Huiming Liu

In light of the growing demand for quality certifications, quality management practices have become crucial in the quest for profitability and market share. To date, the research into the firm performance of quality management is very limited. This paper aims to investigate the effects of quality management practices on the operational and financial performance. An event study methodology describing the year-to-year and cumulative effects of quality awards is developed. The data were collected from a sample of 148 Chinese manufacturing companies that won Chinese national and provincial quality awards. The results indicate that while quality award winners have advantages in terms of their profitability and operating efficiency, their sales growth is not improved as expected. In terms of innovation capability, award winners strongly underperform compared with their counterparts. This study also highlights that the positive impact on profitability may disappear after the certification and that the most significantly positive stimulus occurs in the certification year. This study provides evidence that quality certification cannot assure companies of competitive advantages. It also enlightens managers regarding the existence of obstacles from quality management systems to business performance.

Quality management practices have become increasingly important as firms seek to obtain quality certifications to dominate markets. To date, adequate research evaluating the effects of quality management is lacking. In this work, we used Chinese quality awards to evaluate a firm’s quality level. A PSM-DiD (propensity score matching and difference-in-difference) model describing the relationship between quality award effects and financial benefits in terms of return on assets was developed. We further used a hierarchical regression to examine the influence of operational performance on financial benefits. The results show that quality awards cannot assure their winners a higher return on asset. Indicators of operating performance, such as less lead time and higher inventory turnover, can significantly enhance firms’ profitability. The moderating effects of operational performance suggest that firms may focus on how to translate quality management practices into business improvement. This study also contributes to the operation management literature by describing how firms need outstanding financial performance for sustainable development and continuous improvement.