After carrying out an extensive literature review, it is clear that Total Quality Management (TQM) has a significant influence on many areas of companies. The development of quality management practices can lead to the generation of intellectual capital and thus become a key competitive factor.
The purpose of this research was to explore whether TQM practices have a positive influence on a company’s intellectual capital.
We formulate three hypotheses considering the components of intellectual capital: human capital, social capital and organisational capital. This article develops an empirical analysis through the use of structural equation modelling using the partial least squares technique.
The results show that TQM has a strong positive causal effect on intellectual capital.
This research, therefore, identifies a key determinant of one of the most important strategic variables for companies at present: intellectual capital.
Grant (
Moreover, studies show that Total Quality Management (TQM) has a positive influence on a firm’s competitive advantage (e.g. Powell
The purpose of our research is to explore whether TQM practices have a positive influence on a company’s intellectual capital. The gap in literature that we wish to cover is, therefore, the fact that numerous studies measuring the effect of TQM practices on business results exist, but few also consider the direct relationship between TQM and intellectual capital. If we are successful in showing this relationship, then companies should include TQM in the management process and fit the intellectual capital work practices to the TQM strategy.
We formulate three hypotheses that consider the components of intellectual capital: HC, social capital (SC) and organisational capital (OC).
In order to achieve this objective, we shall proceed as follows. We shall firstly present detailed definitions of TQM and of intellectual capital and its subcategories of HC, SC and OC. We shall then go on to present the conceptual model, the research hypotheses and the variables, after which we shall present the sample and describe the manner in which the information was obtained and the variables were measured. This will be followed by the realisation of an empirical analysis through the use of the structural equation modelling (SEM) technique, and finally we shall present the main results and conclusions of this research.
There are many definitions of quality. However, most of them have the following commonalities: (1) the fulfilment of requirements, in particular customer needs, (2) the focus on specific products, services or processes, (3) improved organisational performance, and (4) the absence of errors (Sila & Maling
Quality management has, over the last few decades, evolved from being a result-orientated quality control to being an integrated company-wide approach. Researchers refer to this approach as TQM, which is a set of philosophies and methods used by an organisation to guide it in its continual improvement in all aspects of its business (Boon, Arumugam & Hwa
According to many researchers, TQM produces value through a variety of benefits (Kaynak
At the core of TQM’s ability to create value is its power to bring about an efficient creation and utilisation of valuable specific knowledge at all levels of the organisation. This contribution to knowledge creation leads to improvements in certain distinctive competencies, such as managerial competencies, employee know-how, external cooperation skills, the creation of a collective mind, organisational commitment, stimulation of the organisational learning process, speed and flexibility in the design of new products or services, and reputation (Bowen & Lawler
The term ‘intellectual capital’ is used as a synonym for intangible or knowledge assets (Stewart
Some of the definitions converge at the same point: the difference between the company’s market value and the cost of replacing its assets. Some empirical works highlight a persistent gap between market value and book value, and intangible assets or intellectual capital could, perhaps, explain some of these gaps (Bontis
Stewart (
As can be seen from some of the definitions, three key characteristics of the intellectual capital construct can be described as follows: its intangibility, its potential to create value and the growth effect of collective practice and synergies (Martín et al.
Having discussed the term ‘intellectual capital’, in the following we review the current body of knowledge regarding its dimensions.
Various approaches concerning how intellectual capital can be classified and measured are available in the existent literature, but one important hurdle has been detected: the lack of a common language. Keeping this in mind, Aisenberg et al. (
In order to analyse whether TQM influences intellectual capital, we propose the model shown in
A model of the relationship between Total Quality Management and intellectual capital. TQM, total quality management; HC, human capital; SC, social capital; OC, organisational capital.
Evans (
Training is a prerequisite for the effectiveness of quality improvement activities. The usage of workers’ knowledge is so important that training has become a fundamental requirement in all companies. It is one of the TQM dimensions, and having the management support and the necessary resources makes it possible to achieve the appropriate level of HC (Das, Paul & Swierczek
In this research, these lines of reasoning will be employed as a basis on which to test the following hypothesis:
There are some dimensions of TQM that lead to an improvement in SC. Firstly, it is management that creates a work environment that is conducive to employee involvement and that encourages and facilitates open communication (Anderson et al.
These lines of reasoning will be employed as a basis on which to test the following hypothesis:
Hietschold et al. (
Tóth and Jonás (
These lines of reasoning will be employed as a basis on which to test the following hypothesis:
After offering a research model and related hypotheses, the following section describes the research methodology and explains the findings of our study.
The sample used in our research was developed by choosing some companies from the SABI
The questionnaires of our research were sent to the chief officer or coordinator of the Human Resources Department and Quality Department. Of the 876 questionnaires distributed, 142 were returned. However, some of them were incomplete; we eventually obtained 129 usable questionnaires, yielding a response rate of 14.7%.
Analysing the sample, the companies’ employees had a mean age of 25.56 years (
Harman’s one-factor test and confirmatory factor analysis were conducted to test the presence of a common method effect. This single factor test examines the unrotated factor solution to determine the number of factors that are necessary to account for the variance in the variables. If a single factor emerges or one general factor accounts for the majority of the covariance among the measures, then it is concluded that a substantial amount of common method variance is present (Podsakoff & Organ
The questionnaire employed a five-point scale from one (strongly disagree) to five (strongly agree). That is, the questions reflected the level of agreement with some statements related to TQM and intellectual capital (see
TQM is based on nine items. The scale is based on the studies developed by Hayes, Wheelwright and Clark (
Measurement of the three intellectual capital dimensions was based on the scale developed by Youndt and Snell (
The hypotheses were tested using SEM, which permits a simultaneous test of the causal relationships among multiple variables in a model and provides techniques with which to correct for measurement errors, which are potential problems in behavioural research.
In order to carry out a SEM analysis, it is necessary to choose between two statistical methods (Hair, Ringle & Sarstedt
When employing Cronbach’s alpha, the standardised indicator loadings should be equal to or greater than 0.70 (Nunnally
Internal consistency reliability and convergent validity.
Construct | Mean | SD | Range of loadings | α | ICR | AVE |
---|---|---|---|---|---|---|
3.81 | 1.03 | 0.659–0.776 | 0.866 | 0.895 | 0.517 | |
3.68 | 0.92 | 0.765–0.896 | 0.886 | 0.917 | 0.688 | |
3.67 | 0.96 | 0.804–0.892 | 0.901 | 0.927 | 0.717 | |
3.35 | 1.15 | 0.650–0.908 | 0.855 | 0.902 | 0.697 |
α, Cronbach´s Alpha; ICR, indicator of composite reliability; AVE, average variance extracted; TQM, total quality management; HC, human capital; SC, social capital; SD, standard deviation; OC, organisational capital.
Note: All loadings are significant with
Analysis of the convergent validity of the reflective variables follows three criteria: the size of the indicator loading, the average variance extracted (AVE) and the significance of the indicator loading. The TQM AVE is under 0.5 (0.495), and we therefore eliminated the indicator with the lowest loading, that is, TQM1 (0.641). Upon recalculating the AVE, we obtained values of up to 0.5 for all the constructs (
The analysis of discriminant validity follows three criteria, the first of which is Fornell and Larcker’s criterion (Fornell & Larcker
The second criterion is to analyse the cross loadings, which should be higher for each construct than for the rest of the construct loadings (Götz, Liehr-Gobbers & Krafft
The third criterion is the heterotrait–monotrait correlations ratio. The values should be lower than 0.85 (Hair et al.
Upon considering the results it will be noted that all three criteria have a good adjustment, as the values obtained fall within the commonly accepted limits (
Discriminant validity.
Construct | Fornell–Larcker criterion |
Construct | Heterotrait–monotrait ratio |
||||||
---|---|---|---|---|---|---|---|---|---|
TQM | HC | SC | OC | TQM | HC | SC | OC | ||
TQM | - | - | - | TQM | - | - | - | - | |
HC | 0.574 | - | - | HC | 0.637 | - | - | - | |
SC | 0.660 | 0.595 | - | SC | 0.743 | 0.668 | - | - | |
OC | 0.659 | 0.719 | 0.603 | OC | 0.740 | 0.803 | 0.684 | - |
TQM, total quality management; HC, human capital; SC, social capital; OC, organisational capital.
Note: The bold values in the table are the square root of AVE values.
We shall first analyse the multicollinearity of the contructs, for which we require a variance inflation factor of five or lower to avoid the collinearity problem (Hair et al.
We evaluated the predictive relevance of the structural model by using the work of Falk and Miller (
Structural model results.
The significance of the structural relationships was evaluated by calculating the path coefficient and using bootstrapping to assess significance. In this procedure, a large number of subsamples (in this case, 5000 and a sample size of 129) were taken from the original sample with replacement in order to obtain the bootstrap standard errors, which in turn provided approximate
Hypothesis contrast.
Hypotheses | Influence between construct | Path coefficients (standardised β) | Hypothesis contrast | |
---|---|---|---|---|
H.1 | TQM→HC | 0.213 |
2.687 | Accepted |
H.2 | TQM→SC | 0.402 |
6.205 | Accepted |
H.3 | TQM→OC | 0.441 |
4.282 | Accepted |
TQM, total quality management; HC, human capital; SC, social capital; OC, organisational capital.
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This article investigated the effect of TQM on intellectual capital in a sample of Spanish companies using the proposed model provided in
The results of various studies suggest that intellectual capital enhances organisational performance because the creation and development of employees’ knowledge and abilities (HC), lateral relations (SC) and investments in information systems (OC) increase an organisation’s capacity to efficiently and effectively process information. We have accordingly sought those company strategies that lead to an improvement in intellectual capital. TQM is one of these strategies. In this respect, we have analysed the relationship between TQM practices and the firm’s HC, SC and OC.
With regard to the practical contributions of this research, given the direct influence of TQM on intellectual capital, the organisation’s top management should conduct TQM programmes focusing on employee, customer and supplier participation, business coordination, manager commitment and a decrease in waste and defective products. Top managers should monitor their formal structures and systems in order to ensure that TQM is truly incorporated into the actual strategic business planning process. The empirical evidence in the shape of an association between TQM and intellectual capital performance shows that the companies that provide these practices with resources can make relevant improvements to aspects related to the three dimensions of intellectual capital, such as their employees’ knowledge and abilities, their employees’ aptitudes and cooperation with stakeholders, and the firm’s knowledge-storing capacity. Authors such as Tóth and Jonás (
Several limitations are associated with this study. Firstly, it was conducted only in Spanish firms and it is thus difficult to generalise the findings to an international context. Secondly, cross-sectional research design was used to collect data for the current study; however, longitudinal research would provide more insights. Furthermore, the data was collected using a questionnaire technique and the information might not, therefore, be reliable and the research findings could be biased. We have attempted to, at least partially, overcome this limitation by using previously validated scales (see the sections ‘Total Quality Management’ and ‘Intellectual capital [human capital, social capital and organisational capital]’), addressing the questionnaires to the top managers, and in some cases, carrying out personal interviews to assure more and better responses. Moreover, all the analyses confirm the validity and consistency of the model (see section ‘Measurement model’). Finally, the study examines different sectors, but we have not included this variable in the model. This might also be considered in future research, in addition to data from other regions or countries.
The authors declare that they have no financial or personal relationships which may have inappropriately influenced them in writing this article.
I.P. and J.D.S.P. were the project leaders. Moreover, I.P. and J.D.S.P identified the population. E.R. developed the questionnaire and data analysis through partial least square methodology. Furthermore, E.R. conducted the bibliographic review. Finally, R.M. developed the structure of work and the conclusions.
When considering the company over the last 3 years, it is possible to state that (from 1 – strongly disagree to 5 – strongly agree):
TQM1: The different company departments are coordinated.
TQM2: Customers’ necessities are a priority for the company.
TQM3: Employees participate in the development of the quality strategy planning.
TQM4: Employees participate in the quality improvement programmes.
TQM5: The performance of production processes is monitored.
TQM6: Proper systems are in place to eliminate the activities that do not add value to the production processes.
TQM7: Proper procedures are established to decrease defective products.
TQM8: Suppliers participate in the company’s quality programmes.
TQM9: Managers are committed to quality at all levels and in all areas of the firm.
Are you of the opinion that, in the company, and considering the last 3 years (from 1 – strongly disagree to 5 – strongly agree):
HC1: Your employees are highly skilled?
HC2: Your employees are widely considered the best in your industry?
HC3: Your employees are creative and bright?
HC4: Your employees are experts in their particular jobs and functions?
HC5: Your employees develop new ideas and knowledge?
Are you of the opinion that, in the company, and considering the last 3 years (from 1 – strongly disagree to 5 – strongly agree):
SC1: Your employees are skilled at collaborating with each other in order to diagnose and solve problems?
SC2: Your employees share information and learn from one another?
SC3: Your employees interact and exchange ideas with people from different areas of the company?
SC4: Your employees partner with customers, suppliers, alliance partners and so on to develop solutions?
SC5: Your employees apply knowledge from one area of the company to problems and opportunities that arise in another?
Are you of the opinion that, in the company, and considering the last 3 years (from 1 – strongly disagree to 5 – strongly agree):
OC1: Your organisation uses patents and licenses as a means to store knowledge?
OC2: Much of your organisation’s knowledge is contained in manuals, databases and so on?
OC3: Your organisation’s culture (stories, rituals) contains valuable ideas, ways of doing business and so on?
OC4: Your organisation embeds much of its knowledge and information in structures, systems and processes?
SABI (Sistema de Análisis de Balances Ibéricos) is a database that collects the economic and financial information of 3 200 000 Spanish and Portuguese companies.