The relationship between organization strategy, total quality management (TQM), and organization performance – the mediating role of TQM

The study presented in this paper examines the fit of total quality management (TQM) practices in mediating the relationship between organization strategy and organization performance. By examining TQM in relation to organization strategy, the study seeks to advance the understanding of TQM in a broader context. It also resolves some controversies that appear in the literature concerning the relationship between TQM and differentiation and cost leadership strategies as well as quality and innovation performance. The empirical data for this study were drawn from a survey of 194 middle/senior managers from Australian firms. The analysis was conducted using structural equation modeling (SEM) technique by examining two competing models that represent full and partial mediation. The findings indicate that TQM is positively and significantly related to differentiation strategy, and it only partially mediates the relationship between differentiation strategy and three performance measures (product quality, product innovation, and process innovation). The implication is that TQM needs to be complemented by other resources to more effectively realize the strategy in achieving a high level of performance, particularly innovation.