Entrepreneurial orientation of SMEs, total quality management and firm performance

Purpose - The purpose of this paper is to investigate the effects of entrepreneurial orientation (EO) and total quality management (TQM) on the performance of small-and medium-sized manufacturing enterprises. Design/methodology/approach - Frameworks for describing EO and TQM derived from the literature were reviewed and used to develop a questionnaire. The hypothesized relationships of this model are tested with the data collected from 121 manufacturing small and medium enterprises (SMEs) by using AMOS. The approach has been directed toward justification of EO and TQM strategy for its support to competitive manufacturing in the context of Indian manufacturing industries. Findings - The results indicate that EO plays an influential role on the adoption of TQM strategy, and also has a direct effect on firm performance (FP). The results also indicate that the significance of the direct effect of EO on FP is reduced when the indirect effect of EO through TQM is included in the total effect model. Firms with higher level of EO will be more successful in adopting TQM strategy, which helps them in developing new capabilities that allow them to achieve better performance. Research limitations/implications - The research is cross-sectional in nature and, therefore, it does not permit us to account for the lag between implementation and performance. Second, the performance measures are subjective and may be subject to response bias. Practical implications - The study presented in this paper offers entrepreneurs, academics and practitioners a better understanding of the relationship and impact of the EO and TQM on the manufacturing performance. Thus, entrepreneurs and practitioners will be able to make better and more effective decisions about the implementation of TQM practices. Originality/value - By linking EO strategy and TQM practices to world-class manufacturing practices and performance in Indian manufacturing SMEs, this research adds a new dimension to study of world-class manufacturing and more generally to the best practices and practice-performance debates. This knowledge is important and unique, because it emphasizes that in addition to quality management practices, which are focused on efficient process management aspects of the organization, EO should also be given equal emphasis, in order to improve manufacturing performance of SMEs.