Research on the Influence of Total Quality Management Practices on Chinese Enterprises’ Financial Performance: Dual-Perspective Based on Synergy and Time Lag Effect

Haishan Wang, Fordham University


Total Quality Management (TQM) was originated in the United States in the 1960s and then adopted, promoted, and developed in Japan. It has improved Japanese companies’ competence rapidly, hence boosting the Japanese economy. After that, TQM has gained popularity all over the world, and has further evolved into new quality management methods such as Performace Excellence Model (PEM). The concept of “quality” has also gradually evolved from product quality of a single product to service quality, operation quality, development quality, etc. The evolution has helped American and European companies achieve sustained success. Most studies on Chinese companies focus only on the static performance of firms in a certain period of time, rather than from a dynamic perspective. Therefore, it remains unanswered how long it takes total quality management practice to have a positive effect on company performance. Moreover, existing literature rarely pay attention to the impact of specific components of PEM on company performance. Unlike the previous studies, this dissertation studies the time-lag effect of TQM. It focuses on the companies that participate in the quality-award selection, and chooses the standard PEM of the quality-award selection as the representative form of TQM. It empirically studies the impact of TQM on corporate financial performance. The dissertation measures financial performance by the growth rate of three major financial indicators: operating profit, total profit, and net profit. It run regressions of the three financial indicators against the 6 elements of PEM. The dissertation also examines the changes in financial performances before and after the adoption of PEM. My results show that the typical form of TQM practice, i.e. PEM, is correlcated with corporate financial performance. At the same time, the various factors of TQM and financial performances are also correlated.When PEM is adopted at first, the growth rate of a company's operating profit, total profit, and net profit tend to go downward. However, those indicators improve significantly in only a few years. These results indicate that there is a time-lag effect associated with PEM. This dissertation helps companies deeply understand TQM practices, address companies’ confusion on the relationship between financial performance and quality management, provide theoretical support for decision-making, strengthen the confidence to initiate and implement TQM practices, and provide insights on policy-making to relevant government agencies.

Subject Area

Entrepreneurship|Finance|Management|Business administration|Public policy|Asian Studies

Recommended Citation

Wang, Haishan, "Research on the Influence of Total Quality Management Practices on Chinese Enterprises’ Financial Performance: Dual-Perspective Based on Synergy and Time Lag Effect" (2020). ETD Collection for Fordham University. AAI28148162.