2001), the philosophy of TQM could be visualized asconstructing a house with top management commitment being the foundation or base.On top of a solid foundation, four pillars are constructed that include process

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management, quality measurement and control, employee training, and customer focus.However, it is not justifiable to discuss TQM without addressing the work of five“quality gurus” Deming (1982, 1986), Juran (1974, 1988, 1989, 1992), Crosby (1979, 1996),Feigenbaum (1951, 1983, 1991), and Ishikawa (1985). In a recent study, Reed et al. (2000)systematically reviewed the ideas proposed by these TQM researchers and found fiveTQM practices on which all of them had agreed. These are: customer focus, leadershipand top management commitment, training and education, team, and culture.

Sila and Ebrahimpour (2002) analyzed survey-based research on TQM conducted indifferent countries that was published in a variety of journals between 1989 and 2000.They found that the empirically researched TQM practices could be grouped under 25categories[1]. The seven most frequently investigated factors were customer focus andsatisfaction, training, leadership and top management commitment, teamwork,employee involvement, continuous improvement, and quality information andperformance measurement. It is not surprising that issues related to customer focusand satisfaction received the biggest coverage in this survey literature because of themajor push towards increasing customer satisfaction in virtually all types of businesses.

Two of the seven practices that received the highest coverage (training, andemployee involvement) relate to human resource management, and assign humanresources a critical role in the implementation of TQM. In addition, great attention wasgiven to the role of leadership and top management commitment as well as givingauthority to employees – the so-called empowerment – to make their own decision onany improvement project (Spreitzer, 1995; Ahire et al., 1996; Ahmed, 1998; Motwani,2001). Furthermore, issues related to quality information and performancemeasurement were also embraced by most studies.

For the continuous improvement, Sila and Ebrahimpour (2002) showed that thispractice was also included in a relatively large number of the studies on TQM. Theauthors also indicated that even though process management was not listed as one ofthe practices that appeared very frequently in the literature, it was, however coveredby many of the studies in practices such as process control, product and service design.Therefore, process management could be considered as one of the important TQMpractices.

The importance of service culture has been widely discussed and emphasized in theTQM literature (Bowen and Schneider, 1988; Schneider and Bowen, 1992, 1993; Harberet al., 1993a, b; Sureshchandar et al., 2001). Service culture is actually the extent towhich the employees at all levels realize that the real purpose of their existence is“service to the customers”. An organization characterized by a service culture is morelikely to offer a reliable, responsive, empathetic service to the customer, that, in turn,leads to a higher service quality as perceived from the customer’s point of view(Sureshchandar et al., 2001).

Strategic planning, that was covered by some researchers (Powell, 1992; Andersonand Sohal, 1999; Prajogo and Sohal, 2003a,b), is one of the criteria that most prestigiousquality awards such as Deming Prize (Deming Prize, 1996), Malcolm Baldrige NationalQuality Award (MBNQA, 1999), and European Quality Award (European Foundationfor Quality Management, 1994) apply in their ranking. Being an indicator for thecompany’s long-term plan and quality policy, strategic planning should be reflected interms of meaningful goals and objectives that aim at gaining customer satisfaction(Ghobadian and Woo, 1996). Therefore, strategic planning could be considered as oneof the important TQM practices.


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The relationship between TQM and organizational performance was investigatedby Prajogo and Sohal (2003a) who explored the six TQM practices suggested by thestudy of Samson and Terziovski (1999), These practices can be distinguished into twogroups: mechanistic elements and organic elements. Mechanistic elements includecustomer focus, process management, strategic and planning, information andanalysis, while the organic elements are leadership and people management. Thereason for this study to classify TQM practices into mechanistic and organic elementsis the findings of Kruger’s (1998, 2001) who proposed that TQM should combine people(soft element) and technical systems (hard element). The mechanistic elements (i.e.customer focus, process management, etc.) could be considered as the hard aspect andthe organic elements (i.e. leadership and people management) represent the soft aspect.

Based on a comprehensive review of previous studies, including the criteria of themost prestigious quality awards such as Malcolm Baldrige National Quality Award(MBNQA, 1999), European Quality Award (European Foundation for QualityManagement, 1994), Asia-Pacific Business Excellent Standard (www.copc.com; www.icdlap.com), and Vietnam Quality Award (Vietnam Quality Award, www.tcvn.gov.vn),10 constructs of TQM practices were developed and tested with 14 practitioner expertsand academics in Vietnam. During these pilot interviews with the experts “openorganization” was suggested as an important TQM practice that reflects the operatingenvironment and climate in the “TQM house” proposed by Motwani (2001). Thispractice was also considered as a TQM construct in the work of Powell (1995). Thefinal research survey on TQM practices consisted of the 11 constructs shown in Table I,because these constructs:

. constitute practices that represent the hard and soft aspects of TQM discussed inthe literature;

. cover the most prestigious quality award criteria of leadership, strategicplanning, customer and market focus, information and analysis, human resourcefocus, and process management that are widely accepted by TQM scholars andpractitioners;

. have been considered as critical practices in TQM implementation in bothmanufacturing and service organizations (Powell, 1995; Samson and Terziovski,1999; Sureshchandar et al., 2001; Sila and Ebrahimpour, 2002; Prajogo and Sohal,2003a, b); and

. correspond to the Vietnam Quality Award criteria, and are therefore suitable fortesting in the Vietnamese industry context.

Innovation measuresIn order to measure a firm’s ability to innovate, previous research used scales based oncriteria such as, the number of patents, total research and development expenditure,the number of new products introduced to the market, the speed to market, being the“first” in the market, the newness of the new product, (or new method of production, ornew market), etc. (Daft and Becker, 1978; Miller, 1987; Subramanian and Nilakanta,1996; Karagozoglu and Brown, 1998; Johannessen et al., 2001; Prajogo and Sohal,2003a,b).

This study measured innovation in terms of both the actual innovation output andits level of newness. In order to reflect actual innovation output, two variables wereused: the number of new products (or new services) that the firm had developed and

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Table I.TQM constructs in the

literature


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commercialized over the last three years, and the share of the current annual turnoverthat sales of these innovative products and services had generated. In order to assessthe level of newness, the scale developed by Johannessen et al. (2001) was adoptedbecause this measure of innovation seems to be the most meaningful as it captures theessential factor of innovation: the newness. The findings of Johannessen et al. indicatethat how new an innovation actually is perceived to be is closely linked to the issue ofwho perceives it as such. This notion allows to assess the “newness” of an innovationwithin different economic units, the company itself or the entire industry. When theeconomic unit that perceives this newness increases in size or scope, the innovation’sdegree of radicalness also increases. While in a developing country, like Vietnam,several innovations may be perceived as new by the companies that introduced them tothe local market, they may actually have been developed by other organizationsabroad. Nevertheless, the local companies value such innovations highly because theyindicate that the firm has in-house development initiative and capabilities. In Vietnam,several ISO 9001 certified companies such as Tribeco Beverages Co., Bach Tuyet PaintCo., Sapuwa Drinking Water Co., Kinh Do Cake Co., Biti’s Co., Thai Tuan Garment Co.,etc. have introduced such new products and services that opened new markets andhelped these firms to become national industry leaders. Therefore, adopting the scaleproposed by Johanessen et al. which provides measures of newness within thecompany is appropriate for assessing the innovativeness and its business implicationsin the Vietnamese context.

After intensive discussions with the 14 quality experts during the pilot study, theoriginal scale of Johannessen et al. that consisted of six dimensions (new product, newservice, new method of production, opening new market, new source of supply, newways of organizing) was modified by adding two new dimensions and combining newproduct and new service into one dimension. Thus the final innovation scale used inthis study consisted of the following seven dimensions of newness within the companyto be assessed by its management (“within the company” means that activities that areperceived to be new for the organization may have been previously used by otherorganizations):

(1) Entirely new product or new service.

(2) Use of new materials or intermediate products.

(3) New functional solution for an an existing product or additional service basedon an existing service.

(4) New method of production.

(5) Entering a new market.

(6) New source of supply.

(7) New ways of organizing (re-arranging the company’s human resource).

The respondents were asked to indicate on a five pointer scale (ranging from 1 ¼ “Tono extent” to 5 ¼ “To a very great extent”) their perceptions about the degree to whichtheir firm had made changes within the last three years to any of these seven items.

Data collectionThe scales for measuring TQM practices applied and innovations developed by thefirms were tested in a pilot survey in Hochiminh city with 12 companies that had been

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ISO 9001 certified. These firms were selected based on personal contacts to facilitatedata collection. Data from this pilot survey was evaluated through the Cronbach’salpha and item-total correlation coefficient. Cronbach’s alpha measures whether agroup of items combined to represent a construct is internally consistent and reliable.Generally, variables which have items with a total correlation below 0.3 are excluded,while a reliability coefficient of 0.7 or more is considered good (Nunnally, 1978; Hairet al., 1998). The Cronbach’s alpha of all TQM and innovation constructs were wellabove 0.7, and all the item-total correlation coefficients exceeded 0.3, except for theStrategic Planning construct. After deleting the sixth item of Strategic Planning withan item-total correlation coefficient of only 0.22, all remaining items had the item-totalcorrelation coefficients greater than 0.3, and the Cronbach’s alpha increased from0.7611 to 0.7930. Thus, the measurement for the final large survey consisted of 11 TQMconstructs with 59 items, and one construct for measuring the level of newness withseven items.

All manufacturing and services companies included in the survey had been ISO9001 certified for at least two years. These companies were sampled for thequestionnaire survey because of their managers’ knowledge of the subject matter,especially pertaining to quality management practices. As Carr et al. (2000) notedearlier, many Asian firms are reluctant to participate in research surveys without firstdeveloping a personal relationship with the researchers. We encountered the sameattitude among companies in Vietnam that very often hesitated to reply to thequestionnaire sent by mail. For this reason, we had to select companies in HochiminhCity and neighbouring provinces that provided us more favourable conditions for datacollection as we could rely on personal contacts and existing relationships withmanagers in the target companies. In 2005, 1339 Vietnamese organizations had beenISO 9001 certified of which companies located in Hochiminh City accounted for about50 per cent (Vietnam Productivity Centre, www.vpc.org.vn). Thus, ISO 9001 certifiedcompanies in Hochiminh City can be considered as sufficiently representative forcompanies that apply quality management practices in Vietnam.

Questionnaires were sent to the managers of 500 companies, resulting in a total of222 questionnaires returned, a response rate of 44.4 per cent that is one and a half timesthe average response rate reported by previous research (Terziovski and Samson, 2000;Prajogo and Sohal, 2003a,b; Loan, 2004). Due to missing data, 18 questionnaires had tobe excluded, leaving 204 valid questionnaires for the analysis.

Characteristics of the company and respondents are shown in Table II. Followingthe Decree No. 681/CP/KTN issued by the Vietnamese Government on 20 June, 1998,the companies in our sample were categorized into three groups: small firms with lessthan 50 employees, medium size with 50-200 employees, and large firms with morethan 200 employees (Ministry of Planning and Investment, 1999). As small companiesaccounted for a small share (2.04 per cent) in our sample, we finally divided the firmsinto two groups: small and medium size with less than or equal to 200 employees (32per cent of the sample), and large companies with more than 200 employees (68 percent). A similar classification was used by Laosirihongthong et al. (2003) in their studyin Thailand. About 25 per cent of all firms were foreign-owned or joint ventures, and 56per cent were state-owned companies, the rest were private owned.

About half were in manufacturing, 17 per cent were in services and the rest wereproducing both manufactured products and services.


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In order to compare the respondents with non-respondents, 30 non-respondingcompanies were contacted by phone to collect the following information:

. size (number of employees);

. ownership; and

. type of industry (manufacturing, service or both).

Similar to the respondents’ sample, the first two dimensions above were categorizedinto two groups: small to medium, and large companies; and manufacturing andservice companies. Ownership was divided into three categories: 100 per centforeign-owned and joint venture, state-owned and private companies.

The results of the comparison between the respondents and non-respondentssamples show a higher share of large companies, state-owned companies, andmanufacturing companies in the non-respondents sample with 76.7 per cent of thecompanies being large compared to 67.9 per cent in the respondents sample, 76.7 percent being state-owned and stock companies compared with 56.4 per cent in therespondents sample, and 63.3 per cent in manufacturing compared with 47.3 per cent inthe respondents sample (see Table III). However, these differences are not large enoughto indicate a substantial difference between respondents and non-respondents. Allchi-squared values for size, type of industry, and ownership are smaller than thechi-square table value for 0.05 significance (3.84 for 1 degree of freedom, and 5.99 for 2degrees of freedom), then all p-values are greater then 0.05. Thus, the respondents andnon-respondents can be considered as being similar.

Characteristics DescriptionNo. ofrespondents

Percentagea

(%)

Company size (numberof employees)

Small to medium: , ¼ 200Large: . 200Missing

631338

32.167.9

Ownership Foreign owned, and joint ventureState-owned companyPrivate companyMissing

52114362

25.856.417.8

Industry ManufacturingServiceBoth manufacturing and serviceMissing

9635721

47.317.235.5

Respondents’ positions Director/Vice DirectorFinance managerMarketing managerTechnique/Production managerR&D managerQC managerHuman resource, administration . . .

9.315.85.522.211.825.89.6

Note: aNot including missing respondents

Table II.Company and respondentcharacteristics

IJQRM23,9

1100

ResultsReliability and validity constructTo assess the reliability of the collected data, the Cronbach’s alpha reliability test wasperformed for both TQM and innovation constructs. In this study, the Cronbach’salpha of all TQM and innovation constructs were well above 0.7, and all the item-totalcorrelation coefficients exceeded 0.3, with the second item of the Process managementmeasures having the lowest value of 0.4368. Therefore, the instrument developed formeasuring TQM and innovation constructs was judged as sufficiently reliable.

Next, the confirmatory factor analysis (CFA) method using Analysis of MomentStructures (AMOS) 4.0 with a maximum likelihood procedure was conducted toexamine the construct validity. CFA was performed for each construct to eliminateitems with weak loading coefficients (smaller than the cut-off point of 0.5) and confirmfor the adequate measurement model. During this validation process, five items – thefirst item of Teamwork measures; the first, second, and third items of Processmanagement measures; and the first item of Information and analysis measures weredeleted because of poor loading on their respective latent variables. After excludingthese six items, the Goodness of Fit Indexes (GFI) for all constructs well exceed 0.9 andthe Standardized Root Mean Squared Residual (SRMR) coefficients are less than 0.1.These criteria meet the requirement for an acceptable model (Kline, 1998). Table IVpresents the Cronbach’s alpha and the GFI and SRMR of the final TQM and innovationconstructs that safeguard for the reliability and validity of the constructs underinvestigation.

Organizational characteristics Respondents Non-respondentsChi-squared

value p-value

Small to medium (, ¼ 200 employees)Large (.200 employees)

63 (32.1%)133 (67.9%)

7 (23.3%)23 (76.7%)

0.944 0.331

Foreign owned, and joint ventureState-owned companyPrivate company

52 (25.8%)114 (56.4%)36 (17.8%)

3 (10%)23 (76.7%)4 (13.3%)

4.846 0.089

ManufacturingService, and both manufacturing and service

96 (47.3%)107 (52.7%)

19 (63.3%)11 (36.7%)

2.691 0.101

Table III.Comparison of

respondents withnon-respondents

Construct No. of items Cronbach’s alpha GFI CFI SRMR

TQM Top management commitment 6 0.8065 0.921 0.90 0.0625Employee involvement 7 0.8311 0.946 0.932 0.0491Employee empowerment 4 0.7531 0.998 1 0.0123Education & training 5 0.8450 0.959 0.957 0.0377Teamwork 3 0.8189 0.990 0.997 0.0000Customer focus 7 0.8559 0.907 0.92 0.0590Process management 4 0.8321 0.941 0.929 0.0556Information and analysis system 5 0.8575 0.968 0.975 0.0365Strategic planning 5 0.8989 0.900 0.918 0.0512Open organization 4 0.8865 0.982 0.987 0.0226Service culture 4 0.8142 0.926 0.902 0.0705

Innovation Level of newness 7 0.8265 0.945 0.926 0.0486

Table IV.Reliability and validity of

TQM and innovationconstructs


1101

The relationship between TQM and innovationIn this research, TQM is an abstract construct of 11 latent constructs, of which eachhas multiple items attached (from three to seven items for each construct). Therefore,a CFA model with a second-order factor (see Figure 1) was developed to examine theconvergent and discriminant validity and test for the relationship between the latentconstructs in the model: TQM, level of newness, number of new products andservices, and the share in current year sales that the new products and services hadgenerated.

According to Kline (1998), besides the Chi-square to degrees of freedom ratio (x 2=dfratio), widely used measures of fit for the model include the Goodness of fit index (GFI),the Bentler Comparative Fit Index (CFI), the Bentler-Bonett Non-Normed Fit Index(NNFI), and the Standardized Root Mean Squared Residual (SRMR). It is desired thatthe x 2/df ratio is less than 3; and that the GFI, CFI, and NNFI are at least 0.90; and theSRMR less than 0.1. The standardized estimates of the CFA model shown in Figure 1

Figure 1.The second-order CFAmodel of the relationshipbetween TQM andinnovation constructs

IJQRM23,9

1102

and the indices for fit presented in Table V indicate that these requirements aresatisfactory for both measurement and structural models. All variables presumed tomeasure latent constructs had high factor loading coefficients on their respectiveconstructs and were statistically highly significant (all p-values equal 0). Thus, allvariables that measure latent constructs in this model achieved convergent validity(Anderson and Gerbing, 1988).

Then, the test for discriminate validity was performed. The estimated correlationcoefficients for the factors are presented in Table VI. While not excessively high (lessthan 0.85), these coefficients show nevertheless evidence for discriminant validityamong the factors in the model (Kline, 1998). The path coefficients within each of the 11TQM factors and between these 11 TQM factors with the TQM latent variable are allacceptably high as well as highly significant, and validate the measurement model.These data also confirm that TQM can be generally considered as a set of practices, asproven in previous studies (Ahire et al., 1996; Samson and Terziovski, 1999; Prajogoand Sohal, 2003a).

The standardized estimates of the structural model shown in Figure 1 indicate thatTQM has a quite strong positive relationship with the level of newness achieved, andthe number of new products and services developed (t.2, p-value ¼ 0). But there is norelationship between TQM and the share in current year sales contributed by thesenew products and services (t ¼ 0.275, p-value ¼ 0.783).

Therefore, with respects to the research question whether TQM practices, ingeneral, have an impact on innovation performance or not, our results support thehypothesis that TQM – as a latent construct – has a positive relationship with thelevel of newness, and the number of new products and services. We found, however, noevidence for a relationship between TQM and the sales of new products and services.

The relationship between specific TQM practices and innovationIn order to explore the influence of each TQM practice on the two innovation measures– the level of newness, and the number of new products and services – a CFA model

x 2=df GFI CFI NNFI SRMR

Measurement model 1.664 0.972 0.969 0.966 0.0327Structural model 1.667 0.976 0.968 0.966 0.0356

Table V.Fit indices of the CFA

measurement andstructural model

Factors Std estimate Std error Critical value p-value

TQM & level of newness 0.331 0.063 4.003 0.000 * *

TQM & new products and services 0.628 0.245 7.721 0.000 * *

TQM & share of turnover 0.023 2.054 0.214 0.830New products and services and level of newness 0.315 0.228 3.150 0.002 * *

Share of turnover and level of newness 0.304 1.730 2.553 0.011 *

Share of turnover and new products and services 0.083 6.127 0.786 0.432

Notes: *Significant at p , 0.05; * *significant at p , 0.01

Table VI.Correlation coefficients

among factors


1103

presented in Figure 2 was constructed. This model excluded the proportion of turnoverfrom new product and service innovation because no relationship with TQM has beenfound in the previous analysis.

In this model, an exploratory approach was taken by estimating all possiblerelationships between each of 11 TQM factors considered as the independent variablesand the two innovation measures considered as the dependent variables. Each TQMfactor and the innovation variable are the observed variables represented by the meanvalue. Table VII shows the correlation matrix that served as the input matrix forAnalysis of Moment Structures (AMOS) in estimating the theoretical model.

The first part of Table VIII summarizes the standardized estimates and the fitindices of the initial model. This output indicates that the TQM variables topmanagement commitment, employee involvement, teamwork, customer focus,

Figure 2.Initial model of therelationship between eachTQM factor and twoinnovation measures

IJQRM23,9

1104

Var

iab

leA

BC

DE

FG

HI

JK

LM

Top

man

agem

ent

com

mit

men

t1

Em

plo

yee

inv

olv

emen

t0.

7734

1E

mp

loy

eeem

pow

erm

ent

0.62

250.

698

1E

du

cati

onan

dtr

ain

ing

0.58

890.

669

0.60

31

Tea

mw

ork

0.52

440.

6353

0.51

60.

5998

1C

ust

omer

focu

s0.

6558

0.65

410.

5754

0.60

690.

623

1P

roce

ssm

anag

emen

t0.

5628

0.56

010.

5375

0.51

220.

5412

0.59

71

Info

rmat

ion

and

anal

ysi

ssy

stem

0.51

130.

5384

0.43

150.

569

0.47

030.

6049

0.65

671

Str

ateg

icp

lan

nin

g0.

7593

0.69

880.

5399

0.64

810.

5578

0.69

520.

6096

0.63

651

Op

enor

gan

izat

ion

0.45

740.

5959

0.49

530.

4833

0.60

770.

3553

0.35

660.

287

0.44

681

Ser

vic

ecu

ltu

re0.

6373

0.60

120.

4535

0.58

230.

5494

0.55

450.

465

0.44

010.

646

0.50

471

Lev

elof

new

nes

s0.

3213

0.24

980.

4034

0.17

490.

2009

0.32

70.

3848

0.22

440.

3192

0.10

740.

2048

1N

ewp

rod

uct

0.52

410.

5468

0.54

220.

5912

0.47

40.

4996

0.52

750.

5029

0.52

470.

4672

0.48

020.

2945

1S

D0.

6908

0.75

940.

8113

0.85

150.

8471

0.69

270.

8092

0.90

730.

7971

0.80

850.

6873

0.79

333.

0691

Note:

A=

Top

man

agem

ent

com

mit

men

t;B

=E

mp

loy

eein

vol

vem

ent;

C=

Em

plo

yee

emp

ower

men

t;D

=E

du

cati

onan

dtr

ain

ing

;E

=T

eam

wor

k;

F=

Cu

stom

erfo

cus;

G=

Pro

cess

man

agem

ent;

H=

Info

rmat

ion

and

anal

yis

syst

em;I

=S

trat

egic

pla

nn

ing

;J=

Op

enor

gan

izat

ion

;K=

Ser

vic

ecu

ltu

re;

L=

Lev

elof

new

nes

s;M

=N

ewp

rod

uct

Table VII.Standard deviations and

correlations among TQMpractices and innovation

variables


1105

Ex

ogen

ous

con

stru

ctE

nd

ogen

ous

con

stru

ctS

tan

dar

diz

edes

tim

ate

tp-

val

ue

Initialmodel

Top

man

agem

ent

com

mit

men

tIN

NO

,N

PD

UC

T0.

075,

0.08

30.

658,

0.86

50.

511,

0.38

7E

mp

loy

eein

vol

vem

ent

INN

O,

NP

DU

CT

20.

174,2

0.04

92

1.45

4,2

0.48

80.

146,

0.62

5E

mp

loy

eeem

pow

erm

ent

INN

O,

NP

DU

CT

0.39

7,0.

149

4.30

4,1.

918

0.00

0*

* ,0.

055

Ed

uca

tion

and

trai

nin

gIN

NO

,N

PD

UC

T2

0.19

2,0.

242

22.

026,

3.02

60.

043

* ,0.

002

**

Tea

mw

ork

INN

O,

NP

DU

CT

20.

019,2

0.04

52

0.20

3,2

0.56

40.

839,

0.57

3C

ust

omer

focu

sIN

NO

,N

PD

UC

T0.

104,

0.02

61.

029,

0.30

60.

304,

0.75

9P

roce

ssm

anag

emen

tIN

NO

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PD

UC

T0.

261,

0.15

42.

880,

2.01

60.

004

** ,

0.04

4*

Info

rmat

ion

and

anal

ysi

ssy

stem

INN

O,

NP

DU

CT

20.

091,

0.13

02

0.99

5,1.

692

0.32

0,0.

091

Str

ateg

icp

lan

nin

gIN

NO

,N

PD

UC

T0.

173,2

0.02

81.

536,2

0.29

50.

124,

0.76

8O

pen

org

aniz

atio

nIN

NO

,N

PD

UC

T2

0.09

8,0.

176

21.

141,

2.43

90.

254,

0.01

5*

Ser

vic

ecu

ltu

reIN

NO

,N

PD

UC

T0.

002,

0.05

90.

028,

0.78

30.

978,

0.43

4F

itin

dex

esx

2=df¼

2.40

3G

FI¼

0.99

8C

FI¼

0.99

9N

NF

I¼

0.93

6S

RM

R¼

0.00

71

Revised

model1

Lea

der

ship

and

peo

ple

man

agem

ent

INN

O,

NP

DU

CT

0.31

6,0.

143

2.68

,1.

492

0.00

7*

* ,0.

136

Ed

uca

tion

and

trai

nin

gIN

NO

,N

PD

UC

T2

0.19

6,0.

243

22.

022,

3.08

90.

043

* ,0.

002

**

Tea

mw

ork

INN

O,

NP

DU

CT

20.

024,2

0.04

32

0.24

1,2

0.53

30.

810,

0.59

4C

ust

omer

focu

sIN

NO

,N

PD

UC

T0.

107,

0.01

71.

005,

0.19

90.

315,

0.84

2P

roce

ssan

dst

rate

gic

man

agem

ent

INN

O,

NP

DU

CT

0.24

6,0.

257

2.27

3,2.

934

0.02

3* ,

0.00

3*

*

Op

enor

gan

izat

ion

INN

O,

NP

DU

CT

20.

094,

0.16

82

1.05

,2.

320

0.29

4,0.

020

**

Ser

vic

ecu

ltu

reIN

NO

,N

PD

UC

T2

0.02

7,0.

026

20.

298,

0.36

10.

766,

0.71

8F

itin

dex

esx

2=df¼

3.77

1G

FI¼

0.99

6C

FI¼

0.99

7N

NF

I¼

0.90

3S

RM

R¼

0.01

35(continued

)

Table VIII.Summary of therelationship betweenTQM factors andinnovation measures

IJQRM23,9

1106

Ex

ogen

ous

con

stru

ctE

nd

ogen

ous

con

stru

ctS

tan

dar

diz

edes

tim

ate

tp-

val

ue

Revised

model2

Lea

der

ship

and

peo

ple

man

agem

ent

INN

O,

NP

DU

CT

0.27

52.

680

0.00

7*

*

Ed

uca

tion

and

trai

nin

gIN

NO

,N

PD

UC

T2

0.21

3,0.

290

22.

289,

3.90

60.

022

* ,0.

000

**

Pro

cess

and

stra

teg

icm

anag

emen

tN

PD

UC

T0.

316,

0.29

43.

227,

4.12

10.

001

** ,

0.00

0*

*

Op

enor

gan

izat

ion

INN

O0.

197

3.20

00.

001

**

Fit

ind

exes

x2=df¼

2.23

1G

FI¼

0.98

9C

FI¼

0.99

3N

NF

I¼

0.96

6S

RM

R¼

0.02

42

Notes:

* sig

nifi

can

tat

p,

0.05

;*

* sig

nifi

can

tat

p,

0.01

;IN

NO

:le

vel

ofn

ewn

ess,

NP

DU

CT

:n

ewp

rod

uct

Table VIII.


1107

strategic planning, and service culture show no significant relationships with any ofthe two innovation variables while the TQM variables information and analysissystem and open organization show no significant relationships with the innovationvariable level of newness.

However, as indicated in Table VII, top management commitment shows highcorrelation with employee involvement, and employee empowerment: 0.7734, and0.6225, respectively; process management correlates highly with information andanalysis system, and strategic planning: 0.6567, 0.6096, respectively. These highlycorrelated exogenous variables cannot present a significant impact on endogenousvariables at the same time. For example, because employee empowerment showsalready a significant impact on both innovation variables, top managementcommitment, and employee involvement indicated then no significant relationshipswith any of the two innovation variables, despite the fact that top managementcommitment, and employee involvement show high correlation with number of newproduct and service variable: 0.5241, and 0.5468, respectively. Thus, using the meanvalue, two composite variables named leadership and people management, and processand strategic management were formed to represent all of the following variables: topmanagement commitment, employee involvement, and employee empowerment, andprocess management, information and analysis system, and strategic planning,respectively. Top management commitment, employee involvement, and employeeempowerment are practices that mainly relate to human aspects in the companieswhile process management, information and analysis system, and strategic planningare considered as mechanistic elements of TQM. Strategic planning, and informationand analysis system also constitute the basic elements of the strategic managementprocess because these practices reflect the two essential phases, planning andevaluation, of this process (Prajogo and Sohal, 2003a). Therefore, these incorporationsare acceptable from the theory aspect.

The revised CFA model 1 then was estimated with these two composite exogenousvariables. The estimates of this revised model presented in the second part ofTable VIII indicate that the variables teamwork, customer focus, and service cultureshowed no significant relationship with the two innovation variables. Leadership andpeople management had significant relationship with level of newness, while openorganization showed a significant relationship with the number of new products andservices. Only two variables, education and training, and process and strategicmanagement, were highly significant with both, the level of newness and the numberof new products and services. All fit indices for this revised model – GFI, CFI, andNNFI – can be acceptable (greater than 0.9), SRMR is well below 0.05, but x2=df aregreater than 3 (3.771). Thus, the revised CFA model 2 with all non-significant pathsdeleted (Figure 3) was estimated. The estimates of this revised model presented in thethird part of Table VIII indicate that all investigated relationships were highlysignificant. All fit indices satisfied the requirement for the acceptable model: GFI, CFI,and NNFI well exceed 0.9, x 2/df is less than 3, and SRMR is well below 0.05.

Thus, in response to the research objective of determining the impact of each TQMpractice on the firm’s innovation performance, our results indicate that not all TQMfactors had an impact on the Vietnameses companies’ innovation performance. Therevised CFA model 2 confirms that only two variables, education and training, andprocess and strategic management had a predictive power against both variablesmeasuring the firm’s innovation performance, namely the level of newness and the

IJQRM23,9

1108

number of new products and services. Leadership and people management had asignificant relationship only with the level of newness while open organization showeda predictive power against the number of new products and services. It is also notedthat both TQM practices – leadership and people management, and education andtraining, an organic dimension, and process and strategic management, a mechanisticdimension – supported the firm’s innovation. This result is different from previousresearch, such as Powell (1995) and Prajogo and Sohal (2003a) who found that onlyorganic elements, namely the open culture and employee empowerment had an impacton the firm’ s innovation performance, but could not confirm any contribution of TQMtools and techniques, such as process improvement.

In quantitative research methods, generally a research sample has to be divided intotwo sub-samples: one is used to estimate parameters, and the other for re-evaluation ofestimated parameters. Another method is to replicate the study with a different sample.These methods require time and are expensive, especially for a large sample.Bootstrapping is a suitable alternative method that provides empirical informationabout the variability of parameter estimates (Schumacker and Lomax, 1996).Bootstrapping is essentially a resampling procedure in which the original data setserves as the population (Kline, 1998).

This study used the bootstrap method with a replacement samples of N ¼ 500. Theresults shown in Table IX reveal only minor differences compared to the estimatesobtained from the revised CFA model 2, and thus confirm that these estimates are reliable.

Discussion of the findingsWith respect to the first research question of whether TQM practices, in general, supportthe firm’s innovation performance, our findings in Vietnam indicate that TQMsignificantly and positively impacts on the level of newness and, especially on the numberof new products and services commercialized (see Figure 1). This finding provides clearevidence to support the arguments form the literature for a positive relationship betweenTQM and innovation. Although this result confirms findings of previous studies(Gustafson and Hundt, 1995; Baldwin and Johnson, 1996; Prajogo and Sohal, 2003a), it isdifferent from the research result of Singh and Smith (2004), as we could not confirm allTQM factors to have an impact on innovation. Our findings show that the threeconstructs – leadership and people management (including top management

Figure 3.The revised model 2 of therelationship between TQMfactors and two innovation

measures


1109

commitment, employee involvement, and employee empowerment), process and strategicmanagement (including process management, information and analysis system, andstrategic management), and open organization – have, to a certain degree, a positiveimpact, on the innovation performance of the companies surveyed in Vietnam.

A surprising finding, however, was that education and training, while showing apositive effect on the number of new products and services, had a negative relationshipwith the level of newness, (see results of the revised CFA model 2 in Table VIII). Althoughthe number of new products and services shows a positive correlation with the level ofnewness (r ¼ 0.30, p-value ¼ 0.002), these unclear findings on the impact of educationand training on innovation indicate a complex relationship between these variables. Ourresult suggests the need for more intensive research to explore in more deepth therelationship between education and training, and the level of newness and the number ofnew products and services to identify the existence of potentially mediating variables.

It is noted that we also cannot report any evidence for the impact of customer focuson the firm’s product and service innovation performance as already suggested byothers. Atuahene-Gima (1996) concluded that customer focus was not associated withproduct newness. The remarkable impact of process management, and informationand analysis system on innovation found in our study confirms the findings ofprevious research (Gustafson and Hundt, 1995; McAdam et al., 1998). These practicesmainly deal with formalizing and controlling in order to reduce variation. It is in theprocess of analyzing information and looking for ways to reduce variation that creativethinking and innovation have been created. As mentioned above, it is worth to notethat both, the mechanistic and organic components of TQM practices show asignificant impact on innovation.

These findings both confirm and contradict the results of previous studies such asPowell (1995) who concluded that only certain tacit resources, such as open culture,employee empowerment, can influence the firm’s performance, but not the TQM toolsand technique, such as process improvement. Prajogo and Sohal (2003a) also foundonly organic elements that showed an impact on innovation.

Descriptive statistics for TQM practices implemented by the firms (see Table X),show that top management in the Vietnamese companies participating in our surveygenerally expressed a high commitment to quality management. Top managementcommitment was ranked 4.02 and came second after customer focus, followed by

Maximumlikelihoodestimation Bootstrap estimation

Impact e se e Se se(se) b

Leadership and people management ! INNO 0.275 0.168 0.273 0.172 0.005 20.002Education and training ! INNO 20.213 0.121 20.218 0.140 0.004 20.005Education and training ! NPDUCT 0.290 0.364 0.296 0.358 0.011 0.006Process and strategic management ! INNO 0.316 0.148 0.319 0.138 0.004 0.003Process and strategic management ! NPDUCT 0.294 0.409 0.295 0.352 0.011 0.001Open organization ! NPDUCT 0.197 0.324 0.196 0.310 0.010 20.001

Notes: e: estimated path coefficient; se: standard error; se(se): standard error of the bootstrap standarderror; b: bias; INNO: level of newness; NPDUCT: new product

Table IX.Estimates results usingbootstrap method

IJQRM23,9

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employee involvement, teamwork, open organization, strategic planning, and serviceculture, with mean values ranging from 3.5 to 3.9. Information and analysis system,education and training, employee empowerment, and process management wereranked lowest with values of less than 3.5. Similar results were reported by Loan (2004)who proposed some possible explanations for this.

First, in order to survive and create a competitive competence edge, most CEOsunderstand that product and service quality is one of the decisive factors. Topmanagers are strongly determined to apply quality management programs forimproving their products and services. Both, customer focus and top managementcommitment are critical evaluation criteria for obtaining the ISO 9001 certificate (Loan,2004). Thus, the fact that top management commitment is deployed so well in theVietnamese companies can be explained by ISO 9001 certification requirements.

Second, despite the recent transitioning from central planning and subsidizing to amore market-based economic regime, most Vietnamese companies are still unfamiliarwith the concept of empowering their employees who are often quite passive. As statedby Evans and Lindsay (1993), TQM would be effective only when all employees areinvolved. Absence of employee empowerment is likely to influence employeeinvolvement that requires more assertive and independent employees who are lessconstrained by technical or rule-bound aspects, and self-efficacious in doing their work(Spreitzer, 1995),. These more innovative employees are able to point out themselvesthe approaches and conditions that allow them to innovate and accomplish their tasks.

Teamwork is another problematic issue in Vietnamese companies. During thesurvey, most managers stated that their employees were often not willing to shareideas and experience with others, but rather tend to solve problems alone and hesitateto join teamwork. This finding was confirmed by Hung (2003) who noted that“teamwork is an inherent weakness of Vietnamese companies”.

Third, although some companies expressed concern about training for theiremployees, the majority had not yet designed any long-term training policy andstrategies nor provided employees with sufficient training on how to use quality toolsand techniques in their job. Investment into education and training requires vision andlong-term strategy which most Vietnamese companies seem to lack, because theypursue rather short-term business results.

Finally, many Vietnamese companies are also weak in using information systemsand have not recognized yet the role of statistical process control in quality

TQM dimensions Mean S.D.

Customer focus 4.08 0.69Top management commitment 4.02 0.69Service culture 3.88 0.68Strategic planning 3.87 0.79Open organization 3.73 0.80Teamwork 3.66 0.84Employee involvement 3.56 0.75Process management 3.49 0.80Employee empowerment 3.49 0.81Education & training 3.49 0.85Information and analysis system 3.39 0.90

Table X.Descriptive statistics for

implemented TQMpractices


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management. Analyzing information and using statistical process control also needsupport from the company’s local area network. But few Vietnamese companies, so far,can afford investing into both information technology and human resources to operateand effectively exploit such networks (Loan, 2004). Hua et al. (2000) reported similarconditions in Shanghai’s manufacturing firms: top management commitment wasconsidered of highest importance while but people management was at the lowestlevel. According to the Motwani’s metaphor, at present the “TQM house” ofVietnamese companies has a relatively strong base (top management commitment) andonly one pillar, the customer focus, while the three remaining pillars, information system,statistical process control and people management, are of average strength.. However, asthese three elements have been found to support the firms’ innovation performance,Vietnamese companies need to learn how to deploy those tools more effectively.

ConclusionThis study examined the impact of TQM, in general, and of each TQM practice, inparticular, on the firm’s innovation performance. Structural equation modelingtechnique was applied to test the relationship between the TQM practices deployed bythe firm and its innovation performance.

The contribution of this study can be considered along three dimensions, thatinclude the TQM theory, research methodology and empirical evidence.

In terms of the research methodology, this study has validated for Vietnam, adeveloping country, the measurement instruments for TQM practices and the firm’sinnovation performance that were initially developed and tested mainly inindustrialized countries. One of the difficulties in doing research on TQM was thelack of the measurement instruments that reflect the industry’s operating conditions ina developing country. With some adjustment that reflect the market and businessconditions in Vietnam, these measurement instruments have proven reliable and valid.This study has contributed to develop a measurement system of TQM practices andinnovation performance that facilitate more quality management research indeveloping countries. Concerning TQM theory aspects, this study has contributed toclarify the disputed relationship between TQM practices and the firm’s innovativeness.

However, while empirical evidence found in this study confirms that TQM has apositive impact on the firm’s innovation performance, the data also show that not allTQM practices did enhance the firm’s innovativeness. Only three practices, namelyleadership and people management, process and strategic management, and openorganization showed a positive relationship with innovation. These findings haveimportant implications for managers in Vietnam who aim at improving theircompany’s business performance through product, service or process innovation withthe help of quality management practices. By focusing on leadership and peoplemanagement, an open organization, a climate for innovation along with an analysissystem towards a continuous process management these managers can more in-houseinnovation in their companies.

This study has some limitations. First, it is based on a convenience sample thatincluded firms in Hochiminh City and adjacent provinces. However, the sample chosendoes not decrease the significance of the findings because, as shown previously, thesample companies are as representative for most Vietnamese business organizationsthat apply quality management practices following the ISO 9001 standard. Aconvenience sample was the only option for this study in Vietnam, where having a

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personal relationship is crucial to obtaining a sufficient number of responses, andrandom sampling would have limited the available data severely.

The second limitation relates to measuring the innovativeness as this studyassessed the concept of “newness” within the company boundaries. Future researchassessing the impact of TQM practices on the firm’s innovation performance shouldmeasure “newness” within the boundaries of the specific industry, allowing to identifyand assess more radical innovations (Johannessen et al., 2001).

Thirdly, the unclear evidence found in this study on the influence of education andtraining needs to be further investigated. Specifically, the relationship between thenumber of new products and services, its level of newness, and the specific support toeach from better education and training should be explored in further studies.

Note

1. Listed in the order of decreasing frequency: customer focus and satisfaction, training,leadership and top management commitment, teamwork, employee involvement, continuousimprovement, quality information and performance measurement, supplier management,communication, strategic planning, process management, employee appraisal, rewards, andrecognition, human resource management, process control, product and service design,benchmarking, employee empowerment, employee satisfaction, flexibility, qualityassurance, zero defects, quality culture, quality systems (mostly issues involving ISO9000), just in time, and social responsibility (includes environmental control, security andsafety of employees, customers and communities and other related issues).

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About the authorsDinh Thai Hoang is a Lecturer and PhD student in the School of Management, Asian Institute ofTechnology, Klong Luang, Pathumthani, Thailand.

Barbara Igel is an Associate Professor in the School of Management, Asian Institute ofTechnology, Klong Luang, Pathumthani, Thailand. She is the corresponding author and can becontacted at: [email protected]

Tritos Laosirihongthong is an Assistant Professor in the Industrial Engineering Department,Faculty of Engineering, Thammasat University, Klong Luang, Pathumthani, Thailand.


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